Energy Bill [HL]

Baroness Worthington Excerpts

Committee stage
Monday 5th September 2022 Lords Chamber

I am also inclined to support Amendment 6, in the name of my noble friend Lady McIntosh, to establish one “principal objective”: energy security. On Amendment 231, eloquently spoken to by my noble friend Lord Moylan, it is interesting to seek to distinguish and separate carbon and non-carbon sources of electricity and the pricing mechanisms of those two subsectors. I would like to know what the Minister thinks about that and the other amendments in this group.

[Baroness Worthington (CB)]

My Lords, I will speak to Amendment 7, to which I have added my name. I declare my interest as a co-chair of Peers for the Planet. I apologise for not being present at Second Reading; I wrote to the Minister, and I am grateful for his detailed response to some of my points. I will endeavour to be brief, as this is Committee, and will simply explain why we consider that Amendments 7 and 242, together, bridge the divide that is evident between the two sides of the House, as witnessed in this debate.

The noble Lord, Lord Moylan, was absolutely right that you cannot simply declare that you want to win a war; you need to have tactics and a strategy for winning it. Our Amendment 7, complemented by Amendment 242, provides that strategy, which is, as the noble Lord, Lord Ravensdale, eloquently articulated, fundamentally underpinned by physics. Energy is a question of physics and, if we understand that, we will know that we are not struggling towards net zero but in fact doing very well on that path.

The clarity with which I now see industry communicating on this issue is far greater than it has been over the last decade. It is saying: “Electrify everything that can be electrified and use our abundant resources of clean electricity to decarbonise.” That is how you square the three principal objectives of energy policy: affordability, cleanliness, and resilience and security. That pathway is so clear now that the Bill could be hugely enhanced by having this set out at the front.

I support the Government’s intentions. They seek to address the trilemma of those three objectives, which are fundamental to winning this war against climate change and against the energy crisis that we currently face. That very energy crisis is an interesting reason why we are powering towards net zero faster than ever before: it is absolutely clear that the volatility of gas and oil underpins it, and we cannot forget that. What is the Government’s current policy? It is to reduce our reliance on those volatile commodities, which would serve everyone’s needs: it would help us reduce bills and would give the consumer a reliable source of energy.

The Bill has many measures which we will come on to debate that will help us along that path. But it lacks an overarching statement of objective. We now need to revisit the debates we had on the Energy Act 2013 about the need for a decarbonisation target to provide clarity over this direction of travel. We all sat there—many noble Lords here today were there—and had debates on why knowing our way towards that target was needed for investor and stakeholder confidence. It is now very clear that it is needed because, as the noble Lord, Lord Ravensdale, pointed out, simple mathematics shows that we still have a lot of technology that needs to be put into place to become operational, and we need a plan that monitors progress towards that.

Subsequently, we have added an extra dimension to this: electrification. As I said, physics tells us that electrification is fundamentally more efficient; you will get six to seven times more usable energy from an electricity-based system than if you rely on fossil fuels or hydrogen. Six to seven times fewer wind turbines will be needed to provide the same benefit in terms of heat or transport. That should be of interest to everybody; it saves costs and helps make the system more secure.

So I hope that the Minister will look at our amendment carefully. It adds an extra dimension to this Bill, which will give it so much clarity so that everybody will have a clear sense of the path that we are on. As I have said, the UK should be very proud of the efforts it has taken to date. We are not as exposed to the energy crisis as other countries, because of investments we have made over the last two decades and because we have taken seriously this objective of making our system more resilient and fit for the future. There is an international dimension—I am sure we will come on to talk about this in other parts of the Bill—but it is absolutely clear that the thing that we can do best at the moment is continue on the path of decarbonising our electricity system using technologies that locate cheap power on our shores, to rid ourselves of the insecurity and volatility of gas prices and to move forward to an efficient system that converts primary energy into heat, transport and work. If we can do that, we will show the world how it should be done: do not pick winners but instead create a system that is sensible and will provide the right guardrails for capital investment so that money will flow and we will all benefit. I look forward to the Minister’s response to our amendment.

[Lord Teverson (LD)]

My Lords, it is always a great pleasure to follow the noble Baroness, Lady Worthington, and although we do not always agree on absolutely everything, I reckon that I agree with about 99.5% of her speech.

