Energy Bill [Lords]

David Duguid Excerpts

2nd reading
Tuesday 9th May 2023 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

I appreciate that hon. Members want to demonstrate cross-party support for net zero. Yes, by and large, we agree about decarbonisation, but sadly we do not agree about the speed of that process. The UK has a responsibility to go much further and faster than most other countries because we are disproportionately responsible for the cumulative emissions that are already in the atmosphere.

We were the first country into the industrial revolution—the fossil-fuel industrial revolution—and we need to be the first country out of it. I have not heard enough urgency from Members on either side of the House about that this evening. Winning slowly on this issue is the same as losing. The bottom line is that there can be no new exploration for fossil fuels if we are serious about doing our fair share to avoid the worst of the climate crisis. The report by the United Nations environment programme on the production gap states clearly that

“governments still plan to produce more than double the amount of fossil fuels in 2030 than will be consistent with limiting global warming to 1.5°”.

Ministers often seek to justify new oil and gas developments in the North sea in the name of energy security, but that is profoundly misleading. The majority of fossil-fuel projects in the pipeline are for oil, not gas, which will do nothing to boost energy security, given that we currently export at least 80% of the oil we extract because it is not even the type that is used in UK refineries.

That defence also exposes a paucity of imagination and a failure to grasp what true energy security looks like. True energy security is about abundant and cheap renewables. It is about a flexible energy grid. It is about properly insulated homes and it is about better storage. I urge Ministers to grasp this opportunity genuinely to transform the future of our energy system so that it works for people and planet.

What is most striking about the Bill is its failure to wean us off fossil fuels—the very thing that is choking our planet and driving high energy prices. I endorse the Lords amendment on the prohibition of new coalmines. It was simple in its drafting but vital in its importance. The Minister will no doubt note that it does not only cover coal for energy; it covers coal in its entirety, extending its reach to the newly approved Whitehaven coalmine—and so it should, because that stranded-asset coalmine would produce vast amounts of climate emissions. It is neither wanted nor needed by the UK steel industry, and it is not wanted in Europe, which is rapidly moving towards green steel. I urge the Government to retain the amendment to the Bill.

We need to go much further than that, and reduce our wider reliance on all fossil fuels, not just coal. As a first step, that must involve a review of the outdated and dangerous duty to maximise the economic recovery of petroleum from the North sea. It is beyond imagination that at a time of climate crisis we still have on the statute book an obligation to maximise the economic recovery of oil and gas. We need to move away from that. We also need to move away from the extraordinary position on the so-called windfall tax.

[David Duguid (Banff and Buchan) (Con)]

I am listening to the hon. Lady’s speech with great interest, and want to pick up on one part of it. On moving away from maximising economic recovery, does she agree that we are already less than 50% dependent on our own domestic sources of oil and gas? Does she agree with the Climate Change Committee’s assessment that our dependence on oil and gas will decline more slowly than our ability to replace it, so we will become more dependent on imports? What she has recommended will not stop our use of oil and gas—it will just make us more dependent on imports.

[Caroline Lucas]

I thank the hon. Gentleman for his intervention, but I totally disagree. The option before us is not to use home-grown fossil fuels versus imported fossil fuels. The choice—[Interruption.] No, it is not. The choice before us is whether we continue to depend on fossil fuels or whether we shift to a green transition much faster. I appreciate why that is difficult for him to understand. Having listened to the right hon. Member for Epsom and Ewell (Chris Grayling), who spoke about the future of aviation, I was struck by the fact that nowhere in his speech was there anything about demand management. People are looking for technical fixes the whole time without recognising that the bottom line is that there are climate limits to what we can do.

[David Duguid]

Will the hon. Lady give way?

[Caroline Lucas]

No, I will not, I am sorry. Some climate limits mean that we need to change behaviour as well as depending on new technologies.

