Energy Bill [ Lords ] (First sitting)
Alan Whitehead ExcerptsTuesday 23rd May 2023
(1 year, 4 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 23 May 2023 - (23 May 2023)
The Chair
Copies of written evidence received by the Committee will therefore be circulated to members by email and published on the Bill website.
We now proceed to line-by-line consideration of the Bill.
Clause 1
Principal objectives and general duties of Secretary of State and economic regulator
Dr Alan Whitehead (Southampton, Test) (Lab)
I beg to move amendment 75, in clause 1, page 3, line 11, at end insert—
“or who seeks to be a party to arrangements for the use of sequestered and transported carbon dioxide”.
This amendment seeks to refer specifically to the “use” of carbon dioxide, as well as arrangements for transport for the purpose of disposal.
The Chair
With this it will be convenient to discuss the following:
Amendment 76, in clause 2, page 3, line 35, at end insert—
“(c) the use of sequestered and transported carbon dioxide.”
This amendment seeks to provide an additional area of activity prohibited on an unlicensed basis.
Amendment 81, in clause 57, page 51, line 19, at end insert—
“(d) a carbon capture use revenue support contract.”
This makes explicit the case of a contract for the use of carbon capture.
Dr Whitehead
It is a pleasure to serve once again under your chairmanship, Mr Gray. We have served in Committee together on a number of occasions, and I know that you will keep us closely to the subjects in hand as we go through the Bill, which I am sure will be a good thing for its progress.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I thank the hon. Gentleman for giving way. I want to make a personal point: may I ask him to speak up slightly? I am hard of hearing and I am already struggling to hear what he is saying. I thank him.
Dr Whitehead
I appreciate that point. A moment ago, I was just making a personal aside to the Chair. I will try to address the Committee in a more expansive manner.
This group of amendments would put the full definition of carbon capture, usage and storage into the Bill. As Members know, this Bill chapter is about various activities that go on with carbon capture, usage and storage, but unaccountably the detail in the Bill talks about only carbon capture and storage. We may think that is the definition of what we are talking about, but it is not just a process of sequestering the carbon that arises from, say, a power station or cement works. Various carbon capture and storage arrangements will have to be made for the sequestering of carbon dioxide in many uses, both industrial and energy-based, throughout the country.
Then, so the story goes, that carbon dioxide is transported, by either pipe or barge, and is sequestered at a suitable site. The Secretary of State for Energy Security and Net Zero waxed lyrical recently about just how much sequestering space there is around the UK waters. His view, which I think is absolutely correct, is that the sequestration of carbon dioxide as an industrial activity in the UK, with all the preparation that goes with it, is not just a necessary feature for the end of the carbon capture and storage process but something that the UK can offer to many countries around the world for their carbon sequestration, making a substantial plus-industry for the UK out of the process.
That is the end of the carbon dioxide story—how it goes from capture, either by chemical means or by extracting it from flue gases or whatever, to being put on its journey. In my long history of engagement on carbon capture and storage, I have always said that that is the case, but a number of years ago the Government added an important rider to that process in the definition that we use: CCUS, not CCS. CCUS is important because it is not just an uninterruptable process of carbon going into the transportation and sequestration arrangements, having been captured in the first place; there are points in the process whereby the carbon can be taken out of the transportation and sequestration process. Depending on the quality of the carbon dioxide that has been captured, it can be put to secondary use, before being captured again in the process, as it goes round again.
There are considerable opportunities in making the cycle go round twice, or several times, before the sequestration takes place. That is potentially an important part of getting best value out of the carbon capture and storage process. One of the first uses of the process that I came across was quite a while ago, when I paid a visit to one of the world’s first operational carbon capture and storage plants at the Boundary dam in Saskatchewan. The energy company in Saskatchewan was capturing the carbon output from a fossil fuel energy plant and diverting the carbon that was being captured in the first instance to the process of repressurising wells in oil fields to enhance the recovery of oil. Of course, the carbon was then recaptured after that point but, importantly, that cycle had been broken and something else had happened.
That is just one use, but there are many other uses that we could think about putting carbon dioxide to. It can be used in the chemical industry in the production of methanol, in metalworking to harden the casing of moulds, or in the petroleum industry to optimise the yield of oil wells. It has a substantial use in healthcare and in horticulture. As we know from junior-school biology, plants can increase their size and output by having a carbon dioxide-rich atmosphere in which to grow, and there are substantial opportunities to use carbon dioxide under those circumstances.
Those are not significant interruptions, as it were, in the carbon-capture cycle. Indeed, the use of carbon under those circumstances is beginning—or will begin—to be programmed into the carbon capture and sequestration process. Of course, programming it in is important in terms of the arrangements being set out in the Bill for the circumstances under which licences can be granted.
We will hear a lot about licences in the passage of this Bill. As we know, certainly in the energy sphere, pretty much everything that can or cannot be done is licensed in one way or another, and there is a great deal of legislation for that purpose—for example, the Petroleum Act 1998 and the electricity and gas Acts, which set out the circumstances under which licences should be granted. Indeed, as we will see in the first part of the Bill, there is a restated imperative that people cannot carry out these things on an unlicensed basis; they really must have a licence at all stages of carbon capture—a licence to capture, a licence to transport and a licence to sequester.
The hole in the Bill is in what happens when the process is interrupted. I do not use the word “interrupted” in a derogatory sense; it is very positive that we can make the most use of carbon dioxide in its passage. Having invested a lot of money in capture, it is a good idea to try to recycle the process as much as we can, but for reasons I am not quite clear on—the Minister may be able to enlighten me—the wording of the Bill does not appear to account for that particular sphere of CCUS activity.
It may be that I have missed something and that the use of carbon should not be included in the licensing and licensable arrangements. The Government may be quite satisfied that the interruption of the process is perfectly okay to leave alone. I do not think that is the case because, as I have set out, it is part of the whole process. If we are to take carbon capture and storage seriously, we will want to know that carbon dioxide use, as part of the process, goes back into the cycle of capture and storage in the long term, and that carbon is not just captured but used for a particular purpose in the way I described. After that, it disappears back into the atmosphere, presumably to be captured again at a future date.
It is important that the licensing arrangement is complete as far as the passage of carbon is concerned. Amendments 75, 76 and 81 would add the use of carbon dioxide to the various clauses that relate to the overall process. The amendments would provide a definition of carbon capture use, and additional wording for the process of licensing and of use itself. We would not want to move the amendments separately; they are rightly marshalled together in today’s proceedings. I move the amendments together, as they are grouped in the selection list, because, as I have said, they are essentially concerned with the question of use.
I am sure the Minister will provide us with a suitably inspired reply, so that we can be reassured either that this has all been thought about, and our amendments are therefore superfluous, or that there is a problem and, whether or not he accepts the amendments this morning, the process will be looked at to ensure that we have the full definition, and the full process is in hand as far as the passage of carbon capture and storage is concerned.
The Chair
Technically speaking, the Member has moved only amendment 75. The other two amendments will be decided on when we reach the relevant clauses. He cannot move all three together; he has moved amendment 75. I call Taiwo Owatemi.
Andrew Bowie
I thank my right hon. Friend for his intervention. I would be happy to give a thorough explanation of exactly how the carbon capture and storage will proceed; I am sure we will get to that in the course of our debate on the Bill, and in other places. However, I am not sure where that would fit within the context of this debate, other than to say that the technology being developed by companies, organisations and clusters around the UK is world leading. When it comes to being able to store in the future the carbon dioxide being produced in the UK now, the North Sea is of course the greatest asset that we have as a country. The oil and gas industry will be able to play a pivotal role in that development as we move forward.
Given the reasoning I have set out, I hope that the amendment tabled by the hon. Member for Southampton, Test will be withdrawn.
Dr Whitehead
I appreciate what the Minister has said this morning. Frankly, though, I am not wholly convinced that the processes have been fully accounted for. I emphasised the various uses of carbon dioxide. The Minister is right that not all those uses lead to eventual sequestration. However, most of the uses that do not lead to additional sequestration do, on occasions, sequester the carbon dioxide in the process itself.
For example, carbon dioxide used in horticulture is substantially sequestered during the process of growing the plants. There is potentially an important use of carbon dioxide in processing hydrogen and in producing sustainable aviation fuel. Those processes sort of sequester the carbon in producing a different product, which is itself then burned. We then have to sequester the whole lot again, but the product has been used in the meantime.
It is important to concentrate on aligning the processes within carbon dioxide use as closely as possible with the process of sequestration, not simply allowing the carbon dioxide to escape. One thing that concerns me is the use of carbon dioxide in the process of the enhanced recovery of oil, because unless that carbon dioxide can be sequestered at the point it is injected into a well, although it produces greater amounts of oil it leaks into the atmosphere again, so we have a net negative outcome. We have produced more oil, but arguably it should have been left where it was in many instances.
