Electricity Supplier Payments (Amendment) Regulations 2026

Earl Russell Excerpts

Tuesday 17th March 2026 Grand Committee

[Lord Fuller (Con)]

My Lords, there is a reason why UK energy prices are some of the most expensive in the world. We are starting from a high base and we are increasingly vulnerable. At the moment, our gas prices are six times higher than you might find on an ex-NOLA basis: that is, exported from New Orleans. We are more expensive than the rest of Europe, apart from Germany, which has its own particular industrial problems, and we are increasingly vulnerable because we are trying to run our 24-hour-a-day, 365-day-a-year economy on energy sources that do not work at night or when the wind does not blow. I understand that, and I am not against using renewable energy—we need to have an energy mix—but the way we are going at the moment is to put too many eggs in the renewables basket.

With this statutory instrument, the name is on the tin: it is all about nuclear energy, but the speech that the Minister gave was not really about nuclear at all, but about the mission creep that has led to us having the world’s most expensive industry, whereby we are deindustrialising. Only today, what a shame that the Huntsman Group has announced that the Wilton facility, that last vestige of ICI at Billingham, could be closed. How ironic it is that the obituary of Sir Ronald Hampel, the architect of ICI, was in the Times this week: he must be turning in his grave.

This debate has all been about carbon capture and storage. I did not realise it was going to be, I thought it was about nuclear, but there we are. Carbon capture and storage is expensive, technically challenging and hard to implement. It does not work, it is the most expensive way of doing it and it is unproven. If it were proven, it would be eligible to be discounted against CBAM, but it is not. One of the main things by which this Government want to take carbon reduction on board—they are parroting and trumpeting carbon capture and storage—is ineligible for the headline carbon reduction process. Can noble Lords not see the incompatibility here?

What we have heard so far in this debate, and I know it is early days, is that—

[Earl Russell (LD)]

This is not a debate. This is an SI about the mechanism for contracts for difference. It is not a debate on energy policy.

[Lord Fuller (Con)]

I thank the noble Earl, but he will forgive me for having made an introduction, and now I come immediately to the substance, because what we have heard, and it came from the Minister’s mouth, is that this is all about investor confidence. This is about subsidy farming; this is about underwriting the most emitting power station in Britain, Drax, which is responsible for the desecration of huge tracts of forestry on the other side of the world, the shipping costs associated with getting it and its transport to that power station, as if it is somehow renewable. That is a fantasy.

What these regulations underpin is a false economic market that says, “No matter how high the gas price is”, and, my goodness, gas prices are high now, “we’re going to bid up the costs of renewables in an unearned income”. This is financial engineering. We are kidding ourselves that we are doing this for low carbon. We are creating a false market in unproductive assets such as carbon capture and storage. When we invest in carbon capture and storage, and I use the word “invest” advisedly, we are not investing in productive assets that will generate an economic return; we are just burying money, money that we need.

I do not deny that, as a result of this regulation, the authorities—forgive me, there are so many acronyms, I cannot remember them all, the LCCC and so forth—have to be paid for. However, this debate has exposed that it is not just about paying for the authorities, it is about financing a mission creep into all sorts of areas that collectively and cumulatively are driving the cost of our energy. Householders are paying more and industry is paying more—and, candidly, industry is now voting with its feet to go to other parts of the world because it cannot afford all this.

At some stage, we need to draw a line. I am grateful that the Minister has used the word “crisis” to describe the circumstances currently being visited on the Middle East and, by extension, on our own economy. When the facts change, you need to alter your position, and when it comes to this panoply of extra burdens on industry—not least contracts for difference—we need to have a fresh look, because the definition of insanity is doing the same thing over and over again and expecting the outcome to change. This nation cannot afford it, and neither can our industry or our householders. Clearly, we are going to note this statutory instrument, but at some stage the music needs to stop.

[Baroness Redfern (Con)]

My Lords, it is a pleasure to follow my noble friend and to have the opportunity to speak to this statutory instrument. I support and welcome the update levies to fund operational costs of low carbon and nuclear energy schemes. However, it is the wider context that is my concern: the continued high prices of electricity, which are among the highest in the world for our heavy industry—such as steel, which is truly disadvantaged when having to compete worldwide. Our high-energy intensive industries—not only steel, chemicals and ceramics, which are the industrial base of the UK—are, therefore, left inadequately supported.

We all know that lower electricity costs directly help to retain manufacturing reinvestment and jobs, and support the supply chains, so it is disappointing to see manufacturing jobs moving abroad in the past 12 months. For high-energy intensive industries to compete on a level playing field, confidence must be targeted, building that elusive confidence and bringing the precious private investment into the heavy sector. The Government know they have to develop and go further with serious long-term plans, and possibly introduce a two-way contract for difference to provide a competitive wholesale electricity price to support and restore our British industrial competitiveness for the next decade.

Finally, the Government must support further—rather than undermine—the UK’s wider industrial strategy and growth emissions. I look forward to the Minister’s reply.

[Earl Russell (LD)]

My Lords, the draft Electricity Supplier Payments (Amendment) Regulations make technical but necessary changes to the levies that electricity suppliers pay to fund three of the UK’s key energy schemes: the contracts for difference—CfD—scheme, the capacity market and the nuclear regulated asset base, or RAB model.

There is a sense of gravity on these Benches in that we fully recognise the role that CfDs have played, since they were introduced by the Liberal Democrats a long time ago, in helping to fund and secure funding for our energy transition. We recognise that these are necessary updates, and we welcome what the Minister has said to introduce these amendments. We welcome the measures that are being taken to ensure that efficiency savings are gained. Therefore, we fully support this SI.

[Lord Moynihan (Con)]

My Lords, I am very grateful to my noble friends Lady Redfern and Lord Fuller for their contributions. They bring a great deal of expertise to this Committee from a lifetime outside London in places where industries’ success has depended on low energy prices. For them to give up their time and dedicate it to the work of this Committee is commendable, and I associate myself with everything that both of them said.

That helps me in one way because it means that I can be short on this occasion. I will make just make four points. First, Drax has been raised. There are still major issues with Drax, as the Minister knows. Billions have been spent in public subsidies on it. As I recall, it was axed from the S&P green bond index because it clearly did not add to the net-zero objectives of either this Government or the previous one. Indeed, the burning of pellets releases CO₂ immediately and does not achieve anything except for carbon debt. That undermines our net-zero goals, not least because the pellets come from the west of Canada; they are brought right the way across Canada and must then be transported to the United Kingdom by boat. The sooner we grasp the nettle and stop biomass burning, the better. In fact, it is unfair even to call it biomass: it is a CO₂ pellet-driven wrong solution for Drax. Today, it has contributed a significant amount of electricity generated into the grid—not much less than comes from solar energy in the UK at the present time.

However, these are technical changes—this has been made very clear—and we on these Benches will not oppose them. I would just say three things. One is that the heart of this is, in fact, nuclear energy; look at the introduction and the rest of the statutory instrument. On the nuclear energy policy question, I welcome the fact that the Government have committed to implementing the recommendations of the Fingleton review in order to make nuclear power much cheaper. That is really important; we need to make it affordable, and it needs to be quicker and easier to build. We look forward to receiving the relevant legislation—even if I anticipate that, on that particular Bill, it will be colleagues from the left of the Labour Party and the Green Party who will give the Minister a lot of airtime because there is no doubt that the environmental impact is going to light the red touchpaper of the Labour left and the Green Party, which the Secretary of State has done so much to court.

Secondly, this Government cancelled the previous Government’s full-system cost analysis of the energy system. This statutory instrument highlights that such an analysis is important and would help all of us in this Committee—indeed, all of us in the House—to understand the cost of energy. I ask the Minister to consider reintroducing it, certainly before any further legislation comes before the House.

Finally—I was not going to make this point but I think it is important—I echo the comments made by my noble friends. The Government have not fulfilled their pledge to cut energy bills by £300. Pushing the costs on to tax bills is simply sleight of hand. The truth is that the Secretary of State’s made-up promise to cut bills by £300 has become, understandably, a national embarrassment for the Government, so they have turned to the already-struggling taxpayer for a bailout of £7 billion.

With all that said, I promised to be brief and make only a few comments on this instrument. These are technical changes, and we on this side will not oppose them, but it has been exceptionally helpful for the Committee to hear the comments made by my noble friends and the noble Earl, Lord Russell; I look forward to hearing the Minister respond to them.

Renewables Obligation (Amendment) Order 2026

Earl Russell Excerpts

Tuesday 17th March 2026 Grand Committee

This draft order represents a small but important step in that direction. It reflects the pragmatic, consumer focused approach that underpins the Government’s energy strategy: always seeking opportunities to make the system work better for the British people, while maintaining the confidence of the investors who are helping to deliver the energy infrastructure of the future. I beg to move.

