Air Quality Strategy

Debate between Andrea Leadsom and Alan Whitehead

Monday 24th April 2017 Commons Chamber

[Andrea Leadsom]

I absolutely agree with my right hon. Friend, who always speaks very strongly for the Chilterns. She is right to do so as it is a beautiful area. Air quality is of course vital not only for humans, but for our lovely landscapes. Preserving the contribution made by our trees, peat lands and so on is a very important priority.

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

Southampton is one of the 10 cities threatened with an infraction under the air quality regulations. It is also one of five cities, under the Government’s December plans, to introduce clean air zones, and Southampton’s local authority has been really assiduous in moving forward with its plans. While it has received grants, it has also put in a great deal of its own money. Is it the Secretary of State’s advice that the city council should now go easy on its plans because the Government cannot get their own together?

[Andrea Leadsom]

I was in full agreement with the hon. Gentleman until that last bit. Of course not. I was going to praise the work of Southampton City Council, which has received significant Government funding for its clean air programmes. It is doing a good job and should continue to do so. To be clear, as things stand, clean air zones can be implemented by any local authority. It should therefore be in the interests of all local authorities to do whatever they can to improve air quality for their local communities.

Oral Answers to Questions

Debate between Andrea Leadsom and Alan Whitehead

Thursday 14th July 2016 Commons Chamber

[Mr Speaker]

The Deputy Leader of the House has other important responsibilities and she knows that. As far as the men sitting on the Front Bench are concerned, they all look absolutely fine and are doing the right thing—simply nodding in the appropriate places.

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

I thank the Minister for her kind comments this morning. I, too, enjoyed our exchanges—and the chocolate peanuts.

The CMA’s final report has been characterised as blaming sticky customers for not switching and condoning penalties on them if they continue not to switch. Does the Minister agree with that analysis?

[Andrea Leadsom]

I also enjoyed the chocolate raisins.

The evidence is clear that customers on expensive standard tariffs could save £325 by switching to the cheapest fixed deal. I do not think that the CMA is blaming consumers; it is recognising a slight inertia or unwillingness to switch. We are trying to urge people to switch. Between January and March this year, almost 2 million energy accounts were switched, over half of which moved to new suppliers, so the push to switch is actually getting through and we are seeing some progress.

--- Later in debate ---

[Andrea Leadsom]

The capacity market is incredibly important for ensuring secure energy supplies. We recently announced that we will bring forward an earlier auction for 2017-18, to secure more capacity. We hope that that will enable us to get over this short-term issue where wholesale prices are so low that the viability of power stations is at risk. By having that capacity mechanism firmly embedded in our energy supply, we believe that we will bring forward new, attractive gas investment through longer-term contracts that will benefit the UK energy consumer.

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

The Government have estimated that the capacity auction this winter could put £36 on customer bills. Given that today the Minister has talked about keeping down customer bills, how does she think that that auction will affect those bills?

[Andrea Leadsom]

Our central assessment is that the impact on bills could be up to £28, but our impact assessment also shows that if we did nothing, further power station closures could add a further £46 to consumer bills. We believe that this auction is good value for consumers, and it provides the energy security on which we all rely.

Draft Electricity Capacity (Amendment) Regulations 2016

Debate between Andrea Leadsom and Alan Whitehead

Monday 27th June 2016 General Committees

[Andrea Leadsom]

I am grateful to hon. Members for their comments and questions. It will be a great pleasure to answer them all and hopefully my answers will please hon. Members.

The hon. Member for Southampton, Test asks whether there is mission creep. The capacity market is there as an insurance policy for energy security. It is true that it has the secondary goal of bringing on new investment in new, lower-carbon plant, but its core goal is as an insurance policy that ensures that the lights stay on. As he pointed out, a 15-year deal is not available in the supplementary capacity auction. The reason is that, because it is only for 2017-18, there is not time to build the plant and start dispatching electricity between now and the delivery date. However, the T-4 auctions are indeed designed not only to provide energy security, but to bring on new investment.

The hon. Gentleman says that that has not been successful, but that is not true. We have had a variety of new build plants, including more than 800 MW of small scale gas and the CCGT that he mentioned. It is crucial that we provide opportunities for new investment, which is why we have announced separately that we will buy more capacity and do so earlier. We will announce shortly what that means for the next T-4 auction.

The hon. Gentleman talked about the counterfactual of the supplementary capacity auction versus the £8 billion cost of early closure. To be clear to all Members, he is exactly right that our best estimate of what the supplementary auction will cost is £2 billion to £3 billion. It is very difficult to assess exactly what that means per consumer bill, but it will be in the region of £11 to £20. As he has acknowledged, the reason for having the auction is the drop in wholesale prices, which has meant that the economics for wholesale generators have been difficult. In fact, the average dual fuel bill is roughly £200 a year lower than it would have been. We cannot be clear about what the bill impact will be, because it is subject to a competitive auction, but our estimate is that it will be between £11 and £20, which is less than 10% of the reduction in wholesale costs for consumers. In net terms, it is a very good deal for consumers and provides energy security at a time of low wholesale prices.

[Dr Whitehead]

I would be grateful if the Minister confirmed that the estimate she has just given is post the estimates about the dampening effect of wholesale prices of this particular measure, and not the gross effect of what the measures might produce. That is to say, this is the figure after that presumed effect is deducted, and if that presumed effect was not deducted, the cost would be substantially higher to consumers.

[Andrea Leadsom]

I will have to write to the hon. Gentleman on that point. I am not sure I completely understand his concern. The impact assessment is clear that our best guess is that the bill impact will be in the region of £11 to £20. I have just been informed that that is net. I will write to him if he wants a fuller answer, but I hope that clarifies things.

The average dual fuel bill is £200 lower than a year ago as a result of lower wholesale prices, which make it more difficult for wholesale generators to cover their costs. Bringing forward the supplementary capacity auction will therefore ensure that there is security of supply. The best estimate is that that will cost £11 to £20 per bill, which is very good value for consumers.

The hon. Gentleman also questioned the £8 billion counterfactual. That £8 billion counterfactual assumes that we do not bring forward the supplementary capacity auction. There would therefore be nothing available for wholesale generators, and they would have to deal with the consequences of the poor economics of low wholesale prices. He asked about the contingency balancing reserve. Our estimates show that it would be more expensive than the supplementary capacity auction. That is why we are doing this. The SCA is more cost-effective and provides energy security. I hope that that answers his questions.

The hon. Member for Coatbridge, Chryston and Bellshill asked about interconnector links. I can tell him that they will go ahead. I confirm for all Members that my view is that energy policy will not be impacted at all by the public’s decision to leave the European Union, because we will continue to have our energy trilemma and our commitments to decarbonisation at the lowest possible price, to energy security and to interconnectors, which after all are all commercial decisions made between businesses. Our policy for more interconnectors will endure, provided that Ofgem finds on a case-by-case basis that they offer good value to consumers.

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

Debate between Andrea Leadsom and Alan Whitehead

Monday 13th June 2016 General Committees

[Andrea Leadsom]

My hon. Friend is exactly right to point that out. The balance we are seeking to achieve is to be fair to the industry and fair to those consumers, including businesses—we have seen this a lot of recent weeks and months—who are really struggling to meet their electricity costs and to be competitive. As I said, overall the changes will save at least £7.6 billion from energy bills over the next 20 years.

Members of the Committee will recognise that this Government were elected with a clear manifesto commitment to keep bills as low as possible, so controlling costs under the LCF is a key part of delivering that commitment. Urgent action was needed to bring projected FIT scheme spend down in order to manage LCF spend responsibly and to protect consumers. It is simply not acceptable to continue with an unconstrained scheme.

This amending instrument makes a number of changes to the FIT scheme, including, first, the introduction of deployment caps, limiting the aggregate total installed capacity of installations that can be applied for within any quarter. That will enable us to limit spend on the scheme to £100 million up to the end of 2018-19. Such caps are necessary if the scheme is to continue and if its impacts on consumer bills are to be properly controlled. I tell the hon. Member for Southampton, Test that currently, if the technology does not reach its quarterly cap, the underspend is rolled over to the next quarterly cap.

Secondly, the order reintroduces pre-accreditation. That would not have been appropriate without the security provided by the deployment caps. It will therefore also mitigate some of the uncertainty inherent in a system of capped deployment.

Thirdly, the order removes the right to receive a generation tariff for extensions to existing installations. That is intended to incentivise generators to install the maximum capacity achievable and to eliminate the potential for gaming of tariffs.

Fourthly, the order introduces a cap on the amount of green overseas electricity by which suppliers are exempted from paying FIT policy costs.

The rest of the measures from the review are implemented through amendments to licence conditions. First, there are changes to the generation tariffs. Tariffs have been revised following consultation to ensure a viable scheme while maximising value for money for bill payers. Secondly, there are modifications to both default and contingent degression tied to the quarterly system of budgetary caps. Thirdly, there are changes to energy efficiency criteria to require that an energy performance certificate—an EPC—is obtained prior to the commissioning date of solar PV installations under 50 kW. That change has been made to encourage improvements to the energy efficiency of properties more generally.

Prior to making the changes, my Department carried out an extensive stakeholder consultation. DECC officials met stakeholders across England, Scotland and Wales, and received and analysed just under 55,000 consultation responses. We listened carefully to the views of industry, in particular the £1 plan of the Solar Trade Association, and we took account of its responses in redesigning our scheme. I myself held a roundtable for all industry associations to hear their views. As a result of our stake- holder engagement, we revised tariffs upwards to reflect the findings of the evidence provided. We allocated more budget to solar under our £100 million cap and we implemented a cap system that will allow us to recycle underspend and to consider the balance of caps between years.

Our changes combine the visibility that industry asked for with the robust cost control that the Government need.

[Dr Whitehead]

The Minister has set out the various cost benefits of the changes, but has she set that against the possible loss of capacity after 2020 and the consequent expenditure, also a cost on bills, that will ensue from getting further capacity on the systems concerned? Has she looked at how that works in the round? Has she put those comparative figures to the Treasury in terms of how the levy control framework and the capacity market may work as a consequence?

[Andrea Leadsom]

I think the hon. Gentleman is suggesting that subsidy will continue to be necessary for ever for solar.

[Dr Whitehead]

indicated dissent.

[Andrea Leadsom]

No? Okay. In which case, the hon. Gentleman will appreciate that, given the rate at which costs are coming down in various renewable technologies, it is our hope and expectation that as subsidies become less necessary, different renewable technologies will be able to stand on their own two feet. I am not entirely sure what he is asking me.

[Dr Whitehead]

Perhaps I can clarify. As the Minister is aware, we are about to spend £5.5 billion on procuring capacity through capacity markets. If we had greater renewable capacity in the system, and we were able to make that visible on the system, a good proportion of the expenditure to procure capacity from non-fossil fuel plant would not be necessary. Has she considered that, because the very large expenditure that is under way, which costs bill payers between £20 and £30 a year on their bill and dwarfs the figures she has cited, could at least in part be avoided by opting for that route?

[Andrea Leadsom]

Yes is the answer to that; we have absolutely considered that option, as we always do. Of course, the capacity market is an insurance policy for security of supply. In three or four years’ time, we hope and expect that energy storage will have been deployed to a greater extent. In those circumstances, the hon. Gentleman might be right that, for future years, we may be able to say that, owing to such storage, solar and wind are despatchable power. However, he will recognise that our energy trilemma is to keep the lights on, keep bills down and decarbonise.

The capacity market is an insurance policy and therefore it is despatchable power that bids into that market. At the moment, solar and wind are not utterly reliable technologies. It is not negotiable: we will keep the lights on. I hope that is a reasonable answer, but I can assure the hon. Gentleman that we look at this from both ends of the telescope, and in the past year, my Department has done a lot of work to look at precisely how different policy changes affect every aspect of our energy trilemma. We always consider the questions, “What does this do to energy security? What does it do to the cost of bills, and what does it do to our targets for decarbonisation?” We never look at just one aspect of our energy policy. I hope that response gives him some reassurance.

The changes will limit the subsidy available under the FIT scheme. That is necessary to prevent overcompensation and to protect bill payers. In our electricity market reform delivery plan, our best estimate of the solar deployment needed to hit our 2020 renewables target was that we should achieve between 10 GW and 12 GW. Without action on demand-led schemes, we would have exceeded that target, and even with those changes, we are still on track to exceed that range. We expect to hit around 12.8 GW by 2020, so even with the limit on subsidies, we still expect to exceed our own targets by 2020.

The aim of the continued support we are offering is to get us to the point where the calculation is not about what jobs are supported because of subsidy, but what the industry can sustain in a post-subsidy world. For example, we believe that the future FIT scheme will provide enough support for new solar installations to power more than 260,000 homes. That is still a significant increase from where we are today. Of course, 99% of all solar installations have taken place since 2010, so this is still a significant growth sector.

The order came into effect on 15 January, so it is still too early to determine the longer-term impact of the changes on deployment, but early data show that six of the 11 caps for Q1 of 2016 have been hit. We are encouraged by the way the industry is responding to the recent changes. For example, deployment of solar under the revised FIT scheme continues at rates that match those seen historically following previous revisions to the scheme. I assure hon. Members that my Department is closely monitoring applications and deployment, and will continue to review the effect of the changes.

I would like to make one final point. If the order were to be annulled, we would have to consider closing the FIT scheme altogether. At the very least, we would need to suspend the scheme while we considered alternative means of controlling costs. That would bring further uncertainty, which would be deeply unwelcome to the renewables industry. Hon. Members will recognise that the Government are consumer champions, and we simply cannot allow uncontrolled costs to impact on consumer energy bills.

I remind the Committee that the changes to the FIT scheme are part of a package of cost control measures to deliver our manifesto commitment to keep bills as low as possible. The Government want to protect bill payers, ensuring technologies can stand on their own two feet while also meeting our renewable energy commitment. To annul the order and remove the cost control measures—measures intended to protect bill payers—simply will not do. I commend the instrument to the Committee.

Energy Bill [Lords]

Debate between Andrea Leadsom and Alan Whitehead

Ping Pong: House of Commons
Monday 9th May 2016 Commons Chamber

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

Let us be clear before we go any further: this discussion does not concern manifesto commitments in any way, shape or form. The Energy Bill provides within its terms of reference a number of grace periods to mitigate the effects of the early closure of the renewables obligation on categories of schemes affected by that closure. That is a consequence of the original plan to close the renewables obligation early.

[Andrea Leadsom]

The hon. Gentleman says it does not concern a manifesto commitment to get costs down for bill payers. Is he willing to put forward the £7 million the amendment would cost the bill payers to whom we made that manifesto pledge?

[Dr Whitehead]

I believe we referred to the manifesto commitments the Minister mentioned during the passage of the Bill as something of a flexible friend. The Minister is quoting a manifesto commitment that was not actually in the Conservative party 2015 general election manifesto. The manifesto commitment was for no new subsidies for onshore wind. The Bill puts that in place, but provides for a number of grace periods for the consequence of that process. What we are therefore talking about in this debate is not that commitment but the grace periods that follow it. That, essentially, is what the Lords amendment is about. It therefore does not breach manifesto commitments in any way. To do that, the Minister would have to say that the grace periods themselves breach the manifesto commitment. Plainly, the Minister put those grace periods into the Bill. She must therefore accept that the grace periods are a part of the process and not the process itself.

Under the grace periods, if there is a delay in grid connection or a delay in clearance for Radar, then the schemes come into the fold. That is set out in the grace periods in the Bill. If you have been turned down by a planning committee, have appealed and the appeal comes through after the cut-off date, then you come into the fold. If investment facilities have been frozen because of uncertainty about what was going to happen to the Energy Bill and investment documentation could not be shown in time, that comes into the fold of the grace periods.

As matters stand, however, one cannot come into the fold if one has gone down the route of seeking local approval for the scheme, gaining that approval, getting the consent of the local planning committee and negotiating section 106 or section 75 agreements, as would happen once agreement is reached. If the final certificate, which is obtained after agreement has been reached, happens to fall after 18 June 2015, then one does not come into the fold. That is especially galling for the people going down this route, which they did not have to go down. A central part of the Energy Bill is that onshore generating schemes should proceed in future only if they have the support of the local communities in which they are to be sited, which might be determined by the grant of locally based planning permission. Clause 78 expressly removes the requirement for consent by the Secretary of State. If one has gone down that route and done everything by the rules that the Energy Bill wants to put in place, one is outside the fold if everything is not in place, even after permission has been granted, by 18 June 2015.

Let us imagine the scene when the managers of the Bill sat down to draft what was always clearly supposed to be a sequence of exceptions to the clear bright line as described by the Minister: the cut-off date and circumstances of the cut-off for new onshore windfarms. The instruction to the team drafting the Bill—I commend the Bill team on a superb job in pulling together the multiple facets of the Bill into a coherent whole—would have been to work towards an overall instruction that the renewables obligation would be closed to all new applicants a year before its original closure date, a date to which developers, local authorities and those seeking to invest in wind farms had all been working. The Bill team was required to place that into a satisfactory legislative context. In doing so, there would have to be cut-off dates before the final date of closure of the scheme overall. It was always recognised, however, that there would have to be exceptions, which is why extensive passages of grace periods have been drafted into the Bill, allowing for exceptions where not to do so for various reasons would have looked particularly unjust, would have led to legal complications or even legal challenge from those affected.

I would have thought that projects about to be completely swept away by the imposition of the cut-off date—when they had done exactly what the Bill provides for, having previously thought the original cut-off date was March 2017—would have been first on the list for possible grace periods. Who knows, perhaps something might have been drafted early on to accommodate such a position? What we know, regardless of any speculation, is that someone decided—it looks to me that they may have done so on grounds of dogma, rather than on a fair analysis of what should go into an already agreed grace period—that those schemes would have the door firmly closed in their faces. That is a manifestly perverse outcome for projects whose approach to planning and investment was exactly by the book. On the other hand, others going through an appeal process—having perhaps been turned down by those very local concerns the Bill emphasises—will find they are on the guest list after all and can come in through the door.

The amendment from their lordships’ House does not seek to alter the premise of grace periods. It does not seek to overturn the early closing date for onshore renewables, sad though that is. It does not seek to alter in any way the vast bulk of this well-crafted Bill, with all its important provisions concerning the North Sea oil industry. It simply seeks to put right one of the great anomalies in the grace period sections of the Bill, and, in that way, strengthen the proper application of those periods. As the Minister may have noted, it now does so in a way that it did not do in a previous amended incarnation. It places a specific time limit after the cut-off date of three months, reflecting the view that grace periods should be just that. This is now a very brief grace period window in which to put right the most difficult cases frozen out for doing the right thing.

