Gas-fired Power Stations

Debate between Alan Whitehead and Graham Stuart

Wednesday 13th March 2024 Commons Chamber

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

I am little puzzled about what all this is about. The Committee on Climate Change and all credible energy experts have said that we will need a small residual of unabated gas in the system for the medium term, and that is consistent with a fully decarbonised power system. No one disputes that, and it is barely worth an announcement. We should extend the lives of existing plants to meet that need. If new-build plants are needed in the short term to replace some of those retiring gas-fired power stations, there is no disagreement, provided they are capable of converting to hydrogen or carbon capture, as the Government say they must be.

However, that is not what the Secretary of State said yesterday at the Chatham House meeting. The Government’s own analysis published yesterday shows that 24 GW of existing gas capacity could be maintained via life extension and refurbishment, and 9 GW of new capacity is already in the baseline under existing capacity market arrangements. That is an uncontroversial position and analysis, and hardly something worth making a huge fuss about. But again, that was not what the Secretary of State talked about at yesterday’s Chatham House conference.

Given that analysis, could the Minister enlighten us with the number of new gas plants that the Government are hoping to build, given there is no mention of that in the 1,500 pages of documents that were published yesterday? That is an important point, because it appears to show the Government’s intention to go beyond what is already in the analysis and build a large number of new gas-fired power stations for the future.

There is a great deal in the review of electricity market arrangements published yesterday that is worth discussing, not least the Government’s glaring failure to bring forward low-carbon flexible technologies such as long-duration storage, which everyone knows we will need. It is a shame that the Minister has not properly addressed that. Will he give us clarity on whether this is a meaningless announcement within existing policy arrangements? Or, as has been said, is it an attempt to conjure a culture war out of climate and energy policy, with announcements with no substance or value that show that the Government have no serious plan for energy in our country?

[Graham Stuart]

The hon. Gentleman asked whether new power plants will be hydrogen or carbon capture, utilisation and storage ready; we will legislate to make that a requirement. He asked how much there will be; around 5 GW, but that is dependent on so many interrelated things, such as the growth of low-carbon and flexible storage, which, as he referred to we are a world leader in developing and supporting both in innovation and through the capacity market. He suggested that none of that was clear yesterday, but it was made crystal clear.

We are a world leader, having announced £20 billion for CCUS. The hon. Gentleman will remember, because he has been around a long time, that in 2003 the then Labour Government said that carbon capture, utilisation and storage was urgent and that there was no route to 2050 without it, but then they proceeded to do nothing about it. This Government are getting on with it. We are putting our money where our mouth is and developing technologies such as carbon capture and hydrogen, in a way that the Labour Government failed to do—as they did with renewables, to boot. All they do is talk about climate, but the truth is that the greatest climate risk to this country is if the right hon. Member for Doncaster North (Edward Miliband) destroys the market and starts some state-run quango, which will wreck the renewables growth that we have seen.

Offshore Petroleum Licensing Bill

Debate between Alan Whitehead and Graham Stuart

Committee of the whole House
Tuesday 20th February 2024 Commons Chamber

[Dr Whitehead]

It is customary on Third Reading to start with thanks, and I would like to thank two groups of people. First, I thank the civil servants who held their noses to write this pile of rubbish for the House’s consideration. Secondly, I thank the Government for introducing the Bill, because as a number of people will know, it has led directly to the election of a new Labour Member of Parliament for Kingswood, following the resignation of the former Government climate tsar, who wrote the net zero report and had this to say about the Bill:

“This bill would in effect allow more frequent new oil and gas licences and the increased production of new fossil fuels in the North Sea… I can also no longer condone nor continue to support a government that is committed to a course of action that I know is wrong and will cause future harm.”

He then resigned, and the rest is history. Thank you, Minister, for increasing Labour’s representation in this Chamber by one seat. Although we hope to have a lot more seats in the very near future, that is progress.

The Minister has form on this. He was the Minister in the Adjournment debate on fracking some while ago—

[Graham Stuart]

It was not an Adjournment debate—get it right!

[Dr Whitehead]

Sorry; the Opposition day debate on fracking, which effectively brought down the Truss Government as a result of the various prevarications at the time. I thank the Minister for that.

What I do not thank the Minister for is the completely misleading and almost erroneous way in which he has characterised the future under the Bill. On licences, the Bill will do things that are already done, and it will not make any change. It will not suddenly increase confidence across the sector, because the sector knows that the Bill is just a piece of performative theatre; and it will do nothing—contrary to what the Minister and others have claimed—to cut energy bills, tackle the cost of living or improve our energy security.

At a time when people across this country have suffered two years of crushing energy costs and an inflationary crisis driven in large part by our significant exposure to gas prices—which, as we all know by now, are set internationally—the Bill offers no solutions. The Secretary of State herself admitted that it would not cut bills, and Lord Browne, the former chief executive officer of British Petroleum, said that it was

“not going to not make any difference”

to energy security. The board of the North Sea Transition Authority, which is responsible for giving out licences, unanimously agreed that the Bill is unnecessary and would challenge its independence. However, even though the Bill will achieve none of its stated aims, it is far from consequence-free.

--- Later in debate ---

[Graham Stuart]

Offshore Energies UK has said that if Labour’s policy was implemented, it could cost this country 42,000 jobs and £26 billion of economic value. Perhaps the shadow Minister will respond to that consequence.

[Dr Whitehead]

We are talking about what the Government are doing through this policy—that is what we are concentrating on today. I hope we will have another much wider debate about the effect that a comprehensive transition policy for the whole North sea field would have, with associated arrangements for the transition of investment, energy security and worker and job security, in the context of future jobs and future energy security. Many people in the industry have already said that that is exactly what we need to secure the future of the North sea. It is a declining basin; its output will not change greatly as a result of the measures that the Government are proposing. On the other hand, unless urgent action is taken to secure a holistic transition for the North sea, it certainly will not have the investment and the future that so many of us want to see. We need to put that overall consideration alongside some people’s shorter-term concerns about what will happen to the oil and gas industry right this minute.

--- Later in debate ---

[Graham Stuart]

The data simply does not exist, as I think I set out. It does not exist and we cannot make a comparison if the data does not exist. We are world-leading in having that data; others do not have it. On the methane comparison, we are already below the internationally set goal; we have very low methane emissions in the North sea. On the comparison with LNG— which is the buffer fuel, which is why it is the true comparator, rather than Norwegian gas, which the hon. Gentleman is failing to admit—methane is emitted as it is shipped, so the methane story would make it even worse for LNG versus domestically produced fuel. Perhaps the hon. Gentleman would put that into his argument.

[Dr Whitehead]

I would not put it into my argument, but I am a little puzzled under those circumstances that the North Sea Transition Authority recently published a factsheet on precisely this point about the relative emissions of various contributors to gas and oil into the UK, which looked at the contribution from various countries and at the various emissions levels of those contributions, and set out how those contributions arise. I do not know whether the Minister is quite up to date with what his own North Sea Transition Authority is doing, but perhaps he ought to have a little look at that because he would see that actually the data is there. It does exist, and we can draw the sort of conclusions I drew this afternoon from it, and indeed from a number of other international data sources that are coming in.

The argument that the marginal unit of gas must always be LNG is simply not correct, because the Bill makes no provision whatsoever for the shape of UK gas demand at the point at which the gas is extracted and used. It effectively assumes that our national demand for gas will remain unchanged in perpetuity. When we are in a crisis caused by our reliance on fossil fuels and committed to a net zero transition, that assumption is patently wrong.

[Graham Stuart]

I hesitate to intervene again, but to suggest that this Bill has the assumption that our gas demand remains the same is absolute nonsense. Of course it is coming right down. We are on a net zero pathway. We are leading the world in that and our demand is falling fast; it is just that our production will fall even faster. The hon. Gentleman should not mislead the House, and I am sure he would not want to do so.

[Dr Whitehead]

I think I have already indicated that gas production is predicted to fall by 95% by 2050. The addition of one or two licences will not make any difference at all to that precipitous fall in practice, as it will be four days more of gas over the period. That is the basis for why we say that the Government’s commitment to net zero transition while producing large amounts of additional gas and oil is patently wrong. We should be sprinting towards clean energy. We should be investing in renewables, rather than banning them, as the Conservatives have done with onshore wind. We should be saving the country billions by moving to decarbonise power systems by 2030 and making far greater efforts to insulate homes and reduce gas demand there.

On climate change, on energy security, on jobs and on bills, this Bill has nothing to offer but false promises that frankly insult the public’s intelligence. To support this Bill, we would need to believe that we can double down on the causes of the cost of living crisis and still solve it; that we can somehow defy geology in the North sea and change the fundamental nature of international energy markets; and that we can ignore all the science and credible experts on climate change and still meet our commitments, including our commitment to transition away from fossil fuels made by the Minister at COP28 a few short months ago. It is clearly nonsense, but it is emblematic of a Government who have run out of ideas and run out of road—a Government who can see the many real challenges our country faces, but have no answer to them beyond confected political drama. In their misguided pursuit of a political dividing line, they have shrunk our country on the international stage, made us hypocrites in the eyes of the world and opened the door in this country to a new divisive politics on climate change that I sincerely believe the Ministers sitting opposite me today are not comfortable with, do not want as their legacy and will come to regret profoundly. This Bill will deliver nothing, but it threatens much. For that reason, I urge the House to vote against it.