[Earl Russell (LD)]

My Lords, I thank the Minister for his introduction. I begin by recognising that this draft Renewables Obligation (Amendment) Order 2026 makes a specific and, on the face of it, sensible change in the way the renewables obligation is updated over time. By moving from RPI to CPI calculations for inflation, it should slow the growth of RO costs and in turn ease some of the pressures on energy bills paid by households and businesses. As the Minister said, during a new energy crisis when far too many families and households are living in fuel poverty and we are seeing rapid rises in our energy costs, we remain acutely conscious that many are watching every pound being spent on their energy bills. This SI, if everything goes to plan, as the Minister said, would save £1.9 billion over the next 11 years.

We therefore welcome the measures, as they are designed to reduce the cost of energy. However, bringing down bills cannot be separated from maintaining the pace of the clean energy transition and maintaining market confidence and those who finance it. As the Minister said, the RO has been instrumental in building our capacity, particularly for mid-scale onshore wind and solar. Many have made investment decisions years ago based on an understood indexing regime. Can the Minister tell us what assessment has been made of the impact on projects that have had financing assumptions predicated on RPI? How many generators are judged to face material changes to their expected revenues as a result? What modelling has been done to check whether these measures could have a disproportionate impact on those at the smaller end of the generating scale?

There is also, for us, the question of overall approach. From the Government’s point of view, this is a small, important, but technical, pragmatic and consumer-focused change. But, for many in the industry, this is yet another incremental tweak to the legacy schemes. I note that, of the 257 responses to the consultation, most did not support either option put forward, citing a preferred option not to change the system at all, based on concerns around investor confidence, minimal consumer benefit and a need—from their point of view—for financial stability and predictability. Do the Government accept that this kind of piecemeal pattern risks the possibility of further eroding investor confidence? That would not be because any one of the individual changes is huge on its own but because it creates a sense that the rules for existing long-term investments are constantly up for potential revision.

As the Minister said, the impact is £1.9 billion. The measures will curtail the existing revenue for RO generators—reductions of around 1% for the financial year 2026-27, which will rise to 5% by the financial year 2030-31. As we know, these are large-scale, long-term investment decisions, so even relatively minor changes can have, over a prolonged period, quite large and sustained impacts on what were expected revenue returns and investment decisions. The Explanatory Memorandum says that, overall, the department does not expect that there will be a disruptive effect on small generators. What does that mean in practice? How confident is the Minister in that statement? Also, how will this be monitored going forward? I note that there is no statutory review clause here, so how will any unintended impacts or consequences of the SI, once it is passed, be monitored? Furthermore, if there are unintended consequences, would there be a willingness by the Government to look again at these changes, particularly if they happen to impact the smaller schemes?

More generally, is it the Government’s intention, over time, to mitigate remaining RO schemes into contracts for difference-type frameworks? Instead of having this piecemeal approach, is there a more fundamental plan, as part of this framework, to reduce bills? I welcome those measures, but is it not time that there was an overall plan for this, rather than looking at individual orders one by one? Is there not a better way of doing this, agreeing it with the investors and the market, so we can both reduce the cost for bill payers and maintain the investor confidence on which we depend to secure future investment? We generally welcome what is here, although we have a few questions about it. We do not oppose this SI in any way, but we want a bit of clarity on those points.

[Lord Moynihan (Con)]

My Lords, I am delighted to stand before the Committee in agreement with the noble Earl, Lord Russell, on this occasion. If I may, I will build on some of the questions he asked. Before I do, I declare my interest as the chairman of Acteon, which is a global specialist subsea services company providing integrated seabed-to-surface engineering solutions for the worldwide offshore energy sector, including oil and gas and wind energy.

During the consultation exercise for this order, almost half—48%—of respondents expressed a preference for not going ahead with either option. Many respondents raised concerns about the wide-reaching, longer-term impacts that these changes could have on investor confidence and regulatory stability. What does the Minister believe will be the effect on investor confidence in this sector?

Many argued that indexation changes could raise risk premia and depress valuations, and that they would likely increase the cost of capital on new investments, which could deter future investment and, ultimately, have an impact on consumers. Does the Minister agree with this? If not, why not? Most respondents felt that both of the options proposed by the Government would represent a breach of legitimate expectations based on prior commitments from the Government. Some believed that the proposals could attract legal challenge. Does the Minister consider legal challenge likely? If not, why not?

Some respondents warned that the estimated consumer bill savings from switching to CPI would be modest or otherwise offset elsewhere by increases to the cost of capital of future projects, and few agreed that the switch to CPI is necessary at all. The UK law firm Burges Salmon said:

“A switch to CPI or a temporary freeze to tariff/buy out levels will therefore unnerve everyone involved. Many investors have modeled returns based on RPI-linked revenues over the full support term. Any switch (whether Option 1 or 2) will therefore undoubtedly result in slower growth of support income which may, in turn, impact projected equity returns and dividends and trigger a downward adjustment in NAV estimations of affected ProjectCos”—


that is, net asset values. It went on to say:

“In addition, projects financed with RPI-linked debt may face a mismatch between the generating asset projected revenues and debt liabilities. Coupled with uncertainty around the introduction of an FPC scheme”—


that is, the fixed price certificates scheme—

“it is clear that the threat of sizable and costly changes to renewable support schemes being implemented is increasingly real and one which the industry may fight hard to resist whether by way of legal challenge or robust responses to the various consultation papers”.

What is the Minister’s response to Burges Salmon?

That firm was not alone. Commercial law firm Travers Smith wrote:

“Although many, including generators, investors and financing parties with interests in existing assets benefitting from these subsidies will be relieved that the more drastic ‘freeze-and-realign’ option (i.e. ‘Option 2’) was not taken, the immediate shift to CPI indexation is nonetheless expected to be a blow to confidence and cause headaches across the sector, with investors seeking to protect valuations and dividend capacity against erosion of RPI linked cash flows, and lenders scrutinising headroom and covenant resilience in the context of the risk of refinancing. The timing—as Government seeks to encourage a ramp-up in investment as part of its Clean Power by 2030 plan—is unfortunate”.


I was going to conclude on this point, but the Minister could not resist the opportunity to refer to the current global crisis and the need to “accelerate to homegrown energy” as his solution—that is, accelerate to intermittent power when what we need is, in essence, firm power.

As we know, three-quarters of our wind and solar power is generated through renewable obligation subsidies. This means that, every time electricity is generated, suppliers get the wholesale price, plus higher subsidies than in all other OECD countries outside China—subsidies that signal the direction of future energy prices for consumers. Every time the wind blows, some wind farms get up to three times the market price of electricity. If wholesale prices are £80 per megawatt-hour—they were roughly at that level before the crisis—wind farms are getting two renewables obligation certificates on top of that, at about £70 each. This means that they have been getting £220 per megawatt-hour, which is almost three times the market price for electricity.

As was evident to those noble Lords who were fortunate enough to see the Secretary of State on Sky News this weekend, he used the word “incredible” in most of the sentences that he spoke. Is it not incredible that the Government continue to say that gas is the problem? In the last week, the price of gas, which generates our electricity, has been high, at around £120 per megawatt-hour. But is it not incredible that the renewables on the scheme will always get more than the gas price? Right now, there are wind farms getting up to, as I mentioned, £270 per megawatt-hour because they get whatever the wholesale price is plus the subsidies on top.

Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026

Earl Russell Excerpts

Thursday 12th March 2026 Lords Chamber

[Earl Russell (LD)]

My Lords, I will respond to this SI and the regret amendment in the name of the noble Lord, Lord Moynihan. My noble friend Lady Suttie will respond to the specific points raised in the fatal amendment tabled by the noble Baroness, Lady Hoey.

This order extends the UK trading scheme to cover emissions from carbon dioxide, methane and nitrous oxide from domestic maritime activities for vessels over 5,000 gross tonnage, including in-port emissions, from 1 July 2026. It implements decisions of the UK ETS authority, agreed by all four Governments of the United Kingdom, and has already passed by a substantial majority in the other place. It is part of our broader strategy to decarbonise all sectors of the UK economy and to meet our legally binding 2050 net-zero targets.

To be clear, we support the order and we will not vote in favour of either the regret amendment or the other amendment. We believe, though, that the SI needs to meet three tests: it needs to have environmental integrity, economic fairness and practical deliverability. It must also support the UK’s wider trading interests, including our growing relationship with the European Union. The Liberal Democrats start from a clear point of principle: carbon must be properly priced and the polluter must pay. The UK ETS is a flagship decarbonisation instrument, a cap and trade system that sets a declining cap on total emissions and auctions allowances, each representing one tonne of CO² equivalent. Tightening that cap over time sends a clear signal to businesses about what they must reduce and by when.