We all want the Bill to pass now and it can do so today. We want the Bill on the statute book because of what we agree on. Overall, we want it to be on the statute book as a just Bill, even when Opposition Members consider the principle behind it—effectively retrospectively pulling an early plug on the renewables obligation specifically for onshore wind—is profoundly mistaken. It is mistaken because it will potentially replace onshore supply with more expensive offshore wind. As I am sure the Minister is aware, a study by the Royal Academy of Engineers estimated a while ago that if just one onshore turbine was replaced by more expensive offshore turbines, it could eventually cost taxpayers £300,000 per annum.

The amendment saves money, therefore, as well as placing equity back into the grace periods. It is of course down to the Government to get their legislation on to the statute books. We have supported most of the Bill, which can be passed today, throughout its passage. I trust that they will have the sense not to stand dogmatically in the way of its passage and allow us to sign it off and get going with the vast bulk of the provisions on which we all agree.

Energy Bill [Lords]

Debate between Andrea Leadsom and Alan Whitehead

Wednesday 20th April 2016 Commons Chamber

[Andrea Leadsom]

My right hon. Friend is exactly right: this is a key, popular manifesto commitment, and we are determined to implement it, as we promised the voters of this country we would last May.

Let me turn briefly to amendment 2A, which was agreed in the other place. The amendment simply seeks to ensure that the function of determining whether an oil field project is materially complete can be transferred to the Oil and Gas Authority. That function sits outside chapter 9 of the Corporation Tax Act 2010 but elsewhere within part 8, so it does not fall within the definition of “relevant function” under clause 2(6) of the Bill. It therefore cannot be transferred from the Secretary of State to the OGA by regulations made under clause 2(2). The amendment simply removes the reference to “Chapter 9 of” from the reference to part 8 of the 2010 Act in clause 2(6), ensuring that this important function can be transferred to the OGA. The amendment is purely technical, and seeks to put beyond doubt that all key oil and gas taxation functions can be transferred to the OGA once it becomes a Government company, as we have always intended.

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

The amendments we have received from the other place make a number of changes to the Bill. In most instances, as the Minister mentioned, those relate to the commencement of the closure of the RO. That is essentially because of the Bill’s progress through Parliament and the potential charge of retrospectivity against the Bill. It is good that the issue has been rectified, and that the Government have confirmed that they do not intend to backdate the closure of the RO.

However, those changes point to the issue raised in amendment 7T, with which the Government have a motion to disagree. We need to be clear that the amendment is not saying that changing the closure date for the RO for onshore wind is wrong, although I continue to contend that it is. Contrary to the impression the Minister has given this afternoon, developers of projects did not realise that the closure date would be earlier than previously thought. Indeed, the so-called warnings before the general election, which she mentioned, were not about the early closure of the RO, but about future funding for onshore wind in general. Developers of projects knew that the RO would come to an end in March 2017, and many had spent several years—a long period—in the development process before the warnings were issued, and before the policy was put forward in the manifesto and, subsequently, the Bill. Having planned on the basis of the notion that the RO would come to an end, they found out very late in the day that the goalposts had been arbitrarily moved, and that their investment was lost overnight as a result.

Nor is the amendment in any way contrary to manifesto commitments; it is not about the principle of the early closure of the RO, but about the grace periods that follow from that closure process. It is not saying that there should not be grace period exceptions for schemes that, for various reasons, might fall foul of the new, arbitrary cut-off date. By highlighting a small number of projects that have fallen foul of the cut-off date for very specific reasons, it is saying that grace-period schemes should be built on a reasonable level of equity and fairness, and should work within an understanding of proper reasons for exemption; they should not simply impose a few extended, but nevertheless still arbitrary, cut-off dates for projects.

Lords amendment 7T highlights a particularly egregious inequity in the grace-period scheme. This involves schemes that have, even according to the new guidelines laid down in the Bill process, done the right thing throughout by seeking and securing local support. As the Government said earlier in the passage of the Bill, it was to be the sine qua non of permission for the development of any onshore wind in the future that local communities should have the final say in decisions; schemes, it was said, should obtain support, perhaps through local planning approval, and should not, for example, seek to win an appeal on the basis of national determination, having been turned down at local level.

The schemes covered by the amendment fit exactly that description. They have determinedly gone through the local process and engaged with it, rather than standing back and waiting to progress through an appeal. They have won local community support, in each instance through the granting of a planning decision by the local authority. The only issue is that, having gone through that often lengthy process of local consultation, they find that the successful, locally supported outcome has, at the stroke of a pen, effectively been turned into refusal. That has happened because the final planning certificate has not arrived by the cut-off date because of issues relating not to the permission, but to details of section 106 agreements on community benefit or similar issues, or to section 75 agreements in Scotland—that is, issues that arise not as part of the agreement process, but because the agreement has been reached. As these schemes could not produce a final, formal planning certificate by the arbitrary date of 18 June, the scheme as a whole was lost.

Here is the timetable of one such scheme, the Twentyshilling Hill wind farm in Dumfriesshire. The planning application was initially made on 15 March 2013 —a long time ago. It was approved by a planning committee, subject to a section 75 agreement, on 16 December 2014. It was not the fault of the wind farm applicant that the council took a few months to settle the section 75 application. Even so, the application was agreed on 17 June—again, before the cut-off date. However, despite the agreement being public and on the council website, the final certificate did not arrive until 1 July, making it null and void in the Government’s eyes, as the Minister has stated.

In retrospect, it might have been wiser for those and other developers not to take too much time on, or give too much attention to, local agreement, but to instead precipitate an appeal that they might have won. Indeed, when developers have done just that and the appeal decision has arrived after the cut-off date of 18 June 2015—we heard of such instances during the passage of the Bill—it has been accepted because of a provision relating to the grace period. The projects are deemed to have been okay all along and are allowed to proceed. That is frankly perverse, and it falls seriously short of the test of reasonableness and equity that ought to inform any grace period arrangement.

Lords amendment 7T relates to a small number of cases and seeks to restore a semblance of equity to the process. It is based on the principle that the Government themselves promoted as the basis for decisions on onshore wind applications. It is a principle for the future that, incidentally, Labour supports.

I shall explain the equity. If a local planning committee found in favour of a planning decision before 18 June, and the decision was arrived at via a process of consultation and community acceptance of the application, it should be covered by the grace period provisions. This small amendment would affect only about half a dozen schemes. In the overall scheme of things, it would make an insignificant inroad into levy control framework financial provisions, as far as the RO is concerned. It would, however, place a much-needed patch of equity on the grace period structure, and perhaps point the way to addressing seriously a future issue. That issue is this: are the Government intent on ensuring that onshore wind will be built in the future—it is, after all, the cheapest and most cost-effective renewable available—if local communities support the proposals, or do they intend to use national clout to override local wishes in pursuit of an overall closure of onshore wind, at least in England?

Accepting the amendment and finalising the Bill in this way would go a long way to restoring a principle that was supposedly central to the process for the future, and it would demonstrate to local communities that they really will be able to decide and not have their local wishes snuffed out by a fiat from the centre.

Oral Answers to Questions

Debate between Andrea Leadsom and Alan Whitehead

Thursday 24th March 2016 Commons Chamber

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

The Secretary of State has produced no impact assessment to accompany her proposals to bring forward the first year of the application of auctions to the capacity market, but all estimates confirm that the auction will have to clear at a far higher price than has hitherto been the case if any new capacity is to be produced by means of this device, with a consequent huge cost to bill payers—an extra £20, according to some estimates. What does the Minister think the additional cost to customers will be, and can she look me in the eye and tell me with reasonable conviction that she is sufficiently certain that the auction will lead to substantial long-term capacity agreements for new plant to make that huge cost anywhere near justifiable?

[Andrea Leadsom]

I can absolutely look the hon. Gentleman in the eye and tell him that bringing forward the capacity market a year early—I am trying to make serious eye contact with him; I am not looking away for a moment—is absolutely in the interests of consumers. He will know that, with wholesale prices where they are at present, old plants are struggling to continue. By bringing forward the capacity market, we are giving them the certainty they need to ensure security of supply. If you like, this is an insurance policy on security of supply, and it is absolutely in the interests of consumers.

Draft Nuclear Installations (Liability for Damage) Order 2016

Debate between Andrea Leadsom and Alan Whitehead

Tuesday 15th March 2016 General Committees

[Andrea Leadsom]

I will let the hon. Member for Southampton, Test off this time. Just to be kind, I will agree that he has not given me too hard a time.

The hon. Gentleman asked if we should effectively bring in all the additional charges in one big bang rather than having a stepped increase. Our view is that it is better to allow the insurance market to develop the capacity to take on the insurance. He will be aware that different insurance markets among the different signatories to the conventions have differing capacity. We have been in regular contact with the insurance industry in the UK, and this is considered to be the best way to implement the increases on a stepped basis.

The hon. Gentleman asked what the difference is between low-risk and high-risk transportation. I can assure him that the difference between them will be more clearly defined when we come to the other legislation that is due later. However, it tends to be the case that low-risk transportation is the transportation of most of the nuclear material that is transported. The high-risk transportation would be, for example, the transportation of spent fuel or vitrified waste, which are more hazardous materials. Those are some examples, but we will articulate the difference between low-risk and high-risk transportation more clearly in other legislation.

The hon. Gentleman also asked about operating costs. It is not expected that this change will have a significant impact on operating costs. The insurance liability adds around 0.4% to costs, so it is not a significant amount. Of course, with anything like this in all probability the cost will be passed on to the consumer. That is what happens; if costs increase, they are passed on. However, this is not a significant change.

In response to the hon. Gentleman’s point about Hinkley Point C, it will have taken all factors into account in assessing the return to the project and therefore the strike price, which, as the hon. Gentleman will be very aware, will not be incurred by the bill payer until Hinkley Point C is producing electricity, which will be some time in the mid-2020s. It is therefore unlikely that any factors have been left out of the calculation of what the strike price should be.

I thank hon. Members for being here today and for hearing me out. This is a very important piece of legislation. I will just reiterate that the UK has one of the strongest nuclear regulatory regimes in the world, which always seeks to maintain and improve the safety of nuclear licensed sites. As new reactor designs are developed, safety will continue to be of paramount importance. As I said at the start of this debate, the order amends the Nuclear Installations Act 1965.

[Dr Whitehead]

I am sorry to ask the Minister to give way so close to her peroration, but could she just elaborate briefly on the question of the stepped insurance increase over five years, which is set out in this document? Bearing in mind that the market is willing to underwrite such arrangements, can she comment on whether an immediate increase to €1,200 million might not be preferable to a stepped increase over a five-year period?

[Andrea Leadsom]

I did just answer that, but perhaps the hon. Gentleman was looking at his papers. We are in constant, regular contact with the UK insurance industry on this point. The decision we have taken is that it is better to introduce it on a stepped basis, to make sure that the insurance market builds the capacity to take on this additional risk. That is very important.

[Dr Whitehead]

I was just puzzling over the difference between the fact that the Department has clearly consulted the market and the market has stated that it is willing to provide cover. I did hear what the Minister said about stepped capacity, but that, frankly, was a repeat of what is set out in the explanatory notes, rather than further elucidation. I am asking whether, since those particular thoughts had been put into the document, greater elucidation had been found from the market on its willingness to undertake the increased amounts. That is what I heard the Minister indicate this afternoon about the market’s willingness to bear the burden of those additional premiums.

[Andrea Leadsom]

Perhaps I can explain it by saying that the insurance market does have an appetite for providing catastrophic cover, as it has done in the past. As I explained in my opening remarks, we are talking here about widening the cover to include damage to the environment, personal liabilities and so on that go beyond what was there previously. In that regard, as the hon. Gentleman will appreciate, the insurance market has an appetite for risk and we believe that that will change and become more relaxed as time goes by. The problem with pricing insurance in the early days is where there is no track record of claims, and so on. Therefore, we are trying to introduce this on a stepped basis, so as not to put too much pressure on the insurance market all in one day.

We intend this order to ensure adequate and fair compensation for victims, with operators taking responsibility for any failure in safety. It also provides a high degree of uniformity of certain basic rules across signatory countries. I commend the order to the Committee.

Question put and agreed to.

Energy Bill [Lords]

Debate between Andrea Leadsom and Alan Whitehead

Monday 14th March 2016 Commons Chamber

[Andrea Leadsom]

As the hon. Lady well knows, one transitional approach to decarbonisation is to move away from coal and towards gas as a bridge to a low-carbon future. She will also be very aware that new nuclear offers a low-carbon technology for the future, and this Government are committed to supporting that.

I appreciate the intent behind much of the hon. Lady’s new clause, but I hope that she can see why I cannot accept its specifics and that she will be content to withdraw it.

I turn now to new clause 8, tabled by the hon. Member for Wigan and others. This would require the Secretary of State to set a decarbonisation target range for the electricity generating sector. We debated very similar amendments in the previous Parliament, and during the passage of this Bill in the other place and in earlier Commons stages. The Government have made our position on this matter very clear. We are committed to ensuring that the UK continues to play its part to tackle climate change, in line with the Climate Change Act and our international and EU obligations. However, we want to do this as cost-effectively as possible in order to keep costs down for families and businesses while delivering on legally binding commitments. We cannot do that by locking ourselves into additional expensive and inflexible targets relating to the power sector. There are too many things we cannot predict about how the energy system will develop over the next 15 years and beyond. The costs of getting this wrong now would be picked up by families and businesses for decades to come.

I find it strange that Opposition parties often argue that we are not doing enough to tackle fuel poverty, and yet they are urging us to sign consumers up to a distorting and expensive power sector target. Investors want to know that we have clear, credible and affordable plans. The Government are now setting out the next stages in their long-term commitment to move to a low-carbon economy, providing a basis for electricity investment into the next decade. The huge investment we have seen so far is evidence that our approach is working. Between 2010 and 2014, our policies have secured an estimated £42 billion of investment in low-carbon electricity, including £40 billion in renewables, and we have more in the pipeline for the future. I therefore cannot accept this new clause, and I ask hon. Members to withdraw it.

I would now like to deal with new clause 9, tabled by the hon. Member for Wigan and others. This seeks to introduce additional capacity market eligibility criteria requiring any new-build capacity accessing 15-year capacity agreements to be made subject to the emissions performance standard, or EPS. As I have explained previously, the new clause does not achieve its intended aim, so I am surprised to see it reappear. The EPS sets an annual limit specifically on CO₂ emissions from new fossil fuel plant with an output above 50 MW. Any new fossil fuel generators above 50 MW seeking to participate in the capacity market will already be subject to this limit, so nothing would be gained by introducing this as a further eligibility requirement in the capacity market. Existing generators, which form the majority of capacity market participants, cannot access 15-year agreements, so the new clause would also have no impact on those generators.

As I have set out before, the emissions impact from smaller generators that sit below the 50 MW threshold is often assumed to be larger than it is in reality. Small “peaking” generators have a relatively small impact on overall CO₂ emissions due to the short hours that they run. These generators typically run for less than 100 hours a year, in the case of diesel engines, while larger fossil fuel plants will run for 2,000 hours or more. The new clause is therefore not effective, for the simple reason that the annual EPS CO₂ emissions limit would be very unlikely to have any impact on small generators participating in the capacity market.

[Dr Whitehead]

Is not the proposal that the Minister herself is putting forward for the future inclusion of small diesel sets in air quality standards subject to exactly the same problem, in that smaller diesel set generators are brought into a scheme that was originally proposed for larger generators, thereby including them in the system? That is exactly what the new clause proposes through smaller diesel sets coming into an emissions performance standard that otherwise would apply to larger plants.

[Andrea Leadsom]

As I have explained to the hon. Gentleman, his new clause would not actually have that effect.

However, I am not complacent about concerns associated with local pollutants from small generators. I am very aware of the concern about diesel, in particular. Later this year, the Department will consult on options that will include legislation that would set binding emissions limit values on relevant air pollutants from smaller engines, with a view to having legislation in force no later than January 2019, and possibly sooner. These limits would apply to generators or groups of generators with a rated thermal input equal to or greater than 1 MW and less than 50 MW, irrespective of their number of hours of operation during any given year. This shows that the Government are taking appropriate action to avoid any disproportionate impact on air quality from smaller engines where those could contribute to harmful levels of air pollutants and the exceeding of existing air quality limit values. These limits, along with other proposals we have recently announced, send a clear message about the viability of developing and running diesel generators in future. I hope that hon. Members have found my explanation reassuring and will be content to withdraw their new clause.

I turn now to new clause 5, tabled by the right hon. Member for Orkney and Shetland (Mr Carmichael). This seeks to reinsert the clause added by the Opposition in the other place, once again rewriting the Oil and Gas Authority’s principal objective of maximising economic recovery of UK petroleum. This topic has been debated at length throughout the passage of the Bill. The Government successfully removed the previous iteration of this clause in Committee, with the support of Scottish National party Members. Importantly, I note that it was agreed across the room, including by Opposition Front Benchers, that diluting the focus of the OGA in such a way was undesirable. In light of this, I am surprised and rather disappointed that the right hon. Gentleman has tabled this new clause, not least because of the serious implications it has for jobs and growth in Scotland. As I have said many times, any amendment that detracts from the OGA’s focus on maximising economic recovery is damaging to the North sea. Such a move is unacceptable, particularly at a time of unprecedented challenge for the oil and gas industry.

Draft Renewables Obligation Closure etc. (Amendment) Order 2016

Debate between Andrea Leadsom and Alan Whitehead

Wednesday 2nd March 2016 General Committees

[Dr Whitehead]

The hon. Gentleman has clearly, with a little long-sightedness, been looking over my notes, because that is exactly the point I need to emphasise now about the levy control framework. Although we think that the issue is about the next 10 years, as far as the deployment of renewables is concerned, we simply do not know in any detail what will happen to the levy control framework between 2020 and 2025, despite the fact that the Government have indicated that detail will be filled in at some stage. Obviously, that is a cause of continued consternation for those attempting to plan some sort of future for their longer-term projects.

We need to emphasise that many of these projects require a number of years to undertake, and therefore some form of guidance and certainty would be useful for projects that may be starting now and may not be operational and available for contracts for difference, if there are such things in the period between 2020 and 2025. It would be helpful if those companies had at least the assurance that they were not wasting their time by putting forward proposals for the future.

