Oral Answers to Questions
Greg Hands Excerpts(2 years, 3 months ago)
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Sir Robert Goodwill (Scarborough and Whitby) (Con)
The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
Let me pay tribute to those who worked at Hunterston nuclear power station in Scotland, which closed a few days ago. The operators have reported that since the station came online in 1976 it has produced enough zero-carbon electricity to power every home in Scotland for nearly 31 years.
Looking ahead, the Government have announced a £120 million future nuclear enabling fund to support new nuclear and we are aiming for a final investment decision on at least one more large-scale nuclear project during this Parliament, subject to value for money and relevant approvals.
Mr Goodwill
What a shame that the Scottish National party is not pressing for a replacement of that old girl, who has given fantastic service over the years. Will the Minister reassure me that he sees nuclear as a way of not only replacing electricity capacity but producing the hydrogen we will need to power the heavy vehicles—the buses and trucks—of the future?
Greg Hands
I thank my right hon. Friend for that further question, and I totally agree with him on where the SNP is. On energy in general, SNP Members are not the friends of Scotland on nuclear or the North sea. He is also absolutely right on hydrogen. On the Government Benches we recognise that net zero needs nuclear for security of supply, to meet our decarbonisation targets and to support new industries such as hydrogen.
Alan Brown (Kilmarnock and Loudoun) (SNP)
When it comes to new nuclear, there is not a single successful EPR plan operational anywhere in the world. The regulated asset base—RAB—model has not been shown to work for new nuclear, so why does the Minister think that it is a good investment of £63 billion of bill payers’ money to sign up for Sizewell C when it is just going to be another white elephant?
Greg Hands
I repeat my disappointment. Scotland has an amazing nuclear past and I would like it to have a very good nuclear future, but unfortunately the Scottish Government stand in the way. This country needs nuclear, and net zero needs nuclear. Hinkley is being built, and we are very confident of the numbers and of building new nuclear power stations in this country. That is what the Nuclear Energy (Financing) Bill—which secured its Third Reading yesterday with the support of the official Opposition but not of the SNP or the Lib Dems—is all about.
Virginia Crosbie (Ynys Môn) (Con)
My constituency is home to Wylfa Newydd, the best potential nuclear site in the UK. Will the Minister accept my invitation to visit Wylfa Newydd to see at first hand why the Prime Minister himself is a fervent supporter?
Greg Hands
I absolutely accept that invitation. There is no more passionate an advocate of new nuclear in this House than my hon. Friend. Nuclear is going to be a vital part of our future. The UN Economic Commission for Europe recently said that international climate objectives would not be met if nuclear power were excluded, so it is a key part of our net-zero ambitions.
John Spellar (Warley) (Lab)
I was disappointed that, in his reply, the Minister did not refer to small modular nuclear reactors, which surely are the future in this sector. Can we take the lesson from the vaccine taskforce that rigorous scientific methods can be combined with speeding up the process and cutting out dead time? Can he convey that message to the regulators so that this world-beating technology can be built in Britain to the benefit of British industry and British workers?
Greg Hands
I absolutely share the right hon. Gentleman’s enthusiasm for SMRs. At the end of last year, the Secretary of State announced funding for SMRs of £250 million, working with Rolls-Royce and with the best of British industry and innovation on SMRs. I recently had a meeting with Sheffield MPs as well, where we talked about Sheffield’s potential to host SMRs, along with other sites. SMRs are very much part of our nuclear future.
David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)
Is the Minister aware that my constituency is on the frontline of the SNP Scottish Government’s dogmatic opposition to new nuclear power stations? For over 50 years, the Chapelcross power station near Annan provided much-needed jobs and a huge boost to the local economy, yet despite public support we cannot have Chapelcross 2 because the SNP is blocking it.
Greg Hands
My right hon. Friend has been a passionate defender of Scotland’s interests since he and I were first elected in 2005, and he is absolutely right. The SNP has a nonsensical policy towards energy in Scotland in general, and towards nuclear in particular. There is a great civil nuclear heritage in Scotland which the SNP has betrayed. I wholly agree with my right hon. Friend.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
Allan Dorans (Ayr, Carrick and Cumnock) (SNP)
The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
May I start by welcoming the hon. Gentleman back to his place?
The Government support the energy transition by harnessing the industry’s existing potential to exploit new and emerging green technologies. As regards Scotland, we have a £20 million pot for tidal stream. The Acorn project has been allocated £40 million in carbon capture, usage and storage development funding so far, and in the hon. Gentleman’s own area, the Ayrshire growth deal has secured investment of £251 million, including up to £18 million for a centre for research and a low-carbon energy and circular economy.
Allan Dorans
I thank the Minister for his response and his kind wishes. The UK Government have decided not to rethink and reverse their decision not to fund the carbon capture, utilisation and storage facility at St Fergus, and the Chancellor has failed to match the Scottish Government’s £500 million investment in a just transition fund for the north-east and Moray. By deploying CCUS, hydrogen and direct air capture technology in Scotland, the Scottish cluster would support an average of 15,100 jobs between 2022 and 2050. Do major Scottish projects only have priority in the months ahead of an independence referendum?
Greg Hands
The hon. Gentleman will not be surprised to hear that I disagree with him on the independence referendum, but we engage regularly with the Scottish cluster and Acorn, and I met Storegga before Christmas. I have also met with my hon. Friend the Member for Banff and Buchan (David Duguid), the MP for St Fergus, and have been to his constituency recently. Just to be absolutely clear, the Scottish cluster is the reserve cluster, which means that it met the eligibility criteria and performed to a good standard in the evaluation criteria. We also recently published our track 2 update for CCUS, which highlights our increased ambition of capturing and storing 20 to 30 megatonnes per annum by 2030. I think there is a great future there for the Scottish cluster.
David Duguid (Banff and Buchan) (Con)
I welcome the hon. Member for Ayr, Carrick and Cumnock (Allan Dorans) back to his place—even though he did kind of trample over my question a little bit. Will my right hon. Friend confirm the UK Government’s support for the oil and gas sector and its vital role in driving the energy transition to net zero? As part of that support, will he confirm what recent engagement he has had with the Acorn CCS project in my constituency of Banff and Buchan on its role as the first reserve cluster?
Greg Hands
As I have mentioned, I met with Storegga before Christmas, and my hon. Friend and I also talked about this in his constituency in early December. I am looking forward to further engagement with the cluster. I also agree with what he said about oil and gas. We have a North sea transition deal, and the important thing is transition. It would be mad, particularly at this time of elevated gas prices, to do anything to close down the North sea, and it is not our objective to do so. Therefore, we should stick to the transition deal, support our key oil and gas sector in the North sea and absolutely reject a lot of the politics coming out of the SNP, which has turned to be anti-North sea, which is not holding Scotland’s best interests at heart.
Stephen Flynn (Aberdeen South) (SNP)
Of course, it is not just on carbon capture underground storage where the UK Government have betrayed Scotland’s interests. As the Minister will be acutely aware, Scottish renewables projects continue to pay the highest level of grid charging anywhere in the entirety of Europe. Indeed, I was speaking to an operator just recently who told me that over the lifespan of his project, he anticipates that it will pay £1 billion in grid charging; meantime, a project in East Anglia will not pay a single penny. Is that a Union of equals?
Greg Hands
I am always pleased to take a question from the SNP Front Bench, although I notice that the hon. Gentleman did not say anything about nuclear, the North sea transition deal or the recent announcement of a £20 million funding pot for tidal. He did mention transition charges. He will know that Ofgem recognises the importance of transition charging arrangements, which is why it is currently considering responses to its call for evidence on transition charging reform. That is already being covered, but I would like to hear from the hon. Gentleman—he may have another question—that he is going to change his mind on nuclear and supporting the North sea transition deal.
Stephen Flynn
Of course, the Minister’s continual deflection to Ofgem fails to meet the needs of businesses in Scotland. He will also be acutely aware that under the Energy Act 2004—section 185, I believe it is—he could take action to change the status quo, but he chooses not to, and the reason is quite clear. The National Grid is clear that in a couple of years Scottish projects will pay £465 million into the grid, while projects in England and Wales will cumulatively get a subsidy of £30 million—a renewables robbery in plain sight. Is it not the case that while Scotland has the energy as part of this United Kingdom, it does not have the power?
Greg Hands
I am not sure quite how to respond to that, but I remind the hon. Gentleman that there is a call for evidence on this and we are awaiting the responses to that call. Once again, I remind him of the support being given by the UK Government to renewables in Scotland: the £20 million tidal pot; the quadrupling of offshore wind capacity across the UK over the next decade; support for CCUS—all these things. It is about time he had a word with his party colleagues back in Edinburgh and got them to have a sensible energy policy when it comes to both the North sea and nuclear before he comes here and lectures us.
Jessica Morden (Newport East) (Lab)
Esther McVey (Tatton) (Con)
The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
I am happy to meet my right hon. Friend and potentially the company, but let us be absolutely clear: the issue with gas is not supply or storage, but price. Storing more expensive gas would not lower the cost of gas. We have excellent security of supply in this country—50% from our continental shelf and 30% from Norway. The issue is very much price, not storage.
Kirsten Oswald (East Renfrewshire) (SNP)
Alicia Kearns (Rutland and Melton) (Con)
At more than 2,000 acres, the Manor Farm solar park proposed for Rutland, the smallest county in England, is eight times larger than the existing solar plant. Can the Minister reassure me that when it lands on his desk, he will listen to the voice of Rutlanders and ensure proper scrutiny to protect our agricultural land and outstanding local biodiversity?
