Baroness Worthington
Main Page: Baroness Worthington (Crossbench - Life peer)Infrastructure Bill [HL]
Baroness Worthington Excerpts
Baroness Maddock
My Lords, I support the noble Lord, Lord Cameron, in looking at community heating. I recommend that he looks at the district heating scheme in Southampton set up many years ago. I was a councillor at the time. Alan Whitehead, the MP there, and I set that up together. Barratt Homes put a new block of flats on to that scheme. We are going back nearly 20 years, but those schemes work.
There is a housing estate in Pimlico that still has a district heating scheme. I live in a flat in Dolphin Square when I am here and am really sorry that the owners of the square came off that scheme. Ever since, we have had gas boilers. Sometimes we do not have hot water. That never happened under the district heating scheme. Those are two schemes that have been successful. I wish the Government would use some of these examples to encourage other people to take this scheme up, as it works. People used to say that it was very difficult for the reason the noble Lord gave—they want their own boiler. However, it has been done successfully and where people have it, they are very satisfied.
Baroness Worthington (Lab)
My Lords, when you have had such a rich and excellent debate, you find yourself in the position where everything you were going to say has been said before you by very eminent and noble people. I thank everyone for their contributions to this debate.
We are very supportive of this amendment in principle. I look forward to hearing from the Minister some, I hope, positive words about how the Government will take this proposal forward in principle and introduce it into the Bill during its passage. It is clear that, when we look at the Infrastructure Bill as a whole, this area represents something of a missed opportunity under this Government. Of the pipeline of infrastructure projects in the UK that the Treasury has collated into its Excel spreadsheet, more than half are energy projects. It is the single biggest sector in terms of the value of projects in that list. Energy is central and fundamental to any infrastructure policy. Yet here we are with not very much in the energy part of this Bill to start with. A few amendments have been added but this is really a missed opportunity to set out a very strong and strategic direction.
I am sure that the Minister will point to the fact that we spent much of last year talking about energy in the energy market reform package but that is still being implemented. On Thursday, we meet to discuss some of the detail of the statutory instruments and there are still significant issues that were debated during the process that are unresolved. I would argue that energy efficiency is one of them.
I am delighted that the noble Lord, Lord Deben, raised the fact that today we saw the Government finally remove the question mark hanging over the fourth carbon budget. It was a recommendation from the Committee on Climate Change that was accepted but a rather insidious caveat was inserted that it would be subject to review. This has been hanging over the carbon budgeting process for some time. Today we saw final clarification that the fourth carbon budget will remain as drafted, as it is in law, and will not be subject to review. That is a very good thing. I particularly extend congratulations to the noble Lord for the work that I am sure he and his committee did in trying to ensure that the Government saw logic on this issue. I also commend the Government for listening to logic and ruling out any changes to that fourth carbon budget.
However, as the noble Lord pointed out, this now has quite serious implications for policy. The first implication is that we must—must—secure a 40% greenhouse gas reduction target in Europe if we are to have a chance of meeting our targets in the traded sector. In the non-traded sector, which means the heat market and the transport market, we will have to up our game significantly and improve the energy efficiency of our transport and heat networks. That is really the nub of this amendment. For too long, we have ignored those essential components of energy policy. How we heat our buildings, homes, offices and industries and our transportation have been sidelined in favour of big glamorous projects in the power sector. There has been—although I hope it is shifting—a perception in the department responsible for energy that real men build power stations. I have heard anecdotally that there have been posters to that effect in certain parts of the department. I hope that they have now been expunged. We have women in that department now, which is great, and a new member in the shape of Amber Rudd who I am sure will contribute greatly.
Energy is not just about cutting ribbons on large projects. It is much more complex than that. It involves massive amounts of infrastructure, which extends all the way to the buildings, housing, homes and roads that we use to transport ourselves and to live and work in. Those aspects of infrastructure should be front and centre in any infrastructure project. It will have escaped no one’s attention that energy security and reducing our reliance on imported energy are of huge importance, particularly in current times. The most sensible way to do that is to reduce the amount of energy you need to use in the first place. That is why energy efficiency is now receiving far greater attention at European level and why we in the UK should similarly up our game on this aspect in meeting our carbon budget and in helping people to occupy, live in and work in buildings that are fit for the 21st century. I see this as fundamental to the question of infrastructure. How we transport ourselves and what we live in is part of our infrastructure. It ought to be in the Bill.
There is another important point. My noble friend’s amendment covers existing infrastructure and new infrastructure. It is important that if we are embarking on this large programme of infrastructure spend, we do so wisely with energy efficiency front and centre in everything we do. This amendment is not simply about retrofitting existing infrastructure. It also requires us when we are embarking on infrastructure projects to think carefully about the energy efficiency of those projects.
