Energy Developers Levy

Debate between Alistair Carmichael and Michael Shanks

Wednesday 25th February 2026 Westminster Hall

[The Minister for Energy (Michael Shanks)]

It is a pleasure to join this debate under your chairship, Mr Twigg; I know that you take a great interest in these issues. I thank my hon. Friend the Member for Suffolk Coastal (Jenny Riddell-Carpenter) for securing the debate. The hon. Member for Strangford (Jim Shannon) was right: my hon. Friend is making a name for herself as a hard worker in this space. Our meetings about this issue have been genuinely really helpful and insightful for me—and her as well, I hope. She is right to flag these issues.

I should also say at the outset that I genuinely welcome the tone that my hon. Friend has taken since she has become MP for Suffolk Coastal. In this place at this time, it is very easy to take the view that the easy answer is simply to say that we should not build anything anywhere ever again and let the country continue to slide further and further backwards; many on the Opposition Benches, who of course are not here at all, would say that.

My hon. Friend concluded her speech by saying something worth repeating: many in her community and across the country are pro the energy transition—they are pro-investment, pro-growth and pro-building the infrastructure—but they rightly want to know that that will be well planned and benefit their community. It is entirely legitimate for communities to ask for that and to be concerned when it does not happen. Given that spirit, she has raised this debate in the right way.

I want to pick up on a couple of things and also go back to why the infrastructure is so important in the first place. We sometimes lose sight of why it is so important for us to build energy infrastructure—in particular, much of the transmission infrastructure that is in my hon. Friend’s constituency. She said that the previous Government had not done that work, and I will come back to that.

It is worth remembering that since this Government came to power we have sought to tackle the energy trilemma: how we bring down bills and make the cost of living more affordable—today’s decision on the price cap is an important statement of how seriously we take that mission; how we deliver our long-term energy security in an uncertain world and how we move away from the volatility of fossil fuels, which have cost us so dearly in recent years; and how we build infrastructure that sets the country up for the future. This is about connecting not just renewable energy but the demand projects that will stimulate economic growth across the country. If we do not do these things, all we will do is harm that economic growth. Those decisions are incredibly important.

[Mr Carmichael]

I urge the Minister to learn from the experience of Shetland and Sullom Voe, 50 years ago. We took the most important step on North sea oil and gas coming ashore in Shetland, but on our terms: there was a genuine funding stream coming to the community. If we give the whip hand to the corporates, they will always use it to their benefit.

[Michael Shanks]

The right hon. Gentleman makes a good point; a generation of lobbyists should look back at the history books of Shetland Islands council at the time, because it is an extraordinary story of how it seized the opportunity of what it knew then would be decades North sea oil and gas and has still benefited from it.

I was also going to come to the right hon. Gentleman’s other point, around the Viking wind farm, which I have seen in the Shetlands myself. The scale of it is extraordinary, but the community benefits are not where they should be and the community is not feeling enough of the benefit of it. It is important that we do everything we can to reduce the constraints on wind, so that local communities benefit directly from it and the country as a whole benefits from cheaper power on the grid, bringing down bills.

Let me turn to some of the actions that we have taken since we came into government. We have set up Great British Energy—a really important moment for us to say, for the first time in 70 years, that we want the public to have some ownership stake in our energy future. We have delivered the most significant programme of investment in home-grown clean energy in our history. Just a few weeks ago, we published the local power plan, the biggest shift of wealth and power in the energy space in British history, to make sure that energy projects are not just built by developers, but owned by local communities that have a real stake in their energy future. We also published the warm homes plan, so that we can have the biggest upgrade to homes in British history.

Any infrastructure, in the energy space or elsewhere, brings local impacts, and there is no point in anyone pretending that those impacts do not upset local people. That is why we have an extremely rigorous planning system, why we take great care over decisions that are made and why, at times, there is great frustration about the length of time it takes for planning decisions. However, that is because the public rightly have a voice in that process, and important determinations should take time. We should always remember the fundamental outcome: since the poorest in our society have paid the price from our exposure to fossil fuels, the infrastructure we are building today is imperative, and it is important that we move faster than ever before.