Emissions trading is, in our view, the most effective way to cut total emissions at the lowest cost. It enables the market to identify and invest in the cheapest abatement options, rather than relying solely on prescriptive regulation, and that reduces carbon leakage. Extending the logic to domestic maritime completes a missing piece in the system that already covers power, heavy industry and aviation. Maritime emissions matter. They are a significant and growing source of CO² emissions. A key barrier to their reduction is that fuel prices do not adequately reflect the environmental costs and therefore reduce incentives for change. Including domestic maritime in the ETS helps to remove the barriers, putting a clear technology-neutral price on emissions from voyages and time spent at berth.

The Government’s impact assessment estimates a central net reduction of around 645,000 tonnes of CO² equivalent, delivering greenhouse gas savings valued on the central estimate of around £155 million and around £179 million in air quality benefits. Overall, the measure has a positive net social value on the Government’s central estimate of £132 million. That is a measurable gain for people and planet. Consultation material suggests that vessels over 5,000 gross tonnes account for two-fifths of domestic maritime emissions. Is the Minister confident that the scope and the threshold align with our overall carbon budgets?

Our climate policy must also be fair. Costs must not fall disproportionately on those who are least able to bear them. The Government’s impact assessment suggests limited consumer impact: typically 1% for most goods and around 2% for some—

[Baroness Butler-Sloss (CB)]

I am grateful to the noble Earl, Lord Russell. Can I ask him two things, from a state of ignorance? First, why is Scotland being omitted and Northern Ireland put in? Secondly, we seem to be dealing with an issue on CBAM that was not referred to in the House of Commons. It seems extraordinary that we should be looking at it from a different perspective from the House of Commons.

[Earl Russell (LD)]

I welcome the noble and learned Baroness’s intervention. The Scotland issue relates to devolved legislation and legislation that Scotland has passed. The issue in relation to the CBAM is in relation to—

[Lord Rogan (UUP)]

Does that not also apply to Northern Ireland?

--- Later in debate ---

[Earl Russell (LD)]

There is a reduction in place in Northern Ireland. There is not specific legislation around that.

[Lord Weir of Ballyholme (DUP)]

The noble Lord gave one of his key considerations as a test of economic fairness. Perhaps he could explain to the House how it is economically fair to have an 100% exemption for Scotland but 50% for Northern Ireland. How is that fair?

[Earl Russell (LD)]

It is not for me to respond to what is a question for the Minister. The Government’s impact assessment estimates central abatement investment of around £22 million, with administrative costs of £179 million over the period. The allowance-purchase cost is largely a transfer to the Exchequer and devolved Administrations, with many operators being non-UK based. Carbon pricing must therefore be matched with a credible transition plan. Without that, this becomes not a nudge for transition but could simply be a tax. However, the Government have announced £448 million for the UK Shipping Office for Reducing Emissions—UK SHORE—between 2026 and 2030, the largest public investment yet in commercial maritime.

Phase 2 will support larger projects through the Clean Maritime Demonstration competition and the Zero Emissions Vessels and Infrastructure competition. That is the industrial policy that must sit alongside carbon pricing. At the same time, the measure is expected, on the Government’s central estimate, to generate around £1.9 billion in allowance-sale revenue: around £95 million a year. Will the Minister confirm that a material share of ETS maritime revenues will be reinvested in maritime decarbonisation, including cleaner vessels, shore power, alternative fuels, and support for local transition in coastal and island communities, rather than simply disappearing? Will the Minister commit to publishing annually how much is raised from maritime ETS and how much is invested in maritime decarbonisation?

The cruise industry is an important and growing part of our economy, calling at some 50 UK ports and making over 2,500 calls a year, supporting tens of thousands of jobs and adding billions to the UK-wide economy. The industry’s concern on ETS is that revenues are not being visibly recycled into cleaner fuels and infrastructure specific to their industry. We only have a handful of onshore connections for cruise liners at the moment, so will the Minister tell us what investment will be made as a result of this scheme to bring shore power, and on what timetable for the cruise industry?

The Government and the UK ETS have done substantial preparatory work, including consultations, a digital monitoring platform and voluntary onboarding since November 2025, ahead of the July 2026 start. The Government’s impact assessment estimates an average administrative cost of around £5,700 per operator per year. This may be modest, but it has real implications for real firms. We recognise that this should reduce over time.

We welcome the formal review at the end of 2028 to assess emissions outcomes, administrative burdens and any needed adjustments to scope or thresholds. We have a number of specific concerns about any plans to expand the scope to international voyages. My noble friend will address the specific issues relating to Northern Ireland aspects. We believe the right approach is to keep these provisions under review and match carbon pricing with practical support, not to abandon maritime decarbonisation. Extending the UK ETS to domestic maritime emissions also helps keep our scheme aligned with greater integration with the EU. In turn, a genuinely linked system will help strengthen our trading relationship.

The fatal and regret Motions both reflect genuine anxieties about costs, competitiveness, and the union, but neither justifies rejecting this order. The suggestion that there is no alternative is not borne out by the evidence. Improved operating practices, routing efficiency and gradual fuel switching all represent viable abatement pathways.

Near-zero emission fuels remain expensive and infrastructure is incomplete. But that is exactly why revenue recycling and UK SHORE matter. The right course is to pair a robust carbon price with predictable investment that keeps the maritime sector on its net-zero path, while keeping the UK economy competitive. To call this measure simply a tax misunderstands how the ETS works. It is designed to minimise the cost of meeting our climate goals, to give business flexibility and to limit carbon leakage: this is a practical measure. It becomes a tax only if the Government pocket the proceeds and fail to reinvest them. Revenue is a byproduct: the purpose is to cap and reduce emissions over time. We are supportive of the extension of emissions trading to domestic maritime. Done well, emissions trading drives real reductions, supports innovation and underpins our net-zero transition.

[Lord Dodds of Duncairn (DUP)]

I am grateful to the Minister for introducing the statutory instrument in the way that he did, to the noble Baroness, Lady Hoey, for introducing her fatal Motion, and to the noble Lord, Lord Moynihan, for introducing the regret Motion. It is very important that we in this Chamber debate these issues: this matter got 47 minutes in the other place. Often, matters that affect Northern Irish consumers and businesses in a very direct and detrimental way do not get any time at all in the other place. It is therefore all the more important that your Lordships have the opportunity to debate these matters.

The noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, have powerfully set out what happened in relation to the Northern Ireland Assembly’s consideration of this matter. This Government are supposed to be pro growth; they are supposed to have the cost of living at the heart of their consideration, and indeed they say that they are pro union and are committed to this through various command papers and policy statements. Thank goodness we are not debating the Windsor Framework edifice today, but it always needs to be taken into consideration, because it was certainly a matter for the Secretary of State when he was interacting with party leaders on this particular issue. This statutory instrument runs counter to all these priorities of the Government, yet they proceed with it nevertheless.

The noble Lord, Lord Moynihan, and the noble Baroness, Lady Hoey, referenced the intense lobbying on the part of His Majesty’s Government, at Secretary of State and ministerial level, to parties in Northern Ireland when it became clear that they were deeply concerned about the effects on Northern Ireland. The introduction of the CBAM argument led Ms Finnegan, the Sinn Féin MLA, to say just this week in the Assembly debate:

“While the challenges facing businesses as part of the changes remain, doing nothing is simply not an option. Failure to implement the ETS would result in the costs being incurred through the carbon border adjustment mechanism”.


That proves that this argument changed minds. This was the deciding argument for Sinn Féin. Interestingly enough, it was Sinn Féin, and the SDLP and the Alliance Party, who succumbed to the arguments of the UK Government. It was an interesting turn of events that those parties succumbed to that type of argument. But that is mainly to do with their total allegiance to anything that advances the cause of the EU, even above the interests of their own constituents, as has been evidenced in many debates in the Northern Ireland Assembly.

I also raise the fact that not only was the CBAM argument introduced at a very late stage but, in messages to party leaders, and certainly my party leader, the issue of the SPS agreement and the EU reset negotiations was also raised, and it was explicitly said that this would be put at risk if this SI was not passed by the Northern Ireland Assembly. These are very serious matters. Raising issues such as these as threats and blackmail, at the last minute and without any proper consideration, as the noble Lord, Lord Moynihan, pointed out in the other place, or indeed when the matter first came before the Northern Ireland Assembly, is totally unacceptable.

It is an outrage that these matters should be considered in this way, especially when we consider what is at stake for Northern Ireland, because this is a discriminatory measure. It is a measure that disproportionately affects Northern Ireland, as has been said. I am not going to repeat all the arguments that have been set out on the economic detriment to Northern Ireland—they have been powerfully set out already—but given our dependence upon maritime transport, it is absolutely clear that this is going to have a knock-on, detrimental effect on businesses, on consumers and on every aspect of life in Northern Ireland.

Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order 2026

Earl Russell Excerpts

Monday 9th March 2026 Grand Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

My Lords, this draft order was laid before Parliament on 26 January 2026. This Government remain fully committed to ensuring that households, particularly those on low incomes or at risk of fuel poverty, can live in warmer, more energy-efficient homes that are affordable to heat. At the heart of this endeavour lies the new warm homes plan, a comprehensive and long-term strategy to reduce energy bills, alleviate fuel poverty and enhance energy security. We have committed to investing £15 billion—the biggest-ever public investment to upgrade British homes and cut energy bills. Of this amount, £5 billion is allocated to support low-income households.

The energy company obligation—ECO—has played a key part in helping households to reduce their energy bills. The energy company obligation was first launched in 2013. Since its launch in 2022, ECO4 has delivered slightly over 1 million energy-saving measures to approximately 300,000 households. The scheme places an obligation on the larger energy suppliers to deliver energy-efficiency improvements to vulnerable and fuel-poor households that result in measurable bill savings.

While ECO4 has delivered a significant volume of home energy-efficiency improvements, it has not been without challenges, as set out recently by the National Audit Office, among others. There have been widespread, systemic issues in the delivery of solid- wall insulation, which we have taken urgent steps to tackle. We are bringing forward comprehensive reforms to the retrofit consumer protection system to make it stronger, more transparent and more accountable so that this cannot happen again. We expect all installers to ensure that households receive timely and high-quality remediation of any non-compliance identified.

Given these systemic issues and inflation that is still too high, we have taken the considered decision not to replace ECO4, therefore easing pressure on household energy bills. This, in combination with the Government funding 75% of the domestic cost of the legacy renewables obligation, will remove around £117 of costs on average from household energy bills across Great Britain.

This statutory instrument introduces a small and necessary change to the existing scheme by extending the end date of ECO4 by nine months from 31 March to 31 December 2026. This extension provides obligated suppliers with additional time to meet their existing targets and, most importantly, it allows them time to focus on remediation of non-compliant installations. I emphasise that the instrument does not change targets, impose new obligations, or increase supplier costs or consumer bills.

As I conclude, I thank the Secondary Legislation Scrutiny Committee for its consideration of this instrument and for not drawing it to the special attention of the House. The changes made by this instrument, which is in essence a very simple one, are limited but important. By extending ECO4, we are ensuring a stable period of delivery and an orderly closure to the scheme, and are safeguarding consumers. I beg to move.

[Earl Russell (LD)]

My Lords, I will respond on the Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order. While appearing to be only a minor adjustment today, this SI is important, as it involves the need to protect the most vulnerable in our society from poorly insulated homes and fuel poverty.

The ECO4 scheme has been a fundamental component of our national strategy to address the dual crisis of fuel poverty and the climate emergency. We have always supported its ambition to reduce the costs of heating for low-income households. This amendment seeks to extend the scheme’s duration by nine months to 31 December 2026. The reasons for doing this require a little bit of scrutiny. The Government say that this extension is necessary for the remediation of non-compliant installations and to ensure the orderly closure of the scheme.

Energy Markets

Earl Russell Excerpts

Monday 9th March 2026 Lords Chamber

[Lord Moynihan (Con)]

My Lords, I declare my interests as chair of Amey, Acteon and Buckthorn.

This Statement comes at a time when the United Kingdom faces major, unparalleled challenges to its energy supply. For 50 years, under successive Conservative and Labour Governments, energy policy has been built on the four pillars of security of supply, diversity of supply to back that security, stronger adherence to ever-improving environmental measures, and, above all, affordability. On all four tests, this Statement fails, and the current war in Iran exposes that the Government’s energy policy is uniquely vulnerable to international supply chains, unaffordable to industry and households alike, glaringly insecure and unashamedly reliant on putting intermittent power before the firm power needed to keep incubators in our hospitals running 24/7, 365.

The Statement argues that there is no point drilling in the North Sea because all our gas is sold on international markets. Does the Minister agree that this is nonsense? Every molecule of gas we extract from the North Sea goes straight into our pipes, making up around half the UK’s supply. Does the Minister agree with the North Sea operators and OEUK that data already submitted to government details 111 named projects, equivalent to £50 billion of investment, that could be unlocked with tax and regulatory reform? On security of supply, we are increasingly vulnerable. Does the Minister accept that we have one pipeline coming to the UK from Norway alone, which is responsible for 30% of our gas supply? As the eminent economist Dieter Helm stated, is this not a sitting duck for a hostile power or an obvious hit for drones in the North Sea?

Does the Minister agree that onshore economically, the UK is facing the highest industrial power prices in the world, crippling our industry and increasing our cost of living? Does he agree that we are failing our energy-dependent industries because we have unaffordable energy prices? Gone is most of the steel industry. Deeply damaged is the fertiliser industry. Through the imposition of additional energy costs this year, the ceramics industry is under threat, as are petrochemicals and refined fuels.

Turning to capacity, does the Minister agree that we already need twice the capacity, twice the grid and all the batteries and storage we can find, plus many more interconnectors, to service a level of power demand of about 45 gigawatts? We used to meet that comfortably with just 60 gigawatts of capacity. Does he not recognise that all this is because we must have therm power available on days like today when the wind does not blow? Only 16% of our electricity was generated from wind today—only double that from the heavily polluting, burning biomass of 7 million tonnes of wood pellets a year in Drax.

Turning to renewables, does the Minister agree that there was good reason for the late publication of the secret MoU between the Secretary of State and the Chinese Government? It demonstrated that not just our renewable energy policy but our overall energy policy is tethered to China, a country which burns more than 55% of the world’s coal and is building another 400 gigawatts of coal generation. Yet our imports of solar panels are nearly 100% imported from China and demonstrate our serious reliance on a foreign state, not least because, as the Minister said from the Dispatch Box recently, he cannot be sure that the solar panels being installed in our schools are not made by slave labour.

Does the Minister agree with me that we need a policy built on renewables and more North Sea gas—not renewables instead of gas? Does he also agree that energy security and affordability depend on a substantial increase in gas from the North Sea, not imported LNG, which has gone up 40% year on year and which, in its total life cycle, emits nearly twice the levels of carbon compared with North Sea gas? The Government need to secure our own gas reserves, first, by a fiscal and regulatory regime which immediately encourages more tiebacks and greater exploitation of existing reserves, then by a licensing regime which ensures that production comes on stream at the same time as new-build nuclear.

None of what I have said this evening is anti-renewable; indeed, when I was Minister for Energy, I launched the first renewables non-fossil fuel obligation and for many years I was president of the British Wind Energy Association. I have set out a direction through which the UK is more energy secure, not less, with more affordable and environmentally acceptable energy; and through which it is more prosperous, with more jobs for working people, greater economic confidence, higher growth and a lower cost of living.

[Earl Russell (LD)]

My Lords, I thank the Minister for the Statement on the very serious and fast-moving situation in the Middle East. The recent escalation in the Gulf following President Trump’s deeply destabilising actions risks widening the conflict. Fourteen countries are now directly affected, global shipping supply routes are shut, and once again oil and gas prices have skyrocketed because of geopolitical chaos. With tragic inevitability, the same man who denies the existence of climate change has unleashed another conflict for the control of fossil fuels. If this conflict is not urgently contained, it will shut down oil fields and disrupt global markets, and drive up oil and gas prices, food prices, inflation and government debt alike. We need an urgent halt to the targeting of energy and desalination facilities on all sides.

We have been here before. Despite the progress we are making on our energy transition, the UK remains frighteningly exposed to the harsh economic impacts of global events far beyond our shores. The Energy & Climate Intelligence Unit and E3G estimate that our reliance on fossil fuels has cost this country an additional £183 billion since 2022, because of the increased costs of energy as a result of the war in Ukraine. We cannot afford another lost decade of dependence on global fossil fuels that we neither control nor influence.

While much of the Minister’s Statement is welcome—the co-ordination with allies, reassurance on supply, and commitment to clean power—the real question is whether this Government will now act at the speed and scale the crisis demands. Unlike the last energy crisis, this one includes oil as well as gas. We on these Benches see the Conservatives’ claim that the solution lies in new North Sea licences as the equivalent of trying to fill a swimming pool via a drinking straw. North Sea gas production is down by two-thirds since 2000. It is set to have declined by 97% by 2050, and even with new licences it will decline by 95%.

On oil-related issues, I want to ask about rural constituents who rely on heating oil to heat their homes. Some 1.5 million rural homes and 62% of homes in Northern Ireland depend on it. Prices have rocketed: in some cases, they have nearly doubled. These consumers are the forgotten victims of energy policy, not covered by Ofcom regulation and therefore without price protection and redress. Will the Government now work with the CMA and Ofgem to establish proper oversight, investigate price abuses and ensure that these households are protected?