Greg Hands
We always listen to Rutlanders and to my excellent hon. Friend who represents them. I very much agree that we want to bring communities with us when it comes to all renewables, but I think she knows that I cannot comment further at this stage. She can reassure her residents that she has been heard.
Nick Smith (Blaenau Gwent) (Lab)
The Treasury has benefited hugely from the miners pension surplus over the years. Even though the Prime Minister pledged in the 2019 election that no miner would be left behind and out of pocket, they have been. Will the Government look again at giving miners their fair share or is that another example of the Prime Minister saying one thing and doing another?
Mr Richard Holden (North West Durham) (Con)
My constituents in Consett in North West Durham are paying up to 10p a litre more at major supermarkets, including Tesco, for their fuel supplies than their neighbours just down the road in Bishop Auckland, 18 miles away. Will my right hon. Friend meet me to discuss what I can do to stand up for my North West Durham constituents, who are fed up with being screwed by the big supermarkets?
Greg Hands
My hon. Friend has done a great job representing his constituents. I know from when I visited his constituency in the aftermath of Storm Arwen how well he is appreciated. The RAC did a recent report on this, and I would be very happy to meet him at the earliest possible opportunity to discuss the issue.
Nuclear Energy (Financing) Bill
Greg Hands ExcerptsMonday 10th January 2022
(2 years, 3 months ago)
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Dr Whitehead
That is precisely why we wish to put in the Bill that there should be a direction in which the Government should go. Of course they should have flexibility in how they work, but we think this is an important backstop that will ensure customers do not lose their shirts in a company that goes bust after they have invested large amounts of money in its operation.
We will seek to divide the House on amendments 2 and 3 in the absence of any clear further Government commitments today in relation to. We may well be minded to support amendment 9, tabled by the SNP, should that also be put to a Division. However, I emphasise that we are happy to support the Bill overall. We want it to go through Third Reading, but we would like it to be strengthened as much as it can be by the addition of the amendments we have put forward today.
The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
First, may I minute my condolences on the death of Jack Dromey? I shared his 12 years here and he made an enviable contribution to the House. Particular condolences to the right hon. and learned Member for Camberwell and Peckham (Ms Harman).
I am thankful for the excellent contributions we have heard today, and over the past few weeks during the passage of the Bill through the House, from Members throughout the House. I will attempt to address all Members’ comments and explain why the Government do not believe that today’s amendments should be accepted.
I turn first to new clause 1, tabled by the hon. Member for Kilmarnock and Loudoun (Alan Brown) for the SNP, regarding the special administration regime, but before I deal with his amendments, let me reflect a little bit on the contribution by my hon. Friend the Member for Gloucester (Richard Graham). The SNP, as we know, is talking today about transparency, but its real agenda is a hardcore anti-civil nuclear power agenda. This comes, ironically, just a few days after the closure of the Hunterston power station, which had its life extended by two decades beyond what was predicted and provided 31 years—31 years—of zero-carbon electricity to every home in Scotland. The Bill would make things cheaper, but I do not think that the SNP has got Scotland’s best interests at heart here for Scottish electricity or Scottish consumers.
Nuclear power has been a massive success story in Scotland, which is what I hope the Bill will also enable. New clause 1, tabled by the hon. Member for Kilmarnock and Loudoun, would severely risk the effectiveness of the special administration regime by delaying the speed at which an administrator could access funding to continue a nuclear RAB project construction or a plant’s generation of electricity. That could result in significant sunk costs for consumers and is not in the public interest.
I will turn now to Labour amendments 1 and 2, tabled by the hon. Member for Southampton, Test (Dr Whitehead), while responding to some of the points made in the debate. The hon. Member and I are aligned in our concern that foreign investment in our critical infrastructure should not come at the cost of national security. However, I want to be clear that the Bill is not about decisions on individual future projects; it is about widening the pool of potential investors and financing while reducing our reliance on state-owned developers to build new nuclear power stations. As the House is aware, we have committed to taking at least one project to final investment decision in this Parliament, subject to value for money and all relevant approvals. We are in active negotiations on the proposed project at Sizewell C. The hon. Member argued that the approval of Hinkley Point C would inexorably lead to the approval of other projects. That is simply not the case. Decisions on nuclear projects in this country are made on a case-by-case basis, and subject to a number of robust approvals from both Government and independent regulators.
Greg Hands
I am not going to take an intervention. I will respond to the debate first.
Whatever the intent of the hon. Member for Southampton, Test with amendments 1 and 2—this is the crux of the argument, ably pointed out in interventions by my hon. Friend the Member for Gloucester—they could rule out many companies from investing in new projects under a RAB model. The RAB model is designed to bring in new investment, but in my view and in the view of the Government, his amendment would severely restrict who could invest. It could extend to some of our closest international partners. My advice is that EDF itself would be very much in scope, or at least it would be arguable in court as being in scope, of his amendment. It could also mean the rejection of huge amounts of potential investment from bodies such as major sovereign wealth funds of friendly or allied countries.
I am sure that the hon. Member’s intent does not lie in that direction, as that could make it much harder to bring new projects to fruition, and the purpose of the RAB model is to find new investors. We also need to maintain resilience in our fuel supply chain, referred to in amendment 2. I put on record my visit to Springfields recently to give the UK Government’s support, including funding announced in the spending review recently, to make sure that we have that flexibility.
Alan Brown
Will the Minister explain why he does not want to put forward a report that explains the public funding that is allocated to a project? I do not understand why that would be so difficult for him.
Greg Hands
We think those processes are already in place, and it is right that this should be a commercial decision and negotiation, but with transparency. We think the balance in the legislation as proposed currently meets that.
On amendment 9, also tabled by the SNP, the additional reporting obligations are unhelpful and unworkable. The requirement to publish up-front capital costs of a project could jeopardise our ability to complete a complex and lengthy capital raise. The amendment’s requirement to publish the floor price is simply not workable. In the context of a RAB model, there is no minimum floor price, and nuclear companies’ allowed revenues are determined by the economic regulator throughout the life of a plant.
Greg Hands
No, I will not. I will try to respond to the debate.
Amendments 3 and 4, tabled by Labour, address how additional costs beyond the financing cap could be paid for. I agree that any RAB scheme must have adequate protections in place for consumers. However, given the size and importance of a new nuclear project, there must be a mechanism in place, with appropriate protections, to allow additional capital to be raised to ensure completion of a project where the financing cap is likely to be exceeded. The amendments proposed by the official Opposition would nullify the ability to be flexible. We are making sure that we do not have to go down that course to carry out robust due diligence on the project in the first place, having learned from existing and current projects to set a robust estimate of project cost.
SNP amendments 7 and 8 refer to reporting requirements. Planned outages at nuclear power stations may happen for a variety of reasons, and it is right that they are governed by the amount of time required to complete the maintenance—the actual cause of the outage in many cases—rather than the arbitrary time limit set out in the SNP’s amendment. Both the Office for Nuclear Regulation and National Grid already work closely with nuclear operators with regard to outages and availability, and they should do so independently of the Government. Nevertheless, I would like to reassure the hon. Member for Southampton, Test that we are aiming to design the RAB regime so that the nuclear company is incentivised to maintain availability.
I turn now to amendment 5, tabled by Labour. It deals with situations whereby a RAB project
“cannot be rescued as a going concern”,
having entered special administration. Of course, I share the wish of the hon. Member for Southampton, Test that the special administration regime should protect consumer interests, but the amendment could have the impact of damaging those interests. We expect the insolvency of a nuclear RAB company to be a highly unlikely event. However, there may be even rarer circumstances within this where it is actually in the best interests of both consumers and taxpayers to discontinue the project, and for it to be safely decommissioned—for example, if a safety fault, which is very unlikely, discovered at a plant made it, in practical terms, inoperable. It is important that the Secretary of State retains the discretion to act in whichever way can achieve the best outcomes for consumers or taxpayers during the insolvency of a relevant licensee nuclear company, and the Opposition’s amendment would remove this discretion.
Finally, I would like to discuss amendment 10, tabled by the SNP. It is important to make it clear that special administration is a court-administered procedure and that the nuclear administrator is an appointee of the court. There is already an appropriate level of transparency through the court process for the transfer.
I will now deal with other points raised in the debate. My right hon. Friend the Member for Wokingham (John Redwood) asked about new supply, particularly in relation to gas, which is not on the face of the Bill. I can tell him that six new gas fields came on stream in the last quarter of the last year: Arran, Columbus, Finlaggan, Tolmount, Blythe and Elgood. It is not the case that there are no new gas fields coming on stream. Gas is, of course, heavily incentivised at present, simply by the price, for there to be more extraction. According to the developers’ estimates, Hinkley Point C could be online or start to come online as early as 2026. However, my right hon. Friend is right that we need to think ahead. I should Make it clear that I welcome the official Opposition’s support for the Bill overall, but let us not forget that awful 1997 Labour manifesto, which said:
“We see no economic case for the building of any new nuclear power stations”—
not just state-owned nuclear power stations, as my right hon. Friend said. Hinkley Point is being built, and an amazing job has been done to keep that construction work going through the pandemic. Our nuclear industry deserves congratulations.
The hon. Member for Bath (Wera Hobhouse) said that we should be rolling out renewable energy. That is exactly what we are doing. We have massively expanded our offshore wind power, and we are quadrupling it over the next decade. I think she said that Germany did not have any wind, but it has a target of 30 GW of offshore wind. There is a lot of wind in Germany. I know that she is from Hanover, which is a long way from the sea, but there is even a famous film—it is one of the best German films—called “Mit dem Wind nach Westen”, which is all about wind carrying people in balloons from east Germany to west Germany. There is most definitely wind in Germany.