I was about to talk about the windfall tax and the gaping hole that allows corporations to claim £91.40 for every £100 invested if—perversity of perversities—they reinvest that money in yet more oil. This comes at a total cost to the taxpayer of nearly £11 billion—enough to give an inflation-matching pay rise to every NHS worker and teacher for a year. Instead, the North Sea Transition Authority should have a duty to help meet the UK’s climate commitments and deliver a managed and orderly phase-down of UK petroleum. This, of course, must come with a requirement to support a just transition for oil and gas workers and communities—a clear pathway coupled with financial support to enable them to move into green jobs. Crucially, we need to see no new licences, which means that Ministers must give up any idea of giving a green light to projects such as Rosebank, the UK’s largest undeveloped oil field, which would produce more emissions than 28 low-income countries combined. That would be the definition of recklessness.

The Energy Bill aims to deliver a

“cleaner, more affordable and more secure energy system”,

which is a worthy aim. I very much hope the Government listen to hon. Members on both sides of the House who have talked about introducing a new duty on Ofgem to abide by net zero requirements. The amendment on that tabled in the other place received cross-party support, and I cannot see why the Government would not want to make sure that we retain that.

The Government have repeatedly said that they wish to see more community energy generation, but they objected to amendments on that in the Lords on the grounds that they constituted a subsidy. That is not the case. Rather, those amendments would give community energy schemes fair access to the market. If the Government are serious about community energy, they have to find a way to bring community energy to market, precisely by the kind of mechanism—a fixing of price—that we already use with contracts for difference. I urge the Government to accept retain the amendments on community energy, or offer a workable alternative.

In the very short time I have left, I would love to say more about energy efficiency and the need to insulate our homes properly. The cheapest energy is the energy that we do not need to use in the first place, and I despair of the fact that the Government have still failed to come up with the community-led, local authority-led, street-by-street home insulation programme that would achieve proper progress on this.

In the very few moments that are left I want to say a few words about nuclear. Government support for this nuclear white elephant, formalised by the Bill, is beyond ludicrous. We have already discussed the cost of nuclear—it is massively expensive and going up in price—but it is also massively slow. The Government have accepted the goal of decarbonising the UK’s power system by 2035. Given that it will take eight to 10 years to produce new nuclear, it will make absolutely no difference to that decarbonisation target. It is too expensive, too slow and it needs to come out of the Bill.

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[Elliot Colburn (Carshalton and Wallington) (Con)]

In the short time available, I want to focus on an aspect of the Bill that has not yet been discussed in this debate: the new regulations on district heat networks. I am very grateful that the Government have listened to concerns—not just from me, but from colleagues across the House who have district heat networks in their constituencies—about just how damaging those networks’ unregulated nature can be. That can be seen on the New Mill Quarter estate in my constituency, which I have raised a number of times in this place. I will outline briefly why this new regulation is so needed and why it is welcome, but also where I would like the Government to look into potentially going further.

To give a quick bit of context, the New Mill Quarter estate in Hackbridge is heated by a series of insulated pipes that stretch from the incinerator in the north of the constituency across redeveloped farmland to heat those homes, but it has been bedevilled by problems. It is not even online yet: it is currently being powered by a back-up gas boiler system, and it has suffered a number of blackouts and two call-outs from the London Fire Brigade and, practically, seems to have had a huge failure. I do not have time to go into that subject now, but I draw Members’ attention to some of my other contributions in the House on it.

Blackouts are probably the No. 1 reason why regulation is needed. The reliability of district heat networks is a massive problem, and not just in New Mill Quarter in Hackbridge; it has happened across other estates in London, such as Oval Quarter in Lambeth, New Festival Quarter in Tower Hamlets and multiple estates in Southwark—no guessing which party runs those local authorities.

Customer satisfaction is lower for customers on district heat networks, rather than gas boilers. A 2017 survey conducted by the Department for Business, Energy and Industrial Strategy found that district heat network customers were much less satisfied with their service than those with other forms of energy.