People might be considering how we make this real and what energy efficiency looks like. I have three examples. I mentioned our housing stock: we have among the worst housing stock in Europe. It is appalling that a country of our wealth and history should have people living in fuel poverty in damp and unheatable homes. This has to be stopped. We have to make sure that our housing stock is upgraded to give us warm and healthy homes to live in. It is not just that. There are also large swathes of commercial and retail buildings that could be re-engineered to become smart buildings and upgraded so that they use energy wisely and minimise the amount they use.
There is also lighting. There is huge potential for reduction in emissions and energy demand from lighting from the new LED lighting that is coming on board. When we are building roads and extending infrastructure, we should be planning to have the most efficient and up-to-date technologies that will save us money in the long run.
I do not want to detain the Committee any longer. This has been an amazing debate—I thank all noble Lords for their contributions. I am very much looking forward to the Minister’s response. I hope that before the legislation reaches the statute book, we will see a positive response to these amendments.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I agree with the noble Baroness that this has been an excellent debate. Everybody has spoken with great passion. Each and every one of us shares a common approach to making sure that we deal with energy efficiency in the round, not just for people in fuel poverty but as a commitment from our country to our carbon targets. Before I respond to the amendment moved by the noble Lord, Lord Whitty, I shall put on record for my noble friend Lord Deben and the noble Baroness that some of us are not playing with boys’ toys and are not interested in them but have spent a lifetime making sure that the subject that we are so passionate about is properly addressed. For those who like wearing helmets, good luck to them. I am just not one of them.
Baroness Worthington
Baroness Worthington
The amendments in this group are essentially probing in nature to allow us to debate in more detail the one part of the Infrastructure Bill that touches on energy. It is worth reiterating that I find it curious that there is not more interest in the energy aspect of infrastructure and energy efficiency when more than half of the projects in HM Treasury’s pipeline are energy related; the biggest sector by value is energy. Even so, when this Bill was published it had only a few clauses related to what is in reality only a small aspect of policy, which is the community right to buy. The next business tabled by the noble Lord, Lord Jenkin, will allow us to have a slightly more principled debate about whether this is the right approach, while these amendments seek to elicit from the Government a little more clarity on what the thinking is.
It is clear that other countries have pursued the community ownership of energy far more effectively than we have. We need only look to Germany where there has been a huge uptake of renewable energy projects across all parts of the economy; a large proportion of them are community owned and backed. The Germans have had a far more successful experience of deployment of renewables as a result, and it is clear that this is something which needs to be explored. I am sure that other noble Lords have received various briefings on this aspect which make it clear that there are lots of different ways of securing community involvement ranging all the way from sole community ownership, whereby a community forms a co-operative or group of which it is the operator and investor, to the other end of the spectrum, which might be some kind of mandated share or stake being sold to the community. It seems that with these enabling regulations, the Government have decided in their wisdom to select just one of those options, and that is the right to a stake in renewable projects.
The first amendment, Amendment 94AA, is clearly probing in nature. We understand that if it were to be accepted, a great many consequential amendments would be necessary. The reason we tabled it was to explore with the Government why it is that community renewable projects are being singled out for this measure. In the future, renewable energy will cease to be a term because it will be integrated into energy as we know it today. A whole host of technologies are hidden behind the term “renewables”, but renewables themselves are no different from other forms of energy: they produce heat that keeps our businesses and homes running by providing power for our communities. Over time, renewables will need to stand on their own two feet and be integrated as a normal part of how we produce electricity and heat. Yet here we have a set of provisions that single renewables out as some kind of special element which needs to be governed in a certain way under a series of quite complex procedures. I find it deeply regrettable that this is not about making community energy work. It is more about providing Tory MPs and candidates with a nice soundbite to use on the doorstep: “Don’t worry. If there is a renewables project you don’t like, we will force them to sell some of it to you”. This feels like a rather cynical and quite narrow way of tackling a hugely important issue.
I do not want my speech to be interpreted in any way as being against community ownership or community involvement in renewables, and certainly I do not want it to be seen as being against renewables, but I am slightly disappointed and curious as to why the Government have selected such a narrow piece of legislation to push forward in this Bill. Amendment 94AA asks why renewables are being singled out. There will be other forms of community energy that are not from renewable sources, and this provision could apply to those as well. Why does it apply only to renewables?
The second amendment, Amendment 94AB—this touches on the debate that has just gone—opens up to community ownership projects that will reduce our demand for energy and our carbon emissions through energy efficiency, demand reduction and demand management. We have just had a lengthy debate about how the demand side of this always gets overlooked. However, here we are again, with precisely the same thing happening and renewables being singled out, but with a complete blind spot when it comes to community involvement in the infrastructure of our community and how our houses, buildings and communities are made more energy efficient. This is a huge oversight because, in reality, those energy efficiency projects will be far more successful, stand on their own and give payback periods that are probably shorter. That would excite a community and get it involved. They are also likely to need the involvement of the community because they might involve multiple sites. I can see no reason why Amendment 94AB should not be part of government thinking on this. I will be very interested to hear what the Minister will say in response.
