Energy Bill [Lords]

Debate between Andrea Leadsom and Philip Boswell

Monday 14th March 2016 Commons Chamber

[Philip Boswell]

Onshore wind is one of the most inexpensive forms of renewable energy, and it is therefore critical to maximise its input into a renewable energy solution across the UK to enable Scotland and the rest of the UK to meet our climate change targets.

Closing the RO early puts in jeopardy £3 billion-worth of onshore wind investment in Scotland alone for a forecast 30p saving in energy bills. This is a false economy because £3 billion of onshore wind investment equates to 63 million tonnes of CO_2. That is from DECC’s own analysis and represents a missed opportunity both economically and in terms of hitting climate change targets.

I spoke at length in Committee on the grace periods and the importance of getting them right, so I will not labour the point here. However, it is important that they are fair and do not disadvantage projects which, through no fault of their own, fall through the crack owing to early closure of the RO.

My hon. Friend the Member for Aberdeen South (Callum McCaig) and the hon. Member for Southampton, Test (Dr Whitehead), who is no longer in his place, spoke eloquently about the real and very difficult deterioration in investor confidence caused by the early closure of the RO. Now that that is proceeding, it must be done fairly and with a view to the critical part that onshore wind plays in the overall energy solution for the UK. We must keep the lights on, which is why we intend to press amendment 8 to a Division.

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

Before dealing with other proposals, I would like to speak to Government amendment 50. As I made clear during our last debate on this issue, I would like to see an equivalent approach taken right across the UK to the early closure of the renewables obligation to onshore wind, to provide consistency to industry and to protect consumer bills. Amendment 50 relates to clause 81—the backstop power regarding Northern Ireland.

In Committee, I introduced a clause with a view to protecting consumers in Great Britain from the costs of any additional support that Northern Ireland may decide to provide to onshore wind. I remind hon. Members that the clause received considerable support at that stage and that it is a backstop power—this is to say, it is intended to be exercised only if Northern Ireland decides not to close the Northern Ireland renewables obligation scheme to new onshore wind on equivalent terms to those in Great Britain.

The new amendment simply clarifies the drafting of the clause to ensure consistency with the provisions relating to the early closure of the renewables obligation in Great Britain by making it clear that the power in clause 81 extends to capacity added to existing onshore wind stations, as well as to new stations. I should highlight that the intent behind the clause has not changed at all.

I thank all hon. Members for their comments on the non-Government provisions. A number of them—specifically amendments 1 to 21, tabled by the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell)—were discussed in some detail and at length in Committee. As far as I can see, the amendments have not changed at all since we last discussed them. Following our agreement not to include them then, the hon. Gentleman has tabled them here once again.

To ensure clarity for hon. Members who did not attend the Committee debates and to move forward with this debate, and indeed the Bill, I am happy to set out the Government’s position again. I will first remind hon. Members of the intended effect of clauses 79 and 80. Clause 79 implements the early closure of the renewables obligation to new onshore wind in Great Britain. Clause 80 sets out the grace period conditions under which certain projects may continue to accredit beyond the early closure date.

Let me be clear: the Government remain committed to delivering our manifesto pledge to end new subsidies for onshore wind, and I am grateful to my right hon. Friend the Member for Wokingham (John Redwood) and my hon. Friend the Member for Daventry (Chris Heaton-Harris) for the clear support they expressed. The Government are, however, also conscious of the need for industry certainty. Therefore, in response to the question from the hon. Member for Southampton, Test (Dr Whitehead), I would like to make it clear that, if Royal Assent for the Bill goes beyond 31 March, the Government intend the provisions to come into force from the date of Royal Assent and do not intend to backdate them. I reiterate that there is absolutely no change to our commitment to end new subsidies for onshore wind, and our actions have shown that we will be tough on subsidies to keep bills down for families and businesses.

Onshore wind has deployed successfully to date. Based on our analysis, and taking early closure of the renewables obligation into account, we still expect the deployment of onshore wind to fall within our electricity market reform delivery plan projections of 11 to 13 GW by 2020. That is our best estimate of what is needed to meet our 2020 targets and of what is affordable under our low-carbon spending cap.

When we announced early closure on 18 June, we made it clear that it was appropriate to curtail further deployment of onshore wind, balancing the interests of onshore wind developers with those of the wider public. As I explained in our earlier debates, the grace period conditions in clause 80 were developed following extensive stakeholder engagement and have been designed specifically to provide certainty and clarity for industry. In particular, we engaged in detail on the core grace period conditions, referred to as the “approved development condition” in the Bill. This requires projects wishing to accredit under the RO beyond 31 March 2016 to provide evidence that, as of 18 June 2015, they had, first, relevant planning consents; secondly, a grid connection offer and acceptance of that offer, or confirmation that no grid connection is required; and thirdly, access to land rights.