Disruption to supplies arising from the Gulf crisis has also pushed up the cost of aviation kerosene by more than 80%. What consideration is being given to resilience, as 70% of our kerosene is imported, and how are the Government mitigating escalating costs for consumers and operators alike? On the cost of electricity and gas, we have some stability with the energy price cap, but that is short lived. While our gas supply is more secure than that of oil, gas prices have already reached a 12-month high. There is a very real risk of a renewed cost-of-living squeeze later this year, placing further pressure on families and businesses who are struggling to pay their bills.

The Government must make plans for scenarios where prices stay high and new interventions will be required. Families and businesses deserve reassurance that the Government’s support will not vanish if the crisis endures. I ask the Minister to give that reassurance today. These events bring into sharp relief the deeper issue: the structure of our energy market. Despite our work on renewables, UK consumers remain uninsulated from the global fossil-fuel markets, as our energy market has not been reformed to reflect the increase in renewables uptake. Three years on, we have been told repeatedly that energy market reform is coming. The Government have ruled out the introduction of zonal pricing, but this crisis is a clarion call that urgent action is needed. Why are we still funding crucial decarbonisation and social/environmental levies through household bills rather than general taxation? Moving more of those policy costs into general taxation would help to make the system fairer and more equitable. Will the Government commit to reviewing this balance?

Our gas storage capacity—just 12 days—remains among the lowest in Europe, so will the Minister consider the case for a greater strategic reserve? The price of gas still sets the UK electricity price 97% of the time. Do the Government agree with Greenpeace’s call to bring gas plants into a regulated asset base, creating a strategic reserve administered by NESO to break the link and save customers an estimated £5.2 billion by 2028?

We must double down on the rollout of renewable energy, grid upgrades, long-term storage, diversity of supply and greater energy interconnection with Europe, so that we can gain energy security and price control. Investors need predictability on planning, on grid connection and on the carbon pricing framework. Britain must move to a continuous pipeline of renewable projects: built faster, connected sooner and supported by modernised transmission networks. Every insulated home, every electrified heat pump and every community-scale battery gives us energy independence.

True energy security for Britain will not be won in the North Sea. It will be won on our rooftops, in our grids, in our offshore wind fields and in our insulated homes. If this latest conflict teaches us anything, it is that energy dependence is a choice, and energy independence through clean energy must now become our utmost mission.

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

I thank the noble Lords for their contributions this evening and I will attempt to address the questions that they have put to me. I must say, however, to be absolutely frank, that there appears to have been one sensible contribution and one not-very-sensible contribution. I will attempt to answer them just the same, but what I thought we were talking about—and I think we are talking about—is the really difficult situation everyone finds themselves in now as a result of the Iran war: what that is likely to do to energy prices, what the likely effect will be on supplies for consumers and industry, and what we can reasonably do to make sure that we have indeed the security that noble Lords have talked about tonight, for our own supplies for the future but also in such a way that we have a secure future ahead of us as well.

In that context, I would have thought that the particular lesson we should draw from the events of the last few days is that we cannot get away from, for various reasons, enormous volatility in the fossil fuels and gas markets abroad. That itself, for various reasons, directly leads to volatility and difficulty with energy prices and energy supplies and various other things. The lesson surely has to be that we should ensure that we have secure, homegrown energy that is not subject to international volatility in the way that we are finding right now, but is also secure for our suppliers and for our consumers, and builds an industry on the back of that which actually creates jobs and businesses and energy arrangements that are secure for the long-term future.

That, of course, is to continue with the moves towards renewables and low-carbon energy, getting the role of gas as far as possible out of our markets and securing a future where our homegrown energy is not only not subject to dictators and petro states but is entirely under our own control: not only under our own control but under our own control as far as the sources of that are concerned.

We have a number of worries and concerns right now about what no one in this Chamber knows too much about—exactly how long this war will continue. Obviously, one earnestly hopes that the war comes to an end fairly soon or that, as the UK Government are pushing, we have a negotiated diplomatic settlement on particular issues for the future. However, we know that prices are going up rapidly at the moment and that there is a bit of a differential between different areas of the oil and gas economy. For example, heating oil, which is not subject to the energy price cap, is going up rapidly. We have to deal with a number of such issues on different fronts pretty immediately, regardless of the long-term future that should be in place for our energy economy.

As far as customer security is concerned, we have the energy price cap in place. That means that, for three months at least, customers of electricity and gas will have cheaper prices than they had over the most recent period. That is protected to that extent. Heating oil is not as protected; we have seen considerable spikes in that, which are also associated with jet fuel, because they are essentially the same thing—kerosene—and we have seen considerable spikes in that. The UK has considerable reserves of jet fuel but does not have the same reserves of heating oil. We have taken action just today in writing to the CMA and leaders in the heating oil industry to make sure that they keep a cap on prices, that they are not price gouging and that they are keeping their prices as modest as they can.

However, all this depends on what happens over the next period with the progress of the war and whether the Strait of Hormuz will be opened or we are at least in a position such that oil and gas can get through it, so that we can start talking about a reasonably reliable supply for world energy coming through in a way that it is not at the moment. Mark my words: this crisis is not about supply. The UK has ample supplies of gas of all sorts—50% of which is from UK fields, assuming it stays in the country. We will perhaps touch on that. We also have supplies from Norway and of liquefied petroleum gas; three terminals have been built and a number of LPG vessels are on their way to the UK, as we speak.

It is not so much about supply but about price and what happens to it if the war continues for a long time. For example, we take only about 1% of our gas in the form of LPG from Qatar—very small supplies—as most of it comes from other sources. But other forces in the world are trying, literally, to turn those LPG vessels around, so that they go to their parts of their world to supply them with LPG at an increasingly high price.

We are clear that we need to take firm action to make sure that we have the right prices for the future, the ability to protect our own energy interests and the ability to make sure that supplies, which are reliable at the moment, continue to be reliable in the longer term.

One thing this is not about is the idea that we should suddenly start drilling for gas or oil and translating a lot more gas and oil back to the UK, which the noble Lord opposite appears to think should be the next move. First, that would take a very long time to happen. Secondly, as I have previously mentioned, it is not the case that this gas would just come to the UK; it goes all around the world at a world price. It would make no difference to the world price, as we have only 0.7% of global oil and gas production in the UK, in any event. It would make no difference to the outcome. The outcome on which we need to work is to continue with our low-carbon policies to get us off gas as quickly as we can and to secure renewable, low-carbon and firm energy through renewables policy in the longer term, so that we are not dependent on gas and this kind of situation never happens ever again. That is clearly the task ahead of us, so I therefore commend to the House this Statement and what it says about the future, despite the situation that we find ourselves in at the moment.

Carbon Budget 6

Earl Russell Excerpts

Tuesday 3rd March 2026 Lords Chamber

[Lord Whitehead (Lab)]

It is certainly not true that the pursuit of a low-carbon economy has led to deindustrialisation. The noble Lord need only look at the £60 billion of investment that is coming into the green economy and all that goes with it. Indeed, the low-carbon economy is growing three times as fast as the general economy. Many of the things that are coming in concerning low-carbon energy are very much concerned with industrial plants, grids, new forms of electricity generation and so on, which will not only produce large numbers of jobs but a very sound industrial base for the country.

[Earl Russell (LD)]

My Lords, to return to the Minister’s original Answer in relation to legal challenges, what assessment has been made of the electric vehicle rollout and boiler replacement mandates and their timeframes, and the Government’s ability to meet the building and transport emission cuts and the sixth carbon budget in good time?

[Lord Whitehead (Lab)]

On EV rollout, the noble Earl will be aware of what has been put in place for ending internal combustion engine use in vehicles and the phase-out of hybrid by 2035. The rollout of electric vehicles continues unabated, and the number of electric vehicle charging points in this country, currently at more than 80,000, is well on target for what we think necessary over the next period to ensure that the fleet works as well as it should.

Fire and Rescue Services: Clean Energy Projects

Earl Russell Excerpts

Thursday 26th February 2026 Lords Chamber

[Lord Whitehead (Lab)]

My noble friend, to whom I pay tribute for his enormous service in the fire service over a number of years, really ought to be the person who knows what he is talking about on this subject. He refers to the fire in North Hyde a little while ago, which, as noble Lords will know, caused considerable problems at Heathrow Airport in 2025. That was subject to a NESO investigation into the circumstances around that particular fire, which related to faulty maintenance in a substation. As a result of that investigation by NESO, the Government have accepted all the recommendations that were put forward in the report and are working closely with other government departments and the energy industry in implementing the 12 recommendations and 20 related actions, detailed in the Government’s response to that investigation. Among other things, that ensures a joined-up approach across organisations to improve energy resilience, emergency response and recovery. The majority of actions are forecast to be delivered by the end of 2026.

