Public Ownership of Energy Companies

Debate between Alan Whitehead and Sheryll Murray

Monday 31st October 2022 Westminster Hall

[Mrs Sheryll Murray (in the Chair)]

Order. I remind the hon. Gentleman that he should address the Chair.

[Dr Whitehead]

I apologise, Mrs Murray—I will face the right way from now on.

The grotesque result is that Shell has stated that it has not actually paid any windfall levy because it has got it all back through that loophole. Customers see that the regulation of the system is so dreadful that they are paying enormously high prices for their power as if all of it came from gas, even though half of it now comes from much cheaper renewables. That is because the market is regulated in such a way that the marginal cost of gas provides the whole of the price for the market, and it is a substantial part of the reason why prices are so high. In short, customers have seen for themselves a thoroughly broken energy system in operation. They have perhaps concluded that the privatised norm of the last 30 years has failed, and that placing energy back in state hands is the relatively straightforward answer.

What a delight it is to see so many Conservative Members in the Chamber to support their Government’s response, which states:

“The Government does not agree that nationalisation of energy assets is the right approach. Properly regulated markets provide the best outcome for consumers as a driver of efficiency and innovation.”

Wouldn’t it be nice if proper regulation did drive energy efficiency and innovation? We know that it simply does not; the failure of proper regulation is at the heart of the many problems in our energy markets. We also know that the Government themselves have recently resorted to measures that might be compared to nationalisation.

As my hon. Friend the Member for Wirral West (Margaret Greenwood) said, Bulb—the seventh largest retail energy company in the country—went bust a little while ago, along with 40 other retail energy companies. Bulb, however, was regarded as too large to fail and was effectively nationalised by Government. It was put into special administration and has sat there for quite a while, at a cost to taxpayers of about £3.5 billion. It has just been sold for scrap, as it were, with its customers being transferred to Octopus Energy for, we think, several hundred million pounds—far less than the amount that taxpayers put in as a result of the Government’s reaction to appallingly bad regulation. Does the Minister have further information on exactly how much Octopus paid for the remains of Bulb, so that we can get an accurate grip on how much money has been retrieved from that episode?

An energy Bill that was recently mysteriously withdrawn by the Government proposed that the operator of the national transmission system be fully detached from National Grid and placed in the public sector. That means that it would no longer be a part of National Grid, even at a distance. As set out in the Bill, the future system operator would have full power to plan the system, commission investments in it, and run and balance the system overall as a public sector organisation. However, as I say, that Bill has mysteriously disappeared, but I would be interested to know whether the Minister continues to support the idea that the future system operator be a company in the public sector, not the private sector. I would also be interested to hear when that energy Bill will return to Parliament, if at all. It contains a great deal of things that could lead to better regulation of the energy system, which is exactly what the Government are saying is the alternative to nationalising it.

Although it is true that part of the answer to the problems we face in the energy system at the moment is proper regulation—and the Government have an enormous amount of work to do get it properly regulated—we also have to give careful consideration to where our energy system is going now, because it will not be successful in reaching its targets, particularly in the low carbon context, if we simply continue the privatisation experiment of the past 30 years. Of course, the energy system is changing before our eyes. All the old considerations about 80 or so power stations providing power for the grid and then to customers through retail sales are effectively disappearing. We now have about 1.5 million inputs that are owned by all sorts of different people. Indeed, some of that input is from companies and bodies that are not in the private sector, but are community owned or locally owned. There are all sorts of generators providing a different form of input to the grid.

Of course, the grid itself is changing rapidly. National Grid Electricity System Operator, the forerunner of the future system operator set out in the energy Bill, considered in a recent holistic design plan that accommodating the new way in which the energy system is going to work, and making sure that it works well in future, would require a huge recalibration of the grid system, both onshore and offshore, at the probable cost of about £62 billion. An enormous amount of investment is needed to make the future energy system secure, and to get the green and low-carbon generators into it for the future. We will not sort that out by just hoping that somehow the market will come to the rescue and provide all the investment for the future based on our current regulation and system. My hon. Friends the Members for Wirral West, for Leeds East (Richard Burgon) and for Ilford South (Sam Tarry) both pointed to how that needs to be done. Perhaps we should not have to rely on the private sector to come to the rescue and sort out the future system.

