Energy Bill [HL]

Baroness Worthington Excerpts

Wednesday 4th November 2015 Lords Chamber

[Baroness Worthington (Lab)]

My Lords, I, too, thank the Minister for the way he has conducted the debate inside and outside the Chamber. It has been a genuine pleasure to work with him.

When the Bill arrived, it appeared relatively simple but did not seem to flow from the understanding we now have of the energy trilemma: having to balance the need for reliable, resilient energy systems with affordability and decarbonisation. The Bill focused almost exclusively on extraction of fossil fuels—something we will continue to do—but contained nothing about the other elements of the trilemma, other than two short clauses on onshore wind. I hope that, following the scrutiny it has received, we now have a better balanced Bill, due in part to the contributions from all sides of the House but also to the way the Minister has engaged, so I thank him for that.

This is going to be my last official opportunity to speak as the shadow Minister, so I take this opportunity to thank all my colleagues who have worked with me not just on this Bill but on the previous one—this in fact is my second energy Bill. I particularly thank Catherine Johnson, of our research team. This has been a tricky Bill to work on, with lots of detail and condensed timescales, and she has dealt with everything we have thrown at her admirably. I also thank my Whip, the noble Lord, Lord Grantchester, all my colleagues on the Front Bench and my colleagues in the shadow DECC team in the other place.

Everyone knows that energy and climate change are passions of mine, and I have found it an absolute privilege to work on two significant pieces of legislation. We have not always agreed and we have differences, but there is a common core aim: to decarbonise our economy, as the Minister has reiterated. That, we know, is certain, and we seek to do so cost-effectively and with a reliable outcome. The challenge is in working out exactly how to achieve that, and the Bill now is testimony to the subtleties involved in that complex challenge. It has been a great privilege to be part of that remarkable process.

I shall be moving on, although not very far. I shall return to the Back Benches and follow the passage of this and subsequent Bills that will address this topic, because this is a multi-decadal challenge and no country has all the answers. We are at the forefront of trying to work through some of these difficult issues. As the Minister said yesterday:

“There is no silver bullet”.—[Official Report, 3/10/15; col. 1591.]

There is no blueprint we can simply pick up and follow. We are inventing the rules as we go. We will make mistakes and will have to revisit issues, but I hope that this House in particular will do so in the spirit of shared endeavour, as we seek to decarbonise cost effectively and to create a reliable system. I hope that we will continue to revisit this issue, improve policy and, most importantly, send clear signals to the outside world, bringing investors with us, maintaining investor confidence and moving forward as a country, united in this endeavour.

The amendments the Minister has introduced are technical—I am particularly pleased to see that the Long Title is changing to reflect the more balanced approach to the energy trilemma we are grappling with—and I am very grateful to him for tabling them.

[Lord Howell of Guildford (Con)]

My Lords, perhaps I may say how sorry I am to hear that the noble Baroness, Lady Worthington, is leaving the Front Bench; it is news to me. I have learnt a lot from listening to her. I do not agree with everything she says, but her grasp of climate issues is unquestioned and she has added a great deal to the debate.

I also thank my noble friend for the way he has conducted this complex debate. I hope that the Bill goes to the other place with the clear message from our debates on it, and from yesterday’s debate on electricity resilience, that the whole of our energy policy needs rebalancing. Not that one necessarily wants a lot more energy Bills to come through your Lordships’ House, but I hope that this is just the beginning of a move to a better balance than the current position, which has led to some quite serious muddles. The noble Baroness mentioned one of those last night: that, in our attempts to establish good capacity three, four and five years out, we appear to be ending up with a lot more diesel engines, which is the opposite of what was intended. That arises from the lack of balance between subsidies for wind, which we discussed, and the unwillingness of people to invest in new combined cycle gas turbines.

That is not strictly connected to the government amendments, but I thought I should register my admiration of the amazing grasp that the noble Baroness, Lady Worthington, has of this very complicated subject.

--- Later in debate ---

I join my colleagues in wishing our Front Bench spokesperson, my noble friend Lady Worthington, all the best for the future.

[Baroness Worthington]

I thank my noble friend and the noble Lord, Lord Oxburgh, for tabling the amendment and for pursuing this aspect of our discussions to this point. I am very grateful to hear from the Minister what I think will be a very effective way forward in the creation of an expert group that will report to the Secretary of State. That is a very welcome development. It seems to be the season of paying tributes, and I pay tribute to the noble Lord, Lord Oxburgh, who, not just through the passage of this Bill but for many years has been a fantastic champion of CCS and the group of technologies that falls within that. I know that he is stepping down as the chairperson of the CCSA fairly soon, but he has played a pivotal role in bringing this technology to the minds of policymakers and decision-makers. I thank and congratulate him for that.

It is right that we have a brief discussion about CCS in this debate today, because of the Redcar situation, as my noble friend pointed out, which illustrates how important it is that we get our energy and industrial strategy right. There is a risk to dragging our feet and there is an urgency involved in sorting out our policies on how we are going to not just maintain but actively attract industrial players back to the UK to reindustrialise our nation.

We are home to brilliant engineers and bright graduates, and we have a skilled workforce. We have and need the infrastructure that requires us to have a vibrant primary industry. There are ways in which we can rekindle that industry, but it will not be through trying to push back the tide of green policy, trying to deny that climate change is happening or blaming green taxation for our woes; it will be the reverse. It is like a judo role. We have to go into this subject in a positive way and not just accept that we are going to decarbonise but do so with conviction. If we do that, if we embrace the fact that of course there are engineering solutions that will allow us to continue to produce steel but without the emissions, we can go forward with a positive investment agenda, attract European money and external investment, and persuade Tata that this is the country where it should be developing the steel production plants of tomorrow, now.

