Renewables Obligation (Amendment) Order 2026
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Lord Whitehead
That the draft Order and Regulations laid before the House on 2 February be approved.
Relevant document: 52nd Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 17 March.
UK Energy Sources and Cost of Energy
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The Earl of Effingham
To ask His Majesty’s Government, following the recent military strikes in Iran and Qatar, what steps they are taking to secure UK energy sources and reduce the cost of energy for UK citizens.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
I thank the noble Earl for his Question. The UK benefits from a strong and diverse range of energy supplies. The physical supply of fuel to the UK is stable. The only way to protect ourselves from these and future potential price spikes in the longer term is to get off international fossil fuel markets controlled by the actions of petrostates and dictators. That is what our clean energy mission for homegrown power that we control is all about.
The Earl of Effingham
My Lords, I thank the Minister for his response. Last night’s escalation proved that we should not be dependent on imported oil and gas and that the UK must make use of its domestic energy supplies. Given this and the fact that, by autumn, we could be producing enough gas to heat 1.6 million homes by simply approving production at the Jackdaw gas field, will the Minister today commit to approving Jackdaw for gas production?
Lord Whitehead (Lab)
The noble Earl will be aware that the present crisis is essentially a price crisis rather than a supply crisis. I emphasise again that the UK has a strong and diverse range of energy supplies and that the physical supply of fuel to the UK is stable. However, the Government have not been idle in this respect. Among other things, the Government have introduced transitional energy certificates for North Sea and associated producing fields that allow producers to engage in tie-backs, which is the development of fields additional to fields that are already in production. That is completely in line with IEA recommendations on how production can be increased in the not too distant future.
Earl Russell (LD)
My Lords, I welcome the measures that the Government have already taken, particularly around reducing the cost of heating oil. Does the Minister agree that it is important that we work with allies and partners to encourage all involved to stop targeting energy infrastructure?
Lord Whitehead (Lab)
The noble Earl is absolutely right that one of the key issues in the recent escalation has been the targeting by both sides of oil and gas installations. Clearly, this brings into a further spotlight the need to seek an urgent de-escalation of hostilities and the resolution of this crisis by negotiation rather than continued bombing of everyone’s oil and gas facilities.
Lord Alton of Liverpool (CB)
My Lords, in the light of the Times report earlier this week on energy links between the United Kingdom and Xinjiang, has the Minister read the Joint Committee on Human Rights report on supply chain transparency and modern-day slavery? Will he say when he last discussed with Great British Energy its compliance with Section 3(2)(e) of the Great British Energy Act, which was added following an all-party amendment in your Lordships’ House and prohibits the use of products, such as solar panels, made by slave labour?
Lord Whitehead (Lab)
I will have to write to the noble Lord on the specifics he mentioned. He should know that the UK Government are pursuing very robust measures to ensure that the supply of products such as solar panels is not the product of modern slavery. Efforts are under way on the diversification of supply and on the certification of panels to ensure they are not subject to modern slavery. The noble Lord will of course appreciate the difficulty of getting exact information on the sourcing of particular products, but the British Government are doing everything they can to ensure that they are not from the sources that the noble Lord is so concerned about.
Lord Anderson of Swansea (Lab)
My Lords, does the current crisis and the vulnerabilities that have been exposed lead the Government to re-examine the case for tidal power in the UK?
Lord Whitehead (Lab)
The noble Lord mentions what is potentially a very effective, long-term and secure method of homegrown energy. As I mentioned in my initial Answer, the long-term way to protect ourselves from these price spikes is to develop homegrown energy. Clearly, tidal range, which has a very stable supply of energy and a not particularly long period of development, could play a role in that process. However, I emphasise that we are very far at the moment from developing tidal range in the way that the noble Lord seeks to promote.
Lord Moynihan (Con)
My Lords, two days ago, the Chancellor of the Exchequer said that all countries must play their part in boosting oil and gas production. The Energy Secretary demonises and bans drilling for oil and gas in the North Sea. Who is right?
Lord Whitehead (Lab)
No, the Energy Secretary does not wish to see drilling for North Sea oil banned. What he is doing, as the noble Lord will know, is developing transitional energy certificates, which will enable tie-backs to take place in existing fields. The noble Lord will know that the existing structure of the North Sea fields largely consists of fields that have not been tapped—small fields that are adjacent to additional fields—and so the tie-back arrangement will ensure both production and drilling for those tie-back fields in association with the existing fields.
Baroness Hayman (CB)
My Lords, I declare my interest as a director of Peers for the Planet. Given what the Minister said about this being, in essence, a price security issue, what progress have the Government made on the issue of decoupling the price of other forms of generation from the price of gas? As we know, that is hugely volatile and has an enormous impact on both domestic and industrial consumers.
Lord Whitehead (Lab)
The noble Baroness is exactly right. As she will know, part of the price increases that are being suffered at the moment go into the market-making price of gas that secures the general price of electricity, for example, in our markets by marginal cost pricing. Certainly, the renewed and continuing volatility in international markets is likely to be a substantial driver of high price levels and price increases in the future. Therefore, the Government are actively looking at measures that could decouple the UK energy market, where it is green and low carbon, from that marginal cost pricing arrangement, which is still driven by gas in about 65% of settlements at the moment. That will be part of the UK’s drive for clean energy sources for the future.
Lord Robathan (Con)
My Lords, surely the issue is one of supply, and it is not the Government’s fault. However, there is one thing that is the Government’s fault: we do not have a single ship in the Persian Gulf that can assist with guarding the Strait of Hormuz. Does the Minister share my disappointment that we do not have anything in the Gulf that can assist?
Lord Whitehead (Lab)
The noble Lord will know that we do have quite a presence in the Gulf, not of ships but of other defence capacity which can play some part as far as the Strait of Hormuz is concerned. He will also know that the US has already indicated that it does not wish to have the UK and other NATO countries’ assistance in undertaking the clearance of the Strait of Hormuz. Nevertheless, we regard the opening of that strait as imperative as far as fuel supplies are concerned. As far as UK fuel supplies are concerned, only about 1% currently comes from sources relevant to passage through the Strait of Hormuz—for example, Qatar. We are not as internationally exposed to those supplies as a number of other countries.
Lord Mohammed of Tinsley (LD)
My Lords, following up on the question from my noble friend Lord Russell, who mentioned support for domestic users in particular of heating oil, my question is on highly energy-intensive industries, particularly steel. What support, if any, are the Government thinking of providing, particularly if this war continues for weeks and months rather than just ending in days, as we hope, for the steel industries in south Wales, Scunthorpe and South Yorkshire?
Lord Whitehead (Lab)
The Government are open to all eventualities as far as this crisis is concerned and are keeping the position under review on a very regular basis. The noble Lord will know that immediate support has been for heating oil, particularly for those customers who are off grid in the UK. The Government recently announced over for supplies of heating oil, with particular reference to Northern Ireland, where a substantial proportion of the population are dependent on oil for heating. Of that £50 million-odd, £17 million has gone to Northern Ireland for that purpose.
Baroness Bennett of Manor Castle (GP)
My Lords, I am sure that the Minister will agree that the cleanest, greenest, cheapest and most secure energy is the energy that you do not need to use. France, for example, is far ahead of us in avoiding wasteful use of energy, with measures such as switching off the lighting for shops, ensuring that offices switch off lights during the night and taking measures to stop wasting energy, such as with video screens with advertising. What steps are the Government taking to reduce the wastage of energy, which will make us all more secure?
Lord Whitehead (Lab)
The first issue is, as the noble Baroness suggests, the efficient use of energy by more intelligent means and planning how that energy is deployed on a highly intelligent basis. That is activity that the Government are advanced on as far as the management of our energy system is concerned. The second point is, as the noble Baroness mentions, the energy security from energy that is not used. The Warm Homes Plan that the Government have recently introduced—a multi-billion programme over a number of years to increase the energy efficiency and resilience of people’s homes, particularly those in fuel poverty—will produce not only a win for fuel poverty but a substantial win for the efficiency with which energy is used and the amount of energy that is used in the domestic sphere.
Lord Fuller (Con)
My Lords, the crisis is immediate. What assessment have the Government made about the essential products that rely on gas—ammonia, CO2, aniline, soda ash, ethylene and sulphuric acid—without which a modern economy cannot exist and without which factories will close?
Lord Whitehead (Lab)
The noble Lord will know that we have recently engaged in an extensive conversation in corridors about the question of ammonia in the UK economy. This is related to the energy crisis, in as much as we do not have ammonia manufacturing sites in the UK and the manufacture of ammonia is highly energy dependent. One of the ways forward on that is to produce green ammonia, which he will know was a subject of our discussion just recently. That is one way to secure the future of ammonia supplies in the UK without resorting to high levels of fossil fuel in the process.
Electricity Supplier Payments (Amendment) Regulations 2026
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Lord Whitehead
That the Grand Committee do consider the Electricity Supplier Payments (Amendment) Regulations 2026.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, you have got me again. These draft regulations were laid before the House on 2 February 2026. I trust that since they are very technical in their nature and very modest in their effect, they will be agreed, because they are an essential element of making sure that our supplier payments and supplier collection work well for the future; they are an integral part of how the system works, so I hope that they will meet with general agreement.
This statutory instrument amends regulations concerning the levies used to fund the operational cost budgets for the Low Carbon Contracts Company and the Electricity Settlements Company. Before I proceed, I apologise to the Committee for the enormous number of acronyms that will no doubt emerge during this debate and in my speech. Let me start with the LCCC and the ESC, which I have already explained.
The LCCC administers the contracts for difference scheme on behalf of the Government under the Energy Act 2013. Under that Act, the LCCC also administers schemes modelled on the contracts for difference, including the dispatchable power agreement, the DPA, and the low-carbon dispatchable contracts for difference, or LCD contracts for difference. The LCCC also acts as the revenue collection counterparty for the regulated asset base for new nuclear under the Nuclear Energy (Financing) Act 2022.
It is anticipated, subject to future policy decisions and the will of Parliament, that the LCCC will conduct additional work to support government energy objectives under the Energy Act 2013. This includes work on a new scheme supporting the deployment of large-scale power bioenergy with carbon capture and storage electricity generators, work relating to DESNZ’s proposals to support nuclear generation, and work relating to DESNZ’s proposals to potentially support landfill gas generation.
The ESC administers the capacity market scheme. Those schemes will incentivise the significant investment required in our energy infrastructure to keep costs affordable for consumers and help to deliver our clean power mission, while keeping our energy supply secure.