Amendment 94AC has a similar theme. Here, we are just probing to find out why the Government’s guidelines initially indicate that the technologies classed as renewable in this case are solar and onshore wind. We do not see why offshore projects and offshore renewable projects could not be included if they are near to coastal communities. If coastal communities look out on to a wind farm, why should they not also be part of it? They could also be involved in wave and tidal projects. Is offshore not considered to be part of that and, if not, why not? We strongly suggest that it should be as inclusive as possible on all projects.
Amendment 94AD is another probing amendment to find out the Government’s view on whether facilities can be exempted and on what would be accepted as an exempted facility. I would just like clarification about what circumstances would mean that a facility would be exempted. Amendment 94AE is about the age qualification for this right—again, simply to probe and receive more information. It is quite an enabling set of regulations and we would like a bit more detail.
Similarly, the final amendment, Amendment 94AF, is to just test whether charities—I think it is fair to say that, under this Government, charities have felt slightly hard done by in recent times—are eligible to be part of this and whether they are classed as a community group and to ask for clarification on that. There are a whole range of amendments here, and I would like responses from the Minister on all of them. If she is unable to give them now, perhaps she will be kind enough to write.
The most important point I want to get across is that we have a massive opportunity here to move towards a much greater degree of community involvement in renewable energy and, indeed, in energy in general. That way, people will appreciate more what goes into creating energy, where it comes from and how they can make money from their involvement, thereby generating excitement. There is a whole raft of things that the Government could have done to make that happen. We want to see it happen because we want to see how we can match what Germany has done in terms of community engagement and up the rate of acceptance and deployment. This part of the Bill does not do the job, and we have serious concerns about it. I think we will be able to go on to debate that in a little more detail in the next group, but I look forward to the response to this group of amendments. I beg to move.
Lord Teverson
This is a major step forward. It is a very positive step. I have sympathy with the amendment, but at least this enables us to get on and start down this road. If we find out how to make it work, we have opportunities to broaden it out. However, there is a question about why we are restricting it to the energy field. What about putting up a housing estate or a multiple retail store next door? The same argument applies.
Baroness Worthington
The difference is that we are going through something of a transformation from a situation where we have a limited number of generators dotted around the country, often in the most far-flung places, so that people do not have to engage with energy, and are shifting to a much more diverse, devolved and distributed system. Therefore, we have, as is widely acknowledged, political issues about managing that transition. That is the difference.
Lord Teverson
As I said, I am sympathetic and understand that. However, that is also true of other parts of the economy. and I am just making the point about how far one could extend the argument. I hope that we can prove that this works, although there is still quite a challenge, and I have an amendment on some bits of it later on. At this point, I just want to say that it is an excellent initiative and that at least we are on the first few steps of this process, even if we do not get perfection straightaway. I fully understand the points made by the noble Baroness, but this is a great start and we should get on with this, prove that it works and move on after that point.
Baroness Worthington
My Lords, I thank noble Lords who spoke on this amendment and the others in the group. I thank the Minister for her response. I cannot say it has done much to assuage my cynicism. I feel that this is more to be used in leaflets on doorsteps in Tory constituencies than anything else. That said, I understand and am grateful for the detailed responses.
This feels a slightly too restrictive interpretation of what we want to achieve with community engagement. I fear that it is slightly motivated by a desire to make renewables seem like a very special case and that there is something about them that is inherently difficult which you have to live with on your doorstep and therefore you will be given a special right which does not apply to any other type of energy project. I do not know that that is necessarily going to be a good thing.
The noble Lord, Lord Teverson, made a valid point about how far you go with this right to buy. I do not quite share his logic in saying that this might not be perfect but we should get on with it. This is so far from perfect that I am not sure that that logic applies.
I am very grateful for the responses. I will follow with interest whether charities end up being included on the list. I am sure that if they are not other people will be reading Hansard with great care and will follow up on that issue in particular. I do not follow the logic of the Government’s approach: “We have said it this way; therefore it has got to be this way”. There was a circular logic in some of the answers: “We have not included energy efficiency; therefore we cannot include energy efficiency” and “We do not think it should apply to offshore; therefore it does not apply to offshore”. Those are not principled responses because they just say, “This is what we are currently doing and therefore we are legislating to do what we are currently doing”. That is not necessarily the right approach.
Baroness Verma
My Lords, I have said that there will be times when formal consultations are held, so it will be useful to wait and see what the results of those formal consultations are.
Baroness Worthington
I thank the noble Baroness for that, and indeed it will be interesting to see what comes back from stakeholders and whether offshore generators will accept that this is a necessary provision. It feels like this is less about securing community engagement and more about trying to send a message along the lines of, “We know that renewables are really difficult and we are sorry. We will try to do something about them”. Anyway, I look forward to the debate on the next group of amendments.
