Oral Answers to Questions

Debate between Callum McCaig and Andrea Leadsom

Thursday 14th July 2016 Commons Chamber

[Andrea Leadsom]

My hon. Friend is exactly right. People all too often fail to recognise that the energy trilemma consists of keeping the lights on, keeping bills down, and decarbonising. He is right that the capacity market is there to ensure the security of supply and that is the payment we make to keep the lights on.

[Callum McCaig (Aberdeen South) (SNP)]

I echo the remarks made about the right hon. Member for Hastings and Rye (Amber Rudd) and wish her well in her new role as Home Secretary. I am glad that the Minister is here, because if she had not been, these questions may have been a little more rhetorical than usual.

The previous Prime Minister said in 2012 that he would legislate to ensure that all consumers were on the lowest tariff. We have had four years since then, and an extensive CMA report has come up with recommendations that are a little underwhelming in their scope. Does the Minister think that that will be enough to ensure that energy customers get the best possible deal?

[Andrea Leadsom]

That was a fair question. The CMA has carried out a detailed piece of research and we are committed to implementing all its recommendations as soon as possible. We have also made it clear that if we do not see change, we will take further steps. The hon. Gentleman is right. We will implement the CMA’s recommendations. We will see costs come down, competition go up, and better remedies for people on prepayment meters, but we will also be alert to other opportunities to get costs down for consumers.

[Callum McCaig]

I am glad that the Minister says that the Government will remain vigilant on this matter. The CMA found that 70% of customers of the big six domestic suppliers were on the more expensive standard variable tariff. Will she set a target for reducing that so that we know what success looks like and to determine whether the further action that she mentions is required?

[Andrea Leadsom]

As I have just explained, we do not want to set a specific target. However, we are successfully providing support to organisations that then go on to help people to switch. I love the idea that if anybody listening to this really wants to help their grandparents, neighbour or whomever, who may not have the confidence to switch themselves, they could go and help them switch, possibly saving them several hundred pounds. Instead of setting targets and blaming people when they are not met, we need to persuade people of the advantages of switching.

Draft Contracts for Difference (Miscellaneous Amendments) Regulations 2016

Debate between Callum McCaig and Andrea Leadsom

Tuesday 28th June 2016 General Committees

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

I beg to move,

That the Committee has considered the draft Contracts for Difference (Miscellaneous Amendments) Regulations 2016.

Before I turn to the detail of the regulations, I want to make clear the Government’s commitment to delivering the secure, affordable and low-carbon energy supply that the country needs and which the Secretary of State set out in her reset speech in November of last year. [Interruption.] That sounds like an aeroplane taking off in the corridor—sorry, it completely threw me.

The decision that the country made last week to leave the European Union does not change the Government’s approach to the challenges, and we remain fully committed to delivering on our priorities, including encouraging the development of offshore wind, where we see great potential, and where good progress is already being made, to get costs down and to deploy at scale. The ability to provide quality jobs and apprenticeships and to support industrialisation of the supply chain, including UK companies, is just one of the elements that makes the industry attractive. We are proceeding with plans to hold a competitive allocation round for the less established technologies later this year, and we hope to announce the details as soon as we can.

The instrument amends regulations concerning the contracts for difference scheme. The scheme is designed to incentivise the significant investment that we need in our electricity infrastructure to address the challenges I mentioned earlier: to keep our energy supply secure; to keep costs affordable for consumers; and to help meet our decarbonisation targets.

Contracts for difference, or CfDs, give eligible generators increased price certainty through a long-term contract, which allows investment to come forward at a lower cost of capital and therefore at a lower cost to consumers. Participants in the scheme bid for support via a competitive allocation, which ensures that costs to consumers are minimised. As I said, we plan to run the next allocation round late in 2016.

Hon. Members will be aware that the first CfD allocation round was held in October 2014, leading to contracts being signed with 25 large-scale renewable generation projects, at significantly lower cost than if the projects had been carried out under the renewables obligation scheme. Although the scheme is operating successfully, the Government are looking to make a number of minor amendments, first to ensure that an application for a CfD cannot be made where there is a pending application for a capacity agreement in respect of the same unit and, secondly, to improve the efficacy of the allocation process, including by making available non-price bid information to enable evaluation of the allocation rounds.

To implement our proposed amendments, four sets of regulations need to be amended: the Contracts for Difference (Definition of Eligible Generator) Regulations 2014, the Contracts for Difference (Allocation) Regulations 2014, the Contracts for Difference (Standard Terms) Regulations 2014 and the Electricity Market Reform (General) Regulations 2014. The instrument under consideration makes a number of minor and technical amendments to the current regulations, and I will run through the amendments briefly.

The amendments are designed to improve the effectiveness of the CfD schemes. The most significant of the amendments include, first, ensuring that an application for a CfD cannot be made where there is a pending application for a capacity agreement in respect of the same unit. That ensures that an applicant cannot apply to participate in the CfD and the capacity market auction at the same time and then make a choice of scheme, potentially distorting the allocation for both processes. Secondly, the connection requirements applicable to generators who connect to the national transmission or distribution system, or to a private network, are set out, to align with the allocation framework.

[Callum McCaig (Aberdeen South) (SNP)]

May I take the Minister back to the point about the two models for which generators can apply? I understand why one would look to separate the two, and I think that is supported, but will it lead to any potential projects falling off? When looking to bring something forward, one would want to keep as many options as open as possible. What does the Minister see as the potential for projects not getting beyond the drawing board because they have only one avenue to pursue?

[Andrea Leadsom]

The hon. Gentleman is right to ask the question. Essentially, it is saying that the consumer subsidy for each is sufficient to bring forward investment, so it would not be right or fair either to allow double subsidy for the same project—effectively twice the amount of subsidy or thereabouts—or to bid for one and the other and choose between them. Neither of those things would be right and fair. Our assessments show that it should be perfectly possible to decide either to apply for a CfD or for a capacity market auction bid. No one should need to do both, so I am ensuring that they cannot do both.

The most significant amendments include setting out the connection requirements applicable to generators who connect to the national transmission or distribution system, or to a private network, to align with the allocation framework. Those are key qualification requirements for applicants who connect to the grid in that way and, by having the detail in regulations, we will provide greater certainty to generators in advance of a future allocation round.

We also seek to refine the procedures that apply if there is a need to delay or rerun the auction or allocation round, which again will lead to greater clarity for investors. We make a distinction between confidential price information and non-price information in a sealed-bid submission, which will ensure that the Secretary of State can obtain information relating to non-price sealed-bid data, in order to evaluate the efficacy of the allocation round.

The amendments enable unincorporated joint ventures to participate in the CfD regime, and ensure that only those bank holidays observed in England and Wales are considered within the definition of “working days”. The proposal to focus on a single jurisdiction to define a working day allows for consistency of time periods and deadlines throughout the CfD regime. The amendments also allow the Secretary of State to issue a direction to the CfD counterparty to amend signed CfD contracts where the sustainability criteria have been altered in subsequently published versions of the CfD.

All of the proposals being implemented by the instrument were publicly consulted on and received a largely favourable response. Some concern was expressed about the proposal to split non-price data from confidential price information in a sealed-bid submission. We are confident that the non-price data can be effectively disaggregated from confidential price information and anonymised in such a way that individual projects cannot be identified. That will enable us to evaluate the efficacy of the allocation round.

As a final point, I take this opportunity to assure all Committee members that the Government will continue to evaluate and monitor the reforms following implementation, ensuring that the measures put in place remain effective and continue to represent value for money for the consumer.

--- Later in debate ---

[Andrea Leadsom]

I am grateful to the hon. Member for Brent North for his comments and I share his tribute to the hon. Member for Southampton, Test. It was a great pleasure to spar with him in Committee over the last year, and his knowledge of the energy sector has been a huge plus in our debates. I shall certainly miss him and I sincerely hope that his grape vines will do very well this summer. That is a bit of an in issue, but I was very interested to learn that he was a grape pruner.

The hon. Member for Brent North asked whether there has been an attempt to bid for a capacity market auction and a CfD. The answer is that it has not happened yet. The 2014 allocation rules already prevent an application for a CfD where an applicant has secured support under the capacity market scheme. That prevents an application for a CfD where an applicant has a pending application to the capacity market scheme. Obviously, any project that does not secure support in either a CfD or a capacity market scheme can participate in future rounds for either scheme. I hope that clarifies that point.

To clarify further, the CfD scheme is designed to bring forward low carbon generation, specifically to meet our decarbonisation targets. On the other hand, the capacity market scheme is designed to bring forward dispatchable electricity, to give the confidence for energy security. They therefore have different aims, but we are trying to make sure that no one project can benefit from both or, indeed, cherry pick between the two. Of course, CfDs will be allocated via a competitive process, to make sure that there is best value for money for consumers. These regulations are minor and technical in nature. They are designed to make the competition more efficient, not to change the criteria by which a CfD is awarded.

The hon. Gentleman for Aberdeen South asks whether projects could be encouraged to bid too low. Obviously, this is a competitive auction: we want to see bids come in as competitively as possible. We believe there is room for costs to come down as deployment increases and the supply chain is better developed. If projects fail to sign contracts after bidding, or if they fail to deliver against key milestones, they are prevented from bidding in future rounds, so there is a penalty for not being realistic and deliberately underbidding. There is also evaluation of the non-price parts of a bid to make sure that it is realistic. We have absolutely considered that and taken steps.

[Callum McCaig]

I appreciate the Minister’s response. Yesterday in this room, we discussed changes to penalties in the capacity market. Will she keep this measure under review? Sensible changes were made yesterday and, as we come forward with further CfD rounds, that is potentially something worth looking at.

[Andrea Leadsom]

Yes. I am grateful to the hon. Gentleman and that will absolutely be the case.

National Grid, as the delivery body, monitors both the capacity market and the CfD schemes and is very alert to issues of gaming or underbidding and so on. We are focused on looking for best value for consumers as we bring forward both our decarbonisation and our energy security strategies.

The hon. Member for Brent North asked why the impact assessment has not been updated. The impact assessment for the original order was approved and published in 2014 and these minor and technical amendments are not enough to alter the balance of costs and benefits discussed in that assessment, which is why a further one has not been produced.

Finally, the fifth carbon budget is a top priority. As I have made very clear, nothing has changed following the referendum decision to leave the EU. Our commitment to meeting our UK Climate Change Act 2008 decarbonisation goals is as strong as ever. I disagree with the hon. Member for Brent North about the impact on investment. It is true that Siemens has said it is waiting to see what Government policy is, but it is also true that it is going ahead with its turbine plant in Hull. It behoves all of us, as MPs, not to try to create uncertainty—we should be determined to avoid that. I welcome DONG Energy’s commitment and its important announcement today of continued investment in UK offshore wind, which is fantastic. We will make announcements on the fifth carbon budget as soon as possible.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Contracts for Difference (Miscellaneous Amendments) Regulations 2016.

Draft Electricity Capacity (Amendment) Regulations 2016

Debate between Callum McCaig and Andrea Leadsom

Monday 27th June 2016 General Committees

[Andrea Leadsom]

I will have to write to the hon. Gentleman on that point. I am not sure I completely understand his concern. The impact assessment is clear that our best guess is that the bill impact will be in the region of £11 to £20. I have just been informed that that is net. I will write to him if he wants a fuller answer, but I hope that clarifies things.