Alec Shelbrooke
That leads to the question that I asked the Minister. The issues that the hon. Member for Southampton, Test is raising show that there is a research and development need for sequestration in, for instance, licensing oil and gas. That will need a large investment, so does he agree that it is important that the oil and gas industry uses some of its large profits to ensure that it can do the R&D available to sequester carbon dioxide, and does that call into question the idea of scrapping the return on profits—often criticised by the Opposition—because we need R&D to achieve this?
Dr Whitehead
All right, I won’t be.
The key point that I am trying to add to this morning’s debate is that a number of systems could be greatly enhanced in their operation by, for example, having a much greater supply of carbon dioxide available to them than is the case at the moment. The Minister may remember that we had a mini-crisis a little while ago: one of the factories that was producing industrial-use carbon dioxide closed down and we were left in the UK with one factory producing carbon dioxide. There was then a considerable run on it, which meant that, going to the heart of our civilisation, carbonating fizzy drinks was potentially under threat.
Having much greater availability through the carbon capture and storage process of carbon dioxide that could be used in industrial processes could be very good for industry, and indeed for the security of the processes that we continue to need carbon dioxide for. At the same time, that process needs some supervision to ensure that we are not undoing what we have started to do in carbon capture by making the product more widely available. Although I do not intend to push the amendment to a vote, I hope that the Minister will take onboard the idea that this is a substantial area, which we need to pay close attention to. We need to regulate it so that it points in the same direction as the carbon capture and storage process and so that the whole system is not undone by what is available.
The Chair
Order. Interventions must be brief; Members should not ramble on for half an hour. I call Alan Whitehead.
Dr Whitehead
The hon. Member is right that we should not seek to regulate everything out of existence. As she says, provided that the basic position is in place many industrial and commercial processes do not actually do harm, and there are all sorts of ways of making sure of that; then we can leave them alone.
My only point is not about separately regulating something that has otherwise been completely unregulated, but that this is an overall process and we need to make sure that, overall, the processes all point in the same direction. That is, one way or another, that we produce less carbon dioxide, allow less carbon dioxide to escape into the atmosphere and do what we can to use sequestered carbon dioxide in the best way. Normally, that means transporting it, for which we need regulations to make sure that there are no leakages, for example.
At the moment, we are considering a number of different options when it comes to the transportation of carbon dioxide. As the hon. Member for South Ribble will know, that does not just consist of trying to put down pipelines to deliver the carbon dioxide to the port of exit before it is put into the storage site. Obviously, sites themselves need proper regulation so that they are safe for the purposes of storage.
Earlier, the right hon. Member for Elmet and Rothwell questioned the process of storage. It is vital that the storage itself is suitable. We know, from what we have to rely on, that the storage is likely to be sound—that means, frankly, that once we have put the stuff underground it stays there and does not leak out subsequently. That is quite a science in its own right. A great deal of the time spent looking at storage sites is about being absolutely sure that the site is as we thought it was in order to avoid disaster once we have committed ourselves to storage on the site. Given the different kinds of storage site, considerable work is under way, all of which needs to be regulated properly.
We have to consider alternative forms of storage—saline aquifers, for example. It is not just a question of storing carbon dioxide in depleted oil or gas fields; a number of other geological formations appear to be suitable for the purpose. Whether those alternative formations can be used for storage onshore as well as offshore is a particular concern. People may raise the issue of carbon dioxide leaking out onshore—as well as offshore, potentially.
Throughout, there is a need to regulate how the process works. With respect to the hon. Member for South Ribble, I do not think that it is over-prescriptive to say that we need some regulation of the use of carbon dioxide—after all, in theory at least, using the carbon for the best purpose is an essential part of the process—hence the amendments that we have tabled, which I hope are constructive.
Olivia Blake
There are two points to this, are there not? There is a set amount of carbon at the moment, which is increasing annually. Usage allows us to reduce that—instead of new forms of carbon going into the atmosphere, we would reuse what we have. That is why the amendment is key. I hope that the Government take it away to look at again. It is also basic chemistry that if we are putting CO2 into a chemical reaction, we will not get CO2 coming out the other end until the product degrades, so it is a falsehood that it will all immediately leak—
The Chair
Dr Whitehead, perhaps you will be brief. We have already given this group quite a long debate.
Dr Whitehead
Thank you, Mr Gray. My hon. Friend makes an important point about the distinction between what we do now with carbon dioxide and what we might do with it in future. At present—I mentioned a carbon dioxide factory that closed down—we are actually purposely making carbon dioxide in other processes, where it was previously sequestered among the molecules or whatever of the raw material. In future, we will take the carbon dioxide that we have captured in a different form to replace the manufactured carbon dioxide. It is important to understand the difference and to have a positive effect on the arrangements for carbon dioxide used for industrial purposes by substituting the creation of carbon dioxide with the use of carbon dioxide already going through the system.
I agree, Mr Gray, that we have had a good debate. We do not wish to press the amendment to a Division, but I am sure that although the Minister has not exactly been taking copious notes, he will be assured of the purpose of the amendment and can consider whether anything further needs to be done to ensure that such processes are integral to the system as a whole. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
New clause 33—Purposes—
“(1) The principal purpose of this Act is to increase the resilience and reliability of energy systems across the UK, support the delivery of the UK’s climate change commitments and reform the UK’s energy system while minimising costs to consumers and protecting them from unfair pricing.
(2) In performing functions under this Act, the relevant persons and bodies shall have regard to—
(a) the principal purpose set out in subsection (1);
(b) the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008 (carbon targets and budgets) and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change;
(c) the desirability of reducing costs to consumers and alleviating fuel poverty; and
(d) the desirability of securing a diverse and viable long-term energy supply.
(3) In this section “the relevant persons and bodies” means—
(a) the Secretary of State;
(b) any public authority.”
This new clause and NC34, NC35 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.
New clause 34—Strategy and policy statement—
“(1) The Secretary of State may designate a statement as the strategy and policy statement for the purposes of this Act.
(2) The strategy and policy statement is a statement prepared by the Secretary of State that sets out—
(a) the strategic priorities, and other main considerations, of His Majesty’s Government in formulating its energy policy for Great Britain (“strategic priorities”);
(b) the particular outcomes to be achieved as a result of the implementation of that policy (“policy outcomes”); and
(c) the roles and responsibilities of persons (whether the Secretary of State, a relevant public authority or other persons) who are involved in implementing that policy or who have other functions that are affected by it.
(3) The strategy and policy statement must have regard to the considerations listed in subsection (2) of section [Purposes].
(4) The Secretary of State must publish the strategy and policy statement in such manner as the Secretary of State considers appropriate.
(5) For the purposes of this section, energy policy “for Great Britain” includes such policy for—
(a) the territorial sea adjacent to Great Britain, and
(b) areas designated under section 1(7) of the Continental Shelf Act 1964.
(6) A relevant public authority must have regard to the strategic priorities set out in the strategy and policy statement when carrying out regulatory functions.
(7) The Secretary of State and a relevant public authority must carry out their respective regulatory functions in the manner which the Secretary of State or the relevant public authority (as the case may be) considers is best calculated to further the delivery of the policy outcomes.
(8) A relevant public authority must give notice to the Secretary of State if at any time the relevant public authority concludes that a policy outcome contained in the strategy and policy statement is not realistically achievable.
(9) A notice under subsection (8) must include—
(a) the grounds on which the conclusion was reached; and
(b) what (if anything) the relevant public authority is doing, or proposes to do, for the purpose of furthering the delivery of the outcome so far as reasonably practicable.”
This new clause and NC33, NC35 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.
New clause 35—Strategy and policy statement review—
“(1) The Secretary of State must review the strategy and policy statement if a period of 5 years has elapsed since the relevant time.
(2) The “relevant time”, in relation to the strategy and policy statement, means—
(a) the time when the statement was first designated under section [Strategy and policy statement], or
(b) if later, the time when a review of the statement under this section last took place.
(3) A review under subsection (1) must take place as soon as reasonably practicable after the end of the 5 year period.
(4) The Secretary of State may review the strategy and policy statement at any other time if—
(a) a Parliamentary general election has taken place since the relevant time;
(b) a relevant public authority has given notice to the Secretary of State under subsection (8) of section [Strategy and policy statement] since the relevant time;
(c) a significant change in the energy policy of His Majesty’s Government has occurred since the relevant time; or
(d) the Parliamentary approval requirement in relation to an amended statement was not met on the last review (see subsection (12)).
(5) The Secretary of State may determine that a significant change in His Majesty’s Government’s energy policy has occurred for the purposes of subsection (4)(c) only if—
(a) the change was not anticipated at the relevant time, and
(b) if the change had been so anticipated, it appears to the Secretary of State likely that the statement would have been different in a material way.
(6) On a review under this section the Secretary of State may—
(a) amend the statement (including by replacing the whole or part of the statement with new content),
(b) leave the statement as it is, or
(c) withdraw the statement’s designation as the strategy and policy statement.