Lord Teverson
I am absolutely fascinated by the political analysis because I see this as something completely different. I do not know whether what the noble Baroness is saying suggests that this is good or it is bad. I do not think that it is some sort of Conservative move to persuade electors. Let us be quite clear: certain parts of the coalition want to stop onshore wind in its tracks. That is not the case for the whole of the coalition, but for some, and this is not an answer to that. This is a way of making it a positive thing and moving forward the programme of changing some of the ways that it works. This does not seek to give up, it tries to make it something far more workable. There is no greater advocate of wind power in the countryside than I. I revel in the fact that I can see at least 50 turbines from my house, which luckily for me is on the top of a hill where it is windy—but without a turbine.
We know that certain people and communities are quite legitimately concerned about these issues, so this is a way of involving them and giving them part of the benefit of the schemes. I do not think that it is at all cynical. If we could push things further, I would do that as well, but even so the political analysis is wrong. It is a positive development and if it is successful, it will inevitably be rolled out more widely. I agree that there probably are issues around shale, possibly more around exploration than production, but again there is something cynical in this political analysis. We all understand where cynicism comes from, but in this instance it is absolutely wrong. I am not talking about the dynamics of the two political parties which make up the coalition, but the dynamics of the coalitions between different government departments, along with other things. As is the case in all of politics, it is a broad church. This is a solution that will start things off. I want to reject all this cynicism.
Baroness Worthington
I thank the noble Lord for attempting to reject my cynicism. We know that there is an issue with the coalition Government. We know that one department is pushing renewables while another department is calling all the renewables projects in and objecting to them. I do not think that I am being paranoid in saying that there is a problem in the signals being sent to investors in renewable energy projects. It is quite apparent in the statements being made by different Ministers.
Baroness Verma
My Lords, I apologise. We should move on to the next group. However, I want to clarify that it is healthy to have these debates. The noble Baroness’s own party is also having them. To make this into a political debate is, I think, wrong, because the underlying premise of the noble Baroness’s amendment is what we are all trying to achieve—greater community engagement.
Baroness Worthington
I do not dispute that. I say again that I have nothing against community engagement—in fact, I positively encourage it for all the reasons the noble Lord, Lord Teverson, has outlined. As I said, it clearly helps people to move forward with renewable energy. I am simply saying that this approach is very narrow and that it inevitably puts an administrative burden on to a certain class of developers which does not apply to other developers. That is my concern. I am sure that we will talk about these issues in the next group of amendments. I do not think that I am wrong to express a healthy degree of cynicism and I am glad that I tabled these probing amendments so that we could have this debate. It is now on the record, so let us see how we get on. I am sure that it is something which will evolve over time. I beg leave to withdraw the amendment.
The Duke of Montrose (Con)
My Lords, I have considerable sympathy with what my noble friend Lord Jenkin has said, but I wonder if I might be allowed to introduce a small element. This is the first clause we have considered on the question of energy generation, and it also happens to be the main clause in the legislation that will apply to Scotland. Moreover, I always keep an eye open for this particular subject. Can the government ministerial team tell us at what stage it expects the legislative consent Motion to be dealt with in the Scottish Parliament to make sure that what we are passing here will apply to all parts of the United Kingdom?
Baroness Worthington
I thank the noble Lord, Lord Jenkin, for a characteristically thorough, thoughtful and detailed speech on this very important issue. I hope that if I attain his high level of expertise, I will be able to make similar speeches during my time in the House of Lords. I look forward to the Minister’s response. Some very important points of principle have been raised. Indeed, we aired some of the same concerns when considering the previous group of amendments. I support the noble Lord, Lord Jenkin. He sought to point out that essentially this feels like a solution in search of a problem. There is a predetermined view which says, “This is what we want to do, so now let us do it”, on not a great deal of evidence and the potential to send a rather unfortunate message to an industry that should be encouraged to expand. Given the Government’s usual approach to regulation as reflected in their Red Tape Challenge, which insists that if a new regulatory burden is put on an industry another one should be taken away, can the Minister tell us which of the renewables industry’s current regulatory impediments is going to be removed in order for this to be introduced? This is an impediment on industry. I am very grateful to the noble Lord, Lord Jenkin, for quoting Ofgem. That confirmed the fears I had. How is this to be administered? Will it be able to be enforced? What are the costs involved in doing this? Is it justified by any evidence that there is a problem that is not being addressed through the much more flexible, creative and, I hope, successful voluntary approach?
I strongly support the noble Lord, Lord Jenkin, and his opposition to the clause, which I am sure is designed to elicit reassuring comments from the noble Baroness that this is not a straightjacket that the Government are rushing to introduce and that we can take some time to get this right.
Baroness Verma
My Lords, I am extremely grateful to my noble friends Lord Jenkin and the Duke of Montrose, and to the noble Baroness for her contribution. This debate on Clause 26 allows me to lay out why we consider that what the Government are doing is absolutely the right approach. At the same time, I will address the matter of my noble friend’s Amendment 98AB, which seeks to delay commencement of the provisions by two years.