Bills are another big issue. The cost of living is a massive concern for all our constituents right now, and the No. 1 concern that comes up time and again when I talk to Carshalton and Wallington residents is meeting the cost of their energy bills. We need to empower Ofgem to force the pricing model of district heat networks to be comparable to the market average. That is incredibly important, and I am grateful to the Government for looking at that in detail and taking steps in that direction. The residents of New Mill Quarter are facing energy bills higher than the market average. They are not protected by, for example, the energy price cap, because it is an unregulated piece of heating. I very much welcome the Government’s measures, which will provide a lot of reassurance not just to residents of New Mill Quarter, but to others living under a district heat network.

The final thing that I welcome the Government taking action on is simply the monopolistic nature of heat networks. Customers cannot change and go to a new supplier, because a district heat network forces those living within it to use that heat network. They cannot shop around for a better deal and they cannot rely on the market—this is important to me as a free-market Conservative—to drive down prices while driving up reliability. Regulation therefore is so important, and I am grateful that the Government are taking steps in that regard.

One area I would like the Government to look at further is future-proofing district heat networks. Many of them are future-proofed by their very nature, but for those that are heated by incinerators, such as the one in Hackbridge, I can see a glaring problem coming down the line. The Government outlined in their waste minimisation strategy that they want to phase out incineration as a form of dealing with waste. All of us across the House support the reduction and stopping of incineration as a form of dealing with our waste. Incineration is only slightly better than landfill—only very slightly. It is not a net zero-conducive form of waste management, as we rely on creating waste to feed it.

The problem we can see in estates such as New Mill Quarter is that we will have an incinerator that becomes less and less needed as the years go on. We then have two options: either we have to import waste to feed the thing and keep the heating going, which obviously is not conducive to any net zero ambitions; or the thing has to be turned off, and what happens then? That entire estate was new build, built specifically with the infrastructure to deal with the incinerator. I might be long dead by the time it happens, but the problem is coming, and we should not leave it to a future generation to solve. We should look at future-proofing that now.

[David Duguid]

I am interested in what my hon. Friend is saying about heat networks and wonder whether he might agree with something I have learned just recently. It is a proposal from a stakeholder who deals in renewable energy, including hydrolysis to create hydrogen. That generates a lot of heat, and their suggestion is that we declare heat as a utility in a wider form. Would that help his purposes?

[Elliot Colburn]

My hon. Friend is absolutely right, and it relates to a point that a number of colleagues have made today: we cannot mandate the use of one technology or a very small number of technologies; we need to have that collective option. I urge the Government to err on the side of caution because, under their own ambitions, district heat networks could account for something like two fifths of the UK’s heat provision. Given the problems that have existed in Hackbridge and across multiple estates, and not just in London, I urge the Government not to put all their eggs in one basket by relying on district heat networks as a singular answer. I agree with my hon. Friend. There are plentiful supplies of renewable energy out there. We need to make sure that we are neither mandating nor preventing the use of any one. We should be using all those potentials to reach our net zero ambitions and provide more domestic energy security.

I very much welcome the measures set out in the Bill and urge colleagues to support it. It will certainly have my support tonight.

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[David Duguid (Banff and Buchan) (Con)]

It is excellent to see you in the Chair tonight, Madam Deputy Speaker. Let me say from the outset that the main message I receive from all parts of the energy sector—the Minister will know how many parts of that sector exist in my constituency—is this: let’s get the Bill passed; let’s get on with our job that needs to be done. That said, this is a complex Bill. We have heard about some of that complexity tonight, not least the various conflicting priorities that it is the Minister’s unenviable task to sort through.

I will not go through every part of the Bill as time will not allow—in fact, time probably will not allow me to go through the topics I wish to try to talk about, so I will get on with them. Oil and gas has been spoken about already, but the “inconvenient truth”, to steal a phrase from former Vice-President Al Gore, is that we are not going to get to 2050, keeping the lights on, homes warm and the economy moving, without oil and gas, albeit at greatly reduced demand. It therefore stands to reason that we will not get to net zero by 2050 without carbon capture, usage and storage, and I want to talk about the Scottish cluster in particular.