Following further industry engagement and analysis by my Department, the Bill’s provisions have been improved in a number of ways: first, to capture those projects that had a planning application refused on or before 18 June 2015, or where the relevant planning authority failed to determine a planning application where a decision was due by 18 June 2015, and which are then subsequently granted consent on appeal; secondly, to introduce an “investment freezing condition” allowing certain projects that qualify for the grace period an additional nine months in which to accredit where they have been unable to secure debt funding due to legislative uncertainty; and thirdly, to provide that the existing grid and radar grace period will continue to be available so that projects that have suffered delays outside their control in this area will have a further 12 months in which to accredit.

Let me take a moment to reflect on the important point about investor confidence. The Government believe that the early closure and grace period provisions that we have presented within the Bill strike the right balance between protecting investor confidence and ensuring our ability to control costs under the levy control framework.

--- Later in debate ---

[Andrea Leadsom]

The new clauses seek to place a duty on the Secretary of State to produce and implement a CCS strategy by June 2017 and to report to Parliament on progress every three years. They also set out that the strategy must help to deliver the emissions reductions needed to meet the fifth and subsequent carbon budgets.

As I emphasised in Committee, the Government’s view remains that CCS has a potentially important role to play in the long-term decarbonisation of the UK’s industrial and power sectors, the long-term competitiveness of energy-intensive industries and the longevity of North sea industries. However, CCS costs are currently high, which is why we remain committed to working with industry to bring forward innovative ideas for reducing the costs of this potentially important technology.

[Philip Boswell]

I thank the Minister for her commitment to carbon capture and storage. However, in terms of our commitment on climate change, we have seen the increased construction and usage of coal-fired power stations around the world, and it has also been well noted in the House that the removal of the CCS competition was a missed opportunity. In Scotland, we still have the Grangemouth CCS project, involving a facility fitted with CCS technology that would cut 90% of emissions. Does the Minister agree that the CCS advisory group should look at that, as an opportunity to get us back on track?

[Andrea Leadsom]

What I can say is that the Government have invested more than £220 million in CCS since 2011. This financial year alone, we have invested £6 million, including £1.7 million in October 2015, to support three innovative CCS technologies—from Carbon Clean Solutions, C-Capture Ltd and FET Engineering—and £2.5 million to investigate potential new CO₂ stores. We have also invested £60 million of our international climate fund to support CCS capacity building and action internationally. The hon. Member for Stockton North will be aware that DECC provided £1 million in 2014 for a feasibility study into industrial CCS on Teesside, as part of the city deal.

As I said, CCS prices are currently high, so we are committed to working with industry on bringing forward innovative ideas to reduce costs. A key part of that is our continuing investment in CCS through innovation support, international partnerships and industrial research projects.

I recognise that industry and others are keen for the Government to set out our approach to CCS as soon as possible. As I emphasised in Committee, we will do that by the end of 2016. In doing so, we will continue to engage closely with industry, the all-party group on carbon capture and storage, the CCS strategy group and Lord Oxburgh’s CCS advisory group, which is planning to deliver its findings and recommendations to the Government by the summer.

I hope I have reassured hon. Members that the new clauses are unnecessary. I therefore hope they will be content not to press them.

Hinkley Point C Reactor

Debate between Andrea Leadsom and Philip Boswell

Tuesday 8th March 2016 Commons Chamber

[Philip Boswell]

The Minister spoke earlier about safety. At Sellafield, engineers estimate that it will cost about £50 billion over the next 100 years to clear up buildings B30 and B38. Will she tell us how much has been set aside for the decommissioning of the Hinkley Point C project, and where that money is going to come from?

[Andrea Leadsom]

The hon. Gentleman knows that that is a completely different matter. I see him nodding his head—he knows he is being mischievous. He also knows that the full cost of decommissioning Hinkley point C is included in the contract for difference—[Interruption.] It is included. It is a requirement of new nuclear to have a fully costed decommissioning programme included in that way.

The Government remain committed to conducting this deal in an open and transparent manner. We intend to honour the commitment made in this House by the previous Secretary of State to place the contracts—with only the most commercially sensitive data redacted—and the value for money assessment for Hinkley in the House of Commons Library once the documents have been entered into. This is a good deal for the British public, and it is one that the UK Government remain committed to. I thoroughly commend the project to all Members of this House.

Question put and agreed to.

Biomass Energy

Debate between Andrea Leadsom and Philip Boswell

Wednesday 24th February 2016 Westminster Hall

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

I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing this debate and, in particular on being such a champion of Drax. He and I have had many conversations about it. I am delighted to see my hon. Friend the Member for Cannock Chase (Amanda Milling) here supporting Rugeley, which is absolutely right. I have enormous sympathy for the people affected by yesterday’s incident at Didcot, which was a long-standing and good source of energy for the UK. It was a great tragedy.