First, I declare my interest as chair and director of Aldustria Ltd, an energy storage company; I will try to avoid too much discussion of that area. On these amendments, I very much thank the noble Lord, Lord Lennie, for having opened our debate today. I very much agree with the principle of what the Opposition Front Bench is trying to achieve here. What this Bill does not have—the noble Lord, Lord Moylan, put it very well indeed—is great focus or coherence. It would be good to start trying to improve that through a type of preamble that puts context, including strategic context, at the beginning of the Bill. I hope that we can refine that more on Report; it may not be perfect, but perhaps we can find a way of doing that between us.

I also agree with the noble Lord, Lord Moylan, about the pricing of electricity and how that works. As he says, our European colleagues are looking at that very strongly now. There must be a better way of doing this; it cannot make sense to the public that we charge and price our main energy sources on the marginal cost of the last producer. Clearly, that does not make sense, and it does not do the reputation of the fossil fuel industry any good either. Yes, they might use their money to give back to shareholders—hopefully they will use it for different types of investment and diversification—but it besmirches the whole sector, and we need to find a way around that.

Where I would disagree very strongly with the noble Lord, Lord Moylan, is around trying to game or look at alternative dates for net zero. It seems to me that in September 1939 the Cabinet probably did not look at whether to declare war on Germany this month or two years later or four years later. We may criticise Neville Chamberlain for all sorts of things in retrospect, but I guess that is not one of them. It was an absolute threat to our future security, and we made a decision. If we think of the costs to this country, and to us and consumers, of our right stand on Ukraine, I guess that we have not done those calculations either—because we know that Putin’s war has to fail and that, for European security and our long-term security, we in the western world need to pursue the tactics that we have.

I thank the noble Baroness, Lady McIntosh of Pickering, for her amendments, particularly in mentioning rural aspects of oil—my own household is on oil, and we are not covered by a price cap—and in particular business. In all the media coverage that we have had on this very real energy crisis over the past months, it is funny how business has very much taken second place to households and consumers. Clearly, households and consumers are ultimately the most important, but business is completely fundamental to our economic performance and being able to solve this crisis in the long term.

I am not absolutely sure about energy from waste plants. Clearly, it does not make sense to export it, but the real challenge there is in starting to raise recycling again, or even AD in terms of other parts of household waste. I was so impressed by the forensic look by the noble Lord, Lord Ravensdale, at investment need and the scale of the challenge, and also at how we need to measure that and put proper planning into how we meet it.

The one other area that I would like to mention comes back to 2013 and the then Energy Bill, mentioned by the noble Baroness, Lady Worthington. At that time, one big thing that we discussed was the energy trilemma of security, cost and decarbonisation. The noble Viscount, Lord Trenchard, brought that back up again. But what this crisis, and the almost a decade between these two Bills, has shown, is that it is no longer a trilemma—they all work in exactly the same direction. Renewables are now cheaper than fossil fuels, as we know—it is why we have the huge price increases that we do. Our security is reinforced by having much more renewable generation on our own seas and our own land—and, as a result, we have lower costs and a decarbonised energy system as well. We have moved on since that time.

We need to have a focus in this Bill, and I support the amendments. We need to move on in this debate, but I am absolutely sure that we will need that coherence when we get to Report.

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[Lord Callanan (Con)]

Yes, it is a complicated area that requires proper and detailed policy analysis, but that work is under way, and we will do so.

Splitting the wholesale market would a necessitate a fundamental and irreversible design of our electricity market arrangements, and without the appropriate consideration of the potential costs and any potential benefits and without sufficient stakeholder input, it could well lead to higher bills for consumers, and it would create an investment hiatus which would jeopardise our ambitions for decarbonising the power sector by 2035—which is exactly the point I was making to my noble friend. So, this is an important issue, but it is one that needs to be looked at thoroughly, properly and professionally. I hope that my noble friend is assured that the issue is being closely examined and will therefore feel able to withdraw his amendment.

[Baroness Worthington (CB)]

My Lords, would the Minister care to comment on the fact that—and this has been mooted as a potential solution in the short term during these unprecedented times where we see such high prices and so many people suffering—there is surely a logic to take a power now, to use it in extremis and then to continue with the longer-term conversation? I think the nation wants to see some action quite quickly and we have an Energy Bill.

[Lord Callanan (Con)]

I do not think it is important to do that at this stage; we have published the consultation, we are closely analysing responses, as the noble Baroness will understand. It is a difficult area, it is a complicated area, there are a number of potential ramifications, and we think it is worthy of consideration. If we took a power now, that might have a very destabilising effect on the market and on the amount of investment that is flowing into many of the sectors, so the Government’s position at the moment is that we do not think that is necessary or desirable.