The average dual fuel bill is £200 lower than a year ago as a result of lower wholesale prices, which make it more difficult for wholesale generators to cover their costs. Bringing forward the supplementary capacity auction will therefore ensure that there is security of supply. The best estimate is that that will cost £11 to £20 per bill, which is very good value for consumers.

The hon. Gentleman also questioned the £8 billion counterfactual. That £8 billion counterfactual assumes that we do not bring forward the supplementary capacity auction. There would therefore be nothing available for wholesale generators, and they would have to deal with the consequences of the poor economics of low wholesale prices. He asked about the contingency balancing reserve. Our estimates show that it would be more expensive than the supplementary capacity auction. That is why we are doing this. The SCA is more cost-effective and provides energy security. I hope that that answers his questions.

The hon. Member for Coatbridge, Chryston and Bellshill asked about interconnector links. I can tell him that they will go ahead. I confirm for all Members that my view is that energy policy will not be impacted at all by the public’s decision to leave the European Union, because we will continue to have our energy trilemma and our commitments to decarbonisation at the lowest possible price, to energy security and to interconnectors, which after all are all commercial decisions made between businesses. Our policy for more interconnectors will endure, provided that Ofgem finds on a case-by-case basis that they offer good value to consumers.

[Callum McCaig (Aberdeen South) (SNP)]

That is interesting. May I ask whether the Minister envisages the emissions trading scheme continuing?

[Andrea Leadsom]

Obviously, the emissions trading scheme is an EU-wide scheme, and the UK’s participation will be subject to the negotiation of the terms of our leaving the European Union. There has been a lot of discussion in this very room about the ETS, the amendments the UK would ideally like to make and whether it should count towards our decarbonisation goals at all. I say to the hon. Gentleman that those discussions are not for today, but will of course be part of the negotiation.

The hon. Member for Coatbridge, Chryston and Bellshill raised the question of storage and, as I have said to him before, we remain completely committed to that. The Department believes that storage presents a huge opportunity to provide the certainty that intermittent technologies cannot provide for energy security. We are big supporters of it. Work is going on in the Department to look at what we can do to facilitate storage and to remove any barriers, whether regulatory or structural, to allowing storage to deploy. I hope he will appreciate that nothing has changed and that that enthusiasm will continue. I think I have mentioned to him before that I have met all the trade bodies and developers for storage to hear their views, and we are completely supportive.

[Callum McCaig]

I am interested in that answer. Is there any indication of the timescales for that review and of what any forthcoming changes may be?

[Andrea Leadsom]

I am so sorry, but I have to say to the hon. Gentleman that we will announce that as soon as possible. He will be aware that there are a number of announcements that we are keen to make as soon as we can. Some of this work is very complicated and we are keen to get the right answers. During the passage of the Energy Bill, we had a good discussion about storage. We are all on the same side; we all want to see progress. The key thing is to make sure that we get solutions that benefit the deployment of storage and that there are no unintended consequences of the solutions that we choose; it is important that they do not have the opposite effect. We have had that discussion before, so I will leave it there.

The final point made by the hon. Member for Coatbridge, Chryston and Bellshill was on transmission charges for Scotland. As he knows, the transmission charging regime is a matter for Ofgem. As he also knows, it is designed to be cost reflective to ensure the economic and efficient use of the network across Great Britain and, importantly, to keep costs down for consumers. It is true that there are higher charges for generators in Scotland as a result, but that reflects the actual cost that those generators impose on the transmission network. He will also be aware that the greater part is paid by the electricity supply companies, also on a cost-reflective basis. That means that the majority of transmission charges are in fact recovered through consumers in areas of highest demand—namely in England and Wales. Although generators pay more in Scotland, consumers pay less. Ofgem has concluded, having done a recent study on transmission charges, that there would be winners and losers from any change away from cost-reflective charging, and it does not feel as if there is a case for that.

I hope that the responses I have given have been helpful. As I said at the start of the debate, I am confident that with the changes we have discussed today, the capacity market will ensure the security of our electricity supplies in a way that provides the best value for money for consumers. I therefore commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Electricity Capacity (Amendment) Regulations 2016.

Oral Answers to Questions

Debate between Callum McCaig and Andrea Leadsom

Thursday 12th May 2016 Commons Chamber

[Andrea Leadsom]

I commend my hon. Friend for both his tenacity and his command of the English language. Whether from Scottish projects or from projects in the Humber region, this project pipeline will benefit the UK supply pipeline enormously. That is what we really want. He will be aware of the ongoing east coast review, and I am talking with individual developers to try to ensure that we buy British wherever possible and use UK fabricators, and that the UK has the opportunity to get more of this valuable business, which has been a real success story for the UK.

[Callum McCaig (Aberdeen South) (SNP)]

Scotland’s undoubted potential in offshore wind, and in renewables more generally, is being squandered by remote control from here in Westminster. When will the Department stop treating Scotland like an absentee landlord?

[Andrea Leadsom]

I am unsure whether saying, “What rubbish,” is unparliamentary, but, frankly, that was absolute rubbish. There is no sense in which the UK Government treat Scotland as if we were an absentee landlord. The hon. Gentleman will be aware that 60% of the renewables obligation has gone to projects in Scotland, which has about 8% of the population. How on earth can he think that Scotland is somehow losing out? That is absolute nonsense.

[Callum McCaig]

If we are not being run by remote control, will the Minister tell us how many times the Secretary of State has been to Scotland since the last election?

[Andrea Leadsom]

I can tell the hon. Gentleman that I have been to Scotland a number of times.

[Callum McCaig]

Answer the question.

[Andrea Leadsom]

I do not know the answer, but I can write to the hon. Gentleman. My right hon. Friend the Secretary of State is absolutely committed, as am I, to the success of not only wind and the renewables sector in Scotland, but, importantly, the oil and gas sector. The hon. Gentleman will be aware of the hours that she and I have spent in this Chamber desperately trying to get the Oil and Gas Authority sorted out through the Energy Bill, which he and his colleagues have tried to delay and scupper at every turn.

Oral Answers to Questions

Debate between Callum McCaig and Andrea Leadsom

Thursday 24th March 2016 Commons Chamber

[Andrea Leadsom]

I pay tribute to my hon. Friend the Member for Cannock Chase (Amanda Milling) for her excellent work in representing those affected by the closure of Rugeley. The decision on how to use the site is obviously a commercial issue for ENGIE, but I encourage the company to discuss its plans with the Planning Inspectorate, which can clarify the process for building a new gas plant, and particularly how long it might take to do so.

[Callum McCaig (Aberdeen South) (SNP)]

Yesterday marked the end of an era with the sad closure of Longannet power station. I put on record our thanks to the countless folks who worked there and kept the lights on in Scotland for over 40 years. When does the Minister expect new CCGT gas in Scotland to replace Longannet?

[Andrea Leadsom]

I, too, wish to express enormous gratitude, on behalf of Conservative Members, for all the work that has been done at Longannet over the past 47 years. It certainly is the end of an era. It is astonishing that the plant was expected to last for only about 25 years, and the extension of that to 47 is pretty impressive.

As I have said, the capacity market needs to buy earlier and buy more capacity at a time when wholesale prices are so low and various plants are struggling, partly to ensure that new gas is available. The location of the combined cycle gas turbines will, of course, be a matter for individual developers.

[Callum McCaig]

It will be a matter for developers, but one of the biggest hurdles to new CCGT in Scotland, and one of the reasons for the early closure of Longannet, has been the imposition of transmission charges, along with the additional costs that are levied on generators in Scotland, primarily owing to their location. Margins are tight, and they are getting tighter. Can we remove this barrier to new gas generation?

[Andrea Leadsom]

It is extraordinary that the hon. Gentleman should say that, because Scottish consumers are huge beneficiaries of locational charging. He needs to look at the situation in the round. Scottish consumers benefit from being part of a Great Britain-wide energy market. Had the Scots voted for independence, today would have been the day when they were on their own. Issues such as the price of energy and the locational pricing would have worked very much to their detriment without that GB-wide market.

Energy Bill [Lords]

Debate between Callum McCaig and Andrea Leadsom

Monday 14th March 2016 Commons Chamber

[Andrea Leadsom]

As I have said to the hon. Gentleman, I think our intentions are clear from words spoken in this Chamber and in the Bill Committee. I will certainly look into the case he mentions, but I do not have the information that he is looking for right now.

Amendments 24 to 46 are all intended to delay the early closure of the RO until 1 March 2017, closing it only one month earlier than the original closure date of 31 March 2017. It is therefore my understanding that the hon. Members who have tabled the amendments want the RO to close to onshore wind only a month earlier than planned, while maintaining the grace period provisions set out by the Government. Clearly, such a change would not meet the objectives of the early closure policy, which I have consistently set out in debates on the Bill and have explained again today. To change the early closure date to 1 March 2017 would go against the intentions of our manifesto commitment, and would be likely to make no reduction to overall deployment or costs under the levy control framework.

I remind hon. Members that those limits have been set for a crucial reason. As my right hon. Friend the Secretary of State set out in a speech in November last year:

“We can only expect bill payers to support low carbon power, as long as costs are controlled. I inherited a department where policy costs on bills had spiralled. Subsidy should be temporary, not part of a permanent business model.”

I remind hon. Members again that the Government have an electoral mandate to deliver on our manifesto commitment to halt the spread of onshore wind, and that is exactly what the clause is intended to do. However, the Government are mindful of the need to protect investor confidence and to take into account the interests of the onshore wind industry. That is why we have set out grace period provisions, which appear in clause 80.

I believe that I have consistently explained that the Government have an obligation to protect consumers from the risk of over-deployment of new onshore wind and rising energy bills. The date changes proposed in the amendments would simply put us back to where we started, providing no protection for consumers and putting us at risk of deploying up to 7.1 GW of additional onshore wind, which is well beyond what the Government have decided is affordable under the levy control framework.

To conclude, I stress the importance of swiftly moving forward with the proposals. I again quote the hon. Member for Coatbridge, Chryston and Bellshill, who said in Committee on this very issue:

“We agree that swift passage of the Bill with clear and consistent RO grace period provisions is needed in order to provide certainty to investors in the onshore wind sector as quickly as possible.”––[Official Report, Energy Public Bill Committee, 2 February 2016; c. 127.]

Clear and consistent provisions are exactly what the Government are attempting to provide, and we need to be able to move forward with the debate to do so.

[Callum McCaig]

I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Clause 79

Onshore wind power: closure of renewables obligation on 31 March 2016

Amendment proposed: 24, page 46, line 20, leave out “31 March 2016” and insert “1 March 2017”.— (Dr Whitehead.)

This amendment and amendments 25, 26, 40, 41, 42, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38 and 39 have the effect of closing the Renewables Obligation for onshore wind a month earlier than the original date set out in the Statutory Instrument: Renewables Obligation Closure Order 2014: 2388, rather than a year earlier, as the Bill does in its present form.

Question put, That the amendment be made.