The Labour party wants a Great British energy company —a publicly owned company at the heart of investment and driving forward, planning and managing that new energy system. As my hon. Friends have pointed out, that company would stand alongside companies elsewhere in Europe that have already started that energy revolution with investments not just in their own countries but on an international scale. Companies such as Vattenfall in Sweden, which owns the largest onshore wind farm in the UK, Ørsted in Denmark, Equinor in Norway and a number of others across Europe are making investments in the future system and, moreover, keeping the equity in those investments for the people of the countries on whose behalf they are working. Either individually or in partnership with the private sector, they are turning over those investments for those people, and keeping their equity in them.

In this country, as members of the public and customers we are spending enormous amounts of money each year on providing energy transmission and distribution companies with the means to invest in the grid system—the assets of which stay with those companies, even though we the public have paid for those assets. That is also the proposal for the new nuclear programme—we pay the money, they get the asset—but a Great British energy company would put a stop to all that. The assets would stay with the public and the money would come back to the public purse. That is the right approach. Our investment ought to go towards producing our future energy system.

I reject the Government’s idea that this will all happen via better regulation—though it would be nice if that did happen—and the operation of the market. We need to be much smarter than that. I do not agree that we should nationalise the energy system as it stands. Among other things, if a lot of the junk and clapped out stuff in the energy market were nationalised, the people who own those stranded assets would be delighted to have them put out to grass and taken off their hands as the energy system changes, so that they could run off with the compensation money.

We have to think smartly about the future of our systems. They will certainly not be funded, run or sorted out on the basis of the failed privatisation experiment of the last 30 years.

--- Later in debate ---

[Dr Whitehead]

We have not got a policy of nationalisation. The Minister is not telling the truth.

[Mrs Sheryll Murray (in the Chair)]

Order.

[Dr Whitehead]

Sorry—I am getting very annoyed about this.

Climate Change Committee Progress Report 2021

Debate between Alan Whitehead and Sheryll Murray

Thursday 21st October 2021 Westminster Hall

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

Thank you, Sir Christopher. I am always guided by your wisdom. I will attempt to restrain my remarks as much as possible, although, I am not sure whether I can get them done in 45 minutes. I hope I will be much briefer than that, because quite a lot of what I wanted to say this afternoon has already been said. That is a reflection of the very high quality debate that we have had.

I do not want to go overboard about this and start saying things such as, “Better fewer, but better”—better being the watchword for these sorts of occasions—which is actually a quote from Lenin, but it reflects very well on the Members present. I could not have asked for a better group of parliamentarians to debate this issue. Between us, we have addressed in a sober manner both the pluses and the minuses of where we stand on emissions. For the second day running, I congratulate the hon. Member for South Cambridgeshire (Anthony Browne) not only on securing the debate, but on the quality and content of what he had to say. I know that is probably a career-limiting move on the part of an Opposition Front-Bench spokesperson, but I really think that the hon. Gentleman did ample justice to his brief, albeit perhaps he pulled some punches a little because of his party political position. Overall, his speech was a sound and good exposition of both the pluses and minuses of our progress on climate change.

[Mrs Sheryll Murray in the Chair]

I will come back to one or two things that the hon. Gentleman said, but I also want to say that valuable additional points were made by Members from my party and the Scottish National party. My hon. Friend the Member for Rochdale (Tony Lloyd) emphasised the importance of buildings, heat pumps and the seismic change in delivery that we have to get into over the next period. Those were well made points, which reflected how we talk about what we have achieved so far and what we have to do in the future. That is a central point in our discussions.

My hon. Friend the Member for Bristol East (Kerry McCarthy) made some important points about transport and the difference between what we think we have achieved by putting something down on a piece of paper, and, when we follow it through, where we think that has got to. That was exemplified in her comments on the 900 buses that have allegedly been procured. Indeed, I was present at the visit to the buses yesterday, along with her and other hon. Members. That exemplified that we have some things that are an obvious next step in the decarbonisation of the transport sector. If it is possible to embrace an entire bus, we should be running off with those examples and planting them everywhere in the country as quickly as possible, yet we appear to be falling down badly in terms of how we roll out that fine ambition over a period of time.