The impact assessment for the SI says in its opening lines:

“The proposed interventions intend to limit projected spending under the Renewables Obligation, while not harming projects that have already made significant financial commitments”—

which is not necessarily the case, as we have seen—

“This is to limit the impact on the LCF of significantly greater solar deployment than previously anticipated.”

Of course, we do not know the actual impact on the LCF of significantly greater solar deployment than previously anticipated because we do not know the effect of overspends within the LCF—that is, the LCF’s original projections for spending on solar and the overspend in terms of the variation from those original projections. We do not know that because apparently we are not to be trusted with that information. No variation figures have been published, nor are apparently likely to be.

Indeed, I have now asked three parliamentary questions on the effects of that variation, which is central to the impact assessment of this SI. On each occasion, I have been met in the answer with complete stonewalling, on frankly increasingly spurious grounds, on what those variation totals consist of. I am sure the Minister is aware of that issue, because it was she who signed off the answers to those questions on the future of the LCF variation.

It would be helpful for the passage of this debate if the Minister, perhaps by an intervention, gave me the actual sums for the variations over the period relating to solar. It would be even more helpful if she gave those relating to variations in her Department’s calculations as far as the LCF is concerned below 5 MW. We could then determine whether the variations in spending really had such an impact on the LCF that they caused this particular decision to come about, or whether they were of an order that would not have had much of a substantial impact on the LCF—as I suspect may be the case, though we do not know.

[Andrea Leadsom]

I am slightly offended to hear that the hon. Gentleman thinks I have ever stonewalled him in answer to a parliamentary question. I assure him that I always seek to reply as openly and fully as I can to parliamentary questions, and I take particular care with his.

In answer to the hon. Gentleman’s question, as I have already set out, this early closure is saving in the region of £60 million to £100 million per year on the levy control framework. In aggregate terms, with the rate of deployment that we were seeing in the smaller solar fields, the total cost over the lifetime of the up to 20-year subsidy could have been up to £2 billion—a fairly princely sum. He will also be aware that the levy control framework projections will be set out by the Office for Budget Responsibility in only a couple of weeks’ time, during its Budget assessment.

[Dr Whitehead]

I thank the Minister for that intervention. Frankly, the information she has provided the Committee with today is rather in line with the circumstances in which she felt she could respond to my parliamentary questions. I hope the Minister is not offended by any suggestion that she personally prevented me from getting the information that I requested. My point is that the levy control framework is now so opaque, in terms of its operation and its variations, that it affects proper scrutiny of how decisions have come about. That is not as a result of possible spending in the future but about variations in the past—what was originally thought to be the trajectory of the levy control framework and, as reported in the impact assessment, its actual trajectory in terms of overspending, and how that relates to subsets of that, in particular as we are discussing this afternoon, subsets of solar expenditure as they relate to sub-5 MW installations.

Draft Electricity Supplier Payments (Amendment) Regulations 2016

Debate between Andrea Leadsom and Alan Whitehead

Tuesday 1st March 2016 General Committees

[Andrea Leadsom]

I am grateful to the hon. Gentleman for his review of how this all came about. I can tell him that, in this consideration, we have not gone back and reviewed the original proposal to set up the Low Carbon Contract Company, or the Electricity Supplier Payments Company, because it was agreed at the time of implementing electricity market reform that it would be an industry-led and managed arrangement as far as possible. I note the hon. Gentleman’s point that a Government guarantee would be much simpler, but he will recognise that that introduces an element of taxpayer risk as well as implications for the public sector balance sheet and so on. This was always intended to be an industry-led arrangement.

In answer to the hon. Gentleman’s specific question about whether small energy companies would be discouraged, the evidence is that they have not been discouraged. As he will be aware, there are considerably more energy companies supplying to the UK market than there were in 2010. If my memory serves me correctly, there are well over 20—I am thinking 28, but I will have to confirm that number for him. Certainly, there is no evidence to suggest they have been put off by these arrangements. This measure seeks to simplify and improve the capacity of supplier obligations to be actualised so that they are not made in anticipation of payments but are much more closely related to the actual costs.

The hon. Gentleman asked whether there was any means to control costs. As he would expect, costs are scrutinised very carefully. He will also be aware that a number of contracts for difference and a number of capacity market bids have been undertaken, although payments have not been made. Nevertheless, there is a big burden of contractual work that needs to be undertaken and that is where those operational costs have increased, but only by a small amount: in fact, it will be around 20p in additional operational costs on household electricity bills in 2016-17 at 2014 prices. As the hon. Gentleman would expect, we are very alert to the need to keep costs down—both the companies concerned and the Department of Energy and Climate Change—as well as to the importance of public consultation, and to scrutiny and debate in Parliament. We do not expect further significant increases in either budget, based on our expectations of current and future duties over the next couple of financial years.

[Dr Whitehead]

I would be grateful if the Minister wrote to me to confirm, ideally, or otherwise explain the true position on the overall costs of the counterparty body and the settlement body as far as capacity payments are concerned. As I have said, there seems to be a discrepancy between what is in the measure and what appears to be the total set out in the explanatory notes. It would be good to have that cleared up at the earliest possible stage.

[Andrea Leadsom]

I will certainly write to the hon. Gentleman on that point.

Draft Infrastructure Planning (Onshore Wind Generating Stations) Order 2016

Debate between Andrea Leadsom and Alan Whitehead

Monday 22nd February 2016 General Committees

[Andrea Leadsom]

The national planning policy framework encourages local councils to consider identifying suitable areas for renewable energy; equally, local neighbourhood plans can identify sites. As I have said to the hon. Gentleman, it is absolutely the case—it was in our manifesto—that we are determined that local communities have the final say, so he is exactly right: in the event that the local authority cannot get the backing of the local community, it will turn down that application, and that is the point about our manifesto commitment.

Moving on to the point made by my hon. Friend the Member for Waveney, I am grateful for his support for the measure, which takes local planning absolutely to the forefront for all onshore wind. I am also grateful to my hon. Friend the Member for Montgomeryshire for raising the very important point about how, under devolution, the Welsh Government decide how they intend to hear onshore wind farm applications. I can only confirm to him that it will be for them to decide, and I share his concern that given that this Government’s policy is to ensure that local communities have their say and have the last word, it will be unfortunate if that is not the case in Wales for those in his community who want it to be, but this is a devolved matter and it will be for Welsh Ministers to decide.

[Dr Whitehead]

The Minister has made it clear that the commitment in the Conservative manifesto was that local authorities should have the final say. The concern that I raised in my initial comments—my hon. Friend the Member for North Durham has alluded to this— was what guidance will be in place on local authority actions once the Minister has relinquished her authority under the previous legislation to consider applications, so that local authorities really do have the final say and other factors do not come into play. It seems to me that the guidance would necessarily have to spell that out fairly clearly, either where a local authority is minded to turn down the application because there is a great deal of local opposition or good planning grounds to turn it down, or where a local authority, because there is massive local public support, is very much minded to agree an application and has the policies in place to back that up.

[Andrea Leadsom]

As I think I said, the national planning policy framework encourages local authorities to identify sites that are suitable for renewable energy. It also encourages neighbourhood development plans to do the same. I want to be clear that this Government believe in devolving powers to local authorities. We made a manifesto commitment that local communities will have the final say on onshore windfarms.

Energy BILL [ Lords ] (Seventh sitting)

Debate between Andrea Leadsom and Alan Whitehead

Thursday 4th February 2016 Public Bill Committees

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

As we heard this morning, new clause 12 approaches similar aims, though in a slightly different way, from the clauses put forward by the hon. Member for Aberdeen South this morning. It concerns the allocation rounds for contracts for difference and the extent to which they should be held on an annual basis.

I appreciate that the Government have indicated in principle that there will be further allocation rounds, although we are still waiting to see what might be in them. For example, would onshore wind be included in allocation rounds in future? In the context of the levy control framework, which I am pleased to see is now being investigated by the National Audit Office, we are not sure whether there will be any substance in those allocation rounds. We are not sure whether there are any allowances in the pot that can be put into the allocation rounds in order to make them realistic for operators to bid into them.

We also understand that the process for bidding in allocation rounds means, as we heard this morning, that what comes out as the auction strike price will not be the same as the allocated strike price originally announced for various different categories of renewables. While that suggests that there should be an annual allocation round in each year where the UK is not on target to meet the 2020 EU renewable energy target, what those allocation rounds actually cost would be a variable factor. The suggestions that went around a little while ago on the possible emergence of subsidy-free CfDs could mean that the allocation rounds could be held with little or no effect on the levy control framework. Can the Minister say whether subsidy-free CfDs are a current question in her Department? If there are future allocation rounds, might they be a part of the allocations? If no clear answer is forthcoming this afternoon, perhaps it would be easiest for her to consult her departmental adviser who, I know, had a substantial hand in advancing the idea of subsidy-free CfDs before he became an adviser. I am sure his expertise on this issue could be put to good use on CfDs.

The issue with holding allocation rounds annually is not necessarily or even reasonably disposed of by the idea that this is simply about keeping control of how much money goes out under the levy control framework, because there are ways to hold an annual contract round without overthrowing those arrangements. The new clause would ensure that the issue of frequency of allocation rounds was about what it should be about—the extent to which CfDs drive the deployment of renewables towards the goal of achieving our renewable energy targets. That has been publicly stated as one of the goals behind the working of the levy control framework. We have not heard about this yet, but there is also the possible allocation of further targets after 2020, so the proposal could continue to drive forward the deployment of renewables and ensure that those targets were reached.

We have also discussed what we mean by reaching the 2020 EU renewable energy targets. We have emphasised that that means the discharge of the obligatory target agreed by the UK for the provision of 15% of energy from renewable sources by 2020. In turn, that means that the sub-targets that were set in the UK but nevertheless contribute towards the overall EU target should themselves be either on target or be underpinned by other areas being on or above target. The letter from the Secretary of State to other Departments in October set out precisely what that means and I trust that on this occasion the Minister has a copy easily to hand, which would be a good step forward. It states that the trajectory towards reaching those EU targets “increases substantially” after 2017-18 and

“currently leads to a shortfall against the target in 2020 of around 50 TWh (with a range of 32 - 67TWh) or 3.5%-points (with a range of 2.1 - 4.5% points) in our internal central forecasts (which are not public).”

So the Secretary of State emphasises that the trajectory and the shortfall are not public but goes on to say:

“Publically we are clear that the UK continues to make progress to meet the target.”

I trust that the Minister, now having a copy of that letter, will agree that that is an accurate depiction; the Secretary of State was clear that we are on target not to be on target as far as EU 2020 goals are concerned. Although the fact that we are on target not to be on target has not been made public, nevertheless, that very clear conclusion stems from departmental trajectories and is robust in terms of what the departmental modelling represents.

I take that internal observation as the starting point for this amendment and I hope that the Minister will confirm it to be the case. Secondly, I hope she will be able to change the status of those internal central forecasts, on which this is based, from not being public to being public. That would be very helpful to our discussions in the longer term. The idea that the UK is not on target, overall, to meet the EU 2020 renewable energy targets—and, as the letter makes clear, it is largely not on target because of factors relating to quite substantial failures in heat and transport—suggests, among other things, that in order to make sure that the Government are on target, other areas perhaps need to over-perform, and among those would be those projects which would be in line for contracts for difference through the allocation auctions.

Of course, I remind the Committee that that is not about onshore wind or renewable obligations, it is about a variety of renewables that may qualify for those contracts for difference—biomass, offshore wind, other forms of renewable energy which, together, could make a contribution to getting to the target by overachieving in that area. So it is a mechanism, essentially, to ensure that we are straining every sinew to get to that EU target and using the devices that we already have available to us to get there through a competitive process that ensures best value for money in the process. I therefore commend this amendment to the Committee and trust that the Minister will take it on board.

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

New clauses 5 and 12 seek to amend the Energy Act 2013 so as to require contracts for difference, or CfDs, allocation rounds to be held at least once a year. This would be either when the carbon intensity of electricity generation in the UK exceeds 100 grams per kilowatt hour or when the UK is not on target to meet the 2020 EU renewable energy target. I completely acknowledge that it is important that developers and investors have some foresight as to the frequency of CfD allocation rounds. However, this must be balanced with levy control framework budget availability, which, as hon. Members know, is funded by a levy on consumer bills.

I will answer a couple of specific questions. My hon. Friend the Member for Daventry asked how CfDs will include less developed technologies. As the Secretary of State said last November, the current intention is to hold the next CfD allocation round for “less established” technologies, which are defined as pot 2, in late 2016. We are currently working with the Treasury to finalise the budget as part of discussions on the next levy control framework period. We will set out details on that as soon as we can.

The hon. Member for Southampton, Test put the question of whether the levy control framework would be updated post-2020. I can assure him that that is something we are looking at now. He also asked about our work on market-stabilising CfDs, effectively subsidy-free CfDs for onshore wind. That is something that we are continuing to look at and would be delighted if industry or hon. Members want to provide input to that discussion, as it is something we are very interested in.

--- Later in debate ---

[Andrea Leadsom]

Through normal channels. Discussions on the early closure of the onshore wind subsidy included lots of bilateral stakeholder meetings. Some industry workshops were held. If the hon. Gentleman wanted to submit information to me or my Department, we would be delighted to hear from him, his party or companies he is aware of that are interested. We are very interested to hear views on that, though we obviously want to make progress with it at the same time.

Coming back to the LCF, its function is to limit the amount paid by consumers. It is crucial that the Government are able to take account of the latest evidence and use the LCF budget in light of latest evidence around deployment projections and costs. The hon. Member for Aberdeen South talked a lot about the difference in cost of different types of CfDs. He will be aware that we are talking with the Scottish Government about the remote highlands and islands and the potential for onshore wind projects there, which by nature of their remoteness would have big transmission costs that might make them more akin to offshore than onshore wind.

The hon. Member for Coatbridge, Chryston and Bellshill mentioned that onshore wind CfDs are around £80 and for offshore wind, as hon. Members pointed out, they are still well in excess of £100, some at £145 and so on. Our hope and expectation is that those costs will come down. That is a key reason why my right hon. Friend the Secretary of State set out in her policy reset speech that we would look to the offshore wind industry to bring their costs down in order to participate in further auctions, which we think is achievable.

Hon. Members have reflected that, when looking at the budget for the levy control framework, which is how consumers pay for all of this, and the CfD pots that add costs to the LCF, we must look at the latest evidence and technologies and have a proper balance.

To answer the hon. Member for Southampton, Test, the UK is continuing to make progress towards the 2020 renewables target of 15% of final energy consumption from renewable sources. Renewables accounted for 7% of energy consumption in 2014, up from 1.3% in 2005. We have exceeded both our 2011-12 and our 2013-14 interim targets.

[Dr Whitehead]

I am sorry to have to tell the Minister, but that was exactly what the Secretary of State’s letter stated would be said in public on targets. Although I appreciate what the Minister is saying, it does not add anything to the core of the letter that, while Ministers may say something in public, something else is the correct position in private.

[Andrea Leadsom]

I have to disagree with the hon. Gentleman. The Secretary of State has set out that we are making progress. As Ministers do, she was talking about what needs to be done next. Since then, we have had the spending review, where the renewable heat incentive scheme budget was confirmed to March 2021, rising each year to a total of £1.15 billion.

That is in excess of where we are today and goes a good way towards meeting some of our heat targets, which were referred to in the letter as needing those decisions. Life is not static and for the Secretary of State to write to colleagues saying what needs to be done is not tantamount to saying that we have no plans or efforts in place to meet this. I am sure that the hon. Gentleman would acknowledge that.

We are also making progress in decarbonising the power sector. Investors want to know that we have clear, credible and affordable plans for the sector. That is what the Secretary of State set out in her speech in November, highlighting the important role that gas generation, nuclear power, offshore wind and innovation can all play. For example, as we have discussed, we have a world-leading offshore wind industry, with the UK making up about half of all deployed offshore wind in the world. This is an area where the UK can help to make a lasting technological contribution to supply chains, and certainly to the UK supply chain, supporting a growing installation, development and blade manufacturing industry in the UK.

By committing to annual CfD allocation rounds, the new clause would inhibit the Government’s flexibility to apply appropriate mechanisms to achieve renewable and decarbonisation targets. The Government should retain their ability to respond to evidence on technology cost reductions, costs to consumers and of course opportunities in other sectors such as heat and transport. The hon. Gentleman’s proposals would unnecessarily tie the Government into a course of action that may neither benefit the consumer nor provide any certainty to renewable energy generators or investors. We are committed to our energy and carbon targets and continue to make strong progress towards meeting them. For that reason, I cannot accept the amendments but I hope that I have addressed his concern and that he will be content to withdraw them.

New clause 6 seeks to devolve the matter that, when exercising electricity market reform functions under the Energy Act 2013, including in respect of contracts for difference, the Secretary of State should consider matters specifically in respect of Scotland. It also seeks to devolve annual reporting on how the Secretary of State has carried out the functions under part 2 of the Energy Act 2013 during each year. EMR, including CfDs, is GB-wide. That is, electricity market reform, including contracts for difference, is Great Britain-wide––I am sorry, I am trying not to use acronyms––and does not operate in a regionally specific way. That is linked to the fact that we have a GB-wide, integrated energy system on which the CfD scheme relies. The costs of the CfDs are spread across all consumers in Great Britain, which results in a fair distribution of the burden. That means that when exercising EMR functions under part 2 of the Energy Act 2013, it is appropriate that the Secretary of State has regard to the matters in section 5(2) of the Act on a Great Britain-wide basis. Having a GB-wide system ensures that support is directed as efficiently and cost-effectively as possible, which helps keep down the cost ultimately borne by bill payers.

Under current energy policies, Scotland has more than proportionally benefited from financial support from all GB bill payers. Around 9% of the UK population is in Scotland but around 30% of UK renewable electricity generation capacity is in Scotland. Of the 25 successfully signed contracts for difference, 12 have been awarded to projects in Scotland. That includes the 448 MW offshore wind farm in the outer firth of Forth and 11 onshore wind farms with a combined capacity of more than half a gigawatt. Transferring the power to Scottish Ministers to award contracts would go well beyond the Smith commission agreement. It was not the intention and nor is it appropriate.

I do not think it is necessary to devolve the publication of the annual report to Scotland. Every year, we publish an update that reflects the scheme’s GB-wide nature and sets out the progress the Government have made over the past year in implementing electricity market reform and how the Secretary of State has carried out functions under part 2 of the Energy Act 2013. Furthermore, the Secretary of State is already required to send the published report to Scottish Ministers, so I urge the hon. Gentleman to withdraw his amendment.

