Strategy and Policy Statement for Energy Policy in Great Britain

Baroness McIntosh of Pickering Excerpts

Monday 25th March 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, the past few years have brought unprecedented challenges and uncertainty to Great Britain’s energy system. But we have remained resilient and last year laid the foundations for an energy system fit for the future with the landmark Energy Act 2023, which I know many noble Lords were involved in. It was the largest piece of energy legislation in the UK in a generation, and a world first in legally mandating net zero.

The changes in that Act, including the powers to establish the National Energy System Operator, NESO, and new duties for Ofgem, mean that now is the right time to reaffirm the Government’s strategic priorities and policy outcomes in this strategy and policy statement. The Draft Strategy and Policy Statement for Energy Policy in Great Britain is developed according to Part 5 of the Energy Act 2013. It sets out in clear terms the Government’s strategic priorities and other main considerations of their energy policy, the policy outcomes to be achieved, and the roles and responsibilities of persons involved in implementing that policy.

The Secretary of State, Ofgem—the independent regulator for gas and electricity markets in Great Britain —and the NESO, a new independent public corporation responsible for planning Britain’s electricity and gas networks and operating the energy system, will be required to have regard to the strategic priorities set out in this SPS. The Secretary of State and Ofgem must also have regard to the policy outcomes contained within the SPS, and they must both carry out their respective regulatory functions in a manner that they consider best calculated to further the delivery of the policy outcomes.

The NESO is expected to be established this year. The SPS serves an additional purpose of setting out and clarifying the roles and responsibilities of the NESO, alongside Ofgem and the Government. The SPS is intended to provide guidance to the energy sector on the actions and decisions needed to deliver the Government’s policy goals, and places emphasis on where the Government expect a shift in the energy industry’s strategic direction.

As the independent energy regulator for Great Britain, Ofgem cannot be directed by the Government on how it should make decisions. Similarly, the NESO is being set up to be operationally independent and free from day-to-day government control. However, the SPS will provide guiding principles for Ofgem and the NESO, when it is established.

The strategic priorities and policy outcomes within the SPS do not include the creation of any new policies or duties. The SPS reaffirms the Government’s existing priorities and commitments, such as affordability, protecting consumers, security of supply, net zero, investment ahead of need, and encouraging Ofgem to make full use of its enforcement powers to support these ambitions. This statement will therefore support strategic alignment between government, Ofgem, NESO and the industry, through making clear what government wants to achieve in the energy sector.

As mentioned, the legal framework of the Energy Act 2013 means that Ofgem, NESO and the Secretary of State all have a duty to have regard to the strategic priorities within the SPS. Ofgem and NESO must also give notice to the Secretary of State if, at any time, they conclude that a policy outcome contained in the SPS is not realistically achievable. Ofgem must also publish a strategy showing how it will further the delivery of the policy outcomes, and its annual report must assess its contribution to delivery of the policy outcomes. The SPS therefore acts as a tool to promote alignment between government, Ofgem and NESO, as all parties will have to have legal regard to the statement in some sense.

As per the Energy Act 2013, the SPS has completed two consultations. The first consultation was undertaken with Ofgem and the Welsh and Scottish Governments. Government worked with all parties to make sure that their views were correctly captured before moving on to a second, public consultation held last summer. In the public consultation, government received views from Ofgem, the Scottish Government, ESO and many stakeholders across industry, including businesses, investors, trade bodies, suppliers, generators and infrastructure operators.

Feedback throughout both consultations was generally positive, and stakeholders were keen to see an SPS implemented to give guidance to the sector and clarity on the roles of Ofgem, NESO and government in delivering the Government’s priorities for the energy sector. Since the consultations have concluded, officials have worked through that feedback and, where appropriate, have used this to inform the current iteration of the SPS which is now laid before your Lordships. The Government are confident that this SPS reflects the right strategic priorities and policy outcomes for energy policy for the whole of Great Britain.

I thank the Secondary Legislation Scrutiny Committee for the time it has taken to review the SPS, as well as the noble Lords, Lord Hollick and Lord Lennie, the noble Baroness, Lady Hayman, and others, for their interest in the development of the SPS.