--- Later in debate ---

[Andrea Leadsom]

The right hon. Gentleman misses the point. The OGA is going to have an enormous brief. The point about its principal objective being to maximise the economic recovery is that that would focus its efforts on the long-term sustainability of the North sea and not what the other House tried to put in place, which is related to short-termism and trying to maximise profitability and so on. That would be counter to the interests of jobs and growth in his constituency and others. Removing the OGA’s focus on that principal objective seriously risks weakening its ability to provide support to an industry that is urgently in need of it, and the potential knock-on effect would be significant. Doing so would risk the premature decommissioning of key North sea infrastructure and would seriously jeopardise vital skills and experience, including those that could help to promote the longevity of the industry through carbon storage projects. From that perspective, the amendment is self-defeating. Furthermore, the “Maximising the Economic Recovery” UK strategy has now been published and is currently before Parliament. The amendment would undo the significant amount of work that has been undertaken with industry and would require the OGA to revise its MER UK strategy to take into account the expansion in the principal objective.

As the hon. Member for Aberdeen South has mentioned on several occasions, it is mission critical that the OGA maintains a “laser-like focus” on maximising economic recovery above all else. Without such a focus, we risk conflicting the OGA—setting it up to fail in its crucial mission to protect our domestic energy mix and to support hundreds of thousands of jobs. That is not what is best for the UK continental shelf now or in future.

[Callum McCaig]

I thank the Minister for drawing attention to that. It is absolutely fundamental that the OGA has that laser-like focus. It is also fundamental for the industry that the Chancellor has that laser-like focus. I reiterate to the Minister the need for her to use her good offices to make sure the industry gets the support it needs on Wednesday.

[Andrea Leadsom]

I am grateful to the hon. Gentleman for that. He will be aware that the Chancellor and the Prime Minister have looked carefully at the matter, so I hope that he will be pleased. I assure him that his interests and the interests of the UK continental shelf are being carefully considered. I hope that the right hon. Member for Orkney and Shetland will be content not to press the new clause to a vote.

Finally—hon. Members will be pleased to hear that—I turn to amendment 47, which was tabled by the hon. Member for Wigan and others. The amendment would oblige the OGA to consider the most advantageous use of North sea infrastructure for the overall benefit of oil and gas extraction prior to the decommissioning of such sites. I am delighted to note the support across the House for the measures to establish the OGA and give it the powers needed to maximise economic recovery. The impact of the fall in oil prices on industry makes that even more critical.

Although we are taking urgent steps to stimulate investment in exploration, it is equally important to the overall viability of the North sea that we make the best use of infrastructure in order to mitigate the risks of premature decommissioning. That requires a holistic approach in which operators, licence holders and infra- structure owners collaborate to ensure the maximum economic recovery of petroleum from the UK continental shelf. That is precisely provided by the OGA’s principal objective set out in section 9A of the Petroleum Act 1998.

The strategy to maximise economic recovery further addresses that issue. It includes duties to plan, commission and maintain infrastructure in a way that meets the optimum configuration for maximising the value of economically recoverable petroleum, taking into account the operational needs of others. The strategy and the measures in the Bill ensure that before commencing the decommissioning of any infrastructure in relevant UK waters, the owners of the infrastructure and the OGA must ensure that all viable options for its continued use have been suitably explored. The OGA is already working to support a stable and sustainable decommissioning framework focused on improving late-life management. The OGA will publish its decommissioning sector strategy early in the summer. I hope that hon. Members have found my explanation reassuring and will be content not to press the amendment to a vote.

[Mr Speaker]

I call Callum McCaig, if he wishes to speak.

Hinkley Point C Reactor

Debate between Callum McCaig and Andrea Leadsom

Tuesday 8th March 2016 Commons Chamber

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

In the same tone as the hon. Gentleman, I would like to draw attention on International Women’s Day to the fact that Dame Sue Ion was on “Desert Island Discs” as the first woman to be awarded the very prestigious president’s medal by the Royal Academy of Engineering and she is herself a nuclear expert. I am sure that all hon. Members will be delighted to hear that today of all days.

I thank the hon. Member for East Lothian (George Kerevan) for securing this debate, which gives me the opportunity to put forward the Government’s vision for Hinkley Point C. HPC is a matter of national importance for our energy system, and it is only right that it should be discussed in this House. However, let me point out that we do not put all our eggs in one basket. Far from being the only game in town, as the hon. Gentleman suggested, it is part of a balanced mix of energy sources that includes renewables and fossil fuels. It is absolutely vital that we stick to our plan for energy security and decarbonising at the lowest price to consumers.

Returning to HPC, there are numerous approvals processes for a project like it, many of which have already been completed. These include state aid; the approval of a funded decommissioning programme to cover the costs of managing waste from HPC, which is included in the contract for difference; planning approval; and grid connection. Some other processes will continue up to signature of the documents. Looking ahead, HPC will need to comply with the UK’s robust nuclear regulations—among the most stringent and safest in the world.

However, the key to this project is the funding package that has been negotiated with the developer. It is this, I think, that the hon. Gentleman had in mind when calling for this debate, and I intend to focus my remarks on it. The short answer to the question he raised is that the timing of Government’s final approval of the deal is dependent on EDF being in a position to make a final investment decision. As he is aware, this is ultimately a commercial matter for EDF. In the UK, it is for developers to fund, build and operate new nuclear power stations. I would like to take this opportunity to explain what this Government are doing to expedite the successful conclusion of this landmark deal.

[Callum McCaig (Aberdeen South) (SNP)]

rose—

[Andrea Leadsom]

I shall not give way for a while; I am slightly short of time and I have important points to make. I will give way later if there is time.

Let me first remind the House of the reasons why the Government have supported the development of Hinkley Point C, and how we have ensured that this is a good deal for Britain. New nuclear is needed, alongside renewables and fossil fuels, because nuclear is the only non-renewable low-carbon technology that is currently proven and can be deployed on a large scale to provide continuous supply. Most existing nuclear plants, which currently meet about 16% of our energy needs, are due to close by the late 2020s. Without new nuclear build, the share of nuclear generation could dip to 3% in 2030. Britain is a world leader in civil nuclear, through our skills base, our infrastructure and our regulatory regime. Hinkley Point C will keep Britain at the forefront of nuclear development.

Government policy has determined that the new plant should be financed and built by the private sector. The Government have worked closely with new-build vendors and industry to develop a number of initiatives to maximise both the capability and the economic benefits to the UK. That goes far wider than Hinkley Point C—industry has set out proposals to develop 18 GW of new nuclear power in the UK—but the first step in this long-term plan is Hinkley, which will be the first new nuclear power plant to be built in the UK for 20 years, and which will blaze a trail for further nuclear development.

Once it is up and running in 2025, Hinkley will provide 3.2 GW of secure, base-load and low carbon electricity for at least 60 years, meeting 7% of the UK's energy needs. That is enough to power 6 million homes, twice as many as there are in the whole of London. Hinkley will give an enormous boost to both the local and the national economy, providing 25,000 jobs during construction, as well as 1,000 apprenticeships. The plant will provide employment for 900 permanent staff once it is up and running, contributing £40 million a year to the local economy.

Having visited Bridgwater recently, I can tell the House that there is a real sense of excitement about the project. EDF has not been complacent; it is digging away. It has back runs, and the whole site has been levelled. There is big investment in the local community, and local people are very supportive of the project.

EDF believes that at least 60% of the £18 billion value of construction work on Hinkley will go to UK-based businesses. Through our negotiations, we have ensured that consumers will not pay anything for the electricity until the plant is generating, so the risks of construction will be transferred to the developer. At the same time, we have ensured that mechanisms are in place to enable any construction underspends or profits above a certain level to be shared with consumers. If the project comes in under budget, savings will be shared with consumers, but if there are overspends, the developer will bear all the additional costs.

As I have said, we need new nuclear, and Hinkley Point C will pave the way for a new generation of nuclear plants in the UK in a cost-competitive way, thanks to the unique deal that we have negotiated.

[Callum McCaig]

In the context of that “unique deal”, may I ask the Minister, as the final decision approaches, for a cast-iron guarantee from the Government that the strike price of £92.50 will not be increased?

[Andrea Leadsom]

As I have explained, the strike price has been agreed, and we expect a final investment decision in the very near future.

The deal has already been through a number of rigorous approvals processes, both within the Government and within the European Union. In October 2013, the Department of Energy and Climate Change and EDF agreed the strike price for the electricity to be produced by Hinkley Point C. In October 2014, the European Commission approved the Hinkley Point C state aid case, following a lengthy and rigorous investigation by the Commission. Notwithstanding the ongoing opposition of a small minority of member states, we are confident that the decision is legally robust and will stand up to challenges.

In October 2015, EDF and its partner of 30 years, China General Nuclear, signed a strategic investment agreement in London. That commercial agreement set out the terms of EDF's partnership in the UK with CGN, starting with Hinkley Point C. EDF and CGN agreed to take a 66.5% stake and a 33.5% stake in Hinkley respectively. At that point, the final form of the contracts was agreed in substance. My right hon. Friend the Secretary of State made it clear at the time that she would make her final decision on Hinkley once EDF had reached its final investment decision.

The Government’s position has remained unchanged while the final details of the contracts have been ironed out. In November, we set out that we expected to conclude the deal in the coming months, and the Secretary of State made it clear that she was minded to proceed with the contract for difference support package for the deal, subject to any change in circumstances. We remain confident that all parties are firmly behind Hinkley Point C and are working hard towards a final investment decision. We have received assurances from EDF and the French Government—EDF’s largest shareholder—on this point. Hinkley is a large investment for EDF and CGN, so it is only right and proper that they take the necessary time now to ensure that everything is in order so that they can proceed smoothly once they have taken a positive final investment decision.

Offshore Oil and Gas Industry

Debate between Callum McCaig and Andrea Leadsom

Thursday 3rd March 2016 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

It is a great pleasure to serve under your chairmanship, Mr Davies. I echo the hon. Members for Aberdeen South (Callum McCaig) and for Southampton, Test (Dr Whitehead) in saying that the good and unusual thing about this debate is that we are all on the same page. We all absolutely agree that the oil and gas industry is vital for the United Kingdom. It is currently in great difficulty, but we are all united in our determination to do everything we can to see it get through this period and continue to thrive.

I was slightly concerned to hear the hon. Member for Southampton, Test raise the question of joint enterprise and mention “Dallas” in the same speech. We will of course all remember the question, “Who shot J. R.?”; I would not like to think that there was any joint enterprise whatever.

[Callum McCaig]

I should make it clear to the Minister that some of us are not old enough to remember “Dallas”. [Laughter.]

[Andrea Leadsom]

I take that extremely personally. That is going to cost the hon. Gentleman chocolate raisins in our next debate—he knows what I mean. I am watching him very closely.

Like other Members, I was delighted that my hon. Friend the Exchequer Secretary to the Treasury was able to join us for much of the debate and hear the views of several Members on the needs of this important sector. The North sea is a mature basin, yet it is still meeting the equivalent of around 65% of the UK’s oil demand and 55% of its gas demand. As many Members have said, there is no doubt that oil and gas will remain central to the UK’s energy mix as we make the transition to a low-carbon economy in a cost-effective way for consumers, so investing in domestic oil and gas production is essential. It helps to reduce our reliance on energy imports and provides a significant input to our economy, supporting hundreds of thousands of jobs directly and indirectly.