--- Later in debate ---

[Andrea Leadsom]

I do have the letter. On reading it, a power is taken, but we take all sorts of powers in case we need them. Is it not simply the case that, because we are doing well against our own targets, we do not necessarily always want to legislate? I find it completely counterintuitive to say that, just because we have a power, we should therefore legislate to use it. That is just not the case. My noble Friend Lord Bourne made it clear to the shadow Energy and Climate Change Minister in the other place, Lady Worthington, that, in line with our Conservative manifesto, which I am pleased the hon. Member for Southampton, Test quoted accurately:

“We…will not support additional distorting and expensive power sector targets.”

Lord Bourne made it clear in his letter that that is precisely why we will not implement the power, even though we have it. In summary, just because we have a power does not mean that we need to use it. We will only use it if we need to use it, or if there are good reasons to do so.

New clauses 11 and 7—new clause 7 has now been withdrawn—have the same underlying purpose. Both new clauses would require the Secretary of State to set a decarbonisation target range for the electricity generating sector. New clause 11 would also require the target range to be reviewed annually, and amendments with very similar effects were debated and defeated during the last Parliament and during the passage of this Bill in the other place. Lord Bourne clearly set out the Government’s position on this matter, as the hon. Member for Southampton, Test has just explained.

We are committed to ensuring that the UK continues to do its part to address climate change, in line with the Climate Change Act 2008 and our international and EU obligations. I think all hon. Members recognise that we have played a leading role in the Paris climate change negotiations and done everything we can. The UK on its own cannot change the future for climate change, but acting internationally we can. We are determined to do our bit as cost effectively as possible to make sure that our own energy is secure and affordable, as well as low carbon. Locking ourselves into additional expensive and inflexible targets relating to the power sector is not the way to do that.

There are too many things that we cannot predict about how the energy system will develop up to and beyond 2030, and the costs of getting it wrong would be picked up by consumers for decades to come. Yesterday we were discussing fuel poverty and how we must do more to keep costs down for consumers, and now Opposition Members are urging us to sign consumers up to a distorting and expensive power sector target. It simply does not make sense, and our manifesto was clear that we will not do that.

Instead, investors want to know that we have got clear, credible and affordable plans—that is what my right hon. Friend the Secretary of State set out in her speech in November—including the role that gas generation, nuclear power, offshore wind and innovation can play in decarbonising the power sector. The Government are now setting out the next stages in their long-term commitment to move to a low-carbon economy, providing a basis for electricity investment into the next decade.

The huge investment that we have seen so far is evidence that our approach is working. Between 2010 and 2014 our policies have secured an estimated £42 billion of investment in low-carbon electricity, including £40 billion in renewables, and we have more in the pipeline for the future.

[Dr Whitehead]

I take the point that the Minister made. On occasion Governments allow themselves secondary legislation opportunities, which are then placed in a cupboard and never seen again. I deplore the tendency in Bills to provide possible powers that are never acted on because the Government subsequently feel that it is not a good idea to do so. However, the provision in the Energy Act 2013 is not a small power that was put in the back of a cupboard. Part 1, section 1 is the part around which the rest of the Act hangs. Other parts of the Act that refer to other targets make complete sense in the end only if the decarbonisation range is properly put in place by the Secretary of State. It is not at the front of the Act by accident, but because, in order to make sense of the Act overall, it is clearly incumbent on the Secretary of State to set that decarbonisation range at some stage.

If we are doing so well and we want to stand by our Paris commitments, why on earth would we not set a range? What is there to lose? I am more worried about what the Minister says than I am that the Government are unwilling to come forward with a range, because it suggests that—in the light of all these other matters—perhaps there is the beginning of a conscious view that targets will not only not be met, but consciously veered away from in future.

--- Later in debate ---

[Dr Whitehead]

I beg to move, That the clause be read a Second time.

The new clause adds to the Energy Act 2013 requirements relating to fossil fuel generating plant that is granted a 15-year capacity contract. The plant must adhere to certain conditions if the contract is to be granted—the three conditions are listed in the new clause. Regarding the final condition—the emissions performance standard—hon. Members will be interested to know that section 57 of the Energy Act 2013 contains a target, or, to be exact, a formula that under subsequent secondary legislation led to a performance standard of 450 grams per kWh being established.

To what does that section refer? It clearly does not refer to gas, because new plant for gas comes in at 378 grams per kWh and is below the emissions performance standard. What it refers to is diesel coming in to the provision of electricity, particularly in the context of what has occurred in the previous two capacity auctions, whereby diesel reciprocating engines, historically installed in industrial plants for standby generation, for example, are connected to the network to provide a regular system of electricity generation.

Those diesel engines escape the provisions of the Energy Act, because individually they are below the size at which plants are caught, but in terms of their individual emissions they are the most dirty of the various electricity generation devices. I mentioned that the combined cycle gas turbine plants being considered for commissioning come in at up to about 378 grams per kWh. Coal, which the Government are consulting on taking off the system entirely by 2015, comes in with existing plant above the energy performance standard at 930 grams per kWh. The carbon intensity of diesel generation sets is more than 1,000 grams of CO₂ per kWh, so they are probably the dirtiest generating systems possible. However, in the last two capacity auctions, virtually the only type of plant to have obtained a 15-year capacity payment to develop is diesel; virtually every other plant that put in for such a payment failed to clear the auction. Because diesel is exempt from present EPS levels because of the individual size of the reciprocating sets, it has cumulatively obtained a substantial proportion of long-term capacity payments coming into the system.

Perhaps we should dwell for a moment on the supposed purpose of the capacity auction system, which is to bring new generating plant on to the system. The interesting thing about the first two auctions is that they signally failed to bring on to the system any new generating plant that looks likely to be built. From the earlier capacity auction, one plant, Trafford, looks like it will probably not be built, and in the most recent auction there were no plants at all except, mainly, for those small diesel generation sets. The net policy outcome of capacity auctions over the last two periods is that no new plant has come forward. Yet diesel generating sets have run in under the wire and have got a considerable amount of cumulative capacity, which I will come to in a moment, despite being the dirtiest form of generation. That is a completely perverse outcome compared with what one might have thought would be the case with both capacity auctions and the Government’s policy of taking coal off the system in the longer term.

Of course, one reason that diesel sets have been able to get into capacity auctions is that they have succeeded in coming under the clearing price for the capacity auction. When the clock auction comes down to the point at which the right amount of capacity has been procured, everybody under that point gets that payment, and diesel sets have been able to get under the clearing price whereas other plants have not. It is not because diesel sets are particularly cheap to run; it is, at least in part, because they already receive a substantial underwriting from HM Treasury through enterprise investment scheme payments for the establishment of those plants. Originally, it appears, the payments were set to encourage the plants to be established for standby purposes, but they have been used for other purposes in the capacity auction.

Although that route has been changed in the autumn statement, the most polluting generating plants have managed to get two lots of subsidies for generating and have got in through the capacity auction process as well. That is not only bad climate policy but bad public policy in general, and it is certainly a perverse outcome of the capacity auction process. I am sure the Minister agrees, if not publicly then certainly in private, as she is a sensible person. She might even agree publicly; it would be really helpful if she did.

[Andrea Leadsom]

I absolutely agree with the hon. Gentleman and I can tell him that the loophole has been closed. An HMRC amendment to the Finance Bill has excluded reserve generating activities from eligibility for tax reliefs under venture capital schemes from 30 November 2015, and it has subsequently been announced that all electricity generating activities will be excluded from eligibility from 6 April 2016. We are now considering whether any consequential changes to the capacity market are needed to ensure that this position is reflected adequately. I am grateful to the hon. Gentleman for that point.

[Dr Whitehead]

Indeed, the Minister confirmed what I said: that the EIS loophole was closed in the autumn statement. I am interested to hear, and I previously understood, that the Department was actively considering ways in which the capacity auction could be amended. I am not surprised that the Department is doing that, because so far the capacity auction has completely failed to fulfil its purpose, which was to bring forward new plant. The Department will have to think rather carefully about how it amends the capacity auction process.

It does not seem to me that the EIS loophole has been closed and that that in itself removes diesel sets from future capacity auctions. Although one would hope that the Government, when they look carefully at capacity auctions, will ensure that that happens, it is by no means certain. I remind the Committee that we are not talking about a small amount of generation that has already come on to the system. In the first auction, 375 MW of diesel set generation were given 15-year contracts; in the second auction, 650 MW of diesel sets were given room in the auction. In case we have any difficulty in scaling that, I point out that the one gas-fired power station that is presently under construction and that might produce energy in the near future will come in at an overall capacity of 880 MW. In fact, we have more than one new gas-fired power station’s worth of diesel sets in the capacity auction. That is a substantial amount indeed, even though the diesel sets themselves are fairly small.

--- Later in debate ---

[Andrea Leadsom]

New clause 13 would introduce additional capacity market eligibility criteria for new-build capacity accessing 15-year capacity agreements based on a carbon price, a requirement to fit the best available technologies to mitigate air pollutants, and the emissions performance standard. As the hon. Gentleman says, the new clause targets his concerns on the potential growth of diesel engines participating in the capacity market. Although I do not accept the new clause, I am not unaware of or unsympathetic to his concerns.

I will explain the steps being taken on the issue, but first I point out that we are in this situation in large part because of the long history of inadequate emission controls, which we inherited. Also, there has been a lack of investment in future energy sources over a very long period—that is a matter of record. I assure Members that small-scale diesel and gas generators can offer big security of supply benefits, as they can help to meet peak demand quickly by producing electricity when it is most needed. I know that the hon. Gentleman, who is expert in these matters, knows that that is the case.

As it stands, diesel engines represented just 1.5% of the capacity procured in the capacity market auction that concluded last December. Like other forms of capacity, they will be paid a clearing price of £18 per kW. The capacity market will oblige participants to run in response to stress events, when the electricity system is otherwise tight. Those events are likely to be infrequent and may not occur at all in some years. The generators are there to switch on very quickly at times when we urgently need to meet shortfalls, because of issues such as the intermittency of renewables, unexpected downtime on traditional power plants and so on.

The emissions impact from diesel engines is often assumed to be larger than it is in reality. In fact, they have a relatively small impact on overall CO₂ emissions because of the short hours that they run. They are typically used as peaking plant, running for less than 100 hours a year, whereas larger fossil fuel plants will run for 2,000 hours or more. In addition, per unit of generated electricity, diesel emits around 30% less CO₂ than coal. Because they start up more quickly than bigger generators, diesel can emit less CO₂ than larger gas plants when used for these short periods. The controls proposed on CO₂ are not appropriate and are not likely to be effective.

[Dr Whitehead]

I take the Minister’s point that diesel sets can be used for very rapid start-up under peaking conditions, but does she agree that they are by no means the only device that can do that? There are other opportunities for quick start-up under peaking conditions, including, under certain circumstances, wind. Wind can start up and ramp very quickly. Historically, diesel sets have been used not for peaking purposes but for reserve purposes, should every other system go down; that has been the main use. It is their introduction into the main generation system as a peaking device under the recent capacity auction arrangements that is new, and it is that use we should be disturbed about.

[Andrea Leadsom]

I do not disagree with the hon. Gentleman. Wind can ramp up very quickly and it will often be the first choice, but it cannot always be controlled—the wind does not always blow. Unfortunately, diesel generators still have their place. The concern about diesel engines is more relevant in the context of local emissions, particularly oxides of nitrogen, or NOx. I am fully aware of that and I emphasise that we are actively looking into that issue. Diesel engines typically run for under 100 hours a year, so we need to start by improving our evidence base on exactly what their local emission impact is.

I want to set out the steps that are being taken. First, DEFRA will begin transposition of the medium combustion plant directive into legislation this year. The directive sets limits on the levels of nitrogen dioxide that small, sub-50 MW generators can emit, because they fall below the minimum threshold for existing controls. DEFRA will provide more details when it consults later this year and is already building its evidence base to fully understand the risks from diesel engines so that it can take action accordingly.

Secondly, Ofgem is aware that many people are concerned that there may be a level of embedded benefit for these generators and is looking into whether action is needed. In particular, the transmission charging regime has been brought to my attention, as it can account for a significant share of revenues for small generators and so would be partly responsible for encouraging their growth.

Thirdly, we are looking at whether any further direct steps could be taken if there is evidence that future capacity market participants are at risk of subsequently contributing to breaches of local air quality limits. However, as I am sure the hon. Gentleman realises, any measure would need to have state aid clearance, which requires that the capacity market does not discriminate against types of technology. We need to ensure that we do not do anything that creates security of supply risks by depriving the electricity system of a fast, flexible form of capacity before there are reliable and viable alternatives.

For those reasons, I cannot accept the new clause. We need to ensure that we are taking the right action in the right places, where there is clear evidence that it is needed, and without placing our energy security at risk. I hope he is reassured by my explanation and will be content to withdraw the new clause.

[Dr Whitehead]

Because it is a Thursday afternoon and because the Minister gave me a little bit of reassurance, I will speak briefly. I still think we need to get to grips with this soon rather than later, but if the Minister undertakes the actions she has set out with some alacrity, so that they are done well in advance of the next capacity auction, we may make some progress. In those circumstances, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 14

Electricity storage

‘(1) Section 4 of the electricity Act 1989 is amended as follows.

(2) After subsection (1)(c) insert—

“(d) stores electricity for the purpose of giving a supply to any premises or enabling a supply to be so given,”

(3) At end of subsection (4) insert—

““Store” means the conversion of electricity into a form of energy which can be stored, the storing of the energy which has been so converted and the reconversion of the stored energy into electrical energy in devices with an individual capacity of more than 50MW.”

(4) Section 6 of the electricity Act 1989 is amended as follows.

(5) After subsection (1)(d) insert—

“(e) a licence authorising a person to store electricity for the purpose of giving a supply to any premises or enabling a supply to be so given (‘a storage licence’);”

(6) After subsection (2) insert—

“(2ZA) In addition to holding a storage licence, the same person may be a holder of—

(a) a distribution licence,

(b) a transmission licence, or

(c) a generation licence.

(2ZB) The Secretary of State may by order determine the circumstances under which a person may hold a storage licence in addition to a distribution licence, a transmission licence or a generation licence under subsection (2ZA).””—(Dr Whitehead.)

Brought up, and read the First time.

Energy BILL [ Lords ] (Sixth sitting)

Debate between Andrea Leadsom and Alan Whitehead

Thursday 4th February 2016 Public Bill Committees

[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.

Energy BILL [ Lords ] (Fifth sitting)

Debate between Andrea Leadsom and Alan Whitehead

Tuesday 2nd February 2016 Public Bill Committees

[Dr Whitehead]

Indeed, but one in which we do not get to know the dénouement until the next episode. The dénouement is, as the Minister will know, that the commitment in the Conservative manifesto was to end any new public subsidy for onshore wind. The question is whether that means new public subsidies, or public subsidy that previously existed but applies to new projects. Clearly, the renewables obligation is a long-standing subsidy and unless one places a very specific interpretation on that manifesto pledge, it is about new forthcoming subsidies and we should bear that in mind in our discussions.

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

I am excited to hear the question of the hon. Member for Southampton, Test. I had not anticipated that it would be that, simply on the grounds that, as I, my right hon. Friend the Secretary of State and many Members in Committee and on Second Reading have made absolutely clear, our manifesto commitment was to end subsidies for onshore wind early. I therefore say philosophically to the hon. Gentleman that, had we meant new subsidies we would have said “new subsidy schemes”, which is the interpretation I think he wants to put on our manifesto commitment.

Let me be clear: the Government were elected with a clear manifesto commitment to end new subsidies for onshore wind and to ensure that local people have the final say on where onshore wind is built. I hope that hon. Members will accept that it is for the Government to agree what their manifesto commitments are. We have gone to great lengths to assure all hon. Members that what we meant was to close the subsidy early; we are not referring to new subsidy schemes. Had we meant schemes, we would have said schemes.

--- Later in debate ---

[Andrea Leadsom]

As the hon. Gentleman knows, there are separate binding targets for different types of renewable energy. He also knows that we are making good progress in meeting our targets. We expect to be within the deployment range for onshore wind that was projected in the electricity market reform plan.

If we do not implement the early closure proposals in these amendments, there is a risk that we will deploy beyond the range that we forecast. There is the potential for up to 7.1 GW of further onshore wind under the renewables obligation. Without action to close the renewables obligation early and manage the spending under the levy control framework, there is a risk of deploying beyond the delivery plan range, which would add more costs to consumer bills.

I remind the Committee that, as my right hon. Friend the Secretary of State for Energy and Climate Change said on 18 January,

“Subsidies should be temporary, not part of a permanent business model.”—[Official Report, 18 January 2016; Vol. 604, c. 1152.]

That is what we seek to implement.

[Dr Whitehead]

May I press the Minister on her point that it is necessary, among other things, to cap the deployment of onshore wind, bearing in mind that we already have deployment over the EU 2020 renewables target? The legal target, the one for which we would get fined, is the overall target. The sub-targets, which relate to heat, transport and renewable energy, are not legal targets, but they are aspirations towards the legal target. Therefore, the consequences of whether one underperforms or overperforms in any particular sector relates only to the overall target. Overperforming in particular areas would actually make a positive contribution towards ensuring that we do not get fined as a result of not meeting the 2020 targets. Is that the Minister’s understanding of how the targets work? If so, does she want to amend her point about how onshore may play a role in meeting them?

[Andrea Leadsom]

I guess that the hon. Gentleman makes the reasonable point that one could be traded for another, but the object of our renewables policy is not merely to avoid getting fined by the EU. I am quite sure that he does not mean to imply that that is the case. The idea is to decarbonise the UK economy. Yes, we could decide to take one route only and therefore not worry about other sectors such as transport and heat, but I am quite sure that the hon. Gentleman is not seriously suggesting that. Even if he were, it is absolutely still the case for the renewables sector that if we continue to offer generous billpayer subsidies, costs to consumers will continue to rise.

The policy was well thought through and had deployment ranges that forecast the achievement that we sought against our legally binding targets. We believe that we are in a position to meet the target with onshore wind. Simply saying, “We should carry on with it because we can do more than we set out to do,” is not a way to run anything, so I cannot agree with the hon. Gentleman that it would make sense to continue with subsidies at the expense of billpayers. This is not free money. We frequently discuss in the Chamber the problem of people being in fuel poverty and those are the people who will have to keep paying for subsidies if we choose to deploy beyond the level that we have already set for ourselves.