(7) The amendment of a statement under subsection (6)(a) has effect only if the Secretary of State designates the amended statement as the strategy and policy statement under section [Strategy and policy statement].
(8) For the purposes of this section, corrections of clerical or typographical errors are not to be treated as amendments made to the statement.
(9) The designation of a statement as the strategy and policy statement ceases to have effect upon a subsequent designation of an amended statement as the strategy and policy statement in accordance with subsection (7).
(10) The Secretary of State must consult the following persons before proceeding under subsection (6)(b) or (c)—
(a) a relevant public authority,
(b) the Scottish Ministers,
(c) the Welsh Ministers, and
(d) such other persons as the Secretary of State considers appropriate.
(11) For the purposes of subsection (2)(b), a review of a statement takes place—
(a) in the case of a decision on the review to amend the statement under subsection (6)(a)—
(i) at the time when the amended statement is designated as the strategy and policy statement under the previous section, or
(ii) if the amended statement is not so designated, at the time when the amended statement was laid before Parliament for approval under subsection (7) of the next section;
(b) in the case of a decision on the review to leave the statement as it is under subsection (6)(b), at the time when that decision is taken.
(12) For the purposes of subsection (4)(d), the Parliamentary approval requirement in relation to an amended statement was not met on the last review if—
(a) on the last review of the strategy and policy statement to be held under this section, an amended statement was laid before Parliament for approval under subsection (7) of section [Strategy and policy statement: procedural requirements], but
(b) the amended statement was not designated because such approval was not given.”
This new clause and NC33, NC34 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.
New clause 36—Strategy and policy statement: procedural requirements—
“(1) This section sets out the requirements that must be satisfied in relation to a statement before the Secretary of State may designate it as the strategy and policy statement.
(2) In this section references to a statement include references to a statement as amended following a review under subsection (6)(a) of section [Strategy and policy statement review].
(3) The Secretary of State must first—
(a) prepare a draft of the statement, and
(b) issue the draft to the required consultees for the purpose of consulting them about it.
(4) The “required consultees” are—
(a) the relevant public authority,
(b) the Scottish Ministers, and
(c) the Welsh Ministers.
(5) The Secretary of State must then—
(a) make such revisions to the draft as the Secretary of State considers appropriate as a result of responses to the consultation under subsection (3)(b), and
(b) issue the revised draft for the purposes of further consultation about it to the required consultees and to such other persons as the Secretary of State considers appropriate.
(6) The Secretary of State must then—
(a) make any further revisions to the draft that the Secretary of State considers appropriate as a result of responses to the consultation under subsection (5)(b), and
(b) prepare a report summarising those responses and the changes (if any) that the Secretary of State has made to the draft as a result.
(7) The Secretary of State must lay before Parliament—
(a) the statement as revised under subsection (6)(a), and
(b) the report prepared under subsection (6)(b).
(8) The statement as laid under subsection (7)(a) must have been approved by a resolution of each House of Parliament before the Secretary of State may designate it as the strategy and policy statement.
(9) The requirement under subsection (3)(a) to prepare a draft of a statement may be satisfied by preparation carried out before, as well as preparation carried out after, the passing of this Act.”
This new clause and NC33, NC34 and NC35 are intended as a suite of purpose and strategy clauses for this Bill.
Andrew Bowie
I believe that that was made clear. As I said earlier, we are working with Ofgem to ensure that it has the capabilities to deal with all of this. In terms of a national policy statement for Ofgem moving forwards, there will be a series of announcements over the next few months and, indeed, the year that will enable Ofgem and the future service operator to get into a position where they are able to deal with what we introduce through the Bill and other statements.
Clause 1 establishes Ofgem as the economic regulator for carbon dioxide transport and storage. It also establishes the principal objectives and statutory duties for both the Secretary of State and Ofgem in carrying out their functions under part 1 of the Bill. Transport and storage networks will act as the enabling infrastructure for carbon capture and storage from a range of sources, including power plants, industrial facilities, low-carbon hydrogen production and, potentially, direct air capture.
The economic regulation model provides long-term revenue certainty for network operators while protecting network users from monopolistic behaviours, as has already been described. The Government consider that Ofgem is the most appropriate body to act as the economic regulator for carbon dioxide transport and storage, due to its experience and expertise in the economic regulation of the overall energy sector. The selection of Ofgem as the regulator has received broad support from the industry. The principal objectives set out in clause 1 reflect the balance of considerations for a nascent carbon dioxide transport and storage sector.
Dr Whitehead
Clause 1 concerns the appointment of Ofgem as a regulator for these activities—in particular, carbon capture and storage. The new clauses that we have tabled seek to gather together what is in the Bill and provide it with a purpose clause, and to suggest to the Secretary of State that the Bill’s contents might be encapsulated, for future direction and use, in a strategy and purpose document.
The Chair
Order. Let me interrupt the hon. Gentleman. New clauses would normally be discussed towards the end of the Committee’s debates. We took the view that, because these new clauses deal with strategy and purpose, they might by that time be out of order. We therefore thought it reasonable to allow His Majesty’s loyal Opposition to have a full debate on them now, rather than towards the end of our consideration, as would happen normally.
Dr Whitehead
Indeed, Mr Gray; thank you for reminding the Committee of that. I am grateful to you and to the Clerks for your careful consideration of how we should proceed with these new clauses. As you say, the normal procedure—indeed, I have taken part in a number of Bill Committees where this has happened—is that new clauses are put at the end of the selection list. I can see that a number of new clauses have been selected for debate right at the end of our consideration of the Bill. By the way, I am slightly less pleased to see that the changes to the Bill that were wrought in the other place have been placed, by and large, in a new section at the end. I assume that those will be debated—
Dr Whitehead
Indeed. They will be debated at the same time, at the end of our consideration of the Bill.
As you rightly say, Mr Gray, new clauses 33 to 36 may have be surplus to our discussions, should we have debated them at the end of proceedings rather than at the beginning. I am pleased that we are able to debate them now, given that they are concerned with our discussions on the early part of the Bill.
As has been widely trailed, the Bill is one of the most extensive that has come before this House, certainly in the energy sphere, and is probably one of the most extensive and substantial Bills in recent history. It seeks to do an enormous number of things. Although we do not think it does enough, by and large the things that it does are all necessary for the passage of our energy economy from a high-carbon to a low-carbon basis, with all the things that go with that, which we will discuss later in the Bill, such as carbon capture and storage, hydrogen, new forms of management of grid systems—all the things that point in a green, low-carbon direction. It is essential to put them into legislation by means of what I would describe as the green plumbing of the system. A great deal of the Bill is not about high-flown rhetoric on why we should decarbonise our structures, but about getting down to the real business of doing it as quickly as possible.
I think we can agree that the Bill lists a disparate series of things that are fit for our discussion and ready to go. Indeed, in a famous recent TikTok video, the Secretary of State stood against a wall with individual pages of the Bill stuck on it and said that it is the largest Bill on energy in history. I tweeted a response to the effect that the Government have been really good at getting the largest bills in history into the laps of customers—that was a bit of levity in response to the Secretary of State’s more serious point. The Bill is extensive, for deliberate purposes, which all point in the same direction.
There is perhaps cause for a little concern. When Bills seek to do such extensive plumbing work, it is easy to lose sight of what that plumbing is actually about. We need to be clear that we do not have a series of actions that might or might not be taken in respect of the various subject headings in the Bill; they are all actions that have to be taken in pursuit of what should be the overall purpose of the Bill, which is to secure us a low-carbon future. The Conservatives and Labour agree that those actions are not in dispute; they are essential for the purposes that we think are important for the future of our low-carbon economy.
The idea of a purpose clause is not something dreamt up by the Opposition as an interesting diversion during the early stages of discussing the Bill. A number of pieces of legislation have purpose clauses; they have fallen out of fashion in more recently, but if one looks back over a reasonable period, one sees that many Acts have such sections at the beginning. They recapitulate what comes after and put it in context, so that people who have not been subjected to our detailed discussions in Committee can say, “That is what this Act is about. There are provisions in the Act that point in this direction, and I should look at and respond to the Act in the light of that overall purpose.” That is a good and important thing.
Purpose clauses are not just nice things to have at the front of a Bill. They are quite useful for those who seek to interpret an Act at a later date—lawyers and the like. They may have opinions about what a particular part of the Act does, but they will be guided by the purpose clause at the front of the Act. For the Ministers who implement the terms of an Act, it is useful to have a clear statement of what Parliament thought we were doing when we put the Act on the statute book and of the framework in which the rest of the Act should be read.
The purpose clause that we have tabled, new clause 33, states:
“The principal purpose of this Act is to increase the resilience and reliability of energy systems across the UK, support the delivery of the UK’s climate change commitments and reform the UK’s energy system while minimising costs to consumers and protecting them from unfair pricing.”