[Earl Russell (LD)]

My Lords, long-duration energy storage is an extremely important part of our energy transition, providing much-needed stability to our future energy systems. Falling prices and evolving technology are also helping. I welcome the Minister’s response, and we recognise that robust safety systems are in place. However, Ministers have previously spoken of considering additional measures to enhance the regulation of the environmental and safety risks of BESS. Does the Minister feel that more work is needed to reassure the public on public safety concerns?

[Lord Whitehead (Lab)]

The Government are actively exploring additional measures to manage safety risks on the grid-scale battery energy storage sites. That is important in the context, as the noble Earl mentions, of the substantial expansion that there will be in batteries as an essential part of the UK’s balancing energy system for the future. In August, Defra published a consultation on modernising the environmental permitting regime for industry, which included proposals to include BESS within scope of environmental permitting regulations. The Government are currently reviewing industry feedback and will publish a response in due course. That would require battery developers to demonstrate to the Environment Agency how specific risks were being managed while also providing for ongoing regulatory inspections of battery sites.

Quantum Technology

Earl Russell Excerpts

Tuesday 24th February 2026 Lords Chamber

[Lord Vallance of Balham (Lab)]

My noble friend asks an important question. There is no doubt that UK quantum companies look pretty attractive at the moment. We have a good idea of where those companies are, what their skills are and what is going on across the quantum space, but I believe there is a need to have all the levers in place to make sure that these companies stay in the UK. Yes, that is about funding, but also about regulation, procurement and giving the signals that can leverage the investment that these companies will need, as many of them are getting up to very significant valuations.

[Earl Russell (LD)]

My Lords—

[Lord Waldegrave of North Hill (Con)]

My Lords—

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

We will take the Lib Dems then come to the Conservative Benches.

[Earl Russell (LD)]

My Lords, quantum technology clearly has profound implications for our future national security, including for the secure communications on which we all rely and for potential future threats to cryptography. How are the Government working to ensure the alignment of the national quantum strategy with our cyber and national security strategies? What assessment have the Government made of the UK’s sovereign capability in key parts of the quantum supply chain?

[Lord Vallance of Balham (Lab)]

There are two important parts to that question. First, it is necessary to make sure that all existing data go through into post-quantum cryptography—in other words, into things that cannot be broken by quantum computers. That process is being led by the National Cyber Security Centre, which is working with businesses and trying to get them into place to have that ready, but it is not a short-term project. It will take quite a long time to get all that done. Secondly, the race is on to make sure that we are at the very forefront of getting a working, scaled quantum computer, because that is what will give us an advantage in all these areas. We work very closely with the security agencies across all this.

Local Power Plan

Earl Russell Excerpts

Wednesday 11th February 2026 Lords Chamber

[Lord Moynihan (Con)]

My Lords, although I have no outside interests which impact directly on solar farms and onshore wind, I declare my interest in having worked in the wider field of energy transition since my time as Minister for Energy.

I start by reflecting that we all want clean energy, we all want full engagement with local communities, and we all want to work towards an energy policy based on energy security, sourced from trusted supply chains and, above all, delivering affordable energy. This announcement should be tested against these criteria, for we support community energy enthusiasm where it makes economic sense. Does the Minister agree that reducing energy bills comes only by increasing reliable generation and decreasing costs, yet the local power plan does not come with a generation target nor an analysis of the extent to which it will contribute to reducing bills? If these are not central factors within the policy, I am afraid that it will for sure be time and money misspent.

In the Government’s own press release, they rely on “internal analysis” to claim that additional solar and onshore wind procured through AR7 could lower bills in the early 2030s, but that analysis has not been published. It looks only at a narrow scenario, it seems to exclude wider system costs, and it does not give a full picture of future bill levels. Does it include the load in grid costs to get the power to market, given that many of the wind projects being considered are in Scotland? How does the plan impact on Labour’s promises to cut energy bills by £300, not least given that they have risen by £190 since Labour came to power? How does this initiative change that?

I had a good look at the map of all the proposed projects in the CfD allocation round 7a. There were only two small wind projects in England, some in south Wales, and the vast majority of the other wind projects were in Scotland. Given that there were only two wind projects in England, can the Minister comment on whether this will lead to further increases in the already staggering bill for curtailment—paying wind farms not to produce—because of the grid constraint from Scotland to the south, the B6 boundary, and the cost of debottlenecking that, which is estimated to be north of £50 billion?

Can the Minister comment on whether this initiative is good for employment? There has been real concern recently, which the Minister will be aware of. The OEUK talked a lot about his policies and the redundancies in the offshore sector, and fears that the industrial contagion will spread to onshore supply chain and manufacturing communities. To put this in context, on average, 1,000 direct and indirect jobs are being lost each month from the oil and gas sector. Without intervention, this rate of job losses will continue to 2030. RenewableUK has said that these initiatives being proposed for renewables may create 4,000 more jobs from now to 2030, as against the 50,000 losses of jobs in oil and gas. How does that help employment in the UK? The GMB union’s Scotland secretary, Louise Gilmour, gave the same warning:

“There is a human cost to these decisions that goes beyond the bottom line of this year’s budget and impacts workers, families and communities in Scotland and across Britain. The economic case for easing the financial pressures on our offshore industries is clear and compelling but so too is the moral argument for slowing the rushed and needless abandonment of workers and their communities”.


Does the Minister agree?

I turn to an exceptionally important point. This announcement is principally about solar energy, and solar imports come from China. The Minister of State, the noble Baroness, Lady Chapman of Darlington, stated in a debate initiated in this House recently that

“human rights are a non-negotiable part of this Government’s approach to China”.—[Official Report, 2/2/26; col. 1301.]

This is an initiative to import Chinese goods. Well over 80% of PV modules used in the UK have significant Chinese content, and the true figure is very likely to be above 90% when you include panels made by Chinese-headquartered manufacturers—for example, Jinko, Trina, LONGi, JA Solar and Canadian Solar, all of which are Chinese in origin—and the non-Chinese brands whose wafers, cells or polysilicon is sourced from China. Some 80% to 85% of the global polysilicon that is needed comes from China, and the UK imports almost all its PV hardware. Installers and trade bodies routinely report that Chinese supply chains dominate the UK market because of price and scale. In the map for AR7, we are talking about a widespread, historic, major increase in solar imports from China. This local power plan depends on Chinese goods.

I simply ask the Minister whether he can tonight guarantee that no imported polysilicon, no panels being installed in our schools at the moment under GBE’s first initiative, and no solar content on any of the panels that is foreseen by this particular measure will come from the Xinjiang Uyghur Autonomous Region. A very large share of the world’s solar grade polysilicon has recently come from China, and a significant part of that comes from the Xinjiang Uyghur Autonomous Region.

It is a simple question and I hope the Minister can answer it by saying that there is absolutely no polysilicon that comes from that autonomous region. If he cannot answer it, it would have been wise and sensible to consider that question first. When comfortable that the Government could answer it in the affirmative, he could then come to the Palace of Westminster and bring forward this initiative for a historic increase in the import of solar panels.

In conclusion, can the Minister also say in this context why the Secretary of State, who is fast becoming a night manager, went to China a year ago, signed an MoU and locked it in his safe, marked “secret”, to be hidden from the public and not to be scrutinised? Why did the Government not publish it? They have published all the other MoUs that the Secretary of State has signed but not the one he negotiated with China a year ago. Why is it secret? Is there a reference to solar supplies from Xinjiang? Is there no reference to human rights? The Prime Minister has recently called for open government and honesty with the public. Surely, by locking it away out of sight, this is doing exactly the opposite; above all, to the local communities which are going to benefit from these solar initiatives. What is there to hide?

[Earl Russell (LD)]

My Lords, on these Benches we very much welcome the publication of the local power plan. This is a landmark moment: up to £1 billion of funding from Great British Energy for local community energy. This is the largest public investment to date. Our communities stand ready to generate their own power, cut bills and keep wealth circulating locally. They have been waiting for the Government to back them with serious funding and a level playing field.

We, and many others across the House, campaigned to secure community energy on the face of the Great British Energy Act 2025. We are pleased to see that commitment transformed into this concrete plan. Our communities should rightly be able to partner in, and directly benefit from, the renewable revolution. The vision is one we support.

Great British Energy aims to support an initial 1,000 local and community projects by 2030. However, I would like to see these plans going beyond programmes that the private sector can deliver itself; for example, a programme of community wind energy for our coastal communities. I would also like to see a broader range of technologies used, and greater integration with the warm homes plan. The four pillars—direct funding, expert advice, market innovation, and regulatory reform—are what community groups have asked for.