Offshore Petroleum Licensing Bill

Debate between Alan Whitehead and Graham Stuart

2nd reading
Monday 22nd January 2024 Commons Chamber

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

We have had an excellent and pointed debate this evening. Certainly, Opposition Members have together pointed out the deficiencies in the Bill, pointed out what a specious and potentially damaging Bill it is and, indeed, questioned why the Bill was brought to the House in the first place. All that is what I very much want to do.

My hon. Friend the Member for Rotherham (Sarah Champion) called this Bill “illogical and damaging” and pointed out that it could put marine protected areas at risk. My hon. Friend the Member for Llanelli (Dame Nia Griffith) pointed out that it makes us look ridiculous on the world stage. My hon. Friend the Member for Brent North (Barry Gardiner) pointed out that the Bill itself was based on a series of lies and, indeed, quoted the UN Secretary-General stating that “the truly dangerous radicals” are the countries that are increasing their oil and gas output.

My hon. Friend the Member for Coventry South (Zarah Sultana) pointed out strongly that this Bill, contrary to its claims, is not about energy security. My hon. Friend the Member for Warwick and Leamington (Matt Western), who reminded us of the real effects of climate change right now, pointed out that the future is largely electric and this Bill is a “great deception”. The hon. Member for Bath (Wera Hobhouse) called it stupid, unnecessary and dangerous—she did not mince her words very much. My hon. Friend the Member for Nottingham East (Nadia Whittome) laid many of the myths of the Bill to rest and questioned why the Government are pushing it in the first place. The hon. Member for Brighton, Pavilion (Caroline Lucas) pointed out the “political theatre” behind the Bill and why it is completely incompatible with our climate change commitments.

This really is a reprehensible Bill. It is a Bill based on a number of myths and, frankly, lies, which require people to believe that there are people around really saying that oil and gas is going to be stopped immediately and will not continue to play a substantial role, as it will in the energy economy up to 2050. No one is saying that oil and gas will not continue up to a period of time and no one is saying that the existing fields in the UK will not continue to produce and contribute their products in the future. There will be jobs in that continuing North sea oil operation.

However, this is a one-clause Bill with effectively two sections in it. The first section ostentatiously requires the Oil and Gas Authority to do what it is already doing; indeed, both the hon. Member for Angus (Dave Doogan) and the hon. Member for Brighton, Pavilion reminded us that the Oil and Gas Authority has been carrying out regular licensing rounds every 18 months since 2016. It is required to do so because it is bound by the maximum economic extraction requirement. All that is already in legislation and the Oil and Gas Authority is already doing it.

The second section sets out an entirely bogus climate test, which by definition cannot be failed. That is achieved by skewing the test conditions to test UK gas production emissions only against aggregate liquefied natural gas imports, which are overall likely to be dirtier in production than UK gas, and not against pipeline-delivered gas that, in the case of our main importer Norway, is half as dirty in production as gas in the UK.

There is no emissions test for oil, despite its constituting 70% of North sea fossil reserves—80% of which, as we have heard, is shipped and refined overseas. For oil there is a “net importer” test, which requires the OGA to issue licences if the demand for oil and gas products in the UK is greater than the production—when that has been the case in the North sea for 20 years, with no prospect of reversal. It is a Bill built on completely bogus premises.

[Graham Stuart]

The hon. Gentleman is talking about bogus premises, but he just suggested that we could get more pipeline gas from Norway. Does he not recognise that if we do not produce as much gas here, it will not be gas from Norway that we can access but will inevitably be LNG with higher emissions? Will he please, for the benefit of the House, step up and be honest? We do not have the option to get massively more gas from Norway—if we did, we would have done it already.

[Dr Whitehead]

I think I am going to get injury time for that intervention. If the Minister had been listening to what I was saying, he would know that I was stating that the Bill, in a very bogus way, has deliberately sidestepped the fact that there is gas available for import that is much cleaner than ours in its production. We should use that as a test, but the only test carried out was on LNG which, conveniently, is a little bit dirtier than the gas we produce in this country.

The Bill is about not what it says as much as what it does. As the former Energy Minister and author of the Government net zero report, the former right hon. Member for Kingswood, said recently, the Bill goes against everything the UK is saying internationally about moving away from oil and gas, and it has already damaged our international stance by appearing to double down on precisely the thing to which we are saying the opposite on the world stage. The right hon. Member for Reading West (Sir Alok Sharma), the former president of Glasgow COP, said in a courageous and precise speech this evening that the Bill puts into legislation something that already happens under the agency of the OGA. He also stated that its sole purpose is to double down on more oil and that nations around the world will not take that very kindly as far as our commitments are concerned.

The OGA itself emphasised that the Bill was “not necessary”, but

“would significantly challenge one of the tenets of independence for the NSTA, to decide when to run a licensing round.”

Whatever the position in the North sea objectively, the OGA would be forced to scrape up at least a licence a year forever. We know the claim that that would somehow do something for energy security is also bogus. The right hon. Member for Maidenhead (Mrs May) recently said that

“new oil and gas licences only provide for energy security if all that energy is sold into the UK and, actually, it will be sold on the world market”—

a point that a number of Members have made this afternoon.

The whole Bill appears to have come about as a result of a wheeze, cooked up by a couple of strategy advisers over a heavy lunch, to put the Opposition on the wrong foot—or, to put it another way, on the right side of history. Quite honestly, that wheeze should have been put down as soon as the effects of the heavy lunch wore off, but instead it has persisted through the corridors of power and has finally made it to the Floor of the House in the shape of this risible Bill, the contents of which evaporate on the first examination by anybody of its serious purpose.

That says rather more about the state of the Government than anything else. Where were the quality controls on policy making? How did something so evidently content-free and fact-averse as this piece of legislation ever make it so far? How did the present departmental Government Ministers, for whom I have a great deal of respect, allow it to happen on their watch, when they must know it is a load of hokum with no policy merit at all? Now they are forced to go out and try to justify it to the House. It is a very sad reflection of what a tiny, bitter and sad space the Government have retreated into, where serious policy development in the energy sphere—God knows we have enough of that to be working on—is replaced by such ill-advised emptiness. That is what this Bill is, in the end: just empty. If passed, it will linger on the statute book for a short period, make no difference to anything in the meantime and be rapidly overtaken by the reality of the forward march to decarbonisation in energy.

However, the Bill will have one lasting effect, as I have mentioned, because it signals strongly and, I am afraid, potentially lastingly that the UK is not serious about its climate and net zero ambitions and is prepared to say duplicitous things on both an international and a national stage. That is bad news for all the genuine work that has so far been done by the UK on net zero climate leadership. This Bill will not stick, but that charge might. For that reason, if for no other of the many reasons that have been put forward in this debate, it is best that we take this Bill no further than Second Reading and refuse as a House to let it pass to further stages.

Oral Answers to Questions

Debate between Alan Whitehead and Graham Stuart

Tuesday 16th January 2024 Commons Chamber

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

On 28 November, I asked the Minister how many planning applications for onshore wind had been lodged in England since the alleged loosening of planning restrictions on onshore wind in September. The answer then was zero. Even now that the policy has had more time to bed down, the answer, I am afraid, is still zero, and I predict that it will be zero the next time we meet. In September last year, the Secretary of State said that the changes made in September

“will help speed up the delivery of onshore wind projects”.

Does the Minister think that the Government have succeeded?

[Graham Stuart]

I thank the hon. Gentleman for his question. As he will be aware, in the last contracts for difference round, a great deal of onshore wind was successfully brought forward and it still constitutes the largest single form of renewable energy in the United Kingdom—the Under-Secretary of State for Energy Security and Net Zero, my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) will correct me if I have got that wrong. I share with the hon. Gentleman a frustration in making sure that we see that pulled forward, so that we see more projects in England as well as in the rest of the UK.

[Dr Whitehead]

I am glad the Minister is frustrated about the complete failure of this alleged policy turnaround, but I am frustrated because if we had not had the absurd ban in the first place, the onshore wind development that would have taken place would have saved each family £180 on their energy bills. All Labour is suggesting is that onshore wind is treated like any other development. How long will it be before the Minister accepts the reality and concludes that he needs to go back and properly repeal the ban?

[Graham Stuart]

I thank the hon. Gentleman for his question and his personal commitment to this area, but he knows as well as anyone the parlous performance of the previous Government, which his right hon. Friend the Member for Doncaster North (Edward Miliband) was a leading figure in. Less than 7% of our electricity came from renewables as recently as 2010. It is this Government that have led the world after a flatlining in carbon emissions from our electricity sector under Labour. We have seen renewables grow and, by October, we will see coal entirely removed from our mix.

Oral Answers to Questions

Debate between Alan Whitehead and Graham Stuart

Tuesday 28th November 2023 Commons Chamber

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

The Minister is being a little shameless with his figures. We really ought to look at what is continuing to happen in England. In England, industry and other bodies warned that the supposed changes to onshore planning restrictions that were announced in September were far too timid to make any real difference to the dearth of new onshore wind.