Before the energy profits levy was introduced, the oil and gas industry was already paying 40% tax, compared with most businesses paying 19%, which rose to 25% last month. With the EPL, the oil and gas industry is now paying 75% tax on oil and gas profits—not on global profits, but profits made in this country. According to the Office for Budget Responsibility, it will pay around £15 billion in financial year 2022-23. That represents a fifth of the UK’s corporation tax receipts, from exploration and production alone.

The Climate Change Committee’s ambitious net-zero pathway profile predicts that demand for oil and gas will decline at a slower rate than domestic supply. It is hugely important that we are able to access our own domestic supplies to meet that continuing, albeit declining, demand. It is also hugely important, as the Minister knows, that the industry is adequately engaged through the passage of the Bill. Oil and gas companies, and their employees, skills, technology and expertise, stand ready to help the Government and this country not only to deliver our energy security needs, but to invest and drive the energy transition that, as should have been said, is at the centre of the North sea transition deal that was signed between the Government and the oil and gas sector in 2021.

The industry and Governments must continue to work together to make the most of our homegrown industry and supply chain in which, crucially, most of the 200,000 oil and gas jobs in the UK exist. With that in mind, I reinforce calls that I know the Minister has already heard from the industry through the trade body Offshore Energies UK. In the immediate term, we need to introduce a clear mechanism, or announce what such a mechanism will be, by which a trigger or a floor price ensures that the 75% tax rate is applied only to company profits that are earned from the excessively high market price environment. In the medium to long term, we must legislate for an effective decarbonisation investment allowance that allows for decarbonisation expenditure, which is essential to delivering the UK’s net-zero ambitions and North sea transition deal emission targets. There are longer-term requests, of which I am sure the Minister is aware.

A huge part of our decarbonisation effort is this Government’s strategy to deliver up to 30 megatonnes of carbon capture and storage by 2030. I welcome the Chancellor’s announcement in the spring statement of £20 billion to help deliver at least that commitment of four CCUS clusters in the UK by 2030, and more beyond that. The £20 billion is for 20 years, from this year. Last month the launch of track 2 of the cluster sequencing process was widely welcomed by industry stakeholders and project developers alike. That includes the Acorn project in my constituency, and the Scottish cluster more generally. Despite continued efforts to downplay the status of that project by SNP Members and Members of the Scottish Government in particular, work on that project has never stopped. In fact, more than £40 million of UK Government money has been directly invested into the Scottish cluster, compared with £80 million promised by the Scottish Government and then withdrawn, with clarity not provided on exactly where that £80 million has gone.

As I said, the sector is impatient to get on with the work to be done on energy security and decarbonisation. Speaking for not only the Scottish cluster but CCUS more broadly, the announced streamlined approach to track 2 is very much welcome, but, as I am sure the Minister realises, even more welcome would be a clear and rapid process for rolling out track 2 clusters, building on the lessons learned from track 1. For example, it would be extremely helpful to award initial capture projects swiftly—and concurrently, if possible—with transport and storage licences. May I also ask for the inclusion of shipping and other non-pipeline transport of emissions, bearing in mind that most centres of industrial activity around the UK do not currently have clarity on what their pathway for decarbonisation will be?

Finally, on CCUS, given direct air capture’s current absence from the Bill as a carbon capture entity, will the Minister clarify what role that will play? Will it need to be included in the context of the appropriate clause—I think it is clause 63—of the Bill? If the Government cannot table that amendment, would it be helpful for me to table such an amendment, as others have offered? I am sure we can discuss that in more detail as Committee approaches.

Energy Bill [Lords]

David Duguid Excerpts

Report stage
Tuesday 5th September 2023 Commons Chamber

[Andrew Bowie]

I can confirm that we will move to a consultation in the next few months. Indeed, we will use the powers to support the use of those fuels in heat in future, should they be needed. Again, as we move through the consultation period, other Ministers in the Department and I would be delighted to meet my hon. Friend and all Members concerned. I understand that this issue affects many constituencies across the country and, rightly, interests many right hon. and hon. Members. As we move forward with the consultation and towards implementing the powers, we will be delighted to meet Members.