I reassure noble Lords that the addition of electrification to the Energy Bill is also unnecessary. The net-zero strategy sets out the Government’s view on how electrification can enable cost-effective decarbonisation in transport, in heating and in industry—to that extent, I agree with the noble Baroness, Lady Worthington, and the points that she made—along with our approach to deliver reliable, affordable and low-carbon power. The energy security strategy accelerated, as I am sure the noble Baroness is aware, our ambitions for the deployment of renewables for nuclear and for hydrogen. I can assure noble Lords that the Government will never compromise our security of supply: that remains our primary consideration. But our understanding of what the future energy system will look like and the level of the demand that we will need to meet through electrification will essentially and inevitably evolve over time. So, we are not targeting a particular solution, but we rely on competition to spur investment in the different technologies and new ways of working, and new technologies such as more efficient batteries et cetera are coming onstream every day. We will closely take all these matters under consideration. We take the view that the Government’s role is to ensure the market framework is there and that encourages effective competition and, at the same time, delivers a secure and reliable system.

Finally, let me thank the noble Lords, Lord Howell and Lord Teverson, the noble Viscount, Lord Trenchard, and the noble Baronesses, Lady Jones and Lady Hayman, for their valuable contributions to the debate. I assure my noble friend Lord Howell that we are working internationally with the US, with the EU and with our other partners to produce a secure and reliable energy system together. In response to the noble Viscount, Lord Trenchard, I am sure he will be pleased to hear that through the £385 million advanced nuclear funds, we are providing funding to support research and development for precisely the small modular reactor designs that the noble Viscount wishes to see, and we are progressing plans to build an advanced modular reactor demonstration by the early 2030s at the latest. Therefore, with the reassurances that I have been able to provide, I hope that noble Lords will not press their amendments.

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[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, it is my responsibility and pleasure to move Amendment 8 and to speak to Amendments 9, 14 and 16 in the unavoidable absence of the noble Baroness, Lady Liddell, who will be with us from Wednesday onwards. She sends her apologies but I am pleased to speak on her behalf, and my own, and to thank the Carbon Capture and Storage Association for its excellent briefing about this issue and the implications involved and the help it has given us with drafting these amendments.

I have two points before I go on to the detail of the amendments. As others have said, the UK has one of the largest potential carbon dioxide storage capacities in Europe. This is a very important issue that we are dealing with today, and it should not be underplayed and underestimated. It extends throughout the whole United Kingdom—Scotland, England, Wales and Northern Ireland. Also, as I understand it, it will support 50,000 jobs—a not insignificant number, given the current situation.

Turning first to Amendments 8 and 9, these deal with the importance of a net-zero principal duty to enable rapid network expansion. If we in the UK are to meet our emission reduction targets, carbon capture and storage will need to be rolled out rapidly across the UK during the rest of this decade. To capture and store 30 million tonnes a year by 2030, as the Net Zero Strategy says, we will need to go from nothing to building significant CO₂ infrastructure in a short space of time. It is therefore vital that the regime set out in the Bill enables initial oversizing of CO₂ pipelines, increasing their size, which will allow for the subsequent rapid network expansion to connect more capture sites to the growing suite of storage sites.

The National Infrastructure Commission’s 2019 regulation review, Strategic Investment and Public Confidence, recommended that the economic regulators’ duties be updated to facilitate long-term investment in networks. It recommended implementing updated duties that will enable network operators to deliver the best results for the public by building and investing in networks that are resilient and fit to deliver net zero while also providing value to current and future users of those networks.

The Government should be commended—it is unusual for me to commend them—for proposing that the duties of the economic regulators include consideration of the needs of existing and future users, but this seems a missed opportunity to include a duty to deliver net zero by 2050, to help the regulators to effectively balance these two equally important factors.

It should be noted, however, that outside the regulators’ core duties, the Bill includes a further requirement for the regulator to support the Secretary of State in having regard to the Climate Change Act 2008, and the new CCUS strategy and policy statement should go some way to addressing this. However, in practice, these mechanisms are not as strong as the regulators’ own duties.

This amendment is therefore essential to give the regulator the necessary powers to make decisions that enable the required strategic anticipatory investment on the network. Ofgem will need to be empowered to make well-justified decisions that balance the interests of current and future transport and storage network users with delivering net zero.