As all speakers have pointed out, over the past year oil prices have continued to fall, dropping to below $30 a barrel earlier this year. The impact of the fall on the industry was reported last week in Oil & Gas UK’s annual activity survey, which also indicates that investment in new projects has fallen from approximately £8 billion a year over the past five years to an expected £1 billion in the coming year, and that the number of wells drilled to explore for new reserves is low. It is therefore vital that industry and Government step up and respond to the challenges facing the industry.

I assure all Members that the Government are committed in their support for the industry and have already made significant changes to the fiscal regime. In the March 2015 Budget, the Chancellor introduced a £1.3 billion package of reforms, including reductions to headline rates of tax, a new investment allowance and £20 million of funding for seismic surveys to support exploration. In fact, no other Government have made fiscal changes as extensive as the UK’s in response to falling oil prices. Both the Government and the Oil and Gas Authority will continue to listen to the industry’s views on further reforms in this area, but, as the Wood review made clear, fiscal changes are not the only solution to the issues the industry currently faces.

Several Members, including the right hon. Member for Tynemouth (Mr Campbell), spoke about the need for fiscal measures to be taken in the next Budget. I hope that he and others were reassured by the presence of my hon. Friend the Exchequer Secretary. The changes announced in the 2015 Budget were obviously significant. Several large projects have already gone ahead as a result of them, such as Maersk’s Culzean project—an investment of £3 billion in the UK, supporting 6,000 jobs—and BP’s eastern trough area project, which is a £670 million investment. In response to the March 2015 Budget package, the then CEO of Oil & Gas UK, Malcolm Webb, said:

“These measures send exactly the right signal to investors. They properly reflect the needs of this maturing oil and gas province and will allow the UK to compete internationally for investment.”

That is what we were setting out to achieve, and I think those measures were very well received.

Members have highlighted what the industry is asking for: that we address the remaining fiscal barriers to late-life activity; that we abolish the supplementary charge, or at least reduce it by 10%; that we bring the rate of the investment allowance for offshore expenditure in line with that for onshore expenditure; that we temporarily remove all special taxes from exploration, so that only basic corporation tax will apply for all discoveries made over the next five years for the whole life of the field; and that we introduce a Government loan guarantee.

The Government have been building on the evidence gathered at working groups that met over autumn 2015. The Treasury, supported by the OGA, is conducting internal analysis of the findings of the three workstreams on barriers to exploration, infrastructure access and new entrants for late-life assets. As usual, should the Chancellor make any decisions, the announcement and implementation of any changes to the tax regime will follow the fiscal policy-making process. I hope that that reassures Members, but they should understand that I cannot make any further comments. It is not a matter for me anyway, but the Budget is coming the week after next.

In addition to looking into and undertaking further fiscal reform, the Government are supporting the industry in a number of other ways. The OGA has been established as an independent regulator and asset steward for the UK continental shelf. The Energy Bill before Parliament will provide the OGA with the powers it needs to maximise the economic recovery of oil and gas from the continental shelf. The OGA is working with the industry to identify opportunities to reduce costs, and good progress has already been made, with Oil & Gas UK’s recent activity survey showing that production rose by 10% in 2015, while production costs fell by a third. That is an impressive achievement.

As the hon. Member for North Tyneside (Mary Glindon) pointed out, we have recently re-established the cross-party oil and gas group, and we are aiming to promote the competitiveness of the offshore fabrication sector. Our first meeting, in January, was very productive. I am grateful to my hon. Friend the Member for Waveney (Peter Aldous), the hon. Member for North Tyneside and other Members for their involvement in the forum. As the hon. Lady mentioned, our next meeting will be with fabricators, and we will be looking at new opportunities not only in the traditional oil and gas sector but outside it.

Supporting the industry’s supply chain is crucial at this time, as it is a vital and integral part of the UK oil and gas industry. As those Members who have constituents who work in the industry and others who themselves have worked in the industry will know, it has suffered job losses and revenues falling by around a quarter last year. We must acknowledge that. The hon. Member for Aberdeen North (Kirsty Blackman) asked whether enough is being done about job losses. I can tell her that in intergovernmental ministerial meetings, and particularly in the work I am doing with my right hon. Friend the Minister for Small Business, Industry and Enterprise, we are examining what more can be done to view the energy sector holistically to see how job losses in the oil and gas sector can be a win, not only for offshore and onshore wind but, for example, for the new nuclear efforts. We are looking at what more can be done to provide new opportunities in the energy sector.

Despite the low oil price and the downturn of work being contracted offshore, there are steps we can take to support our supply chain and put it in the best position to win contracts. The OGA is actively involved in promoting future success through its supply chain strategy and board, for which unlocking new investment and future work is a priority. The OGA is working closely with the Department for Business, Innovation and Skills and with industry to make sure that companies remain competitive. The Government are working to further develop mechanisms to provide greater transparency about upcoming business opportunities to companies in the supply chain.

I am delighted to be able to inform Members that over the past few days I have held meetings with several offshore wind developers to emphasise to them that I want to see them do more to make the industrialisation of the UK offshore wind supply chain happen. In particular, the industry needs to work collaboratively to deliver a UK jacket foundation solution and competitive UK tower solutions. Successful delivery of towers and jacket foundations will create opportunities for fabricators and enable people with the right skills to transfer across to the offshore wind sector.

In the past 48 hours, I have met a couple of developers, one of whom told me that they have been very successful in winning overseas offshore wind business by using onshore Aberdeen-based oil and gas consultants with expertise in engineering, if hon. Members can follow that tortuous thought process. Rather than using offshore wind consultants, wherever they are based, they are using the UK’s long-established expertise in onshore oil and gas to win overseas wind business. That is important, and we need to do more to promote that interesting opportunity.

I am working with my hon. Friend the Minister for Skills to develop a national college for wind energy to provide people with the right skills to work in the sector. I had a meeting yesterday with a number of hon. Members from across the House to talk about what more we can do to get it up and running. Retraining is required if we are to take the people who lose opportunities in the oil and gas sector into offshore and onshore wind and other renewables sectors. There is a big opportunity there.

The UK has a strong record on manufacturing jackets and topsides for offshore wind substations. The majority of those items are manufactured in the UK. Sembmarine SLP Ltd, which won a contract from Siemens Transmission and Distribution in 2014 to design, engineer, procure, project manage and construct its platform’s jacket substructure and topside, has begun fabrication. The offshore transformer station, which is being constructed at SLP’s yard at Lowestoft on the Suffolk coast, is providing work for up to 300 employers for the next 21 months. I encourage all hon. Members—I know they are already doing this—to work with Ministers, cross-party groups and the OGA to look at other opportunities in the energy sector, not only on direct workforce re-engagement but on supply chain opportunities. That is really important. The Government and the OGA are continuing to work with initiatives such as the Scottish energy jobs taskforce and the New Anglia local enterprise partnership to support those who have already, sadly, lost their jobs. We need to continue that work.

In addition to those measures, during his visit to Aberdeen in January, the Prime Minister announced a package of measures to support the industry, including £20 million of Government funding for a second round of new seismic surveys to unlock new exploration activity in the UK continental shelf, which is the lifeblood of the basin. That funding, together with the OGA’s flexible and pragmatic licensing strategy for frontier and mature acreage, is designed proactively to influence and incentivise exploration on the UKCS. To back genuine innovation, the data from those new surveys will be made publicly available and £1 million will be allocated to fund innovative uses of data to unlock new fields. That additional investment will help to accelerate the drilling of new wells, which will replenish our reserves and lead to new infrastructure projects.

In addition, £700,000 is to be invested in the development of world-class 3D visualisation facilities at the Lyell centre at Heriot-Watt University in Edinburgh. The appointment of a new oil and gas ambassador will help to ensure the best possible access for UK companies to markets overseas, promote the North sea around the world and boost inward investment. The new strategy to maximise the economic recovery of offshore oil and gas in the UK will, subject to the will of Parliament, come into force soon. I share the sense of urgency of my hon. Friend the Member for Waveney, who rightly pointed out that that needs to happen as soon as possible.

In addition to all those measures, Innovate UK is set to launch an energy game-changer, which will make £1.5 million available to encourage innovators, microbusinesses and small and medium-sized enterprises from outside the energy sector to come up with radical solutions and disruptive technologies in response to challenges set by the energy industry. The Natural Environment Research Council will also allocate an additional £1 million investment in the successful oil and gas centre for doctoral training, led by Heriot-Watt University in Edinburgh. Aberdeen University is another core partner. That further investment will enable the programme to be extended for another year and will take the total number of PhD students funded under the scheme to 120 by 2017.

The Government are committed to supporting regional development. Aberdeen is Europe’s energy capital, and has rightly received a package of investment through the Aberdeen city region deal, which included funding for an oil and gas technology centre that will help to strengthen the UK’s position as a global centre of expertise for offshore oil and gas and encourage future investment in the UK. However, that is not the only area that contributes to the industry. Although Scotland supports 45% of the UK’s oil and gas jobs, largely in and around Aberdeen, 55% are located in England, with concentrations in the south-east, the north-west, the west midlands and the north-east. Those areas all support thousands of highly skilled and well-paid jobs. I was very pleased that my hon. Friend the Minister for Housing and Planning was able to join us for part of the debate and that he lent his support for our doing all we can to ensure the success of the sector. It is crucial that we have a joined-up approach across the Government, the OGA, industry and the regions.

As my hon. Friend the Member for Waveney made clear, the southern North sea off the coast of the east of England is a vital part of our industry. For that reason, we are moving forward with our regional development plans. This year, the OGA will carry out an evaluation of the potential for transforming the southern North sea into an energy hub.

As many hon. Members pointed out, although the industry faces challenges, we must remember that there are still opportunities out there. It is definitely not all doom and gloom. As Sir Ian Wood pointed out recently, there is still a huge prize out there. There are still up to another 20 billion barrels of oil equivalent to recover, and 10 new developments will come online in the next two years, which will create much-needed jobs. There is a strong portfolio of new projects in the planning stage just waiting for an upturn in the oil price.

Draft Renewables Obligation Closure etc. (Amendment) Order 2016

Debate between Callum McCaig and Andrea Leadsom

Wednesday 2nd March 2016 General Committees

[Andrea Leadsom]

No, the hon. Gentleman has had his say so many times and I am sick and tired of it. He needs to stop peddling that argument. The point of the Government’s policy is to support consumers and to decarbonise at the lowest price. We absolutely support subsidies for renewables. They have been so successful and their costs have come down so much. We have carefully consulted, and we have concluded that they no longer need the subsidies at the rate they were receiving them at and that the potential impact on consumer bills of continuing with subsidies at that rate is too great. That is the end of it. Those are the facts. I am sorry that Opposition Members want to play politics with that but we are on the side of the consumer.

The hon. Member for Southampton, Test specifically asked about the eligibility date and why we chose 22 July 2015. That is the date on which we announced the proposals and the grace period was designed to align with that. The significant financial investment grace period is designed to protect those who made such commitments before we proposed to bring forward the RO closure date for solar PV. Moving the date to enable other less advanced projects to meet the eligibility criteria would increase the risk of more projects deploying at greater cost to the LCF. We have tried to strike the right balance between the public interest, including protecting consumer bills and ensuring the right mix of energy, and the interests of solar developers and the wider industry.