[David Duguid (Banff and Buchan) (Con)]

I welcome Government new clauses 52 and 63, which are of particular value to those living in certain parts of the country, such as north-east Scotland, as the Minister is very much aware. Will he join me in reinforcing and emphasising the benefit of developments in sustainable aviation fuel and renewable liquid heating fuel respectively, particularly in Aberdeenshire?

[Andrew Bowie]

Yes, I am very pleased to welcome developments in renewable liquid heating fuel. The consultation, which will be UK-wide, will benefit those living in rural constituencies such as Banff and Buchan, and those across north-east Scotland and rural Britain. I welcome the support for the sustainable aviation fuel amendment, to which I will refer shortly.

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[David Duguid]

I welcome the hon. Member to his new role and pay tribute to his predecessor, the hon. Member for Kilmarnock and Loudoun (Alan Brown).

The hon. Member gave a whole list of reasons why there would be an absence of baseload in Scotland, but I think I may have missed the point where he suggested how that baseload would be supplemented in the absence of nuclear. Could he clarify that? Does it include a new gas-fired power station in Peterhead with carbon capture, usage and storage?

[Dave Doogan]

The hon. Gentleman is entirely correct: he did miss me highlighting what would replace that baseload, and I refer him to Hansard after today’s debate.

The challenges of inflation and interest rates have altered the parameters to such an extent that this Government’s pretence that it is business as usual is breathtaking. Have they not seen what happened in the recent auction round in Spain or, conversely, what happened in Ireland when the Irish Government intervened to protect investment in renewables and reaped the benefit and reward for their economy?

If projects do slip from allocation round 5 as a result of an unrealistic strike price, where do Ministers think the supply chain capacity, the skilled workers and the specialist vessels will go? They will not wait around here, waiting for the Department to get its sums right—they will be off to the US and the EU to access commercially cogent incentive packages such as those found in the Inflation Reduction Act or the EU’s Net-Zero Industry Act. The stakes could not be higher for both net zero commitments and UK energy prices.

I am proud that the SNP has worked to protect people from the worst effects of the Westminster cost of living crisis with our amendments to the Bill, with steps that would protect the next phase of contracts for difference projects within AR5, properly provide for a comprehensive and complementary mix of energy storage solutions, advance local supply rights and work towards supporting our most vulnerable with the development of a social tariff, especially for those with higher energy use caused by medical conditions. I am pleased that the SNP’s new clause 39 will be put to a vote this evening, and I urge all Members to support that provision, which, while modest in scope, would have profoundly positive effects on many in our rural constituencies who live off the grid and have to heat their homes through liquid fuel.

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[David Duguid]

In the interests of time, I will limit my remarks to carbon capture and storage, and the impact of offshore wind on other commercial activities at sea, specifically fishing. If I have time at the end, I will talk about hydrogen and maybe even the future of oil and gas.

I welcome the announcement on 31 July by the Prime Minister in my constituency confirming the Acorn CCS and hydrogen project; that will mean that four CCUS clusters will be operational by the end of the decade. The Scottish cluster is particularly crucial for my constituency of Banff and Buchan, as well as the whole of Scotland, not just for the estimated 21,000 jobs the project is predicted to support but to enable the construction of a new CCS power station at Peterhead. That power station will replace the existing one, which is currently the only dispatchable thermal power station north of Leeds. It will be critical is providing stable baseload in support of intermittent renewable sources of energy, and will do so in a way that is 95% emission-free.

Again in the interests of time, I am not going to speak about every single amendment that I tabled, but I hope the Minister will bear with me and perhaps respond to the following questions. In respect of clause 2, which deals with licensable activities and their prohibition, can he clarify whether, or why, an economic licence would be required specifically over and above the geological storage licence that would be granted under the existing regulatory regime, namely the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010? Will private operators be able to develop merchant models in competitive transport and/or storage markets in the longer term?