That is a good summation of the Bill’s purpose. Members may want to add or subtract bits, but it is reasonable summation of where we are and where we want to go. Subsection (2) seeks to ground the Bill in other important legislation and states:
“In performing functions under this Act, the relevant persons and bodies”—
that is, people who are interpreting the Act’s principal purpose—“shall have regard to” certain matters, including, most importantly,
“the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008…and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change.”
The new clause therefore grounds the Bill firmly in the historic Climate Change Act 2008, sections 1 and 4(1)(b) of which provide for the target in the reduction of carbon dioxide and greenhouse gas emissions that the Secretary of State is supposed to ensure that we achieve by 2050. What will happen to whoever is the Secretary of State in 2050 if they are unable to deliver that target is debateable, but I think we can agree that the Act has really stood the test of time.
Andrew Bowie
I thank the hon. Member for his careful and considered contribution, which reflected the careful and considered discussions that His Majesty’s loyal Opposition and the Government have been having on the Bill and on the wider issue of net zero and energy security over the past few months and years. He is absolutely right: this is not a partisan debate, and there is very little to distinguish the Opposition’s approach to this issue from that of the Government. We all agree that our overarching aims, though this Bill and through the other actions that we as a country are taking, are to reduce emissions, reduce bills, strengthen our energy security, and create and secure new British jobs in the process, which will be to the benefit of this country and help us to lead the way in the world.
The hon. Member spoke with great purpose. I find very little to disagree with in the substance of what he said about the purpose clause, but he also admitted that the Bill is stuffed full, to use his phrase, of clauses that explain exactly what we are striving to do. For that reason, I suggest that despite the good intentions behind this specific purpose clause, it would be superfluous to the Bill at this stage. However, it is something that we are willing to consider moving forward.
With regard to the hon. Member’s comments on the strategy and policy statement, the power of the 2013 Act was not specific to the measures contained in that Act but covered all of the Government’s strategic energy priorities. That is why we published the consultation on an SPS just 13 days ago.
Andrew Bowie
Well, we got around to it eventually. The hon. Member for Kilmarnock and Loudoun asked whether the strategy and policy statement covers Ofgem. Yes, it does, and Ofgem will have regard to the SPS consultation that we are working on right now.
As I said, we intend to designate a final strategy and policy statement by the end of this year. That will be a decision for Parliament, not the Secretary of State, whichever party the Secretary of State happens to be from at the time. The new clauses are therefore superfluous to the Bill, despite the fact that they are well intentioned and that there is very little in their contents that I can disagree with. That is why I ask the hon. Member for Southampton, Test not to press his new clauses.
The Chair
I presume that His Majesty’s loyal Opposition wish to say something. I remind the Committee that when you wish to catch my eye, it is important to stand up and make it plain that you wish to speak. If you do not do so, I will not call you. I call Dr Alan Whitehead.
Dr Whitehead
Thank you, Mr Gray, and I appreciate that undertaking. My knees do not necessarily work in the way that I would ideally like them to in my advanced years, but I will attempt to do that.
The clauses provide a pretty good start point on prohibition on unlicensed activities. Indeed, clause 2 states:
“It is an offence for a person to carry on an activity within subsection (2) unless the person is authorised to do so by a licence.”
Again, that is the whole licensing arrangement that pervades the energy sector. The clause then specifies the activities, including
“operating a site for the disposal of carbon dioxide by way of geological storage”,
and
“providing a service of transporting carbon dioxide by a licensable means of transportation.”
We tabled an amendment on the use of carbon dioxide, but we were assured by the Minister at that time that that would be effectively covered by the scope of this clause.
That is a great start, but then we move on to not just the consultations but, in clause 5, the exemption from prohibition. Interestingly, clause 5 states:
“The Secretary of State may by regulations grant exemption from the prohibition under section 2(1).”
It does not actually specify what those exemptions might be; it just states that the Secretary of State may by regulations grant exemption. I therefore presume that, within that secondary legislation, the Secretary of State will unpack and set out the exemptions, and indeed how far those exemptions might run. It is interesting that the Bill states:
“An exemption may be granted…unconditionally, or subject to such conditions as may be specified.”
I presume that those conditions will be specified in the regulations that the Secretary of State will be required to introduce in secondary legislation. It also states:
“An exemption may be granted…indefinitely, or…for a period specified in, or determined by or under, the exemption.”
That will also presumably be in the regulations.
Kerry McCarthy (Bristol East) (Lab)
I know that this is a lengthy Bill, and there is a lot to get through, but I slightly had trouble keeping up with the breakneck speed at which the Minister introduced the clauses, so I am glad to have an opportunity to question him. He said that although there will be instances where licences are not needed, the situation might change and a licence may be needed. It would be helpful to have some examples of those scenarios to illustrate when the Secretary of State might invoke these powers. Does my hon. Friend agree?
Dr Whitehead
Yes, indeed. My hon. Friend has read my mind, as she often does.
This clause is procedural, as I have illustrated, and essentially says: “There may be exemptions. We don’t know what they are or what they might consist of, but don’t worry about it. The Secretary of State will think about that in due course and produce regulation that we hope—but we don’t know—might set that out in greater detail.” It is important that the Minister sets out today what might be in his mind when he makes those regulations, as far as exemptions are concerned. Is he a wide exemption Minister or a narrow exemption Minister? If he is a wide exemption Minister, what is the scope of the exemptions that he will be thinking about? If he is a narrow scope Minister, how does he interpret subsection (7), which states that an exemption may be granted indefinitely, given what he just said about how things may change in the future?
I know that there are things that we thought were indefinite in legislation that have turned out not to be—most importantly because Parliament cannot decide what the previous Parliament thought. However, it seems to be a hostage to fortune to put the word “indefinitely” in this legislation in the way that we see in clause 5(7).
I would be grateful if the Minister could provide us with some thoughts on what exemptions might look like and what his intentions are as far as regulation is concerned. I have not looked yet at the end of the Bill to see how any regulations might be considered by Parliament, but when the Secretary of State makes regulations on exemptions, I would expect those to be put forward under the affirmative rather than the negative procedure so that we have an opportunity to examine what they consist of.
Kerry McCarthy
Clause 5(6) refers to “Notice of an exemption” being given. It would be helpful to have clarity on the reference to
“Other persons who may be affected by it.”
I am not sure how that would be decided. It is really important that we have transparency and accountability in these processes. Does my hon. Friend agree?
Dr Whitehead
Yes, I do agree. Again, I appreciate that the wording of this Bill might be regarded as necessarily fairly vague, because of the fact that—in the words of Donald Rumsfeld—there are known knowns, known unknowns, unknown knowns and unknown unknowns about the future. However, it is important at least to have on the record something that guides us in a more positive way on who might be the “other” people affected and on indefinite exemptions and so on. It would be a good idea if that could at least be included in the discussion of the Bill.
By the way, our proceedings in Committee are of course recorded, and they are used on occasion in law to determine what the purpose of particular clauses was and what was thought to be in the mind of legislators when they introduced them. So it would be helpful, not just for our discussions today but perhaps for the future record, if the Minister was able to clarify these matters in a suitable way.
Alec Shelbrooke
It is a pleasure to serve under your chairmanship, Mr Gray, for what will be a long and detailed consideration of the Bill.
I want to focus on these clauses, because they provide an overall setting for the entire agenda. As the hon. Member for Southampton, Test outlined, the Bill is perhaps one of the most important pieces of legislation to come before the House in the 21st century, as we look at how we deal with these issues for the rest of the 21st century—it really is that significant.
To draw on the hon. Gentleman’s comments about unknown knowns and so on, we have to be careful at this early stage that we do not regulate to the point that we choke off innovation and research. A complaint is often made at several levels about how difficult it can sometimes be in this country for innovators and entrepreneurs to move forward without getting tied up in huge amounts of red tape. Given the global competition that exists in the field of climate change, environment and green energy, we want to have a competitive advantage.
I am sure we will discuss later areas such as tax credits and how research and development can be expanded in this industry. The Bill is so wide-reaching, across so many Departments—indeed, you might rule us out of order as we consider it, Mr Gray—that I expect to be told once or twice that some provision is not the responsibility of the Minister. The Bill ties up so many areas of Government, including the Department for Business and Trade, the Treasury and the responsibilities of the Minister.
Therefore it is important that we do not try to license every possible outcome that we may consider at this stage. That would delay the process. Often, it is important to allow a Minister to make a reasonably quick decision as something comes to the fore, whether through secondary legislation or a delegated decision. If we look at America’s Inflation Reduction Act or the EU’s response to it, we know that we are in a highly competitive, subsidised market. I do not believe in the heavy subsidisation of companies; I believe in being able to exploit their intellectual capability to be innovative, to be world leading and to get things to market as quickly as possible. Having said that, later clauses of the Bill concern things, such as battery storage, about which I have great concerns and on which we probably need a bit more legislation. That is one of those areas that may well fall under a different Department, but it will be important to raise those issues in the context of the Bill.