Every hon. Member here will know that our priorities are to move to decarbonisation at the lowest cost while ensuring that lights stay on. This debate has shown that there are many ways of achieving that. I am grateful to the hon. Member for Ynys Môn (Albert Owen) for pointing out that a balanced energy policy is needed—the shadow Minister also made that point. It cannot be all or nothing.

The installed biomass capacity of all biomass technologies at the end of 2014 was 5.4 GW, which is no small capacity. Of that, biomass combustion was about 3 GW, landfill gas was 1 GW and energy from waste was coming up to 1 GW. That is impressive and the technology certainly plays its part, from potentially low-carbon dispatchable energy to uses in heat and transport biofuel applications and from extracting energy from waste products to injection of low-carbon gas into our gas grid.

It has been pointed out that we cannot go ahead without careful consideration of the effects, both positive and negative, that biomass can have on the wider environment. Unlike other renewable technologies, biomass cannot rely on an inexhaustible fuel like the wind, tides or sunshine. The fuels on which biomass is dependent need to be sourced responsibly and sustainably, and in a manner that realises the carbon and greenhouse gas savings that biomass is capable of delivering. Our renewable energy policy seeks to balance those considerations.

My hon. Friend the Member for Selby and Ainsty asked about CfD auctions. He will know that, in November 2015, the Secretary of State announced that if, and only if, the Government’s conditions on cost reductions are met, we will make funding available for three contracts for difference allocation rounds in this Parliament. The first, for less established technologies, is expected to take place by the end of 2016, and the technologies included will be offshore wind, wave, tidal stream, advanced conversion technologies, anaerobic digestion, dedicated biomass with combined heat and power, and geothermal. That is where we are right now. We will set out our further thoughts on that as soon as possible.

My hon. Friend asked whether I agree with the proposals in the NERA report regarding whole-system costs. I am often asked, and I understand why, whether Department of Energy and Climate Change is familiar with the full-life costs of biomass compared with other technologies. I assure him that we are very aware of the costs of balancing the grid from intermittent technologies that are not incurred from electricity generated from biomass. It is dispatchable, can be base load, is controllable and is very valuable. I confirm that my Department is looking carefully at whole-system costs, but the reports that he and the hon. Member for Southampton, Test (Dr Whitehead) mentioned consist of a subset of technologies and we must look carefully at whole-system costs.

My hon. Friend the Member for Warrington South (David Mowat) asked whether subsidies can be available for co-firing. I assure him that subsidies are still available through the renewables obligation. Fiddlers Ferry in his constituency has previously co-fired under the renewables obligation and can take advantage of that scheme until 2027.

My hon. Friend the Member for Cannock Chase asked how the correct mix should look going forward. I assure her that we recognise there are implications when looking at proposals to end coal generation. It is important to have clear consultation on that, which we will announce shortly. In particular, we will look at how that might impact on coal-fired power stations that are currently co-firing.

The hon. Member for Inverclyde (Ronnie Cowan) raised his proud point that Scotland is doing so well on renewables, but I remind him that, as my hon. Friend the Member for Selby and Ainsty pointed out, over 20% of the support under the renewables obligation as a whole goes to Scotland with far less of Great Britain’s population. Scotland received 24% of RO payments in 2014-15 and will receive significantly more than its per capita share, so it would be fair if the hon. Gentleman credited the UK Government and Great Britain’s bill payers with the Scottish Government’s achievements in renewable energy.

[Philip Boswell]

Will the Minister give way?

[Andrea Leadsom]

I am sorry, I will not give way.

The hon. Member for Inverclyde asked why the Government are cutting RHI support. The RHI budget to cover renewable heat schemes has been confirmed to March 2021, rising each year to a total of £1.15 billion. The hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) referred to biomass CHP. We are considering our proposals for that for the forthcoming RHI consultation. We will refine our current policy so that it delivers improved value for money to taxpayers and targets biomass in line with the Government’s long-term approach to heat decarbonisation, focusing on large biomass and biomass for process and district heating, and to encourage deployment that is sustainable without subsidy in future.

The hon. Member for Southampton, Test asked about the bioenergy strategy published by the previous Government in 2012. It set out a direction for biomass and recommended supporting sustainably produced biomass to deliver real greenhouse gas savings cost-effectively and taking account the wider impact across the economy. A great deal has happened in the industry since it was written, but those recommendations remain compatible with our current intentions.

Finally, as many hon. Members have pointed out, bioenergy contributes to the UK economy, creates jobs in the fuel supply chain in harvesting, processing and transport, and creates opportunities for foresters, farmers and UK ports and railways. It remains and will continue to remain important, bringing many benefits to the UK in decarbonisation, security of supply and economic benefit. I remain of the view that, when sourced responsibly, biomass can provide a cost-effective, low-carbon and controllable source of renewable energy.