I recently visited the site in Leighton Buzzard of the only turbine that has been put in place onshore in England since those supposed restrictions were lifted. It turns out that it has been in the planning process since 2014, and is not on a new site anyway. The Department’s renewable energy planning database shows that there are precisely zero new schemes in the pipeline in England. Should the Minister not go away and reconsider the remaining planning and funding restrictions on onshore wind so that it really can get going again?

[Graham Stuart]

As I have said, I share the enthusiasm on both sides of the House for onshore wind. The Government have set regulations that require onshore wind developers to consult communities in advance of submitting a planning application, as well as having it consulted on post-submission. We make no apology for rolling out this transformation in renewable technologies in concert with communities, rather than seeking to ride roughshod over them.

Draft Green Gas Support Scheme (Amendment) Regulations 2023

Debate between Alan Whitehead and Graham Stuart

Wednesday 22nd November 2023 General Committees

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

It is a pleasure to serve under your chairmanship, Mrs Murray; we seem to be meeting rather frequently today, but that is always a pleasure.

The SI concerns the green gas support scheme, which is a scheme that I advocated for a very long time. I was delighted when it came in in 2021, and it has proved very successful in bringing about substantial advances in biomethane production and substantial increases in the amount of biomethane injected into the grid, thereby decarbonising the gas grid to a considerable degree. I hope it continues to be successful. We have to be careful that people who are in favour of sustainable aviation fuel do not seek to pinch that biomethane in the not-too-distant future, but that is perhaps a debate for another day.

As the Minister outlined, the instrument makes some very minor changes that streamline and make more efficient the operation of the scheme. Those are unexceptional changes, which we certainly support. I have two very brief questions—or rather, one brief question and a suggestion—as far as the changes are concerned. I would be grateful if the Minister could respond, and I am sure he will do so very briefly and succinctly when we get to that in a moment.

The first issue is that, as hon. Members will have seen, the interest that accrued in Ofgem’s account from the levy was, from the beginning of the scheme, added to, rather than deducted from, the levy collection target. Of course, that does not make much sense unless it was a mistake when it was first introduced in the framework. This instrument changes that addition to a deduction. My question is, what has happened to what appears to be an over-collection into the levy from gas suppliers, which are levied for the purpose of the support scheme? I am not a great advocate of handing back money that has been collected to make a scheme work, but has the Minister ever received any complaint or concern from the gas industry that it was being over-levied and would like its money back? I would imagine that, otherwise, it would stay in the support scheme and therefore make the MLA more appropriate to enabling the scheme to last longer.

The other point, which the Minister has mentioned, is that the maximum levy amount in the scheme is designed to, among other things, cope with the maximum point at which the levy is likely to be called on. It is a sensible change to make that maximum point rather more flexible on the decision of the Secretary of State. We want the levy to remain sufficiently flexible to finance the green gas support scheme after 2028-29, because we hope it will go on considerably longer than that.

Although the change is positive, it seems to me a little clunky. It is a fixed rate which requires the Secretary of State to take a decision on it. At that distance in the future, it is quite likely that inflation will begin to eat into the MLA seam. It might have been a better idea to index the MLA against inflation over the periods, leaving the Minister to take a decision only in the event that matters proved adverse to the passage of inflation over a period of time, rather than having to take a decision should things need adjusting even within that parameter.

Those are my only two comments on the scheme. I am sure the Minister will be delighted to know that I am going to stop very shortly.

[Graham Stuart]

Promises, promises!

[Dr Whitehead]

Those two clarifications would be very helpful to understand exactly where the changes to the scheme can best go, and whether we need to do any more work to make sure these amendments to the scheme stick as well as they are clearly intended to.

Draft Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023

Debate between Alan Whitehead and Graham Stuart

Tuesday 21st November 2023 General Committees

[Dr Whitehead]

That was a particularly stirring ringtone.

[Graham Stuart]

Bringing uniquely to a conclusion the hon. Gentleman’s words.

[Dr Whitehead]

I am afraid not. I distinctly detect that that was part of an overture, not a final movement.

As I said, the agreement states that

“the Parties shall cooperate on carbon pricing”,

but there is no evidence of such co-operation. Not only that, but the two systems are diverging significantly. Hon. Members may ask whether that matters. It matters a lot in view of what is happening in the EU on the development of carbon border adjustment mechanisms.

[Graham Stuart]

None of which is covered by the order.

[The Chair]

Order. Minister, sedentary interventions are never helpful. May I just ensure that we are talking about the order that the Committee is considering and not the issue generally?

--- Later in debate ---

[Graham Stuart]

I thank hon. Members for their contributions to this debate on pretty technical adjustments to the ETS.

By capping aviation free allocation, we are ensuring that it is distributed appropriately until full auctioning in 2026. The current situation is not deliberate; the policy did not intend for aircraft operators to receive more allowances than their verified emissions. It is noteworthy, though, that those allowances meant that operators were doubly encouraged to invest in cleaner operations, since they were incentivised not only by any savings from investment in more fuel-efficient aircraft, for instance, but by the credits that they received within the ETS. The Government have no plans to claw any of that back.

On the overall position of the UK carbon market, the UK ETS is of course a market mechanism. The price of carbon allowances in the UK ETS is set by the market. In line with the net zero cap we announced in July, the supply of emissions allowances entering the market will fall significantly every year from 2024. We are committed to continuing to deliver on these changes, as we have shown, by legislating to amend the supply of allowances over the coming years and publishing an auction calendar.

The hon. Member for Walthamstow mentioned the CBAM. We are closely following developments on the EU CBAM and engaging with the Commission on technical considerations that are relevant to UK manufacturers. As the hon. Lady will know, EU CBAM charging does not start until 2026.

I am nervous of opening up wider matters, although you have been generous, Sir Gary, in allowing discussion of issues that are broader than the technical amendments that the SI makes. If Members want a broad debate on the ETS and its interaction with Europe, there are many opportunities in the parliamentary calendar to do exactly that.

[Dr Whitehead]

Given that the Minister has mentioned the CBAM in response to the inquiry of my hon. Friend the Member for Walthamstow, I want briefly to record that iron and steel are in the first phase of the EU CBAM, and that that may affect UK iron and steel negatively. They could be treated as if they were imports to the EU, similar to iron and steel from India or other parts of the world. That should give substantial pause for thought about how we proceed with the UK ETS.

[Graham Stuart]

The hon. Gentleman is right about that being a substantial prompt for thought, but not on the particular order that the Committee is considering. As hon. Members will know, we ran a consultation earlier this year on domestic measures to mitigate carbon leakage, including consulting on a potential UK CBAM and mandatory product standards.

In answer to the point that the hon. Member for Walthamstow made, our commitment to the UK steel sector is clear. We continue to work closely with industry, including British Steel, to secure a sustainable and competitive future for the sector and its workers. We will continue to fulfil that commitment.

As I said, the UK ETS is a market mechanism, and the price of carbon allowances is set by the market. That continues to be our position.

The UK ETS is a cornerstone of UK climate policy. It is worth noting, to look momentarily at the bigger picture, that since 1990, the UK has cut its emissions by more than any other major economy on the planet. The Government put net zero into law for the first time, and the former Conservative leader, now the Foreign Secretary, was the first leader of a major party to call for a climate Act, which was introduced in 2008. I was proud to serve on the Joint Committee on the Draft Climate Change Bill under the excellent chairmanship of Lord Puttnam.

[Dr Whitehead]

We were both members of that Committee.

Oral Answers to Questions

Debate between Alan Whitehead and Graham Stuart

Tuesday 19th September 2023 Commons Chamber

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

The Minister will know, although he unaccountably did not tell us, that there was precisely no new onshore wind in England in the recent AR5. The Minister claims that the latest compromised wording, which he alluded to, will lift the ban on onshore wind, but he knows really that that is not so and he knows what the industry has been saying about it and why it will not invest for the future. The result is no new onshore wind getting built in the medium-term, higher bills for families and less energy security for the country. Why will his Department not just face down his luddite Back Benchers, introduce fair planning regulations for onshore wind and get the industry restarted across England?

[Graham Stuart]

As I have just said, we announced changes as recently as 5 September. Like the hon. Gentleman, I look forward to a positive future for onshore wind in England, as well as in the rest of the United Kingdom.

Draft Nuclear Regulated Asset Base Model (Revenue Collection) Regulations 2023

Debate between Alan Whitehead and Graham Stuart

Monday 6th February 2023 General Committees

[Graham Stuart]

I will wait for historic refreshment, if such there is, although I am sure the hon. Gentleman recognises that the RAB model is designed to ensure that, given the capital requirements and intensity, it lowers the cost of capital, thereby making the investment more desirable, which it does by sharing some of the risks. Our calculation is that it therefore leads to a lower cost to the public purse in the long term.

The draft regulations have been informed by a full public consultation—undertaken last year between 14 June and 9 August—which sought views on the proposals to replicated the CfD framework and the various differences needed for the RAB model. We received 40 responses from organisations and members of the public, who were, for the most part, supportive of the proposals.