The other thing I will say to Opposition Members is that, since our changes to the feed-in tariff, deployment has continued in the solar sector. They like to speak as if no subsidy somehow means that no solar or renewable projects are coming forward. That is blatantly not the case. A significant and decent amount of renewables are still coming forward. Under the Government’s policy, we believe that the feed-in tariff will enable up to another 1.1 GW of new solar installations between now and 2020, protecting the consumer while protecting and supporting the industry.

The hon. Member for Great Grimsby asked about job losses. The consultation period suggested that up to 23,000 jobs will continue to be supported by subsidy and, potentially, many others without subsidy. We are aware that large-scale solar projects are coming forward without subsidy, so it is simply not true to say, as she did, that there are thousands of job losses and that there will be thousands more. There is no evidence for that.

Other hon. Members asked about the LCF transparency. I will make a further point about that. We have been clear that we do not break down published information on components of LCF spend, because of the potential disclosure of commercially confidential information. In certain sites, that has to be the case and has to remain so.

Other hon. Members talked about our impact assessment not having sufficient data points. I can tell the Committee that there were 55,000 responses to the feed-in tariff review and, from that, we gained about 5,000 extra data points from which we were clearly able to target that policy to continue to support renewables, so it is simply not the case that the draft order has been ill-thought-through or that it is not seeking to strike a balance between the interests of the consumer and the interests of the industry.

We are confident in our policy on renewables. Those industries are superb and great British success stories. Hon. Members will be aware that 99% of all solar installations have taken place since 2010, when the Conservative-led coalition Government came to office. Today, still, the vast majority of solar deployments has taken place under a Conservative Government.

In answer to the specific point about nuclear made by the hon. Member for Aberdeen South, he must realise that solar and nuclear are not directly comparable. Solar is not dispatchable; it provides electricity when the sun is shining. Nuclear is dispatchable; as the hon. Gentleman is aware, most days we get 19% or 20% of our electricity, day in, day out, from dispatchable, reliable nuclear electricity. That cannot be the case from solar.

[Callum McCaig]

I accept that, but will the Minister likewise accept the point that I made, which is that if we are to be serious about storage, with investment and a proper mechanism for it to happen, solar can do that and, arguably, at a similar cost to nuclear, if not cheaper?

[Andrea Leadsom]

The hon. Gentleman did not make that point, but I entirely agree. As he well knows, in the Department we are looking closely at what exactly we can do to bring forward more storage. He also mentioned that nuclear in Scandinavia is asking not to be brought forward because it cannot compete with renewables. As he knows, what is meant there is hydroelectricity, which is dispatchable, so he makes my point for me. We cannot compare intermittent technologies with dispatchable electricity—it is simply not relevant to our discussion.

I thank members of the Committee for their contributions to this debate. It is very important to make it clear on the record that this Government are on the side of consumers. We will absolutely keep the lights on and decarbonise at the lowest cost to consumers, keeping the balance right between the interests of consumers and of developers.

Oral Answers to Questions

Debate between Callum McCaig and Andrea Leadsom

Thursday 11th February 2016 Commons Chamber

[Andrea Leadsom]

I think the hon. Gentleman is referring to some of my excellent hon. Friends, who are superb constituency MPs. We will have to agree to disagree. I am sure he would agree, however, that the role of an MP is to represent the interests of their constituency as they see them. We have now struck the right balance between the country’s need for superb renewables—it is now a very successful sector—and the need of local communities to have their wishes and their environment taken into account.

[Callum McCaig (Aberdeen South) (SNP)]

Prior to the Energy Act 2013, Scottish Ministers had full control over the renewables obligation. That power was removed on the clear understanding and promise that there would be no policy implications. Why was that promise broken, and will the Minister commit to backing the Scottish National party’s calls for that power to be returned to Holyrood as part of the Energy Bill?

[Andrea Leadsom]

The hon. Gentleman is aware that the reason we are closing the subsidy for onshore wind a year early is in great part to avoid the additional costs to the bill payer of extra deployment beyond our calculations of what could be expected. This is about trying to keep consumers’ bills down. We have had a number of debates about fuel poverty, and striking that balance is absolutely vital. It is in the interests of the whole of UK that we do not keep burdening bill payers with more costs.

Energy BILL [ Lords ] (Sixth sitting)

Debate between Callum McCaig and Andrea Leadsom

Thursday 4th February 2016 Public Bill Committees

[Callum McCaig]

Will the Minister give way?

[Andrea Leadsom]

Let me make some progress.

As hon. Members have said, the matter was subject to a very difficult spending review where all capital infrastructure costs were reviewed and measured against clearly set out value for money targets, and the competition did not meet those targets, but that is not to say that CCS does not play a part; it certainly does.

The Prime Minister is regularly accused of saying that CCS does not work. In fact, he said that at the moment it is not economic where it is already working, so it does not represent value for money. Hon. Members have asked whether we are effectively turning out back on CCS and not preparing ourselves, and they have asked about when we bring on new gas as part of new policy reset. I can assure hon. Members that any new gas plants for power generation will be CCS-ready, so there is no sense that, by not doing certain things now, we are closing the door for the future.

The Committee on Climate Change argued that meeting the 2050 targets would cost more without CCS, but we are absolutely not ruling out CCS. I want to make that clear.

[Callum McCaig]

The Minister mentioned that the competition was clear that the companies involved would not have their risks or costs mitigated by the Government. The problem that the companies have, and that I and other hon. Members have, is that the competition did not conclude. The rules of the game were ripped up at the 11th hour. Does the fact that the competition was incomplete change the Minister’s interpretation of the competition’s rules?

[Andrea Leadsom]

No, it does not.

The Government continue to invest in the development of CCS. This includes investing more than £130 million in CCS research and development since 2011. For example, in October last year we invested £1.7 million to support three innovative CCS technologies—Carbon Clean Solutions, C-Capture Ltd, and FET Engineering Ltd—and there is the potential to reduce costs. We have continued to support, jointly with the Scottish Government, the CCS developer, Summit Power, with £4.2 million in funding to undertake industrial research and development at its proposed CCS Caledonia clean energy plant in Grangemouth in Scotland.

We have invested £2.5 million in a project to investigate a suite of five stores for the storage of carbon dioxide in the North and Irish seas. We have continued to invest in the development of industrial CCS, providing £1 million to Tees Valley for a feasibility study on an industrial CCS cluster in Teesside. We remain committed to exploring with Teesside how to progress its industrial CCS proposals as set out in the area’s devolution deal, published last October, and in the context of the Lord Heseltine-led taskforce on Teesside.

Through our international climate fund, we have invested £60 million in developing CCS capacity and action in priority countries, including Indonesia, South Africa, Mexico and China, and we work with CCS partners, including the United States and Canada, through the international carbon sequestration leadership forum.

--- Later in debate ---

[Andrea Leadsom]

No, I think we have had that discussion.

As part of our commitment to the future of CCS, we will continue to engage widely, including with Lord Oxburgh’s CCS advisory group, which met for the first time yesterday. I have also met the all-party parliamentary group on CCS, whose meeting I attended and spoke at last month, and the joint Government-industry CCS development forum, which I co-chair and which met at the end of last year. We are engaging widely with the CCS industry on what more can be done, supporting individual pilot schemes and measures to try to bring costs down, and ensuring that what we are building to maintain our energy security will be CCS-ready.

We need to take this opportunity to get the next steps right. We will then set out our thinking for the way forward for CCS, using the expert advice from industry, Lord Oxburgh’s group and the APPG. I hope that I have reassured hon. Members that the new clauses are unnecessary as the Government are already considering how they can support the further development of CCS.

[Callum McCaig]

The Minister has spoken a lot. Splitting hairs on what is a commitment and what is not is perhaps interesting for folks watching elsewhere given the voracity of the defence of a Tory party manifesto commitment to end new subsidies for onshore wind that could, in fairness, be read in a multitude of ways. When is a commitment not a commitment? When they do not want to do it. It was clear in the manifesto that it should happen. That it has not is regrettable. I am interested that the Minister believes that there will be no comeback from any of the companies involved in the bidding process. That may essentially be welcome for the sake of the taxpayer, but it is by no means assured and underlines the Government’s atrocious handling of the competition. I want them to make amends and to provide a clear strategy for the CCS industry.

--- Later in debate ---

[Andrea Leadsom]

I assure the hon. Gentleman that Lord Oxburgh’s group on CCS will be advising the Government. We have recommended that the hon. Member for Coatbridge, Chryston and Bellshill be invited to join that group, because we agree that it will be important for Scottish Members to take part, give their thoughts and views and have an input into that.

[Callum McCaig]

I thank the Minister for that. That would be sensible; my hon. Friend has considerable expertise in this area and would make a significant contribution to that group.

We need to be careful in this House to recognise the difference between Scottish National party Members of this Parliament and of the Scottish Government. It is clear that we have different roles. While we are of the same party, I cannot speak on behalf of the Scottish Government or commit the Scottish Government to things, in the same way that Labour Members cannot commit the Welsh Government to things. Recognition of the different roles and responsibilities of the different Parliaments, Governments and Executives is required, in order for the strategy to happen. New clause 4 would achieve that in a marginally better way than new clause 10, and I hope it will win hon. Members’ support.

--- Later in debate ---

[Andrea Leadsom]

On a point of clarification, is the hon. Gentleman suggesting that National Grid could somehow prevent electricity generated from a nuclear power station from going to Scotland?

[Callum McCaig]

Absolutely not, no. I am talking about how Governments in the different jurisdictions are allowed, in collaboration with each other and National Grid, to pursue different energy policies. It would be unwise to suggest that power generated in any parts of these islands should not sensibly be allowed to flow in any way dependent on need. Through the Irish interconnector there is collaboration with the Republic of Ireland and likewise with the French and Dutch interconnectors. The move is towards greater interdependence, but that still allows a degree of autonomy in how the individual parts pursue their policies.

It will come as no surprise that I would like to see Scotland have greater control over large aspects of our lives. That is my party’s position.

Energy BILL [ Lords ] (Seventh sitting)

Debate between Callum McCaig and Andrea Leadsom

Thursday 4th February 2016 Public Bill Committees

[Callum McCaig (Aberdeen South) (SNP)]

I welcome that statement from the Minister but I want to ask about the process. What kind of information is she looking for, from whom and when?

[Andrea Leadsom]

Through normal channels. Discussions on the early closure of the onshore wind subsidy included lots of bilateral stakeholder meetings. Some industry workshops were held. If the hon. Gentleman wanted to submit information to me or my Department, we would be delighted to hear from him, his party or companies he is aware of that are interested. We are very interested to hear views on that, though we obviously want to make progress with it at the same time.

Coming back to the LCF, its function is to limit the amount paid by consumers. It is crucial that the Government are able to take account of the latest evidence and use the LCF budget in light of latest evidence around deployment projections and costs. The hon. Member for Aberdeen South talked a lot about the difference in cost of different types of CfDs. He will be aware that we are talking with the Scottish Government about the remote highlands and islands and the potential for onshore wind projects there, which by nature of their remoteness would have big transmission costs that might make them more akin to offshore than onshore wind.