Contracts for difference—CfDs—provide long-term price stabilisation to low-carbon generators, allowing investment to come forward at a lower cost of capital and therefore at a lower cost for consumers. AR7, the most recent CfD auction and the seventh to date, secured a record 14.7 gigawatts of new clean energy capacity across Great Britain, making it the largest round ever delivered. It brought forward a diverse range of renewable technologies while delivering a good deal for bill payers. The LCCC is currently signing 197 CfDs with projects that were successful in this auction.
Dispatchable power agreements—DPAs—under the Energy Act 2013 are agreements modelled on CfDs. They have been designed to instil confidence among investors in power carbon capture and storage projects and incentivise the availability of low-carbon, non-weather dependent dispatchable generation capacity. The LCCC signed its first DPA on 19 November 2024 for the Net Zero Teesside Power project. This pioneering project in the north-east aims to build the world’s first commercial-scale gas-fired power station with carbon capture and storage.
Over the next three years, the LCCC is expected to sign additional DPAs, which will drive the private sector investment required to bring forward further power carbon capture and storage projects by the mid-2030s. The LCCC will be the counterparty for these DPAs, as it was originally for CfDs, and funds have been included within the budgets to support this role.
The LCCC also signed its first low-carbon dispatchable CfD—LCD CfD—with Drax Power Ltd on 4 November 2025. This agreement will ensure that Drax generates electricity when needed between 2027 and 2031, thus bolstering our energy security. It is also a good agreement for consumers, saving them around £6 per year on their household bills compared to previous arrangements.
The Government also agreed heads of terms with EP Lynemouth Ltd on 6 February 2026 for an additional LCD CfD. If a full contract is concluded in the following month, this will further bolster our energy security by ensuring that Lynemouth continues to generate when needed between 2027 and 2031. Funds have been included in the budgets to support the LCCC’s role as the intended counterparty for this LCD CfD, as well as its role as counterparty for the existing contract with Drax Power Ltd.
The revenue collection contract with Sizewell C Ltd, the first project to use the regulated asset base—RAB—model for new nuclear, became effective on 4 November 2025, and funds have been included in the budget to cover the LCCC’s operational costs as a revenue collection counterparty for the RAB. As noble Lords can see, this all amounts to a large amount of additional work and activity for the LCCC, which is important in terms of this particular SI.
Turning to the ESC, the capacity market is tried and tested and is the most cost-effective way of ensuring that we have the electricity capacity we need now and in the future. It provides all forms of capacity and the right incentives to be on the system, delivering capacity when needed by increasing generation or by turning down electricity demand in return for guaranteed payments. The capacity auctions held to date have secured the capacity we need to meet the forecast peak demand out to 2028-29. A T-1 auction is currently ongoing and a T-4 auction will take place next week, securing most of the capacity we need out to 2029-30. In both the CfD and capacity market schemes, participants bid for support via a competitive auction that ensures that costs for consumers are minimised.
In the DPA, agreements are allocated through a process involving competitive assessment, followed by shortlisting then a final stage of bilateral negotiations between project developers and DESNZ. In the LCD CfD, contracts are agreed following a structured negotiation process between DESNZ and the generator. This process ensures that only those contracts are signed that offer value for money for consumers and include strict sustainability criteria.
Revenue collection contracts under the RAB model are agreed through a structured process involving DESNZ, Ofgem and the LCCC. These contracts provide a stable, regulated revenue stream to projects during construction and operation. In turn, we expect the RAB to lower the cost of financing for nuclear, one of the biggest drivers of new project costs, resulting in better value for money to consumers.
The LCCC and ESC’s effective administration of the CfD, the capacity market and other schemes to date has demonstrated their ability to deliver such schemes at least cost to consumers. It is in part for this reason that the LCCC has been working with DESNZ and other departments to develop new schemes for incentivising deployment of more low-carbon technologies. For example, the LCCC has supported DESNZ in the development of incentives for bioenergy with carbon capture and storage. Although this has not been confirmed, contracts for such projects could potentially be entered into following a process established under the Energy Act 2013. Were DESNZ to move forward with this option, the LCCC would need to undertake activity to prepare for acting as the counterparty in the next three years. Consequently, funds have been included within the budget for this purpose.
The LCCC and ESC are mindful of the need to deliver value for money, as their guiding principle is to maintain investor confidence in the schemes they deliver while minimising costs to consumers. They have taken a number of actions to date to reduce costs, such as bringing expertise in-house rather than relying on more expensive outside consultants. It is because of actions like that that CfD operational costs per contract are expected to fall by 27.3% per CfD across the budget period, despite the growing size of the CfD portfolio. It is a similar narrative for the ESC, which expects the number of capacity market electricity meters to exceed 1.2 million over the budget period, a 450% increase on current meter numbers. It estimates that costs per meter will fall by 23% over 2025-26 to 2028-29. The operational cost budgets for both companies were subject to consultation, which gave stakeholders the opportunity to scrutinise and test the key assumptions in the budgets and, importantly, ensure that they represent value for money. Subsequently, the budgets remain unchanged.
In conclusion, to summarise this rather detailed and technical narrative, the LCCC has done a great job in managing as the counterparty for taking money in for contracts, giving money out and balancing between the two—and, indeed, when it runs a surplus it gives it back to the companies that are paying the money back in. Its activities have changed very substantially over the years, and the levy that goes into those companies has not changed since 2022. Therefore, it is right that the levy coming into the LCCC and the ESC for the expanded work that they do is reviewed, which is what the Government have done, to make sure that the LCCC can cover its costs for the relevant financial years up to 2029-30.
I assure the Committee that the Government are also mindful of the uncertainties involved in setting a budget for the next three years, such as world events impacting energy demand and policy decisions on new schemes that have not yet been taken. Consequently, DESNZ will keep the companies’ budgets under careful review throughout the budget period to ensure that costs to consumers are minimised. I commend these draft regulations to the Committee.
Lord Whitehead (Lab)
I thank noble Lords for, as I have said on previous occasions, their valuable, extensive and wide-ranging contributions to the debate. I am similarly tempted to follow the wide-ranging comments that have been made—some of which I agree with and a lot of which I do not—but I do not think that this is the place to undertake that particular debate.
As noble Lords have reflected on, this SI is, in essence, about a practical and straightforward measure to ensure that the body that administers the working of the CfDs and an increasing amount of further contracts—acting as the counterparty and the proper regulatory body to make sure that there is value in all directions from the money that is collected—simply has the wherewithal to make sure that it can do that job. As I have said, the levels of that wherewithal were set in 2022 and have not been revised since then. They really need to be revised so that we are not in a position where the taxpayer has to come in and bail out the LCCC or similar bodies, come 2028-29, if they do not have sufficient funds to administer the contracts in the way they should.
Renewables Obligation (Amendment) Order 2026
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Lord Whitehead
That the Grand Committee do consider the Renewables Obligation (Amendment) Order 2026.
Relevant document: 52nd Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, the renewables obligation scheme has incentivised UK renewable electricity generation through a system of tradeable certificates called renewable obligation certificates. Three separate but complementary renewables obligation schemes cover the UK: the RO and the renewables obligation Scotland—ROS—were introduced in 2002, and the Northern Ireland renewables obligation —NIRO—was introduced in 2005. The UK Government are responsible for RO legislation in England and Wales. The Scottish Government and the Northern Ireland Executive are responsible for the legislation of their respective schemes. Ofgem administers all schemes across the UK. The scheme is now closed to new applications—indeed, it was closed in 2017—but existing sites continue to receive support until the scheme ends in 2037. The scheme has been instrumental in taking a nascent renewable energy sector to where it is today, with the scheme supporting around 30% of total UK electricity generation.
Electricity suppliers are required each year to present a set number of renewables obligation certificates to Ofgem reflecting the amount of electricity they supply. Where a supplier does not present enough certificates, it must instead pay a buy-out price for each missing certificate. Those buy-out payments are then recycled back to suppliers that have complied, which supports the overall value of certificates and ensures the scheme operates in a fair and predictable way.
Lord Whitehead (Lab)
First, I thank noble Lords for their valuable contributions to this debate. The Government have listened carefully to the concerns expressed, particularly in relation to investor confidence, which I will come back to in a moment, to policy stability and to the long-term credibility of the UK’s renewable support schemes.
In considering the valuable and detailed contributions from noble Lords, I must say one thing to start with. The noble Lord, Lord Moynihan, is tempting me into a widespread debate about energy changes, energy prices and so on, but I kindly suggest that that is not the subject of our discussion this afternoon. The points that he makes are certainly ones that need replying to, and I hope that replies are being undertaken—but of course we are undertaking those replies at a time of energy crisis, and indeed a period of great volatility and uncertainty. That perhaps underlines why it is a better idea for the long term to have homegrown sources of energy that are not volatile and which can actually inform what is happening in the domestic market without inevitable consequences on the international market. The move towards renewables and low-carbon energy sourced from within the UK is a very effective way of doing that in the long term.
Lord Moynihan (Con)
I absolutely do not want to start a debate this afternoon, because we will unquestionably have plenty of opportunities in the future to cover this ground, but there is nothing more secure, in terms of our security of supply, nothing that creates more firm power, than our natural gas in the UKCS, which is much cheaper and far less polluting than importing gas from Qatar or liquefied natural gas from the United States. That reserve is critical, and if there is one lesson that comes out of this crisis, it is that we should maximise that reserve for our own country, for our own people, in exactly the same way as the Norwegians are doing at the moment for their people—unless the Minister thinks that the Norwegians are hopelessly wrong and should have shut in their basin, which he may wish to say. I think that our differences on this subject are worthy of future debate, but I think it is important to place them on the record.
Lord Whitehead (Lab)
I thank the noble Lord for placing that on the record. The Norwegian basin, of course, is far less mature than the UK basin, and indeed the Norwegian system works on substantially the same basis of international pricing as the UK system as far as gas is concerned.
The noble Lord has used the word “incredible” on several occasions. It was incredible, over the years, how much gas we were exporting from UK fields, even at a time when it was absolutely necessary to have the maximum supplies bought and used in the UK. Indeed, even during the Ukraine invasion crisis, there were still substantial exports on to the international market of gas that had come into the UK in the first instance. It is also the case, of course, that as far as marginal cost pricing is concerned, gas still makes the market over 65% of the time, so the whole market is still informed by international gas prices and international gas market-making in a way that is inimical to the stable, homegrown future energy that we need to import so that those positions are no longer taken.
Lord Moynihan (Con)
To place it firmly on the record, Norway and ourselves share the same basin in the northern North Sea, delineated by a median line. Geology does not recognise a median line, which is why in 1990 we were, broadly speaking, producing about 2 million barrels a day each, and in 2010 we were, broadly speaking, producing about 4 million barrels a day each. Today, we have gone right down to 400,000 barrels, and the Government are driving it down lower, while the Norwegians are going north of 4 million barrels.