My hon. Friend the Member for Leeds North West (Alex Sobel) emphasised the role that local government and a cross-departmental approach can play in the fight to reduce emissions across the board. He made a number of very telling points about what local government can and cannot do, and how much needs to be entrusted to local government in order to bring about emissions reductions.

I return to one or two of the comments made by the hon. Member for South Cambridgeshire. He made the important point that if we are to have a balanced assessment of where we have come from and what we are trying to get to, we should neither condemn a Government—or, in this case, the two Governments we have had from the turn of the century to today, or three if we count the coalition—for doing nothing, nor praise them for doing everything. We have to have a clear line between those two positions to make a sober assessment of just how much we have to do, and to place our successes and failures so far in context.

As the hon. Member also said, it is only possible to decarbonise our power sector once, which is an important observation for our record so far. Some people, talking about where we have got to, might say that we have done better than a number of other countries in the world, that we have reduced emissions substantially while expanding our economy, and then stand back with folded arms and say, “There we are—it is pretty much done, isn’t it?” The Climate Change Committee’s report gives a telling antidote to that stance. It draws our attention to not just changes in UK emissions over the period 2000 to 2020, but changes by sector.

A useful chart appears on page 20 of the report—I see hon. Members flicking through their copies to find it—which shows that there has been a stupendous change in emissions from electricity supply. We have done a fantastic job of decarbonising our emissions from electricity supply, which have plummeted from annual emissions of about 160 megatonnes of CO₂ in 2000 to less than 45 megatonnes of CO₂. We see the wisdom of the point made by the hon. Member for South Cambridgeshire—we can only decarbonise these things once. Although we should go much further, and it is good that we have seen a proposal for the complete decarbonisation of the power sector by 2035, we will not be able to repeat that reduction in emissions in that sector, so we cannot set that achievement against what we need to do next in the areas we need to concentrate on for the future.

That same chart is alarming in a number of areas. We must enter a caveat about the deep reduction in emissions from aviation and surface transport during the pandemic, because all the evidence already suggests that they will pretty quickly return to their previous levels. In general, despite some reduction in emissions from manufacturing and construction over the period and a smaller reduction in buildings—albeit a flat line in recent years—emissions in most other sectors are flat or increasing. That means that, in effect, measures in those sectors either have not started or have been completely ineffective in reducing emissions. As we look at the overall picture, it is important to be able to say, “We have done well here and we have done badly there,” and, when we are judging the totals, we must carefully take that into account.

We must also carefully consider the proportion of emissions in those sectors. For example, electricity supply—power stations—currently accounts for 15% of emissions. Yes, we can achieve a reduction in emissions there, but those emissions as a percentage of total emissions are now about the same as those from agriculture and land use, yet emissions from that area have stayed static in the period. Therefore, among other things, if we continue to make progress in particular areas, as has been described, but others stay static, they will represent an increasing, and increasingly intractable, part of our emissions over the next period. To do nothing about aviation, shipping, surface transport and, certainly, agriculture and land use, or to ignore them or put them in the background, is nearing criminal. If we leave them out, they will be impossible to pull back later.

We need to look at the progress made under the plans in those areas and how well they are getting us towards the same emissions curve as we see in the power sector, and as soon as possible. In that context, the Climate Change Committee’s report to Parliament is telling. The committee is the most polite organisation that one could come across. Not only is it unfailingly courteous in personal dealings with Members but all its reports have “courteous” written through them, like a stick of rock. It does not jump up and down and scream, and it does not over-hype its statements; quite the opposite. Where necessary, it is careful to caveat them as far as possible. In those circumstances, it is sometimes accused of being a bit soft. I do not think it is, but it is rigorously careful and accurate in what it tries to do.