During the passage of the Act, Members of this House and the other place raised some concerns in respect of which I hope I can offer suitable reassurance. Perhaps most important were the concerns about the potential impacts of RAB levies on consumers. Through our consultation, we sought views on the inclusion of measures to prevent suppliers from passing on the costs to vulnerable consumers. Having considered the responses, we remain of the view that it would be better to mitigate potential impacts on vulnerable consumers through holistic measures that deal with people’s overall energy bills, rather than tying actions to these regulations specifically. We do not believe this is the appropriate point in the process to bring in measures to protect vulnerable consumers.

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

By mentioning “holistic” arrangements, the Minister gives me the opportunity to ask one of my questions now rather than later. What on earth does that mean? What are the Government proposing to do with their holistic examination of measures across the board, rather than going through the regulations? If they are going to do a holistic examination, will that have any impact on anyone in particular, and will it be publicised?

[Graham Stuart]

Like the hon. Gentleman, when I hear the word holistic it tends to get my nose twitching. To use other language, the point is that this is not the appropriate moment to address that. However, as the hon. Gentleman well knows, we are consulting and will come forward with a new system to protect vulnerable consumers from April 2024 onwards. We feel that it is elsewhere in the overall energy system that we are best able to intervene to protect vulnerable customers from such costs, or indeed other costs in the system, whereas to come in specifically at each structure we set up to encourage generation would create a system that is over-complex and might, through that complexity, not deliver in the way that both he and I would wish to protect the most vulnerable.

Relevant measures include those recently announced in the November autumn statement—this is where I fill out the hon. Gentleman’s holistic insight—such as the cost of living payments to households on means-tested benefits and for pensioners, not to mention the £37 billion of Government support for the cost of living previously announced in 2022. I hope this is getting more and more holistic for the hon. Gentleman.

Members should be reassured that the likely impact on household bills because of the nuclear RAB would be low. We have estimated that for a generic project approved in this Parliament, it would cost each typical household dual-fuel bill approximately £1 a month on average during the construction phase. I believe, given the scale of this project, that that is proportionate, given the benefits nuclear offers for our electricity mix. Ultimately, by having nuclear power we will deliver a lower-cost system for consumers than if we relied on intermittent, low-carbon power sources alone.

To touch briefly on scope, the regulations will not apply to suppliers in Northern Ireland.

--- Later in debate ---

[Dr Whitehead]

It is a pleasure to serve under the chairmanship of my near constituency neighbour and central south co-ordinator, Dame Caroline.

We are not talking about the principle of RAB this evening, because we discussed that at some length in our deliberations on the Nuclear Energy (Financing) Bill —or the 2022 Act, as it now is. Some Members will recall that at the time I had considerable reservations about not necessarily RAB in its entirety, but how it would actually operate in the context of a really large, complex, long-lived project in a way that had not been tried before. Even when programmes have been tried before, such as the Thames Tideway project, they were about raising money for a project that is finished and done and that is the end of it. In this instance, we are committing ourselves to provide support over not just the construction phase but the operational phase and most of the life of the project. In addition, we are putting in a mechanism that will be funded—sort of—through the RAB mechanism for the low-carbon contracts company administering the project. Perhaps I shall say more on that in a moment.

The big issue in all this is with the complicated, long-term and expensive scheme. As the Minister said, the RAB method essentially does not exactly share the risk of the project but puts most of it on the customer. Effectively, the customer underwrites a lot, and not just the cost. Indeed, the theory goes that if the customer underwriting is well spent, well sorted out and known to be reliable, it can reduce the cost of capital and the outcome of the project in the price that customers eventually pay for energy, if all goes really well. If things do not go so well—this is one of the things discussed in the deliberations on the 2022 Act—the customer can pay a huge amount of money to deal with cost overruns, the possible cancellation of the project and all those sorts of things.

Some of the issues were addressed at the time in amendments to the Bill, but others remain a considerable risk for the customer over a long period of time. This statutory instrument is about putting the scheme in place so that it runs for the whole course of the project and runs, we hope, as well as it possibly can in terms of making all those things work. It does not actually add anything to the customer protections that a number of us asked about at the time of the 2022 Act and continue to question now.

The issue that is related to that and that the Minister has mentioned this afternoon is that the RAB proposal as we discussed it—so I understood—in the deliberations on the Bill was about, shall we say, getting a way of supporting one particular nuclear power station, namely Sizewell C. It was pretty much designed for that particular purpose. Indeed, most of the material relating to impact assessments and so on related to the RAB scheme as it applied to Sizewell C, and that has been carried through in, among other things, the impact assessment relating to this SI, which says, among other things:

“The illustrative modelling assessing the opportunity cost of the reserve fund and collateral is based on the potential impacts of one new large-scale nuclear power plant built using the RAB model.”

However, the Minister has characterised this model as one that can be applied to the new generation of nuclear power stations, a fleet that the Government have already said—for example, in the energy security policy paper—is their ambition for the future. But we have nothing in the impact assessment, which has ducked the issue, and we have had no further discussion on the impact that a number of new nuclear power stations—perhaps having a long-run RAB behind them—all at the same time would have on customer bills overall.

The Minister said that he thinks the cost of the RAB would be about £1 on customer bills. I do not in any way want to suggest that the Minister has not put the entire picture to us, but as I understand it the cost of £1 is at the beginning of the curve of the RAB process as it goes through the entire construction and operational life of that particular power plant. The £1 cost is only the cost at the very beginning of that process, when we are just beginning to get the construction phase under way. A cost of at least £10 and probably much higher than that—indeed, £10 was a figure put forward by the promoters of Sizewell C—would be the more likely level on bills as the construction phase came to an end and the operational phase began. Then, over a long period of time, that might degrade.

It is at least £10 and perhaps more like £20, so it is important that we put the record straight on what the customer cost is likely to be from this project alone, let alone from other projects that may come up in future. Of course, that £10 per annum is based on the project going well and there being no overruns, no possible cancellations and so on; it could be a lot higher, so it is very important that we keep a very close eye on what the customer cost will be over the period as far as the RAB is concerned. Will the Minister comment on that when he responds?

I note that, as the Minister has also said, the mechanism of the RAB’s operation is akin in many ways to, but not quite the same as, contracts for difference. Of course contracts for difference are managed, in terms of the levy that is collected to pay the people who are constructing and running facilities—mainly wind—by the Low Carbon Contracts Company, which is the company in the middle of the whole process, as it were; it collects the money and disburses it.

At the moment, the LCCC has rather an issue with the fact that the inversion between strike price and reference price means that it finds itself sitting on a huge pile of money. By the way, that is a good thing; it is a good way of CfDs working if money comes back to the LCCC when the relationship between the strike and reference prices is inverted. However, does that money sit in LCCC’s reserves, or does it go back to customers? In this instance, there is a suggestion that the extra money should go back to customers, but there is no mechanism to allow that to happen. There is a suggestion that the money goes back to the supply companies that have been levied to raise the money for the CfDs in the first place, but there is no requirement for those supply companies to pass the money on to customers.

The reason I raise that is because it is more than possible that a similar situation could arise with the Low Carbon Contracts Company in the event that the cost of projects at various stages is less than has been budgeted for. Under those circumstances, the LCCC, being the agent for the collection of the levy for RAB and the dispersal to the Sizewell C company, in this instance, could find itself sitting on large surpluses. There is no mechanism in regulations to cover how those surpluses should be judged, such as if they should be considered as something on account. If the surpluses are deemed not to be on account, what happens to them? Does the Low Carbon Contracts Company just sit on customers’ money, rather than handing it back to them, even though there is a surplus, or does it have an obligation to hand it back? I would be grateful for the Minister’s comment on that potential problem; I am not saying that that will necessarily occur, but it is a distinctly possible.

[Graham Stuart]

It is highly unlikely.

[Dr Whitehead]

Well, just two years ago we thought it was highly unlikely that the LCCC would be giving away £1.4 billion with CfDs, so there we are.

On the subject of the LCCC, we have observed something that the Minister did not really give prominence to: we are actually talking about two levies. There is a support levy and an operational cost levy, both of which are separate—they are calculated as separate—but collected by the LCCC.

The interesting thing about the operational levy is that it is effectively collected by the LCCC to pay itself. The pay under the operational levy is by no means minimal; indeed, the impact assessment puts it as rising to about £700 million a year by 2024-25. That is an LCCC estimate, but it is the cost that the LCCC will recover through the operational levy, which the company itself sets.

There appears to be a bit of solipsism at work. The LCCC seems to be responsible for deciding what it will collect, for collecting it, and then for deciding on the next levy and so on. What regulation will be in place to ensure that the operational levy is collected in a reasonable manner, providing for reasonable operational costs, rather than being a subjective levy on the basis of what the LCCC thinks it is going to do?