My second point is that yes, the Minister is absolutely right that the Norwegians are exporting it to the international market. They do that because they can satisfy their domestic demand from hydroelectricity. As a result of that, however, they have managed to set up a sovereign wealth fund that assists their healthcare and their social security. The money they are earning is fundamentally important to the success of their economy. If we had done the same thing, we would have been in a far stronger financial position and would be able to take significant tax receipts to the Treasury to assist us with the many other challenges that the Government face.
Lord Whitehead (Lab)
The noble Lord is exactly right about a sovereign wealth fund, and it is our joint regret that the UK did not pursue that path many years ago. However, that is not the fault of the current Labour Government, as those actions were taken many years ago. He is right to point out that we would be in a much better position had that path been taken, but we did not take that path. We are where we are and we need to move on from that in terms of homegrown energy of a different form.
I am anxious to make progress with the business in hand, and I am pleased to see the overall welcome for these measures from both sides of the House. I will very briefly deal with one or two concerns that were raised. For example, on the concern about the effect of these measures on investor confidence, the future investment is of course not going to be carried out through the renewables obligation. As I mentioned, the renewables obligation is a sunset measure: indeed, it closed to new entrants in 2017. We are therefore talking about the remaining years of this measure, not the years in front of us of future and present measures, which we are undertaking in order to expand and stabilise the renewables and low-carbon world. Investor confidence will, therefore, be determined by how those measures are working.
In any event, the path that was taken to not freeze the RO, but to relate it to CPI rather than RPI, actually continues to allow RO to grow, albeit at a slightly lower indexed case. Therefore, in terms of the returns that those historic companies thought they were getting as far as the RO is concerned, there is not a great deal of difference—especially since we are so far past the point at which new entrants were accepted to the scheme.
As for legal challenges, we have been very scrupulous in making sure that we have received full advice, and that we are well entitled to make these changes. It is difficult to see how a legal challenge on the basis of not liking the changes very much might succeed, as opposed to a legal challenge on the basis of making the changes in the first place.
The noble Earl, Lord Russell, asked whether there could be a more comprehensive measure as far as future ROs are concerned, and this is something I have been quite interested in doing myself. It would involve trying to move RO recipients on to a CfD contract, which can be done in various ways. I suggest that if we did that forcibly, it would probably result in a legal challenge, but there are other ways of making the change.
Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026
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Lord Whitehead
That the draft Order laid before the House on 13 January be approved.
Relevant document: 49th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, I thank the House for its consideration of this draft order, which was laid before the House on 13 January.
The UK Emissions Trading Scheme was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme contributing to the UK’s emissions reduction targets and net-zero goal. The scheme was established to increase the climate ambition of the UK’s carbon pricing policy while protecting the competitiveness of UK businesses.
The scheme is run by the UK ETS Authority, a joint body comprising the UK Government and the devolved Governments acting together. A cap is set on the total amount of certain greenhouse gases that can be emitted by sectors covered by the scheme, and the cap is reduced over time so that total emissions must fall. Under the UK ETS, operators participating in the scheme are required to monitor, report on and surrender allowances in respect of their greenhouse gas emissions. The scope of the UK ETS is being expanded to maritime activities as part of the Government’s strategy of decarbonising all sectors of the UK economy to meet our net-zero target by 2050. It is an effective lever to reduce emissions and delivers on a key commitment in the UK’s maritime decarbonisation strategy. We expect this to help overcome key barriers to maritime decarbonisation by incentivising low-carbon fuels and fuel-efficient technologies and operating practices. Last week, the Government also brought forward £271 million of funding to help industry with the changes to vessels, fuelling and infrastructure required for maritime decarbonisation.
This statutory instrument makes amendments to the legislation that gives effect to the UK ETS. It expands the scheme’s scope to include coverage of carbon dioxide, methane and nitrous oxide from domestic voyages and in-port activities in the UK, effective from 1 July 2026. The instrument amends the legislation to require maritime operators to participate in the scheme, and to allow them to bid at auction for UK allowances. It will apply to ships of 5,000 gross tonnage and above, but a small number of exemptions apply, such as for government ships, including military and law enforcement ships, and ferries operating services to Scotland’s islands and peninsulas. Ferries serving Rathlin Island and the Isles of Scilly are out of scope of the instrument as they are below the 5,000 gross tonnage threshold. We consulted on the potential inclusion of Crown dependencies and overseas territories in the recent international maritime consultation, but they are not in scope of this instrument, which expands the scheme to domestic maritime emissions only.
The provisions set out in the instrument require the maritime operator of a ship, either its registered owner or the company responsible for its compliance with the International Safety Management Code, to obtain an emissions monitoring plan. This plan will document the processes used to ascertain its ships’ emissions. For each scheme year, maritime operators will then be expected to monitor, independently verify and report their maritime emissions to the relevant regulator, and surrender an equivalent level of allowances. The instrument also introduces the concept of “surrender deductions”, reducing by 50% the number of allowances for surrender in respect of voyages between Great Britain and Northern Ireland, to deliver equivalence in carbon-pricing coverage on routes across the Irish Sea. Operators will be assigned to a UK ETS regulator based on the location of their registered office or place of residence. This is the same approach that applies to aircraft operators.
One emissions monitoring plan will cover all the ships for which the maritime operator is responsible, and emissions must be monitored using one of the four methods prescribed in the instrument. Maritime operators will be required to report emissions from all ships for which they are responsible through an annual emissions report, which must be submitted to the regulator on or before 31 March in the year following the scheme year to which it relates. Maritime operators have an obligation to verify their annual emissions report. The verification must be carried out by an impartial and accredited verifier, independent from the maritime operator. If satisfied, the verifier will draft a verification report, which will be submitted to the regulator alongside the annual emissions report.
Maritime operators will also be required to surrender a level of allowances equivalent to their emissions by 30 April in the year following the scheme year. However, the instrument introduces the concept of a “double surrender”, whereby the date by which allowances must be surrendered in relation to the first scheme year—2026—is 30 April 2028 and not 30 April 2027, as would otherwise be the case.
Neither the UK carbon border adjustment mechanism, CBAM, nor its EU equivalent applies to maritime emissions, and this instrument does not introduce any CBAM obligations for maritime operators.
These changes follow comprehensive engagement and consultation with stakeholders. The UK and devolved Governments carried out a consultation in 2022 which was concerned with the development of the UK ETS, including whether to include maritime activities in the scheme. A second consultation ran between 28 November 2024 and 23 January 2025 and sought views on the details of how maritime would be incorporated into the ETS from 2026. The relevant responses to this consultation were summarised in the interim and main authority responses, published in July and November 2025 respectively.
I recognise the fatal and non-fatal amendments tabled by the noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, for our discussion today. I wish to ensure that noble Lords in attendance today are aware that this legislation was approved by the Northern Ireland Assembly two days ago. This is of particular importance, as the amendments tabled identify potential issues with respect to Northern Ireland. I hope that this provides the noble Baroness and the noble Lord with some reassurance as to their concerns. Noble Lords will be aware that this instrument needs to be approved by all the UK legislatures. That has now been the case with the approval of this instrument by the Northern Ireland Assembly.
Further, I urge noble Lords to consider the importance of this legislation for our wider relationship with Europe, in particular in enabling a link with the EU ETS, which includes these emissions and will provide for a mutual exemption from CBAM. This exemption will protect UK businesses from charges on £7 billion-worth of goods and services. Linkage of our emissions trading systems, combined with the sanitary and phytosanitary—SPS—measures, is set to add nearly £9 billion to the UK economy by 2040. I strongly urge my fellow noble Lords to consider these benefits, and the costs they would be placing on UK businesses today should they vote in favour of the amendments tabled by the noble Baroness and noble Lord.
In conclusion, the expansion of the UK ETS to cover maritime activities will support its role as a fundamental pillar of the UK’s climate policy. It plays a key part in the Government’s strategy of decarbonising all sectors of the UK economy to meet our net-zero target by 2050. It also delivers on a key commitment within our maritime decarbonisation strategy. I beg to move.
Amendment to the Motion
Baroness Suttie (LD)
My Lords, this has been a characteristically impassioned debate, which is perhaps not surprising given the subjects of EU alignment, devolution and greenhouse gas emissions. It is inevitable that people are going to feel very strongly about this subject. If the noble Lord, Lord Empey, expressed his concern for the Minister in trying to reply to this debate, I would add that it is slightly difficult, as the only Scot who has so far spoken in this debate. In well over two hours, I think I am only the fourth person to vaguely talk in favour of this statutory instrument. I thank the Minister for both his time, when he gave us a briefing, and his introduction to these regulations. I also thank the noble Baroness, Lady Hoey, for tabling this fatal amendment—even though we will not be supporting it—because it is incredibly important that we get the time to debate these matters.
As the noble Lord, Lord Dodds, said, it is incredibly important that this Parliament has a chance to debate these issues, not least because we are going to see an increasing number of them as we approach dynamic alignment with the European Union on ETS, as well as potential agreements on SPS and the electricity market. We have to find a way to allow this Chamber and those at the other end of the building to debate these things properly. I hope that the Government are giving some considerable thought to how effective parliamentary oversight on these matters can and will take place if and when these additional agreements are made later this year.
These regulations, it should be recalled, stem from regulations introduced by the Conservative Government in 2021 and the creation of the UK ETS following our departure from the EU ETS after Brexit. As these issues are devolved, they have had to be decided by the four parts of the United Kingdom. In answer to the noble and learned Baroness, Lady Butler-Sloss, I am the only Scot speaking here today, but it was the Scottish Government who effectively campaigned for the exemption for the Scottish islands. They are not my party, but they obviously campaigned very successfully on this matter. The noble Baroness, Lady Foster, who is no longer in her place, was right when she said that these regulations stem from regulations introduced in the Scottish Parliament in 2018.
It is important to note that these regulations were agreed last month by both the Scottish Parliament and the Welsh Senedd, and this week by the Northern Ireland Assembly, notwithstanding the comments from noble Lords about that process. It was voted for by the Northern Ireland Assembly by 44 votes to 23 this Tuesday. As I said, the noble Baroness, Lady Foster, was quite right. My understanding is that the exemption for Scottish ferries is not a general maritime exemption; it stems from the Islands (Scotland) Act 2018, which was passed by the Scottish Parliament eight years ago to protect specific lifeline services for small, isolated island communities. Clearly, protection for small island communities is very important. Will the Minister confirm that this Scottish exemption for island ferries will form part of the review in 2028? I feel it is important for us to know.