The hon. Member for Coatbridge, Chryston and Bellshill mentioned that onshore wind CfDs are around £80 and for offshore wind, as hon. Members pointed out, they are still well in excess of £100, some at £145 and so on. Our hope and expectation is that those costs will come down. That is a key reason why my right hon. Friend the Secretary of State set out in her policy reset speech that we would look to the offshore wind industry to bring their costs down in order to participate in further auctions, which we think is achievable.

Hon. Members have reflected that, when looking at the budget for the levy control framework, which is how consumers pay for all of this, and the CfD pots that add costs to the LCF, we must look at the latest evidence and technologies and have a proper balance.

To answer the hon. Member for Southampton, Test, the UK is continuing to make progress towards the 2020 renewables target of 15% of final energy consumption from renewable sources. Renewables accounted for 7% of energy consumption in 2014, up from 1.3% in 2005. We have exceeded both our 2011-12 and our 2013-14 interim targets.

[Andrea Leadsom]

I have to disagree with the hon. Gentleman. The Secretary of State has set out that we are making progress. As Ministers do, she was talking about what needs to be done next. Since then, we have had the spending review, where the renewable heat incentive scheme budget was confirmed to March 2021, rising each year to a total of £1.15 billion.

That is in excess of where we are today and goes a good way towards meeting some of our heat targets, which were referred to in the letter as needing those decisions. Life is not static and for the Secretary of State to write to colleagues saying what needs to be done is not tantamount to saying that we have no plans or efforts in place to meet this. I am sure that the hon. Gentleman would acknowledge that.

We are also making progress in decarbonising the power sector. Investors want to know that we have clear, credible and affordable plans for the sector. That is what the Secretary of State set out in her speech in November, highlighting the important role that gas generation, nuclear power, offshore wind and innovation can all play. For example, as we have discussed, we have a world-leading offshore wind industry, with the UK making up about half of all deployed offshore wind in the world. This is an area where the UK can help to make a lasting technological contribution to supply chains, and certainly to the UK supply chain, supporting a growing installation, development and blade manufacturing industry in the UK.

By committing to annual CfD allocation rounds, the new clause would inhibit the Government’s flexibility to apply appropriate mechanisms to achieve renewable and decarbonisation targets. The Government should retain their ability to respond to evidence on technology cost reductions, costs to consumers and of course opportunities in other sectors such as heat and transport. The hon. Gentleman’s proposals would unnecessarily tie the Government into a course of action that may neither benefit the consumer nor provide any certainty to renewable energy generators or investors. We are committed to our energy and carbon targets and continue to make strong progress towards meeting them. For that reason, I cannot accept the amendments but I hope that I have addressed his concern and that he will be content to withdraw them.

New clause 6 seeks to devolve the matter that, when exercising electricity market reform functions under the Energy Act 2013, including in respect of contracts for difference, the Secretary of State should consider matters specifically in respect of Scotland. It also seeks to devolve annual reporting on how the Secretary of State has carried out the functions under part 2 of the Energy Act 2013 during each year. EMR, including CfDs, is GB-wide. That is, electricity market reform, including contracts for difference, is Great Britain-wide––I am sorry, I am trying not to use acronyms––and does not operate in a regionally specific way. That is linked to the fact that we have a GB-wide, integrated energy system on which the CfD scheme relies. The costs of the CfDs are spread across all consumers in Great Britain, which results in a fair distribution of the burden. That means that when exercising EMR functions under part 2 of the Energy Act 2013, it is appropriate that the Secretary of State has regard to the matters in section 5(2) of the Act on a Great Britain-wide basis. Having a GB-wide system ensures that support is directed as efficiently and cost-effectively as possible, which helps keep down the cost ultimately borne by bill payers.

Under current energy policies, Scotland has more than proportionally benefited from financial support from all GB bill payers. Around 9% of the UK population is in Scotland but around 30% of UK renewable electricity generation capacity is in Scotland. Of the 25 successfully signed contracts for difference, 12 have been awarded to projects in Scotland. That includes the 448 MW offshore wind farm in the outer firth of Forth and 11 onshore wind farms with a combined capacity of more than half a gigawatt. Transferring the power to Scottish Ministers to award contracts would go well beyond the Smith commission agreement. It was not the intention and nor is it appropriate.

I do not think it is necessary to devolve the publication of the annual report to Scotland. Every year, we publish an update that reflects the scheme’s GB-wide nature and sets out the progress the Government have made over the past year in implementing electricity market reform and how the Secretary of State has carried out functions under part 2 of the Energy Act 2013. Furthermore, the Secretary of State is already required to send the published report to Scottish Ministers, so I urge the hon. Gentleman to withdraw his amendment.

[Callum McCaig]

I have nothing to add to what I have said already.

Question put, That the clause be read a Second time.

Energy BILL [ Lords ] (Fourth sitting)

Debate between Callum McCaig and Andrea Leadsom

Tuesday 2nd February 2016 Public Bill Committees

[Andrea Leadsom]

My hon. Friend makes an important point about gas energy security. The UK has made great efforts to diversify its sources of imported gas. The UK Energy Research Centre recently recognised that we have significantly diversified the sources and the means of bringing gas into the country. We have liquid natural gas terminals, and we have pipelines, as my hon. Friend mentioned. Each of those sources is important, but support for home-grown gas in the North sea and through other sources is vital.

[Callum McCaig]

A while back in our back-and-forth, the Minister said that she does not feel that this will do anything to strengthen investor confidence. Where does she feel investor confidence is? We discussed investor confidence in relation to renewables, but there have been reports in the press about EDF and its commitment to Hinkley Point C due to its French shareholders. Where does she see those deals going forward? We could be in severe difficulties without them.

[Andrea Leadsom]

Again, the hon. Gentleman highlights the need for diverse sources of energy and for an absolute focus on ensuring that we have a proper mix of sources, and not a focus on having all our eggs in one basket. Specifically on EDF, we expect announcements any day. We fully expect to have that deal done within the next short period of time. These are commercial deals, and it is a big transaction, as we know. Such things take time. Nevertheless, a comprehensive energy policy that includes new gas, new offshore wind and new nuclear is important so that we can be the first country in the developed world to take coal out of power generation. Of course, we are continuing to support renewables.

I make it clear that, in our feed-in tariffs review and in all our work on renewables, we have trodden a fine line between what is right for renewables generation and what is right for the bill payers who pay for it. We have had a lot of debates in this House, and in the other House, on fuel poverty, which is a big issue. New technologies should stand on their own two feet when they are able to do so. As the costs of deploying new renewables come down, so should the subsidies. We should not continue with subsidies that create an overly generous return when, at the other end of the spectrum, we still have many people who cannot afford to heat themselves or to keep their lights on. That is an important balance. As I have said time and again, the Government are absolutely committed to energy security but, secondly, we are committed to decarbonising at the lowest cost to consumers, which underpins everything that we do.

The hon. Member for Norwich South asserted that effectively removing ETS from the calculation of carbon budgets would somehow make decarbonisation cheaper. I am sorry, but I just do not find any evidence for that. We will keep our accounting under review, and it is right that we do so, but he has not provided any evidence that decarbonisation would be cheaper or that investor confidence would be greater. He has failed to answer why, with only a few months to go before, according to our legally binding commitment under the Climate Change Act 2008, we must set out our policies to meet the fifth carbon budget, which is being proposed, we should suddenly turn everything on its head and change how we account for carbon.

The hon. Gentleman and all Opposition Members must appreciate and realise that although what they are proposing has some merit—it is certainly an interesting idea that the Government will keep under review—it is just not realistic at this late stage to start to turn on its head the way in which the Committee on Climate Change or the Government make their calculations. The work has been going on for up to a year already and is now stepping up apace so that we can meet our legally binding commitment to publish our report by the end of June this year.

The hon. Gentleman quoted the Committee on Climate Change’s recent letter, which I can quote back to him. On whether the fifth carbon budget should be tighter, it said a few days ago, in January, that its

“judgement is that our existing recommendation is sufficient at this time, although a tighter budget may be needed in future”.

Let us be clear that the committee is not calling for what is in the clause. All its recommendations and assessments have been done on the assumption that we continue to use the European ETS scheme to account for carbon in the power generation and other sectors. Were we to go ahead and agree to the clause, it would be extremely difficult, if not impossible, to meet our commitments under the 2008 Act.

Energy BILL [ Lords ] (Third sitting)

Debate between Callum McCaig and Andrea Leadsom

Thursday 28th January 2016 Public Bill Committees

[Andrea Leadsom]

I am delighted to tell the hon. Member for Southampton Test that I welcome his bringing forward this proposal, as it is an important area for debate. It gives me the opportunity to set the record straight on the economic narrative of the North sea. I am sure all hon. Members here will be aware of the issue, but it is important to put it on the record.

The Government believe in making the most of the UK’s gas and oil resources. To date, the oil and gas industry has contributed more than £330 billion to the Exchequer, and it is the UK’s largest industrial investor, supporting hundreds of thousands of jobs, supplying a large portion of the UK’s primary energy needs and making a significant contribution to GDP. Those jobs are not just in Aberdeen, or indeed in Scotland, but right across the UK. Members have all paid tribute to the contribution made by that North sea basin over many years.

With between 11 billion and 21 billion barrels of oil equivalent still to be exploited, the UK continental shelf can continue to provide considerable economic benefits for many years to come. That is what we are here to try to sort out, with the establishment of the OGA.

As the hon. Member for Southampton, Test pointed out, decommissioning is an inherent cost of doing business in the UKCS. Capital allowances are available on decommissioning expenditure, as they are for most of the costs of doing business in the UKCS. The rate of allowances for decommissioning match those for oil and gas research and development, exploration and appraisal, and mineral exploration and access.

I will answer the specific point raised about whether the tax relief situation might encourage people operating in the North sea to hurry to decommission, lest they be whisked away. The tax relief rate is guaranteed by way of decommissioning relief deeds between Government and operators so there is not a likelihood that either they will disappear or that people need to take precipitate action to avoid the risk that they might disappear.

[Callum McCaig (Aberdeen South) (SNP)]

One issue around decommissioning that is inhibiting new players from coming into the market, as I am sure the Minister is aware, is that of transferring tax history and the tax basis built up to allow it to be offset against decommissioning in future.

If new entrants do not have a significant tax history, that could be an impediment to their coming in because they would have to foot a greater part of that bill. Likewise, the company looking to offset an asset may not want to transfer it because it might come back, should that company be unwilling to do that. Would the Government be willing to look carefully at that issue to find a solution to allow the freeing up of assets?

[Andrea Leadsom]

That is exactly the area we are looking at. That issue has been raised, including at the maximising economic recovery meetings before Christmas.

To reiterate, as hon. Members from all parties have repeatedly stated, it is crucial now more than ever that we provide support for this industry that has contributed, and will continue to contribute, so significantly to the balance sheet of our country.

I will now speak to new clause 9, and I thank the hon. Member for Southampton, Test for tabling it. It would require the Secretary of State to report to each House of Parliament on the estimated cost of decommissioning North sea oil and gas infrastructure, one year after the Act comes into force and annually thereafter. As we have discussed, the inevitable consequence of a maturing basin means that the future cost of decommissioning activity in the North sea is expected to be substantial, and the scale of the decommissioning challenge is undeniable. That is why Government measures in the Bill are aimed at preventing premature decommissioning of critical UKCS infrastructure and ensuring that the decommissioning that does occur represents the best value for money.

