Energy Bill [Lords]

Bim Afolami Excerpts

2nd reading
Tuesday 9th May 2023 Commons Chamber

[Grant Shapps]

As I mentioned before, we are working constructively across the whole UK on energy security. I am not sure I follow the hon. Lady’s first point. She seemed to be saying that we should import oil and gas from elsewhere, using about twice as much carbon, rather than exploiting our own. I want to work as closely as possible on those issues with Members across the House.

[Bim Afolami (Hitchin and Harpenden) (Con)]

Let me bring the Secretary of State back to the independent system operator and planner. We in this House should always be wary of creating new regulators, and we must be clear about their exact purpose. Will he explain in a bit more detail how the ISOP will operate with Ofgem, and the relationship between the two? Clause 123 states that the ISOP will

“have regard to the strategic priorities set out”

by the Department. We must be clearer about whether Members of the House and the Government will be able to direct the ISOP to do what we want it to do and deliver on the ambitious plans in the Bill, which we hope will be successful.

[Grant Shapps]

My hon. Friend is right to raise that concern, but he will be pleased to hear that that is exactly the purpose of this structure. The ISOP should be able to take instruction and guidance about its policy, to ensure that we do something that is not really possible at the moment, which is to combine oil and gas input into our network in a much more strategic way. That is required more now than ever, given the extraordinary mix of energy that goes into our network.

--- Later in debate ---

[Edward Miliband]

No, I will not.

Let us talk about how we can get an energy system that is fit for purpose. Nowhere is that more true than when it comes to the grid, where the delays that have been allowed to build up are a disgrace. For all of the Conservative party’s boasts, this is what Keith Anderson of Scottish Power says about the delays to the grid:

“The wind farms that are coming online today were approved when Gordon Brown was in power—that’s a long time ago and we need to be much faster to move beyond this crisis”.

The new independent system operator is a step forward, but there are questions remaining about whether it goes far enough in its powers, remit and independence.

What the energy system sorely lacks at the moment—this goes to the question that the hon. Member for Hitchin and Harpenden (Bim Afolami) asked the Secretary of State—is a guiding mind. It is about not simply balancing the system day to day and hoping that the market provides—this is the purpose of the regulator—but planning for the future of the system as we transition. This is the point: at the moment, that planning role is a job for everyone—the Energy Department, Ofgem and the network companies—but the ultimate responsibility of nobody. That needs to change with the ISOP so that we auction offshore wind in the right places, we plan and build the grid in the right places and on the right timescale, and we have the right amount of power in the system in the years ahead. For us, that is the purpose of ISOP, and during the Bill’s passage we will test out whether its proposals for ISOP adequately meet that vision.

If the regime is to work—I concur with the interventions on the Secretary of State—we need a price regulator in Ofgem that supports and never stands in the way of change. I hope that the Secretary of State’s failure to say that he would oppose such an amendment is a good sign, but obviously Ofgem should have a formal net zero duty. I think that was recommended by the net zero tsar, the right hon. Member for Kingswood (Chris Skidmore), and it was rightly inserted by the House of Lords. However—this is boring but very important—we also need to sort out the issues of planning.

The National Infrastructure Commission recently produced an important report about the delays to planning. It said that, in part, that was the fault of Government, who have not updated their energy national policy statements for a decade. It also said that there should be a statutory duty on the Government to review them every five years, and we agree. Here is the other thing that is important: all relevant regulators, including the Planning Inspectorate, should have a net zero duty, because otherwise we will find the system being slowed down and gummed up. Of course, the views of local people are important and must be taken into account, but we must also make progress.

The Bill could achieve those things to speed up the planning process. However, even if we get all the forms of low-carbon power that we need—I think that we should have all of them—and we sort out the grid and planning, there is an obvious question that the Secretary of State did not address. Even if we get all of those renewables and indeed nuclear, the price of electricity is currently tied to the prevailing price of gas. We do need reform of that system. Labour first called for that in January last year, and I say to the Secretary of State that we will be talking about that in the Bill Committee. We believe that there should be a commitment in the Bill to a timetable for that delinking; otherwise, we will get more drift and delay and we will not reap the benefits of the move to zero-carbon power.