As the Minister will know, the UK has about a third of Europe’s entire offshore carbon dioxide storage potential undersea, roughly equal to that of all the other EU states combined. Only Norway has slightly more than the UK in the North sea. This enormous potential to offer CO2 storage services to European and other countries presents an opportunity for the UK to become a global leader in CCUS, and accelerate the global efforts to prevent CO2 emissions. How will cross-border transport and geological storage of carbon dioxide be enabled to develop in time, without having to rely on the granting of exemptions to allow private networks to develop? Can the Minister also confirm that it will be possible to facilitate transportation by ship, and any other means of transport other than pipeline, through regulation, and that that is covered adequately by clause 128(1)(a)? I see him nodding.

Finally, may I raise the subject of offshore wind? The fishing industry understands that energy security matters, and that offshore wind has an important part to play in the overall energy mix, but food security matters too. The Minister will be aware of studies which have shown that up to half our seas could be lost to fishing owing to other activities, including offshore wind. Academic studies carried out by Heriot-Watt University, among others, have shown the impact that electromagnetic fields from subsea cables have had on the migration, growth and development—including abnormalities—of crabs and lobsters. The Energy Bill already makes provision for the principle of a levy to address the environmental impact of these new wind farms, which is absolutely right and proper, so what consideration—including engagement with devolved Administrations, as required—has been given, or could be given, to the businesses, industries and coastal communities that will inevitably be impacted by offshore wind operations?

Last month, the think-tank Onward published a compelling paper arguing for statutory payments, from developers, to be made to communities where—if and when—onshore wind was developed. If that principle is fair, payments for actual loss of earnings to other marine business from offshore developments are even more compelling as a principle. I am aware of the various voluntary codes and guidance that are available, but they have so far proved to be insufficient. If the Minister is unable to respond to that last question today, will he agree to meet me, and representatives from the fishing industry, to discuss how best to embed a fair and equitable principle in Government action, that would come at no cost to His Majesty’s Treasury?

[Wera Hobhouse (Bath) (LD)]

The UK has a responsibility to deliver an effective net zero strategy. This Energy Bill provided a chance to ensure that the Government’s own climate commitments could be met. Some parts of the Bill are welcome, but as it stands, it presents us with many missed opportunities. The Liberal Democrats fully support the establishment of the independent systems operator, and I am pleased that the Government have finally listened and given Ofgem a net zero duty. However, I am disappointed that the Government removed sensible amendments in Committee, such as the amendment to ban new coalmines, and I strongly support new clause 2.

Let me now focus on the Liberal Democrats’ new clauses 11, 12, 15, 24 and 28. The aim of new clause 28 is to ban fracking permanently. Fracked fuel is a fossil fuel; it hardens our reliance on expensive gas, and it flies in the face of our net zero commitments. The Government’s own experts have said that the seismic activity caused by hydraulic fracking is not safe. It is incomprehensible that the Government ever considered lifting the ban, and it caused huge anxiety among communities across the country. That must never happen again.

Last year, Shell forcibly installed prepayment meters in more than 4,000 homes, while making £32 billion in profits. Those on prepayment meters typically spent about £130 a year more than direct debit customers. Why are so many vulnerable people forced into this? The Government must support my new clause 15 to prohibit the installation of new prepayment meters unless consumers explicitly request them.



Solar is one of the cheapest forms of energy, and again it is incomprehensible that this Government do not give it the support that it deserves. The Climate Change Committee says that UK solar power deployment is significantly behind the Government’s target of 70 GW by 2035. The smart export guarantee should incentivise households to invest in solar panels by allowing them to sell the excess electricity produced back to the grid. However, under the current system it will take householders decades to break even and this will not incentivise solar investment. Our Liberal Democrat new clause 11 aims to enhance the reward under the smart export guarantee.