--- Later in debate ---

[Callum McCaig]

I will be brief, because the debate that we have just had has already highlighted a number of the decommissioning issues that arise with this clause, and in many ways my new clause 16 speaks for itself.

As the Minister said and as I think everyone in Committee agrees, we hope that decommissioning is delayed as far into the future as is possible. If not, there is the potential to miss out on significant amounts of hydrocarbons that meaningfully could be extracted. The issue here and the vast amount of what the Bill is about is maximising economic recovery and delaying decommissioning, although that does not mean that it will not become a reality. It is something we are fully aware of—the costs are clear and a large part of them will fall on the taxpayer—so it is important that the Government in conjunction with relevant bodies, including the Scottish Government, are prepared for its economic potential.

The costs will be what they are and jobs will come from that decommissioning—that is inevitable—but the long-term viability or added value that can be got from it is if we become a true world leader in the development of the new technologies, skills and expertise, so that we can export and/or project manage decommissioning in other places. That is the real prize on offer. To achieve it and to enable the work to be done, there may be a requirement for infrastructure improvements to harbours and so on, most notably up and down the North sea coast. If the UK taxpayer is to foot the bill, it would be much better were it to be cashed in the UK, rather than in other parts of the world.

[Andrea Leadsom]

I am grateful to the hon. Gentleman for tabling new clause 16.

The new clause would require the Secretary of State to develop a strategy for the Department of Energy and Climate Change to incentivise the competitiveness of UK-registered companies in the decommissioning supply chain market. There is no doubt that UKCS operations are served by a world-class UK supply chain. The industry supports more than 350,000 jobs in the UK and produces a £35 billion annual turnover. As we have discussed, the inevitable consequence of a maturing basin is the ramping up of decommissioning activity in the North sea in the coming years.

The intention behind the new clause—the development and support of a world-class decommissioning supply chain industry—is something that the Government wholeheartedly support. Such an industry certainly has the potential to create world-leading expertise and to support thousands of UK jobs.

The UK Government stand 100% behind our oil and gas industry and the thousands of workers and families that it supports. We have today announced a £250 million Aberdeen city deal to boost innovation and diversification in the north-east Scottish oil and gas industry. The city deal will address various proposals from the region, including a new energy innovation centre and supporting the industry to exploit remaining North sea reserves, as well as the expansion of Aberdeen harbour, enabling the city to compete for decommissioning work, and I hope that cruise liners will stop there in future. There is a lot to see in Scotland and I am sure visitors would enjoy making the most of that. The Prime Minister is visiting Aberdeen today to meet local employers and workers, as well as senior executives from the oil and gas industry, to hear about the challenges facing the area.

I was delighted yesterday to be enrolled in a new ministerial group on oil and gas, chaired by the Secretary of State for Energy and Climate Change, which has been set up to reiterate the UK Government’s commitment to supporting the oil and gas industry and those who work in it. We met for the first time yesterday and agreed to produce a UK oil and gas workforce plan in the spring. This will focus on what steps the Government aim to take to support those who may lose their jobs in the oil and gas sector, and will set out how Government and industry can help the skilled workers, particularly in the supply chain, move into other sectors, including other energy-related infrastructure projects: the offshore wind sector and the new nuclear sector, for example. This builds on the significant work that the OGA is already doing in this area, bringing together industry, Government and trade bodies to develop and promote a strong decommissioning supply chain that can compete globally, while anchoring activities in the UK.

The OGA is working to produce a supply chain-specific strategy, which will influence the development and commercialisation of supply chain opportunities, capitalising on the inherent strengths of the sector not only to support the UKCS, but to grow exports. Decommissioning will be a part of the whole world’s oil and gas story, so there is an opportunity for the UK to take a leading role in that. The OGA has been working closely with BIS, Scottish Enterprise and with UKTI in this area, as well as taking opportunities to participate in industry-wide events such as the offshore technology conference in Houston.

Furthermore, the OGA continues to support and be involved in the significant decommissioning supply chain work of industry trade bodies such as the Oil and Gas Industry Council and the Technology Leadership Board. Such forums are critical in bringing together Government, industry and the OGA. Such efforts are already bearing fruit. For example, the OGA has recently connected eight operators conducting well plugging and abandonment campaigns in the southern North sea with the UK supply chain.

Although I recognise and agree with the intention behind the new clause tabled by the hon. Member for Aberdeen South, the need for action is now, as we have discussed at length. Putting his proposal into primary legislation could force us to stop, consult and think again, and we could miss the ever-closing window of opportunity that we have to support the industry immediately. I hope the hon. Gentleman is reassured by my words and will agree to withdraw his proposed new clause.

[Callum McCaig]

I welcome what the Minister said. I am not tempted to be drawn on the city deal. I will go no further than to say that The Press and Journal, a local voice of repute, described it as underwhelming. The investment is welcome, but I shall leave it at that.

I am not convinced I agree with the Minister that putting the new clause in primary legislation would cause us to miss the boat on decommissioning. The concentration of minds and of efforts and expertise is absolutely fundamental. In many cases, there have been opportunities that, for whatever reason, we have missed the boat on. This opportunity is one that we are absolutely clear will come. The question of timing is not explicitly clear, but it will come and we need to be ready. There may be specific investments in infrastructure, from Norfolk up to Nigg in the Highlands, that can deal with the kind of port facilities that will be required, and we need a proper strategic overview to enable that to happen.

I understand we will not be dividing on this matter today, but at a later stage I wish to press it to a vote.

Question put and agreed to.

Clause 74 accordingly ordered to stand part of the Bill.

Clauses 75 and 76 ordered to stand part of the Bill.

Ordered,

Manuscript amendment made: in programme motion (b), leave out “and 2pm”—(Julian Smith.)

Ordered, That further consideration be now adjourned—(Julian Smith.)

Energy BILL [ Lords ] (First sitting)

Debate between Callum McCaig and Andrea Leadsom

Tuesday 26th January 2016 Public Bill Committees

[Andrea Leadsom]

Amendment 7 would add a new requirement for the Secretary of State to undertake an assessment of whether the OGA’s powers are fit for purpose within one year of clause 2 coming into force. The provision should be read in conjunction with clause 17, to which I have tabled my own amendments to overturn the amendments made in the other place. My amendments reinstate the original wording of clause 17 to require the Secretary of State to carry out a review of the OGA’s performance and functions on a no more than three-yearly ongoing basis

Amendment 7 returns to the notion that a review of the OGA’s powers should be carried out within one year of the Bill coming into force. Moreover, it would seek a much wider review than that specified in clause 17, covering all the OGA’s powers. I remain of the view that the amendment is not necessary and risks damaging the OGA’s effectiveness. The hon. Gentleman puts it very well when he says he does not want to pull the plant up the roots to see if it is growing, and I fear that that is exactly what would happen.

For such a wide-ranging review to be undertaken within one year, it would have to begin almost immediately, diverting significant OGA and Government resources from the urgent task at hand. It would also leave no time for the OGA to operate within the powers that it will have, making it difficult to reach any view on whether they are effective. It would also cut across Sir Ian Wood’s recommendations, which remain crucial. Government and industry have made it clear that, more than ever, we need a robust and well resourced regulator to support the North sea oil and gas industry. It is crucial that the OGA is given the space it needs to fulfil that role as a new regulator with new powers. The amendment risks stifling the OGA and creating uncertainty over its functions at a time when it needs to be resolutely focused on providing urgent support to industry, so I hope that the hon. Gentleman will be content to withdraw his amendment.

Government amendments 2 and 3 overturn Opposition amendments made in the other place and reinstate the original wording of clause 17 to require the Secretary of State to carry out a review of the OGA’s performance and functions on a no more than three-yearly ongoing basis. There is broad consensus that measures are needed to ensure that the OGA remains well equipped to address the diverse challenges faced by the oil and gas industry, and that its role and scope, particularly in relation to carbon dioxide and storage, is appropriate, sufficient and regularly evaluated. As such, the Government introduced provisions requiring a review of the OGA’s effectiveness in exercising its functions, as well as a review of the fitness for purpose and scope of such functions. However, as I said, Opposition amendments made in the other place require an initial review to take place no later than one year after the Bill comes into force, and then annually for subsequent reviews. These time periods were reduced from the three-year periods that the Government had introduced.

I have already set out how a mandatory annual review would be an incredibly onerous process for the Government, the OGA and industry, and is likely to have myriad unintended consequences. It would require the almost continuous evaluation of the effectiveness of the OGA, with very little time to implement the recommendations from each review. Reviews would be extensive, needing to cover both statutory and non-statutory functions, and an assessment of effectiveness against external factors, such as changes in the regulatory landscape, operational practices across the UK continental shelf, and environmental and economic factors. All of this would be required as part of the review to enable the Secretary of State to produce a report setting out the findings of the review, which is to be laid before Parliament. This would create significant resource burdens for the OGA and the Government and risk obstructing the work of the OGA. The process would be inefficient and would therefore risk producing an ineffective review. It would weaken the ability of the OGA to act as an independent regulator free from Government intervention. It would also create a review process significantly out of step with those to which other regulators are subject.

It is worth noting that other mechanisms will be in place to ensure that the OGA is held to account for its performance and functions. It will publish, on an annual basis, a refreshed five-year business plan and an annual report and accounts. The need for an arm’s length body charged with effective stewardship and regulation of the UK continental shelf was a central recommendation of the Wood review. I believe the original three-year review periods introduced by Government must be reinstated to avoid conflict with that recommendation.

[Callum McCaig (Aberdeen South) (SNP)]

I look forward to serving under your chairmanship, Mr Bailey. It is incredibly important that we establish the OGA, as dealt with in clause 1, and we wholeheartedly support the OGA having the powers that it requires to fulfil its role of securing maximum economic recovery. That principle is enshrined in the Wood review, which was conducted some 18 months ago, albeit in a climate where the price of oil was considerably higher than it is now and the challenges facing the sector were likewise considerably different.

The Scottish National party supports amendment 7. The principle that the Secretary of State should look at the OGA to see whether it has the required powers is fundamental, given the change in circumstances. That said, we are content to support the Government amendments. The principle of establishing the OGA, and looking at it after a year, is sound. However, once that has been done, the OGA should be looked at on a three-year rolling basis. The Minister has made a sensible case not to over-burden the OGA with regular reviews and we support that. In conclusion, the SNP will support both the Labour and Government amendments.

--- Later in debate ---

[Callum McCaig]

On Second Reading, there was a lot of discussion of the clause and the founding principles of the OGA. For the SNP, it is mission critical that the OGA focuses on maximum economic recovery above all else.

I take issue with the contention of the hon. Member for Norwich South that the OGA will act as an insolvency practitioner. That is insensitive and unrealistic, and I do not believe it reflects the true future of the North sea, if it is marshalled correctly. Marshalling these enormous resources is vital. Academic and industry experts suggest that there are up to 24 billion barrels of oil and gas to be extracted from the North sea. This is by no means a sunset industry.

The potential for the supply chain and operators to explore new technologies that will enhance oil recovery, and explore and develop smaller more marginal fields is the future of the industry. The oil and gas to be extracted in the world will come from more marginal fields. The expertise that we have in the UK, particularly in the north-east of Scotland, will be truly world leading.