On the one hand, we need the drive to zero-carbon power, but we also need a decisive shift away from the high-carbon expensive path—again, that was raised earlier—and unfortunately the Bill does not attempt to make that shift; it is business as usual on fossil fuels.

On coal, the Secretary of State rather dismissed the intervention of the hon. Member for Bath (Wera Hobhouse). Yes, there has been a good record on coal in the last decade. [Interruption.] He says “Thank you”, and he wants to chunter away, but opening a new coalmine drives a coach and horses through that record. [Interruption.] He says that it does not. We cannot go around the world, as did the former President of COP, the right hon. Member for Reading West (Sir Alok Sharma), telling everybody that they have to power past coal, and then say, “But not us,” because that totally undermines our moral authority. Here is the thing: the steel industry in Britain says it will not use the coking coal, it will not provide the long-term jobs that Cumbria needs and it sends utterly the wrong message on climate. That is why their lordships inserted a provision to ban new coalmines. Labour supports that amendment.

Labour will also table an amendment to ban dangerous, expensive, unpopular fracking. I know that Conservative Members want to say the Truss period was a bad dream—Bobby Ewing in the shower and all that. [Interruption.] I am showing my age, that is true. I am a big “Dallas” fan, actually. Labour will table an amendment on fracking.

We also believe—this is an important point—that the Bill should remove the 2015 duty to extract every last drop, the so-called maximum economic recovery, from the North sea. I can do no better than to quote the net zero tsar, the right hon. Member for Kingswood, praised by the Secretary of State, who did a very serious piece of work—Government Front Benchers are nodding. What he said could not be clearer:

“developing new oil and gas fields is incompatible with limiting warming to 1.5°… There is no such thing as a new net zero oilfield.”

Those are not my words, or those of the Liberal Democrats or any other party in this place. [Interruption.] The Secretary of State starts chuntering, but he should talk to his own net zero tsar, who did a brilliant report that he himself praised.

Let me just explain, for the benefit of right hon. and hon. Members, why that is the right position. That approach will have no impact on bringing down bills. How do we know that? Because every previous Energy Minister has said that. Gas and oil are traded on an inter—[Interruption.] Just pipe down for a minute. The price is set on the international market and 80% of our oil is exported. It drives a coach and horses through any possibility of keeping global warming to 1.5°, according to hundreds of leading scientists and the right hon. Member for Kingswood.

Here is the other thing, which is a new part of this. We now know how much the Government are having to shell out to the oil and gas industry to persuade it to make this investment, because it is in the detail of the Budget Red Book: over £11 billion. The current Prime Minister, the previous Chancellor, introduced a windfall tax, but then he introduced an absolutely massive super-deduction—not available now to any other industry, including renewables—of over £11 billion. Massive, massive cost to the taxpayer, no impact on bills, the oil from Rosebank exported, and driving a coach and horses through our climate commitments—no wonder the net zero tsar concluded that it is the wrong policy for Britain. It is. Government Members can carry on pretending that business as usual is consistent with the science and consistent with what we go around the world saying, but it is not and the net zero tsar has rightly said so. Labour will seek to improve the Bill so that it delivers on the zero-carbon sprint we need.

Next, I want to turn to the second part of my remarks —I will try to speed up, Mr Deputy Speaker—on what the Bill can do to ensure the fairness of the transition. We know that the fairness of the transition is essential if we are to take the public with us, and we know there are huge opportunities. I want to come back to the issue of energy efficiency, because Government Members go on and on about their great record on energy efficiency. Here are the facts. In 2010, there were 1.6 million energy efficiency upgrades. In 2022, there were 160,000 equivalent measures. In other words, there were 10 times more when the last Labour Government left office than there are now.

We know why that has happened. The Chair of the Environmental Audit Committee, the right hon. Member for Ludlow (Philip Dunne), has done many important and learned reports on this question. Massive cuts were imposed on energy efficiency schemes when David Cameron said, “cut the green crap” and the investment has not recovered. That is why the UK Business Council for Sustainable Development says it will take almost 200 years at the current rate to get all homes up to EPC C—200 years. That is not just bad for the constituents of my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), who intervened earlier, and the constituents of many others in this House; it also means we import more gas and use more gas supplies. The estimates are that we could cut gas demand by 20% if we got all homes up to EPC C.