[Andrea Leadsom]

I remind the hon. Gentleman that, in making progress towards our 2020 renewables target of 15%, we have surpassed our interim target for 2013 and 2014 with an average 6.3% of final energy consumption coming from renewable sources over those two years against a target of 5.4%. The contribution of renewables to energy generation is increasing across heat, electricity and transport. Heat from renewable sources increased by 4.6% during 2014. As hon. Members have pointed out, a record 19.1% of electricity generation came from renewables in 2014. Renewable biofuels for transport also rose by 14% during 2014.

I can again say to the Committee that we have targets for each of our energy sectors, and it is simply not realistic to say that just because onshore wind benefits from a generous subsidy and other projects could come forward, we should change our deployment target aspirations, putting the ensuing costs on to consumers’ bills at a time when we are already comfortably meeting our targets.

[Dr Whitehead]

rose—

[Andrea Leadsom]

I want to make some progress. We have discussed this point and I have given hon. Members the chance to give their views, but I have been clear that I do not agree that we should overcompensate on electricity generation.

We are mindful of the proposals’ potential impact on industry and of the need to protect investor confidence, which is why we have been listening and continue to listen closely to what people have to say. In fact, the grace period provisions, which were first tabled in the other place and have been re-tabled for debate here today, have been developed directly in response to industry feedback on our proposals. We must move forward with these proposals, not only to protect consumers but to provide much-needed certainty to both onshore wind developers and investors. I will now speak about each Government amendment in turn.

--- Later in debate ---

[Dr Whitehead]

I seek a little more clarity from the Minister on varying planning consent. My understanding, from what she has said, is that where a development received planning permission consent or development consent before 18 June 2015 but a variation on that consent was subsequently undertaken, it is within the grace period. Modifying the grace period in order to accommodate that is therefore not necessary, because it is definitely already in the grace period. Anyone who undertakes that development therefore has a clear understanding from the Minister that their development will not be impeded as a result of that process.

[Andrea Leadsom]

That is correct, yes.

Amendments (q) and (r) relate to projects that are the subject of a deemed planning permission. I am pleased to reassure the Committee that a planning permission deemed to be granted as part of the consent granted by the Secretary of State under section 36 of the Electricity Act 1989 is already allowed for within the current drafting, as long as the section 36 consent is granted on or before 18 June last year. Planning permission deemed granted under section 36, like other planning permission, meets the conditions of the grace period so long as it was deemed to be granted on or before 18 June. Again, the intent of the amendments is already the intent of the policy, so changing the drafting is unnecessary.

Amendments (s), (t) and (u) relate to the proposed investment freezing condition, and I thank the hon. Member for Coatbridge, Chryston and Bellshill for tabling them. The investment freezing condition was not a part of our original policy proposals but was developed in response to my Department’s extensive industry engagement, following the announcement on 18 June. We listened to stakeholders, including the devolved Administrations, developers, supply chain and investors. A number of stakeholders expressed concerns about the impact that the lack of legislative clarity was having on certain financiers’ willingness to lend, and we are committed to addressing that.

To ensure that projects that otherwise meet the grace period criteria are not held back from deploying, we developed a proposal to allow an additional nine months in which to accredit those projects that already meet the approved development condition but that have suffered from the investment freeze. That nine-month period is intended approximately to reflect the time period between the date of the Secretary of State’s announcement and the Bill’s expected Royal Assent. The amendment will ensure that we meet the intent of our original policy without unfairly affecting projects. The evidence we received during engagement with industry suggests that those most likely to be affected by an investment freeze were those funded by banks, so the definition of “recognised lender” has been drafted to reflect that.

The investment freeze condition is about protecting projects that evidence demonstrates are affected by this issue; it is not about giving developers a better chance than they would otherwise have had to access the RO before its closure date. Unfortunately, the amendments tabled by the hon. Member for Coatbridge, Chryston and Bellshill risk doing exactly that. Removing the requirement that a project must need funding specifically from a recognised lender and widening the definition of a recognised lender as suggested could open up the grace period to gaming. As I have said, we must limit deployment to what we believe is affordable. The Government’s policy does exactly that in a fair way for developers while clearly and sensibly managing potential risks and protecting consumer bills.

I understand that, through amendment (a) to new clause 3, the hon. Gentleman seeks to ensure that the power relating to Northern Ireland renewables obligation certificates may only be exercised in relation to certain wind generating stations. In particular, he seeks reassurance about the equivalence of the eligibility dates for the grace period in Northern Ireland. I reassure him that the intent of the clause is only to protect consumers in Great Britain from the cost of any additional support that is given to onshore wind in Northern Ireland beyond what would be available in Great Britain. The Government’s position is that the power will not apply to projects meeting grace period conditions that are equivalent to those applying to projects in Great Britain. Those projects meeting equivalent conditions will be excluded from the power. Therefore, Northern Ireland renewables obligation certificates for such projects will continue to be redeemable in Great Britain.

The Government have been in regular discussions with the Northern Ireland Executive about the implementation of this policy. In September, the Government agreed a position with Northern Ireland regarding the equivalent terms for closure. On that basis, the Northern Ireland Executive published their consultation on proposals for early closure of the renewables obligation in Northern Ireland to onshore wind, which included reference to the eligibility dates mentioned in the amendment.

I thank the hon. Member for Aberdeen South for tabling new clause 15. My understanding is that he wants only Scottish Ministers, and not the Secretary of State for Energy and Climate Change, to be legally able to close the renewables obligation to onshore wind in Scotland. I remind hon. Members that energy policy across Great Britain is reserved to the UK Government. The power to make a renewables obligation closure order is reserved to the Secretary of State for Energy and Climate Change under section 32LA of the Electricity Act 1989, which was inserted by the Energy Act 2013 specifically to ensure that closure could be effected consistently across Great Britain. Because the policy is reserved, the provisions to close the RO early to onshore wind in the present Bill will also apply to Great Britain.

The hon. Gentleman’s proposed change would reverse the policy implemented by section 32LA of the 1989 Act and set out in the original Renewables Obligation Closure Order 2014. I remind the Committee that it is imperative that we maintain consistency across Great Britain as a whole, providing consistency and certainty to industry and, importantly, fairness to consumers. We estimate that in 2015-16, £850 million of the support under the RO as a whole will go towards funding onshore wind across the UK. Of that, we estimate that about £520 million, or approximately 60%, will go towards funding Scottish onshore wind farms, even though only about 10% of UK billpayers are in Scotland.

Energy BILL [ Lords ] (Fourth sitting)

Debate between Andrea Leadsom and Alan Whitehead

Tuesday 2nd February 2016 Public Bill Committees

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

It is a pleasure to serve under your chairmanship again this morning, Mr Bailey.

This provision reminds us that the theme of fees runs throughout the Bill. I am also reminded of a sketch in the well known Marx Brothers film “A Day At The Races” where Chico Marx is allegedly selling ice cream but is actually selling form guides to the races and Groucho Marx has to keep buying form guides in order to understand which horse is running in the race, with the result that he ends up purchasing about 20 form guides from the ice cream truck. I commend the film to hon. Members who wish to understand this section. [Interruption.] I wanted to get a mention of Marx into proceedings and that particular one is important.

The provision relates to the Secretary of State’s power to charge fees. It does so by inserting clauses into other pieces of legislation, hence my reference. It is necessary to look at the proposed new clauses to understand how the fees actually work. In the first instance, fees relating to recuperation of costs associated with functions relating to petroleum licences are laid down in part 4 of the Energy Act 2008. The clauses amend that Act to enable the Secretary of State to charge for functions in part 4. A further provision relates to the Marine and Coastal Access Act 2009, and allows the Secretary of State to charge for marine licence functions as they relate to oil and gas regimes.

That effectively means, returning to our earlier discussions on clause 13, that the following regime appears to apply: if an operator in the North sea is considering an application for a licence to explore for petroleum, a consideration of that licence by the Oil and Gas Authority is chargeable with a fee. It is, indeed, part of the remit of the OGA to charge a fee for that purpose. If, however, there is an actual licence, then the Secretary of State charges fees, not the OGA, under this arrangement. If there is a licence arrangement relating to the Marine and Coastal Access Act, a different Secretary of State, the Secretary of State for Transport, provides the licence and presumably charges a fee, which goes to the Department for Transport. As far as activities relating to petroleum and oil exploration activities are concerned, the Secretary for Energy and Climate Change charges for the licence. After transferring a number of people working for the Department of Energy and Climate Change to the OGA for the purpose of putting the organisation on a proper footing, a regime would presumably be developed in the OGA to charge for the consideration of licences under clause 13. Another group of individuals, remaining in DECC—not going to the OGA—would charge for a separate number of licences which are associated with the original arrangement on licences for exploration, but are now charged under those auspices.

A third set of remaining civil servants presumably collaborates with the Department for Transport to charge fees relating to the licences as they pertain to the requirements under clause 77(2) which are taken by this Secretary of State into the purview of the Department of Energy and Climate Change and away from the Department for Transport. To the best of my ability, that is my understanding of how this regime will work.

It raises the question, following our previous discussion about the remit of the OGA relating to fees: why has this arrangement been placed in this particular way in this particular Bill? Far from simplifying the licensing regime, it appears to make it more complex for different agencies issuing licences and charging fees for the scrutiny of the application of particular licence arrangements.

If I were a North sea operator, I would find not only navigating around the North sea but navigating those fee arrangements quite a complex procedure. From the point of view of the Department, I would find the relative inefficiencies of having at least three centres of fee and licensing arrangements in the OGA, DECC and possibly an association with the Department for Transport, not only a bureaucratic problem, but a problem of efficiency and interfacing with operators in the North sea.

Will the Minister elucidate for the Committee the thinking behind these clauses and how they are sited in the Bill? Had it been considered, for example, whether the OGA itself might have taken on some of the fee-charging arrangements? What was the rationale for keeping fee-charging arrangements for licences within the Department? Does the Minister agree that in an ideal world it might have been a better idea to concentrate on the various fee arrangements relating to licences under one authority, which, among other things, would immensely simplify the process for operators?

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

Good morning, Mr Bailey. It is a great pleasure to be back in Committee for what I hope will be a very interesting day. I assure the hon. Gentleman that this clause relates only to oil and gas functions, not to the functions of other Departments. These functions relate to a separate arm of DECC. As he will appreciate, it is an established practice, accepted by the oil and gas sector, that the costs associated with the provision of regulatory services should be recovered from industry. That is based on the well established “polluter pays” principle that exists across several sectors, ensuring that the taxpayer does not bear the burden of funding regulatory activities.

The clause simply permits the Secretary of State to make regulations, allowing her to recharge functions carried out under part 4A of the Energy Act 2008 and part 4 of the Marine and Coastal Access Act 2009. Those are set out in secondary legislation, which includes the overall fee and calculation, and an impact assessment will be prepared before the regulations are finalised. The clause specifically relates to oil and gas functions. It has been discussed closely with industry and is based on the widely understood principle that the polluter pays and recharges are made, so that the cost does not fall to the taxpayer.

[Dr Whitehead]

I thank the Minister for her response. I understand that these fees relate to oil and gas exploration activities and that the industry is au fait with them. My point was this: why can the OGA not be responsible for this particular licensing arrangement, since it relates to petroleum and gas exploration and exploitation and the OGA has the overall function of regulating that whole area? Would that not be simpler?

As far as the structure is concerned, there might have been a one-stop shop for the process of obtaining licences and paying the relevant fees, with consideration of the licences in the various interfaces those licences have with other considerations in the North sea. Would it not have been a better idea for all of that to be placed under one roof—the OGA—rather than have this dissipated arrangement, whether or not that is something the industry thinks it can, in general, work with? What we have in the Bill is effectively a three-way split in terms of how licences are considered, paid for and granted in relation to other activities in the North sea.

[Andrea Leadsom]

I am grateful to the hon. Gentleman for raising those points, but I would like to assure him that the clause goes to the heart of the OGA’s purpose. As he will be aware, it is the responsibility of the Department of Energy and Climate Change to cover the environmental protection of the North sea, whereas the establishment of the Oil and Gas Authority aims to enable it to manage the licensing of oil and gas exploration and extraction in the North sea. That separation of duties seeks clearly to maximise the recovery of reserves, while minimising the impact on the environment. That is why those roles are kept separate, and the charging for different activities within those responsibilities is therefore also kept separate.

Question put and agreed to.

Clause 77 accordingly ordered to stand part of the Bill.

Clause 78 ordered to stand part of the Bill.

Clause 79

Onshore wind generating stations in England and Wales

[Dr Whitehead]

I beg to move amendment 16, in clause 79, page 46, line 43, at end insert—

‘(2) Within six months from the date of this Act coming into force, the Secretary of State shall report to Parliament on the impact of this section and any other policy changes to the renewable energy sector with regards to how they affect the United Kingdom’s ability to comply with the 2020 EU renewable target.

(3) The report in subsection (2) must include an estimate of the cost to the taxpayer should the UK not comply with the 2020 EU renewable target.”

This amendment would require the Secretary of State to report within six months of this Act coming into force on how changes to renewable energy policy (including the changes stipulated in section 79 of the Act) have affected the UK’s ability to comply with the 2020 EU renewable target.

The clause and the amendment present two issues concerning wind generation. The clause under part 5 concerns wind power and I am sure there will be further debates about the wider issues later today.

Clause 79 amends section 36 of the Electricity Act 1989 and removes the obligation to secure consent to construct, extend or operate an onshore wind farm in England and Wales with a capacity greater than 50 MW. The previous arrangement meant that local planning authorities were effectively countermanded by the Secretary of State in the case of larger wind farms, by reference to a section 36 agreement, which is required to allow an onshore wind farm to operate in England and Wales.

By stripping out that countermanding, the clause means that in principle the final requirement for permission for wind generation at local level lies with the local planning authority. We discussed on Second Reading the desirability of that provision for the future of onshore wind and the idea that the local planning authority should have the final say in those application because it would reflect the wishes of the local population—assuming that the authority had taken proper soundings of local interests and thoughts regarding an application.

That exemplifies the principle on which the House agreed on Second Reading: that this would be a welcome change and give clarification of the future direction of onshore wind applications in England and Wales. We discussed whether the Opposition really meant that, and indeed it was emphasised by the shadow Secretary of State that we welcomed the proposed arrangements. I will not rehearse those arguments this morning other than to say that, in principle, the arrangements outlined in the clause are welcome, but I will look at the detail of the clause.

The provision does not stop at removing section 36 of the Electricity Act 1989. The explanatory notes outline the intention for the arrangements in the clause to be

“combined with secondary legislation to be made by Government to amend the Planning Act 2008.”

That is when some very small alarm bells start ringing in my head, because if clause 79 is to be taken at face value and it is simply about removing section 36 of the Electricity Act, it appears to me that, by default, the power to decide resides with the local planning committee. That is something on which we all agree. If, however, the intention is to undertake further secondary legislation to further amend the Planning Act 2008, not through the Minister’s Department but, I would imagine, through the Department for Communities and Local Government, would that take away from that planning authority any power to make those decisions?

--- Later in debate ---

[Dr Whitehead]

I am at a slight disadvantage because at the conclusion of my previous comments I handed the copy of the Secretary of State’s letter to the Hansard writers for their perusal, so I do not have it in front of me. [Interruption.] Thank you, I do now have it and, by the way, Hansard will get this back in a moment. In her letter, the Secretary of State makes some further comments on her position on the UK’s trajectory towards the 2020 targets. She states that essentially the Department has a public position and private position. She writes:

“Publically we are clear that the UK continues to make progress to meet the target.”

However, she is clear that privately, that is not the case. The figures set out in her letter indicate that what is stated publicly is not, shall we say, untrue, but a shaving of the completeness of information that might otherwise enable people to make an independent decision on where we are. There appears to be a difference between what is acknowledged privately to be the case in the Department and what is stated publicly on the progress of the trajectory.

That important point needs to have a substantial light shone on it. It is true, as the Minister states, that the Department has published various figures relating to progress, but I wonder whether they are in the realm of the statement made publicly that the UK continues to make progress to meet the target, or privately that we are clear that we are not making progress to meet the target. As suggested here, a report would clear up that issue and could be an important accurate fix on our progress.

I do not expect the Minister to comment on the exact syntax and grammar that the Secretary of State may have used in her correspondence, but there is a point at issue as to the clarity with which progress towards the target may be made and whether there would be further issues to be considered if they were properly in the public domain and related to the question of what costs might be otherwise be sustained in the future. I hope the Minister will give further clarification on that point. With that, I hand my letter back to the Clerk.

[Andrea Leadsom]

I assure the hon. Gentleman that the UK is making progress towards the 2020 renewables target of 15%, and that in the latest report we have surpassed our interim targets for 2013 and 2014 with an average of 6.3% of final energy consumption coming from renewable sources over the two years against a target of 5.4%. The hon. Gentleman quotes from a letter that I do not have in front of me, so I hope that he has not given his version of what it says. I can tell him that the UK is committed to meeting our legally binding targets and that we are making progress towards those targets.

[Dr Whitehead]

I do not wish to press the amendment to a vote, but I hope that the points about transparency on this issue will be taken on board. Indeed, should the Minister wish me to retrieve the letter a further time—[Interruption.] There we are. I am sure that she can have a look at it for herself. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 79 ordered to stand part of the Bill.

Clause 80

Emissions trading: United Kingdom carbon account

Question proposed, That the clause stand part of the Bill.

[Andrea Leadsom]

Clause 80 was inserted into the Bill by the Opposition in the other place and intends to restrict the carbon accounting rules that are permissible under the Climate Change Act from 2028, which is the start of the fifth carbon budget period. This is quite a technical area and to aid Committee members’ understanding, I thought it would be helpful to explain briefly how carbon budgets and carbon accounting work at the moment. I hope hon. Members will bear with me as I explain that before I come to set out our reason for seeking to remove the clause from the Bill.

The Climate Change Act sets a target for the UK to reduce emissions by 80% from 1990 levels by 2050. It also requires us to set intermediate targets called carbon budgets to reduce emissions along the way. Carbon budgets are a cap on the emissions allowed over successive five-year periods. For example, the first carbon budget covered the period from 2008 to 2012, and we met that budget with 36 million tonnes of carbon dioxide equivalent to spare. We set carbon budgets 12 years in advance, so by 30 June this year we will be setting the fifth carbon budget to cover the period from 2028 to 2032. As well as setting each carbon budget, we make regulations that set carbon accounting rules for each budget period. The rules, in addition to what is set out in the Climate Change Act, tell us how to calculate the budgets and therefore whether we have met them.