We can do that, because we can act without fear of falling foul of state aid. With every rescue package we try to put together that denies the reality of climate change or seeks to bail out companies that are failing for global trade reasons, rather than anything to do with carbon pricing, we will fall foul of state aid. If, however, we embrace the fact that we need inward investment into zero-carbon and low-carbon production, Europe will be on our side. We can then draw down funds, apply our own funds, and recycle funds out of our carbon pricing policies into an inward investment programme.

We have a policy tool almost readily designed to do that, in the form of contracts for difference. As they were introduced in the Energy Act 2013, contracts for difference were designed for power investment and power projects. They can be adapted. We can create a contract for difference, strike off the carbon price and make it available to industrial investors. That would derisk the investment and give a guaranteed income to people, so that they could see for certain that they will be able to come to the UK and that at least one of the factors that controls whether or not they will be profitable will be taken care of. If we move with the agenda of Europe towards decarbonisation and take CCS seriously, that is the way out of this problem. To do anything else would simply be to stick our finger into a dyke that will burst: there is no escape from the inexorable move towards a low-carbon agenda. If we want to maintain our industrial activities and investment, we have got to have technologies that allow us to do that with low carbon—and that means CCS. It does not just mean CCS on its own; it can be combined with electrification, once we have a low-carbon power system. But CCS is going to play a huge role.

As we have discussed previously in this debate, by CCS we do not just mean one technology. It is very similar to renewables; a whole group of technologies falls under that category, some of which produce a usable product. Carbon capture and utilisation is also grouped within this. I am very much looking forward to the creation of this expert group. We could not have chosen a better chairperson for that endeavour, and I hope that I might be able to play a part in my new role as a Back-Bencher. We can explore these issues; we have an opportunity here and should grasp it. We are almost on our own in Europe in understanding how important CCS is and having a populace that supports us in that. Germany needs it but cannot deliver it. The only other countries that are close to us in terms of understanding are Holland and Norway. We can work with them to form a North Sea alliance to make this happen. There is huge potential: the UK is blessed in terms of its ability to embrace this technology. I hope that that endeavour, led by the noble Lord, Lord Oxburgh, will lead to concrete changes in policy, a new approach, with new vigour and energy, and ultimately to UK plc becoming once again the home of industrial innovation and engineering excellence that will lift people in those communities currently suffering job losses, give them hope for the future and bring all the social and economic benefits that come from that.

I shall not detain the House any longer, although I am tempted because this is one of the topics I like to talk about a lot. I wish the Minister well in the remaining stages of the Bill and in the associated regulations and legislation that will come his way. There is a lot more work to be done. Some of the topics we have touched on, including the recalibration of the capacity mechanism, are urgent and outstanding areas of work. We look forward to hearing more about the CFD allocations in the autumn. There are big challenges outside the UK that the Minister and his department will be grappling with. Paris is upon us, and I am looking forward to that being a historic move forward in the world starting to take this issue seriously and moving forward on a united front. Europe has a huge part to play in this.

My final word is that on energy policy the best way to engage with Europe is to engage positively with new ideas, take our vision to Europe and persuade it that our technology-neutral, all-of-the-above, focus-on-least-cost way is the right way to do this. We have some great tools and great examples of policies that work. We must work with Europe and persuade our colleagues that ours is the right path. We should not seek to disengage. We can benefit hugely from Europe, and it can benefit from us. I hope that that will be the basis on which we continue. For now, I say thank you and goodbye.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord, Lord Oxburgh. As has been indicated, the noble Lord is the right person to chair this group and I have no doubt that he will do so in the very fair way that he approaches all these proceedings. The remit of the committee has been worked through with the noble Lord, and it is for him to decide who goes on to it, but I am sure it will be done on a cross-party basis. I very much hope that the noble Baroness can be a part of it, but that is entirely a matter for the noble Lord, Lord Oxburgh.

I also thank the noble Baroness, Lady Maddock, for her kind comments. I agree with my noble friend Lord Howell that a lot of money is being put into carbon capture and storage. That is because the department regards it as a top priority. We have made sure that that is reflected in the Bill. I reassure the noble Lord, Lord Young, and I am glad he has come in with words of support for the main aim of the Bill which is to maximise economic recovery in the North Sea. That remains very much the thrust of what the Wood review sought to do, and it is an important part of moving us to a low-carbon future. We cannot get there instantly and we are going to have to depend on gas. It is far better that it is British gas with British jobs and all the safety features and so on that we ensure through the North Sea. It also provides us with an historic opportunity for CCS. We have already invested £130 million in this since 2011, and we are committed to spending a lot more during this Parliament. We already have two projects—White Rose and Peterhead—moving forward. CCS is a proven technology. There are 14 plants globally and a further eight under construction.

The noble Baroness’s contribution was a typical tour de force. It is absolutely right that we have to see how we can provide incentives for the steel industry to decarbonise, but I am sure she recognises that the trilemma is never more evident than in dealing with the steel industry. I know because I have been at meetings where a lot of MPs of all parties, including the Labour Party, have been pressing us to do something about the energy price. It is a factor, but it is certainly not the only factor. The noble Baroness is right that there are many other factors in play and we have to move towards a low-carbon solution. I am sure that she understands that we have to do what we can through Europe to see how we can provide assistance, but she is right that this is not the sum total of what needs to be done. I believe that much more can be done on the procurement front. In the department, we are looking at what we can do about public procurement with the much more relaxed rules that are now adopted in Europe. I think the UK has been the first country to have its rules cleared through this new procedure.