That deals with Amendments 8 and 9. I now come to Amendments 14 and 16, which would ensure that all types of permanent storage are included. Of course, geological storage is not the only type of permanent storage of CO₂. This can also be achieved by types of usage where the carbon dioxide is used in a way that it is chemically bound in a product and not intended to re-enter the atmosphere. As currently written, this clause allows only for geological storage, so this amendment is intended to recognise that there are other methods of permanent storage. However, it is important to qualify in this drafting that only carbon capture and usage where it is intended to be permanent—and therefore subject to monitoring and verification—can qualify for this.

It is worth noting that in other areas of the Bill a wider definition of storage is used, and the question could be asked: why are there different definitions for each clause of the Bill? Perhaps the Minister could explain that in his reply. This amendment aligns with Clause 63(8), where the Bill defines “storage” as

“any storage with a view to the permanent containment of carbon dioxide.”

Would it therefore be possible to have a common definition of storage used throughout the Bill?

I hope that the Minister will give a positive response to these amendments and I beg to move.

[Baroness Worthington (CB)]

My Lords, I will speak very briefly in support of Amendment 14 and reiterate the question of why there may be inconsistent definitions of storage in the Bill.

In my time exploring carbon capture and storage over the years, I have become somewhat cynical about its ability to scale. The sheer cost of it and the presence of alternatives that may be cheaper and more secure mean that its role will be relatively limited. I am sure that it will play a role, but only if we enable it to be pursued in its widest possible senses. It is absolutely the case that you can store large volumes of carbon dioxide underground; we have aquifers and other underground storage facilities that could be used for this, including in the North Sea and on land, and we should explore those where they make sense. However, there are other mechanisms through which you can enable the use of other stored forms of carbon. Novel techniques are coming to market now involving plasma torches, which, applied to natural gas streams, deliver pure streams of hydrogen plus black carbon. That black carbon can then be used as a manufacturing commodity. Therefore, it would be foolish of us not to include that as a potential option. Similarly, CO₂ is used as a binding agent in the production of building materials. In fact, currently the CO₂ has to be bought at an extortionate rate, so using pure waste streams of CO₂ for the production of building materials will again be a permanent form of storage and it should be supported in the Bill. I fully support this amendment.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I want briefly to reinforce the comments that have already been made. I wish to speak particularly in favour of Amendment 9, on the duty to assist in delivering net zero, and to Amendments 14, 15, 16 and 19; as has been argued clearly, having a consistent definition of storage throughout the Bill makes total sense.

Like the noble Baroness, Lady Worthington, I am very sceptical about the claims made about carbon capture and storage. Often, we see it used as a “get out of jail free” card: “We’ve got all the numbers and they don’t add up. We’ll just throw in a figure for carbon capture and storage to allow us to continue as we are”. That is clearly unviable. None the less, it makes a lot of sense to grab carbon emissions wherever they occur and use them in a constructive way.

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We anticipate that those who may wish to off-take carbon dioxide from the network for the purposes of carbon capture and usage are likely to have alternative options available, such as off-taking directly from an emitter. Therefore, it is considered that economic regulation is not currently needed for networks transporting carbon dioxide for non-geological storage or for usage purposes. I hope therefore that I have offered sufficient reassurance to noble Lords on that matter and that they will not press their amendments.

[Baroness Worthington (CB)]

I have a point of clarification. Are the definitions different because regulation over transportation is not needed or is the Minister saying, “We have picked a winner. It is going to be storage through this mechanism and we are not interested in the innovation that is coming through in these other sources of permanent storage.”? If it is the latter, I would find that very hard to understand in a Bill that is seeking to support new technologies.

I think it is the case—the noble Baroness, Lady Bennett, mentioned it—that there is a company in the UK already doing this, with limited support from government. It can scale. It is not a silver bullet by any means but there is not a single operational carbon capture and storage facility in the UK apart from that one, and yet the Bill does not seem interested in supporting it. I would like to understand: if the Government is interested in supporting new technologies, can we make that as broad as possible?

[Lord Callanan (Con)]

The Bill is intended to establish an economic means of support for geological formation. Of course, I commend the company referred to by the noble Baroness, which is managing to find ways of—I hope—permanently storing carbon dioxide in a form other than geological formation; indeed, there are other potential support mechanisms that could be deployed towards that. There is lots of research and development funding through UKRI and there is a whole range of other advanced technologies that we are supporting. In this case, in relation to economic regulation, the market mechanism that we want to set up on CCUS is dedicated principally towards geological long-term storage; we think that is the area that needs support under this system. That would provide the vast majority of storage that we can envisage at the moment but, of course, we are always willing to consider other methods. If this company is proving to be a success, that is great and I would be very happy to look at alternative ways of supporting it.