I also thank the Minister for clarifying that ferries to small island communities in Northern Ireland are already exempt from these regulations, as they do not involve vessels of over 5,000 cubic tonnes. As my noble friend Lord Russell clearly set out, we on these Benches strongly support measures to reduce the quantity of greenhouse gases produced by maritime activities, but we none the less believe that these must be accompanied by port upgrades or cleaner fuel infrastructure, as well as by encouraging innovation and economic development in a cleaner maritime sector. I note, in passing, that those who constantly oppose measures to reduce climate change never seem to factor in the cost of non-action. We also support the general principle of aligning as closely as possible with the EU ETS to minimise friction on trade.
It is important to bear in mind, however, the impact that other noble Lords have set out on the economy of Northern Ireland and on the cost of living in these increasingly challenging times for the global economy, not least in terms of energy because of the war in the Gulf. It is also important to allow a full and transparent review of how the scheme works in practice and to correct any unintended consequences once it is introduced later this year. Given that the Government’s own impact assessment states that Northern Ireland
“could face disproportionate administrative burdens”,
it is important that we continue to monitor the situation extremely closely. Can the Minister say whether they intend to give regular reports to this Parliament, as well as to the devolved parliaments, on how the regulations are working in practice once they are introduced? Can he confirm that they will continue to consult closely the maritime sector, businesses and consumer organisations?
As there is currently a distinct lack of viable low-carbon alternatives for many maritime routes serving Northern Ireland, have the Government carried out any analysis regarding the extent to which additional ETS-related costs could be passed on to consumers by shipping operators and retailers? The EU ETS currently covers 50% of emissions from international voyages starting or ending in an EU member state, which, for example, currently includes container ships travelling from GB to the Republic of Ireland. It is therefore welcome that there is a 50% deduction for GB-NI routes, as it provides for a level playing field with Irish ports. However, if and when there is increasing—or indeed eventually full—alignment with the EU ETS, can the Minister say whether he expects this 50% deduction for both the Republic of Ireland and GB-NI routes to be removed? I appreciate that might be a rather complicated question, but I would very much appreciate his answer. Can he also say what measures the Government intend to put in place to avoid a cliff edge following the review of these regulations in 2028?
In conclusion, we support these regulations as we welcome the move towards greater alignment with the EU ETS, and we do not support either the regret amendment or the fatal amendment. None the less, we recognise the need for proportionality as well as strong transitional and review measures. I look forward to hearing the Minister’s reply.
Lord Whitehead (Lab)
I thank noble Lords for their valued, valuable and very wide-ranging contributions to this debate this afternoon. I am, I think, a fairly plain and straightforward person, but I have at times in the debate failed to get to grips with exactly what it is supposed to be about. It is about the decarbonisation of the UK economy, how the emissions trading scheme is probably the most efficient way of ensuring decarbonisation in our economy, and what should and should not be in that emissions trading scheme. We have also heard in the discussion how that trading scheme might be more widely based so that its decarbonisation effect is improved.
A part of that is of course the entry into the ETS of the maritime sector. For those who say that this statutory instrument is very rushed, I might have to go down a brief historical byway and mention that one can trace back this particular SI to a 2022 consultation on whether the maritime sector should be included in the ETS—a consultation under the previous Government, not this Government, I might add. The response to that consultation was a strong indication that, yes, the maritime sector should be in the emissions trading scheme. Since then, there has been a series of consultations with the maritime industry and many other people about exactly how that should be done, what part the maritime industry should play in its own decarbonisation and how it can contribute substantially to the UK overall trading emissions picture. I have to say that the UK maritime industry has done very well in its contribution so far to making that transition as effective as it can be.
Taken in that context, I am a little surprised at the regret amendment that has been tabled, because essentially this is a past Government regretting their own actions. Yes, there is plenty to regret about the previous Government, but to have the previous Government regretting themselves seems to be a step further forward than was previously the case.
Lord Ashcombe (Con)
We have a problem with the Isle of Wight. One of the vessels has done everything that it could possibly do to decarbonise. It has no option to go anywhere else because the power is not there. It is a fully hybrid boat, as the noble Lord, Lord Greenway, pointed out with a great deal more technical ability than I have. These vessels cannot go anywhere else, so this is a straight tax that will end up primarily on the residents of the Isle of Wight.
Lord Whitehead (Lab)
The noble Lord makes a strong point about the power supply to the Isle of Wight. This is also the case with some other ports. Other noble Lords have said this in their interventions, including the noble Lord, Lord Greenway, for whom I have a great deal of respect and admiration, through our long relationship with the Maritime and Ports Group in another place. He speaks with great authority and considerable knowledge and wisdom on this subject.
Shore power and an electrical supply to ports to enable decarbonisation to take place is a serious question. Both the port of Portsmouth and, in parallel, the port of Southampton suffer from particular cable connections from the substations in their area, which could, at a sub-national grid level, provide sufficient shore power and power for the electrical hybrid ships that may visit these ports. That can be effected by what is called a reopener of the arrangements for distributed network operations to ensure that this power can come forward at an early date. This is what Southampton has done. The power is likely to be forthcoming long before the 2037 date that the noble Lord mentioned. If Portsmouth has not done this yet, I would suggest that it does so. The power is there and readily available to get to the ports. It is a question of putting it in early, rather than later, to make sure that this transition can take place. That is part of a wider problem about grids and grid power in the country as a whole, which this Government are addressing urgently to make sure that we have the power to get ourselves across the transition in the way that we want.
Because of the time available, I will have to address some of the issues by writing to a number of Peers. In this debate, I want to emphasise that this is not a conspiracy to do anybody down or to try to isolate particular communities. Nor is it aimed at undermining the economic prosperity of the country. It is a decarbonisation measure that has to happen as part of our general decarbonisation route to net zero. It would be anomalous if the maritime sector were to be excluded from that decarbonisation route and if we were not to take measures, which I have known about for a long while, to make sure that that decarbonisation route is as effective as it can be in how it aligns with the EU ETS and eventually with the CBAM process. At present there is some problem of alignment because the EU CBAM process is proceeding earlier than the UK CBAM process. These need to be aligned in the longer term. As has been mentioned in this debate, the prize for that alignment is a substantial bonus for UK trade—£9 billion or so over a longer period. It would be remiss of this Government if they did not have that largely in view in what they are undertaking as far as this SI is concerned. Indeed, the Government do have this in view.
I can certainly say to noble Lords that the effect of this SI will be seriously reviewed in 2028. It is likely that, should everything come into proper alignment with CBAM and the EU, some of those shorter-term exemptions and changes will come jointly into alignment for the net benefit of everybody, including Northern Ireland, the Republic of Ireland and the UK. That alignment will mean a joint overall benefit all round.
Lord Whitehead (Lab)
It is not an impossibility for the next 15 years. Getting an accurate picture of trade always involves a range of calculations—you cannot get it exactly right. However, so far the impact of this proposed order has been assessed at below 1% of those costs; the Government do not recognise the figure of 6% put out by some parts of the industry. That is set against the gain that could come from those bodies being in the ETS, the alignment with CBAM in future and so on.
I might add that, although the product of this particular entry into the ETS has not and will not be hypothecated—indeed, no British Government have ever hypothecated anything that has come into their coffers—what we need to judge it by is how much money has already gone out. Just last week, £271 million went out to further support the maritime industry in its transition to a low-carbon basis. The SHORE fund has several hundred million in it, including £18 million that has already gone to Northern Ireland. All of these are paying back the money that is going into the fund in the future, for the benefit of the maritime industry and its transition.
Baroness Hoey (Non-Afl)
My Lords, at the beginning of this debate, when I was being nice to the Minister and thanked him for the meeting he asked for with me, I said that I did not want to spoil his career prospects and that I thought that, if it had been his decision, he might have chosen to withdraw the SI at the beginning. Now, by the end of this debate, perhaps he would have been even more keen to withdraw it.
This has been an extremely good and wide-ranging debate, as the Minister said. It has brought together two or three key issues—I will not go over them again. It is the first time I have had an SI dealing with not only Northern Ireland but other parts of the United Kingdom, and it has been very good to see so many of the Government Benches full. If one benefit of tabling a fatal amendment is to get a lot of Labour Peers to come here and listen, it is probably worth it.
I thank in particular those Peers who do not normally speak on issues related to Northern Ireland. My fatal amendment is very much geared to the inequality of Northern Ireland and the way it is treated differently from Scotland. It was particularly good to hear from the noble Lords, Lord Berkeley and Lord Ashcombe, on the wider aspects of the SI in relation to the Isle of Wight and the Scilly Isles. It was also good to hear from the noble Baroness, Lady Bennett, and the noble Lords, Lord Mountevans and Lord Greenway—I am very sorry if this might well have been his last speech in the House—who brought their genuine experience of shipping.
If there is any lesson to learn today about speeches, it is that we should all, including me, follow the example of the noble and learned Baroness, Lady Butler-Sloss, who, in her two very short interventions, hit the nail right on the head about how this issue has been handled. Despite the meetings on this side, what happened over the past few days in Northern Ireland was a very bad way for government to be working. The way that the Northern Ireland Office has completely ignored the wishes and needs of Northern Ireland, in terms of business opportunities and what will happen with this carbon tax, has been quite deplorable. Worst of all, as has been said by a number of Peers, was the way the statutory instrument was dealt with in the other place: absolutely different information was given right up to the very last minute. The MLAs were cajoled, blackmailed and treated by the Government as if they were pretty stupid and would not understand that they were being told things that were different from what had been said in the other place.
I thank all Members who have spoken. Of course, all the Northern Ireland Members know the issue and how strongly people will feel its effects. The unfairness to part of the United Kingdom, which comes up over and over again in this place, is becoming ridiculous and quite unsustainable if we care about the union and equality between all parts of the union. Having said all that, I really do not want to waste people’s time when they have sat through and listened. I would like to test the opinion of the House.
Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order 2026
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Lord Whitehead
That the draft Order laid before the House on 26 January be approved.
Considered in Grand Committee on 9 March.
Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order 2026
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Lord Whitehead
That the Grand Committee do consider the Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order 2026.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, this draft order was laid before Parliament on 26 January 2026. This Government remain fully committed to ensuring that households, particularly those on low incomes or at risk of fuel poverty, can live in warmer, more energy-efficient homes that are affordable to heat. At the heart of this endeavour lies the new warm homes plan, a comprehensive and long-term strategy to reduce energy bills, alleviate fuel poverty and enhance energy security. We have committed to investing £15 billion—the biggest-ever public investment to upgrade British homes and cut energy bills. Of this amount, £5 billion is allocated to support low-income households.