However, in reading between the lines, the progress report is a pretty coruscating condemnation of progress, particularly in the areas that I have represented to hon. Members. As hon. Members have mentioned, page 24 of the summary report shows the areas where progress falls far short of the Government’s stated ambition and commitments. In some areas the Government’s commitment meets what the Climate Change Committee said should be the pathway. However, in a number of other areas their commitment is failing very badly, and those areas represent a large chunk of the overall emissions coming down the road, while those where they are succeeding often account for relatively small amounts of emissions. We need to try to get that into proportion as well.

Looking at what the Climate Change Committee said, something that we ought to think carefully about, which we have not done particularly this afternoon, is that the progress report is about not only mitigation but adaptation. Although there is a separate adaptation report, it comes under the overall ambit of the general report to Parliament. On adaptation, the committee says:

“A robust plan is needed for adaptation. The UK does not yet have a vision for successful adaptation to climate change, nor measurable targets to assess progress. Not one of the 34 priority areas assessed in this year’s progress report on adaptation is yet demonstrating strong progress in adapting to climate risk. Policies are being developed without sufficient recognition of the need to adapt to the changing climate. This undermines their goals, locks in climate risks, and stores up costs for the future.”

That almost sounds not terribly polite. It is waving a red flag about the disgraceful complete lack of any plan for serious Government action in this country on adaptation, which will really turn around to bite us in the near future if we do not get our act together. If the hon. Member for South Cambridgeshire is minded to apply for a further debate in this Chamber, I would suggest a specific debate on adaptation. It is a very important area, which we have largely missed out on, and we do so at our peril.

The committee’s report also reflected on the fact that, at the time it was written, the Government were in the process of producing a number of reports that had been promised for quite a while but had not arisen, such as the net zero plan, the transport plan, the hydrogen plan, and the heat and buildings strategy, which the Climate Change Committee was unable to incorporate into its report to Parliament because they were still anticipated. Just this week, no fewer than 1,800 pages of material finally came tumbling out of the Department for Business, Energy and Industrial Strategy, the Treasury and so on, with 10 days to go to COP26, rectifying a number of those emissions. I am afraid that, try as I might, I have not been able to get through all 1,800 pages by any means. It is apparent from reading those just how far off we are from getting to grips with things that the Climate Change Committee mentioned in its report.

Let me take the “Heat and Buildings Strategy”, which has just come out, as an example. I do not particularly blame the Department for Business, Energy and Industrial Strategy for this, and hon. Members will have to take it from me, but the “Heat and Buildings Strategy”, which is an interesting report, has been written, in what we might call Shakespearean authorship analysis, by several different hands—I do not include the Minister in that. Broadly, I can say that the right questions have been written by one series of hands, and the wrong answers have been written by another series of hands, so the report does not cohere.

The answers to the ambition that the Climate Change Committee was concerned to underpin in its report to Parliament are not very ambitious at all. There is a really lame response to the question of how we go about the insulation and energy efficiency uprating of our homes, which, as everybody knows by now, is a sine qua non of a load of actions in other areas, as we have mentioned already.

The hon. Member for Kilmarnock and Loudoun (Alan Brown) unpacked some of the issues on heat pumps. We know that they will not work in badly insulated homes. We have an ambition for heat pumps, but there are all sorts of issues even within the report about the difference between the ambition of 600,000 heat pumps a year by 2030 and the practical issue of who will be trained up to install them, whether they will be manufactured in this country, and which sectors will have heat pumps in them. I note, for example, on the Government’s ambition for 300,000 homes a year, that it is suggested that heat pumps will go into only about 60% of them, so we have the prospect of new homes being built with gas boilers in them, which will have to be retrofitted pretty shortly afterwards, but we will perhaps let that pass us by.

On how the paper addresses our overall ambitions, the sector, as the strategy sets out, occupies 23% of emissions just on heat. So when we talk about the energy sector, we are talking about heat being much more important in terms of emissions than power, and it is heat that we have made virtually no progress on at all. The overwhelming majority of our homes are still heated by gas, and that figure has remained fairly static for a fairly long time. A strategy that proposes more heat pumps only works if we deal with other heat factors, particularly how much heat we lose from our buildings, how meaner we could be in our use of heat in buildings in future, and what sort of win-wins we might have in insulating our homes, and we must deal with fuel poverty and various other such things.

