Energy BILL [ Lords ] (Sixth sitting)

Andrea Leadsom Excerpts

Thursday 4th February 2016 Public Bill Committees

Hon. Members may disagree and perhaps they will intervene to do so, but most reasonable people would say that that is a pretty unambiguous statement of intent, and that the industry in this case cannot be accused of being myopic or in any way ostrich-like—that is what the hon. Member for North Dorset accused the onshore wind industry of being at our last sitting—in believing that its investments were safe. That makes the Government’s decision to renege on their manifesto commitment and pull £1 billion—

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

I gently point out to the hon. Gentleman that the reference to CCS in the Conservative party’s manifesto was as an example, not as a manifesto commitment.

[Matthew Pennycook]

We will have to agree to disagree again. I am probably one of a handful of people who have read the manifesto in the name of which so much is being enacted. I think that is just another example of the Government trying to have it both ways and to interpret what I and, more importantly, industry and commercial funders took to be a clear statement of the Government’s intent.

It is worth bearing in mind—the Minister touched on this—the context in which the decision was made. Funding was abruptly withdrawn at a time when a number of companies had been working tirelessly for many years to progress their projects, and just weeks before they were expected to submit their bids. Business and investors were given no notice. We heard evidence in the Select Committee that the industry first got wind of this through the Financial Times, when it reported expectations of the Government about that settlement. That was just a few hours before Department of Energy and Climate Change officials posted the notice on the London Stock Exchange and a week after the “reset” speech in which CCS was mentioned as a central part of the Government’s energy policy. To say it was unexpected is an understatement. As a witness in the Select Committee said, it was a shabby way to treat those involved in trying to further this technology.

It is important to bear in mind that millions of pounds of public money have already been wasted, for example, in proving up the Goldeneye store for the Peterhead project through two competition processes, or in the White Rose projects. Those are public investments and public money has been put into them, but they are now at risk of abandonment and sterilisation. Like the Government’s decisions on onshore wind and in a host of other areas, it reflects incredibly badly on their relationship with business and their ability to drive long-term investment in this area.

As Richard Simon-Lewis, financing director of Capture Power Ltd told the Committee, the decision had

“the effect of taking the wind out of our sails. I think the cancellation by UK Government of the competition signals to the market that there is a question mark in the UK Government’s mind over CCS.”

I think the only thing captured here is UK energy policy by Her Majesty’s Treasury. The justification given that in a tight spending review—we all accept that it is tight—now is not the time for this simply does not stack up.

Waiting or buying in technology from other parts of the world will have an impact and costs down the line. It is important that the Government come forward with a strategy for carbon capture and storage. We do not have one in place as things stand. We have uncertainty and muddle.

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[Holly Lynch (Halifax) (Lab)]

May I say what a pleasure it has been to serve under your chairmanship over the last couple of weeks, Mr Davies?

As the Opposition Whip in this Committee, I would not normally speak at any length, but I hope Members will forgive me for making an exception to speak in support of new clause 10. I do so as an MP from Yorkshire, where the decision to cancel the £1 billion CCS competition fund has been a real blow for the region, as I have no doubt it was for Peterhead and for other hopeful projects and their surrounding areas up and down the country.

Earlier in the week, we heard from the Minister, the hon. Member for Daventry and others about the tenacity with which this Government are committed to delivering an end to any public subsidy for onshore wind. I heard the Minister’s intervention earlier and perhaps that is the very crux of the issue. I hope that Members will not mind my quoting from a sitting earlier in the week, when that commitment to end subsidies for onshore wind was referred to as an absolute “manifesto commitment”—no ifs, no buts—and I think people might be forgiven for assuming that the commitment to end the £1 billion fund may have come with the same terms.

[Andrea Leadsom]

Absolutely not.

[Holly Lynch]

I think people would be forgiven for making that assumption, having read the manifesto.

The White Rose project at Drax was set to be the first CCS project of its kind in Europe and it had been awarded Government funding to carry out a feasibility study, as has been mentioned. The project, once it was up and running, was expected to generate enough low-carbon electricity to power 630,000 households, with hopes that up to 2,000 jobs would be created, bringing much needed investment, jobs and growth to Yorkshire. If Yorkshire had been the first region in Europe to get CCS up and running on this scale, the economic benefits of exporting the expertise, the skills and the transferrable technologies all over the world could have been such a boost for the local and wider economies. With the cancellation of the £l billion fund, we also sent €300 million euros from the European Commission back to the Commission. That sum had been awarded to the White Rose project in match funding, because the project was the Commission’s preferred option in its NER 300 competition.