As we all agree, shared ownership is a key way to galvanise support and acceptance from local communities. That is critical for the future of the renewables industry. I have said previously that this Government have set out a logical and sensible approach to achieving that, first, through a voluntary means. Then, only if that is not successful, would we consider bringing forward legislation—and that only following a formal consultation.
With that in mind, I will respond to the points that my noble Friend Lord Jenkin raised today. First, I do not agree that the Government do not trust industry to deliver the voluntary approach. As I said before, the Government have set up an industry-led task force to drive an increase in shared ownership. We hope and believe that shared ownership will be achieved in that way. If we do not trust industry, as my noble friend suggested, why would we have set up a task force in the first place? I welcome the fact that the Shared Ownership Taskforce is—
Baroness Verma
I am grateful for my noble friend’s intervention but reiterate that we are working closely with industry. That work, through the Shared Ownership Taskforce, is going well. We commend the publication of its draft report. However, it would be naive to expect all those in industry to welcome this with open arms. Taking legislative powers has helped bring this matter to the forefront. The possibility of legislation has encouraged industry to take this matter seriously and provide the commitment necessary for the voluntary approach to succeed. The Government’s firm view is that the backstop powers are needed precisely in order for the voluntary approach to work. It is basically a call to action.
My noble friend made the point that there is nothing stopping Government legislating, even if the voluntary approach works. I would like to be absolutely clear that that is not our intention. The backstop powers would be exercised only if the voluntary approach does not succeed. In determining success, we will be guided by the task force and the outcome of its review in 2015. The Secretary of State for Energy and Climate Change addressed the task force to reassure it on that point. In addition, he provided further reassurance that, in order to give sufficient time for the voluntary process to take effect, there was no intention of exercising any power before 2016, if at all. In the Queen’s Speech debate in the other place, he reiterated this point:
“Since we are pursuing a voluntary approach, the power in the Bill is a back-stop. The community energy sector was clear that the voluntary approach should be given a chance to succeed, and I agree”.—[Official Report, Commons, 5/6/14; col. 139.]
Baroness Worthington
This reminds me of a debate that we had on the Energy Bill, where there was a similar backstop measure. On the decarbonisation target, for example, we were asked to accept a form of wording that said it could not be set until 2016. Perhaps something like that could be formulated for this Bill to give people reassurance that the intention is that it will not be done until 2016.
Baroness Verma
As with all things, I listen with great care and will, of course, having done that, discuss this with my officials. If we can improve the writing of legislation, I am always happy to look at that. However, I reiterate that this is basically a backstop power. We expect industry to deliver, but let us not be naive: there will be parts of industry that do not and will not, and we therefore need to have that measure in place. Finally, exercising this power would, of course, be subject to affirmative resolution procedures and would therefore require the consent of both Houses.
The Delegated Powers Committee’s view is that these provisions are not inappropriate, in particular since they provide for the affirmative parliamentary procedure to be used. The committee hoped that we would provide as much information as possible on the shape and content of secondary regulation, and we are currently considering what we can do to satisfy this. As I am sure my noble friend is aware, when I am asked by the Delegated Powers Committee, I try my level best to ensure that as much information is available to it as possible.
I have spoken previously about the importance of not prejudicing the models coming forward through the voluntary approach and the outcome of any formal consultation. It is for these key reasons that we have not set out the finer details of implementation within primary legislation. However, I take on board my noble friend’s concerns and hope that I can offer him some comfort. We are currently considering the recommendations of the committee and, in particular, whether we can provide further briefing on what any secondary legislation might look like. The Shared Ownership Taskforce is due to publish its final report in October. Following that, we could consider how its final approach influences the details of implementation, but going any further than this now could prejudice the outcome of the task force’s consultation, which we would be loath to do. I hope to provide an update to the Committee on this matter before Report.
The amendment proposed by my noble friend would introduce a two-year delay to the commencement of these provisions, which I do not believe is the right approach. I will set out a few reasons for that. First and foremost, the current timescales associated with the voluntary and mandatory approaches are aligned. The policy as a whole creates the right impetus and drive to achieve our objective of substantially increasing shared ownership from next year. The potential to introduce backstop powers is intended to nudge industry to ensure that the voluntary process is sufficiently robust, but it also sends a very clear signal that we want to see offers to communities being made on the ground from 2015.
By contrast, the approach proposed by my noble friend would mean that when the voluntary approach is reviewed in 2015, if it were found to be unsuccessful, it could be at least until the end of 2017 or early 2018 before the powers could come into force. This would follow a formal consultation and the development of secondary legislation which is inconsistent with the approach set out in the community energy strategy.
Baroness Worthington
Will there be any regulatory deregulation on the renewables industry to compensate for these new regulatory powers? What are the administrative and cost implications of this for how we are going to police and monitor it?
Baroness Verma
I apologise for not being able to respond to the noble Baroness. I had a note to say that I would be writing to her because it was a detailed question. I will ensure that Members of the Committee get a copy.
I hope that I have been able to reassure my noble friend Lord Jenkin as to why Clause 26 should stand part of the Bill and convince him that delaying commencement of these provisions is not the right approach.