Question put and agreed to.

Resolved,

That this House has considered biomass as a source of renewable energy.

Oral Answers to Questions

Debate between Andrea Leadsom and Philip Boswell

Thursday 11th February 2016 Commons Chamber

[Andrea Leadsom]

I know that my hon. Friend has big constituency interests in the success of this industry. I can reassure him that our tariff reset was built on a huge data set submitted by industry and, in terms of domestic rates of return, nearly 5% will still be offered for well-sited projects. After our announcement, the Solar Trade Association said:

“The new tariff levels are challenging, but solar power will still remain a great investment for forward-thinking home owners”.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

14. The Scottish Government have led the way, setting ambitious building standards for every new build home, the Glasgow Commonwealth village being a prime example. Does the Minister agree that our goal should be for every suitable home to be equipped with solar PV?

[Andrea Leadsom]

I agree with the hon. Gentleman up to a point. What is essential for the UK right now is that new homes get built. That is our absolute priority; people are in desperate need of more homes being built. I can assure him that since April 2014 builders have had to consider the use of renewables in all their designs, and I am pleased that during the previous Parliament the energy standard for new buildings was improved by 30%.

Energy BILL [ Lords ] (Seventh sitting)

Debate between Andrea Leadsom and Philip Boswell

Thursday 4th February 2016 Public Bill Committees

[Philip Boswell]

I thank the hon. Gentleman for his intervention; it is most helpful and clarifies the position, should anyone be in any doubt. As such, we are minded to support this clause.

[Andrea Leadsom]

Since this is our last new clause, I thank all hon. Members. We have had a very entertaining and at times quite feisty debate. I put on record my gratitude to Opposition Members for raising so many different issues. I reassure them that in a lot of areas we are not disagreeing, it is just that the proposals they have made on specific methodology is not what the Government agree is the right way forward. I am grateful to Opposition Members and, of course, to my hon. Friends who have contributed enormously to an interesting debate. On this last new clause, I am as keen as mustard on electricity storage; it has a vital contribution to make to dealing with intermittency and I wish we were five years ahead—it will be interesting to see how much we have managed to achieve in creating this new ability to store intermittent generation.

New clause 14 would create a new licence category for electricity storage operators and allow other licence holders, such as generators and transmission and distribution network operators, to hold an electricity storage licence. The creation of a separate electricity storage licence is an option that is being considered by my Department and one of a number of issues for storage operators to be included in a call for evidence in the spring. This will enable us to test it against other options, which may be less regulatory and burdensome, more targeted and, importantly, faster to implement. So, much as I would love to say, on this very last new clause, that we agree with the hon. Member for Southampton, Test, the problem is that licensing storage now would be premature. Indeed, the Electricity Storage Network, which is a key trade body for the storage industry, has criticised this new clause on the grounds that it

“pre-empts the current work by the Department”

and

“may hinder, rather than help, the progress of well thought-out strategies to support … the storage industry.”

I fear that the new clause could also have unintended consequences. For example, it could put the UK in breach of EU unbundling rules in the third energy package. These rules make it clear that transmission owners, in particular, must not own generation or supply assets, which could include storage. Also, and fundamentally for me, licensing storage is just not a simple or a quick solution. While, as the hon. Gentleman points out, we could include it in the Bill, it would require wholesale changes to the industry codes, which could take up to two years or more from licensing. This autumn, when we respond to the call for evidence, we will set out what actions we will take, and by when. These actions will include measures to address policy and regulatory barriers to storage.

I know that all hon. Members recognise how vital energy storage could be for our system. It is a feeling we all share, but I hope that they will also recognise the wider implications of acting too soon. I hope that hon. Members are reassured that the Government are actively seeking solutions to how best we can deploy storage while keeping an open mind about their proposals.

Before I sit down, I very much thank the Clerks, the Doorkeepers and you, Mr Bailey, for all your efforts in managing this Bill Committee so well.

Energy BILL [ Lords ] (Third sitting)

Debate between Andrea Leadsom and Philip Boswell

Thursday 28th January 2016 Public Bill Committees

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

I was going to speak on the same subject— clause 46 and the amount and nature of the financial penalty in relation to the numbers that we are dealing with in terms of daily production—but I will not labour the point, because the issue has been more than adequately covered by the hon. Member for Southampton, Test.

[Andrea Leadsom]

Thank you—short and sweet.

These clauses provide the OGA with powers to regulate compliance with new and existing duties imposed by the Bill, the Petroleum Act 1998 and offshore licences by imposing civil sanctions on persons who are in breach of those duties. In the Bill, the duties are referred to as petroleum-related requirements. A key recommendation of the Wood review was for the new regulator to acquire new sanctions to guard against behaviours that are known to have obstructed the objective of maximising economic recovery of UK petroleum. We have therefore worked to develop a framework of sanctions that is fit for purpose and that provides a transparent and independent means of appeal.