The energy company obligation—ECO—has played a key part in helping households to reduce their energy bills. The energy company obligation was first launched in 2013. Since its launch in 2022, ECO4 has delivered slightly over 1 million energy-saving measures to approximately 300,000 households. The scheme places an obligation on the larger energy suppliers to deliver energy-efficiency improvements to vulnerable and fuel-poor households that result in measurable bill savings.
While ECO4 has delivered a significant volume of home energy-efficiency improvements, it has not been without challenges, as set out recently by the National Audit Office, among others. There have been widespread, systemic issues in the delivery of solid- wall insulation, which we have taken urgent steps to tackle. We are bringing forward comprehensive reforms to the retrofit consumer protection system to make it stronger, more transparent and more accountable so that this cannot happen again. We expect all installers to ensure that households receive timely and high-quality remediation of any non-compliance identified.
Given these systemic issues and inflation that is still too high, we have taken the considered decision not to replace ECO4, therefore easing pressure on household energy bills. This, in combination with the Government funding 75% of the domestic cost of the legacy renewables obligation, will remove around £117 of costs on average from household energy bills across Great Britain.
This statutory instrument introduces a small and necessary change to the existing scheme by extending the end date of ECO4 by nine months from 31 March to 31 December 2026. This extension provides obligated suppliers with additional time to meet their existing targets and, most importantly, it allows them time to focus on remediation of non-compliant installations. I emphasise that the instrument does not change targets, impose new obligations, or increase supplier costs or consumer bills.
As I conclude, I thank the Secondary Legislation Scrutiny Committee for its consideration of this instrument and for not drawing it to the special attention of the House. The changes made by this instrument, which is in essence a very simple one, are limited but important. By extending ECO4, we are ensuring a stable period of delivery and an orderly closure to the scheme, and are safeguarding consumers. I beg to move.
Earl Russell (LD)
My Lords, I will respond on the Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order. While appearing to be only a minor adjustment today, this SI is important, as it involves the need to protect the most vulnerable in our society from poorly insulated homes and fuel poverty.
The ECO4 scheme has been a fundamental component of our national strategy to address the dual crisis of fuel poverty and the climate emergency. We have always supported its ambition to reduce the costs of heating for low-income households. This amendment seeks to extend the scheme’s duration by nine months to 31 December 2026. The reasons for doing this require a little bit of scrutiny. The Government say that this extension is necessary for the remediation of non-compliant installations and to ensure the orderly closure of the scheme.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the Minister for his introduction of this statutory instrument. This order extends the energy company obligation end date by nine months to ensure an orderly transition for consumers and suppliers to help meet existing targets. This extension was determined following consultation and following the calls of business. On that basis, we on these Benches support the order.
The ECO was established to help households reduce energy consumption and lower heating costs. Since it was launched in 2013, around 4.4 million measures have been installed in 2.6 million properties, up to the end of September 2025. ECO4 is the latest version of that scheme, beginning in 2022. It has meant that approximately 949,800 measures have been installed in around 281,000 households.
It is of course right that, where there were non-compliant installations, installers fund the repair work, overseen by Ofgem and insured by further on-site audits. We have already committed to working cross-party to ensure that affected households receive the remediation they deserve. We understand that the Government now seek to end this scheme and replace it with their warm homes plan to provide loans and grants to households instead; indeed, they have claimed that this will result in a £150 cut from the average household bill.
However, although the end of the ECO scheme means that households will no longer pay the levy through their energy bills, the new plan will be funded through taxation. There is no clarity, therefore, that this will end up saving taxpayers money in the long term; indeed, the new taxpayer funding initiative, coupled with rising energy costs—particularly now—and already high installation costs, mean that it looks increasingly unlikely that the Government will be replacing the ECO with an improvement. Have the Government made any assessment of how much taxpayers will save overall? To what extent are these projections reliant on projected energy costs, which will now be redundant? Oil prices are already 50% higher than in the OBR’s projection last week.
I appreciate that these questions are about issues that are outside the Minister’s control, but they have ramifications for the Government’s policy. Is it really wise to push forward with tax-and-spend green policies, which will likely do little to reduce costs, at a time of global instability? I understand that these are also developing events and that they do not directly relate to the functioning of the ECO.
Returning to that, it would be helpful to clarify how much money taxpayers will now be expected to pay to cover the cost of this new extension period. As I have stated, I support the extension to ensure an orderly transition, but the public must know what they will pay. I restate our support for this order to help consumers and suppliers but, more broadly, we remain concerned that the Government’s plan will, ultimately, not save taxpayers money. I look forward to hearing the Minister’s response.
Lord Whitehead (Lab)
I thank noble Lords for their constructive contributions to this afternoon’s debate; I hope to respond to their points in a similarly crisp and succinct fashion.
First, the noble Baroness, Lady Bloomfield, asked how much taxpayers will pay for the extension of the ECO. The answer is: nothing. The ECO will continue exactly as it has previously, except it will be extended by nine months. There will be no new obligations, only the continuation of obligations that are already in place. Of course, there will be an opportunity to make sure that the remediation that will be necessary for a number of treatments is carried out in good time, and will be sorted out and finished by the time the ECO comes to an end.
Of course, the ending of ECO4 will in itself save bill payers a considerable amount of money. Indeed, as the noble Baroness knows, ECO4 is, in effect, an obligation on energy companies, which they passed on to customers in the form of bills. Alongside the cost of some other legacy obligations, such as the renewable obligation, the removal of that obligation and the end of ECO4 will remove, as I said, around £117 of costs on average from household energy bills across Great Britain.
It is true that the new warm homes plan is underwritten from general taxation, but it is a substantial transfer from direct customer bills to general taxation, with the resulting saving that I have outlined. The warm home scheme is a far more far-reaching programme over a longer period, with a substantial investment of up to £15 billion in it. In the long term, that will be judged by the difference between what has been put in it and what has resulted from the energy savings coming about as a result of the warm homes plan— this will, obviously, be further savings to customers’ bills—as well as by the efficiency with which the warm homes plan is put into place.
The noble Earl, Lord Russell, asked about the arrangements for remediation in properties that the Government consider should be undertaken during the period of the extension of the ECO4 programme for nine months. As I am sure he will know, the NAO report considered that almost all of the external wall insulation measures had major issues requiring remediation; to put that into context, that is about 40,000 treatments, as compared with the 1 million-plus treatments that there were in ECO4 overall, but external wall insulation was a particular problem for the scheme. To a lesser extent, that applies also to internal wall insulation: 29% had major issues requiring remediation, and the NAO considered that a smaller number of treatments had possibly falsified claims attached to them.
Part of the task of this extension is to ensure that those remediations, which are down to the installers to put right, can be done during the period of the ECO extension. The noble Earl raised the possible issue of what the position is if we have got to the end of the period of extension and some of the remediations have not been done. I emphasise that these remediations are being done by obligated installers, first, but also under a strengthened trust mark arrangement for oversight, with increasing audits, site inspections and various other things as regards non-compliance detection and enforcement. So, the people who have to do that remediation will be known about, clearly, and Ofgem has taken the action of writing to all of the people who are possibly in a position where they can have remediation undertaken in order to offer them the opportunity to go on a register for remediation.
This is driven to some extent by installers and to some extent by customer demand for that remediation, and it is backed up by a strong code that makes sure that it gets done. Even if that strays beyond the end of the extension of ECO, it is not the end of the story as far as that remediation is concerned. It will be done. If it is in danger of life and limb it has to be done immediately, but if it is less serious, as it were, it has to be done during the course of that extension.
We think the Government have a good belt-and-braces position as far as those remediations are concerned, and that ECO can come to an end in an orderly fashion. That is quite important in terms of the issues that both the noble Earl and the noble Baroness mentioned about whether there is a cliff edge between what is happening with the end of ECO4 and the beginning of the warm homes plan. Among other things, this extension will mean that there is less of a cliff edge. Indeed, in conjunction with industry, the Government are active in holding round tables to enhance the ability of industry that has invested in ECO4 to transition to activity under the warm homes plan. I hope that it will not be such a cliff edge as the noble Earl mentioned and will run reasonably smoothly—if not necessarily entirely smoothly—into the warm homes plan itself, and therefore a lot of the investment that various companies have put into ECO4 can be realised through the warm homes plan.
Energy Markets
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Earl Russell (LD)
My Lords, I thank the Minister for the Statement on the very serious and fast-moving situation in the Middle East. The recent escalation in the Gulf following President Trump’s deeply destabilising actions risks widening the conflict. Fourteen countries are now directly affected, global shipping supply routes are shut, and once again oil and gas prices have skyrocketed because of geopolitical chaos. With tragic inevitability, the same man who denies the existence of climate change has unleashed another conflict for the control of fossil fuels. If this conflict is not urgently contained, it will shut down oil fields and disrupt global markets, and drive up oil and gas prices, food prices, inflation and government debt alike. We need an urgent halt to the targeting of energy and desalination facilities on all sides.
We have been here before. Despite the progress we are making on our energy transition, the UK remains frighteningly exposed to the harsh economic impacts of global events far beyond our shores. The Energy & Climate Intelligence Unit and E3G estimate that our reliance on fossil fuels has cost this country an additional £183 billion since 2022, because of the increased costs of energy as a result of the war in Ukraine. We cannot afford another lost decade of dependence on global fossil fuels that we neither control nor influence.
While much of the Minister’s Statement is welcome—the co-ordination with allies, reassurance on supply, and commitment to clean power—the real question is whether this Government will now act at the speed and scale the crisis demands. Unlike the last energy crisis, this one includes oil as well as gas. We on these Benches see the Conservatives’ claim that the solution lies in new North Sea licences as the equivalent of trying to fill a swimming pool via a drinking straw. North Sea gas production is down by two-thirds since 2000. It is set to have declined by 97% by 2050, and even with new licences it will decline by 95%.
On oil-related issues, I want to ask about rural constituents who rely on heating oil to heat their homes. Some 1.5 million rural homes and 62% of homes in Northern Ireland depend on it. Prices have rocketed: in some cases, they have nearly doubled. These consumers are the forgotten victims of energy policy, not covered by Ofcom regulation and therefore without price protection and redress. Will the Government now work with the CMA and Ofgem to establish proper oversight, investigate price abuses and ensure that these households are protected?
Disruption to supplies arising from the Gulf crisis has also pushed up the cost of aviation kerosene by more than 80%. What consideration is being given to resilience, as 70% of our kerosene is imported, and how are the Government mitigating escalating costs for consumers and operators alike? On the cost of electricity and gas, we have some stability with the energy price cap, but that is short lived. While our gas supply is more secure than that of oil, gas prices have already reached a 12-month high. There is a very real risk of a renewed cost-of-living squeeze later this year, placing further pressure on families and businesses who are struggling to pay their bills.