Baroness Worthington
Baroness Worthington
My Lords, this has been grouped with a similar amendment from the noble Lord, Lord Teverson. It concerns the one and only bit of finer detail that we see in these clauses. The Minister has just said that the Government did not want to do anything that prejudiced the findings of the task force and that they were having a consultation. A lot of helpful information has been provided, but if we are intent on not prejudicing the voluntary approach, the outcomes of the task force or the consultation and do not wish to bind ourselves with finer details, why do we see in this Bill a figure of 5% for the stake being taken in these projects? This amendment asks that question. I beg to move.
Lord Teverson
My Lords, I am rather encouraged that there has been some detail from the Government on this point, and I welcome it. However, I want to understand a little better why this particular percentage has been chosen. My noble friend the Minister held an excellent meeting with us to go through the principles of this part of the Bill. I thought that the figure of 5% must be a minimum amount, but it actually means that it cannot be exceeded. Once you work your way around the language in which the Bill is written, you see that it means the exact opposite of what you might have thought; that is, when the regulations are produced, the minimum percentage that a company must offer should be no more than 5%.
Amendment 94AH is a probing amendment and I am not saying that my suggestion is right, but what concerns me is that if we adopt the attitude—which I do—that it is essentially to put a backstop around the hope that the voluntary schemes work, as my noble friend Lord Jenkin has so strongly advocated, in the end we must make sure that if they do not work, there is a way of ensuring that this style of ownership of these projects can move forward. Yet what we have here, or at least as far I can see in theory, is a provision which will allow the regulations to provide that the minimum should be 0% or 1%. It seems to have the potential to undermine a scheme in that companies could offer very small amounts. I have tried to change the provision by suggesting some more sensible language for it. There should be a straightforward minimum of something like 5% and possibly a maximum of 25% in terms of what the Government’s recommendation should be. Again, I say this within the context that if the public do not want to take up the offer, they will not do so and the whole amount will not be taken up, so the percentage would not be so high.
On the other hand, I can see that allowing too high a percentage as a maximum, if it were taken up for certain kinds of renewable scheme, could involve a very large sum of money—well beyond the ability of a community to meet it. I think that this should be written down in a much more positive way so that we do not have something that must not exceed a minimum. We should have a minimum and a maximum. I have explained this incredibly badly and I should have worked it out before I started to speak, but I think that that is illustrative of how this part of the Bill is written. I apologise to the Committee.
It may not be possible for the Minister to respond to my next point in detail, but I shall ask her about it anyway. There are very strict rules indeed covering the ability of companies to sell shares in their organisation to unsophisticated investors. The Financial Conduct Authority has all sorts of rules around it. I would like to understand how the Government see that important financial legislation working in this instance so that it does not become too burdensome for the energy companies to offer such financial investment opportunities and high barriers are not put in place that would prevent members of the community from actually signing up. I am myself a member of a community energy scheme and it is terribly straightforward. I presume that there may be limits on this and I am interested in understanding how we are going to make sure that it will be something of which individual members of a community can take advantage. The regulatory burden should not be too burdensome on renewable energy companies; it should help them not to transgress against the various rules of financial conduct.
Lord Teverson
I thank the Minister for that reply. Again, I apologise for having explained my amendment quite so badly. I accept the point about a special resolution within company law but that would require a block vote and I just do not see that happening. I think that it can be responded to by perhaps having in regulations a maximum individual shareholding. Also, it is not as if this is an IPO. If a certain number of shares are offered, it is not death for the company if they are not all taken up. They can be taken up by other investors, such as perhaps institutional investors. I do not see that as being a problem in this particular case. However, I understand that the numbers I have suggested are not exactly right, and indeed I welcome the fact that we are bringing this forward in any case. I will not press my amendment.
Baroness Worthington
I thank the noble Baroness for her response and all noble Lords who have contributed to the debate. Obviously the schedule to which these amendments apply provides quite a wide range of what a stake equals. It does not always mean that someone is taking shares in a company. It is not always going to be the case of a company owning the individual project. In fact, I am sure that what will be more common is very large companies having to create new instruments for individual projects, which will then enable the community to take part in them. I hope that the fears expressed by the noble Lord, Lord Cameron, would not be an issue of great concern in practice.
I still think that it is quite odd that in such an enabling piece of legislation which is meant to be a backstop for a voluntary approach, we have quite a prescriptive definition of the level of the stake. It is clear from the schedule that many other aspects of what that stake is are completely open and flexible on what might be included, and yet here we have the figure of 5%.
I am always nervous when I see numbers like that in primary legislation and I just hope that there will be sufficient flexibility so that it can be reviewed if necessary.
I do not want to reopen the debate, but the very fact that you need to create comfort and certainty for this class of investors in infrastructure indicates that this is not something that they are embracing with open arms—not because they do not want community involvement but because they fear that the Government’s approach is too limited and inflexible to give them the range of possibilities that they want. However, I am very happy, on the basis of the Minister’s response, to withdraw my amendment.