These clauses allow sanctions to be imposed for breaches of the duty to act in accordance with the strategy to enable the principle to be met. They allow sanctions to be imposed when holders of offshore petroleum licences are in breach of the conditions of those licences. They also allow sanctions to be imposed when relevant persons are in breach of other statutory duties imposed by part 2 of the Bill.

--- Later in debate ---

[Philip Boswell]

We are conscious that Oil & Gas UK already publishes an annual decommissioning insight, and that that is the leading forecast for decommissioning activity in the UKCS. Oil & Gas UK has also published guidelines on decommissioning cost estimation from 2013, providing a methodology for breaking down the process of decommissioning into separate phases, to enable the development of robust and consistent decommissioning cost estimates that can be meaningfully compared across the industry.

As the decommissioning sector evolves and matures, it is important that the industry has an accurate and consistent basis on which to estimate costs. Oil & Gas UK’s new decommissioning cost estimation guidelines build on the industry’s latest experiences in the practice and will be used extensively in planning future projects.

We have some concerns that such frequency of report by the Secretary of State might duplicate and, depending on the methodology used, conflict with the industry work already going on in the area. It might also create additional onerous data-reporting demands on the OGA. However, reliability, transparency and effective cost-management in this respect are critical. We would also expect wide consultation across the OGA, the Department of Energy and Climate Change and the industry to be undertaken.

As such, we are minded to support the amendment.

[Andrea Leadsom]

I am delighted to tell the hon. Member for Southampton Test that I welcome his bringing forward this proposal, as it is an important area for debate. It gives me the opportunity to set the record straight on the economic narrative of the North sea. I am sure all hon. Members here will be aware of the issue, but it is important to put it on the record.

The Government believe in making the most of the UK’s gas and oil resources. To date, the oil and gas industry has contributed more than £330 billion to the Exchequer, and it is the UK’s largest industrial investor, supporting hundreds of thousands of jobs, supplying a large portion of the UK’s primary energy needs and making a significant contribution to GDP. Those jobs are not just in Aberdeen, or indeed in Scotland, but right across the UK. Members have all paid tribute to the contribution made by that North sea basin over many years.

With between 11 billion and 21 billion barrels of oil equivalent still to be exploited, the UK continental shelf can continue to provide considerable economic benefits for many years to come. That is what we are here to try to sort out, with the establishment of the OGA.

As the hon. Member for Southampton, Test pointed out, decommissioning is an inherent cost of doing business in the UKCS. Capital allowances are available on decommissioning expenditure, as they are for most of the costs of doing business in the UKCS. The rate of allowances for decommissioning match those for oil and gas research and development, exploration and appraisal, and mineral exploration and access.

I will answer the specific point raised about whether the tax relief situation might encourage people operating in the North sea to hurry to decommission, lest they be whisked away. The tax relief rate is guaranteed by way of decommissioning relief deeds between Government and operators so there is not a likelihood that either they will disappear or that people need to take precipitate action to avoid the risk that they might disappear.

Energy BILL [ Lords ] (Second sitting)

Debate between Andrea Leadsom and Philip Boswell

Tuesday 26th January 2016 Public Bill Committees

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

I rise to speak to amendments 11 to 15. The Scottish National party would welcome the powers for the OGA to levy charges for services such as attending or carrying out tests or inspections on applications, storage, samples or information. We recognise that the licence holder levy is an important piece of funding infrastructure for the OGA. We recognise that subsection (4) of the clause provides for the Secretary of State, with the agreement of the Treasury, to do exactly what Labour’s amendments suggest. Nevertheless, we would be happy to support the Labour amendments if they went to a vote. We also recognise that subsection (7) of the clause actually provides for the Secretary of State, again with the agreement of the Treasury, to do exactly what Labour’s amendments suggest, but we would still be happy to support these amendments on the basis that they would guarantee that the funds raised by the OGA are kept by OGA.

[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.

Energy BILL [ Lords ] (First sitting)

Debate between Andrea Leadsom and Philip Boswell

Tuesday 26th January 2016 Public Bill Committees

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

I look forward to serving under your chairmanship, Mr Bailey.

While the environmental considerations of climate change are vital, of course, we do not feel that this is the forum to deal with them. It is the Government as a whole, and DECC in particular, who should be dealing with this and who carry the responsibility. As such, we will not pursue this.

[Andrea Leadsom]

As the hon. Member for Southampton, Test pointed out, clause 9 provides a non-exhaustive list of matters to which the OGA must have regard when exercising its functions, so far as is relevant. These include, for example, the need to maintain a stable, predictable system of regulation that encourages investment and the development and use of facilities and other things needed for carbon storage.

