Energy Support for Farms

Lord Whitehead Excerpts
Tuesday 21st March 2023

(3 years ago)

Westminster Hall
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Lord Whitehead Portrait Dr Alan Whitehead (Southampton, Test) (Lab)
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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

Lord Whitehead Excerpts
Tuesday 28th February 2023

(3 years, 1 month ago)

Commons Chamber
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Lindsay Hoyle Portrait Mr Speaker
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I call the shadow Minister.

Lord Whitehead Portrait Dr Alan Whitehead (Southampton, Test) (Lab)
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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 Portrait Grant Shapps
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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

Lord Whitehead Excerpts
Monday 27th February 2023

(3 years, 1 month ago)

General Committees
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Lord Whitehead Portrait Dr Alan Whitehead (Southampton, Test) (Lab)
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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.

--- Later in debate ---
Andrew Bowie Portrait Andrew Bowie
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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.

Lord Whitehead Portrait Dr Whitehead
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Will the Minister give way?

Andrew Bowie Portrait Andrew Bowie
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I will, given that we have taken up so little time so far.

Lord Whitehead Portrait Dr Whitehead
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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 Portrait Andrew Bowie
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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.