I understand the desire to say, “We must try to use the Bill to offset any health and safety concerns that may come along, because we are in such a new technological area.” But when we look at the granting of licences in this part of the Bill, we would not want to choke off the innovators for which this country is well regarded in so many countries around the world. We are an innovative nation. We have the lead on innovation. China steals IT and reduces the cost of producing materials through poor wages and a disregard for health and safety, but it is not an innovator, which is what our universities and sectors work so well towards being.
The hon. Member for Sheffield, Hallam mentioned that she had spoken to the institutions in her great city. In a previous life, when I worked for the University of Leeds, I was involved in the early days of nanotech. We joined up all our seven major universities, including the universities in the hon. Lady’s city, and that accelerated Yorkshire’s ability to lead in nanotechnology. We could do that because we could draw those things together, bring the expertise together and accelerate it. Innovation hubs formed out of those universities in the early 2000s and gave us a leading edge, which we have used.
As legislators, we must try to ensure that we provide a framework for companies, innovators and researchers to work within. But that should not be prescribed in such a way that, when a product is ready to take to market, needs extra investment or needs to be able to work elsewhere, we have put a very tight pair of handcuffs on the ability to do those things. The premise of the Bill gives direction, but my hon. Friend the Minister should not make it so tight that we choke off the very things that we are trying to do.
We all talk about the huge potential investment in the green economy, about the green investment bank and about the massive changes that have taken place in the Treasury in recent years. Of course, we talk about having a smooth transition when there is a potential change of Government. That is why the Bill is so important and why I pushed to be on this Committee. The Bill is a major change that will stand this country—and indeed the world, if we can export some of the technology—in good stead in terms of achieving the better society we are trying to achieve on climate change. It is important that we go down this road, but let us not make the provisions so restrictive that we choke off the innovation at which this country excels.
Oral Answers to Questions
Alan Whitehead Excerpts(1 year, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Dr Alan Whitehead (Southampton, Test) (Lab)
Will the Minister explain how, on his watch, things have got to such a wretched state with grid development? The grid apparently cannot now connect renewable energy plants to the system until after 2035, the date by which the Government say in the energy security strategy
“we will have decarbonised our electricity system”.
Presumably they envisage that system will be connected to the grid by that point. Has he been unaware that there is a serious problem, or was he aware, but did nothing about it?
Andrew Bowie
My watch began only in February. However, I believe the United Kingdom is a victim of its own success, as this is what happens when new renewable electricity production is developed at such scale and pace. We understand the challenges facing the country and the grid. That is why we are meeting with Ofgem and have commissioned the Winser review, which we will publish in the summer. We are determined that we will meet that 2035 target.
Dr Whitehead
The Minister says that some things are beginning to happen, but does he recognise in this context the figure of £30 billion, which is the investment the energy system operator considers is necessary to make the system fit for offshore wind and other renewables coming on to the system, not by 2035 but by 2030? Is he prepared to commit now to find that amount of investment, one way or another? If he cannot do that, how can we take his assurances on action at all seriously?
Andrew Bowie
This Government are determined to face up to the challenges that we have. We have moved forward at such pace, having inherited a disgraceful situation in terms of how much renewable electricity was being produced under the last Labour Government. That is why the grid is facing such challenges today and why we have commissioned Nick Winser to produce a review in the summer to see how we can move much faster to achieve our goals. I would welcome the hon. Gentleman and the Labour party being more supportive, talking up this country and our success in developing renewable electricity, and working with us to tackle the challenges that he so rightly brings to the Floor of the House today.
Energy Bills Discount Scheme Regulations 2023
Energy Bills Discount Scheme (Northern Ireland) Regulations 2023
Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023
Energy Bills Discount Scheme Pass-Through Requirement Regulations 2023
Energy Bills Discount Scheme Pass-Through Requirement (Heat Suppliers] Regulations 2023
Alan Whitehead Excerpts(1 year, 4 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Dr Alan Whitehead (Southampton, Test) (Lab)
We have been around these houses quite a few times, between us. I cannot remember exactly how many SIs we have had on the energy bill support scheme pass-through requirements—the non-domestic element of the original scheme—but I think it is well into double figures. During that period we have debated a whole range of things relating to those SIs, both positive and negative. The overwhelmingly positive aspect of the SIs has been that they provide the support people need for their bills in these times of great uncertainty and difficulty.
Today we are debating five SIs, which, secure the energy bill discount scheme for non-domestic businesses in Great Britain and Northern Ireland for a further year. The Minister will not be surprised when I repeat my concerns about the likelihood of some people getting the money they are entitled to, in view of the requirements of the SIs. She will recall our discussions about whether there should be a strict legal liability on the intermediaries responsible for the pass-through arrangements. There has been a further development in the arrangements for the energy ombudsman to become involved in matters of dispute, but he or she has no legal recourse to enforce payments. We still lack a strict legal liability for those whom the legislation makes responsible for passing through payments to the right people. I do not think we will profit greatly by having a long debate about that— I do not think we will resolve it further—but I note that I am still not entirely satisfied.
I am puzzled about how the new scheme fits in with paragraph 5 of schedule 6 to the Energy Prices Act 2022, which provides for reduced energy charges for non-domestic customers in Great Britain. It is right that the secondary legislation should concern itself with a one-year scheme, particularly for non-domestic customers, bearing in mind that the contracts they enter into do not fall strictly within any particular six-month period. One problem we had in our previous discussions about non-domestic customers was that someone might take out a contract for a non-domestic service that started before the support period and finished halfway through it, or that they might take out a contract halfway through the support period that finished outside it. There could be problems at either end. Those issues seem to have generally been resolved, but a period of a year is a more approachable proposition.
The Energy Prices Act sets out a two-year window within which support is to be provided, and states that that support
“may only provide for the reduction of charges for electricity supply that takes place during a period of six months or less;”.
As the explanatory notes to the Energy Bill Discount Scheme regulations state,
“The EBDS takes us up to the end of the third of the four successive periods.”
That means that the Act envisages a maximum of two years in four different tranches of six months. It then states:
“Support under EBDS will be provided for a year (divided into two six month periods), reflecting the limits in the Act.”
Dividing the support into six-month periods reflects the limits in the Act, but it does not make it clear—it is certainly not clear in the secondary legislation that we are debating—whether the superior legislation so limits the provision of support for a period of six months or less that putting forward a proposal that support should be provided for one year does not necessarily count, for legislative purposes.
It may be perfectly in order for the Government to set an aspiration that support should be for one year, but that may not necessarily accord with what the Act says. In order to make that right for a year, we may have to be here, yet again, in six months’ time re-legislating for the second of those two six-month periods.
I would like to know whether today’s proceedings really will be the last word on that support, or whether the proposal for a year’s support is an aspiration that will require us to go around the houses with legislation in six months’ time. If the Minister can clarify that, I will be very happy to support these regulations. In fact, I am happy to support them for the reasons I have outlined; I will not make my support conditional on the Minister’s doing that, because I am sure it will take some clarification. It is important, however, that we make it clear that we have finished legislating to give that certainty, and that as a result of today’s proceedings, we have put to bed for another year the question of price support for non-domestic customers.
Amanda Solloway
I thank hon. Members for their contributions to this debate. First, I address the question of whether these instruments are the end of the legislation in this area. I sincerely hope so. However, if there is anything to add when we meet tomorrow, I will of course let the hon. Member for Southampton, Test know, but it is very much my clear understanding that they are the end.
I turn to the point made by the hon. Member for Cardiff West about the music industry. I understand his great passion. He indicated very clearly why the industry is so important to the whole United Kingdom. He mentioned that he is very proud of our music industry—I am as well. I will attempt to explain the reason why we have these schemes. If I am unable to give a full enough explanation, as always I will be happy to offer a further meeting. Within the discount scheme, there is the universal level, which I believe is the level originally mentioned by the Department for Digital, Culture, Media and Sport Minister, my hon. Friend the Member for Hornchurch and Upminster. On that level, support will be given across all of the non-domestic industry. That is my understanding of the support that the music industry will be receiving.
Clearly, the energy-intensive industries needed more support based on the energy that they use, and the fact that a lot of the work is international was also taken into account. The list that the hon. Member for Cardiff West referred to was the standard industrial classification list, known as the SIC list. That is the standard that we used to define the energy-intensive industries that were to have the additional discount. If I have not explained that fully, I am happy to have a meeting with the hon. Member at a later date.
Dr Whitehead
The Minister mentions the so-called SIC list. That is an interesting list in so much as it provides, as my hon. Friend the Member for Cardiff West said, a number of categories of energy-intensive industries. Some of those categories are very narrowly drawn, and some are very widely drawn. His point, at least in part, was that some of the categories within the energy-intensive classification for the higher level of funding are very tightly drawn, and therefore they come into that level, whereas others are very widely drawn.