Amendment 8 seeks to require the OGA, when exercising its functions, to have regard to the need to address environmental considerations and to facilitate the pursuance of section 1 of the Climate Change Act 2008 in relation to relevant activities. The European offshore safety directive requires the separation of licensing and environmental functions, and to require the OGA to have regard to environmental considerations risks breaching the requirements of that directive.

Climate change is, of course, of great importance, but the OGA’s primary role and focus will be to deliver MER UK. It would not be right to impose obligations on the OGA relating to environmental considerations in respect of which it does not have expertise and is not required to have expertise. It is important that our climate change objectives and environmental regulations are furthered by the experts in the field. The expertise on climate change will remain with the Secretary of State for Energy and Climate Change. Likewise, environmental regulation in relation to offshore oil and gas will remain with the Secretary of State and, onshore, it will remain with the Environment Agency and with the Scottish Environment Protection Agency and Natural Resources Wales in the relevant jurisdictions in Great Britain.

It is right that, once established, the OGA will be bound by environmental law and therefore in the exercise of its functions it will by default have regard to environmental issues. It already has existing close working links with the environmental regulators and these will continue. However, I do not think it is right or necessary to impose on the OGA obligations to consider environmental considerations and climate change. Both of these are matters that would require a change in the core expertise of the OGA if it were to properly fulfil them. In addition, we can foresee circumstances where these obligations might conflict with the requirement on the OGA to maximise economic recovery. The objectives are not incompatible at policy level, in that we will need significant oil and gas in the transition to a low-carbon economy.

I am grateful to the hon. Member for Southampton, Test for reassuring the Committee that his party accepts that there is a future for the North sea basin and they do not wish to shut it down. I am sure that all hon. Members in the Aberdeen area will be delighted to hear that those 350,000 jobs would remain safe in Opposition hands and that it is not their intention to precipitately close down the North sea industry. Nevertheless, in particular circumstances each consideration in relation to the environment and climate change could point to a very different course of action if the Opposition amendments were made, creating a very difficult position for an arm’s length body to manage. That would be very unfortunate for the OGA, leaving it facing an impossible dilemma between two incompatible statutory obligations. I hope that Members are convinced that we already have enough powers to ensure that these important matters are given appropriate consideration.

Clause 10 also gives the Secretary of State the power to give the OGA directions on matters of public interest. The environment and climate change are clearly matters of public interest and the powers in the clause may be exercised if it proves necessary.

Turning to amendment 9, I suggest that we all agree that the economically viable reuse of North sea infrastructure for carbon capture and storage projects and marginal field extraction, as an alternative to decommissioning, is of great importance. I am grateful to the hon. Member for Southampton, Test for his clear examples of precisely why Sir Ian Wood drew up his strategy for the OGA to be not just a regulator but an asset steward. He pointed out some of the clear challenges when lots of small operators in small fields try to share infrastructure, and so on. That highlights the OGA’s need for the proposed asset stewardship powers.

Indeed, consideration of reuse of infrastructure already plays an integral role in the decommissioning approval process, and amendments tabled by the Government in the other place would reinforce that requirement by creating a statutory basis for the alternatives to decommissioning that would have to be considered by industry, the Secretary of State and the OGA. When a decommissioning programme is submitted, the current process requires any person who wishes to decommission relevant infrastructure to demonstrate that the potential for reuse has been fully examined, as set out in Department of Energy and Climate Change guidance on decommissioning under the Petroleum Act 1998.

Further, clause 74 and schedule 2 to the Bill will place a requirement on industry, the OGA and the Secretary of State to ensure that alternatives to decommissioning, such as reuse or preservation, are considered. Requirements to consider reuse of infrastructure will include considering purposes other than the original one—carbon capture and storage, for example.

It is also worth noting that the measures enjoy the support of both the oil and gas industry and the Carbon Capture and Storage Association. It is expected that the OGA will facilitate discussion among all parties to the decommissioning process, to ensure that all options for viable reuse are explored.

I recognise the intention behind the amendment, but I do not consider it to be necessary, as its objective has already been given effect by previous provisions, which ensure that viable reuse of infrastructure for purposes such as carbon capture and storage and marginal field extraction is brought to the forefront of the decommissioning process. They make sure we do not miss the important opportunities that those measures present to develop such industries.

I hope that hon. Members will accept my explanation of why the amendments are unnecessary, and will not press them to a vote.

[Philip Boswell]

Amendment 9 is essential both for the future of carbon capture and storage and to enable the more marginal fields to be harvested by smaller operators, which the Scottish National party sees as increasingly vital for the future of the industry. The hon. Member for Southampton, Test and the hon. Member for Norwich South spoke of previous short-termism in the industry and the need for a longer term vision, as pointed out in the Wood report. We completely agree with that and see that there is a requirement for a more holistic view with respect to management of oil and gas collection and transport infrastructure. We therefore support the amendment.