My hon. Friend the Member for Suffolk Coastal and I have talked about cumulative impact before, and I have said repeatedly in the House that it is a serious issue. All nationally significant infrastructure projects must take account of cumulative impact, including the range of those cumulative impacts—not just the number of projects in a particular place, but the impact on other local services and other bits of infrastructure. They must submit a local impact report, which makes the examining authority aware of what those potential impacts are. That process must demonstrate that the applicant has taken seriously the concerns of local communities. If they have not, that will count against them. Consultation cannot be an exercise to tick a box; there must be some demonstrable engagement with that process. Local communities have a voice in that process through early consultations, but they can also register through the Planning Inspectorate in the pre-examination stage. All those various issues are taken into consideration.

Let me also speak to the broader point about how we plan the future energy system. My hon. Friend made a correct observation: while the previous Government now want to run a mile from all the renewable energy projects that they developed, which we would support— I think I am the only person still cheerleading the previous Government’s drive for renewable energy, because they certainly are not—they did not design and co-ordinate the system such that we were not building unnecessary grid to connect all those projects. My hon. Friend’s constituency is a good example of where better co-ordination at a strategic level would have got the same outputs from the system, but with much less local impact.

We are taking forward a number of things—this is where we get into the acronym soup that is the energy world. First, and most importantly, the National Energy System Operator will design the first ever strategic spatial energy plan, or SSEP, which will be published by the end of next year. This is an important opportunity for us to design the future of our energy system holistically: to take into account what can be built where and what the future energy system looks like for our needs, not now, but in the future. As a result of that planning, we can design the most efficient network and transmission system that goes with it. The centralised strategic network plan, which will be the holistic design of the network, will follow that. This is something that we should have done 15 or 20 years ago, but we start from where we are now, and we are determined that the future of our energy system will be much more strategically planned and aligned.

That plan will take into account local impacts and views, and the regional energy plans in particular will take a much more granular and local look, engaging with local authorities and others to make sure that those plans really take into account both local needs and local opportunities. Those will be designed for Scotland, Wales and nine English regions, and we will bring together various people to share their views on how the plans should meet local priorities. I want to be really clear about the scale of that work. The reason why the Government are taking longer than perhaps we would like is that that is the best way to plan long into the future what the system will look like, and to give communities a real opportunity to shape it at an early stage. That is important for the planning of the system and for community benefits, which other Members have raised.

It is really important that we fundamentally recognise that communities who host energy infrastructure are doing a service for the country. Infrastructure has to be built somewhere. There is not some third place that would let us say, “Well, we are in favour of this, but please don’t build it in my area.” At some point, it has to go somewhere; as a Government, we are done with dither and delay and we are going to build things again, but communities should get a benefit from that infrastructure being built. We are committed to making sure that communities who host infrastructure will benefit. As my hon. Friend said, we have consulted on whether community benefits should be made mandatory—at the moment, they are voluntary and a patchwork across the country, and they have different degrees of impact on communities, even where the funding is being delivered—and we will respond to that consultation soon.

In the Planning and Infrastructure Bill, we have also outlined the very first community benefits and bill discounts for people close to transmission infrastructure, recognising that often they have been left behind in terms of community benefits, as pylons and transmission wires flow through communities. That scheme will be up and running soon. It will directly deliver money off bills for those people living within 500 metres of new transmission infrastructure, but also millions of pounds of investment in communities next to significant pieces of transmission infrastructure such as substations. The grid is critical for the future of the country, and those who host grid infrastructure should get some benefit from that. In July last year, we also published guidance on voluntary community benefits to make sure that they are as robust as they can be.

My hon. Friend mentioned a levy, and I am happy to meet her to discuss that further. I pay tribute to the fact that, having identified a problem, instead of just bringing that problem to the House—I do not want to criticise other hon. Members here—she has worked on a solution. I am happy to engage with it and to look at it further.

There are two things that I want to say clearly. First, the affordability crisis is this Government’s No. 1 objective. It is driving decisions right across Government. It is what has led to a 7% reduction in bills from the next price cap period, which was announced today. Every single penny that might find its way on to bills has to be scrutinised very carefully. I am initially hesitant at the idea of an additional levy. Although my hon. Friend made the point that these energy companies are making significant profits, and I would not disagree with her on the scale of some of those profits, we should also be aware that, unless the Government are going to take a power to cap those profits, it is likely that the cost of a levy and the costs of the projects themselves would simply be passed on. Consumers, at the end of the day, would pay for it. I will look into her suggestion further, because every penny on bills makes a difference.