Greg Hands
No, I will not give way.
My hon. Friend the Member for Ynys Môn (Virginia Crosbie), who described herself as one of the original atomic kittens—my hon. Friend the Member for Copeland (Trudy Harrison) is the other one—gave a passionate speech in favour of civil nuclear power. She is right that the Bill is all about financing, making cheaper and alternative sources of finance.
Again, I welcome the Opposition’s support for the Bill, but the hon. Member for Warrington North (Charlotte Nichols) was wrong to point the finger of delay at the Government. I should point out the 1997 Labour party manifesto and how nothing happened for 13 years. Hinkley Point C is now being built.
My hon. Friend the Member for Isle of Wight (Bob Seely) made a fantastic speech. He was quite right that the Bill’s purpose is to reduce dependence on foreign developers. He is right that we are not in a perfect position when it comes to energy or to nuclear power, but the Bill will significantly improve that position by creating options and establishing expertise for us to go forward.
The hon. Member for Strangford (Jim Shannon) made important points about Northern Ireland. I speak to Gordon Lyons quite often, and obviously Northern Ireland has a special status for energy and electricity.
My hon. Friend the Member for Gloucester made a fantastic speech and fantastic interventions. I am sure that his hub of expertise in Gloucester will come in incredibly useful, and I of course agree to visiting it.
I turn finally to my right hon. Friend the Member for Maldon (Mr Whittingdale). Bradwell, which has been a successful site in Britain’s civil nuclear experience, is at a very early stage of development and not a decision for now. Of course, in terms of the future of the site, the Bill is not site-specific; it is all about financing.
This has been an excellent, wide-ranging debate and I thank all right hon. and hon. Members for their contributions.
Greg Hands
No, I am winding up now. For the reasons that I have set out, I cannot accept the amendments tabled and therefore ask right hon. and hon. Members not to press them. I hope that I have nevertheless shown that our aims are closely aligned for Britain’s brilliant nuclear renaissance, and the Bill will be a key part of that. I urge the House to reject new clause 1 and amendments 1 to 10.
Alan Brown
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Clause 1
Key definitions for Part 1
Amendment proposed: 1, page 1, line 15, at end insert—
“(6) ‘Owned by a foreign power’ means owned by a company controlled by a foreign state and operating for investment purposes.”—(Dr Whitehead.)
This amendment is a definition of “foreign power” set out in Amendment 2.
Question put, That the amendment be made.
Departmental Contingent Liability Notification: Energy Supply Company Special Administration Regim
Greg Hands Excerpts(2 years, 3 months ago)
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The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
Today I will lay before Parliament a departmental minute describing a contingent liability arising from the issuance of a letter of credit for the energy administrators acting in the special administration regime for Bulb Energy Ltd (Bulb).
It is normal practice when a Government Department proposes to undertake a contingent liability of £300,000 and above, for which there is no specific statutory authority, for the Department concerned to present Parliament with a minute giving particulars of the liability created and explaining the circumstances.
I regret that, due to recess, I have not been able to follow the usual notification timelines to allow consideration of these issues in advance of issuing the letter of credit.
Bulb entered the energy supply company special administration regime on 24 November 2021. Energy administrators were appointed by court to achieve the statutory objective of continuing energy supplies at the lowest reasonable practicable cost until such time as it becomes unnecessary for the special administration to remain in force for that purpose.
My Department has agreed to provide a facility to the energy administrators, with a letter of credit issued, with my approval, to guarantee such contract, code, licence, or other document obligations of the company consistent with the special administration’s statutory objective. I will update the House if any letters of credit are drawn against.
The legal basis for a letter of credit is section 165 of the Energy Act 2004, as applied and modified by section 96 of the Energy Act 2011.
HM Treasury has approved the arrangements in principle.
[HCWS524]
Nuclear Third Party Liability Framework
Greg Hands Excerpts(2 years, 4 months ago)
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The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
Today I am notifying Parliament of the ratification of the 2004 protocols to amend the convention on third party liability in the field of nuclear energy (the “Paris convention”) and the convention supplementary to the Paris convention (the “Brussels convention”) (together the “2004 protocols”) that will come into force on 1 January 2022. The 2004 protocols were laid before Parliament in September 2015 under cover of miscellaneous series 6 (2015), Command Paper 9135 and miscellaneous series 7 (2015), Command Paper 9136 respectively.
The Paris and Brussels conventions are implemented domestically through the Nuclear Installations Act 1965. This has been amended prospectively by the Nuclear Installations (Liability for Damage) Order 2016 to implement the 2004 protocols. Ratification of the 2004 protocols will trigger the remainder of the 2016 Order coming into force in the UK on 1 January 2022.
Nuclear has a key role to play in our transition to net zero by 2050. Nuclear safety and regulation are of paramount importance and the risk of any accidents in the UK remain very low. Nevertheless, ratification of the 2004 protocols mean that in the highly unlikely event of an incident, an increased level of compensation would be available to victims and the period during which claims can be brought would be extended. The 2004 protocols, once in force, increase operator liability in the event of a nuclear incident from the current €140 million to a maximum of €1.2 billion over a period of five years and extend the period for which claims can be made from 10 to 30 years.
The Government recognise that in the short term, there is a gap in the insurance market. Therefore, the Government have agreed initially to provide an indemnity, for a charge, to cover increased personal injury liabilities for the 10 to 30 year period. For each individual site, the maximum HMG liability is between €70 million and €160 million depending on the site's classification, operator’s uptake of the indemnity, and whether transit of nuclear material takes place. The indemnity will be reviewed annually to ensure that it remains the best value for money option. In relation to this, I have today laid before Parliament a departmental minute giving notice of the Department incurring this contingent liability.
Additionally, the Government are also providing an indemnity to the Nuclear Decommissioning Authority (NDA). The NDA are a non-departmental public body who are responsible for the decommissioning of several civil nuclear facilities, and who will be required to have appropriate cover in place. This creates a maximum contingent liability of €700 million in the first year, rising to €1.2billion for the Government per site over a five year period.
We also intend to build on our well established nuclear third party liability regime by seeking accession to the convention on supplementary compensation for nuclear damage (the “CSC”), by working with the International Atomic Energy Agency (“IAEA”) as depository for the CSC, and legislating when parliamentary time allows. Accession to the CSC would expand the number of countries to which the principles of channelling liability to the operator, and capping that liability, apply. This further improves the investment climate for new nuclear in the UK, without placing any additional burden of liability for developers or operators. In the event of a nuclear incident in a country that is party to the CSC, the UK would contribute an amount to the shared international fund, based on its installed capacity and UN contributions at the time. Similarly, in the events of an incident in the UK, we would be able to draw on these pooled CSC funds.
[HCWS504]
Draft Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021
Greg Hands Excerpts(2 years, 4 months ago)
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The Chair
Before we begin, I remind Committee members that in these omicron days, Mr Speaker has enjoined us to wear masks when we can and to remain as far apart from each other as we can.
The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
I beg to move,
That the Committee has considered the draft Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2021.
The regulations were laid before the House on 28 October 2021. They will amend the Companies Act 2006 to require certain publicly quoted and large private companies to include in their annual reports disclosures in line with the international framework for climate reporting developed by the Taskforce on Climate-related Financial Disclosures.
Climate change is the biggest challenge of our time, both to society and to the economy. Internationally the Government are taking a leading role to promote action through our presidency of the United Nations COP26, and domestically we are working to deliver the UK’s world-leading target of net zero greenhouse gas emissions by 2050. The Government have published our net zero strategy, which sets out the measures to transition to a green and sustainable future. To support the transition to net zero, it is important that economically significant companies assess, disclose and act to manage climate-related risks and opportunities. Without an accurate assessment of climate risks by companies, it will be impossible to assess what action is needed to address them. Information from those assessments should be taken into account in the business model and strategy of every company to create more climate-resilient businesses. It should also form a key part of all investment decisions.
Some large UK companies are already reporting on climate risks, but to date those disclosures have been variable in both quality and quantity. The inconsistency makes it very difficult for investors to compare opportunities and risks across companies, let alone across markets. Many organisations are also not making the fuller disclosures that are needed to inform business risk and investment decisions.
Mr Robert Goodwill (Scarborough and Whitby) (Con)
From listening to the Minister, I understand that we are talking about general statements about risks and opportunities, not about accounting for the carbon dioxide or other greenhouse gases produced in the same way as businesses produce business accounts for currency.
Greg Hands
This is a qualitative assessment done by the 1,300 largest companies in this country—those with more than 500 employees—of how they see the risks and opportunities of climate change, to help their own company planning and also help investors looking at particular companies and across sectors. At this stage, the idea is to have a qualitative assessment from each company in its annual report. Producing annual reports is part of an established process.
Mr Goodwill
Does the Minister think that in due course we might see a carbon balance sheet where companies have detailed information, so we would be able to tell exactly where they were in terms of their own net zero targets?
Greg Hands
We already have a separate reporting regime in place for that—streamlined energy and carbon reporting. I think my right hon. Friend is a member of the Environmental Audit Committee, which takes a keen interest in these matters. I refer him to that separate reporting stream, which might satisfy some of his rightful craving for more information.