Energy Market Design

Debate between Andrea Leadsom and Philip Boswell

Monday 23rd November 2015 General Committees

[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.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

The Minister spoke of the especially effective integration of renewables. The document mentions storage. Does she agree that the storage of energy, particularly from renewables, will be key to the solution for European energy in the future and deserves a much higher profile in the document than is currently the case? What does she propose to do about storage in the UK?

[Andrea Leadsom]

The hon. Gentleman is exactly right that storage will play a huge part in future. I certainly feel that not enough has been done at a time when power generation from renewables has been rising rapidly not only in the UK but throughout Europe and the world. Of course, that renewable generation has added stresses to the system because of its natural intermittency, so finding a way to bring down the costs of storage and exploring the different storage technologies is important for all of us throughout the world who aspire to decarbonise our energy systems.A particular advantage of greater focus on the electricity market design across Europe is that we will be able to share with our European neighbours the costs of the technology and of research and development. We will be able to co-operate and find the best and most cost-effective solution for all our consumers.

[Andrea Leadsom]

The hon. Gentleman might be aware that significant investment has already been made into research at both grid and domestic-level storage in the UK. My Department has invested significantly in trying to bring design ideas to fruition. We are at the cusp of a big change, with storage costs coming down. He is right that some of the household battery designs in the States are becoming significantly cheaper. We are seeing those costs fall, supported by co-operation not only at EU level but elsewhere. Last week I was at the International Energy Agency, which is also very keen to focus on research and development into new storage technology to ensure that costs come down for us all.

The hon. Gentleman is exactly right that at both system and domestic level, storage and the whole demand-side response to enable people to reduce their own demand on the system are extremely valuable, not only to keep down costs for consumers but to help to support our energy security.

[Philip Boswell]

Following on from the hon. Member for Luton North, both he and the Minister mentioned battery power as a potential fix. Does she agree that that would be a megawatt solution for a gigawatt problem? I was Shell’s contract lead on the carbon capture project, which I moved from Longannet to Peterhead, and I am familiar with different storage facilities. Does the Minister think that compressed air electricity generation might provide an alternative solution? Does she agree on the megawatt issue?

[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.

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[Philip Boswell]

Following on from that, I understand that stopping wind and solar was one option, but was not another option to slow them down to retain the supply chain? Creating a supply chain from nothing, as we look to move into tidal, wave and other forms of renewable energy, is extremely difficult. Continuing with wind and solar, although they might have slowed down, may have given us a greater advantage, putting Britain at the forefront of renewable energy and maintaining the advantage we had gained. Was it perhaps unwise to stop entirely?

[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.

--- Later in debate ---

[Andrea Leadsom]

I am pleased that we have had a good, constructive debate on the important subject of electricity market design. Now is the right time to review European energy market design. As Europe continues to make progress towards its decarbonisation objectives, it is important to ensure that they are achieved without placing at risk the effective and efficient functioning of the single market in energy.

The hon. Member for Southampton, Test talked about the EU decarbonisation targets. The Climate Change Act 2008 provides a stronger decarbonisation challenge than the EU targets and I assure him that we are looking at what we can do on heat and transport to ensure that we meet those challenges. I take his point that we could do more on electricity generation, but he would agree that it is also essential that we keep an eye on the cost to consumers. We cannot simply worsen fuel poverty and make our businesses uncompetitive, which we would if we increased, with no limits, cost to consumers through their energy bills.

The hon. Gentleman mentioned the use of interconnection being historically far too low. I hope that he welcomes the fact that we are looking at far more interconnection going forward. He said that prices will eventually make interconnection inefficient and ineffective, but I assure him that that is not the case at the moment: the cap and floor regime makes interconnection still profitable and we hope to take advantage of lots of other interconnection opportunities that are coming up.

The hon. Member for Luton North raised coal. Our coal-fired power plants are all very old—40 or 50 years old—and they are due to come off-grid. They are not brand-new clean-coal plants. Most are not able to meet the industrial emissions directive and only a couple are prepared for it. Their future is not long term and I do not think he is right to say that we should stick with coal just because it is cheap. The Secretary of State made it clear that because gas is the cleanest fossil fuel—its carbon footprint is about half that of unabated coal—we should look to it as the bridge to a low-carbon future, not old coal. We are still dealing with the legacy of our deep coal mines. People are still dying of cancer and appalling problems caused by them, so I think we should be glad that those days are behind us.

[Philip Boswell]

On deep coal mines, we are get most of our coal from Colombia, where the health and safety record is appalling, as it is in China. If we were digging for our own coal here, at least we would be doing it safely. In the talk of switching to gas, I feel there is an alternative agenda, which is fracking, which the Government are rushing headlong towards. I wrote a paper on fracking in about 2006 and while I admit that the chemicals we were using or talking about using then as catalysts for better—

[Philip Boswell]

I apologise. Does the Minister intend to rely heavily on fracking to provide us with gas?