In conclusion, the SPS reaffirms the Government’s commitments and priorities for the energy sector and, in doing so, acts as a tool to support alignment between government, Ofgem, NESO and industry. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate my noble friend on bringing forward the draft strategy and policy statement, which I support.

As president of National Energy Action, and focusing on the SPS’s aims of affordability and protecting consumers to which my noble friend referred, I want to put a question to him. Although I accept, as the department explains in paragraph 46—this was also referred to by the Secondary Legislation Scrutiny Committee—that although Ofgem is independent of government, the regulator is required to

“have regard to the strategic priorities set out in this statement when carrying out its regulatory functions”,

does my noble friend share my concern, particularly for those living in fuel poverty, that although a consumer has control over the unit cost of electricity they are purchasing, they have less control over the standing charge? My understanding of the changes being brought in on 1 April, is that, although we are reducing the unit cost to the consumer, the standing charge is going up incrementally. I imagine, in a very short order—possibly two to three years’ time—that instead of standing charges going up to 50p or 70p, they will cost up to £1 per day. I believe that for many living in fuel poverty that is unaffordable.

So, while I accept that Ofgem should operate independently of the Government, I recall that in 2014, as part of the price review that the water companies’ regulator Ofwat carried out, the Government issued a request to Ofwat to have regard to the affordability of customers’ bills. My question to my noble friend is: is that something the Government might be minded to do under this SPS, in order to have regard to affordability and protecting consumers?

Biomass: Power Generation

Baroness McIntosh of Pickering Excerpts

Wednesday 13th March 2024 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend look clearly at developing more home-produced products, such as fast-growing willow coppice, that will both give a sustainable source of energy to Drax but also help hard-pressed British farmers at this time?

[Lord Callanan (Con)]

My noble friend makes a good point. It is not just Drax; there are many commercial and domestic biomass boilers as well that I am sure would be happy to use sustainable British-produced biomass.

Electricity Network Connection Action Plan

Baroness McIntosh of Pickering Excerpts

Wednesday 22nd November 2023 Lords Chamber

[Lord Callanan (Con)]

I think the noble Baroness will find that Ofgem’s view is that it was already fulfilling that mandate—and, of course, the vast majority of the new connections are because of new renewable electricity, which is to fulfil our net-zero obligations. Ofgem is fully in line with that.

[Baroness McIntosh of Pickering (Con)]

My Lords, does my noble friend not agree that it would make more sense to keep locally the electricity that is generated in the North Sea and coming onshore in Scotland, the north of England and Humberside, which have some of the coldest and poorest-insulated households in the UK?

[Lord Callanan (Con)]

I am not sure I understand the point my noble friend is making. The reason we have a national grid is to distribute electricity around the country so that all communities get the chance to benefit. If you had a much more localised system of grids, it would be much more inefficient. The whole idea or principle of the national grid is that the whole country can benefit from all our renewables infrastructure.

Biomass Strategy 2023: Cross Sectoral Sustainability Framework

Baroness McIntosh of Pickering Excerpts

Wednesday 15th November 2023 Lords Chamber

[Lord Callanan (Con)]

I am pleased to hear that the noble Baroness has a biomass boiler. In fact, she does not need to get rid of it, because if she sources her pellets from the appropriate sources, that is a renewable resource. These are not pellets from virgin forests but by-products from the timber production process. There are very strict sustainability criteria attached to them and, even if those pellets were not used for biomass production, they would be a waste product because the timber would still be harvested for its other uses. So the noble Baroness does not need to feel so guilty.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend look favourably on taking fast-growing willow coppice and miscanthus from local growers right across Yorkshire to give a constant stream of reliable, sustainable farm produce to Drax going forward?

[Lord Callanan (Con)]

I did not quite hear the start of my noble friend’s question, but if she is asking whether we want to source more sustainable biofuels from UK sources, the answer is yes, absolutely.

2030 Emissions Reduction Target: Heating

Baroness McIntosh of Pickering Excerpts

Tuesday 5th September 2023 Lords Chamber

[Lord Callanan (Con)]

Public acceptability is a key component; that is why we ruled out Whitby for the trial. Redcar is the only other location being considered.