Greg Hands
Yes, of course, Mr Gray. The regulations will now require the UK’s largest companies to assess and disclose actions to manage climate-related risks and opportunities. In November 2021, the Government published “A Roadmap towards mandatory climate-related disclosures”, which set out how the UK would become the first G20 country to mandate TCFD-aligned climate-related financial disclosures across major parts of its economy. At the meeting of G7 Finance Ministers in June, the Chancellor of the Exchequer won agreement from his counterparts to include mandatory climate-related financial disclosures in their countries. Major economies are set to introduce similar measures to ours, following our lead.
The Government have already introduced regulations to require climate disclosures, for example from occupational pension schemes. The Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021 were approved by both Houses and came into force on 1 October 2021. In addition, the Financial Conduct Authority has introduced TCFD-aligned disclosure in the UK listing rules for premium listed companies. It has also conducted a consultation on extending this to standard listed companies. The Government have now laid these draft regulations to integrate TCFD-aligned climate-related disclosures in UK corporate reporting.
The regulations we consider today will amend the Companies Act 2006 to place obligations on certain publicly quoted companies—banks, insurers and large private companies—to incorporate TCFD-aligned climate disclosures into their annual reports. These requirements will apply for an accounting period starting on or after 6 April 2022. Companies in scope will be required to make specific climate change-related disclosures in their annual strategic report in respect of governance, strategy, risk management, metrics and targets. These headings reflect the four thematic pillars of the TCFD framework.
The regulations have been drafted to ensure they fit effectively into the existing corporate reporting framework and, specifically, company reporting on risk in the strategic report where these new climate disclosures will be located. The disclosure requirements will apply to all public interest entities and companies traded on AIM—the alternative investment market of the London Stock Exchange —where those companies have more than 500 employees. They will also apply to private companies with over 500 employees and over £500 million in turnover. This will bring over 1,300 of the most economically significant companies in the UK economy into the scope of the disclosure requirements.
Large private companies are also included in the scope of the draft regulations. Increasing disclosures of climate risks and opportunities to inform decision making is just as relevant for private companies, which are an important part of value chains across our economy, as for listed companies. The Government will introduce separate regulations to apply the same climate disclosure requirements to large limited liability partnerships according to equivalent size thresholds. This separate statutory instrument will be laid before Parliament at a later date and will be subject to the negative resolution procedure.
The Department is preparing to publish non-binding guidance to help companies in the scope of these regulations. The guidance will provide additional information to help companies to understand the requirements and to improve disclosures. The guidance will signpost to sources of further information for companies, including to the online resource of the TCFD. The Department consulted on the policy design for these regulations between March and May 2021;we received 137 responses from a range of companies and LLPs—financial institutions, civil society organisations, trade associations and accountancy firms. Officials also took part in three online events to engage with wider audiences. Overall, the Department’s proposals received wide support. Many respondents were pleased to see Government taking action in this space, and they welcomed the clear timeline for businesses to prepare for the disclosure requirements.
The Department made two main policy changes in response to the consultation. First, it simplified reporting for companies that are also subject to the Financial Conduct Authority rules. We have amended the wording of the regulations to make it more closely aligned to the wording in the TCFD’s framework. Secondly, respondents to the consultation called for companies to be required to analyse their risks against specific climate scenarios. As such, these regulations include the requirement for companies to assess their climate risks against different scenarios and to report on this on a qualitative basis. Scenario analysis is a powerful tool to help companies in their assessment of climate-related risks and opportunities. It supports better resilience against climate risks.
The Government consider that the draft regulations are in the UK’s long-term interest to help to future-proof our economy against climate change. The Government want to ensure that companies and investors can make the most of the opportunities created as we transition the economy to net zero and sustainability, so we need companies to understand the risks and opportunities and report on them transparently. I commend the draft regulations to the Committee.
Greg Hands
I thank the hon. Members speaking for the official Opposition and the Scottish National party for their contributions. Many of the points they made vindicate the approach that the Government have taken.
The hon. Member for Southampton, Test asked what the penalties for non-compliance will be. It is worth pointing out that we are amending the procedures in the Companies Act 2006, which, through the Financial Reporting Council procedures, are a well established means for companies to publish their annual reports. The regulations amend those procedures so that the existing regime remains in place. Company directors have duties under the 2006 Act to prepare a strategic report and to comply with the Act’s requirements. When they knowingly approve non-compliant accounts or fail to take reasonable steps to ensure compliance, enforcement action may be taken and they may be liable to fines if convicted. I think that very unlikely for the sort of companies that we are talking about—the 1,300 largest companies in the UK—but that sanction does exist in the 2006 Act.
The Financial Reporting Council monitors the contents of strategic reports, and has the powers to make an application to the court for a declaration that the reports do not comply with the 2006 Act. The court may then order the preparation of revised accounts, including the revision of the strategic report. As I say, we are not envisaging that the sanction will be needed. I remind the Committee that the majority of businesses that responded to the consultation were in favour of taking action in this place.
The hon. Member for Airdrie and Shotts raised the importance of COP26 in Glasgow, which vindicates the UK Government’s decision to host that conference. We are delighted with the success of COP26, particularly in areas such as financial disclosure, which builds on a lot of the activities that the Chancellor of the Exchequer and the whole of Government have been leading this year, including through the G7. COP26 tied all that in very well, which vindicated our decision to host it.
The regulations for TCFD-aligned climate disclosures are designed to enable our businesses and the UK economy to embrace transparency about climate risks and opportunities as part of a greener and sustainable future. I thank hon. Members for their valuable contributions to the debate. I hope that the Committee will approve the statutory instrument.
Question put and agreed to.
Storm Arwen: Power Outages
Greg Hands Excerpts(2 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Mr Kevan Jones (North Durham) (Lab) (Urgent Question)
To ask the Secretary of State for Business, Energy and Industrial Strategy to make a statement on the current situation regarding power outages cause by Storm Arwen.
The Minister for Energy, Clean Growth and Climate Change (Greg Hands)
As the House will know, the Secretary of State updated Members last week on how we are continuing to work to ensure that power is restored to people’s homes following Storm Arwen. We have provided a named contact for MPs, on request, for each network operator, which I was delighted to do personally with the right hon. Member for North Durham (Mr Jones) on Friday morning.
Storm Arwen was the worst storm in over 15 years in terms of the disruption and damage caused. Those most badly hit have been in northern England and Scotland, and some have now been without power for over a week. That has made life incredibly difficult and stressful for many residents, and I want to assure them that help is there.
On Wednesday, I visited County Durham and on Friday I visited Aberdeenshire to see first-hand some of the devastation caused by Storm Arwen, and yesterday the Secretary of State was also in the north-east of England. I thank the engineers, the emergency workers and our armed forces who are on the ground for their incredibly hard work and perseverance in challenging conditions. We have removed the compensation limit to allow customers affected to claim up to £140 per day if they are without power.
I am glad to say that 99.8% of those affected by the storm have had their power supply restored so far—but this is not good enough. It is completely unacceptable that about 1,600 of them were still in this position as of this morning, although the situation is improving each hour. The remaining areas affected are in the north-east of England, predominantly the Wear valley surrounding Eastgate, where I was on Wednesday. I have been assured by the network operators that all efforts are focused on having power restored to those households in the next days.
Mr Jones
First, I am disappointed that the Secretary of State is not here today to address us on this very important issue.
There is something seriously wrong with Northern Powergrid—not with the engineers and individuals who are out restoring power but with the management and senior management of that company. The Secretary of State, during his visit, said that he met, as I know the Minister met, local managers, and I thank the Minister for his phone call on Friday morning. But in the past 10 days I have had constituents in Craghead, Stanley, High Handenhold, Edmondsley and parts of Chester-le-Street without power. Some have now had it restored, but Blackhouse, Edmondsley and parts of Craghead are still without.
I ask the Minister to go back to the power company, as it cannot give the assurance that he has just given to those communities: it says on its own website that there is no date yet for restoring power in parts of my constituency. Constituents have had to experience sub-zero temperatures in terrible conditions. That has been made worse by Northern Powergrid.
On the night of Friday 26 November, I understand that internally the company issued an emergency for County Durham. That was not transmitted to the local resilience forum until Wednesday 1 December, which only became apparent to the county council and other resilience forums when an enterprising council officer started plotting on a map how many homes were affected. What has made the situation worse is Northern Powergrid’s communications, which raised people’s expectations that power was coming on, so people have stayed in homes when they should not have done. Likewise, information now is still not good. I was even told last week by an employee of Northern Powergrid, “Just ignore what is on the website—it’s complete nonsense.” If they are saying that, what confidence can my constituents have in that information? The communication has been appalling and made things worse.
The other thing that has made things worse—particularly in my constituency, parts of which are not rural, but are in towns—is the age of the components, so I will ask three quick questions. First, will the Minister do an urgent, independent assessment of the resilience of the grid, especially since we have the storm coming in tomorrow night? Secondly, what has been done since 2013? Thirdly, what can be done to force the company to pass information on to the bodies that need to know, including the resilience forums? What compensation or money will be put forward to Durham County Council and others for the money they have expended so far?
Greg Hands
I thank the right hon. Gentleman for those further questions, and for his concern. It was good to have a chance to give him an in-person update on Friday morning on the situation in County Durham and particularly in relation to North Durham, and to pass on contact details for Northern Powergrid.
The Secretary of State gave a statement last Wednesday from this very Dispatch Box. He was in the north-east yesterday and is currently on an urgent call with Phil Jones, who heads up Northern Powergrid.