Getting to this stage has involved years of hard work and missed opportunities. The Energy and Climate Change Committee published a report in 2014 urging the Government to reach a final investment decision on the two projects that had made it through to the final stages of the competition by early 2015, which was in line with the Government’s original timetable. The report stated that it was critical that the Government did not waste any more time on unnecessarily delaying the start of the first CCS projects, stressing that we had already lost a decade. It has taken years to bring viable schemes such as the White Rose project into alignment with a Government commitment to invest in the technology and into alignment with the European Commission’s NER 300 timeframe, in order to secure match funding. With the cancelling of the scheme, we are now much further away from bringing those projects online than we were in 2014.

Against that backdrop, I urge the Government to consider the future for CCS, to commit to a strategy and to recognise that new clause 10, and new clause 4 for that matter, present the opportunity to do just that. I think we all agreed earlier in the week about the importance of investor confidence and we have talked about it again today. My hon. Friend the Member for Norwich South made a great analogy about picking the furthest point on the horizon and getting our troops there as fast as we can. In CCS, it is fair to say that investor confidence could not now be any lower. The chief executive of the Carbon Capture and Storage Association, Dr Luke Warren, said the announcement to axe the fund was “devastating”. He went further, saying:

“Moving the goalposts just at the time when a four-year competition is about to conclude is an appalling way to do business.”

I confess that I am still confused about what the Government strategy now is. Ministers have spoken about a future for CCS, but the Prime Minister’s suggestion that there are doubts hanging over both the technology and the economics has really left potential investors with nowhere to go. That is why I ask the Committee to consider supporting new clause 10, to give Members, but most importantly the sector, a much clearer picture about what the future for CCS now means.

[Andrea Leadsom]

It is a pleasure to serve under your chairmanship today, Mr Davies.

New clauses 4 and 10 would place a duty on the Secretary of State to produce and implement a CCS strategy by June 2017, and to report to Parliament on progress every three years. I very much welcome the debate on CCS today. I recognise that the spending review announcement last year confirming that the £1 billion of ring-fenced capital funding to support the CCS competition was no longer available has led to questions regarding the Government’s CCS policy, but I can assure the Committee that the Government’s view remains that CCS has a potentially important role in the long-term decarbonisation of the UK’s power and industrial sectors.

The hon. Member for Greenwich and Woolwich raised the issue of bidders’ costs; I can tell him that the competition rules were clear that the Department would not meet bidders’ costs and that the competition was subject to value for money considerations.

[Callum McCaig]

Will the Minister give way?

[Andrea Leadsom]

Let me make some progress.

As hon. Members have said, the matter was subject to a very difficult spending review where all capital infrastructure costs were reviewed and measured against clearly set out value for money targets, and the competition did not meet those targets, but that is not to say that CCS does not play a part; it certainly does.

The Prime Minister is regularly accused of saying that CCS does not work. In fact, he said that at the moment it is not economic where it is already working, so it does not represent value for money. Hon. Members have asked whether we are effectively turning out back on CCS and not preparing ourselves, and they have asked about when we bring on new gas as part of new policy reset. I can assure hon. Members that any new gas plants for power generation will be CCS-ready, so there is no sense that, by not doing certain things now, we are closing the door for the future.

The Committee on Climate Change argued that meeting the 2050 targets would cost more without CCS, but we are absolutely not ruling out CCS. I want to make that clear.

[Callum McCaig]

The Minister mentioned that the competition was clear that the companies involved would not have their risks or costs mitigated by the Government. The problem that the companies have, and that I and other hon. Members have, is that the competition did not conclude. The rules of the game were ripped up at the 11th hour. Does the fact that the competition was incomplete change the Minister’s interpretation of the competition’s rules?

[Andrea Leadsom]

No, it does not.

The Government continue to invest in the development of CCS. This includes investing more than £130 million in CCS research and development since 2011. For example, in October last year we invested £1.7 million to support three innovative CCS technologies—Carbon Clean Solutions, C-Capture Ltd, and FET Engineering Ltd—and there is the potential to reduce costs. We have continued to support, jointly with the Scottish Government, the CCS developer, Summit Power, with £4.2 million in funding to undertake industrial research and development at its proposed CCS Caledonia clean energy plant in Grangemouth in Scotland.

We have invested £2.5 million in a project to investigate a suite of five stores for the storage of carbon dioxide in the North and Irish seas. We have continued to invest in the development of industrial CCS, providing £1 million to Tees Valley for a feasibility study on an industrial CCS cluster in Teesside. We remain committed to exploring with Teesside how to progress its industrial CCS proposals as set out in the area’s devolution deal, published last October, and in the context of the Lord Heseltine-led taskforce on Teesside.

Through our international climate fund, we have invested £60 million in developing CCS capacity and action in priority countries, including Indonesia, South Africa, Mexico and China, and we work with CCS partners, including the United States and Canada, through the international carbon sequestration leadership forum.