[Baroness McIntosh of Pickering (Con)]

My Lords, does my noble friend agree that decarbonisation would be faster if we had better insulated rental properties, rather than seeing most of the heat go through single-glazed windows, particularly in the north of England?

[Lord Callanan (Con)]

I would not characterise just rental properties in that way; whatever form of heating is used, better insulation and better performance of buildings is a good thing.

Road Fuel Prices

Baroness McIntosh of Pickering Excerpts

Tuesday 4th July 2023 Lords Chamber

[Lord Callanan (Con)]

As I just said to the noble Baroness, Lady Blake, we will legislate as soon as we can. We will consult on the secondary regulations in the autumn, but we cannot implement them until we have the primary legislation through. There are of course a number of existing fuel price checkers, but the problem is that they are not updated frequently enough and are not compulsory, so not all retailers have to take part in them. When we have the powers, there will be a compulsory scheme and all retailers will be expected to comply.

[Baroness McIntosh of Pickering (Con)]

Does my noble friend agree that the excessive prices that have been charged have had a disproportionate impact on rural motorists and have added to the cost of deliveries of foodstuffs and other items? Is that something that the Government will keep a watchful eye on?

[Lord Callanan (Con)]

My noble friend makes a good point. For many rural areas, where filling stations perhaps do not get the throughput of customers, prices tend to be higher anyway. It is certainly something we want to keep an eye on to make sure that rural customers are not disadvantaged.

Drax Biomass Power Station

Baroness McIntosh of Pickering Excerpts

Monday 3rd July 2023 Lords Chamber

[Lord Callanan (Con)]

The noble Lord should be careful of jumping to conclusions. I have not seen the programme, but my officials have. They have engaged extensively with forestry experts and Canadian officials following the programme, and the officials’ conclusion is that the “Panorama” programme provided an inaccurate representation of practices by the forestry and biomass sector on the ground.

[Baroness McIntosh of Pickering (Con)]

My Lords, looking at renewables more broadly, does my noble friend have a view on the efficacy and morality of taking electricity that has been generated offshore in the Yorkshire and Humber region and transporting it all the way down to the West Midlands, when we could actually use that electricity locally, particularly to power up electric cars, for which there are so few charging points in rural areas?

[Lord Callanan (Con)]

I have to say that I am really not sure what the noble Baroness is talking about. There is a national grid. Electricity is transported from all parts of the country to other parts, as demand varies. That is the whole principle of a grid.

Retained EU Law (Revocation and Reform) Bill

Baroness McIntosh of Pickering Excerpts

Consideration of Commons amendments
Monday 26th June 2023 Lords Chamber

We have travelled on a long journey, as I say, and have made some progress in the Minister’s speech today. We have not quite ended up at the destination that I would have hoped to end up at, but, at this point, I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I echo some of the concerns expressed by the noble Lord, Lord Krebs. In moving the amendment, my noble friend the Minister referred to the amendments from the Commons, completely overlooking the fact that there is no legislative consent. Scottish and Welsh legislative consent has been withheld, and I understand that the Government have not yet heard from Northern Ireland. I think that he referred to the fact that we have now moved on and do not have to rely on the other member states to pass our environmental laws, but I would feel more comfortable if the four nations agreed on what the environmental principles should be. I would be very pleased to hear from my noble friend what he believes the situation currently is.

I have just one word of caution. I fear that environmental protections are not as secure as perhaps we might be led to believe by this Government. We have just had brought into effect two ground-breaking free trade agreements with Australia and New Zealand, both of which have set lower standards for imported meat and foodstuffs, which do not meet the same requirements of animal welfare and environmental protection such as our home producers have to meet. That is another source of concern.

Perhaps my overriding concern is that we have seen already—despite the fact that they said that they would not do this—that the Government have overturned primary legislation through secondary legislation in the form of a statutory instrument in the past two weeks.