We are hugely supportive and recognise the economic potential of carbon capture and storage and decommissioning, but we are content that the Bill as it stands deals with those issues. I welcome what has been introduced in that regard and the discussions in the House of Lords that led to it. However, I come back to the first point. What is the OGA there to do? It is there to focus on maximum economic recovery of oil and gas, and that is what it must be allowed to do.

[Andrea Leadsom]

I am grateful to the hon. Members for Norwich South and for Aberdeen South. Like the hon. Member for Aberdeen South, I reject the suggestion by the hon. Member for Norwich South that somehow the OGA will be an insolvency practitioner. That is absolutely not the case. Sir Ian Wood’s proposal is based on maximising the economic recovery, which is what we want to do. We see the industry as an ongoing success story for the United Kingdom, with more than 350,000 jobs throughout the supply chain. It creates enormous benefit to the economy and we hope that it will continue to do so for decades to come. The OGA is absolutely not an insolvency practitioner.

I also agree with the hon. Member for Aberdeen South that, given that more than 20 billion barrels of oil and gas are potentially left in the North sea, it is not a sunset industry. We need to be clear about that. The OGA is both the regulator of an ongoing success story—we want to get the costs of production down and to encourage new exploration and we want the sector to continue to thrive—and an asset steward, as the hon. Member for Norwich South rightly pointed out, with an important role in the strategy for maximising economic recovery.

The strategy is out for consultation. We have worked closely with industry, through industry workshops and close co-operation between the OGA, industry and the Government, to define maximising economic recovery. We hope to provide the Government response to the consultation as soon as possible. It is important to be clear that the OGA is the asset steward and the regulator for an ongoing success story.

I will try to reassure the hon. Member for Norwich South about the OGA’s role in CCS. The OGA will be responsible for issuing carbon dioxide storage site licences and for approving carbon dioxide storage permit applications. We expect the OGA to have subsequent involvement in monitoring, review and possibly enforcement activities as set out in the regulations, which are transposed from the requirements in the EC directive on geological storage of CO₂. The OGA is proactively considering the role of CCS in the technology and decommissioning strategies that it is developing. The Wood review acknowledged the potential benefit of CCS to the UK continental shelf and, as recommended, the OGA will work closely with DECC to examine the business case for using depleted reservoirs for carbon storage.

Under MER UK, CO₂-enhanced oil recovery is being considered by the OGA as part of its wider enhanced oil recovery work. CO₂-EOR could make a substantial contribution to lowering the cost of CCS projects as well as benefiting North sea revenues and jobs. However, more analysis is needed on the timing of future CCS projects and how that could affect CO₂-EOR development, and on the viability of redeveloping abandoned fields as CO₂-EOR projects. The OGA will collaborate with the CCS industry to foster innovation in EOR technologies.

As the hon. Gentleman may know, the OGA’s planned work includes advancing the next tranche of EOR technologies, developing a framework for their economic implementation and developing a CO₂-EOR strategy and five-year plan this year. I hope that that gives him some reassurance, but, again, I urge Members to vote against the clause

Draft Onshore Hydraulic Fracturing (Protected Areas) Regulations 2015

Debate between Callum McCaig and Andrea Leadsom

Tuesday 27th October 2015 General Committees

[Callum McCaig (Aberdeen South) (SNP)]

I will be brief to allow others to speak. First, I will touch on what the Minister said about the call for this debate to happen in the Chamber, as opposed to in Committee. At business questions on Thursday, I made that request to the Leader of the House, and it was rejected. That was unfortunate. This debate would benefit from all Members being given the opportunity to engage in it, because the implications of getting this issue wrong are so large.

Ostensibly, this is an England and Wales only matter. The point that my hon. Friend the Member for Edinburgh East made on the changes to Standing Orders raises the issue of why the Scottish National party is here and why we will be voting. There are two clear issues. First, there is the cross-border issue with water contamination. Frankly, poisoned water knows no national boundaries, or sub-national boundaries, if that is what people wish to call them. Beyond that, the SNP made it clear in the run-up to the election that we would engage in progressive politics with folks from elsewhere in the United Kingdom. Frankly, it saddens me that defining whether we should have safe drinking water should count as progressive politics in this day and age. It is beyond the pale.

[Andrea Leadsom]

Does the hon. Gentleman not think it is rather ridiculous, shall we say, that he should stand there as an SNP Energy spokesman suggesting that somehow the Government of the day would deliberately poison people’s drinking water? Does he not think that is a completely outrageous accusation? Did he not listen to my remarks?

[Callum McCaig]

At no stage did I say that there would be deliberate poisoning of water. If the Minister took some more time to listen and reflect, it might be more helpful. What we are dealing with here is the potential for drilled wells—fracked wells—under protected groundwater source areas.

Oral Answers to Questions

Debate between Callum McCaig and Andrea Leadsom

Thursday 17th September 2015 Commons Chamber

[Andrea Leadsom]

I can assure my hon. Friend that I will always have a positive message. I am very much looking forward to my trip to Humber and Lincolnshire. While I am there I will seek to reassure investors and project managers that it is our intention to continue to support and promote the very important renewables technologies in which, particularly in offshore, Britain is world No. 1.

[Callum McCaig (Aberdeen South) (SNP)]

May I add the welcome of the SNP to the hon. Member for Wigan (Lisa Nandy)? We look forward to working together where there are shared interests.

On the renewables obligation for onshore wind, it will come as no surprise to the Minister that the SNP is opposed to that closure. The implementation of the Government’s policy is causing additional and unnecessary difficulties through lack of finance owing to the lack of clarity about grace periods. Will she clarify when her Department will produce the grace period provision clauses to the Energy Bill, and will she consider a flexible approach where there is an element of community ownership involved in a project?

[Andrea Leadsom]

As the hon. Gentleman will know, we are looking very carefully at the consultation responses on the grace periods, and we intend to publish our response as soon as we can. That will be within the next few weeks, as part of the process of the Bill’s passage through the Lords. As he will realise, around 30% of the total support under the RO goes to Scottish projects, and we are delighted that Scotland still forms part of a GB-wide energy sector. That is very important for Scotland and for the whole UK.

--- Later in debate ---

[Andrea Leadsom]

You threw me as well, Mr Speaker, but I get the point.

I am entirely sympathetic to what the hon. Lady has said. We all agree on the need to avoid decommissioning for as long as possible. The OGA is working with operators throughout the supply chain to try to increase co-operation in relation to, for instance, supply ships, and to ensure that they share resources rather than saying, “That is mine, so you cannot have it.” A great deal of work is being done, but key to this will be looking at the long-term possibilities for new exploration. I hope the hon. Lady welcomes the new Culzean project near the Shetlands, which has just been given the go-ahead. That is a good example of what we can do if we all work together.

[Callum McCaig (Aberdeen South) (SNP)]

May I commend you, Mr Speaker, for the element of surprise that you are introducing to our proceedings?

According to the OGA’s report, more than 5,000 jobs were lost in the sector last year, but analysis carried out by Oil & Gas UK suggests that the wider impact on the industry could involve the loss of some 60,000 jobs. The industry’s calls for support must be listened to. A survey of 450 industry leaders, conducted by the Press and Journal’s Energy Voice, found that there was an overwhelming demand for tax breaks to boost exploration in the North sea, and those calls were echoed yesterday by the National Union of Rail, Maritime and Transport workers. Does the Minister agree with me, and with industry leaders and trade unions, that the Government must provide incentives to encourage exploration and protect jobs?

[Andrea Leadsom]

As the hon. Gentleman will know, the Chancellor introduced some strong fiscal measures in the March Budget to maintain and build investment, including a reduction in the supplementary charge, introducing a new investment allowance and a reduction in the petroleum revenue tax from January 2016, and we will continue to look closely at what else we can do to provide that fiscal support for further exploration and to keep the oil and gas sector thriving in the North sea basin.

Scotland Bill

Debate between Callum McCaig and Andrea Leadsom

Monday 6th July 2015 Commons Chamber

[Andrea Leadsom]

I think the hon. Gentleman means an interconnector. I am absolutely a huge fan of interconnectors. That is not a part of the Bill, but I can assure him that I am happy to discuss that at any time and to facilitate conversations with the Scottish Parliament. I am, however, quite sure he will not need me to do that and is able to discuss that with them directly.

Our proposals on energy company obligations and fuel poverty are fair to all consumers and align with the Smith commission agreement. I urge hon. Members not to press amendments 149 to 153.

Let me turn to renewables incentives. Amendment 154 would remove subsections (2) and (3) of new section 90C of the Scotland Act 1998, in clause 53, such that changes of a minor, technical or administrative nature would no longer be excluded from the requirement to consult Scottish Ministers, nor those made by the Secretary of State that are not subject to parliamentary procedure. The hon. Member for Aberdeen South (Callum McCaig) has raised his concerns about this area of consultation. Removing subsection (3) would remove the exclusion to consult the Scottish Ministers on any levy in connection with a renewable electricity incentive scheme. Amendment 154 would require consultation not just on the design of renewable incentive schemes, but on their operation. This would not be in keeping with the Smith commission agreement and would lead to over-complex and time-consuming consultations that would affect the smooth operation of the schemes.

[Callum McCaig]

The Smith commission refers to

“a formal consultative role for the Scottish Government and the Scottish Parliament in designing renewables incentives”.

I simply cannot understand or fathom how excluding levies gives the Scottish Parliament a consultative role in designing those incentives.

Oral Answers to Questions

Debate between Callum McCaig and Andrea Leadsom

Thursday 25th June 2015 Commons Chamber

[Andrea Leadsom]

The hon. Gentleman must recognise that a diverse set of energy sources is vital not just to our energy security but to decarbonisation, and to our ability to keep consumer costs down. The Government are looking into the different opportunities presented by different technologies. The price of the lagoon project is a long way away from being agreed, but we are keen to promote new ideas and new technologies, and we want the United Kingdom to be at the forefront of that.

[Callum McCaig (Aberdeen South) (SNP)]

The announcement that the renewables obligation for onshore wind will be closed early has caused huge uncertainty and anxiety in the renewables sector in Scotland and throughout the United Kingdom. With that in mind, will the Minister tell us when the timetable for the next contracts for difference allocation round will be published?

[Andrea Leadsom]

As the hon. Gentleman knows, we called time on the renewables obligations for onshore wind early as a result of the success of its deployment, and we are now thinking about what to do next. We are considering all our policies, including those relating to CfDs. We have the tools that will enable us to meet our manifesto commitments on onshore wind, and we will present proposals on the new CfD round in the near future.

[Callum McCaig]

The Minister’s response suggests that uncertainty still reigns. The Green Investment Bank, whose headquarters are in Edinburgh, is to be privatised by the Government. How will the Minister ensure that the original purpose of the bank, which was to accelerate the transition to a low-carbon economy, will be maintained when it is in private hands?

[Andrea Leadsom]

Conservative Members are delighted to learn that owing to the success of the Green Investment Bank, which was only created under the last Parliament, it is now in a position to expand even further by means of private sector investment and access to capital markets, and to do yet more to support and improve the emergence of a green carbon economy. The hon. Gentleman should join us in welcoming that announcement, rather than expressing concern.