On the responses, I agree with the right hon. Gentleman that the communications have not been effective. I said to Phil Jones in person last Wednesday that the communications were not good enough, particularly in the first few days. I was joined by my right hon. Friend the Member for Berwick-upon-Tweed (Anne-Marie Trevelyan), who gave directly to him the frustrations she had had, including that there had been no social media response. I think those messages landed well with Northern Powergrid.
On Wednesday, I also visited the call centre at Penshaw, and I agree with the right hon. Gentleman about the incredible work being done in those call centres. I remember meeting Nicola Chipp, Dave Rose and many others who have been putting in long shifts in that call centre. For the first 48 hours, it was quite difficult to get into the call centre in the storm’s aftermath, but some incredible efforts are being put in there.
A lot of engineers have come from right across the country. When I was there on Wednesday, 200 engineers were there—there are even more today—ensuring that those last properties get reconnected. In terms of reconnection by tomorrow, that is the assurance given by Northern Powergrid. Hundreds of generators have been deployed in the area. Finally, on the independent assessment, what the Department for Business, Energy and Industrial Strategy and Ofgem do after these events is conduct an independent assessment and a lessons learned process, which is exactly what we did following Storm Desmond seven years ago.
Mr Richard Holden (North West Durham) (Con)
I congratulate the right hon. Member for North Durham (Mr Jones) on securing this urgent question, and I thank the Minister and the Secretary of State for visiting my constituency over the past week. There are some real issues here about the relationship between energy companies and the local resilience forums. The Civil Contingencies Act 2004 and its associated regulations in 2005 set out the guidance for how energy providers should engage with local resilience forums, but we need to know from Ministers what assessment they have made of the communications from Northern Powergrid. Does the law need strengthening if it is not passing information over quickly enough?
To make another quick point, we welcome the Ofgem review, which should be a helpful step in the right direction, the fact that the £700 cap has been removed and the doubling of the daily allowance for my constituents. However, many of them in the run-up to Christmas will have spent a huge amount of their own cash on going into hotels or other accommodation and on extra food. Will the Minister put the Government’s shoulder to the wheel to ensure that Northern Powergrid gets that compensation to my constituents as quickly as possible? The run-up to Christmas is an especially expensive time of year for people, and they need to have that money.
Greg Hands
I commend my hon. Friend, with whom I spoke on Tuesday and Wednesday. It was a pleasure to visit his constituency. At Ireshopeburn, I saw the generator being connected to the community centre by engineers from across the UK, including from UK Power Networks in south-east England. I saw the relief centre at St John’s Chapel and I was in Eastgate, so I saw things first hand in his constituency.
To answer my hon. Friend’s question about our assessment of the comms, I have already mentioned that the comms from Northern Powergrid were not good enough in those first days. I am sure that that will be part of the review process that the Government will do with Ofgem as part of the response to all these storm events. On Northern Powergrid, we put the experience of many Members of the House and their constituents in those first few days firmly to Mr Jones, and I think that that message landed.
Edward Miliband (Doncaster North) (Lab)
I thank the engineers, the Army, the emergency services and, most of all, local people in affected areas for their heroic response to the crisis. It is totally contemptuous for the Business Secretary to be available for a photo opportunity yesterday but not to be available today to come to the House to account for the Government’s performance. That simply adds insult to injury for communities in the north of England that have been badly let down by the power networks and by central Government in their crisis response and oversight of the system.
I will ask the Minister some questions. Some 10 days into the crisis, why has the Government’s emergency committee Cobra still not met to co-ordinate the response? Over the weekend, a local Conservative councillor in Durham said:
“if this happened in London…or in the south-east, everything would have got thrown at it.”
Are people in the north not entitled to think that he is right and that they have been treated as second-class citizens? Why did it take a week for the Army to be called in when Members on both sides of the House were calling for that at the start of last week? Why are thousands still without power when the Secretary of State told us last Wednesday in the House that people would be reconnected by Friday? Will the Minister now apologise to communities in the north for the Government’s performance?
The Minister said today, as the Secretary of State said yesterday, that he wants to learn lessons, but we have been here before. After the 2013 storms, multiple reports were produced—I have them here for him—that identified problems of communication, the vulnerability of the network and the complacency of the companies. After that event, during which 16,000 people were cut off for 48 hours, customers were told that they could expect to see “significant improvement”. This time, however, the performance has been far worse. Is not the only conclusion that the Government have been asleep at the wheel not just in the last 10 days but for the best part of a decade?
The climate crisis means that we will face many more such events. The Government must get a grip. Instead of a cosy Government-led process, overseen by the Department for Business, Energy and Industrial Strategy and Ofgem, will the Minister now establish what the situation demands—a proper independent inquiry into the performance and failures of power companies, regulators and the Government to ensure that our country and communities are never left that vulnerable again?
Greg Hands
Let me deal with each point in turn. It would not be fair to say that yesterday was a photo opportunity. The Secretary of State visited the armed forces, engineers, local residents, the relief centres and so on. It was most definitely not a photo opportunity, but an opportunity, as I discovered in County Durham on Wednesday and in Aberdeenshire on Friday, to thank those who had responded. Engineers had come from Northern Ireland and the Isle of Man to assist and we felt that it was right to go and thank them for their efforts. The Secretary of State is on a call at the moment with the Prime Minister and the head of Northern Powergrid.
On the response, the point here is that the mutual aid system is in place between the distribution network operators. The right hon. Member will know from his time as Secretary of State the importance of the mutual aid system—the NEWSAC, or North East South West Area Consortium, system—whereby different companies across the United Kingdom provide help to each other when a storm comes in. That is why engineers can be deployed right the way across the country. That is the most effective thing, because restoring power involves quite dangerous, health and safety-intensive work to restore overhead power cables, and those are the people one needs to be able to do the job.
The right hon. Member says it took a week to bring in the Army, but it is for the local resilience forum to say what the needs are locally. As soon as the local resilience forum in Aberdeenshire and that in Durham gave us the call, the Army was deployed very quickly indeed. He talks about investment, and I mentioned earlier that £60 billion has been invested in the network over the last eight years.
I learned at first hand on Wednesday in County Durham and on Friday in Aberdeenshire about the particular nature of this storm. There was the unusual wind speed and the fact that, rather than the prevailing south-westerly winds, the wind came in from the north-east, which makes a big difference for the power network. There was also the nature of the icing and the accumulation of icing on cables, which was a particular part of the storm. One of the engineers I spoke to in Durham on Wednesday described how he had experienced this particular set of circumstances only once before in his 35-year career in the industry.
Finally, on climate crisis, the right hon. Member is right: of course, there will be similar events like this and more of these events in the future. That is why we need to do everything we can—for example, with our net zero strategy in October—to make sure this country becomes more resilient to these kinds of events. We are currently doing the joint consultation with Ofgem on the future system operator, and that is exactly the kind of response that we need: a net zero strategy for how we equip the country overall, plus in particular how we make sure that the grid becomes more resilient to these kinds of events in the future.
David Duguid (Banff and Buchan) (Con)
I thank my right hon. Friend for his visit to Aberdeenshire on Friday, particularly to probably one of the hardest places to get to—I am not saying that Banff and Buchan is a hard place to get to—when we went to visit the engineers on the ground in a wooded area just outside the village of Methlick in my constituency. I think they really appreciated the visit from my right hon. Friend, and we certainly appreciated the work that they have put in.
I associate myself with my right hon. Friend’s remarks in his opening statement thanking those engineers as well as the resilience partnerships and emergency services. Will he join me in also thanking the local communities, individuals and community groups that have come out in force and shown community spirit, as they have done throughout the covid pandemic as well?
On the communications issue that a number of hon. and right hon. Members have raised, can I urge my right hon. Friend to make sure that the review that has been announced by Ofgem will look not only at the lessons learned and what went wrong with communications during this storm, but at what we can do in future to reach out to those who have become overly dependent on social media and handheld devices, and how we can go back to how we managed to communicate, say, 20 years ago?
Greg Hands
I thank my hon. Friend for that, and it was invaluable to have his assistance on Friday when visiting his community in Banff and Buchan. I met the SSE engineers at Methlick, and this is also a good occasion to thank in particular Mike Coull from the Little Kitchen, who has been working flat out to provide free fish and chips to the community affected in Methlick. I thank my hon. Friend for everything that he has done to keep his constituents posted and to make sure he fulfils his role here in the House, scrutinising the UK Government.
It was also a pleasure in particular to meet in Aberdeenshire those who had come from across the UK to assist. I was talking to one of the engineers who had come up from Liverpool, and there was a genuine professional satisfaction in coming from right the way across the country to help people in their time of need. I saw that from right across the UK, and I think people were very thankful for that. I also join with my hon. Friend in thanking the local communities.
On the review, of course people have become more dependent on electricity. Generally, that can be a good thing for us, particularly with electric vehicles and electricity as a source of power, but we also need to recognise that greater dependence means a greater responsibility, which I am sure will be part of the joint BEIS-Ofgem review coming up.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I, too, pay tribute to the fortitude of those who have been affected and the fantastic community support that has been provided, as well as to the workers doing the work and challenging the elements. However, the reality is that it is completely unacceptable for people to be without power for 10 days, and it is unacceptable for the Minister to stand here and say it is unacceptable—and that communications are unacceptable—without telling us what he is doing to sort out these unacceptable conditions.
With so many faults—way more than were predicted by modelling—what discussions have the Government had about whether the modelling is robust enough? What assessment are they making of the robustness of the network itself, of the recovery plans, and—we knew the storm was coming—of whether people understood the effects of the storm and other factors, such as trees being felled by the wind?