I will now briefly explain how the current carbon accounting rules work before setting out the intended effect of clause 80 to the Committee. Under the current rules, we count the UK’s actual emissions for some sectors and for other sectors we reflect how the EU emissions trading system works instead of counting actual emissions. For transport, buildings, agriculture, light manufacturing and some other areas, we count the UK’s actual CO₂ emissions. For the power sector and heavy industry, we effectively reflect how the EU ETS works instead of counting the UK’s actual emissions. The EU ETS is a scheme in which emissions from power and heavy industry are capped and reduced at an EU level. Emissions are reduced by issuing a declining number of emissions allowances to member states. The emissions allowances are then traded by power stations and industrial sites across the EU. Our current carbon accounting rules tell us to count the UK share of the EU ETS emissions cap for the purpose of carbon budgets. In that way, carbon budgets reflect how the EU ETS works.

Clause 80 is intended to stop us reflecting how the EU ETS works in our accounting for carbon budgets. It amends the Climate Change Act to say that EU ETS units cannot be debited or credited from the UK net carbon account. I clarify that, even with that change, we will still participate in the EU ETS; we would just not reflect how it works in our carbon budgets.

There are positives and negatives in different accounting methods. Weighing them up needs careful consideration of a number of factors, such as the potential impact on consumers, on businesses, on industry and, of course, on cutting emissions at the lowest cost. It is absolutely right that we keep our accounting practices under review. However, I make it clear to all hon. Members that now is not the right time to make this change. The Government are totally focused on setting the fifth carbon budget by 30 June, and we have already been working on it for upwards of a year, as required by the Climate Change Act. That 30 June deadline is less than six months away.

We have been working on the basis that it will be permissible to use the current accounting framework, which is also the basis on which the Committee on Climate Change has produced its advice on the level of the budget. Accepting clause 80 would threaten serious delay in setting the fifth carbon budget, putting us at risk of not complying with the Climate Change Act at a time when the UK should be showing clear, decisive leadership following Paris. It is therefore my strong desire to see clause 80 removed from the Bill.

--- Later in debate ---

[Andrea Leadsom]

As I speak to the Government amendments, I would like to remind the Committee why the clause was first introduced. The Government were elected with a clear manifesto commitment to end new subsidies for onshore wind and to ensure that local people had the final say about where onshore wind stations were built, and we intend to do exactly that. It is for the Government to say what they meant by their manifesto commitment and it is not, with the greatest respect, for anyone else to put their own slant on it.

Our manifesto commitment is very clear. From the very start, the Government made their intentions regarding onshore wind clear: it should be developed only where local people want it and there should be no more public subsidies.

I take the opportunity to acknowledge the written evidence we have received in support of the policy. It clearly demonstrates public support for the manifesto commitment and its timely implementation.

[Dr Whitehead]

May I make a very minor point, to set the scene a little better? Does the Minister agree that the manifesto commitment—

Energy BILL [ Lords ] (Third sitting)

Debate between Andrea Leadsom and Alan Whitehead

Thursday 28th January 2016 Public Bill Committees

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

The purpose of new clause 8 is to ensure that where activities relating to either carbon capture and storage or carbon storage take place in the North sea in the future, the regime relating to those licensed activities would be the same as the regime currently in place for other activities under the Bill.

There is a reason why I think that that is potentially important at a stage earlier than might otherwise be thought—bearing in mind that at the moment there is no carbon capture and storage, and therefore one might think that regulating to make compatible activities of the two kinds would be rather far off. Nevertheless carbon storage is mentioned in its own right. It is more than possible to introduce carbon storage into the North sea process without a full carbon capture and storage process being under way. That would be particularly relevant in the context of enhanced oil recovery.

Clearly, one thing that should be a consideration is the extent to which enhanced oil recovery might become part of the process of maximising the economic recovery of the North sea as a whole. From the guidance about what, in strategy, maximum economic recovery looks like, it appears that carbon storage or other forms of injection to enhance that oil recovery might well become part of the consideration. If a number of wells are effectively close to depletion the injection in various ways of different kinds of materials, but particularly carbon dioxide, could be a part of considerably lengthening the life of the field.

More academic studies have shown—I commend one in particular, called “CO₂ storage and enhanced oil recovery in the North Sea”—that with various kinds of injection the ability to enhance recovery can be quite considerable. Injection can take several different forms. It is not just a question of CO₂ injection; it could be sea water, it could be CO₂ only or it could be mixtures in various proportions. One is water alternating gas, for which I understand the acronym is WAG; I must say that I thought WAG injections meant footballers’ wives going to get their top-up of botox, but it turns out that they are not that at all. We could also have simultaneous water alternating gas—SWAG—which we will not go into any further.

The point that I am trying to make is that a number of different techniques can enhance oil recovery. Some, but not all, would involve CO₂, but all of them would be enhanced if it was injected as part of the process. The processes do not necessarily depend on a fully formed carbon capture and storage process, although injection for enhanced oil recovery is part of the process at the world’s first fully operational, down-the-line carbon capture and storage facility, at Boundary Dam, in Saskatchewan. However, it is feasible, for example, to bring carbon dioxide to an oilfield by other means and to inject it, without having the full line developed.

It is therefore possible, in the context of carbon capture and storage as a future arrangement, that such processes will come upon us rather earlier than we might think. Academic studies certainly suggest that, depending on the arrangement involved, the enhancement of recovery can vary between 1.5% and 10%, which is by no means negligible.

It would, therefore, probably be a good idea, at an earlier rather than a later date, to bring processes relating to carbon storage into line with what is happening elsewhere in the Bill. That is essentially what the new clause seeks to do, so that, when the various elements of the Oil and Gas Authority’s oversight of these processes are looked at, there is a clear line of sight between present arrangements relating to oil and gas and future arrangements relating, in particular, to carbon dioxide storage.

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

Good morning, Mr Davies.

New clause 8 would extend the OGA’s functions in part 2 of the Bill to the carbon storage activities of an offshore petroleum licensee. I absolutely understand the hon. Gentleman’s intention in seeking to make the most of the opportunity presented by the Bill, but those who undertake carbon storage activities must have a carbon dioxide storage licence, not an offshore petroleum licence. The activities he mentioned would therefore be undertaken under a carbon dioxide storage licence, not an offshore petroleum licence. It is therefore unlikely that an offshore petroleum licensee would ever undertake carbon storage activities. I am afraid to tell him that the new clause is therefore flawed.

I would, however, like to assure Committee members that, under MER UK—the maximising economic recovery UK strategy—the OGA is considering CO₂ enhanced oil recovery as part of wider EOR work. CO₂ EOR could make a substantial contribution, as the hon. Gentleman rightly pointed out, to lowering the cost of CCS projects, as well as benefiting North sea revenues and jobs. However, more analysis is needed on the timing of future CCS projects and how they might affect CO₂ EOR development, and on the viability of redeveloping abandoned fields as CO₂ EOR projects.

The OGA will collaborate with the CCS industry and foster innovation in EOR technologies. Specifically, it has already planned work on EOR, including on advancing the next tranche of EOR technologies and developing a framework for their economic implementation. It will also develop a CO₂ EOR strategy and a five-year plan during 2016.

I am afraid that I must tell Members that, as the Bill is drafted, the OGA could apply the powers in part 2 to any activity carried out under an offshore petroleum licence. If an offshore petroleum licensee undertook preliminary work under an offshore petroleum licence, with a view to applying for a carbon dioxide storage licence, that work would be within the scope of the powers in part 2. That could include any activity that might relate to carbon storage for which a carbon storage licence was not necessary—for example, laying a new pipeline to transport petroleum that in future might be reused for carbon dioxide transportation.

For those reasons, I suggest that this new clause does not achieve its intention, and furthermore that the existing drafting of part 2 of the Bill achieves the intention that the hon. Gentleman desires, inasmuch as it possibly can. I hope that all hon. Members will accept my explanation for why this new clause is unnecessary and inappropriate. I hope the hon. Gentleman will be content to withdraw it.

[Dr Whitehead]

I thank the Minister for that full response to the intent of the new clause. Although I am happy not to press it, in part on the basis of the explanation provided by the Minister, I still have a slight reservation. There is a specific clause in the Bill that states that people may have carbon dioxide storage licences. Since that clause exists, the intent of the new clause was to link the fact that one was not just undertaking activities pursuant to the idea that one might have a carbon storage licence but to link in the activities when that licence was issued.

The fact is that we are not in a position, as far as this Bill is concerned, of there being no interest in carbon dioxide storage licences, because there is a clause that specifically states that such licences can be obtained and used. Following from that, it therefore seems in principle reasonably logical that one ought to tie in a process when that licence has been obtained of considering the consequences of that licence, as far as the other provisions of this Bill are concerned.

My intent in tabling the new clause was not, as it were, to jump ahead of the Bill and to start putting in provisions that were inappropriate for what is already there, but to add to what is in the Bill already and to try to bring that into line with what the Bill states.

The Minister states that, certainly as far as activities pursuant to obtaining a licence are concerned, what goes on at present in this Bill is fully covered in terms of what those activities might represent, but it is that further area that remains a concern of mine. The new clause may well be drafted insufficiently well to undertake fully that linkage activity. However, I remain concerned that, since there is already something there, at some stage that ought to be linked in with how the Bill operates.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19 ordered to stand part of the Bill.

Clause 20

Qualifying disputes and relevant parties

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Dr Whitehead]

I want to raise a rather more general issue relating to the clause: what the status of disputes might look like as far as the Oil and Gas Authority is concerned and how the disputes arrangements set out in the clauses relate to what disputes might look like in practice. The wording of the clauses strongly suggests that, essentially, the OGA will oversee and adjudicate disputes between two other parties, and that the tribunals machinery towards the end of the clause will operate to resolve disputes between the OGA and third or fourth parties.

However, it seems to me that in practice, particularly in terms of what is set out in the strategy document “Maximising Economic Recovery of Offshore UK Petroleum” and the powers and definitions envisaged for the OGA that will apply to the MER process, many of the disputes may well be between a third party and the OGA. That is underlined by some of the definitions and directions suggested in the MER UK strategy.

For example, the OGA has powers relating to the making of what the strategy calls a “satisfactory expected commercial return”. The OGA is not just in the business of ensuring that come what may, every company in the North sea runs at maximum possible speed to secure extraction; it must clearly consider, on the basis of those activities, what might constitute a reasonable and satisfactory expected commercial return, which the strategy itself says is a wide concept.

The strategy also suggests that what is economically recoverable is also a fairly wide concept. Is there an obligation on a petroleum company faced with the prospect of recovering petroleum that that company considers not economically recoverable in general terms? Economic recoverability is a fairly variable term, depending on the current price of oil, all sorts of other factors relating to extractability and, as we have discussed in this Committee, factors relating to the size of the field, its connection to infrastructure and various other matters.



The question of what is economically recoverable and what a satisfactory expected commercial return is puts two layers of uncertainty on to the process of potential disputes involving North sea companies and the OGA. There is an interesting overall question of commercial return in the strategy, at the end of the definitions. The strategy expressly acknowledges, in the context of commercial return, that

“although there is a legal obligation to pursue economic petroleum, commercial operators cannot be expected to take on risks for a very marginal return. However, this concept of commercial is limited by what is ‘a reasonable return’ in all of the circumstances. To that extent, projects which are low-risk are likely to justify only a more modest return on investment whereas more complicated projects may reasonably justify a higher return”.

Clearly, the strategy already envisages a wide range of uncertainties about what the theoretical concept of maximising economic return will mean in the context of real business in the North sea—who is there, what they are doing and the circumstances in which they are attempting to extract. I emphasise that point because once this strategy and the dispute provisions are in operation, although I would not say that it is likely to be a lawyer’s paradise, it has the potential to develop a number of grey areas of dispute between those companies and the OGA about exactly what is meant by these various terms as far as the processes are concerned. We should bear it in mind that that is what we are starting with in the new process of the OGA, rather than something that develops as the OGA progresses. If someone has a dispute, who is it with? The OGA. Who decides how that dispute should be determined? The OGA. Who provides penalties and sanctions if the dispute is not resolved? The OGA. There is at least a whiff in this clause that the OGA might be judge, jury and executioner in those dispute processes.

Under those circumstances, I can imagine an energy company in the North sea with a dispute thinking, “Well, I think I can predict how this dispute is going to turn out if I go to the OGA and decide that there is a problem here.” I may have misunderstood this clause, but there does not appear to be a mechanism that provides, at the very least, the necessary Chinese walls within the organisational process to maintain confidence that, when disputes arise, external parties have a reasonable certainty that the dispute will be considered as it should be, in the light of resolving those grey areas properly and perhaps changing elements of the decision by taking representations on those grey areas and on how the OGA reacts to their being re-examined.

Unless it can be shown that I have entirely missed a clause or two in this chapter, the main clauses, other than a subsequent reference to a tribunal at the end of the chapter, do not give great comfort that the original process will be as good as it might be. Does the Minister consider that the arrangements, as currently structured, provide that reasonable certainty and equity in the resolution of disputes? Or does she consider that, at a future date, additional safeguards may need to be built in to ensure that the process can be operated fairly, and observably fairly, for all the partners in the North sea?

[Andrea Leadsom]

The hon. Gentleman is quite right to raise this interesting and important area. The clause sets out the scope of the OGA’s new dispute resolution process. It requires that at least one party to a dispute is a relevant party—a person listed under section 9A(1)(b) of the Petroleum Act 1998—and that the dispute must be about issues that are either relevant to the fulfilment of the OGA’s principal objective or relate to activities under an offshore petroleum licence. The OGA is restricted from considering any dispute that is already the subject of an application for third-party access to upstream petroleum infrastructure under the Energy Act 2011 or any issues that are not qualifying issues.

As the hon. Gentleman will know, the dispute resolution process forms one of the major planks of the recommendations of Sir Ian Wood’s review. Also, he will be aware that the MER strategy is welcomed by industry, which sees it as very important. I absolutely agree with the hon. Gentleman that the area is complex. He mentioned the issue of what a “satisfactory expected commercial return” is. He is right to say that there is some subjectivity and that it is quite difficult and will require that industry and the regulator work closely together. However, there is good will and a desire from industry to see an asset steward who can help to support the ongoing success of the North sea.

Specifically in answer to the hon. Gentleman’s question about a satisfactory expected commercial return, our definition is:

“an expected post-tax return that is reasonable having regard to all the circumstances including the risk and nature of the investment (or other funding as the case may be) and the particular circumstances affecting the relevant person.”

We can all see that that is a deliberately flexible definition. It recognises that many factors must be weighed before deciding whether to invest in a project. For example, the risk associated with the project; the resources thought to be recoverable; how economically recoverable the project is; the future oil price; the current oil price; the cost of capital for the company; the complexity of the project; and shareholder expectations will all play a part. It is not realistic even to attempt to set a clear figure on what a satisfactory expected commercial return would be. However, the definition that we have included in this version of the strategy is intended to recognise all the factors set out above. It is important to note that we face a big job in the North sea, and the OGA and industry are very keen to work closely together on it.

The hon. Gentleman also raised the question of disputes with the OGA itself and how disputes will be brought to the fore. On the one hand, the OGA has the power to initiate the dispute process. I am sure the hon. Gentleman knows that, historically, industry has not necessarily progressed or resolved its own disputes efficiently. There are some that the parties may not refer to the OGA, but where resolution would be in the interests of delivering MER UK. In those circumstances, the OGA will have the power to initiate the dispute process itself to facilitate the resolution of the dispute. Equally, the OGA will take a view on whether there has been a breach of the strategy. If the OGA were to choose to move to a sanctions situation, as we will come to in later clauses, that may be appealed by the person who is under the sanction to the first-tier tribunal. I should mention that clauses 20 to 27 do not apply to disputes between the OGA and third parties.

[Dr Whitehead]

I am slightly taken aback by the point that clauses 22 to 24 do not apply. That is the part of the Bill in which I failed to find any leavening process between a straightforward dispute being referred to the OGA and no differentiation being placed within the structure of the OGA as to how that dispute might be referred to the OGA when the OGA is involved in the dispute. I presume that that does not apply in terms of sanctions and levies, but in terms of other disputes. The Minister underlined my concern about how grey those areas are. A problem remains in the clauses that relate to bringing forward disputes about the point at which, let us say, a company may decide that on balance it ought to bring forward a dispute because it thinks a grey area is a different shade of grey from the OGA. I do not think that we should take that analogy too far, but an issue remains about the assurances that such companies might seek.

--- Later in debate ---

[Andrea Leadsom]

I confirm to the hon. Gentleman that clauses 20 to 27 apply only to disputes between two parties and not to those where the dispute is about or with the OGA. Those come later in the Bill.

I accept that this is a complex and new area. As we discussed on Tuesday, there will be regular reviews, the OGA will announce its annual business plan and it will be required to make statutory notices in all sorts of areas to signal its intentions. I therefore understand what the hon. Gentleman says, but I do not share his concerns.

[Dr Whitehead]

Can the Minister point me to where in the clauses it states that this measure does not refer to disputes between a third party and the OGA? I cannot find that, but perhaps it is there.

[Andrea Leadsom]

With the hon. Gentleman’s indulgence, I will have to write to him on that, because it may take me some time to find the actual place in the Bill. I hope that is agreeable to him.

[Dr Whitehead]

indicated assent.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clauses 21 to 42 ordered to stand part of the Bill.

Clause 43

Power of OGA to give sanctions notices

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Dr Whitehead]

I thank the Minister for her response. I am interested that the matter has been discussed with the industry, although I guess it might be keen to have the fines at the lower end rather than the higher end as far as final sanctions are concerned. I accept that this will need to be tried out over a period to see whether fines work in conjunction with the other sanctions, such as enforcement and removal of licence options that the Minister referred to. I accept that this may be a reasonable starting point, but I hope the Minister will keep the process under review as the OGA gets under way with its work.

I have one final thought. What consideration has the Minister given to where the fines go? I assume they will go to the Consolidated Fund. Given the principles behind the Bill and how the OGA is funded to carry out its activities—we have discussed what people reasonably expect to pay into the OGA and what they expect to get in return, and the extent to which they understand that OGA running costs are effectively capped against contributions and that there will not be additional burdens on companies—one might think that the right route for fines would be for them to be tucked back into the process of developing and enhancing what is happening in the North sea, particularly through the operation of the OGA.