I mentioned the discrepancy between ornamental or leisure gardens and horticulture, which is often very intensive, and between horticulture and agriculture. Clearly, agriculture is outside the energy-intensive industry classification, but because horticulture is classified within agriculture it does not get in, even though it has similarities with things in the energy-intensive list. I wonder whether the Minister will find time, at some stage, to look at the SIC list to see whether it does the job that we think it does when it comes to ensuring that people get the assistance. Energy-intensive industries should be well enough drawn to ensure that we do not have the sort of anomalies that my hon. Friend the Member for Cardiff West thinks we have.
Amanda Solloway
The hon. Gentleman makes an interesting point about the SIC list. That is obviously the list we are using at the moment. We have taken a consistent approach to identifying the most energy and trade-intensive sectors with all the sectors that meet the agreed threshold to be eligible for this support. The Government are committed to continuing to provide essential energy bill support to eligible UK businesses, charities and public sector organisations until April 2024, to help avoid unnecessary financial pressures and job losses resulting from the ongoing situation in the wholesale market.
In addition to the baseline discount for all non-domestic consumers, the new scheme also provides, as we have discussed at length, much-needed targeted support for energy and trade-intensive industries and consumers on heat networks. That additional support will ensure that those most exposed to volatile energy prices and international trade are supported while limiting the fiscal burden on the taxpayer. The methodology ensures that the scheme captures those industries that have been identified as being less able to pass through their increased energy costs to customers because of international competition, as demonstrated by the level of trade intensity, and require an additional level of support. The pass-through requirement sets out how the benefit is passed on to end users in a reasonable and just way. The delivery of this calculation has been designed to ensure that it is not prescriptive but supports all scenarios.
By replicating existing civil enforcement mechanisms, we hope to avoid any complications for end users and provide clarity on how disputes can be raised. My Department has published clear guidance on gov.uk, both for intermediaries and for end users, that provides detailed information to help those affected. We are keen to ensure that all end users, including those who are vulnerable, receive the benefits of the schemes to which they are entitled. We will continue to review our pass-through requirement communication strategy, including reviewing guidance on gov.uk and offering engagement sessions to ensure that intermediaries understand their obligations and that customers receive the benefits to which they are entitled. I commend the regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the Energy Bills Discount Scheme Regulations 2023 (S.I. 2023, No. 453).
ENERGY BILLS DISCOUNT SCHEME (NORTHERN IRELAND) REGULATIONS 2023
Resolved,
That the Committee has considered the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 (S.I., 2023, No. 454).—(Amanda Solloway.)
ENERGY BILLS DISCOUNT SCHEME (NON-STANDARD CASES) REGULATIONS 2023
Resolved,
That the Committee has considered the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 (S.I., 2023, No. 464).—(Amanda Solloway.)
ENERGY BILLS DISCOUNT SCHEME PASS-THROUGH REQUIREMENT REGULATIONS 2023
Resolved,
That the Committee has considered the Energy Bills Discount Scheme Pass-through Requirement Regulations 2023 (S.I., 2023, No. 463).—(Amanda Solloway.)
ENERGY BILLS DISCOUNT SCHEME PASS-THROUGH REQUIREMENT (HEAT SUPPLIERS) REGULATIONS 2023
Resolved,
That the Committee has considered the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 (S.I., 2023, No. 455).—(Amanda Solloway.)
Non-Domestic Alternative Fuel Payment Application Scheme Pass-through Requirement Regulations 2023
Alan Whitehead Excerpts(1 year, 4 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Dr Alan Whitehead (Southampton, Test) (Lab)
What the Minister says about the regulations is all good stuff in terms of the need to ensure that high users of kerosene in off-grid industrial and commercial settings get the benefit of £150 and, indeed, of a top-up, as the Minister mentioned, in recognition of the high fuel costs that they are experiencing.
This is, I hope, the last in a dizzying catalogue of secondary legislation, all of which the Minister’s predecessor, the right hon. Member for Beverley and Holderness (Graham Stuart), and I sat here scrutinising over a long period to try to get right the regulations related to all the different areas under consideration for payments. In this instance, we are considering pass-through requirements. The principle that we should require pass-through in circumstances where an intermediary receives a payment and the end user of the kerosene, in this instance, may not get it because they are not the primary person or organisation to whom the payment goes, is very important as far as the overall legislation is concerned. When we last met to discuss regulations of this sort, I asked the right hon. Gentleman whether they were the last ones. Apparently that was not the case, but I hope these regulations are the last ones. After all, the scheme is pretty much over and done with, but we are still trying to legislate to ensure that we get it right.
As I say, the regulations are well and good—except, as the Minister pointed out, and indeed as the Joint Committee on Statutory Instruments pointed out in relation to another SI, they rather fall down because no one actually has to do anything about them. We have a substantial piece of legislation to try to make sure that people get their money. As my right hon. Friend the Member for Leeds Central acutely pointed out, the intermediary has to write to the end user of the kerosene, in this instance, to tell them that £150 may be coming their way and, if they are not going to get the full amount—there may be reasons for that, due to administration and other costs incurred by the intermediary—what proportion of it might come their way, and that has to be just and reasonable. However, as the Joint Committee pointed out, in law, the intermediary does not actually have to do any of that. It can simply sit on its hands and not tell the end user that they are entitled to £150 and that a portion of it, or otherwise, will come their way. The intermediary can just say nothing and the law will not come after it, because there is no strict liability in the regulations to make anyone do anything.
Yes, there is a theoretical remedy: as with pretty much anything else, if the end user does not get their £150, they can try to recover it as a civil debt through the courts. But, frankly, if someone does not even know they have £150 coming their way because they have not been told in the first place, it is rather difficult for them to take legal action to get hold of it. The intermediary has no legal liability to tell the end user that £150 should be coming their way. Indeed, there is no Government register of those intermediaries that should be passing on the money, so there is no real way of bottoming this out as far as intermediaries are concerned.
The Government have said in response to the Joint Committee on Statutory Instruments that—as the Minister outlined, if I may paraphrase—all this strict liability, for the size of the problem before us, would be an awful faff, and the scheme is coming to an end more or less anyway, so it might be disproportionate. The other odd thing they say, as the explanatory memorandum sets out, is:
“Furthermore, it is considered important to ensure consistency across the pass-through regulations relating to the energy support schemes.”
That means: “We have not done it in other pass-through regulations, so we are not going to do it now. None of them has strict legal liability involved, and they all have that very inadequate, virtually non-existent way of getting any sort of remedy for the £150, so at least we are consistent.” That is not a very good way of going about such things.
The Opposition will not oppose the regulations, because it is important for people get their pass-through money if possible. However, the judgment made by the Government is, in effect, to say that it is useful to have incomplete requirements to do various things such as notification, because most people will probably do it, and it is important that they are there as guidance for how to do it. That may well be true, but a number of people might desperately need the money, as the Minister said, but miss out for various reasons. It is not always the case that the people who are intermediaries—perhaps not in this case, but in a number of others, such as park home owners—are necessarily the most completely upright, careful and judicious operators in their organisations. I can see the temptation for some people to say, “Right, we’re not going to have anything to do with this. Nothing much will happen to us, so it’s probably worth our while not to do anything, because we will probably save more money than we might conceivably expend in one or two small legal cases.”
Overall, I do not think that this has been a glorious way to respond to the points made by the Joint Committee on Statutory Instruments. I am not sure that the decision simply to ignore what the Joint Committee said is ultimately supportable, but I hope that the regulations work well and that the people involved get their £150 and their top-up for kerosene. The regulations are well intentioned, given that they are about ensuring that that happens, and we are absolutely with the Government in that desire, but I wonder whether the Minister intends simply to leave the issue or might she possibly have a look, once things are under way, to see if there is a potential problem in the lack of strict legal liability that we think there is at the moment? She may come back to the House at some stage to say either, “Well, it turns out there wasn’t a problem,” or, alternatively, “Hmm, there was a bit of a problem, so how can we get it better next time?”
Energy Bill [Lords]
Alan Whitehead ExcerptsTuesday 9th May 2023
(1 year, 4 months ago)
Commons ChamberRead Full debate Energy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 86-II Second marshalled list for Report - (13 Apr 2023)
Dr Alan Whitehead (Southampton, Test) (Lab)
We have had a good, calm and well-informed Second Reading debate. Indeed, we have heard contributions from across the House emphasising the point that the Bill is necessary but not necessarily sufficient.
My right hon. Friend the Member for Leeds Central (Hilary Benn) asked who will pay the changed levies as far as heating is concerned, and spoke about the need to undertake that properly for customers.
My hon. Friend the Member for Llanelli (Dame Nia Griffith) pointed us towards the rise of state-controlled companies’ investment in new energy arrangements, and was adamant about the Bill lifting of the ban on onshore wind.
My hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) made a strong contribution on the role of hydrogen in heating and, in particular, on the hydrogen trials that he has experienced. Perhaps we can assure him that we will certainly pursue an amendment to the Bill along the lines that he suggested.
My hon. Friend the Member for Stockton North (Alex Cunningham) spoke strongly about carbon capture and storage, about the importance of CCS in the Teesside industrial cluster, and about the importance of ensuring that the industrial clusters can play their role in CCS as they develop further,
In the spirit of general cross-party support for the Bill, I think it also worth mentioning selected contributions from hon. Members who are not on the Labour side. Unfortunately, if everyone stuck to the contributions from their own side, those of the hon. Member for Brighton, Pavilion (Caroline Lucas) would not be mentioned by anybody, but she made a strong contribution about the future of coal, about the need to support the amendment on coal tabled in the other place, and about the ludicrousness of continuing to maximise the economic production of oil, echoing many of the sentiments of my right hon. Friend the Member for Doncaster North (Edward Miliband).
The right hon. Member for Ludlow (Philip Dunne), who chairs the Environmental Audit Committee, spoke strongly about the need for security of investment in this market, and the length of arrangement that would secure those investments and confidence in markets for the future.
Finally, the right hon. Member for Kingswood (Chris Skidmore), author of the net zero report, spoke enormous sense about delays being the biggest threat to net zero in future. He supported the retention of Lords amendments to the Bill, as did many other hon. Members, on community energy changes and other things that are part of the Bill that we are debating in the Commons.
Wera Hobhouse
Does the hon. Gentleman think that it is important that we do something about methane flaring and venting, which I raised in my contribution?
Dr Whitehead
Yes, I am happy to acknowledge that that is an important issue in the transition to net zero for the oil and gas industry, and that it is ripe for further legislation to outlaw it in the not-too-distant future.
It is fair to say that hon. Members across the House went along with the theme that we have tried to establish on the Bill: it contains a great deal to support, and it is a Bill that is necessary to introduce things that are essential to the development of a low-carbon economy, to the achievement of the many targets on low-carbon energy and renewable deployment, and to the new forms of energy management that the Government have already put in place and on which they are seeking to succeed.
The Bill establishes mechanisms and business arrangements for carbon capture and storage, and for the manufacture and deployment of hydrogen as a low-carbon fuel for the future. It starts to delineate how energy systems are going to be governed and managed for the future, with the establishment of the independent system operator. For the first time, it introduces a proper system of heat network regulation, and it takes the planning and development of heat networks further. It heralds some of the essential elements of energy market reform. In short, it undertakes a great deal of what I would call necessary “green plumbing”, which has to be done now if our low-carbon energy system of the future is to work effectively.
The Opposition have some serious differences with the Government about how to go about those changes, but we acknowledge and support the generality of those “green plumbing” measures, not least because their establishment will undoubtedly help the new Labour Government greatly as we embark on our far more ambitious programme of energy decarbonisation and energy efficiency from 2024 onwards. Indeed, one of our substantial criticisms of the Bill is how long it has taken for us to get to the point of establishing the legislation that will guide the next stages of our energy decarbonisation.
As we have heard, the Bill has been with us for 10 months in its almost finalised form. Yes, the Government have sought to add amendments to the Bill in another place, and there will be further amendments in the Commons, but the measure could have been on the statute book many months ago—and time is of the essence in getting going with the next stages of decarbonisation. Instead, last autumn we were treated to the spectacle of the then Secretary of State for Business, Energy and Industrial Strategy pulling the Energy Bill from its established progress after just two sessions of debate, and sitting on it for over three months for no apparent reason while the legislative process stalled completely. That led to the remarkable situation of the Opposition writing to the new Minister during that period of stasis demanding that the Bill be recommenced as soon as possible. I know about that because I was the person who wrote the letter. [Interruption.] Indeed, I did a very good job there.
Yes, this Bill is necessary, but many Members have asked whether it is sufficient, and we think it is certainly not. There are many missed opportunities to legislate for many aspects of the green transition that are or will become necessary shortly. There are many instances where the green plumbing in the Bill looks, frankly, fairly faulty and could do with beefing up. For example, the Bill fails completely to lift onshore wind back into place as a key element of our low-carbon energy armoury. The Bill fails to redefine Ofgem’s remit to start from a low-carbon imperative. The Bill fails to address another key part of that armoury—community energy—in any sort of meaningful and enabling way.
The Bill fails to address the very real changes in regulatory machinery that will need to accompany the transition from oil and gas to a predominantly low-carbon energy environment. The Bill continues to propose soaking customers for the support of future infrastructure when we require entirely new forms of support that recognise both the breadth of the work that has to be done and the institutions that we will need to support investment and development.
There are many areas where we can say, “Yes, but” to this Bill and put forward the measures that will enable it to rise to the challenge of decarbonisation in a comprehensive way. That is why we will embark on that task as the Bill goes into Committee by tabling the amendments that will make the Bill so much more robust for the challenge of the future, and we hope the Government will be receptive to those proposals. That process has been started, with a number of very well-thought-out additions made to the Bill in the other place on Ofgem, hydrogen, coal, community energy and home retrofitting. We will seek to defend those changes in this place, and we hope the Government will see the wisdom of them and not seek to overthrow them.
This is a necessary but not sufficient Bill that we want to get on the statute book, preferably with the added heft of our proposed changes to it in Committee, so that it becomes more on the sufficient end and less just necessary. We will not seek to divide the House on Second Reading but instead will give conditional support and assistance as far as we can with an early emplacement on the statute book.
Labour has an ambitious low-carbon energy programme for government, with a fully decarbonised power system by 2030, including a doubling of present onshore wind deployment; a grid that is fit for enabling and delivering a low-carbon economy; Great British Energy, an investment company that can do so much to speed the energy transition along; a massive programme to retrofit 19 million homes over 10 years to reach our energy efficiency targets; and serious planning of the energy transition, so that it is a just transition both in the North Sea and elsewhere. All these plans will benefit from many of the measures that are in the Bill, but they could be so much more supportive, and that is why we want to see an extended and more robust version of the Bill on the statute book as soon as possible.
Oral Answers to Questions
Alan Whitehead Excerpts(1 year, 5 months ago)
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Andrew Bowie
The east of England does do a lot of heavy lifting for renewables—almost as much as the north-east of Scotland—but this is not a competition. I am delighted to inform my right hon. Friend that I am visiting East Anglia next week to meet communities in the area. Indeed, I met producers and manufacturers yesterday to see what they can do to mitigate the impact on her local community and other communities in the region.
Dr Alan Whitehead (Southampton, Test) (Lab)
If we are prevented from building renewable power in the first place, connection times become rather a moot point. Will the Minister explain why he has failed to lift the ban on onshore wind, despite the Government saying that it would be lifted by the end of April?
Andrew Bowie
This Government are committed to onshore wind as a huge part of our renewable energy mix—14 GW, in fact. We are also committed to new renewables offshore and to new nuclear, which the Labour party opposed for such a long time. It will be a whole collection of those new technologies and infrastructure projects that will help us drive our way towards our net zero ambitions and the cleanest and cheapest electricity in Europe.
Dr Whitehead
That wasn’t very good, was it? The Government’s own offshore wind champion Tim Pick said last week that we will miss our 2030 offshore wind ambitions by more than 10 GW because of poor grid connections. Even with the lifting of the onshore ban—if we believe the Minister—developers will not invest given the prospect of a 13-year delay in grid connection. When will the Minister commit to a speedy programme of grid capacity building, to give onshore and offshore wind a good chance of success?
Andrew Bowie
As I said, this country is leading the way in investment in new renewable technology. We acknowledge that there are difficulties connecting to the grid, and we are investing in improving that. Nick Winser’s report is coming in June, which will give recommendations to Government on how to reduce the timescale for connecting those new projects to the grid. That is the focus of this Government, not playing politics. We are taking real decisions to benefit this country, to cut our carbon emissions and to reduce energy bills across the piece.
Energy Support for Farms
Alan Whitehead Excerpts(1 year, 6 months ago)
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Dr Alan Whitehead (Southampton, Test) (Lab)
I congratulate the hon. Member for Upper Bann (Carla Lockhart) on securing the debate. It is on an important and usually forgotten part of our current energy debates. We talk generally about domestic customers and industry and commerce and what they get in the various energy bill support schemes and discount schemes and so on, but we very rarely talk about farming or agriculture.
We tend to think that there is not much energy going into these rural buildings. We completely overlook just how much energy is used by farms, particularly in intensive industries such as poultry farming and horticulture where an enormous amount of energy is used in many parts of the process. It is rather hidden behind the seemingly low-cost, low-energy appearance of the rural environment.
It is important to concentrate on the farming sector’s problems with energy costs and what they mean for the ability of such businesses to sustain themselves. We must also think about what that means for the on-costs for everybody else, such as effects on the cost of food production. Many farms are pushed between the prices they are going to get for their end products from further up the chain and their own costs coming in. We must consider how they are going to make a living between those two points.