I have outstanding concerns on these amendments, but I respect the fact that our power is limited to scrutiny in this Chamber. I believe that the Bill is in a better place than when it was first introduced to this House, but I have concerns about what will happen when it leaves this place.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise briefly to express great concern about the lack of any offer on non-regression. I am going to bring this back to the absolute physical reality of the UK and the England that we are in today. In the other place, the Science, Innovation and Technology Committee has started an inquiry into the impact of insect decline on food security. If anyone wants to see the practical reality of this, I invite them to go out the back of the Foreign Office today, where a wonderful wildflower meadow has been created—they should go and look at it and ask where the insects are, because there are practically no insects there.

We have insect decline and a decline in our plants. Non-native plants now outnumber native plants in the UK: that is the state of the UK today. We have, right now, a huge, category 4 marine heatwave, which is going to have a huge impact on our marine world. It is very clear that the protections for the environment that we have now are vastly not enough, yet we are not promising even to maintain them. I ask everyone in this House to consider what people in the future will think when they look at today’s debate.

Electricity and Gas (Energy Company Obligation) Order 2023

Baroness McIntosh of Pickering Excerpts

Tuesday 20th June 2023 Grand Committee

In conclusion, the GBIS will continue building on the successful ECO approach that has been delivering energy efficiency measures to millions of households now for the past decade. The scheme will extend help to hundreds of thousands more households previously ineligible for government energy efficiency scheme support. It will build momentum towards the Government’s ambition to reduce the total UK energy demand by 15% from 2021 levels by 2030. It is estimated that it will save more than 5 million tons of CO₂ emissions over the lifetime of the measures installed. Finally, it will empower thousands more to insulate their homes, protecting the pounds in their pockets and, of course, helping to support jobs across the country. With that, I commend this order to the Committee.

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank my noble friend for introducing the order this afternoon, which I warmly welcome. I declare my interest as honorary president of National Energy Action, based in the north-east, an organisation with which I think my noble friend is very familiar. It welcomes the scheme but has one or two issues that it would like to understand better.

I ask my noble friend about the background to how the scheme has been introduced, because it could lead to unfairness in how the money is distributed. In particular, a potential flaw is that the targeting of the scheme is quite loose: it is not tight enough sufficiently to help fuel-poor households, which he said is the purpose of the order. For the majority of the scheme, households are assumed to make a financial contribution to the cost of the measures, which may effectively make a large proportion of the scheme inaccessible to the lowest-income households, which cannot afford to make such contributions. The way in which the policy is funded is therefore potentially unfair. Coupled with the rather loose targeting, this means that low-income households may effectively subsidise higher-income householders’ home upgrade.

I give my noble friend an illustration. The UK Government are assuming that £80 million will be provided in customer contributions over three years to support funding of the scheme. That is based on the assumption that uptake is not disproportionately affected by the level of contribution required. The assumption apparently originated from research based on a survey of 1,000 owner occupiers who fell within the general eligibility criteria. I put it to my noble friend that that may not be representative of low-income households, which I understood was the purpose we are trying to achieve with the order before us.

Similarly, research quoted in the impact assessment assumes that three-quarters of home owners will be willing to contribute towards insulation measures, with almost half willing to contribute £500 or more. Once again, I put it to my noble friend that it is extremely likely that households unwilling or unable to contribute fall into the category of the most financially vulnerable, and therefore in most need of the support given by the scheme.

Those two examples point to the potential for this not being what the Government intended. On vulnerable households, I think my noble friend described the purpose as extending support to households in the least energy-efficient and lowest income bands. I would like to query my understanding. Could the targeting have been better and could we have directed the funding more clearly to those in that bracket?

I warmly welcome the fact that support is being extended to off-grid rural households in Scotland and Wales. Can my noble friend assure me that the grant to English homes in that bracket for the home upgrade funding that he referred to will be as high as for those in Scotland and Wales?

[Lord Lennie (Lab)]

My Lords, this has nothing to do with the instrument, but I begin by congratulating the noble Lord, Lord Callanan, on his efforts to recruit Sadio Mané to play for Newcastle United when he was recently in Senegal. As a fellow Newcastle United season ticket holder, I can pass on the warm thanks of all fans of Newcastle United. I suppose more unites us than divides us when it comes to being “Howay the lads” fans.