Baroness Worthington
My Lords, I thank the noble Baroness for her introduction to the government amendments before us. I shall speak to Amendment 95ZAA tabled in my name and the other amendments grouped with it. The Wood review was a very interesting document. I think that the noble Lord, Lord Jenkin, has alluded to the fact that we are now in the endgame of a 40-year period during which we have been very blessed with an industry that has been able to deliver in a safe and secure way the volumes of oil and gas that have powered our industries and made our way of living possible. It has underpinned everything we do. However, let us be in no doubt that we are coming to the end of that golden era and obviously a lot needs to be decided about what to do next.
We have the Wood review, which is a great report and to be massively commended for having only four recommendations; that is always easy to get your head around. However, the executive summary tells us the story. We have had the equivalent of 42 billion barrels of oil from the North Sea. There are now possibly only another 12 to 24 billion barrels of oil equivalent left. It is clearly a depleting resource. It is common knowledge that it peaked 15 years ago. As a result, we now see our economy being affected. Our ability to raise tax has been severely impacted by this and it has changed the revenues that we see. In fact, the Wood review makes clear that in 2013 the steep decline in productivity of this resource led to £6 billion less in tax receipts. That is not a small amount of money to try to make up. I can see perfectly why there would be a desire to extract the last barrel in order to get every drop out. This is a problem which faces us all as a community. As UK plc, it has been such a big part of our tax receipts over the past 30 to 40 years.
In the context of the Infrastructure Bill, does the implementation of the Wood review’s recommendations give us a strategic direction? Does it show that the Government understand the nature of the problem and are preparing us for the future? I would argue: not yet. There is clearly a need to implement these findings. I should state that being able to provide our own oil and gas as opposed to importing it from far-flung places is obviously of benefit in terms of security of supply, broader geopolitical stability and carbon emissions. Carbon emissions have been well regulated. Indigenous production of the fossil fuels that we still need to use will emit lower levels of carbon than importing over long distances from different parts of the world where the regulations are not governed by us and we cannot be certain of the carbon footprint.
None of that is to say that we should not do this, but because of where we are today, we need to think of the future of the continental shelf and what it will deliver for us in the next 40 years. It is quite clear that if we are to benefit from a new industry, it will be carbon capture and storage. In fact, it is mentioned in the Wood review. The purpose of tabling Amendment 95ZAA is simply to put in the Bill the recognition that we are in transition and moving to a new era where no matter how much we skirt around it, the oil and gas are running out. That problem is not explicitly stated or put front and centre of the Wood review, for probably good reasons. However, the issue is not that it is a fractured and small industry with 300 wells and a number of different companies. It is just that the resource is dwindling. We can make ourselves more efficient and increase the rate of extraction, but it will not be around for ever.
It is important that the Government of the day should realise that we need to start investing now in what will be the future industry. Carbon capture and storage provides us with a potential source of revenue and a very important tool in the armoury of the low-carbon economy. We know the Government are committed to that, but we would like to see more emphasis being placed on it. In government, we certainly would put that emphasis on it because it is fundamental to our industrial strategy for the UK. There are many ways to produce low-carbon electricity, such as nuclear or renewables. There are not that many way to produce steel, chemicals or cement if you exclude carbon capture and storage. It offers the potential to enable us to fully decarbonise our economy without at the same time de-industrialising and losing those heavy industries to other parts of the world. The key to that is ensuring that we have the infrastructure in place that enables us to build carbon capture and storage technology. I have tabled Amendment 95ZAA merely to raise the issue and ensure that government thinking is in line with this analysis and that there is a recognition that carbon capture, transportation and storage will be a big part of our infrastructure going forward.
The other two amendments are very much probing in nature and relate to the broader question of whether maximising economic recovery is compatible with our climate change commitments. As I said at the start, I am absolutely clear that there are carbon benefits to indigenous supply, and this is not intended to go against that. However, it is also of concern to people that we often hear rhetoric such as, “Well, if we don’t develop it, we’ll be buying it from somewhere else and that will be a negative thing”. That is only true in so far as the carbon footprint of extracting the asset is lower than if it comes from overseas or other sources. There is nothing inherently lower carbon about extracting the last drop of oil from the North Sea. It may well be the case at the moment, but it might not be in the future. We want to make sure that we are not ignorant of the fact that we are going to have to shift to a low-carbon economy and that there will come a point where oil and gas have to be left in the ground.
We know from the Intergovernmental Panel on Climate Change that we have roughly a 3 trillion tonne international or global carbon budget and that around half of that has already been emitted. At the rate we are going, the remaining half of the budget will be fully emitted before 2040, which is not that far away—and that is to have a safe chance of staying within a 2-degree increase in terms of global warming. At some point the oil and gas industry will have either to commit to full carbon capture and storage of all its emissions or accept that a large proportion of the oil and gas will have to stay in the ground. The reason for tabling these amendments, which as I say are very much probing amendments, is to elicit some comments from the Minister about the longer-term vision and whether we accept and acknowledge that there will come a point when our global carbon budget is exceeded and we need to do things very differently.