Customers and Parliament were given dates for when electricity would be restored, but those have proven to be wrong, so what assessment have the Government made of how the electricity companies have undertaken that work? It is quite clear that they did not have a grip of the situation. Was all the technology deployed that could have been deployed, such as drones and other remote working devices? Was sufficient tree-clearing equipment and labour deployed in the aftermath?
The Minister spoke about the mutual aid, but that clearly has not been sufficient to resolve the situation. It is quite clear that the Army should have been deployed more quickly. Why did the Government not offer the use of the Army? What compensation will be provided to customers, particularly hospitality business, and how will lessons learned be conveyed to Parliament? The Minister spoke about lessons learned from Storm Desmond. Why were those lessons not sufficient?
Greg Hands
As I mentioned, I spent Friday in Aberdeenshire seeing the situation on the ground. I was joined by Chris Burchell, the managing director of SSE, and I put him on the spot about his communications. I think they were better in the first few days than those of Northern Powergrid, but it has been a difficult time for everyone concerned.
On the calling out of the Army, the hon. Gentleman will know that that is a role for the local resilience forum, the Grampian local resilience partnership. On Friday I also met Jim Savege, the chief executive of Aberdeenshire Council, who I think chairs or leads the local resilience partnership. He was very satisfied, I think, with the response of the Army and others. I met the 3 Scots when I was in Aberdeenshire; I understand that 45 Commando and the 39 Engineer Regiment have also been deployed. I am sure the hon. Gentleman will join me in thanking them for the work they have been putting in to help the community.
In terms of assistance—the NEWSAC scheme and the ability to deploy engineers from right across the United Kingdom—the hon. Gentleman may wish to reflect on the message from the industry about the importance of the UK response in being able to deploy people. A lot of engineers were deployed in Scotland; 630 were deployed from elsewhere in the UK. These are highly qualified, highly capable, very technical people. Two hundred and eighty-five of them came from the rest of the UK to Scotland, and 400 are currently in the north-east of England. I particularly want to minute my thanks for the efforts they have put in right across this United Kingdom.
Dehenna Davison (Bishop Auckland) (Con)
I thank the right hon. Member for North Durham (Mr Jones) for securing the urgent question, and I thank Ministers for their extensive engagement over this horrendous crisis.
I associate myself with the concerns raised by my County Durham colleagues—not least the shock that I think we all felt at learning in a meeting with Durham County Council on Friday that the communications from Northern Powergrid had meant that the response from the local resilience forum was slowed by about five days. That meant we could not get boots on the ground or house-to-house support for the people who needed it. Five days wasted—that is an absolute disgrace. We really need to ensure that we hold Northern Powergrid’s heels to the flame for that one.
I reiterate what my hon. Friend the Member for North West Durham (Mr Holden) said about ensuring that compensation will be paid before Christmas. It is a difficult time financially for so many, so if Ministers could add pressure on Northern Powergrid on that point, I know that it would be much appreciated by all those who have been affected.
I have two quick questions. First, what preparations are the Government undertaking, in conjunction with local resilience forums, for Storm Barra, which is going to hit over the next few days? Secondly, on the BEIS and Ofgem review, will the Minister expand a bit on what the consultation will look into, in terms of the infrastructure and its resilience? Will he also say whether the review will look into emergency provision to ensure that enough support—things such as emergency generators—is available to those who are hit in these horrible crises?
Greg Hands
I thank my hon. Friend for her engagement with me and the Secretary of State on behalf of her constituents, and in particular for making meetings at relatively short notice. I agree that communications from Northern Powergrid were simply not good enough. I have reflected on that and we put that across strongly to Phil Jones.
On when compensation will be paid out, as I understand it, most is paid automatically, but it does take some time to process. I am told that it may take up to three months. I hope that it can be quicker, and I am sure that we can put that view across to the company.
It is not my job to be a weather forecaster, but we expect Storm Barra to hit the island of Ireland in particular. On preparations, an established process is in place whereby the NEWSAC committee would assess the likely landfall of the storm in the UK and start making preparations, often in conjunction with Ireland. I should also minute that engineers from the Republic of Ireland were in the UK helping out last week.
On reviews and resilience, previous reviews have of course led to important reforms. The 105 telephone number was created as a result of a previous review, as indeed was the NEWSAC network of mutual aid throughout the United Kingdom. Such reviews are strongly empowered, and while I would not want to prejudge what a review would look at, two things that I would expect it to look at carefully are communications and the resilience of the network in particular places.
Ian Lavery (Wansbeck) (Lab)
I have to say that I am absolutely astonished that the Minister just gave an assurance that help is there, but went on to say that compensation will be available within three months. People in constituencies like mine, people in the north and people in Scotland—people who have been devastated by Storm Arwen—cannot wait three months. Let us be honest: it is an insult to the people who have been badly affected. Will the Minister look at ways and means of channelling much more financial support into badly affected constituencies so that the people at the bottom who have been devastated by this can receive compensation, not just for power cuts but for devastation to property, loss of property and so on?
Greg Hands
I thank the hon. Member for that contribution. I understand the passion that he feels, but a lot has been done on the ground. I saw for myself the provision of accommodation by hotels, inns, pubs and so on, as well as the provision of food and hot meals—everything from a cup of tea in a community hall. There has been a huge community response right across the affected regions. We have also worked closely with the British Red Cross in providing relief to people on the ground.
It is completely unacceptable that some people are still without power. I think that 99.8% of people have now been reconnected, but it is an unacceptable time for the 1,000 or more people who are still not reconnected. The Secretary of State, the Prime Minister and I have all said that. We obviously need to learn the lessons, and an established process is in place for that. I have already pointed out how previous such storms have led to really strong improvements to the system, and I would also expect that to be the case this time.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
I am sure that my right hon. Friend will agree that it is quite rich to hear criticism from Scottish National party Members after it took the Scottish First Minister four days to even comment on the fact there was an issue in the north-east of Scotland, given that the power went off. I join him and my hon. Friend the Member for Banff and Buchan (David Duguid) in thanking the workers from Aberdeenshire Council, the emergency services, the armed forces and, of course, the Scottish and Southern Electricity Networks engineers who did a power of work to restore electricity to north-eastern Scotland.
Although a lot has been said about the resilience of the energy network and a review of that, will the Minister join me in looking into a review of the communications network? Part of the problem last week seemed to be that whether someone was able to report faults or was offline in their area depended on which mobile network they were on, so I ask for his support in calling for a review from Ofcom of the mobile communications network.
Greg Hands
I thank my hon. Friend for his invaluable assistance on Friday in Aberdeenshire. I do not think he and I will ever forget meeting the engineers who had been working up to 17-hour shifts just outside of Kemnay. They had been at that all week, including with help from right across the UK. My hon. Friend makes a very good point about the communications network. We have become more dependent on electricity and networks. I am sure that that will be part of the review to see what lessons might be learned and whether there can be other ways to approach the communications problem in future.
Grahame Morris (Easington) (Lab)
I might be able to enlighten the Minister, given his earlier comments about Met Office warnings, because we need to give it some credit: it was right on the ball originally about Storm Arwen regarding the wind strength, the timings and the wind direction. It has issued two warnings today, Minister, that tomorrow—7 December—Storm Barra will bring strong winds and snow to my constituency and further north.
Storm Arwen and the response have exposed the deep north-south divide in this country. Individuals and communities in my constituency—I have not had any ministerial visits—have been left without support for over a week. It took five days for the Secretary of State to make a statement, and he did not do that willingly. It was only after multiple requests through the Speaker from Members on both sides of the House from Monday onwards that the Secretary of State came to make a statement, and it took five days for a major incident to be declared. It is too easy to put all the blame on Northern Powergrid and poor comms. At every level, be it the Minister’s Department, local government, the resilience forum or Northern Powergrid, questions must be asked, and I believe that a public inquiry is the only independent and fair way to assess the whole scandal and hold all those involved accountable. Will he support a public inquiry?
Greg Hands
I appreciate the hon. Gentleman’s comments as a local MP, but I reject absolutely his allegation of some kind of north-south divide. The response was very swift from the engineers, and that was the most important part of the response. As I mentioned, 630 engineers came from across the UK. I put on record my thanks to Western Power Distribution—117 came from western England and Wales—to Northern Ireland Electricity Networks, which sent 26 engineers, to the Isle of Man, and to the Electricity Supply Board in the Republic of Ireland, which sent 27.
The NEWSAC process started on the Friday before the storm came in. Obviously, time is needed to see the impact of the storm and where the engineers should be deployed from and to. Simply a forecast that a big storm is coming does not, in any sense, give a prediction of where the damage that will need to be repaired will be. The NEWSAC process is the right one. I have confidence in that and I want to minute again my thanks to the engineers from right across the United Kingdom who helped out by doing the incredibly difficult job of restoring and sometimes rebuilding—in Weardale, I saw a whole process of rebuilding the power line. We cannot underestimate the difficulty and very intensive nature of that job, particularly at a time of poor weather.
Dr Neil Hudson (Penrith and The Border) (Con)
I thank my right hon. Friend and echo colleagues’ comments in thanking the Government, local government, the armed forces, volunteers and engineers for their efforts to help people during this dreadful crisis. I also pay tribute to the resilience of residents in Cumbria, elsewhere in the north of England and across Scotland for facing up to this dreadful crisis. I fear that that resilience will be tested again and again with more and more named storms coming. Will my right hon. Friend assure me that in the lessons learned process, we ensure that support for communities will get to them as soon as possible, in terms of generators and calling in the Army? We know in Cumbria, when we have flooding and such things as foot-and-mouth, that calling the Army in early is an important lesson to be learned, so whoever has the job of calling them in, please can we do that as quickly as possible?