The Government must make plans for scenarios where prices stay high and new interventions will be required. Families and businesses deserve reassurance that the Government’s support will not vanish if the crisis endures. I ask the Minister to give that reassurance today. These events bring into sharp relief the deeper issue: the structure of our energy market. Despite our work on renewables, UK consumers remain uninsulated from the global fossil-fuel markets, as our energy market has not been reformed to reflect the increase in renewables uptake. Three years on, we have been told repeatedly that energy market reform is coming. The Government have ruled out the introduction of zonal pricing, but this crisis is a clarion call that urgent action is needed. Why are we still funding crucial decarbonisation and social/environmental levies through household bills rather than general taxation? Moving more of those policy costs into general taxation would help to make the system fairer and more equitable. Will the Government commit to reviewing this balance?
Our gas storage capacity—just 12 days—remains among the lowest in Europe, so will the Minister consider the case for a greater strategic reserve? The price of gas still sets the UK electricity price 97% of the time. Do the Government agree with Greenpeace’s call to bring gas plants into a regulated asset base, creating a strategic reserve administered by NESO to break the link and save customers an estimated £5.2 billion by 2028?
We must double down on the rollout of renewable energy, grid upgrades, long-term storage, diversity of supply and greater energy interconnection with Europe, so that we can gain energy security and price control. Investors need predictability on planning, on grid connection and on the carbon pricing framework. Britain must move to a continuous pipeline of renewable projects: built faster, connected sooner and supported by modernised transmission networks. Every insulated home, every electrified heat pump and every community-scale battery gives us energy independence.
True energy security for Britain will not be won in the North Sea. It will be won on our rooftops, in our grids, in our offshore wind fields and in our insulated homes. If this latest conflict teaches us anything, it is that energy dependence is a choice, and energy independence through clean energy must now become our utmost mission.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
I thank the noble Lords for their contributions this evening and I will attempt to address the questions that they have put to me. I must say, however, to be absolutely frank, that there appears to have been one sensible contribution and one not-very-sensible contribution. I will attempt to answer them just the same, but what I thought we were talking about—and I think we are talking about—is the really difficult situation everyone finds themselves in now as a result of the Iran war: what that is likely to do to energy prices, what the likely effect will be on supplies for consumers and industry, and what we can reasonably do to make sure that we have indeed the security that noble Lords have talked about tonight, for our own supplies for the future but also in such a way that we have a secure future ahead of us as well.
In that context, I would have thought that the particular lesson we should draw from the events of the last few days is that we cannot get away from, for various reasons, enormous volatility in the fossil fuels and gas markets abroad. That itself, for various reasons, directly leads to volatility and difficulty with energy prices and energy supplies and various other things. The lesson surely has to be that we should ensure that we have secure, homegrown energy that is not subject to international volatility in the way that we are finding right now, but is also secure for our suppliers and for our consumers, and builds an industry on the back of that which actually creates jobs and businesses and energy arrangements that are secure for the long-term future.
That, of course, is to continue with the moves towards renewables and low-carbon energy, getting the role of gas as far as possible out of our markets and securing a future where our homegrown energy is not only not subject to dictators and petro states but is entirely under our own control: not only under our own control but under our own control as far as the sources of that are concerned.
We have a number of worries and concerns right now about what no one in this Chamber knows too much about—exactly how long this war will continue. Obviously, one earnestly hopes that the war comes to an end fairly soon or that, as the UK Government are pushing, we have a negotiated diplomatic settlement on particular issues for the future. However, we know that prices are going up rapidly at the moment and that there is a bit of a differential between different areas of the oil and gas economy. For example, heating oil, which is not subject to the energy price cap, is going up rapidly. We have to deal with a number of such issues on different fronts pretty immediately, regardless of the long-term future that should be in place for our energy economy.
As far as customer security is concerned, we have the energy price cap in place. That means that, for three months at least, customers of electricity and gas will have cheaper prices than they had over the most recent period. That is protected to that extent. Heating oil is not as protected; we have seen considerable spikes in that, which are also associated with jet fuel, because they are essentially the same thing—kerosene—and we have seen considerable spikes in that. The UK has considerable reserves of jet fuel but does not have the same reserves of heating oil. We have taken action just today in writing to the CMA and leaders in the heating oil industry to make sure that they keep a cap on prices, that they are not price gouging and that they are keeping their prices as modest as they can.
However, all this depends on what happens over the next period with the progress of the war and whether the Strait of Hormuz will be opened or we are at least in a position such that oil and gas can get through it, so that we can start talking about a reasonably reliable supply for world energy coming through in a way that it is not at the moment. Mark my words: this crisis is not about supply. The UK has ample supplies of gas of all sorts—50% of which is from UK fields, assuming it stays in the country. We will perhaps touch on that. We also have supplies from Norway and of liquefied petroleum gas; three terminals have been built and a number of LPG vessels are on their way to the UK, as we speak.
It is not so much about supply but about price and what happens to it if the war continues for a long time. For example, we take only about 1% of our gas in the form of LPG from Qatar—very small supplies—as most of it comes from other sources. But other forces in the world are trying, literally, to turn those LPG vessels around, so that they go to their parts of their world to supply them with LPG at an increasingly high price.
We are clear that we need to take firm action to make sure that we have the right prices for the future, the ability to protect our own energy interests and the ability to make sure that supplies, which are reliable at the moment, continue to be reliable in the longer term.
One thing this is not about is the idea that we should suddenly start drilling for gas or oil and translating a lot more gas and oil back to the UK, which the noble Lord opposite appears to think should be the next move. First, that would take a very long time to happen. Secondly, as I have previously mentioned, it is not the case that this gas would just come to the UK; it goes all around the world at a world price. It would make no difference to the world price, as we have only 0.7% of global oil and gas production in the UK, in any event. It would make no difference to the outcome. The outcome on which we need to work is to continue with our low-carbon policies to get us off gas as quickly as we can and to secure renewable, low-carbon and firm energy through renewables policy in the longer term, so that we are not dependent on gas and this kind of situation never happens ever again. That is clearly the task ahead of us, so I therefore commend to the House this Statement and what it says about the future, despite the situation that we find ourselves in at the moment.
Lord Foulkes of Cumnock (Lab Co-op) [V]
My Lords, I am really sorry that I cannot be there in person this evening, but I am also really grateful that I am being allowed to participate virtually. Does my noble friend the Minister agree with me that, in the current crisis, it is even more important that we have nuclear-powered generation to ensure that the energy supply is guaranteed? Will he consider what can be done to extend the lives of the current generators and to bring new nuclear generation forward earlier than is currently intended? Perhaps most difficult of all is to work towards finding a Government in Scotland who also agree to have nuclear generation.
Lord Whitehead (Lab)
I very much welcome my noble friend Lord Foulkes back to his place, as it were. Although he was speaking from a place that is slightly remote, I nevertheless have a real feeling that he is, in essence, in the Chamber with us this evening.
I absolutely endorse what my noble friend had to say on this subject. After all, nuclear is low-carbon, essentially renewable, essentially homegrown and stays with us for a very long time—and, in case anyone had not noticed, this is firm power. Having nuclear in our low-carbon arsenal is very much part of the process of getting ourselves off high-carbon fossil fuels and into a situation where we can control our own energy destiny in this country.
My noble friend will know that work is under way to procure a small modular reactor with Rolls-Royce, which is going very well, and there is the possibility of life extensions to one or more of the existing nuclear power stations, which, again, would be a very good contribution to the energy security of this country for the future.
Lord Fuller (Con)
My Lords, this is the week in which the well-meaning but naive approach to net zero finally hit the buffers. It is not just oil—I should know, as a 40-year veteran of the fertiliser industry—it is the gas that produces ammonia and the CO₂ that drives our economy forward. There is no domestic production of ammonia or fertilisers any more; we are reliant on the kindness of strangers. A third of the world production of fertilisers is now stranded beyond the Strait of Hormuz at the moment the crops need it the most. The reality is that farmers will pay a quarter more for their fertiliser immediately, driving food price inflation on beer, bread, biscuits and butter, just like in 2022.
But there is worse. I know that the UK’s cement and steel industries need support for the CBAM. But, from 1 January, farmers will see the prospect of fertiliser going up by a further 25%, turning a calamity into a food security catastrophe. Will the Minister urgently review the fundamental basis for the CBAM, to stop this food disaster being visited on our shores?
Lord Whitehead (Lab)
The noble Lord talked about the CBAM and ammonia production in one and a half breaths. On the question of the CBAM, it is a very important part of the low-carbon economy in terms of making sure that there is not carbon seepage from our economy elsewhere and that the low-carbon industry that is being developed is not undermined by rogue dumping and various other things in this state from elsewhere. The CBAM is certainly an important part of the green transition, not an impediment to it.
As far as ammonia is concerned, I am sure the noble Lord knows that there are ways to produce it for the UK market other than relying on gas for it. Certainly, low-carbon ammonia can be quite a substantial chemical for the future. That is, of course, not something that will happen overnight but, clearly, as the noble Lord said, we have no ammonia production in this country on a high-carbon basis, so perhaps we should encourage it on a much lower-carbon basis.
Lord Reid of Cardowan (Lab)
My Lords, in the context of media reports over the weekend, can the Minister tell us the most recent assessment that has been made of the adequacy of the UK’s current gas storage capacity to meet demand in the event of a prolonged supply disruption and the absence of an imminent return to a negotiated settlement, which all of us would of course like to see but none of us really expects in the near future? What confidence does the Minister have in that assessment? Finally, can he tell us what recent discussions have taken place with operators of the Rough gas storage facility on its future capacity and role in the UK’s energy security strategy?
Lord Whitehead (Lab)
I thank my noble friend for that question, because he alluded to one of the key points about the future of gas storage—the Rough field—and what will happen with that in the future. He will know that there were suggestions that the Rough field should be used for hydrogen storage. That is now not happening, and the Rough field is available for quite a large expansion in overall gas storage.
Having said that, we do not have enormous amounts of gas storage. On the other hand, we do have access to very secure forms of gas, albeit traded on the international markets, with the pipeline interconnectors that we have, the Norwegian gas supply that is freely available to us and, as I mentioned, with the development of LPG terminals in this country, we have the ability to land large amounts of LPG and to store it as well.
My assessment of gas security would be that, although we do not have a huge amount of gas storage, we have, collectively, a pretty secure gas security arrangement. I just drop in the point that we are producing increasing amounts of biogas in the UK, which is beginning to come to a few percentage parts of the gas supply overall. Again, that is a homegrown, secure way of doing it. That I think means that, although we will have a future management issue of declining gas in the system—and there is much less gas going into the system now than a few years ago—we nevertheless have a pretty secure gas arrangement in the UK.