[Bim Afolami]

I thank the right hon. Gentleman for giving way in an unexpectedly amusing speech from the Opposition Front Bench. On gas and fossil fuels, he made a serious point which should be responded to. The International Energy Authority said that even by 2045 fossil fuels will still make up between 28% and 30% of our total energy mix. Fossil fuels will be with us for decades to come, although of course everybody in this House is working to bring their use down as fast as possible. In the transition period, particularly in relation to gas, does he accept that we will have to, as best we can in existing areas that are within our control, improve our energy security and resilience by exploiting our own gas rather than importing more, as he has just referred to?

[Edward Miliband]

I have great respect for the hon. Gentleman. Let me try to explain the position. Nobody is talking about turning off the taps in the North sea. The question is this: do we defy the International Energy Agency? He cites the IEA. The IEA says, in absolutely clear terms, that if we invest in new fields in the North sea and have new exploration, we will bust way through 1.5°. The point is that every country can say, “Well, we’re going to do it, but you shouldn’t.” But if we do that, we will end up at a 3° world. That is what all the scientists tell us.

One great thing in this House, compared with other countries, is that we have established a cross-party consensus on following the science. But the science could not be clearer. That is why 700 scientists wrote to the newspapers a few weeks ago to say, “This is our view.” That is why the IEA says it. That is why the UN Secretary-General says it. That is why the net zero tsar, when he looked at the evidence, said it. It is not me making it up; it is what the clear evidence is. The hon. Gentleman is right that we will continue to use our existing fields, but to grant new licences and new exploration, defying what all the science tells us, would be a betrayal of future generations. I do not pretend it is easy—I do not—but it is absolutely crystal clear. [Interruption.] They say, “More imports.” No, the answer is to get off fossil fuels and drive towards low carbon.

On fairness, energy efficiency—the Lords have done us a favour and I hope that we keep their amendments in the Bill—is incredibly important. Part of making the transition fair is striking the right balance between levies on bills and public expenditure. When I was Energy Secretary we introduced things through levies, so I am not saying that the Labour Government did not do it, but there is a balance. The Treasury is never keen on investing public money—not just under this Government, although it may be particularly true under this Government—but we have a problem and I have to be honest with the House about it.

If any cost in green investment must be borne through levies, we will pile more and more on to bill payers. Take hydrogen. There is a strong economic case for investing in hydrogen through public investment. That is what the US is doing. Much of the benefit of new investment in hydrogen will go to industry—not consumers directly—which will be at the front of the queue for its use. Putting the cost of hydrogen on consumer bills, as the legislation originally proposed, is not the right way forward. I know that discussions in Government are tricky, to put it mildly, but I say to the Secretary of State that the right thing to do is surely to make public investment, through public expenditure, in hydrogen, not just bung the money on to bill payers. In the course of discussing the Bill, I hope we know how much will be put on to bill payers. We cannot just add levy after levy because the Treasury says, “We don’t want to invest.”

I shall conclude on Britain’s place in the race for the low-carbon jobs of the future. The Inflation Reduction Act has had a massive impact in the US, where nearly 10 times more jobs have been created in low carbon and renewables in seven months than we have seen in the UK over the last seven years. The Bill should be our answer to IRA but, in truth, the Government face a number of different ways: first, they say, as the Secretary of State did, that it is “dangerous”; then they say that we are already doing it; then they say that we will have a response in the autumn. With every day that goes by, we hear another business say, “We are losing the global race.” It may interest the House to know that there are 23 clean steel demonstration projects across Europe. There are none in the UK. Forty gigafactories are due to open across Europe by 2030, but just one is certain in the UK. Where is the national wealth fund in the Bill to invest in our ports, clean steel and gigafactories? It is in the interests of all parties in the House to put pressure on the Government to make the investments to put us in the lead in the race for green jobs. Today, the chief executive of Johnson Matthey said that we have lost the race for gigafactories and are in danger of losing the race for green hydrogen.

Every country that leads the world in renewables has a publicly owned energy generation company. Why doesn’t Britain? This is not a matter of ideology. EDF, Ørsted, Vattenfall and Statkraft all invest in our infrastructure. These are state-owned companies. It is an extraordinary fact that 46% of our offshore wind assets are owned not by foreign companies but by state-owned foreign companies. That means that the proceeds go back to those countries and they build the supply chains. I welcome GB Nuclear, but GB Energy is a much wider version of that. GB Energy is about understanding that reality and saying, “Why not Britain?” This is a moment of peril for Britain in the race for low-carbon jobs. This Bill is not the answer.