Greg Hands
I thank my hon. Friend for his engagement throughout the process on behalf of his Cumbria constituents. He makes some very good points. We will be asking all Members to give their input into the lessons learned process, which might relate to anything from communications to extra resources. I can tell my hon. Friend that, at the peak, 755 generators were deployed in the most affected areas in the United Kingdom; that number is now approximately 500.
With respect to calling out the armed forces, it is principally a matter for the local resilience forum in the first case to make a local assessment of needs. I stress that repairing and rebuilding power lines is a job for engineers. With respect to other relief, other workers and other people who can provide support for local communities, it is a job for the local resilience forum to make an assessment.
Mary Kelly Foy (City of Durham) (Lab)
While power is slowly being restored to many of the villages in Durham, we face further disruption from Storm Barra. Constituents in villages such as Croxdale are now experiencing problems with internet access, badly affecting their ability to work from home and support disabled family members. Can the Minister promise my constituents that increased Government support will arrive immediately if Storm Barra causes further disruption? Will he do everything in his power to work with Openreach and providers to get internet access restored to my constituents as soon as possible?
Greg Hands
Of course we will be working, particularly with local resilience fora. The Secretary of State had a series of meetings on calls with local resilience fora through last week, learning and assessing at first hand what their needs are. If Storm Barra is of a similar magnitude or even anywhere close, I would expect that process to continue. With climate change, we can expect the frequency of such events to increase, and we need to make sure that local resilience fora are ready to meet those challenges.
Mr Philip Hollobone (Kettering) (Con)
May I say very firmly to the Minister that it is simply unacceptable for customers to have to wait for up to three months for compensation payments? This is an accounting function—a billing function. It is easy to press the right button and get the compensation of £140 a day to these poor people before Christmas.
Greg Hands
I stress that I am not apologising on behalf of the companies, but it is “up to three months”; I hope that it will be a lot quicker. Of course the Secretary of State and I will engage with the distribution network operators to make sure that it is done as quickly as possible. Ofgem is engaging with them as well.
Richard Thomson (Gordon) (SNP)
On the Minister’s visit to Aberdeenshire, he managed to visit Banff and Buchan, where he met the local MP, and west Aberdeenshire, where he met the local MP. As the Member for Gordon, I can only assume that my invitation must have been lost in the post somewhere.
When it comes to getting in military support, yes, it is for the local resilience partnerships to make the request, but as the Minister knows full well, a strict set of criteria has to be fulfilled before the request has a chance of being approved. As part of the review of this incident, will the Minister commit to looking at the criteria for military aid for the civilian authorities so that in any future event like this we stand a better chance of being able to deploy the military at an earlier stage, when they can arguably have the greatest impact?
Greg Hands
I am told that the hon. Gentleman’s office was informed that I was coming to Ellon in his constituency, but may I use this opportunity to thank the school in Ellon and particularly the local responders, the local resilience partnership and others who were there providing assistance? The local armed forces, 3 Scots, were there as well, providing really excellent help to the community.
Once the local resilience forum had called out, or said that it needed assistance, the response was incredibly fast: I think it took less than half a day to make that deployment. I talked to the military liaison officer in Aberdeen on Friday; she was absolutely clear that she is a keen member of the local resilience forum and as soon as the call went out, the response was extremely quick.
Andrew Bridgen (North West Leicestershire) (Con)
Given the fallout from Storm Arwen and the disruption to the power grid, will the Government use this opportunity to look into the feasibility of placing more power cables underground?
Greg Hands
My hon. Friend has asked a good question. The difference in cost between underground and overground is considerable, and such action would also be very disruptive. I think that a more organic approach should be taken, involving working with the companies and the engineering resources that we have. In general, however, my hon. Friend is right: an underground grid will be more resilient than an overground grid, and I am sure that that too will feature in the review.
Karl Turner (Kingston upon Hull East) (Lab)
Is this not about Northern Powergrid investing nothing in the network while stuffing its investors’ pockets with profits, and the Government allowing it to put profits before people?
Greg Hands
No, it is not. In the last eight years, the distribution network operators have invested about £60 billion in the network, and I am confident that the structure is right. I think that the way in which the companies collaborate in the NEWSAC mechanism works extremely well, and we should be thankful for the engineers and others who have been out there, including those operating the call centres. As I have said, I think that the communications, particularly in the first days, could have been much better, but I have no doubts about the structure of the market and the electricity network operators.
Dave Doogan (Angus) (SNP)
We all know that this was an exceptional storm with exceptional wind speeds coming from an unusual direction, and we all know that we owe a great debt of gratitude to the engineers and back-room staff who supported the recovery. However, my constituent Craig Fraser, from the north-west of Montrose, was without power for six days—it was restored on Thursday—and for the first four of those days, he could not obtain confirmation from SSEN that there was a problem in his area. What can the UK Government do to mandate minimum standards in surveys of damage caused to network lines after a storm and data logging of customers’ reports of outages?
Greg Hands
I thank the hon. Gentleman for that constructive question. I would say to his constituent Craig Fraser that I think it is unacceptable that it took him more than four days to get an answer from SSEN. After this session, I will give the hon. Gentleman the details of the dedicated contact at SSEN, if he does not already have it, and I will also try to raise the matter with the chief executive, Chris Burchell. A key aim of the review will be to look at why the communications were not as good as they should have been, particularly in those crucial first few days.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
The Secretary of State can make it to the north-east for a photo-opportunity, but he will not come here to answer our questions. If thousands of homes in the south-east were without power, he would be here.
Last month the Government showed their contempt for the north-east by failing to invest in our transport infrastructure, and now we see the consequences of their failure to invest in and support our energy infrastructure. Why were there not enough generators? Why were no proper plans in place? Does the Minister accept that the energy markets as they stand are not working for the north-east, and will he do something about it?
Greg Hands
I am sorry, but I do not accept that. First, it is not right to criticise the Secretary of State for going up to the north-east on a Sunday to see members of the armed forces, and to thank the engineers and the community responders. As you will remember better than anyone, Mr Speaker, he came here last Wednesday to make a statement on the situation. There has not been a delayed response from the Secretary of State.
The hon. Lady also asked about generators. In fact, 755 were provided at the peak of the relief effort, and 500 are still being provided. I thought that she might join me in thanking some of those who are working so hard on the ground—not just the engineers, but those in the call centres. They are making tremendous efforts to ensure that those who have been disconnected are reconnected and that people have the help that they need in the short term, as well as ensuring that we learn the lessons of this unique storm.
Hilary Benn (Leeds Central) (Lab)
Given that we are likely to see more severe storms, and even with the lessons learned from previous storms and the mutual aid system that the Minister has referred to, is not the review going to have to look at increasing capacity—I am talking about materials, machinery, generators, spares and people—in order to be able to deal with these events more effectively so that people do not have to wait so long to have their lights and heating put back on? Who does the Minister think has the principal responsibility for ensuring that that capacity is there when storms strike?
Greg Hands
The right hon. Gentleman raises some good points, but I do not want us to prejudge the review. He has mentioned quite a few things that he thinks we were short of. I think he is saying that we were short of generators, for example. I have already said that 750 generators were deployed. Of course we need to look at whether we have the right number of generators in terms of the capacity, but I would not want to prejudge that important review and the process behind it. Let us wait and let the review run its course. We have learned some really important lessons from previous reviews, for example on setting up a dedicated phone line, the mutual support and the network of engineers from across the country. Let us not prejudge that review.
Tim Farron (Westmorland and Lonsdale) (LD)
Thousands of us in communities across Cumbria have had a devastating 10 days that have been exhausting and even harrowing. I am pretty sure that all of us would agree with the calls for a public inquiry to learn the lessons. I think everyone agrees that lessons need to be learned. However, with Storm Barra approaching, those lessons need to be learned literally overnight, and those lessons are about timeliness as much as anything. Why did it take five days for the Government to come to this House and address the issue? Why did it take until the middle of last week to scramble and deploy additional generators, when that could have happened on the Saturday, eight or nine days ago, so that families were not without heat and light for so long? The relevance of the Army is that it is significant in boosting the capacity of the engineers and also in going from door to door to reach vulnerable people who had no telecoms whatsoever. They include elderly people with care needs who were tucked up in bed to try to stay safe. I want to say a massive thank you to the people in those communities who stepped up to this challenge, and to the engineers who are out there making things better overnight, but what can the Minister say to my communities about how the Government will act to make things better next time?
Greg Hands
I do not think that a public inquiry is the right course. It would inevitably take a long time. It would be better to use the established and effective review mechanism that we already have in place, and I invite the hon. Member and all right hon. and hon. Members to participate in it and give their views. I would say that NEWSAC, the mutual aid scheme, was deployed as soon it practicably could be, actually in advance of the storm coming in. I think that that has worked well. On the role of the Army, it is principally a matter for the local resilience forums to make assessments of the resources they need and then to put in that call. From my experience in Aberdeenshire on Friday, I can tell the House that, when the local resilience forum put in that call, the response was close to immediate.