Energy Bill Relief Scheme (Non-Standard Cases) Regulations 2023 Energy Bills Support Scheme and Alternative Fuel Payment Pass-through Requirement (Northern Ireland) Regulations 2023

Debate between Alan Whitehead and Graham Stuart

Monday 30th January 2023 General Committees

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

I can straightaway inform the Committee that I do not intend to press the two SIs to a vote this evening because they are essentially uncontentious. They complete what is now a very complicated process of getting support to all the categories of people who need it. I freely concur with the Minister that that has been a very complex process. Perhaps I was a little harsh in the recent urgent question—

[Graham Stuart]

You were a little!

[Dr Whitehead]

I thought I was, yes. Nevertheless, the point I was trying to make on that occasion was that we are now coming to the end of the period set out for the schemes, particularly the energy bill relief scheme, and are still making legislation to implement the scheme. We are still saying, as the Minister has said today, that in non-standard cases people will get their money perhaps next month, which means within a month or so of the end of the scheme and five months after it began.

The Minister alluded to the fact that, as these things unfold, it becomes apparent that many cases fall into slightly different categories. I wonder whether this is actually the last of it. Can the Minister say that we have now caught all the different categories that could conceivably have a problem because they are not on the standard route? We have already been through a number of those with other recent SIs. Are there any more to come, or is the Minister confident that we have—I hesitate to say “cracked it”—covered all the particular circumstances that are not the run-of-the-mill, straightforward cases?

I also wonder whether the non-standard cases scheme concerns just the large businesses that the Minister mentioned. I have looked at the “Energy Bill Relief Scheme non-standard cases: guidance for non-domestic customers” document. Unlike the hon. Member for Windsor, I did not consult the impact assessment, although I think I should have done. However, the guidance note said:

“The non-standard customers to whom this scheme will be available, include: businesses, voluntary sector organisations, such as charities, public sector organisations such as schools, hospitals and care homes.”

Is that right, or am I looking at a different scheme? The guidance appears to widen the scheme’s availability from just businesses to voluntary sector organisations, which operate as businesses in many ways, but they are not; they are charities. As I said, it also includes public sector organisations such as schools, hospitals and care homes. They will all be in that category of not getting their money until next month, if my understanding is correct.

It is unfortunate, to say the least, that people are not going to get their money until next month. I do not know whether those particular exceptions—the special, non-standard cases—were known about at the beginning of the process, or whether they have come to light as the process has been gone through. If it is the latter, that excuses to some extent the great lateness of these pieces of legislation. On the other hand, one might say that it would have been good to know about the exceptions at the beginning of the scheme. If they were known about at the beginning, then it has been a mighty long time to write the documentation to get them right. Could the Minister expatiate briefly on which of those two it is?

Finally, in a number of the schemes that the Committee has discussed previously, if the bodies that are supposed to pass through the heat or power do not do so, the arrangements for getting redress involve civil litigation. I think we have agreed that way is not very satisfactory; there could have been a straightforward liability on the part of the people passing the power through. At least with the energy bill relief schemes, the recourse is that the energy ombudsman can assist with the civil litigation process, acting as an intermediary if the money does not appear.

There is no mention of the energy ombudsman in this SI. I wonder whether that should have been included in the procedure for civil litigation, or whether the special cases are, by their nature, outwith the scope of the energy ombudsman in pursuit of civil litigation. I would be grateful for some clarification on the matter. I have no further objections to the proposals. I hope they will go through as speedily as possible, in order to get the relief to people also as speedily as possible.

--- Later in debate ---

[Graham Stuart]

It is about taking the individual circumstances and then applying to those circumstances the principles that we have laid out for this support. That is not as transparent an answer as the right hon. Gentleman would probably like, but that is fundamentally where we are. We have laid out the principles of the scheme and the principles behind our support. We then have to interrogate the specific circumstances, which turn out to be many, varied and complex.

Some people are partly involved in energy generation to some extent, and we want to make sure that we do not double subsidise those in that space. Equally, we want to recognise the complexities if they have had increased fuel costs or other costs coming through. Wrestling with that, and then coming out with something that is broadly fair, is something that has to be determined within the Department, but it is obviously subject—rightly or otherwise—to potential legal challenge if we do not get the balance right. As I say, the more to the fringes we go, the more complex it gets, but it is still material, as has been discussed. These are very substantial sums of money. Very important facets of society are dependent on these non-standard cases: they are not tiny in quantum, just tiny in number, typically.

[Dr Whitehead]

Would the Minister like to say anything about the involvement of the energy ombudsman in the process?

[Graham Stuart]

No such refreshment has come my way. The energy system in Northern Ireland is, of course, devolved, so it is a separate system altogether from that of GB. In this particular instance, we have reluctantly had to step into that situation. I am told that the ombudsman is only applicable to heat networks, if that contributes in any way to the hon. Gentleman’s understanding.

[Dr Whitehead]

None of these will be heat networks.

[Graham Stuart]

Which might explain why they are not covered. If there is any discrepancy between the treatment of the regulations in Northern Ireland and that in GB, I am happy to write to the hon. Gentleman to explain why that is the case, if the Committee will allow me—I hope that will satisfy him. Actually, I suppose I should write to all members of the Committee; they can all enjoy my correspondence with the hon. Gentleman. That is one of the joys of sitting on such Committees.

I thank hon. Members for their valuable contributions to the debate, which I hope has satisfied everyone that we have exhaustively covered the landscape brought about by the regulations. I commend them to the House, but ask the Committee to note that as the Joint Committee on Statutory Instruments has not yet reported, we—and, I guess, I—will have to return to the House on another such joyous occasion to move the motion formally. My understanding is that through the usual channels, a desire was expressed that this debate should go ahead, even if we were not in a position to move the motion formally today. That is the explanation I have had, and I hope that when we come to move the motion, it will be a very short and sweet recognition of the thorough scrutiny that the Committee has undertaken today.

Question put and agreed to.

Resolved,

That the Committee has considered the Energy Bill Relief Scheme (Non-Standard Cases) Regulations 2023 (S.I. 2023, No. 9).

Energy Bills: Self-disconnection

Debate between Alan Whitehead and Graham Stuart

Wednesday 25th January 2023 Commons Chamber

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

One way or another, there are more than 3 million households on prepayment meters. With the rapid rise in prices and the continuing energy crisis, they are now all at risk of unseen disconnection, because they simply cannot afford the huge bills and constant meter top-ups they are facing. Energy companies know this, and they do not want to be saddled with account customers in distress, so we have seen 500,000 warrants obtained, particularly over the last year—18% up on previous numbers—to drive customers in trouble with their accounts into forcibly having prepayment meters installed in their homes, whether they want them or not. Customer disconnection is then not the problem for the energy company or the Government thereafter. For most customers, the energy companies can simply change the supply of smart meters from credit to prepay without a warrant being issued.

What are the Government doing about all this? Polite letters are not enough. Will the Minister now enforce measures to ensure that the energy companies stop issuing warrants and switching smart meters to prepay mode while prices remain high and the energy crisis continues? What are the Government actively doing to seek out and help those who have self-disconnected and are now energy destitute?

The Government have said, and will no doubt say again today, that help is on its way in the form of Government support for energy bills, yet precisely the customers most likely to self-disconnect are getting much less help than they should. As the Minister has said, 30% of the vouchers available to customers on prepayment meters remain unclaimed, for a variety of reasons. And the alternative help scheme devised for those who indirectly pay their bill, whether they live in park homes, communal buildings or district heating schemes, has simply not arrived. It was expected in December and then January, but we now hear it will not be active until the end of February—five months after account customers started to get assistance.

What are the Government doing to ensure that vouchers get through and are claimed by prepay customers, and that barriers to claiming are overcome? Why is the alternative help scheme so consistently delayed? Do the Government just not care about help for those living in park homes and other tenures, or are they incompetent in organising that help in a timely way?

[Graham Stuart]

Those who know the hon. Gentleman will know he is normally better than that. He knows, because we talk about it, just how hard the Department is working to make sure we get these things in place. We are proud that we got the EBSS discount out to an unprecedented 29 million people. I make no apology for prioritising getting the bulk of it out there.

The EBSS alternative funding sounds simple, but it is not. It is a novel scheme with ambitious timescales. It is a complex cohort with a range of different energy arrangements, including off grid, direct to commercial and via intermediaries. [Interruption.] The hon. Member for Newcastle upon Tyne Central (Chi Onwurah) chunters from the Front Bench, but she should recognise the complexity of this challenge.

When we were looking at February delivery for the portal, I challenged it. A few days ago, I met the four pilot local authorities, which are across the devolved nations of Great Britain, to talk about the situation. We must make sure that we sort out all those complexities because, if we do not get it right first time, the pilot authorities say it would delay payments to consumers. My priority is to get funding to people as quickly as possible.

Where people are not already receiving the main EBSS, we have to look after public money by making sure their bank accounts are verified and legitimate, and that they live at the address. Those records are held across Government, local authorities and banks, so a complex case-management system is required. Local authorities need to be able to access the system securely, which requires multi-factor authentication, and some local authorities do not have the ability to implement that quickly. Robust fraud checks are necessary in an application-based system, to which there is no alternative for this group. Each iteration of the application process needs to be tested.