The draft order proposes a Great British insulation scheme, which would require licensed gas and electricity suppliers to promote the installation of energy-efficiency measures, such as loft or cavity wall insulation, across Great Britain. The Department for Energy Security and Net Zero explains that while ECO4 aims to deliver full-house retrofits for low-income and vulnerable households, the new scheme seeks to encourage rapid installation of the most cost-effective, mainly single insulation, measures and to extend support to a much wider group of households in the least efficient and lower council tax banded homes. These are worthy aims.

The department expects the scheme, as the Minister said, to provide around 376,000 insulation measures in 315,000 homes by the end of March 2026, which coincides with the ECO4 scheme’s end date. The department also says that Ofgem, which will administer the scheme, will be required to submit monthly reports on progress to the Secretary of State on suppliers’ performance. What will the Government do if performance is not on target overall? Are there any plans to push beyond the initial target, if performance suggests that this could be possible? Will Ofgem report on the income distribution of household delivery?

Those suppliers required to participate in the ECO4 scheme are also required to participate in the Great British insulation scheme, so the same domestic gas and electricity supply data is being used as under the ECO4 scheme. Were there any issues with the use of this data? If so, have they been addressed and overcome?

Unlike the ECO4 scheme, a minimum level of delivery of the obligation will be set for each of the three phases of the Great British insulation scheme. It requires each obligated supplier to achieve at least 90% of its home heating cost reduction obligation and low-income minimum requirement for phases A and B through measures completed before the end of each phase, with the total obligation required to be met by 31 March 2026. Suppliers will have performance requirements across each phase of the scheme—a new development from ECO4. This is of course a good thing, but how will the performance in each phase be monitored and enforced?

The instrument also sets a low-income minimum requirement. This will ensure a minimum level of support through the scheme for those on the lowest incomes and the most vulnerable—the low-income group, as it is known—while allowing the remaining support to be targeted at a much larger pool of people now challenged by higher energy bills, in other words the general group. There is no upper limit on the amount of a supplier’s home heating cost reduction obligation that can be met through the measures delivered to the low-income group.

The low-income minimum requirement is defined by the instrument as 20% of the overall obligation, and that 20% must be delivered using the standard low-income eligibility criteria. Assuming the distribution is equal, 20% of 315,000 homes is 63,000 low-income households. Given that this scheme will be paid for by all customers but that the much larger benefits will be felt only by benefiting households, does a 20% minimum not feel somewhat low? I appreciate that it is only a minimum, but is there any incentive for the participants to deliver above this 20%? How was this amount reached? Do the Government have an estimate for where they expect this to fall across the whole scheme?

The home-heating cost reduction target is set at a level that assumes that households in the general group —as in Article 12 of the order—will collectively contribute £80 million, as the Minister said, towards the cost of installing the insulation measures, which is equivalent to 10% of the £800 million scheme budget earmarked for this group. This reflects that households in the group will generally have higher incomes and be able to contribute. Any contributions will in practice be a matter for agreement between the customer and the installer, reflecting the measure’s type and property issues.

For the purpose of the home-heating cost reduction target, should a participant elect to go beyond the minimum 20% for the low-income group, would the general group be significantly more burdened by the total contribution required? For example, if, across all providers, the general group averages only 40% of the overall makeup, which I understand is unlikely but a possibility, is it correct that this group would then be required to double their joint contribution to the £80 million home-heating cost reduction target, compared to if it made up the maximum of 80%?

Domestic premises cannot receive more than one insulation measure under the Great British insulation scheme. As long as it is installed on the same day as, or after, the insulation measure is completed, owner-occupied premises in the low-income group can also receive heating control measures under the scheme. The heating control measures must be completed within three months of the insulation measure.

The majority of responses to the consultation addressed the fact that private rented sector households are ineligible for heating control measures, or for cavity or loft insulation, if they are in the general group. These measures are excluded as landlords have responsibilities to maintain and improve their housing. Is that a good enough reason? Why is it acceptable for lower-income households to have to choose between unaffordable bills or a lack of heat because they are renting, if their landlord is not adequately improving their property? For clarity, if a participant offers a combination of an insulation measure and heating control measures to either a household in the general group or a non-owner-occupied household in the low-income group, would the cost be expected to be apportioned between the scheme and the payer or would that not be a feasible option?