Amendment 95ZAC is designed to try to tease out some of the recommendations of the Wood review in a bit more detail. We understand that this is enabling legislation but we felt that it would be good to be provided with a little more detail and some assurances that the Wood review’s recommendations will be introduced.
The last amendment in my name in this group is Amendment 95ZBA, which relates to an aspect of these clauses that the noble Baroness has touched on; namely, the payment of the new regulator. We fully support the idea that this should be an arm’s-length regulator in due course and that it should be funded from receipts from industry. We have tabled this amendment simply to require the Secretary of State to report on when the regulatory body will be fully funded by that levy.
These amendments explore an area which is now the subject of a very important debate. As I have said, we have had 40 years of access to an amazing resource that has led to countless millions and billions of pounds being ploughed into our economy, many thousands of jobs being created and various successful industries being born off the back of it. Those days, I fear, are drawing to a close. There are new ways we can use the continental shelf and what it offers us, and there is infrastructure there which can be reused. Let us be under no illusion: the Wood review was needed because we are in a process of change, and I am sure there will be more changes in the future. I would like to see the Infrastructure Bill, before it leaves this House, fully acknowledge that we are in this transition and put an emphasis on new technologies, new uses of our assets, and the new infrastructure that we will need.
Baroness Worthington
My Lords, I am grateful to the noble Baroness for describing her amendment and will comment briefly on the group. Starting with the last point about making administrative changes to the way the RHI works through the negative process, I do not think that is necessary—we are not there yet and I would not support it. One of the benefits we have had over the last year or two as we have been talking about the RHI is that we have had regular opportunities to discuss the issue. It is definitely not the case that everything is hunky-dory and that we can just forget about it and let it all roll on. There are still some quite important issues, and we will need to return to them and have parliamentary scrutiny over them.
Having said that, it is also true that there are some issues with the RHI that we need to see streamlined. I do not wish to sustain a bureaucratic and complex jungle of regulations, but this is a complex piece of legislation and removing parliamentary scrutiny is not going to resolve that. It is fundamentally about improving the policy over time as we become more comfortable with what the RHI is delivering. The other reason for not supporting that element of the amendment is that, unlike the RO and the FITs, this is money from the public purse and therefore requires a higher degree of public scrutiny.
I was interested to see this amendment last night, but I am afraid that I did not get a chance to speak to the noble Baroness beforehand about the background to it. Not so long ago I was at a party when someone came up to me and said, “We have just installed a renewable heat boiler”. I will not reveal any names, but the person was concerned that in order to get it going, they had had to work around the regulations as they stood because of the restriction on who can receive payments and the fact that it is not the same as self-owned or self-installed renewable technologies. I would be interested to learn about the background to this amendment and certainly I will be interested to hear what the Minister has to say in response to it. It is about flexibility around the finances that are required for what are often quite capital-intensive projects. The funding has to be arranged in a flexible way so that people who do not have a lot of capital upfront are still able to engage with the RHI through arrangements that may not be standard. There is something here that I would strongly recommend the noble Baroness to look at and perhaps come back to us. As I say, it is a simply a coincidence that someone raised this issue with me personally.
On whether Ofgem is the right body to deal with this, well, if we have a Labour Government we will not have an Ofgem, so we can revisit that question then. We will certainly have a regulator, but we will look again at how these things are taken care of. Again, I thank the noble Baroness for tabling the amendment and I look forward to the Minister’s response.
Baroness Verma
My Lords, I thank my noble friend Lady Eaton for her amendment and I thank the noble Baroness for her comments. I know that we have discussed these issues on many an occasion in the Moses Room. Of course we want to make sure that the scheme is as efficient and cost-effective for the taxpayer as it possibly can be. It should deliver the benefits that have been so clearly outlined, which is something that the Government are strongly keen on pursuing.
Perhaps I may respond to my noble friend on using an alternative to Ofgem. We have seen Ofgem already successfully administering a number of schemes for the department through Ofgem E-Serve, including both the domestic and non-domestic RHI, the Renewables Obligation and feed-in tariffs. Ofgem has significant expertise in the area and has experience of running these programmes. It is also frequently evaluated to ensure that lessons are learnt both by the body and the department in order to improve the customer experience and value for money in policy administration. I think that Ofgem is the right body to be the administrator for these tools. The Government want the best kind of body to reach out to consumers. However, I take the points she raised and, listening to the noble Baroness, we have discussed on many occasions how we can improve the process. It is, of course, a complex tool so we need to ensure that it does not inadvertently exclude the very people who we are trying to assist and help.
As with all things, I must look at the upsides and the downsides of my noble friend’s amendment. What I would like to do is take it away and consider it. The amendment seems very sensible, but I would prefer to give it some thought first. Perhaps I may come back to her on Report with some further consideration.