I appreciate that at that point one might say, “It’s the OGA that is levying the fine, and it might be the OGA that gets the benefit from it.” Clearly, that might not be entirely appropriate. Nevertheless, to fine capture and storage in the North sea might be an appropriate way to monitor the destination of those fines over a period. Has the Minister given any thought to that process? Although I appreciate that that would not provide anybody with a regular income, it might at the very least be seen to be an appropriate way to proceed as far as the companies operating in the North sea are concerned, in order to enhance the wellbeing of what they and the OGA are doing in the basin.

[Andrea Leadsom]

Fines would go to the Consolidated Fund, and they would not be available to be used to offset anything else or do other activities. It is a different funding stream from the levy, and the OGA will not keep the fines. The hon. Gentleman has made the point about the potential moral hazard of allowing such a regime.

Question put and agreed to.

Clause 43 accordingly ordered to stand part of the Bill.

Clauses 44 to 70 ordered to stand part of the Bill.

Clause 71

Requirements to provide information

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Andrea Leadsom]

I will describe the purpose of the third-party access, and then answer the hon. Gentleman’s questions.

Clause 71 amends the third-party access to the upstream petroleum infrastructure regime found in the Energy Act 2011. Specifically, it amends section 87 of that Act, which relates to powers to require information, and inserts new sections 87A and 87B, which make provisions for appeals and sanctions respectively.

The clause requires that, where the OGA issues a notice under section 87 of the 2011 Act requiring information to be provided, it must specify a time for compliance with that notice. It also provides an appeal right to the first-tier tribunal against the issuance of a notice on the grounds that the information required is not relevant to the OGA’s functions relating to third-party access or that the length of time given to comply with the notice is unreasonable.

The clause also allows for any requirements imposed by such a notice to be treated as petroleum-related requirements and therefore sanctionable under chapter 5. However, the OGA will not be able to revoke a licence or terminate an operatorship in relation to such breaches. The clause therefore increases the utility of the third-party access to the upstream petroleum infrastructure regime, which is an important tool in the OGA’s pursuit of maximising economic recovery for the UK.

To turn to the hon. Gentleman’s points, clause 72 inserts two new sections into the Energy Act 2011, which establish the third-party access to the upstream petroleum infrastructure regime. New section 89A allows for applications for access to upstream petroleum infrastructure made under section 82 of the 2011 Act to be assigned to another party. Specifically in answer to his point, section 82(13) of the 2011 Act says only that the transfer of such rights may be affected, but the clause makes that automatic. That is an important point.

New section 89B allows for a new owner of infrastructure to which an application for access has been made to be treated as a party to that application. Clause 72 therefore ensures that where the ownership of infrastructure, in respect of which a notice under section 82(11) imposing access rights has been issued, is transferred, the obligations under the notice transfer as well. Once such an assignment or transfer occurs, anything done by the original party is treated as having been done by the party to which the application was assigned or the ownership transferred.

Essentially, the provisions allow for the third-party access regime to continue rather than having to restart on a change of party, and then facilitate the transfer of non-commercially sensitive information already provided to the OGA, ensuring that all new parties are aware of the relevant history of the application. The key point is that the clause automatically assigns the rights and obligations attached to the infrastructure, which provides ongoing certainty of rights to applicants, but does not prevent parties from agreeing to amend the terms of the access if appropriate to do so in future.

[Dr Whitehead]

I thank the Minister for that explanation. Clearly, there are differences, but I hope that they can be fully incorporated into the process as it develops.

Question put and agreed to.

Clause 71 accordingly ordered to stand part of the Bill.

Clause 72 ordered to stand part of the Bill.

Clause 73

Abandonment of offshore installations

Question proposed, That the clause stand part of the Bill.

Energy BILL [ Lords ] (Second sitting)

Debate between Andrea Leadsom and Alan Whitehead

Tuesday 26th January 2016 Public Bill Committees

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

It is a pleasure to serve under your chairmanship, Mr Davies. Before lunch, I had more or less said what I was going to say on amendment 10—news that I realise will be greeted very warmly by all Committee members. I will disappoint everyone only slightly by reiterating the importance of the amendment, particularly in the context of our earlier decisions on the issues to which the Oil and Gas Authority should have regard.

Two of those issues are covered by the amendment, which clarifies the matters on which the Secretary of State may provide directions. The amendment would provide a satisfactory way of bringing the wider issues we discussed this morning properly and collectively into the scope of clauses 9 and 10, which deal with basic working guidance for the OGA. For that reason, I hope the Minister will look kindly on the amendment, even if it is not worded as well as it might be, so that we can make some progress.

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

It is a great pleasure to serve under your chairmanship, Mr Davies. Amendment 10 would amend clause 10 in part 1 of the Bill, which deals with directions that the Secretary of State may give the OGA. The clause gives the Secretary of State the power to direct the OGA as to the exercise of its functions if the Secretary of State considers that the direction is in the interests of national security or otherwise in the public interest. The intention is that the power should be used very rarely, in order to give the OGA the independence it requires to fulfil its role.

The amendment would create a specific power to issue directions that are necessary to inform the OGA’s role in developing and promoting carbon storage. That is unnecessary, since the Secretary of State’s powers to give directions to the OGA as to the exercise of its functions already applies to those functions. Similarly, directions that the Secretary of State considers necessary to meet the terms of the Climate Change Act 2008 would clearly be in the public interest, and therefore clause 10 already provides for such directions to be made.

If anything, the amendment limits the scope of the Secretary of State’s ability to issue directions in those areas by limiting them to what is necessary. For example, if the amendment were accepted, it would not be possible to issue a direction that was highly desirable but not necessary for meeting the terms of the 2008 Act.

The OGA is deliberately not an environmental regulator. Environmental regulation will continue to sit within the Department of Energy and Climate Change, which has the expertise and experience in this field. However, there are synergies between the two forms of regulation and the existing strong relationships between the OGA and DECC will continue.

I want to make clear that the OGA’s functions, including its objective to maximise economic recovery, are compatible with our climate change obligations. We are fully committed to delivering on our domestic, EU and international climate change targets. Under this Government, the UK is making good progress towards our EU 2020 renewable energy target, and we have already surpassed our interim targets covering 2013 and 2014. I hope that the hon. Member for Southampton, Test is content with my explanation of why the amendment is unnecessary and will withdraw it.

[Dr Whitehead]

I am not sure that the Minister has guided us fully as to what clause 10(1) actually says. The amendment would, in effect, add paragraphs (c) and (d) at the end of the subsection. Subsection (1) as it stands states:

“The Secretary of State may give directions to the OGA as to the exercise by it of any of its functions if the Secretary of State considers that the directions—

(a) are necessary in the interests of national security, or

(b) are otherwise in the public interest.”

Those two considerations then stand by themselves in terms of what powers are given to the Secretary of State to direct the OGA.

The amendment would add some guidance on issues that might otherwise be obscure but would not cut across that wider guidance on things that are necessary in the interests of national security and the public interest, to give greater comprehensivity of functions where it might be unclear what the OGA should look at. Certainly in my reading of how the clause and the amendment work together, the amendment does not cut across subsection (1)(a) and (b); it merely adds to the completeness of subsection (1) in areas that might otherwise be unclear.

I am not sure that the argument that the amendment may cause things that might otherwise be done not to be done has a great deal of substance. Indeed, if that is the defence against this amendment, I feel it is something we ought to press. I would certainly need rather more comprehensive assurances from the Minister that the issues raised in the amendment could be accommodated in subsection (1)(a) and (b) in a way that they are apparently not. If that is not forthcoming, I fear we will have to divide the Committee.

--- Later in debate ---

[Andrea Leadsom]

All I can say to the hon. Gentleman is that the powers of direction given to the Secretary of State in the areas of public interest and national security have a very broad definition. By specifying particular examples, we would run the risk of narrowing that very broadly defined set of powers, so I fear that I cannot accept the hon. Gentleman’s amendment.

[Dr Whitehead]

I thank the Minister for that response, which I am sure was meant in a spirit of conciliation. However, it does not go as far as we would like, so we will divide the Committee.

Question put, That the amendment be made.

--- Later in debate ---

[Andrea Leadsom]

I love the analogy of the penny arcades. I have spent many an hour on those myself, and I know the frustration they can bring. I can assure the hon. Member for Southampton, Test that that is not the case here, and I would gently point out that to suggest this is to misunderstand what is intended.

The amendment are designed to allow the OGA to keep the proceeds of fees and charges made under clauses 13 and 14 and to subtract that from the levy, but in accordance with Government policy that the user pays, the OGA will be funded by the industry through fees—for licences and consents, for example—and through the levy. These are separate income streams to recover the costs of the OGA in carrying out certain functions.

Clause 14(2)(b) specifically provides

“that no levy is payable in respect of costs incurred in the exercise of functions—

for which fees are charged under section 13”.

The prospect about which the hon. Gentleman is concerned of somehow charging double will not arise. It is standard practice for legislation to provide that income paid to a body such as the OGA is paid into the Consolidated Fund, hence the wording of the clauses. However, the Bill also contains provisions that provide that this does not apply if the Secretary of State, with the consent of the Treasury, directs otherwise. That will enable income paid to the OGA to be retained by it and not transferred to the Consolidated Fund. We have reached such an agreement with the Treasury, so levy income will be retained by the OGA, and we are considering the position on fees.

The key point for the hon. Gentleman to note is that while we have the agreement to enable the OGA to retain levy income, the clauses need to remain because theoretically that agreement could be revoked at some point. That is not to say that we anticipate that it would be, but that is the purpose of the clauses being there. I hope that hon. Members will appreciate that the proposed amendments, while absolutely genuinely intended to solve a problem, are in fact unnecessary. I hope the hon. Gentleman will not press them.

[Dr Whitehead]

I am not minded to divide the Committee on this. We are trying collectively, I hope, to arrive at a position where what goes into the OGA is what the OGA uses to run its activities, as the Opposition have suggested. It is important that a very clear line of accountability ensures that that happens so that the industry has confidence in the OGA in the future.

I am a little concerned about subsection (4). Clearly, we have a Secretary of State who is honourable and straightforward and a Treasury that can consent to an honourable and straightforward view that she may take about directing the circumstance outlined in subsection (4) to come about. However, it still worries me that the lever that allows that to happen is in the Bill, but the actual process is not.

I therefore make the caveat that that requires that no one at any stage attempts to rob—not to put too fine a point on it—some of the funds for other purposes by not otherwise directing, not coming to an agreement or by otherwise interfering with the process. That possibility is still there.

I am greatly reassured by the Minister’s suggestion that agreement with the Treasury has already been obtained on how this will work. That appears to be a very solid way forward. However, if this goes seriously wrong over the long term, further guidance, either in secondary legislation or primary legislation may be necessary to put it right. With the assurances I have received, I am not minded to press the amendment to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 13 ordered to stand part of the Bill.

Clause 14 ordered to stand part of the Bill.

Clause 15

The licensing levy: regulations

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Andrea Leadsom]

As the hon. Gentleman points out, clause 16 provides a general power for the Secretary of State to make payments and provide financial assistance to the OGA. The power is not restricted to specific functions of the OGA and therefore payments may be made at the Secretary of State’s discretion to fund any of the OGA’s functions. As well as covering statutory functions, it will cover functions contracted out.

The OGA will be funded through a levy on holders of certain energy industry licences and fees, for which industry will pay for carrying out particular services. The Secretary of State might need to provide funds to the OGA to cover any unforeseeable events. That is the purpose of the clause.

For reassurance, I can tell the hon. Gentleman that one would not want some unforeseen circumstance to result in the failure of that Government company. Nevertheless, as accounting officer, the chief executive of the OGA is personally responsible and accountable to Parliament for the organisation and quality of management in the OGA, including its use of public money and the stewardship of its assets.

The chief executive has specific responsibility for ensuring that the OGA operates in accordance with the guidance in the Cabinet Office’s “Managing Public Money”. The OGA is also required, promptly and without delay, to disclose to DECC any information regarding the OGA that is likely to have a material, financial, reputational or otherwise adverse effect on the delivery of the OGA’s purposes and duties.

In essence, this is a general permission for the Secretary of State to support the OGA in the event of unforeseen circumstances. While there is a clear intention that that will not be the case—that the industry will pay for the services it uses and so on—nevertheless, because it is a Government company, it must be important that, in the event of something unforeseen, there is the ability to provide emergency financial assistance.

[Dr Whitehead]

May I prevail further on the Minister’s good offices on the status of the OGA as a Government company? That company could become insolvent. The point at which the company would have to cease trading on grounds of insolvency could well be before the Secretary of State has been able to exercise these powers. Or can the Minister say that this company could not become insolvent because there would be an automatic infusion of funds to keep it solvent so that it could continue trading?

If that is not the case, due to the unusual structure of the OGA, we could face circumstances where the OGA would be unable to trade but not necessarily have access to funds, grants or assistance to enable it to trade. At that point, we would be in the odd situation, for the first time in the history of regulation in the UK, of having an insolvent regulator. What would regulation consist of at that point, bearing in mind the restrictions on how the funding for the OGA might come about? Where we would stand with the security of the regulator at that point is anybody’s guess. Could the Minister provide reassurance on that point?

[Andrea Leadsom]

The important point is that clause 16 is designed to enable the Secretary of State to avoid exactly the kind of scenario that the hon. Gentleman describes, so I hope that he and his hon. Friends will support it.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16 ordered to stand part of the Bill.

Clause 17

Review of OGA and guidance from Secretary of State

Amendments made: 2, in clause 17, page 12, line 7, leave out “one year” and insert “three years”.

This extends the maximum period after which the first review of the OGA’s performance is to take place from one year to three years.

Amendment 3, in clause 17, page 12, line 12, leave out “one year” and insert “three years”.—(Andrea Leadsom.)

This extends the maximum period after which subsequent reviews of the OGA’s performance are to take place from one year to three years.

Clause 17, as amended, ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.—(Julian Smith.)

Energy BILL [ Lords ] (First sitting)

Debate between Andrea Leadsom and Alan Whitehead

Tuesday 26th January 2016 Public Bill Committees

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

Good morning, Mr Bailey. It is a pleasure to serve under your chairmanship in this Committee.

The first clause of the Bill is about the very existence of the Oil and Gas Authority. In truth, it is a rather odd construction: it is a regulator, but at the same time it is a limited company, albeit one that does not have to use the word “limited”. Essentially, it is a private company with one shareholder—the Government. Presumably, therefore, the Government may sell their share whenever they wish. The OGA’s members, officers and staff are not, as we see elsewhere in the Bill, to be regarded as civil servants, but they do have access to civil service pensions. The OGA is quite an anomaly in the world of regulators.

My understanding of how regulators work across the board is that they have to perform a function that is clearly equidistant between Government, industry and other arrangements. In this instance, the set-up of the OGA does not appear to conform exactly to that principal definition of what a regulator should be. Why was it decided that this should be the formulation of the OGA? It is rather different from the precedent for regulators. An unworthy suggestion could be made that the OGA has been set up as it is to take it off Government books, although as far as staff of the OGA are concerned it will put them, at least in some instances, back on Government books again. However, I am sure that that is not the sole or the main purpose in deciding to set the OGA up in this particular way.

I would be very interested to hear from the Minister why this structure was chosen and what advantages it is thought to provide. Does she think any particular difficulties might arise from the Government company structure that the OGA is to have, and if so, can they be satisfactorily resolved by other aspects of the OGA’s construction?

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

Mr Bailey, it is a great pleasure to play a role in the Committee scrutinising this very important Energy Bill, and I thank all hon. Members for being here this morning. I hope we are going to have some very interesting discussions.

Sir Ian Wood published his review on 24 February 2014. It concluded that the UK continental shelf is a very different and more complex operating environment now than in the past. The review proposed four key recommendations, which the Government accepted in full at the time of publication and reconfirmed in our response published on 16 July 2014. The four key proposals were: first, the adoption of a cohesive tripartite approach between the regulator, the Treasury and industry in developing and implementing a new shared strategy called maximising economic recovery UK, or MER UK; secondly, the establishment of a new arm’s length regulator; thirdly, the introduction of a suite of additional regulatory powers for the new regulator; and fourthly, the development and implementation of new sector strategies on issues such as exploration and decommissioning cost reduction.

The Department of Energy and Climate Change is making strong progress in implementing the recommendations of the Wood review. In particular, the principle of maximising economic recovery of offshore UK petroleum was established in the Infrastructure Act 2015. We also took a power in that Act to charge a levy to fund the OGA. As the hon. Gentleman knows, the OGA was initially established as an Executive agency but will become a Government company as a result of this Bill. Classification as a Government company will enable the OGA to have operational independence from Government and will provide a more suitable platform and the regulatory certainty that the industry requires to invest in exploration and production activity. It will also allow the OGA the necessary operational freedoms to recruit high-calibre individuals in a competitive employment market.

To be very clear, there are very well known precedents for Government companies, including the Prudential Regulation Authority, the Financial Conduct Authority and the Highways Agency. The Government-owned company is a private company under the Companies Act 2006, limited by shares, with the Secretary of State for Energy and Climate Change as the sole shareholder. The Secretary of State will appoint the chair and a non-executive director to the board. Of course as the hon. Gentleman knows, the OGA has a new independent chief executive who is already making strong progress. We absolutely support the establishment of the OGA in the terms in which it has been set up.

[Dr Whitehead]

I thank the Minister for that explanation of the set-up of the OGA, but I have to say that the Wood review did not at any point, as far as I can see, refer to the idea that the OGA should be a Government company with a single shareholder. Indeed, as the Minister correctly points out, Wood set out at some length what the activities and scope of the OGA should be—but perhaps that is a debate for another occasion. The issue now is the structure of the OGA in relation to its duties, to the industry and to the question of continuing to maximise the output and return of the North sea. It seems to me that a fairly carefully defined body is required to undertake that regulation.

Sir Ian Wood talked about an arm’s length organisation that would be able to stand between the various interests and make sure that those interests worked collaboratively rather than competitively in securing the success of the North sea. I wonder whether the OGA as constructed will be able to do that in the way that Sir Ian envisaged and all of us in this House want. It is true that, in the past, a few—I emphasise: only a very few—Government agencies have had this construction. I should like to know why the proposed construction is uniquely good for the arrangements of the OGA, in so far as the requirements that Sir Ian Wood set down for the role of the regulator are concerned. What thought have the Government given to other ways of constructing the regulator so that it could provide the best arm’s length arrangement for the industry?