[Andrea Leadsom]

I am glad that the hon. Gentleman has given me an opportunity to respond to that. At the moment we import up to half our gas needs, but by 2030 we will import up to 75% of our needs—he will know that the North sea basin is slowly in decline—so it is vital that we either build our home-grown gas or recognise that we will become extremely dependent on imported gas. My view is that, having looked carefully at all of the regulation and fracking processes, if it is safely done with some of the best regulation in the world—we have more than 50 years’ experience of regulating onshore and offshore gas—we can safely extract in this area.

As the hon. Gentleman will know, there is no fracking going on in the UK at the moment and we do not even know if we can extract gas from the shale. Never to give it a chance seems to be an enormous waste of a potential industry that could offer up to 65,000 much-needed jobs, which would be a huge boost.

[Philip Boswell]

We entirely agree with the Minister on the gas issue—Scotland has a moratorium. However, although it is true that the known gas reserves are in decline, there is plenty of gas off the west coast of which we are aware. Does the Minister agree that we should focus on developing that safer fracking offshore, rather than onshore gas?

[Andrea Leadsom]

I can agree that it is vital that we maximise the economic recovery from the North sea. The hon. Gentleman will be aware of all the measures we have taken, including on the fiscal regime, the setting up of the new Oil and Gas Authority, and our seismic studies to help businesses that want to consider the under-explored parts of the North sea basin. I certainly agree that the industry is vital to the whole UK.

The hon. Member for Luton North said that he thought that we are behind the pace in tidal. We are keen to consider such projects but, notwithstanding our desire to bring on new technologies, the projects need to offer value for money to bill payers if they are to be deployable. He also talked about nationalising energy businesses, and I am sure he will recognise that I do not agree with him on that. The UK has always been open to foreign investment but that does not mean usurers’ profits going overseas, nor does it threaten our energy security. Foreign investment in UK energy projects benefits the UK consumer, bringing in the competition that keeps the costs down.

--- Later in debate ---

[Andrea Leadsom]

The UK is a trading nation. We invest overseas. We allow foreign investors to invest in the UK. I still strongly argue that foreign investment in UK energy has benefited consumers by keeping bills down, and energy security by keeping the lights on.

Finally, the hon. Member for Coatbridge, Chryston and Bellshill discussed his concern about the lack of energy security. I point him to the capacity mechanism that ensures that we provide capacity for the future, to ensure that we have the security on which we all depend. He will be aware of the demand-side response. We enter into agreements with companies that wish to be paid either to reduce their demands on the system or go off-grid and generate their own power at times when that is needed. That response is a vital contribution to energy security, as is the capacity mechanism, and the hon. Gentleman should rest assured that my Department’s absolutely non-negotiable core focus is ensuring energy security.

[Philip Boswell]

On the issue of closing Longannet, 40% of Scotland’s energy generation comes from Longannet, which will make us more reliant on EDF Torness and Peterhead—the two ageing nuclear power stations that the Minister referred to. That creates a massive problem for a black start. If things go down in Scotland it is extremely difficult, without power generation from the coal-fired power stations, to start up again. What assurances can the Minister give us that we will be able to start up again?

[Andrea Leadsom]

All I can say to the hon. Gentleman is that we, along with National Grid and Ofgem, focus above all else on security of supply. National Grid has a range of tools—I have mentioned a couple—to ensure that we are able to keep the lights on at all times. It is our No. 1 priority. I can assure him that National Grid has created sufficient security of supply and that there is a margin to ensure that the lights stay on, as stated in its “Winter Outlook Report”. The matter is absolutely non-negotiable.

For the energy market design in Europe to enable the further integration of the single electricity market, national interventions need to be in line with single market aims and the EU state aid rules. Consumers should be enabled to play a more active role in the market and mechanisms should be developed further to incentivise demand-side response and storage. The UK is already addressing those challenges, including through the implementation of the electricity market reform and other measures, such as smart meters, enabling domestic households to make the most of their electricity management. Many other member states are only just starting. We stand ready to share our expertise with them and with the Commission.

I want the UK to be constructive on the issue of energy market design, but I am determined to ensure that any proposals brought forward by the Commission maintain an appropriate level of competence between the Commission and member states. I urge the Committee to endorse the motion.

Question put and agreed to.

Resolved,

That the Committee takes note of European Union Document No. 11018/15 and Addendum, a Commission Communication: launching the public consultation process on a new energy market design; and supports the Government’s approach of welcoming the Commission’s consultation which addresses the challenges that decarbonisation creates for Member States’ electricity systems and the effective functioning of the internal energy market, while working to ensure that any future legislative proposals preserve an appropriate balance of competence between the Member States and the Commission.—(Andrea Leadsom.)