Another aspect of the instrument is targeted encouragement to support the development of innovative products and installation techniques. This is of course welcome. Has any assessment been made of the potential impact of this encouragement? What counts as an innovative product or installation technique? Perhaps the Minister can enlighten us on that.

The 2021 Sustainable Warmth strategy announced plans for the expansion of ECO to run from 2022 to 2026, with an increase in value from £640 million to £1 billion per year. This obligation is expressed in terms of outcomes, not expenditure. The obligation is for notional annual bill savings of £224 million to be achieved by 31 March 2026. Part 10 of the instrument amends the 2022 order. Most of the changes are made to enable heating measures that are of benefit to ECO4 households in achieving annual cost savings, and reducing their overall energy bill, to be installed in a wider range of circumstances.

Labour’s warm homes plan would upgrade the energy efficiency of about 2 million homes per year. It would upgrade all 19 million homes that need it and help families to save up to £500 on their energy bills. The target of 315,000 homes under this scheme does not really compare. Do the Government accept that this is a drop in the ocean of what is needed? As part of the Labour green prosperity plan, the warm homes plan would give families the grants and loans they need to upgrade the energy efficiency of their homes, cutting their energy bills and emissions. Labour’s national plan would save households £500 a year, cut national gas imports by up to 15% and create over 206,000 full-time equivalent jobs in retrofitting industries.

Climate: Behaviour Change (Environment and Climate Change Committee Report)

Baroness McIntosh of Pickering Excerpts

Wednesday 7th June 2023 Grand Committee

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate the chairman and those who served on the committee on their excellent report and their work, and the experts who contributed. I declare my interests on the register—mostly that I am honorary president of National Energy Action. The noble Baroness, Lady Parminter, ably set out why the report is so important—the need to change behaviour and especially how we heat our homes, what we eat and how we can, I hope, rely on government advice to help us in that regard. I am not asking my noble friend to take up the role of nanny, which would not be welcome, but the Government should provide certain parameters.

I should like to draw some parallels with water. After the terrible floods of 2007, where surface water appeared substantially for the first time, there was the Pitt review. Most of its recommendations have been implemented, though not all. There was the Kay review on competition, which was brought into effect—apart from the recommendations on household competition. Then there was the Walker review. Perhaps because she was the only woman to have contributed to this trio, nothing ever happened about its proposals on water efficiency. The link between water efficiency and energy efficiency is close and I hope that it will come out of this report on an ongoing basis. However, it was disappointing that that issue was not progressed at the time of the Walker review.

The chairman of the committee and others have referred to transport, particularly the noble Lord, Lord Birt. I am not going to change any time soon to an e-vehicle because there are simply no means of charging it in rural parts of the north of England. We must address—my noble friend Lady Vere was kind enough to reply on this—the dearth of power points in rural areas. The other confusion on the part of manufacturers is: why should everyone be encouraged to change to electric vehicles when, at the same time, we are told that hydrogen is coming on stream? Which is it? As an MEP, I was heavily involved with the car industry when it made a massive, world-changing investment in diesel. Now we are being told that from 2030 we can no longer buy petrol or diesel cars.

I should like to refer briefly to electricity companies behaving badly. The unit charge we can control but the standing charge that goes to the distributors is something over which we have no control whatever. I hope my noble friend the Minister will look closely at the fine of £9.8 million imposed on SSE by Ofgem for overcharging the National Grid at a time when it was asked to produce less electricity when it should have been clear, as Ofgem said, that SSE was violating its licensing conditions. That is unacceptable. We each are paying 3% on our electricity bills for renewables. If the electricity companies are going to behave badly, that is not good enough.

I welcome the fact that the Government are looking to have more food produced locally, especially food meeting high environmental and animal welfare standards but, please, can these be reflected in international free trade agreements? Currently they are not in the agreements with Australia and New Zealand.

To conclude, we need clear guidance for waste collection and all these other issues to achieve the core theme of the report—behavioural change is in our hands—but with a clear steer from the Government.