[Clive Lewis (Norwich South) (Lab)]

I do not think anyone would argue that the Government have not made financial commitments to the specific technologies. I am looking at the manifesto again—I know we are obsessing about this—but it says,

“We will protect our planet for our children”,

and it mentions

“committing £1 billion for carbon capture and storage.”

Most members of the public would see that as a straightforward commitment of £1 billion, and yet it has been taken away. The point is that a thread seems to be running through the Bill and the rest of the Government’s actions, whether on community energy, on the subsidies and tax exemptions for solar tariffs, on ending the renewables obligation a year early, or on carbon capture and storage. They are making it more difficult and more expensive for investment to come into renewables by pulling the rug from under the feet of these nascent industries. The important thing is that the Government are making investment in this country’s renewables sector less attractive and forcing up the price of low-carbon technologies.

[Andrea Leadsom]

Only yesterday, in a debate in Westminster Hall, the hon. Gentleman and I were discussing the very real issue of fuel poverty in this country. We were discussing the plight of people who cannot afford to heat their homes, yet today he is advocating more subsidies and more billpayer investment in technologies when I have already made it very clear that we have not gone ahead with the competition project because of the relative value for money versus other infrastructure projects. This is about protecting consumers. The hon. Gentleman cannot have it both ways.

Similarly, the hon. Gentleman talks about cutting subsidies, but although we continue to support the renewables sector, which is absolutely amazing and I pay tribute to it for its enormous success, he must see that as its costs come down so should the subsidies that are paid for by people who cannot afford to heat their homes. He must agree with that. I just cannot understand why yesterday he was arguing that we should be cutting costs and today he is arguing that we should be increasing them.

[Clive Lewis]

I can answer that. Ending the renewables obligation a year early has saved the average consumer 30p a year off their bill, yet we know that the Carbon Capture & Storage Association has concluded that CCS could save the average consumer £82 a year off their bill by 2030. It is a false economy. The Government are either going to be saying in a few years’ time, “We’re not going to meet our carbon targets,” or they will have to go for a more costly way of bringing carbon down and out of our economy. That is the reality. Ultimately, this is about taking a long-term view, not a short-term one.

[Andrea Leadsom]

The hon. Gentleman hangs himself with those remarks. He is saying, “Don’t save 30p today; save £82 by 2030.” Yesterday, we were discussing fuel poverty. The Government do see a role for CCS in our long-term decarbonisation efforts, but the point is that people are unable to heat their homes today. He derides 30p off people’s energy bills, but the central case is that it is £30 million saved over a one-year period or, at the most, if we had greater than expected deployment, up to £270 million. Why does he not write the cheque? If he thinks it is a trivial amount of money, I am very happy to accept his cheque and we can see whether we should continue with these things. It is simply unconscionable to try to equate something that you might achieve by 2030, according to some think-tank, with the very real issues today, including the state of our economy and a very difficult spending review, and the reality of people who simply cannot afford to heat their homes.

[Clive Lewis]

rose—

[Andrea Leadsom]

I will give way to the hon. Gentleman one last time, but then I will continue.

[Clive Lewis]

Thank you, Minister; you are being very generous with your time. On fuel poverty, I will say what I think your fellow Conservative Members were saying yesterday, which is that the key thing for them was that energy efficiency has fallen through the floor. The green deal is finished and the energy company obligation has no funding beyond 2017. That leaves a big gap by 2018. On your own estimates, you are not going to achieve your own targets for warming and insulating people’s homes for another century, so I will take no lessons from the Minister or Government Members on energy efficiency and fuel poverty.

[The Chair]

Order. I hope that in future the hon. Gentleman will not drag me into the debate, because I am not expressing any opinions. If he wants to refer to the Minister, he should refer to her, rather than to me.

[Andrea Leadsom]

I think we will leave it there. We are straying well out of order in terms of our discussion of CCS. All I can say to the hon. Gentleman is that he just put a lot of words into mouths that were not said yesterday. I made it clear from the Front Bench that the Government are absolutely committed, in all our policies, to being the consumer champion and to doing everything we can to keep energy bills down. It is therefore unconscionable to try to tie this in as if somehow spending more billpayers’ money on CCS would save billpayers money in the short term.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Will the Minister give way on that point?

[Andrea Leadsom]

No, I think we have had that discussion.

As part of our commitment to the future of CCS, we will continue to engage widely, including with Lord Oxburgh’s CCS advisory group, which met for the first time yesterday. I have also met the all-party parliamentary group on CCS, whose meeting I attended and spoke at last month, and the joint Government-industry CCS development forum, which I co-chair and which met at the end of last year. We are engaging widely with the CCS industry on what more can be done, supporting individual pilot schemes and measures to try to bring costs down, and ensuring that what we are building to maintain our energy security will be CCS-ready.