Finally, on section 106 agreements, in addition to community benefits arrangements locally, developers are already required to mitigate specific local impacts through 106 agreements. They are legally binding agreements that are paid to local authorities. With section 106 agreements and community benefits together, we think work is being done to invest in and enhance communities, but I am happy to look at what my hon. Friend has proposed in more detail.

To conclude, I reiterate two things. First, my thanks not only to my hon. Friend the Member for Suffolk Coastal, but to right hon. and hon. Members across the House who made serious points and suggestions on how not to turn away from necessary investment, but to ensure that communities genuinely benefit from it. They are absolutely right to champion their local community and to ensure that everyone benefits from the energy transition. Secondly, we should not for a moment think that building that infrastructure is optional, or that it can all be done somewhere else. There are those in this House who believe that we can simply go backwards to deliver energy security and affordability without a serious and credible plan to do so, but simply tying communities to fossil fuels for longer is not a serious proposition.

I reiterate what I said at the beginning. My hon. Friend rightly made the case that all the polling that we have seen points to the country being in favour of the energy transition. Every piece of research points to the importance of tackling the climate crisis, which is not a future threat, but a very present reality. Infrastructure, which for too long has been held up in this country, is necessary to do that. It is necessary to get clean power, cheaper power, to people’s homes and businesses, and to bring down bills, but it is also absolutely necessary to unlock the economic growth that this country needs. There is no shortcut to doing that. We have to build the infrastructure that the country has been crying out for, for many years.

I thank hon. Members for their participation in the debate, including my hon. Friend the Member for Suffolk Coastal. I am happy to meet her to discuss the issues further. As I said at the beginning, we take seriously the role that communities play. We thank them for putting up with disruption when infrastructure is built, and for hosting that infrastructure on behalf of the country. We want to ensure that they benefit from it.

Question put and agreed to.

Oral Answers to Questions

Debate between Alistair Carmichael and Michael Shanks

Tuesday 4th February 2025 Commons Chamber

[Michael Shanks]

I agree with my hon. Friend. The local power plan is a key part of what Great British Energy will deliver. It will give communities the power to develop local power projects wherever possible, and to achieve the social and economic benefits of doing so. We are engaging with a number of stakeholders across the UK. Because of the devolution settlement, our main contact will be with the Scottish Government, who have their relationship with COSLA, but we are determined that local government across the UK will help drive this forward, and will have the capacity to support communities in doing so.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

T10. I thank the Minister with responsibility for energy consumers for agreeing to convene a roundtable tomorrow on the subject of radio teleswitching switch-off at the end of June. The problem will be particularly acute in communities like mine; we are well behind the rest of the country when it comes to smart meter roll-out. When she comes to the meeting, will she have a target for getting us the number of smart meters that we need?

Marine Renewables Industry

Debate between Alistair Carmichael and Michael Shanks

Thursday 16th January 2025 Westminster Hall

[Michael Shanks]

I will touch on the Crown Estate later in my speech. On that specific point, I am afraid that I fundamentally disagree with the idea that devolving the Crown Estate is the answer, and I take issue with the suggestion that the Crown Estate’s considerations in Wales somehow come from Whitehall. I have met a number of representatives of the Crown Estate, and they are in engaged with the Welsh Government and with communities in Wales. If we can do more on that, I am very happy to reach out to the Crown Estate, although I am not directly responsible for it and it is not accountable to me. Of course, it has published a number of strategies recently and there is more coming on the long-term vision for the Celtic sea and other parts of the Crown Estate in Wales. It is about partnership work, which includes not just bringing together the Crown Estate but how we look at the planning system and consenting, as well as the strategic spatial energy plan more broadly to plan for the long term. I will come back to some of those points later.

Although marine renewables are not at the centre of that clean power action plan to 2030, they will hugely benefit from the actions that we will deliver through it, not least on grid connections. Grid connections are all about future-proofing the grid in this country so that it can meet the demand of the future, and prioritising a grid queue that has got out of control with over 700 GW waiting to connect, which is simply not deliverable.