I am confident that we will have the portal up by or on Monday 27 February. We will work with local authorities, upon which we rely, and I thank the four pilot authorities and other local authorities. We need to make sure that their staff are trained, that the complexities are dealt with and that they have a robust system, so that they can swiftly process applications and make sure families get the money they so direly need. I fully accept the point about the need for speed.

Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Amendment) Regulations 2022

Debate between Alan Whitehead and Graham Stuart

Monday 9th January 2023 General Committees

[Dr Whitehead]

rose—

[Graham Stuart]

Really? Does the hon. Gentleman want to intervene after speaking for so long?

[Dr Whitehead]

Briefly, I just want to emphasise something that the Minister does not seem to have taken on board. He said that a mistake was made, but it was such a basic and egregious mistake—to pass a piece of legislation without knowing who is being legislated for—that some questions ought to be asked. Was it simply the speed at which things were done, or was there a fundamental misunderstanding of how the scheme would work?

[Graham Stuart]

I think the hon. Gentleman knows that he utterly mischaracterises the regulations. We legislate all the time for every kind of group in business and society without a database of who they are. We have simply come forward with supplementary regulation, which we are agreeing to today, the better to ensure that the consumer groups that I would have thought he supports enthusiastically are empowered and given the information they need to protect consumers. It is not some egregious error; this is a positive addition. The law applies to those that run heat networks, regardless of whether we know who they are and have their address. As it happens, in order to make it more practicable and quicker to intervene, we are discussing the regulations we have laid. They are supplementary to what was sound legislation in order to deliver a sound policy. Because I know he is an honest man, I think that the hon. Gentleman, on reflection—were he to do that this evening—might think that he somewhat mischaracterised the regulations.

As to what will happen after 31 March, we will make arrangements after His Majesty’s Treasury announces its review of the EBRS for what goes on after that date. Also, for the betterment of the information available to the Committee, on the question whether microbusinesses will be fined £5,000 if they do not notify, that maximum monetary penalty will apply only if a heat supplier fails to comply with a compliance notice or enforcement undertaking relating to failure to comply with the notification requirement. I hope that provides the hon. Member for Cardiff West with reassurance that there is not some automatic imposition of a £5,000 fine on a particular micro-supplier.

Oral Answers to Questions

Debate between Alan Whitehead and Graham Stuart

Tuesday 29th November 2022 Commons Chamber

[Graham Stuart]

The provisions in the Energy Prices Act have been superseded by the announcements made by the Chancellor in the autumn statement, and therefore I do not think that they strictly apply any longer, as the right hon. Gentleman has suggested.

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

Does the Minister accept that the inability of local energy providers to trade within their local community remains one of the biggest obstacles to the development of community energy overall? If he is not willing to take on board the provisions of the community energy Bill that is presently being promoted by community energy supporters, does he have any other ideas as to how that problem could be overcome in the context of the Energy Bill, which I am delighted to see has resumed its parliamentary process today?

[Graham Stuart]

I thank the hon. Gentleman for his question, and for his close interest in this field and knowledge of it. I look forward to sharing with the House further thoughts on how we can deliver precisely that more dynamic situation going forward. As he rightly says, there are provisions in the Energy Bill, which I am delighted to announce is resuming its passage through Parliament.

Draft Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 3) Order 2022

Debate between Alan Whitehead and Graham Stuart

Monday 7th November 2022 General Committees

[Graham Stuart]

I am sure every member of the Committee will be waiting to hear that, and I am happy to write to confirm it. As it is, it is a relatively small number of flights, given the overall number that go from the UK.

[Dr Whitehead]

My checking process was probably not as accurate as the entire civil service was able to muster, but it looks to be the case that there is one direct flight between Belfast and Switzerland, and a number of flights that stop in other places. If we believe Skyscanner, that is where the six flights a week come from. But I stand to be corrected; there may be flights that I have missed out that come under that umbrella, and it may be that some of the stopping flights are included.

[Graham Stuart]

I have agreed to write with further information, notwithstanding the ability that any of us has to check Skyscanner, and I am happy to do so. However, it was 76 flights in total in 2019, so we are talking about a pretty small issue.

On CORSIA, which I know Members will be keen to hear more about, the UK Government, led by the Department for Transport, consulted on implementing CORSIA in 2021, including six high-level options for how CORSIA could interact with the UK ETS on flights in the scope of both schemes. We are carefully considering the approach to CORSIA implementation and will consult further in due course, seeking to have all legislation for CORSIA in force by 2024.

The UK ETS is regarded in legislation as a fiscal measure, not a regulation. We published an analytical annex with the initial Government response in August 2022. That examined the impact of applying the UK ETS to UK-to-Switzerland flights, so I think that only direct flights are affected. I congratulate the hon. Member for Cardiff West: it is hard to be more arcane than his hon. Friend the shadow Minister, or to have a more detailed grasp or inspection of the factors behind legislation, but on this occasion I think he has achieved it, and I know that he will be pleased to continue the discussion even further.

Energy Prices Bill

Debate between Alan Whitehead and Graham Stuart

Committee stage
Monday 17th October 2022 Commons Chamber

[Graham Stuart]

As the hon. Gentleman knows, this legislation lays out the remit of the Secretary of State, under the powers within the Bill, to intervene to protect businesses and consumers. That is its central aim.

Clause 19 ensures that the support schemes I have mentioned reach their intended beneficiaries. The requirement to pass on energy price support will help to ensure that tenants and other end users receive the support they need. Clause 20 will make amendments to the existing price cap legislation to support the delivery of the energy price guarantee. The clause will ensure that Ofgem continues to calculate the cap level to determine what it costs an efficient energy supplier to provide a household with gas and/or electricity. In response to the points made by the right hon. Member for Doncaster North (Edward Miliband), this will not determine the prices that households pay, but it will enable the Government to identify what level of support is needed to deliver the prices in the energy price guarantee. So it has a different purpose, but a useful one, in delivering the EPG. Finally, clauses 21 to 23 provide the power to enable the Secretary of State to modify energy licence conditions urgently, as necessary, and give directions to support the response to the energy crisis.

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

I am sorry that we have such truncated time to discuss this legislation this evening, because while we have a substantial level of support for the Bill, we have our concerns about sections of it and there are parts of it that should not be in it at all. I did not have the opportunity to commend the excellent speeches on Second Reading by a number of my hon. Friends, who put into context the issues surrounding the Bill very well. I will not go over them again. I want instead to concentrate on what is in the Bill and what it will do to move towards the point that we all want to get to, which is to see the support mechanism for domestic and non-domestic customers placed into legislation and supported as well as it can be.

One of the many things that have occurred by way of recent significant U-turns is the fact that the energy price support scheme is now going to last not for two years but for six months. I appreciate that there are, shall we say, warm words behind that, and measures will subsequently be sought to concentrate help for people, but we need to be clear that this Bill is written as if the previous scheme were still in place. Various parts of the Bill, including substantial elements of schedule 6, talk about a two-year programme, after which, by way of a sunset clause, charges should not be raised on energy generators specified in clause 16.

I do not expect the Minister to make immediate manuscript amendments reflecting the change that has taken place between this morning and this afternoon, but he should reflect on the effect it will have on the Bill and whether, by way of a statement to this House or through subsequent changes in secondary legislation, he will introduce into this Bill a more accurate reflection of where we are now. I would be interested to hear from him on that in due course.

The Bill effectively has three parts. Clauses 1 to 8 essentially establish the energy bill relief scheme in legislation, which is just as well because the energy bill relief scheme has so far been effectively voluntary. It is important that we put the scheme into legislation so that it works properly. Not only do the Opposition have no quarrel with that, but we strongly support it.

As my right hon. Friend the Member for Doncaster North (Edward Miliband) told us on Second Reading, however, there are a number of issues relating to the Bill that are not quite so clear-cut. Clause 16 contains a measure that requires designated energy generators—one assumes they consist mostly of renewable generators not in possession of a CfD, although that is not specified in the Bill—to make payments over a period of time that is now in excess of the six-month energy bill relief scheme in order to support that energy bill relief scheme. There is a difference between the two timescales in place under the Bill.

Nor is there clarity, particularly in clause 16, on what the Government mean by “designated energy producers.” What the Government will designate those producers to be is one of the remaining question marks about the Bill. How will the Government decide what the designation looks like? Who is going to be designated? Over what period? And who, by definition, will be excluded from that designation? When we are talking about renewable and low-carbon energy, it is pretty difficult to define exactly who is doing what, who is or is not making super-profits, and who may therefore be excluded from designation or within designation. We are talking about energy companies that run wind farms with renewable obligation certificates. In some instances, those ROCs are relatively recent, and in some instances they cover a longer period of time. The ROC scheme under which they were founded has very different effects.

--- Later in debate ---

[Dr Whitehead]

My hon. Friend makes a good, if somewhat speculative, point. As the Bill mentions, the Government are seeking to regularise the status of various renewable generators into some form of CfD arrangement, but of course the “compensation” one might get varies according to the status of those particular generators that do not have a CfD and are getting their remuneration by other means.