It is Labour’s view that the Bill is necessary but not sufficient given the scale of challenge and opportunity that we face. We welcome many of its measures, which are long overdue reforms that will make the delivery of net zero easier. On the basis of the common ground that does exist, we will work constructively with the Government. The Bill will be useful to whoever is in government after the next election, but for all its length, the truth is that it is further proof that Britain will require a new Government to do what is truly needed to lower bills, give us energy security, create jobs and show the climate leadership that we need.

--- Later in debate ---

[Bim Afolami (Hitchin and Harpenden) (Con)]

It is a pleasure to follow the right hon. Member for Leeds Central (Hilary Benn). I agree with a lot of what he said, particularly his focus on affordability for the people we represent in this House. I will make sure that my remarks address that point.

The first thing we must remember is that we are all on the same side on this Bill; there is huge cross-party support for what we are trying to do. More precisely, we know that for a cleaner, more renewable, cheaper energy system—cheaper for the people we represent—we need to electrify as much as we can and produce that electricity with as much green energy as possible. That includes nuclear power, in order to make sure we have that baseload in place.

I want to talk a little about cost, because until the right hon. Gentleman’s speech, too much of this debate did not address the fact that unless our constituents can pay their bills and businesses can be run affordably, not only do we not have a thriving economy, but we do not have a thriving society. We know what we need to do over the long term to reduce those costs, but we are in a transition, and I will repeat some of the points I made in intervention on the shadow Secretary of State, particularly in relation to gas.

We all support moving to a net zero future, but in the transition to that point we are going to need to expand our gas storage and oil refining capacity in this country. The Bill needs to do even more than it already does in that regard. I say that not because I want to burn fossil fuels, but because in the transition to get to the place that we know we need to get to—we can argue about how best we achieve that—if our constituents see their bills going through the roof, the support for the net zero agenda will plummet. So I am concerned about making sure that, as we go through this transition, we keep bills down for our constituents while making the necessary investments for the longer term.

Other Members have mentioned the need to invest in our grid. I believe it was my right hon. Friend the Member for Kingswood (Chris Skidmore) who said that it is ridiculous if we are taking over a decade to plug in new renewable energy into our grid system. I would like more clarity from the Minister and the Government on how, practically, the measures in the Bill will increase the investment in the grid and the speed with which that will happen, because we do not have forever to wait. All of us will hear examples from our constituencies or elsewhere of that huge delay, and all of our strategies and policies do not mean anything unless we can get them plugged into the grid. That requires real urgency and I look forward to the Government explaining more in that regard.

I wish to make two further points, the first of which is on energy performance certificate standards. This is a small thing on some level but it really matters, because for anyone who owns a home, wants to do the right thing, and can afford to make the investments to make their home more energy-efficient, while reducing the cost of their bills—and why should they not invest to do that?—the EPC we currently have is not fit for purpose, as we all know. I would like more clarity on how we are going to improve it; whether an updated EPC will be focused on the environmental aspect or the bills aspect, or both; and how it will come about. Unless we can do that, businesses, individuals and communities across the country will not know what they need to do, or the investments they need to make and when, to reduce the cost of their energy and the cost for our climate.

The final point I wish to make is about ISOP. I do not want to bore the House, but the detail on that is important and I intervened on the Secretary of State about it. Clause 123(1) explains that ISOP must “have regard” to the strategic policy statement issued by the Government, but subsection (2) then says, “If it can’t achieve a policy aim, it should explain why and how.” We need to beef that up. We need to explain more precisely that when the strategic policy statement is made by the Government, ISOP will be a delivery mechanism, nothing more. This is not the intention of the Government or of anybody in this House, but I fear that unless we can make that clearer, Ofgem will perhaps be doing one thing, ISOP will be thinking it is doing something slightly different, and the Government’s strategic intention will be something different again. We should examine that in Committee.

I should have drawn the House’s attention to my entry in the Register of Members’ Financial Interests, as chair of the Regulatory Reform Group, in that regard. Overall, I support this good Bill and I am glad it has cross-party support.