I would like to turn to the issue of funding, but first I wish a happy birthday to the hon. Member for Taunton and Wellington (Gideon Amos), who does not look a day over 21—but that is the last time I will pander to the Lib Dems. He raised a point about Great British Energy, as did a number of other hon. Members, many of whom I cannot help but notice did not vote for it, but now want it to be headquartered in their constituencies and deliver significant amounts of funding. Great British Energy will play a role in this space. It is our first publicly owned energy champion, and it will deliver and deploy clean power across the country and help with some of the innovation and development work.

Marine renewables are exactly the kind of technology that Great British Energy might invest in at an early stage and have a significant impact on, rather than technologies that are at a more confident stage. Hon. Members may not have had the opportunity to reach out to Great British Energy—the Bill is still going through the House of Lords, so it does not technically exist yet—but the start-up chair, Jürgen Maier, has had a number of meetings across the UK, has engaged on questions about a whole range of technologies and is keen to continue to do so. It will be for Great British Energy, as an independent company, to make its own investment decisions based on a whole range of factors, including the return on investment potential, but I see marine renewable technology as a potential benefit for it.

We think that tidal stream energy will play a significant role, particularly beyond 2030. As many Members raised, tidal stream will bring balancing benefits to a future electricity system that will have renewables at its heart. The balancing role that tidal can play—as a baseload, in the traditional way of thinking about the electricity system—would be important. Currently over half of the world’s tidal stream deployment is situated in UK waters. However, this Government want to go further and faster, as the technology has huge potential.

Aside from having one of the world’s best tidal resources, the UK also hosts world-leading marine energy hubs. Many hon. Members spoke about the EMEC. I have been pleased to speak to the EMEC over the last few months; the Minister for Climate, my hon. Friend the Member for Bristol East (Kerry McCarthy), visited recently and I hope to get to Orkney to do the same at some point.

When we came into power, the Government took the contracts for difference option that had been started by the previous Government and increased the budget to try to get as many projects as we could over the line. That led to a 50% increase in the ringfence for tidal stream to £15 million in the last allocation round. That demonstrated our commitment to the technology and ensured that 28 MW of tidal stream was secured in allocation round 6, including 9 MW for projects based in Orkney.

[Mr Carmichael]

The creation of the ringfence in AR4 had an absolutely transformative impact, so my sense is that meeting the industry’s request for a much bigger ringfence in AR7 could do similar. I am not expecting the Minister to tell us today whether that is the direction of travel that the Government are intending to take—although he is welcome to—but could he at least tell us when we might get an answer on that?

[Michael Shanks]

The right hon. Gentleman makes an extremely important point. One of the things we announced before Christmas in the clean power action plan was the broad outline of where we see allocation round 7 progressing this year, alongside the clean industry bonus. We will be saying more about that in the weeks ahead when we launch the initial information on what it will look like, but I am glad that the right hon. Gentleman is not surprised that I cannot announce anything today about what ringfences might be in place.

It is a tricky balance. The aim of the CfD and the reason that it is effective at what we want it to do is that it has to balance the deployment targets that we want to see with the critical role of delivering value for money for those who will end up paying for it—the consumers and all our constituents. Ringfences have an important role to play, but there is a danger that a ringfence could lead to us paying significantly more for a particular technology than we might want to.

[Mr Carmichael]

The Minister is being very generous. Actually, the setting of the ringfence is a process that could be significantly improved by the taskforce being set up, as that would allow the Government to understand what is going on in the industry, which improved understanding could inform decisions such as the setting of the ringfence.

[Michael Shanks]

The right hon. Gentleman is determined to move me more quickly through my speech; I promise that I will come on to the taskforce. He is right that the more visibility we have of projects that might bid, the more aware we can be of what the sizes of ringfences and budgets for each pot in the CfD might look like. A range of factors makes that complex, such as whether projects are at final investment decision stage, or whether planning and consent are in place to allow them to bid into the auctions. There are many factors, but the visibility point is well made. On ringfencing, I hear what hon. Members have said and what has been passed to our Department over the past few months, but we will seek to balance the needs to deliver deployment and to ensure value for money when making these decisions.

A number of hon. Members raised the issues of licensing and consenting, which are at the heart of our aims for reform of the planning system. We want to continue to have a robust planning system in which communities have a voice, but we also want to move much faster in making decisions, so that projects are not held up for years on end.