Delivery is where this plan will stand or fall. Although the plan is launched this month, the first grant schemes will not open until the spring and the new Great British Energy local products will not be piloted until the summer. There are hundreds of shovel-ready projects just waiting for capital finance. Will the Minister commit to an early fast track for schemes that can demonstrate that they are ready to build this year?

We welcome the commitment of up to £1 billion, but there is a clear gap between this figure and the £3.3 billion previously promised for community energy. Has this ambition been scaled back? How much of this fund is expected to go to actual deployment and how much on facilitation, advice and central programme costs? We recognise the importance of help with these processes but want reassurance that this will not become a scheme where too much is swallowed by planning and too little reaches the projects themselves.

The Government acknowledge that a lack of fair routes to market has held back community energy for too long. Without a genuine right to local supply, underpinned by statute, community groups will remain disadvantaged. The local power plan refers to developing new local energy supply models and a local energy platform, including smart community energy and virtual PPAs. When will the Government bring forward the regulatory changes needed to make them a reality? Can the Minister also confirm that legislation to create a clear right to local supply remains part of the Government’s programme?

The Government are right to recognise that delays and the cost of connections to the grid are among the principal reasons why community schemes have failed. The plan speaks of obligatory response times from DNOs, and of working groups with network companies, but what concrete powers will Ministers use to ensure that these things happen in practice? This matters especially when the technical and regulatory thresholds are already stacked against smaller schemes.

We strongly welcome the intention to introduce a mandatory shared ownership offer for larger renewable developments, and the indication that shared ownership templates and guidance with be published this spring. This could enable fairness into the next generation of large-scale infrastructure. What minimum stake will communities be guaranteed? How will the Government ensure that the offer is genuinely attractive rather than nominal? When will the Government publish the full community benefits framework, so that communities are not left at the mercy of voluntary schemes and of whatever crumbs are left over from the big companies? Will the framework include clear criteria on what counts as meaningful benefit, and will it be underpinned by statutory guidance?

One of the most promising elements of the plan is the commitment to build up local community capacity through expert teams and a “community energy in a box” toolkit, providing standardised documents and advice. Our most underserved areas have previously had the least spare capacity. Communities facing high deprivation, or with small and overstretched councils, lack the volunteers and technical skills needed even to begin. What criteria will Great British Energy use to define these underserved areas? Will they benefit from higher grant-to-loan ratios and more proactive outreach so that they do not miss out?

In the June 2025 spending review, £2.5 billion was allocated for small modular reactors—almost a third of Great British Energy’s existing budget of £8.3 billion. That decision pre-dated the finalisation of the local power plan and of GB Energy’s strategic plan for local energy. Does the Minister accept that the Treasury’s raiding of the Great British Energy budget has constrained what could otherwise have been a more ambitious and better-resourced programme for local power? It may have delayed the scaling up of exactly the projects the Minister is now bringing forward.

The local power plan has the potential to be transformative. Local, community-owned energy is one of the most powerful ways to cut bills, rebuild trust and take people with us on the journey to net zero. To realise this promise, we must move swiftly from plan to practice, getting money out of the door quickly, cutting through grid and regulatory barriers, and ensuring that every community has a fair chance to generate, own and—crucially—sell its own energy locally.

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

I thank the noble Lords for their thorough and constructive response to this Statement on the local energy plan, and for their general support, particularly for the local power plan itself. I particularly thank the noble Earl, Lord Russell, for his forensic analysis of the detail of the report and for the various questions he asked, over and above what I took to be his very strong support for what the local power plan is trying to do: substantially to enhance the ability of communities to own and run their own energy arrangements and to distribute the benefit of those arrangements back to the local communities themselves. I know the noble Earl has been looking into and opining on this issue for a very long time, and I too have something of a track record in it.

I understand, therefore, why it is necessary to get the detail of this right. I hope that this evening I will be able to say one or two things about how that detail is going to be got right, but if there are things that I have missed, I will certainly be happy to write to the noble Earl, putting some of those things exactly into the place they should be. But I think I can give him an assurance that we have thought about most of the things that he has raised this evening.

Indeed, we see those things as an essential part of the move forward with the local power plan, so that communities can, for example, start to trade in local energy, have security and resilience in their local plans and benefit from a substantial hand-holding operation that is designed into Great British Energy’s approach to the 1,000 projects that it is hoped we will be able to get under way in this Parliament. We hope that those will be as robust as they can be with the sort of support that Great British Energy will give them—not just by throwing a little bit of money for a local community project and hoping it works, but actually being with those local communities right down the line, from development and first thought to the “valley of death”, where it gets to operation. I hope that the noble Earl can take some assurance from the fact that we have thought out the whole process, not just the first part of it.

As far as the ambition of the local power plan is concerned, the £1 billion is based on what we think can be reasonably accommodated, invested in and sorted out, and that is the 1,000 projects in this Parliament. That is not the end of the matter; there is potentially a lot more to come. Even within that £1 billion, there are other sources, from the National Wealth Fund and various other things, that can come into play to add resource to the investment. So the idea that a large part of what was supposed to be the original investment has been lost, I am afraid, is not correct; it is more about how we get through the process of this over the period of time, making it work constructively as we go forward.

The noble Lord, Lord Moynihan, for the Opposition, concentrated much more on the other part of the Statement, which concerned the results of the second part of AR7, which was the solar, tidal and onshore wind pots that came within AR7. He was, I think, generally supportive of the results of AR7. In AR7, we have secured a fantastic step forward in terms of the deployment of solar, a very substantial and encouraging initial deployment of tidal stream and the beginnings of the establishment, or re-establishment, of onshore wind, which, as the noble Lord will recall, was banned, in effect, by the previous Administration. So it is perhaps not surprising that we are building onshore wind back up again in this round, when it had been dormant for a long time previously. Overall, these are really good results, which, by the way, will in their own right lead to the development of a very large number of additional jobs in this sector. Indeed, overall, it is thought that the programmes that are under way will lead to perhaps 10,000 direct and indirect jobs over the next period.

In addition to that, the Government are quite earnestly engaged in what we might call a just transition process, which the noble Lord will know is under way, of making sure that those people who are working in the high-carbon industries, which will largely be replaced by these low-carbon industries, are able to transfer their skills and their contribution to the development of the low-carbon industry. Indeed, there are active retraining and reskilling programs under way. Examination of the skills in the high-carbon and low-carbon sectors show that something like 70% to 80% of jobs in the high-carbon sector are certainly transferable to the low-carbon sector, provided the skills are in the right place. It is not just a question of creating lots of new jobs. It is a question of making sure that as many of the jobs in the high-carbon sector—which, yes, will go as gas, for example, retreats in front of the new low-carbon regime—that can be translated to the low-carbon sector are indeed supported to do so over the period.

The noble Lord was also at pains to talk about how supply chains can avoid becoming involved in slave labour and abuses of human rights in the production of those supply chains. He was quite right to mention that, and it is something that we are obviously very concerned about on this side, as the supply chains for low-carbon power establish themselves. Certainly at the moment, the world supply of solar panels rests substantially with China. Of course, there are a large number of initiatives around the world to diversify that supply chain from China to other solar panel manufacturers, such as solar panel developments within the UK. That is the first point.

The second point is that GB Energy has established an ethical supply chain unit to support robust human rights due diligence and transparency in line with the UK’s legislation on modern slavery and the international human rights framework, including the UN guiding principles on human rights. GB Energy will be exploring alternatives to diversify high-risk supply chains and collaborate with partners to improve renewable supply chain transparency and accountability in the UK. Work is at hand to make sure that we are as robust as we can be in terms of those concerns about modern slavery and exploitation of human labour. The noble Lord will be aware that it is often very difficult to trace supply chains accurately as to exactly where they are coming from and going through, but I hope he will agree that we are doing and will do as much as we can to ensure, within that difficulty, that there is proof against those concerns about modern slavery and other practices.

Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026

Earl Russell Excerpts

Wednesday 28th January 2026 Grand Committee

I just take this opportunity to ask not just whether it is regrettable how much this is costing us all, in our household bills, and business and industry bills, but whether it is making the country less competitive. With those few remarks, I will be very grateful for the Minister’s response.

[Earl Russell (LD)]

My Lords, we welcome this order but I have some important questions to ask the Minister. My party has long argued that a robust, transparent, high-standard carbon market is a cornerstone of any credible pathway to net zero by 2050. When done well, emissions trading cuts carbon at least cost, drives innovation in clean technologies and gives industry the long-term policy certainty that it needs to invest confidently in the green transition.

This instrument makes a number of sensible technical adjustments, but this update carries more weight than most of the normal updates. We strongly support all the Covid measures; they are sensible, practical and needed.