Lord Howell of Guildford (Con)
My Lords, having been a Minister through six energy crises rather similar to this one, I cannot resist a bit of sympathy with Ministers having to go through it all again and explain the difficulties over which we have very little control.
Is not the simple truth behind all this that Governments, and this Government certainly, have persistently underestimated the amount of clean electricity that we are going to need for any kind of serious green transition? The data centres—I gather 71 of them are planned—are going to drink it all up. We simply need massive new investment at a pace that does not seem to be contemplated or considered at all. At the moment, we are still talking about 10 years until we try out the SMRs that the noble Lord, Lord Foulkes, referred to. We are still arguing about whether Sizewell C, another giant replica, can possibly be afforded and who is going to pay. We are still facing the fact that we are going to need to draw energy of every kind and every source, including particularly gas, from wherever we can get it through interconnectors, neighbours and LNG—the lot—in order to have a modern economy and recovery and growth. It that not the reality?
Can the Minister assure us that the Department for Energy, which seems so lost in all this, has got a grip on the pace at which we need to accelerate our nuclear decisions, storage, which the Minister has been talking about, and all the rest? We seem to be wandering along, with the next crisis almost looming up while we are standing here.
Lord Whitehead (Lab)
The noble Lord, who has great experience in these matters, makes important points about how we have to cope with substantial additional electricity demand, particularly as we electrify the economy as a whole, and for new things such as data centre demand and so on. Certainly, calculations suggest that the UK low-carbon energy economy, and the tremendous steps forward in procuring offshore and onshore wind, floating wind and various other things, is beginning to inform the quantum of energy that is needed. There are a lot of difficulties in that process, such as connections which we need to get on with very rapidly and various other things, to make sure that we can decongest the system and that the energy that we are producing gets to where we want it to be. Overall, the low-carbon energy revolution is up to the task of producing the additional electricity that we are going to use in the system for the future.
Lord Teverson (LD)
My Lords, the person smiling this evening is President Putin of the Russian Federation, because an economy that was hugely under pressure is going to be relieved when it comes to oil prices. In fact, I read this evening that Putin has offered to help Europe out with its gas shortage. I hope that will not be the case. Will the Minister speak to his Ministry of Defence and Foreign Office counterparts to put much more emphasis, work and pressure on stopping the shadow fleet of the Russian Federation being able to operate, which is its supply line that enables it to continue fighting the war against Ukraine that is a threat to us all?
Lord Whitehead (Lab)
I agree with the noble Lord that Putin may well be smiling a little at the prospect of sky-high energy prices benefiting his beleaguered economy, and that some of the sanctions may be taken off him because people would rather like some of his oil and gas for the future. It is doubly important, therefore, that we keep those sanctions in place, that we sanction the shadow fleet, and that we make sure that the oil from Russia does not get out, by hook or by crook, into various places where it should not go. The UK Government are determined to keep that process under way. It is very important that Putin is not the unwitting beneficiary of this.
Baroness Ritchie of Downpatrick (Lab)
My Lords, I congratulate my noble friend the Minister on the Statement that has been made. In supporting the Government’s policy on alternative renewables, I ask that particular attention is given to Northern Ireland, where two-thirds of the population is reliant on fossil fuels, particularly oil, for central heating. I declare an interest in that, along with many other people. Will the Minister, along with his colleagues in the Northern Ireland Office, discuss ways to mitigate the impact on consumers in Northern Ireland, who will face high electricity bills due to the current global market conditions as a result of the war in Iran?
Lord Whitehead (Lab)
My noble friend is right that, quite uniquely within the UK, Northern Ireland has a preponderance of oil used for heating, as opposed to the relatively small percentage in England, Wales and Scotland. It is particularly important that we get a grip on heating oil and kerosene in general at an early stage in this process. That is why the Government have undertaken the initiative today to make sure that the industry is very clear about how it manages the price of heating oil for the future and does not engage in price gouging as a result of this particular energy crisis. But prices in general will probably be subject to the duration of this war. Part of the process has to be to make sure that this war comes to an end as soon as it can, that supplies are secured, and that confidence is restored in the fact that energy can pass reasonably unhindered from the site of the war to its destinations. The UK Government are very involved in doing that.
Baroness Bennett of Manor Castle (GP)
My Lords, an investigation today by the Guardian finds that a series of government announcements to
“mainline AI into the veins”
of the UK economy are riddled with “phantom investments” and what the Guardian describes as “shaky accounting”. In the light of this Statement on energy markets, is this not perversely a good thing? Does the Minister agree with me that we need to be thinking about the kind of energy use that is truly beneficial and efficient, both environmentally and economically, given that, as Ofgem concluded last month, 140 proposed data centre energy projects could need more power than the current peak demand? I agree with the noble Lord, Lord Moynihan, that we have to keep powering the incubators for ill babies in hospitals. That is surely more important than generating AI slop of pictures of Jesus Christ made up of shrimps.
Lord Whitehead (Lab)
I thank the noble Baroness for that interesting image of what we do not want to happen, as opposed to what we do want to happen. Of course, what we want to happen is real, low-carbon energy projects, and there is an enormous amount of investment—£90 billion is the figure from 2024—going into the low-carbon green economy at the moment, running three times as fast as the general economy. However, that investment has to be in real things. An issue that Ofgem is dealing with at the moment is distinguishing between what you might call tyre-kicker projects that want to come online in order to fund a speculative project, and those that really are necessary for our energy renaissance as a low-carbon energy superpower. The only way to become an energy superpower is to have a super-powered energy economy of real projects with real connections that actually do the business in the way the noble Baroness suggested, rather than being diverted into things that may or may not happen and are largely speculative at the moment in their promotion and origin.
Viscount Trenchard (Con)
Can the Minister please tell the House why the Government have delayed publishing their response to last November’s report from the Nuclear Regulatory Taskforce? Are they going to act and implement the review’s recommendations, and if so, when? It is hugely regrettable that we have thrown away our former leading position in nuclear power. Why have this Government stopped the AMR competition after phase B? Will there ever be a phase C? No update has been published on the government website since July 2023. We know that small high-temperature gas-cooled reactors could be playing a large part in meeting our electricity and industrial energy needs much sooner than currently envisaged. They also enable the production of hydrogen at scale, which is also a priority for our future energy mix.
Lord Whitehead (Lab)
I may have to write to the noble Viscount on aspects of that question that I am not fully sighted on. If he is referring to the Fingleton review, for example, then a great deal of work is being undertaken on that. Part of the issue with that review is how it translates itself into legislation for the future, and that is being fully considered. However, I assure the noble Viscount that that is not a particular cause of delays; it is a question of getting it right and making sure that what is in the review can properly inform the debate for the future.
Lord Hunt of Kings Heath (Lab)
My Lords, can we come back to the North Sea and the Opposition’s obsession with it? Can my noble friend confirm that between 2010 and 2024, production in the North Sea halved? It is a super-mature basin that, even if new licences were to be granted, would have a marginal impact. On the issue of gas being used to substitute for renewables when the wind is not blowing, would we not be in a much better position if the Opposition, when in government over 14 years, had actually managed to open one single nuclear power station?
Lord Whitehead (Lab)
My noble friend is right that the North Sea is not just a mature field but a very mature one. Indeed, as we are seeing, one of the opportunities for the North Sea is not so much getting oil out of the ground but putting carbon back into it, in terms of exhausted fields that are presently near their demise or thereabouts.
There is no magic wand that we can wave to suddenly produce lots of new oil and gas in the North Sea; we are talking about small pools, small fields and so on, if at all. The emphasis clearly has to be on making sure that production continues, not on ensuring that exploration—chasing a bit of a will-o’-the-wisp in terms of the field—is under way.
My noble friend is also right that the previous Government did indeed fail to produce a single nuclear power station during the entire time of their regime, whereas now we are on the cusp of making sure that small nuclear modular reactors are a thing of the future and that we have the sort of nuclear economy that is fit for a low-carbon economy—generally dispatchable, smaller, nimble and part of the energy economy.
Carbon Budget 6
Lord Whitehead Excerpts(2 weeks, 4 days ago)
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Baroness Jones of Moulsecoomb
To ask His Majesty’s Government what assessment they have made of whether their policies and plans will deliver Carbon Budget 6.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
Carbon budget 6, which was set out in 2021 and is current from 2033 to 2037, was subject to several legal challenges. It is now in the hands of the present Government. The Secretary of State carried out a full and rigorous assessment of the package, policies and proposals prior to publishing the recent Carbon budget and growth delivery plan and concluded that they will enable carbon budget 6 to be met. He will continue to monitor policy delivery and keep the package under review.
Baroness Jones of Moulsecoomb (GP)
I thank the noble Lord for the Answer. You can imagine this is something that concerns me, because the previous Government lost two court cases about this as they were not going to achieve what they were aiming for. We have just had carbon budget 7. I am quite curious about whether this Government have really done the right risk assessments. The previous national security assessment said that nature damage will cost 12% of GDP by 2030 relative to what could have been achieved. If Labour are interested in GDP, it really ought to sort itself out on the issue of the environment.
Lord Whitehead (Lab)
We do not have the announcement of carbon budget 7 until the summer. The noble Baroness might care to think about what the process of looking again at carbon budget 6 was after those legal judgments. Indeed, the Government have taken a much more robust approach to developing the plan, which has allowed us to make a much clearer and more rational assessment of the savings that will enable carbon budgets to be met and to quantify them fully.
We have also quantified a number of real-world trends that are rather important today, and which are shaping our society and economy. That means our assessment reflects how we would expect the world to change as we accelerate towards net zero. None of these things were done when the previous Administration set out carbon budget 6—indeed, they were part of the legal challenge to those budgets. That is the reason why we consider that carbon budget 6 can be met, in addition to which a number of new policies and directions have come forward since this new Government took office.
Lord Hunt of Kings Heath (Lab)
My Lords, if we are going to meet our carbon budgets, clearly, the challenge of getting low-carbon electricity generation as quickly as possible is crucial. The latest figures I have for Q2 2025 suggest that nuclear power was about 15.1% of electricity generation. How do you square that with the Greens’ manifesto, which says that they want to get rid of nuclear power in this country?
Lord Whitehead (Lab)
The continued presence of nuclear power as a low-carbon power source is, and will be, an integral part of carbon budget 6 being met. It would be very difficult to catch up with those carbon budget 6 figures without nuclear power. It will come and go a little bit, in terms of retirements of nuclear power stations by the mid-2030s and new nuclear power stations coming online, but it will come back to at least that 15% figure. It is very difficult to see how carbon budget 6 might easily be met without that power in place.