Of course, there are generators in this particular area that are not making super-profits, and indeed are not making profits at all, because in most instances they are community-owned wind farms with a large number of shareholders. The purpose of those shareholdings is, among other things, to keep bills down by paying dividends from the wind farm. Such arrangements should clearly not be designated in the same way as other arrangements, even though these wind farms are perhaps not in receipt of a contract for difference and may look like a number of other arrangements.

My plea is that, first, the Government should define, as soon as possible, what is going to be designated and how it is going to be designated. That should go well beyond what is in this Bill and ensure that those generators that are designated really are those that should pay into a scheme. After reading the Bill, I think it is possible to make those changes so that designation is fair and equitable. I am sure that the Government will, very shortly, want to come out with a scheme that enables that to happen. I will certainly be on the phone to the Minister if it does not happen very quickly.

[Graham Stuart]

That is our intention.

[Dr Whitehead]

I am delighted to hear that, and it is one gain from this evening’s debate.

On the third part of the Bill, I very much concur with a lot of what the hon. Member for Weston-super-Mare (John Penrose) said. The Bill gives powers to the Minister and the Secretary of State that provide for sweeping arrangements not only to intervene in energy markets, but to override Ofgem in various licensing arrangements. There is a power to give direction and a power to change licences, and a whole range of other measures. A number of industry figures are certainly concerned about the stability of investment they can undertake with those powers on the statute book, not knowing whether those changes could take place at short notice and in a way that may affect their investment decisions and the investment landscape for the future.

At the weekend, a senior source at one energy supplier suggested that the Secretary of State had undertaken a power grab “worthy of Henry VIII”. Obviously, our modernist Secretary of State may well be modelling himself on Henry VIII. I do not know whether he is, but this source said that this

“gives absolute power to the secretary of state over all rules governing all aspects of the UK’s energy industry, in perpetuity.”

He continued:

“That means bypassing Ofgem and the entire licensing and regulatory regime without any safeguards or time constraints and no consultation or appeal process for anyone—supplier, generator, networks—affected by any decision.”

So we are very concerned to ensure that those powers taken by the Secretary of State should at the very least have a sunset clause on them when the energy crisis has abated a little. As we can see from the legislation, no such sunset clauses are provided, which leads to a suspicion that this is a potential serious power grab by the Government, and these are powers to oversee the energy process without any of the checks and balances that we have in the system at the moment. If that is the Government’s intention, it is to be deplored. Again, I hope that at the very least the Minister could clarify his intentions on that section of the Bill and how he intends to limit the activity of these things over a period of time.

We have tabled a number of amendments, and as they relate to some of the comments I have made, I shall briefly address them. Amendment 1 would ensure that the full cost of reductions is passed on to customers. Although a passing through arrangement is contained in the Bill to deal with people such as landlords, park home owners and various others who are taking the rebates on bills on behalf of customers and supposedly passing them on but not actually doing so—I very much welcome those clauses—there are other arrangements for third parties in receipt of funds where they are not necessarily required to pass those rebates on to customers at all. For example, the Low Carbon Contracts Company gets money in from contracts for difference but is by no means obliged to pass that back to customers. It is supposed to pass this back to energy companies, but it does not have to do so, and the energy suppliers themselves have no obligation to pass it back to customers. The amendment tries to close some of those loopholes to make sure that all moneys related to this area are passed on to customers.

New clause 2, on the marginal cost of electricity, was mentioned by my right hon. Friend the Member for Doncaster North on Second Reading. The new clause would ensure that we would not be in this situation in the first place. If we had sorted out the whole question of the marginal cost of electricity as it relates to all electricity being effectively determined in retail price as if it had derived from gas and the much lower cost of renewables that we have at the moment in the system being effectively discounted, we would not have some of those renewable generators making “super-profits” and being perhaps subject to the ministrations of clause 16. That is because they would be working in the market on their own prices and looking competitively at a price set by their own boundaries, rather than working through gas in the first place. We think it is important that the Government take action on that quickly, which is what our new clause suggests we do.

I know we are running out of time, but let me come to our amendment on the Energy (Oil and Gas) Profits Levy Act 2022 arrangements. Again, as my right hon. Friend said on Second Reading, they were deplorable, as where fossil fuels are concerned 91% of profits can be returned back to those companies, and do not come to the customer to help reduce their bills, if they have investments in fossil fuels for the future. No such arrangement is provided for in this Bill as far as renewable generators are concerned; it is just a request for payment and nothing else. We want the Government to urgently look at this and bring forward a report on what the effect of reducing that 91% arrangement to 5%, for example, would have on the money that would be coming through to help customers pay their bills for the future.

Finally, as we mentioned on Second Reading, we have tabled a couple of amendments to start the process of payments from September, rather than the end of this year, as is proposed in the Bill. We think that would produce quite a lot more money for customers’ bills to be assured in the process. We understand that the Scottish nationalists are moving a manuscript amendment, new clause 18. It would worry us as it is calling for all the arrangements to be sorted out as far as what happens after six months is concerned within one month. We would prefer that we all united behind new clause 8, which would require full disclosure of the profits and turnover of oil and gas companies and various other generators over the next two years.

Energy Costs in Wales

Debate between Alan Whitehead and Graham Stuart

Tuesday 11th October 2022 Westminster Hall

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

I will try to spend the time I have addressing myself to the excellent speeches we have heard this afternoon. I congratulate my hon. Friend the Member for Cardiff North (Anna McMorrin) on securing the debate. It is about Wales and how Wales is affected by the runaway rises we are seeing in energy costs and by the actions the Government have taken in relation to them. Those price rises are having devastating effects across Wales, and hon. Members have paid considerable attention this afternoon to what is happening to individual constituents across Wales. Of course, price rises are having devastating effects across the whole UK, but two things stand out in the case of Wales.

The first is the particular demography of Wales. As the hon. Member for Ceredigion (Ben Lake) mentioned, Wales has a different profile in terms of its households and energy costs, particularly from England, and from the UK in general. One in five households in Wales is off the grid; fewer than one in six are off the grid across the whole UK, and for England that figure is about one in eight. Those off-grid properties in Wales have suffered to a far greater extent than households in England and Scotland and in the United Kingdom generally. That is, among other things, because the heating fuels needed for off-grid properties were never under the price cap. Those properties suffered price rises of, for example, 250% in two years for heating oil before the crisis came upon us. They are in the crisis now, with further enormous increases, but they were suffering for a long time before that.

It is therefore wholly appropriate and deserves congratulation that the Welsh Government have instituted an additional £200, on top of the funding available in the UK generally, to meet the specific circumstances in Wales. Considering their other financial problems, the fact that they are able to carve out that amount to support people in these circumstances is something we can only stand back and applaud, and I would be first to add my applause.

The immediate response—well, the rather less than immediate response—of the UK Government, through the energy price support scheme, has been relatively generous and goes some considerable way to removing the worst aspects of the energy price rises for the general public, and is to be tremendously welcomed for that reason. However, I have one or two points to make about what the UK Government have done and what it means for the future and what we all have to face. This energy price crisis will not go away in a year’s time, with prices going back to normal.

[The Minister for Climate (Graham Stuart)]

The hon. Gentleman rightly says that the crisis may not necessarily go away quickly, so why is it Labour party policy to intervene for six months? The Government have come in with family support—I am delighted to hear his recognition of the extent and power of that intervention—for two years.

[Dr Whitehead]

The support is for two years for domestic properties. For business and commercial properties, it is for six months. The proposal that the Government have put forward for two years’ support on price rises is completely unfunded. We might, for example, have introduced a windfall levy, to accurately reflect the difference between what is happening in the UK market and the reasons for the price increases, and the profits being made by the energy companies supplying the UK, particularly with gas. Those profits are not based on some amazing technical breakthrough in the delivery of gas to the UK; exactly the same companies are providing exactly the same service in bringing gas from the wholesale market to the retail market in the UK, but they are making nine times the profit they were previously, for no extra work at all. The idea that we should put forward a windfall levy to cover a good proportion of the cost of those arrangements seems a complete no-brainer. I was quite astonished when the Government decided that they were not going to draw on that resource at all for the next phase of the support arrangements. Not only were they not going to introduce an immediate levy, but they were not going to introduce any sort of continuing levy arrangement to keep prices at a reasonable level.

The Labour proposal took into account what we do in the first instance with the windfall levy and what we do over the next period. I want to come to that in a moment, but it is important to recognise that the Prime Minister was bang on guilty of misleading the public in her recent conference speech, and other speeches, by saying that people would pay not more than—

Feed-in Tariffs (Amendment) (No. 3) Order 2015

Debate between Alan Whitehead and Graham Stuart

Monday 13th June 2016 General Committees

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

I beg to move,

That the Committee has considered the Feed-in Tariffs (Amendment) (No. 3) Order 2015 (S.I. 2015, No. 2045).

It is a pleasure to serve under your chairmanship, Sir Edward. Normally, I run in the door three minutes after a debate has started, so it is a pleasure that I was actually here just before things started and someone else was running through the door just behind me.

I am opening the debate on the statutory instrument because the Opposition have prayed against the original negative SI, which introduced the changes. As a result of the way that SI was introduced to the House, those changes have come into effect, so our debate is more about the principle of what is being done rather than about looking prospectively at those changes. That is what I want to address my remarks to today.