The hon. Member for Upper Bann gave examples of just how much energy costs have gone up for relatively small farms in her area. Those costs are, of course, replicated across the United Kingdom. She made a strong case for the question of energy support for farms to be looked at with a far wider lens that encompasses not just the small contributions that have been made to farms through the energy bill support scheme and others—though I know Northern Ireland has a slightly different scheme from the rest of the UK, where the payments are lumped together. There has been a considerable debate in Northern Ireland about the extent to which farms that are both domestic properties and farms get the full amount of payment through the scheme. Indeed, I have discussed with Ministers in Delegated Legislation Committee proceedings the rather complicated nature of that process.
The hon. Member for Upper Bann put forward the case that, notwithstanding Northern Ireland’s scheme, farms ought to be treated as part of an energy-intensive industry. I am sure hon. Members will be interested to know what actually is classed as an energy-intensive industry. The starting point for being treated as an energy- intensive sector is to fall in the 80th percentile for energy intensity—meaning it must fall in the top 20% for energy intensity across the UK—and the 60th percentile for trade intensity. So there is a formula as to what gets on the list of energy-intensive industries and can then receive additional support from the EBRS and be substantially exempted from environmental levies on the whole industry. The exemption has been 85% for quite a while, and there are discussions about whether it should be increased to 100% in the not-too-distant future. Categorisation as an energy-intensive industry is important, in a number of ways, to getting support with energy.
It is curious that poultry processing, for example, is on the list of energy-intensive sectors, but poultry production is not, and that things relating to ornamental plants are on the list, but horticulture is not. I suspect that may be because of the NACE—nomenclature of economic activities—classes, which define sectors. It may be that what look to us like sectors—poultry and horticulture, for example—are lost in the wider definition of a class such as agriculture and farming.
The Government should review fairly urgently how sectors are defined for energy intensity purposes. Seventy-one sectors come under the definition of energy-intensive industries. Is farming simply losing out because, as the sector is defined, its relatively lower-carbon elements dilute the elements with greater energy intensity? Such a review is well overdue. If the sectors were drawn a bit more closely, I think farming—or at least substantial elements of it, in the way that the hon. Member for Upper Bann described—would come under the definition.
Curiously, coalmining is defined as an energy-intensive industry and therefore 85% exempt from environmental levies, when we might think that that activity has something to do with the raising of those levies in the first place. There may be a wider case for redefining what counts as an energy-intensive industry.
This is a very important issue, and the Government could do something about it, not simply by providing a larger cash amount to farms, but by defining much more clearly what it is to run a farm and how energy use affects such definitions. The Government can look again at those definitions, and I hope that the Minister will commit to doing just that.
Oral Answers to Questions
Alan Whitehead Excerpts(1 year, 7 months ago)
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Dr Alan Whitehead (Southampton, Test) (Lab)
The Secretary of State says that he has brought the scandal of prepayment meters to an end, but it certainly is not at an end. Indeed, the Government were repeatedly warned about this scandal but were effectively paralysed while thousands of vulnerable householders were disconnected by the back door. Customers now face more uncertainty as the moratorium on forced installations ends in just four weeks’ time, with nothing in its place. Can the Secretary of State confirm that there will be no lifting of the ban until this rotten system has been reformed and that there will be a proper compensation scheme managed by the Government for every customer affected?
Grant Shapps
As I mentioned previously, there is a role for prepayment meters. For example, my son lives in a shared flat, and they find a prepayment meter a very good way to pay the energy bill. I do not think that an outright ban is the right way to go, but the hon. Gentleman and others have rightly pointed out the level of concern across the House, which I absolutely share, about prepayment meters being forced on customers. We will ensure that we do not go back to those bad old days that I was pleased to play an important part in stopping.
Draft Electricity Supplier Obligations (Green Excluded Electricity) (Amendment) Regulations 2023
Alan Whitehead Excerpts(1 year, 7 months ago)
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Dr Alan Whitehead (Southampton, Test) (Lab)
This statutory instrument is, in principle, pretty straightforward. It removes something that, as the Minister said, was a consequence of state aid discussions, which took place when the CfD first became a major instrument of renewable development in the UK. It deals with the CfD that was in place in the UK, and a potential loophole in state aid regulations. Suppliers importing electricity from Europe should not have that supplier obligation applied to them and the electricity they are bringing in from European sources.
So far, so good. I agree that since we do not now have responsibilities as far as state aid is concerned, it is really no longer relevant to continue with an arrangement that was dependent on a state aid loophole. However, that has a consequence, which the Minister alluded to: pretty much all the energy that comes in from Europe has to come in through an interconnector. In the past, suppliers on this side of an interconnector, having contracted for something to come through that interconnector to the UK, had to produce evidence of the extent to which whatever came through the interconnector would otherwise have been eligible for a payment into the Low Carbon Contracts Company. There was a supplier obligation to pay out the generators, which were getting money from the low carbon contract in respect of the strike price that they had set up for the CfD. They had to provide evidence of the power coming in to claim that there was no money to pay, as it were, for that supply coming in.
Now the opposite is the case. It appears that suppliers will have to provide evidence of what is coming in, as a renewable source, via the interconnector from Europe, to ensure that they do pay. I presume that they will be paying into the Low Carbon Contracts Company in the same way as other people who are eligible in the UK, as far as CfDs are concerned.
My first question is this: why would any company that now has to do the reverse of what it did previously—produce evidence of a green import through an interconnector in order not to pay—willingly give evidence to pay? Would the company not simply say, “We don’t know where our power comes from. It comes through the interconnector, so it might be renewable or it might not”? If the company did have to pay, rather than being exempted, the likelihood of it ensuring that it did not put any evidence in that anything had come in from a renewable source would be quite high. Nothing in these regulations suggests that the Government would require that evidence to make people pay, and there is nothing about any penalties or enforcement against bodies that did not supply that information for the purposes of paying in future. Do the Government have any view on that development possibly taking place?
The second issue, as I am sure the Minister will be aware, is that we do not have an inversion in place as far as the relationship between CfD strike prices and reference prices is concerned. That means that, instead of the normal procedure as far as CfD holdings in this country are concerned, the supplier does not get a payment out of Government in respect of the strike price. As the reference price is consistently above the strike price, or it is at the moment, the supplier has to pay back into the Low Carbon Contracts Company. The company then has a reasonable obligation to pay that money back to suppliers.
Are suppliers newly obligated to pay money into the LCC for CfDs, which were previously exempted, but also to get money from the LCCC when the general strike price is inverted against the reference price? Is that an indication that those companies might have to report what they are bringing into the country, and register that renewables have come in and that, therefore, they might be eligible to get money back, as far as their contribution to CfDs are concerned? If the Minister can enlighten us on those two points, I would be grateful, but we have no intention of opposing the instrument.
Andrew Bowie
I thank hon. Members for their contributions. The hon. Member for Southampton, Test, made some good and sensible points on the SI and the policy. It is only right and proper that companies provide evidence that they are importing electricity. This SI was brought forward following extensive consultation with industry, and we expect companies to do the right thing. In terms of sustaining extra costs, those suppliers who have used the exemption will pay the scheme a cost in closer proportion to their market share. There are more suppliers who will benefit from this change than not. The change is considered to be very minor. The extra cost that the companies will pay will be minor, and we do not suspect that it will be in any way a disincentive for them to declare that they are importing energy.
I welcome the fact that the hon. Member for Kilmarnock and Loudoun put on record that he considers CfD to be a success. I agree: it certainly has been a success. Indeed, we have only to look at my constituency and the number of wind turbines springing up off the coast of Aberdeenshire. On grid connections and the cost for electricity generation in Scotland, he knows that there is a trade-off, and that consumers in Scotland pay less as a result of the higher charges being placed on electricity generation. That is not to say that there are not issues that need to be addressed. I agree that there are, and we should look at them. I hear loud and clear his comments on tidal stream energy. In fact, I have been to see the exciting developments in Orkney, and I look forward to doing more on this.
Dr Whitehead
I am grateful to the Minister for giving way. He passed over my point about whether the suppliers will get a payout from the LCCC when the difference between the strike price and reference price is inverted from its normal position. If they will, how much will that come to?
Andrew Bowie
I am terribly sorry: I will have to write to the hon. Member on that point, but I will get an answer to him in the next couple of days, because it is important that it is answered.
I hope that I have given hon. Members the necessary assurances to approve the statutory instrument. As I said, the changes in these regulations will mean that a supplier in GB will pay a proportion of the CfD scheme cost that is closer to its market share; will remove the condition imposed on the British scheme by the European Commission; and will remove the incentive for GB suppliers to import EU-generated renewable electricity. They must be made now, ahead of the end of the scheme’s reporting period on 31 March, so that electricity suppliers and the scheme administrators can plan accordingly.
Question put and agreed to.