Baroness Boycott (CB)
My Lords, I am very pleased to hear that the Government continually reassess carbon budget 6, but I would like to hear the Minister’s response to the concerns of Ofgem, which has said that the volume of grid connection applications
“exceeds even the most ambitious demand forecasts”.
Further, last week, the Energy Secretary said that energy demand “remains inherently uncertain”. What is the Minister’s department doing to try to work out how much energy will be needed by data centres? Can the Government commit to using only low-carbon sources of power for these operations?
Lord Whitehead (Lab)
In terms of the Government’s clean power 2030 plans, pretty much only low-carbon power will be used for operations in the future. As far as data centres are concerned, this is one of the real-world trends that I mentioned has been analysed out in the carbon budget considerations. While AI will certainly considerably reduce the amount of electricity that is being used, the overall trend towards a large number of data centres will increase its use, so you have trends going in either direction. However, that is within the modelling that has been done so that we can consider how the budget can be met.
On grid connections, among other things, Ofgem is very much under way in reducing the number of people in the queue and making sure that the grid is far better able to accommodate the early connections and consequences of the rollout of new grid bootstraps, for example.
Lord Lilley (Con)
My Lords, given that the pursuit of carbon budgets has so far given us the highest electricity prices in the OECD, can the Minister confirm that the pursuit of decarbonisation has so far primarily resulted in the deindustrialisation of Britian, and that our carbon budgets do not take account of the fact that we have simply exported carbon emissions to the rest of the world?
Lord Whitehead (Lab)
It is certainly not true that the pursuit of a low-carbon economy has led to deindustrialisation. The noble Lord need only look at the £60 billion of investment that is coming into the green economy and all that goes with it. Indeed, the low-carbon economy is growing three times as fast as the general economy. Many of the things that are coming in concerning low-carbon energy are very much concerned with industrial plants, grids, new forms of electricity generation and so on, which will not only produce large numbers of jobs but a very sound industrial base for the country.
Earl Russell (LD)
My Lords, to return to the Minister’s original Answer in relation to legal challenges, what assessment has been made of the electric vehicle rollout and boiler replacement mandates and their timeframes, and the Government’s ability to meet the building and transport emission cuts and the sixth carbon budget in good time?
Lord Whitehead (Lab)
On EV rollout, the noble Earl will be aware of what has been put in place for ending internal combustion engine use in vehicles and the phase-out of hybrid by 2035. The rollout of electric vehicles continues unabated, and the number of electric vehicle charging points in this country, currently at more than 80,000, is well on target for what we think necessary over the next period to ensure that the fleet works as well as it should.
Lord Moynihan (Con)
Does the Minister accept that in the UKCS we have a far smaller carbon footprint for our own North Sea gas than the full life-cycle emissions of imported LNG from Qatar and the United States? Given that the Government’s energy security is challenged with growing dependency over the next 10 years on LNG ships passing through the Strait of Hormuz, why are we the only country in the world that is failing to accelerate development of our own gas reserves, in the North Sea, for energy security and environmental objectives so that we can deliver firm and affordable power to all our high-energy-use industries, which currently face crushing energy costs, four times higher than in the United States?
Lord Whitehead (Lab)
I think the noble Lord knows that, even if we were substantially to increase the footprint of gas production in the North Sea, that would not come on stream for many years. Secondly, gas is traded on international markets at a particular price, so it would make no difference to energy costs in the UK, because the gas would go to one of the three international gas markets and bringing down that price would be beyond the control of the UK—unless we introduced draconian measures to prevent the price discovery of the particular levels of gas being undertaken on international basis, which I am sure the noble Lord would not be happy with.
Fire and Rescue Services: Clean Energy Projects
Lord Whitehead Excerpts(3 weeks, 2 days ago)
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Baroness McIntosh of Pickering
To ask His Majesty’s Government what consultation they have carried out with the fire and rescue services in England regarding clean energy projects such as battery storage plants; and what assessment they have made of the combustibility and flammability of such projects.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
The Government work closely with the National Fire Chiefs Council on battery fire safety. In October 2025, Minister Shanks held a round table on battery safety with industry, regulators and academics, including NFCC representatives. In the last five years, there have been four grid-scale battery fires in Great Britain. Analysis from the Department for Energy Security and Net Zero suggests that these fires appear less likely than fires in non-domestic buildings.
Baroness McIntosh of Pickering (Con)
My Lords, I am grateful to the Minister for that Answer, but it is unacceptable, given the fire risk posed by something as highly combustible, flammable and at risk of thermal runaway as these battery energy storage facilities, that fire and rescue services should not be statutory consultees to the planning application. To look at one constituency alone, the former Vale of York constituency that I represented, there are BESS plants to be built in Scotton and Lingerfield, Bedale and South Kilvington. That will put enormous stress on the fire and rescue services of north Yorkshire, which last year had to deal with one of the most aggravating and long-term wildfires that we have seen to date. Will the Minister use his good offices to ensure that, forthwith, in any current planning application, fire and rescue services will be statutory consultees, so that they can advise on the fire risk of each individual site with a view to mitigating the fire risk?
Lord Whitehead (Lab)
The Government already have moved to make sure that the fire services and developers are closely involved in applications as far as large batteries are concerned. The planning practice guidance has been updated to ensure that developers consult fire services in the pursuit of their applications. The fire service itself considers that to become a statutory consultee would prove enormously bureaucratic and additional to its particular work, and is in line with that particular planning practice guidance update.
Lord Roe of West Wickham (Lab)
My Lords, I declare an interest as the chair of the national Building Safety Regulator and the former London Fire Commissioner. I thank my noble friend the Minister for his Answer. Given the comprehensive new guidance that the Government have published with the National Fire Chiefs Council in December 2025 to directly address the issue of battery energy storage system consultation with fire services, if I was in my former role I would certainly agree that we would have preferred that, rather than the bureaucracy of being a statutory consultee. However, on a related matter, what action are the Government taking following the serious substation fire at Heathrow Airport, which my colleagues at the time fought for many days under very dangerous circumstances, and which closed the airport? Could my noble friend provide an update on how his department intends to implement the 12 recommendations arising from the subsequent National Energy System Operator investigation?
Lord Whitehead (Lab)
My noble friend, to whom I pay tribute for his enormous service in the fire service over a number of years, really ought to be the person who knows what he is talking about on this subject. He refers to the fire in North Hyde a little while ago, which, as noble Lords will know, caused considerable problems at Heathrow Airport in 2025. That was subject to a NESO investigation into the circumstances around that particular fire, which related to faulty maintenance in a substation. As a result of that investigation by NESO, the Government have accepted all the recommendations that were put forward in the report and are working closely with other government departments and the energy industry in implementing the 12 recommendations and 20 related actions, detailed in the Government’s response to that investigation. Among other things, that ensures a joined-up approach across organisations to improve energy resilience, emergency response and recovery. The majority of actions are forecast to be delivered by the end of 2026.
Earl Russell (LD)
My Lords, long-duration energy storage is an extremely important part of our energy transition, providing much-needed stability to our future energy systems. Falling prices and evolving technology are also helping. I welcome the Minister’s response, and we recognise that robust safety systems are in place. However, Ministers have previously spoken of considering additional measures to enhance the regulation of the environmental and safety risks of BESS. Does the Minister feel that more work is needed to reassure the public on public safety concerns?
Lord Whitehead (Lab)
The Government are actively exploring additional measures to manage safety risks on the grid-scale battery energy storage sites. That is important in the context, as the noble Earl mentions, of the substantial expansion that there will be in batteries as an essential part of the UK’s balancing energy system for the future. In August, Defra published a consultation on modernising the environmental permitting regime for industry, which included proposals to include BESS within scope of environmental permitting regulations. The Government are currently reviewing industry feedback and will publish a response in due course. That would require battery developers to demonstrate to the Environment Agency how specific risks were being managed while also providing for ongoing regulatory inspections of battery sites.
Lord Mackinlay of Richborough (Con)
My Lords, I declare my directorship of the Global Warming Policy Foundation. When I was the MP for South Thanet, we had a proposal for one of these battery farms—let us call them that—in the constituency. I wrote to Kent Fire and Rescue Service with my concerns, and it wrote back with its own. As my noble friend Lady McIntosh quite rightly states, fire and rescue services really have very little part in the process. I ask the Government to consider a statutory Section 106 requirement applying to each and every one of these battery farms, so that they have to pay for the specialist equipment that local fire and rescue services need to put such fires out. Once they start to go, there is very little that you can do with usual water systems to put them out. It requires specialist equipment and, not least, a local evacuation, because the fumes that come off these lithium-powered fires are very serious and deleterious to health.
Lord Whitehead (Lab)
I think that we should get this into some proportion. As I have said, the number of battery fires over the last five years is four. The percentage of fires that you might encounter in an industrial premises or commercial premises is higher than the proportion per thousand of battery fires. Battery fires stand within the general problem of fires across industry. As far as the extinction of those fires is concerned, there is protocol already in the fire service about how to deal with those particular fires. It is a process of enabling burnout, so that the battery does not self-reignite. The noble Lord is correct to say that there are issues relating to battery fires, particularly the ability of that battery fire to reignite itself even in the absence of oxygen. There is a protocol now to surround the fire with safety measures and allow it to burn out. That, as far as the fire service chiefs are concerned, is a perfectly adequate and safe response to those fires.
Lord Moynihan (Con)
My Lords, can the Minister revisit his figures on battery fires? On 6 September 2024, the noble Lord, Lord Redesdale, led an outstanding debate in your Lordships’ House on lithium-ion battery safety. Superb contributions were made across the House, particularly by the noble Lord, Lord Winston. Since then, battery fires in bin lorries and at waste sites in the UK have reached an all-time high—not four, but more than 1,200 in 2024. That is an increase of 71% from 700 in 2022, which was described by the Environmental Services Association as an “epidemic”. Will the Minister take this opportunity to go back to his department and agree that, at a minimum, we need the fire service, the Environmental Agency, and the Health and Safety Executive to be statutory consultees for all planning and new stand-alone battery energy storage systems? There is urgent action required in this sector.
Lord Whitehead (Lab)
I do not intend to go back to the department and tell it that its particular concerns are wrong. What we are talking about today are fires in large stand-alone battery storage plants, of which there have been four in the last five years. If the noble Lord would like the individual addresses and locations of those four fires, I have them here. It is not the case that this covers every battery fire there has ever been. We know that certain batteries—for example, illegally imported batteries in scooters—tend to be a little less safe than other batteries. There is proper concern about some areas of battery safety and maintenance, but not about this particular sector, which is very well regulated and safe now. As I have set out today, there have been further measures to ensure that the safety and integrity of those stand-alone batteries is maintained.