The effect of the SI is, first, that changed rates of payment for feed-in tariffs, or FITs, for several technologies have come into place. More importantly, for all technologies, from now on, deployment will be limited by a new first come, first served measure, whereby agreement to provide FITs payments for projects will be based on an overall envelope of spending. We should be clear that that is not spending as we might plainly understand it, but putative tax and spend, because it is financed by a levy on supply that is eventually passed on to customers in the shape of their electricity bills.

It has always been the position of Labour Members that we do not object to degression being part of the FITs regime. Our concerns in the past have been about the rate and effect of degressions that are too precipitous or, as we have discussed on similar occasions, replacing a degression slope with a cut-off on payments. Degression is combined in the order with an absolute limit on the amount of levy that can be spent on FITs overall from now on. The control will be £100 million a year for all small renewable installations, be they wind, solar, hydro or anaerobic digestion, and there will be assumed subtotals in place governing how much of each technology can receive FITs each quarter before the limit is deemed to have been reached—reaching the limit will be the end of a FIT application, except that the applicant might get a FIT in the next quarter, and so on.

We are essentially returning to the original low-carbon building programme from before FITs were conceived. The programme rationed grants to installers to, I think, a quarterly limit, with schemes shut to new entrants as soon as the totals had been exceeded. The FIT arrangements were partly introduced to ensure that if an installer had put in the effort to install a device, with all the up-front investment involved, they would know that they had a tariff waiting for them once the installation had been completed. The pre-accreditation arrangements that the Government unwisely scrapped a little while ago are to come back under the new regulations, but, even so, we have to be clear that that way of doing things is a straightforward and basic breach of the principle of how FITs were supposed to work and from now on will clearly be a considerable barrier to new entrants at a smaller scale.

I note that the Government intend to recycle underspend in any category under the new arrangements by adding one quarter’s underspend to the total available for the next quarter, but they may change caps between priorities according to their own policy priorities. Will the Minister clarify for me during the debate what those priorities might be and at what point underspends on each technology at the end of each quarter, if they occur, will be announced? Will there be a delay in allocating, or reallocating, sums while the Government decide on their priorities, or will the sums go on to the next quarter’s limit pro rata unless the Government say otherwise?

Reallocation or no reallocation, the effect of the proposals will be radically to reduce to deployment of renewables under FITs over the period up to 2020-21. Such limitation in deployment appears to be startlingly large. The impact assessment suggests that, in the central scenario, some 5.7 GW of low-carbon generation that otherwise would have come into the system will be lost by 2021.

The Minister will undoubtedly say that there is a levy control mechanism—here is the shibboleth that must not be breached—and that the order will help substantially to keep levy control spending at levy control figures, regardless of the damage it would cause to the deployment of smaller-scale renewables and regardless of the measure’s adverse carbon impact. It is interesting that that carbon impact is not recorded in the impact assessment, as it is supposed to be.

The impact assessment states that the changes on degression and on capping will save about £1 on domestic customers’ bills per year over the next five years. It is an interesting side proposition, not considered in the accompanying documents, whether the deployment of renewables through FITs itself has a depressing effect on prices as deployment increases, mainly because of solar affecting the daytime merit order of generation and pulling prices down as a result. It is therefore quite possible that the savings set out will be dribbled away against higher prices as a result of the lower levels of deployment that I have outlined. I will not dwell on that because there are rather more important issues to consider on capacity.

[Graham Stuart (Beverley and Holderness) (Con)]

I had hoped that the hon. Gentleman would not pass over the merit order effects quite so quickly, and I encourage the Minister not to do so, because understanding the trade-off between the subsidy and the effect of taking the merit order out of the equation at any one time for the more expensive sources of production is an important component of understanding the real costs involved in subsidising something such as solar.

[Dr Whitehead]

I am delighted that the hon. Gentleman is a member of the Committee, because he will no doubt be as happy as I am to talk at great length about merit order. I suggested that we do not dwell on it partly because of issues about how one looks at the dislodging of merit order by low-carbon energy coming on to the grid, particularly during daytime hours, which is a fairly complicated process. Nevertheless, as he said, that is important in terms of higher-carbon generation potentially coming on to system when lower-carbon generation is available and how that affects the relative prices coming forward, with the heights in the morning and the evening and the dips during the day, and pushes the merit order out along the line. That is a pretty important thing to consider, but other members of the Committee may not wish to be detained at length to discuss the intricacies of such arrangements.

I put that on the table as a potentially important point as far as the arguments for price reduction in energy generation in general are concerned. Actually, the very deployment of a larger amount of renewables may countermand some of the supposed reductions and, in fact, the net effect may be that prices would go up to a greater extent than would have been the case were those renewables in the system and affecting the merit order in the way I suggested.

The important additional point is that the deployment of renewables through FITs is, as I mentioned, adding to the nation’s installed energy generating capacity and the loss as projected in the central scenario in the impact assessment to the order of 5.7 GW by carrying out the cap option is a real loss to installed generation capacity over the medium period. FITs-eligible installations do not get any sort of reward for being there to generate because they already have some assistance through the FIT, but other, non-renewable generation now does through the mechanism of the capacity market—auctioning assistance, essentially, for agreeing to be there to generate if generation is required, although not actually generating, as renewable energy would do if it were installed.

The Minister and her Department have not been slow to ensure that such capacity availability is to be well rewarded—about £18 per kWh at the first two auctions for existing generation. Through those two auctions and the additional early auction, about £5.5 billion will probably have been spent on securing existing capacity and supposedly procuring new capacity under the capacity market, which will explicitly not result in any new capacity coming on the system by the time the first round of capacity auctions is through. Indeed, we now know the results of the first two capacity auctions, which have procured precisely no new large gas capacity, but they have procured the establishment of some heavily polluting diesel sets as small-scale marginal generators to the tune of about 1.5 GW.

By the way, that 1.5 GW of new generation achieved though the capacity market system impacts on customers’ bills in just the same way as FITs payments because that will be financed by a levy on producers, which will be passed on to customers’ bills. That is for £5.5 billion, and 5.7 GW of new capacity will be lost to the system after 2020 because of the levy control cap and the way the Department is lying down and rolling over in front of the levy control framework demands. The purpose of the feed-in tariff—to generate low-carbon energy and incentivise the establishment of new technologies to do it—is being thrown out of the window in the process. If we were to ask the Minister what the impact of that £5.5 billion spend on procuring capacity in the capacity market would be on customers’ bills by 2020, the answer would be, “About £20 to £30”, which massively counteracts the so-called saving achieved on eviscerating the feed-in tariff in the way proposed.

A valid riposte to my figures on capacity, as represented by the proposals before us, would be that the capacity margins of the renewables do not remotely add up to the level of power supply because the sun does not always shine, the wind does not always blow and so on, which is, of course, true. However, certainly as far as small-scale hydro and AD are concerned, the capacity margins look similar to those of gas plant. Even so, according to the impact assessment, some 7,000 GWh of generation will be lost if the cap goes ahead, against present projections. However, if we are making a comparison with the equivalent new generation through the capacity market, that new generation—the diesel sets—is predicted to run for even fewer hours than solar photovoltaics will as a proportion of its installed capacity. Indeed, the Government have made a virtue of the tiny hours that diesel sets will run in the capacity market, as an argument for discounting their extremely polluting nature.

The other, one might say valid-ish, riposte, is, “Yes, but we do not know when smaller generators are coming on to the system, so we cannot count that as capacity.” It is, however, clearly capacity. It is coming on to the system and can increasingly be modelled as such. It is only because there is no visibility of power inputs below 15 MW that National Grid does not know when the capacity is coming on stream; it is merely recorded as a loss of load. With different arrangements on visibility, however, a different picture of what capacity is around could, and would, emerge.

That leads on to the next question for the Minister: has she ever looked, or is she now going to look, at processes whereby the capacity represented by small-scale generation can properly be accounted for in capacity margin calculations—calculations that tell us what capacity gaps there are and impel us towards decisions to build plant to bridge those gaps in the first place? If she did that, the 4.4 GW already installed under FITs and the 13 GW possible as cumulative installation under the present programme—if it continues under the current arrangements—might be seen by the Government in a different light, as a capacity asset and not a funding drain.

The Minister and hon. Members will, I think, have gathered by now that Labour Members do not like the proposals. We do not like them because they represent a fundamental missed opportunity to start to reshape policy so that there is a more real definition of how the system is working, what capacity is coming on to it and how it can be properly rewarded, in bringing the assets forward. I suggest that we have a completely unbalanced system at the moment, but, among the capacity that is coming on stream, penalising the renewable and rewarding the non-renewable is to the detriment of what I believe are overall carbon goals that we share, as far as renewable and low-carbon generation is concerned, for the future shape of our energy policies.

Instead of that, the measures represent a capitulation to limits that dismantle policy in favour of a sterile nightwatchman view of deployment, which cannot be acceptable with the low-carbon energy emergency that we face. We must have a better way of dealing with the deployment of renewable energy—with the capacity and the future asset that it represents—than to cap its deployment in the way described in the statutory instrument.