[Andrea Leadsom]

I have to disagree with the hon. Gentleman. It was a clear recommendation of the Wood review that a step change was needed in Government stewardship and regulation of the UK continental shelf, and this required a new independent body with a strong CEO and greater independence from Government to focus fully on maximising economic recovery. As an arm’s length body, the OGA will be in a much better position to play a strong role in catalysing, encouraging and facilitating actions and agreements within and between operators, and between operators and Government, to ensure the success of the tripartite MER UK strategy. It is simply not true to say that this was not part of Sir Ian Wood’s recommendations; I think it was very much a part of those recommendations. The alternative, as the hon. Gentleman will be aware, is that the OGA continues to operate as an Executive agency, and that of course would not have the same extent of separation from Government as Sir Ian Wood envisaged.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

[Dr Whitehead]

I beg to move amendment 7, in clause 2, page 2, line 9, at end insert—

‘(2c) The Secretary of State shall, within one year from the date of this section coming into force, undertake an assessment of the fitness for purpose of the OGA’s powers in relation to relevant activities, and shall lay before each House of Parliament a report of the findings.”

This amendment would require the Secretary of State to undertake an assessment of whether the OGA’S powers are fit for purpose within a year of this section coming into force.

--- Later in debate ---

[Dr Whitehead]

I thank the Minister for her response to my explanation of why the amendment is useful for the longer term operational strategy of the OGA. However, I gently suggest that she may have slightly misunderstood my earlier comments. I am certainly not saying that the OGA should be reviewed on an annual basis. I share the Minister’s concerns that were that to be the case, it could well stifle the OGA’s activities.

That is an operational point: how can the OGA best operate over a period of time and how can we make sure that it has the wherewithal to do so? It would have a negative effect to put its operations continually under the microscope, and could stifle its ability to do what we hope it will do best, as far as the future of the North sea is concerned.

We have to look back through the legislation to see exactly where the construction of the OGA comes from. The whole question of strategy arises from the amendment of the Petroleum Act 1998 by the Infrastructure Act to provide the principal objective. Interestingly, that measure refers to “collaboration among”—not regulation between—“the following persons”, and lists some consequences of the principal objective, including the

“development, construction, deployment and use of equipment used in the petroleum industry”.

In other words, under that objective, there is a fairly close relationship between the petroleum industry and the OGA.

That is a particular way of proceeding, and it is what is in the legislation, but it may not, as it turns out, be the best way for the future operation of the OGA. The authority could be carrying out its ongoing activities wonderfully, but be stifled by the way in which its powers and objectives have been set up. The review seeks not to run regular speed checks as the OGA goes down the road in the early stages of operation but to look at whether the vehicle in which it has been designed to travel is the best one. It would at the very least be prudent to take the opportunity to consider the situation one year into the OGA’s operation, to ensure that we have got it right, and it could be useful for the authority’s future, whereas longer-term review methods, undertaken too regularly, could cause operational problems.

I am happy to withdraw the amendment. I hope, however, that the Minister will consider carefully how the OGA has been set up. Can we be certain that the authority will be as fit for purpose in the future as we think it is today, and might there be mechanisms for reviewing that as the OGA undertakes its operations?

[Andrea Leadsom]

I think that the hon. Gentleman and I agree in principle—clause 17 was introduced because of the need for regular review—but we disagree about how soon the review needs to take place. It would be unsettling for the industry that supported the establishment of the OGA if within a year everything could change, so I feel that one year is too short a time. I am grateful to the hon. Gentleman for withdrawing the amendment.

[Dr Whitehead]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 ordered to stand part of the Bill.

Schedule 1

Transfer of functions to the OGA

--- Later in debate ---

[Dr Whitehead]

On the OGA’s functions regarding the disposal of gas by flaring, what does the Minister think is the best arrangement for the regulation of flaring and for ensuring that it is undertaken in the safest and most environmentally acceptable way, and in a way that is most conducive to the overall purpose of a platform? The schedule states:

“The OGA’s consent is required for natural gas to be disposed of (whether at source or elsewhere)…by flaring, or by releasing it unignited into the atmosphere”,

and so on.

The schedule also states:

“This section applies to all natural gas of the United Kingdom, whether obtained there or in territorial waters, or in areas designated under the Continental Shelf Act 1964”,

which suggests that the proposed new section applies to the flaring of all natural gas in the United Kingdom, whether onshore or offshore. I might not have read the provision entirely correctly, but if it does apply to all natural gas flaring in the United Kingdom in general, then the role of the Environment Agency in looking at how such flaring works might need to be added to the schedule, given the agency’s proper interest and indeed expertise, in particular in respect of the environmental considerations of flaring that under the schedule as drafted appear to be deputed entirely to the OGA.

I do not seek to overturn the schedule, because it is an important part of the process of getting the OGA under way, but that particular part of the proposed new section appears to be a lacuna on how the function is undertaken. Has the Minister considered, formally or informally, the role of the Environment Agency in the process? Might a function onshore also apply to a function offshore? I seek clarification from the Minister, so we may be as clear as possible that where flaring is undertaken it is done so with the best possible safety and environmental safeguards. Safeguards should also have a relationship to the purpose of the exploration or extraction in the first place.

[Andrea Leadsom]

I am grateful to the hon. Gentleman for raising the issue. As he is aware, although the Wood review looked only at offshore oil and gas, it acknowledged that there were synergies between offshore and onshore. We agree that there are such synergies. In particular, the licensing regimes, technologies and necessary regulatory expertise are all similar. We therefore decided that the OGA will take on a larger range of regulatory functions than originally envisaged by the Wood review.

The clause and the schedule provide for the transfer of DECC’s functions in relation to oil and gas to the OGA, covering offshore oil and gas licensing and regulation, but not health and safety or environment; onshore oil and gas licensing and regulation for England, but not health and safety or environment; carbon capture and storage; and gas storage and unloading. We will transfer the powers that at present lie with the Secretary of State and are exercised by the OGA as an Executive agency. As we have just discussed, an Executive agency has no separate legal identity and so exercises powers that are conferred on the Secretary of State. For the OGA to carry out its functions, the powers will therefore need to be transferred to it as a Government company through legislation.

The Secretary of State’s regulatory functions in relation to the environment will not be transferred, but will stay with DECC. The regulation of health and safety is undertaken by the Health and Safety Executive, and that will remain so. Powers will need to be transferred to the OGA so that it can fulfil its remit. Those include powers to award petroleum licences, issue consents for related activity and regulate third party access to upstream petroleum infrastructure.

With regard to the hon. Gentleman’s particular point, venting is agreed to under licence, but that is determined by safety reasons. Those functions will be under licence to the OGA—so it will take on some of those licensing functions.

--- Later in debate ---

[Andrea Leadsom]

I welcome the hon. Gentleman’s questions and I can assure him that it is our intention to leave staff pretty much unchanged. The legal advice on the application of TUPE was uncertain as to whether this qualifies as a relevant transfer, so, to ensure that TUPE-like protection is afforded to staff, a transfer scheme is required. As a result of the transfer of functions, civil servants currently employed by the OGA as an Executive agency of DECC, who perform relevant functions, will be required, unless they object, to transfer along with those functions to the new Government company. The purpose of the transfer scheme is to provide the same or similar protection to that afforded by the TUPE regulations. I hope that that reassures the hon. Gentleman.

I can also tell the hon. Gentleman that, in line with the handling of all machinery of Government-like changes and TUPE transfers, staff are not able to opt out of the transfer. However, for any individuals who might wish to return to a civil service Department, a provision is normally made for a period of 12 months after the transfer date to allow them to apply for another civil service position.

On the hon. Gentleman’s second, important point about pensions, clause 6 allows civil servants who transfer to the OGA continued access to either the principal civil service pension scheme or the new Alpha pension scheme, which was introduced in April 2015, and, in some cases, both schemes, depending on the date they joined the civil service and their anticipated date of retirement. It also ensures that non-civil servants who are recruited by the OGA in future will have access to the Alpha scheme.

The hon. Gentleman asked why we are allowing new joiners to have access to the civil service pension scheme. I am glad that he welcomes it, but he nevertheless asked whether that complicates things. I can tell him that the Department has used such an approach before. For example, the Energy Act 2013 added the Office for Nuclear Regulation to schedule 1 of the Superannuation Act 1972. The benefit of allowing new joiners to have access is that it will avoid having a two-tier workforce whereby new joiners work alongside existing employees, but with different pension benefits, and of course it encourages the recruitment of staff to the OGA.

[Dr Whitehead]

I thank the Minister for that clarification. Although I appreciate that these matters are complex as far as TUPE is concerned, I welcome what I think I heard was the intention to stick as closely as possible to TUPE—

[Andrea Leadsom]

You did, yes.

Oral Answers to Questions

Debate between Andrea Leadsom and Alan Whitehead

Thursday 7th January 2016 Commons Chamber

[Andrea Leadsom]

Indeed. There are real benefits for the UK in having a wide range of renewable energy sources, but my hon. Friend is right to point out that as the sector develops in the UK, biogas technologies could bring additional benefits, including providing baseload energy, injection into the gas grid and potential use as transport biofuels.

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

In her letter to other Departments on 29 October the Secretary of State—whom I congratulate on stressing in her letter the importance of reaching EU renewables targets in perhaps more recalcitrant Departments—she indicated that the highest potential for additional renewable heat is from biomethane injection into the grid, but she also said that we will face a shortfall against the part of that target that is related to the heat sector, even if support for her proposed measures was agreed by the Chancellor in the comprehensive spending review. Now that she has a reduced amount of money for the renewable heat incentive up to 2020, does she consider that that amount will enable us to reach our heat targets by 2020 and, if not, what new proposals will she bring forward to make sure that there is investment in this sector that can enable us to reach that target?

[Andrea Leadsom]

The hon. Gentleman is right to point out that we had a good settlement in the comprehensive spending review. We were very pleased with the commitment to enhancing—increasing—the renewable heat incentive each year between now and 2021, and we are making good progress towards that. He will realise that the fourth carbon budget is for 2023 to 2027. He would not expect us to be meeting it today, but we are putting plans in place and working towards that progress as we speak, and we will continue to set out plans during this year.

Energy Market Design

Debate between Andrea Leadsom and Alan Whitehead

Monday 23rd November 2015 General Committees

[The Chair]

We now have time for questions to the Minister. May I remind Members that these should be brief? It is open to a Member, subject to my discretion, to ask related supplementary questions.

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

The Minister mentioned the importance of interconnectors in the UK’s approach to the reform of the single energy market. She will know about the programme already under way of increased UK interconnectors. Is she confident that the present UK system of requiring interconnection to work on the basis of arbitrage between different levels of price in the energy system in the UK and where those interconnectors are connected to will work on the basis of a far higher level of interconnection, even in the context of caps and floors, as is envisaged in the EU document?

[Andrea Leadsom]

Yes, I am confident. I think that at the moment, it is very important that interconnectors respond to price movements. The hon. Gentleman will be aware that in the recent notice of insufficient supply margin, interconnectors played their part, so they are a very valuable resource for the UK at times of stress—when we have an unexpected outage of a plant—so that price signal is very important for them. He will also be aware that there are, however, measures to put in place in the event of a real system stress, where system operators can call on each other to provide specific support and help, which potentially can overrule simple price movements; but of course, competition and free-flowing markets are vital.

[Dr Whitehead]

The Minister states that she supports a common methodology for assessing capacity adequacy—indeed, in her Department’s response to the document, it is stated that the methodology

“must respect the differences between Member States”.

What does she think are the main differences that would cause the UK to resile from the real common capacity adequacy methodology?

[Andrea Leadsom]

I am not completely sure that I understand the hon. Gentleman’s question. The point I am making is that it is for individual member states to look at the balance of energy mix that is important for their own energy security. The integration among and co-operation between member states leading to greater interconnection offers all member states access to surplus in another member state, which is of benefit to energy security and, of course, prices in each member state. Interconnection is valuable, but that is not to say that one size fits all and that a common methodology must therefore be used in every member state for every interconnector.

--- Later in debate ---

[Andrea Leadsom]

Yes. I am grateful to the hon. Gentleman for making that point. It is absolutely right to say that domestic battery storage is a small solution for an enormous problem. However, there is increasing use of smart metering; domestic households are increasingly generating their own power through solar panels on their own domestic rooftops; and so on—all these small measures in aggregate are changing the balance of the system. Those demand side responses of individuals play a very important part. Nevertheless, he is exactly right that there are some amazing technologies coming to fruition: compressed air; pumped storage; and grid level battery storage. There are a number of different technologies and my Department is very keen to see which one can have the biggest effect and, of course, which one can offer the most cost-effective solution for consumers.

[Dr Whitehead]

What progress has the Secretary of State made with the inclusion of non-UK-based projects that are eligible for contracts for difference, which the document clearly indicates would be the sort of cross-border collaboration that might be necessary in this reformed energy market? I believe that she produced a document in 2014 that indicated that the proposed date of 2018, when overseas non-UK projects might be eligible for CfDs, would be the earliest date at which that could be achieved. Is the Minister happy with that rate of progress?

[Andrea Leadsom]

Yes, I am entirely happy with that rate of progress. The hon. Gentleman is quite right to raise the issue of CfDs being made available to foreign generators. Of course, the key point for the British consumer is the evaluation of the contribution that offering a CfD to a non-British generator could make to our energy trilemma: decarbonisation; keeping the costs down: and keeping the lights on. We are considering two projects, but he is absolutely right that we will not be making decisions for the next year or two. The two projects are with the Isle of Man and Iceland. The Isle of Man has shallow waters and the appetite to build an offshore wind project, which it would then seek an export market for, and of course that could be very advantageous to the British consumer, because it could be very cheap energy to produce, so it could be good value for the consumer here. Likewise, a project with Iceland could offer us access to geothermal energy sources, which could be very advantageous for the UK. All those projects require quite a lot of evaluation, but I can assure the hon. Gentleman that we will look at them carefully, based on whether they offer best value to consumers.

--- Later in debate ---

[Andrea Leadsom]

I am sure the hon. Gentleman is aware that we have not stopped the feed-in tariff entirely. We are consulting. The consultation is now closed and we will respond as soon as we can. There were significant numbers of responses, and we hope to provide the Government’s policy response by the end of the year. The hon. Gentleman will be aware that, in fact, the proposal is to continue to give a return to investors from participating in the feed-in tariff. He will also be aware that there is a significant amount of onshore wind still in the pipeline in terms of meeting the grace period for the early closure. He will also be aware that, only last week, the Secretary of State gave a continued commitment to support for offshore wind, where Britain has 50% of the world’s deployment. I hardly think that that is calling a halt to renewables.

[Dr Whitehead]

I note that the Minister, in response to my previous question, cited the Isle of Man as somewhere where a connection might be made outside Great Britain. How should other such areas, which are not in the EU, but are clearly associated with Great Britain, be dealt with in the discussions? I have in mind the Channel Islands, in particular.

[Andrea Leadsom]

That is not something to which I have given a great deal of thought. The key thing, from an energy policy perspective, is for the market to come forward with ideas. We do not go out and seek bids directly from the Crown dependencies, the islands, other member states and so on. We are looking for ideas to come forward. They can be generated by developers who have a good idea or by Governments in other countries that feel there is an opportunity. I understand that, in the Channel Islands, there is the potential for a tidal project in Alderney, but we are looking to developers or other Governments to come forward with those suggestions.

[Andrea Leadsom]

I am very disappointed with the hon. Gentleman; I thought he would take a pragmatic view. Hinkley Point offers excellent value to the UK consumer. It provides baseload, it is as low carbon as offshore wind, the consumer pays nothing until such time as it is producing electricity and private investors will be making the investment. The decommissioning price is included in the strike price of the CFD and the funded decommissioning programme has to be agreed up front, so it is simply not true that the decommissioning has not been considered. Hinkley Point will contribute enormously to our energy security at a time when we want low-carbon sources.

Every day of the week, we receive about 19% of our electricity from ancient nuclear power plants that will be shut down some time during the 2020s. We have to replace them either with something that is higher carbon or with new nuclear. France benefits from a relatively older, but not too old, nuclear fleet that reliably provides it with low-carbon energy day in, day out. That is what we want for Britain, which is why we are so committed to new nuclear.

In the UK, we have a huge opportunity to design our own small modular reactors. All the amazing R and D that is going on in the UK right now gives us the opportunity to be part of that. As the hon. Gentleman no doubt knows, Hinkley Point C offers about 25,000 jobs in the Somerset area, and 60% of the £24 billion being spent on it will be spent in the UK. It is a great news story for economic growth, jobs and security of supply, and it will keep the bills down.

[Dr Whitehead]

My hon. Friend the Member for Luton North, in introducing the EU document on behalf of the European Scrutiny Committee, talked about the immense change that is taking place in the way that electricity is generated across Europe. It is becoming decentralised and is entering into different forms of generation, which removes the assumptions about centralisation that have been at the heart of the European system for a long time. Is the Minister confident, in the light of her Department’s recent reset statement, which appeared to point to a very centralised energy future, that the way forward for UK energy will be compatible with the changes that take place in Europe when those greater connections happen?

[Andrea Leadsom]

I do not agree at all that the Secretary of State’s speech suggested centralised energy systems. The UK is facing the most superb and exciting revolution in power generation. One of our biggest challenges in managing the system is the diverse range of power generators coming on to the system, putting stresses on the system and leaving us with the risk of projects being delayed due to the inability of getting a grid connection, for example. Those are the sorts of challenges that we are trying to address right now. Far from being centralised, our energy policy is very decentralised. The Secretary of State was trying to make it clear that the transition away from coal towards gas, which is the greenest, cleanest fossil fuel, and a renewable future is the right way for the UK to go, and I think she is absolutely right.

Oral Answers to Questions

Debate between Andrea Leadsom and Alan Whitehead

Thursday 25th June 2015 Commons Chamber

[Mr Speaker]

That is a fascinating reply, but it is not altogether adjacent to the issue of wind farm applications, from which I think the Minister was led astray, good naturedly, by the hon. Gentleman.

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

Will the Minister confirm that, under existing secondary legislation, her Department is obliged to issue renewable energy certificates to all applicants until March 2017? Will she also confirm that her Department will continue to issue renewables obligation certificates after March 2016 in the event that her proposed legislation to bring them to an end is not on the statute book by that date?

[Andrea Leadsom]

We intend to bring forward primary legislation in the Energy Bill to close the renewables obligation for onshore wind early. As my right hon. Friend said in her statement, that will mean that the grace period will be for those that already have planning consent, grid connection and land rights.