However, uncertainty persists around our future carbon-market relationship with our closest trading partners. The Government’s own documents show that UK industry has repeatedly called for linking the UK ETS with the EU ETS, which has already been spoken to and which is a step we strongly favour. A stand-alone UK ETS would be smaller and more price volatile, driving up costs for British business compared to the stability and liquidity of a larger linked market. When paired with clean power, deeper market reforms and other measures, a linked system offers real opportunities to cut energy costs, modernise industrial processes and slash emissions.

This order moves us towards dynamic alignment by adopting EU benchmarks from 2028, alongside the phase-down of free allocation for CBAM-exposed sectors and by enabling import levies through the UK CBAM. This is the right direction. We cannot ignore the carbon costs embedded in goods we manufacture or import emissions unchecked, but this complex transition demands adaptability, coherence and close management by the Government as we move forward. We remain in a halfway house, following rules we no longer help to write, without gaining the full benefits of a larger carbon market. I seek clear reassurances that the Government are protecting UK industry, working towards positions where we are rule-makers again and ensuring that our needs are recognised and mitigated during the interregnum.

The impact assessment’s estimate of £9.8 billion net present social value shows gains from effective decarbonisation, yet the £92 million annual cost to business is far from trivial for energy-intensive industries. As free allocation pares down—particularly for cement, fertilisers, iron and steel, aluminium and hydrogen—we must not offset our emissions and jobs to less scrupulous jurisdictions. A carbon price that cleans up British industry is welcome; one that simply relocates it helps neither our targets nor our industrial base.

I therefore have just five questions for the Minister. First, the Minister’s department accepts that EU linking would reduce costs and provide price certainty. Adopting EU benchmarks facilitates that alignment. Can the Minister set out a possible timetable for negotiating a formal linking agreement? Does the Minister tend to think that any conditions might be attached to that? Industry must plan and make investment decisions now, not years ahead, so this certainty is important to it.

Secondly, on parliamentary oversight, concerns remain that dynamic alignment could allow changes to benchmarks and core design features with minimal scrutiny. Can the Minister confirm that any future changes to the 2028-30 benchmarks or material changes from further EU alignment will come by affirmative procedures and be debated in both Houses?

Thirdly, CBAM and ETS reforms help tackle import leakage, but export leakage remains mostly unaddressed. As free allocation withdraws, UK exports may face higher carbon costs than our international competitors do. So what WTO-compatible measures, targeted free allocation, export rebates or other measures are being considered to help protect exporters and strengthen our manufacturing base? On the sectors that are hardest to abate—ceramics were mentioned in the other place, and Ministers are having particular conversations with the ceramics industry—it feels that particular sectors will struggle to abate even if they want to and extra support is needed.

Fourthly, on regional fairness, the impact assessment highlights burdens on industrial clusters, particularly in Wales, Scotland, Northern Ireland and the north of England. A lot of these areas have already been hit by processes of post-industrialisation. So how do the ETS reforms integrate with wider decarbonisation strategies, including cluster sequencing, CCUS, hydrogen support and the shared prosperity fund?

Fifthly, obviously SMEs are mostly outside these schemes, but some are captured. Where they are, will tailored support and special consideration be given to their needs?

I have some general questions. How will the Government monitor and report the impacts of these measures, particularly in relation to carbon leakage? What mechanisms will track investment in clean technologies that the Government want to see and expect to happen? What mechanisms will track price changes and the competitiveness of the industries related to those?

My belief is that openness in this sector as we move forward is in everybody’s interests. We support the direction of this order but, without bolder steps toward EU ETS integration, the UK risks drifting—aligning in practice but isolated—and being subscale in market terms. That does not serve our industries, investors or climate objectives. We urge the Government to put linkage firmly on the agenda and give British industry the stable framework that it needs. Our climate and our industry standards cannot afford continued ambiguity.

[Lord Moynihan (Con)]

My Lords, I thank the Minister for introducing this statutory instrument. He generously banked the good will between the noble Earl, Lord Russell, myself and himself yesterday, and I assure him that he will have no need to draw down on that, because I am sure he will disassociate himself from his colleagues in another place when it comes to this scheme.

For once, this is a policy that is solely conceived by the Labour Government. It is a straightforward decision by DESNZ to increase carbon taxes on major industrial users which depend on hydrocarbons, particularly gas in the UK industrial market. Many industries have no choice but to use gas, and no alternative firm sources of supply; indeed, they face heavy dependence on high electricity prices to stay in business.

The Minister’s speech may sound technical, and it is true that 104 pages covering the order and the Explanatory Memorandum take some digesting, but a reread shows exactly what this statutory instrument does. The good news is that the noble Lord, Lord Lemos, sitting beside the Minister, is a good Lewisham man and he had no difficulty understanding every word of the particular trading scheme order that is before us. He will be able to help the Minister; I see he is already doing so.

What does this order do? It reduces the supply of free allowances—the key point that was made by the Minister—and thus it increases the carbon tax cost to many of the UK’s major energy industries in a highly competitive global market. These free allowances have been the mechanisms used to protect businesses such as ceramics, cement and steel from being undercut by cheaper imported products from countries that do not charge carbon taxes.

Take the very real example, considered and referred to by the noble Earl, Lord Russell, which was considered in another place yesterday by Gareth Snell, the Labour MP. He focused on the ceramics industry and said that this sector

“is very difficult to decarbonise”

but that it is

“producing things that are integral to the Government’s missions, whether that be house bricks for our house building programme or advanced ceramics to support our defence industry … because we cannot make steel in this country without ceramics … We are still at huge risk of carbon leakage. We work in an unfair market at the moment, not least because of the way in which non-market economy status countries import into this country … the ceramics sector is desperately trying to do all that it can to reduce its output of greenhouse gases, but that is really difficult when it has to run a kiln at several hundred degrees for many hours to do the bisque and the glaze firing, and run refractories for 12 to 14 hours at 1,500°C. Electrification is not available to many of those businesses at the moment, because the capital to invest … is simply not available; the profit margins on their products do not allow for it … We are wedded to gas for the foreseeable future”.

The sector fears that,

“as we move at pace to meet some of the decarbonisation agendas and reduce the overall cap through the emissions trading scheme, that will mean that the free allowances also have to come down, which will push the ceramics sector into having to buy many more free allowances”,—[Official Report, Commons, Delegated Legislation Committee, 27/1/26; cols. 9-10.]

leading to higher costs.

Even in the Government’s net-zero nirvana of green power plants, gas is the dispatchable power in the system. There is no other choice; nothing else will keep the lights on when the wind does not blow and the sun does not shine. This SI needlessly imposes a tax that inflates the price of gas to the industry and then passes the additional cost through to the consumer when they have no other choice.

Everybody wants clean rivers, clean energy and an improved environment with a clear commitment to tackle global warming. But these objectives should never purposely lead to deindustrialising the country, negating growth and increasing unemployment in our high labour-intensive, high energy-consuming industries on the altar of net-zero zealotry.

We have among the highest power prices in the world and today we are putting them up again. If you drain free allowances out of the system, energy costs rise yet more in comparison with international competitors. Not surprisingly, international companies will relocate abroad in more competitive markets and accelerate deindustrialisation in the petrochemicals sector, the steel sector, ceramics and refineries. Sadly, this may also apply to data centres in the future, with fewer choosing the UK for the very same reasons.

--- Later in debate ---

[Lord Whitehead (Lab)]

The Government recently introduced an average reduction of £150 off electricity bills, through placing legacy bills into Exchequer arrangements rather than putting them back to households through obligations. We will continue to look at that on a wider basis. That is a good start for reducing energy bills, as it changes the nature of how the low- carbon economy works.

The noble Lord, Lord Moynihan, asked why we are changing these arrangements in a fairly rushed way. Part of the answer is that, if we are to have a good CBAM in place—after all, it is coming in a year after the EU CBAM—we have to get our skates on. We also have to get our skates on in linking the UK ETS with the EU ETS. The noble Earl, Lord Russell, is aware that, just six months after the linkage arrangements were agreed in principle at the EU-UK summit last April, the November negotiations and discussions started, and they are still under way at the moment. There are a number of answers on timescale and so on that I cannot give right now, but I assure the noble Earl that these are clearly under way and that there is a clear out from those negotiations.

I am conscious that we have spent a long time on this. I will write to the noble Earl and the noble Baroness on the remaining outstanding issues. I hope that I have been able to give a reasonably reassuring position on the need for this SI and the wider context of the underlying direction of all this policy and why this SI leads to a much better and more stable series of arrangements for both the UK ETS and CBAM, as it comes forward.

[Earl Russell (LD)]

We have had a good debate on this. We may have strayed slightly off the topic into some broader areas, but it is important that these issues are discussed and that, when we disagree, we disagree well. I thank everybody and the Minister for their responses.

[Lord Whitehead (Lab)]

I commend this instrument to the Committee.