One would think that a strategy of energy efficiency should run alongside everything else that we do on heat generation. That one thing, with the exception of some short-term, fairly small amounts of funding for particular projects in the strategy, is sorely missing. I do not know, but I would speculate, bearing in mind the different authors of the report, that perhaps a much more ambitious strategy was in the minds of BEIS, and certain other people came along and crossed a nought off the end of each of the amounts of money in the strategy. It woefully misses the opportunity to really go forward on getting heat firmly in our sights as far as decarbonisation is concerned.

The hydrogen strategy that has come out is interesting, premised on the progress report to Parliament. It does not have any path by which we can develop green hydrogen, which of course is the element of hydrogen that will do the work of decarbonisation. Unless we have a decent path for developing green hydrogen over the period, we will not make the progress that we should on climate change and emission reductions.

As I said, I have yet to go through all of this, but I think we are simply not articulating our own ambition on carbon reduction and getting the details of how we do it right. Indeed, not only are we a long way from that in some instances, but in others we are not even addressing it. I am interested to reflect on the points made by my hon. Friend the Member for Leeds North West about the nudge unit report that came out recently. It was nudged into public view and pretty immediately nudged out again, within I think a day of being published. One of the reasons for that is because the nudge unit drew our attention to some very difficult areas that we have to get to grips with, but we have hitherto walked on by on the other side of the street.

I know that to my cost. Recently, I think at a fringe meeting at the Labour party conference, I ventured the opinion that we will have far fewer livestock farmers in our country in 20 years’ time. That is a straightforward statement of understanding of what we have to do in the agricultural and land use sector, what we have to do about our diets and how we deal with emissions in our food chain, and many such things. I got absolute grief. Indeed, I got a number of angry invitations in my in-tray to visit some farms and see what is really happening, and so on. I know it is a really difficult issue, and that we will have to do a lot of just transition-type work in getting it right, but it is an issue that we have to face. I am afraid that the Government are not doing that in a number of areas as far as emission reductions are concerned.

My conclusion, which I hope will be pretty widely shared across the Chamber, is that although we have done well so far in our emission reductions process, we need to unpack that to understand where we have done quite well and where we have done badly, so that we have better pointers for the future. As things stand, we appear to be nowhere near meeting the challenges ahead of us on climate change reduction. A lot more new policies and new thinking will be needed to get us anywhere near those targets. Regrettably, as the strategies come out they do not appear to rise to that challenge. I hope that this afternoon the Minister will be able to respond to the debate in that vein, because I hope that I have given a reasonably accurate picture of what the Climate Change Committee says and what hon. Members have said in this Chamber today.

I have not quite taken my 45 minutes, Sir Christopher—[Interruption.] Sorry, Mrs Murray; while I was talking, you snuck into the Chair.

[Mrs Sheryll Murray (in the Chair)]

I snuck in.

[Dr Whitehead]

Obviously, the previous Chair just could not stand the idea of being there for the entirety of my speech and has left.

I hope that this debate will serve as almost a watchword for how we approach our task over the next period. We need to work soberly, carefully and, as far as possible, on a consensual basis, for the future of our climate goals, but also with a clear-eyed recognition of just how far we have to go and how difficult many of the choices will be. We need to face them together, creating solutions that can actually work in our national and, indeed, international interests.

By the way, even though it was very late in the day, I understand just how much work has gone into these documents and how hard people have worked at getting them out, and indeed how they have attempted to address the choices in front of us in a real way. I do not underestimate any of that. My criticisms are based on what we have to do politically to address these issues for the future. I am not in any way attempting to denigrate the people who have put these documents together.

That is the offer from the Opposition, and that is what we want to do—to move us forward in the face of this tremendous challenge and the really daunting task ahead of us. And if we can manage to conduct our future debates as well as we have managed to conduct today’s debate, that will be a great help in this process.