We need to take this opportunity to get the next steps right. We will then set out our thinking for the way forward for CCS, using the expert advice from industry, Lord Oxburgh’s group and the APPG. I hope that I have reassured hon. Members that the new clauses are unnecessary as the Government are already considering how they can support the further development of CCS.

[Callum McCaig]

The Minister has spoken a lot. Splitting hairs on what is a commitment and what is not is perhaps interesting for folks watching elsewhere given the voracity of the defence of a Tory party manifesto commitment to end new subsidies for onshore wind that could, in fairness, be read in a multitude of ways. When is a commitment not a commitment? When they do not want to do it. It was clear in the manifesto that it should happen. That it has not is regrettable. I am interested that the Minister believes that there will be no comeback from any of the companies involved in the bidding process. That may essentially be welcome for the sake of the taxpayer, but it is by no means assured and underlines the Government’s atrocious handling of the competition. I want them to make amends and to provide a clear strategy for the CCS industry.

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The only significant difference between the new clauses—it could be seen to be splitting hairs—is the requirement in new clause 4 for genuine consultation with both Scottish and Welsh Ministers in the development of the strategy, which would add to the process. Most of the strategy would ostensibly be required, in terms of reserved areas of legislation, the skills that could be supported and the industrial strategies into which it would feed, particularly in Scotland, where there has been proper engagement from Scottish Ministers, which I would like to see carry on.

[Andrea Leadsom]

I assure the hon. Gentleman that Lord Oxburgh’s group on CCS will be advising the Government. We have recommended that the hon. Member for Coatbridge, Chryston and Bellshill be invited to join that group, because we agree that it will be important for Scottish Members to take part, give their thoughts and views and have an input into that.

[Callum McCaig]

I thank the Minister for that. That would be sensible; my hon. Friend has considerable expertise in this area and would make a significant contribution to that group.

We need to be careful in this House to recognise the difference between Scottish National party Members of this Parliament and of the Scottish Government. It is clear that we have different roles. While we are of the same party, I cannot speak on behalf of the Scottish Government or commit the Scottish Government to things, in the same way that Labour Members cannot commit the Welsh Government to things. Recognition of the different roles and responsibilities of the different Parliaments, Governments and Executives is required, in order for the strategy to happen. New clause 4 would achieve that in a marginally better way than new clause 10, and I hope it will win hon. Members’ support.

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[Dr Whitehead]

Frankly, the Minister’s response to these measures was really poor. She did not speak in a really poor way—as always, she spoke eloquently and comprehensively—but the material she had to deal with in her response was, as anyone can judge, extremely poor in its own right. Giving a few small grants to particular projects, having a working party—useful though it is—and, as the Minister mentioned, an aim for new gas-fired plants, if they are built, to be CCS-ready is not enough. I could easily make my house burglar-ready by leaving the doors and windows open when I go out; that would not necessarily mean I had a great a strategy concerning crime.

The substance of what the Minister had to say about what the Government are doing on CCS only underlined the need for a comprehensive strategy and emphasised Opposition Members’ criticisms that have arisen from about how confused and disoriented industry and the whole sector are at the moment about an appropriate way forward on CCS.

In short, the Minister had no answer to the question of whether there should be a CCS strategy in future. I was sorry that she did not even answer my question about whether she continued to endorse the nearest thing we have to a CCS strategy: the CCS road map of 2012. I hope she will rectify that omission today. Does she endorse that road map? Does she think the Government should continue to operate on the basis of that road map?

[Andrea Leadsom]

I assure the hon. Gentleman that my Department is looking carefully at our next steps for CCS, and although the specific strategy that he refers to may no longer be the approach that we take, a further strategy for CCS will come from my Department in due course.

Question put, That the clause be read a Second time.

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[Andrea Leadsom]

On a point of clarification, is the hon. Gentleman suggesting that National Grid could somehow prevent electricity generated from a nuclear power station from going to Scotland?

[Callum McCaig]

Absolutely not, no. I am talking about how Governments in the different jurisdictions are allowed, in collaboration with each other and National Grid, to pursue different energy policies. It would be unwise to suggest that power generated in any parts of these islands should not sensibly be allowed to flow in any way dependent on need. Through the Irish interconnector there is collaboration with the Republic of Ireland and likewise with the French and Dutch interconnectors. The move is towards greater interdependence, but that still allows a degree of autonomy in how the individual parts pursue their policies.

It will come as no surprise that I would like to see Scotland have greater control over large aspects of our lives. That is my party’s position.