Edward Miliband (Doncaster North) (Lab)
On a point of order, Mr Speaker. Can you give me some guidance on the absence of the Secretary of State from this urgent question? Yesterday, he claimed to be getting a grip on this crisis, but today he has run away from answering questions in this House. The truth is that there are very serious issues here, and the Minister has had to come up with a hastily arranged “dog ate my homework” excuse in which he claims that the Secretary of State is on the phone to Northern Powergrid at the moment. He could have been on the phone before this urgent question or after it. This is an insult to the people in the north of England and an insult to this House.
Greg Hands
I will deal with it head on, because not only did I take a call from the right hon. Member for North Durham (Mr Jones) on the Friday morning but I visited and talked to individuals in the call centre, which is in the constituency of the hon. Member for Houghton and Sunderland South (Bridget Phillipson), who was informed of my visit. So we actually visited there. On Friday, I visited Ellon, which is in the constituency of the hon. Member for Gordon (Richard Thomson). So yes, we visited Conservative-held constituencies, but we also visited Labour and SNP-held constituencies. I urge the right hon. Member for North Durham to withdraw that allegation.
Community Energy Schemes
Greg Hands Excerpts(2 years, 4 months ago)
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The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
Let me begin by congratulating the hon. Member for Bath (Wera Hobhouse) on securing this important debate, and for pre-submitting the three questions that I will answer during the course of my speech. I will, however, return to them at the end to make doubly sure that I have answered them to her satisfaction. I realise that this is the first debate on the topic since I took on my new role in September; I think the previous one was on 1 July. I welcome the debate, and it is fantastic to see so much enthusiasm for community energy from all parties, nations and regions of the UK—it is very heartening to see.
I will start by reassuring the House that the Government recognise the role community and locally owned renewable energy schemes can and do play in supporting the UK’s national net zero targets. Since the last debate we published, on 19 October the net zero strategy, which has already been referred to and sets out our road map of how we will get to net zero by 2050 and the staging posts in between. We understand that the value of community energy is not just in delivering energy projects that stimulate clean growth. Projects such as the community energy cafés run in south-east London support the most vulnerable in society by providing impartial domestic energy advice. Community groups can also act as the catalyst for raising awareness of both the energy system and wider environmental issues. They can be a catalyst in the promotion of behaviour change, which we all know is vital to reaching net zero.
I know Members will agree with me that there is already some excellent work under way in the community energy sector. We have heard many examples today, but I will add one: Swaffham Prior is an off-grid gas village of around 300 homes in east Cambridgeshire that is being supported by its community land trust to bring renewable energy to the village through installing a heat network. This will make it one of the first villages in the UK to do so.
I mentioned the net zero strategy, but we have also heard about a lot of different fantastic schemes from across the United Kingdom. As a Government, we fund the rural community energy fund. Delivered through local net zero hubs, this £10 million scheme supports rural communities in England to develop renewable energy projects that provide economic and social benefits to the community. Since its launch in 2019, the fund has received 1,668 enquiries, 203 applications and awarded millions of pounds worth of grants to projects focusing on a variety of technologies, including solar, wind, low-carbon heating and electric vehicle charging. It includes funding for the constituency of the hon. Member for Bath. She referred earlier to Bath and West Community Energy, which has received more than £92,000 from the rural community energy fund for feasibility grants to develop three community solar projects.
Ofgem also supports community energy projects and, following a consultation process, has announced that from February 2022 it plans to welcome applications from community-interest groups, co-operative societies and community-benefit societies to the industry voluntary redress scheme. That will allow groups to apply for funds to deliver energy-related projects that support energy consumers in vulnerable situations, support decarbonisation and will benefit people in England, Scotland and Wales.
More widely, through the introduction of UK-wide growth funding schemes, such as the community renewal fund, levelling-up fund and the towns fund—all very important new funds—the Government are enabling local areas to tackle net zero goals in ways that best suit their needs. I am aware that those schemes may be used to support the development of community energy schemes, which I highlight for all right hon. and hon. Members. For example, the towns fund has awarded more than £23.6 million to Glastonbury town, including to the Glastonbury clean energy project, which aims to generate renewable energy for use by many of the other projects in the plan, as well as other local businesses and residents.
To take forward the vital work on community energy, we committed in the net zero strategy to reintroduce the community energy contact group. That group will provide a single, dedicated forum for community energy groups to engage and co-operate with Government on key policy issues. That could obviously include discussion of the recommendations already referred to, made by the Environmental Audit Committee’s inquiry into community energy. I hope that group will strengthen outcomes for both the sector and the Government.
Turning to the Local Electricity Bill, which has been mentioned frequently in the debate, a right to local supply would allow electricity generators to sell their power directly to local consumers. As we know, the Local Electricity Bill seeks to establish that right by enabling electricity generators to become local suppliers, and to ensure that the costs and complexity of becoming a local energy supplier are proportionate.
Although the Government agree with the broad intentions of the Bill, we do not support the Bill as the means to enable local energy supply. However, I make a commitment today. I am about to write to my hon. Friend the Member for Wantage (David Johnston) to set up a meeting with him. I will leave it up to him which other Members he wishes to pull into that meeting to discuss the Bill and how we can work together, particularly on some of the obstacles to it.
I will take interventions shortly, but I want to lay out some of those obstacles. There is existing flexibility in how Ofgem regulates energy supply to allow for local suppliers. Ofgem has powers to award supply licences—a point raised by the right hon. Member for Leeds Central (Hilary Benn)—that are restricted to specified geographies and/or specified types of premises. However, many hon. Members have observed that, although the right to local supply exists, the costs of becoming a supplier act as a barrier to entering the market.
Making more substantial changes to the licensing framework to suit specific business models may create wider distortions elsewhere in the energy system. Artificially reducing network costs for local energy suppliers, as the Bill appears to imply, is likely to be distortive. It would mean higher costs falling on other consumers, which would increase as more local suppliers enter the market. It is important, therefore, that we take a broad view. I notice there is a Division in the main Chamber, Mr Betts.
Mr Clive Betts (in the Chair)
Order. I was letting you finish your sentence—we can now suspend the sitting for 15 minutes.
Mr Clive Betts (in the Chair)
The Minister will now resume his speech. We have 11 minutes to go; we will finish at 4.28 pm. I should just say that Alan Brown has courteously given me his apologies, because he is in the main Chamber for the next debate.
Greg Hands
Thank you, Mr Betts; let me carry on. It is important that we take a broad view of all consumers when making changes to the energy markets. That includes consumer protection measures, which form an important part of the supply licence. Suppliers play a key role in providing support to customers, particularly the vulnerable. For example, the energy company obligation requires suppliers to install energy efficiency measures in the homes of vulnerable people. The warm home discount applies a reduction to the bills of vulnerable households, and the price cap protects households from poor-value tariffs. The priority services register is used by suppliers to identify consumers who may need additional support with their energy supply. Of course, suppliers sometimes fail, but we have vital safety nets to ensure supply—as we have seen since the last debate—through the supplier of last resort, or SoLR, process. I would be concerned about the deliverability of such protections under a local electricity supply regime.
Let me turn to the three questions that the hon. Member for Bath asked specifically. I think that I have answered the question on future energy legislation. I have outlined, I think, some of the difficulties with the current Bill as proposed. Also, I think that I have gone into the distortions to the energy system just now and before in some detail. And will I meet her? As I have mentioned, I have an existing commitment to my hon. Friend the Member for Wantage, but I am happy for people to come together. That was the commitment that I made to him—to meet Members with an interest in this area.
Wera Hobhouse
I was originally a little disappointed that the Minister’s invitation went only to his colleague the hon. Member for Wantage (David Johnston), but if he has already fixed a meeting and he is opening it out, may I ask whether there is already a fixed date for it that he can share with us?
Greg Hands
I appreciate the hon. Lady’s line of questioning. I replied specifically to a letter from my hon. Friend the Member for Wantage seeking a meeting. I think the best thing to do would be for me to speak to my hon. Friend or for her to approach him—it would effectively be his meeting—to find the best way forward. I am keen to be as accommodating as possible to Members across the Chamber, but I responded to the letter that my hon. Friend the Member for Wantage sent me, which I think was on behalf of a group of Members. [Interruption.] In that case, I think the best thing to do would be for the hon. Member for Bath to approach, first, my hon. Friend the Member for Wantage.
On the question of the cost to consumers, though costs are reduced for the few in the scheme, that avoids market costs, which fall on those not in the local scheme. That often includes the fuel-poor, who cannot buy into such schemes.
Germany was mentioned many times. Without going off and setting up my own separate Adjournment debate, there are reasons why Germany works well, and less well, in this space. Germany’s grid, for example, makes it very difficult to get renewable energy from the North sea down to Bavaria. Its grid is not set up in the same way that ours is, on a national basis. That can have advantages and disadvantages. I also point out Germany’s reliance on imported gas from abroad. That again stresses some of the difficulties in scaling up; even in Germany, which has been praised for community energy, it does not necessarily offer a scalable solution in that same way.
The hon. Member for Brighton, Pavilion (Caroline Lucas) asked about the continuing expansion of the rural community energy fund. I will look at the options for funding as part of Department-wide planning.
My hon. Friend the Member for Waveney (Peter Aldous) asked five questions; I will try to deal with them as quickly as possible. First, derogation is possible; Ofgem consulted previously on widening the use and geographic premises licences are possible. Secondly, the right to supply is possible; BEIS will work with Ofgem on retail market reform. Thirdly, this is really a matter for Ofgem, which can do a local supply licence, but we can set out why we do not agree with a local supply licence. Fourthly, we are looking at the supply hub model as part of the retail market reform. It is a complex issue, which, of course, has implications for things such as the smart meter roll-out, and so on. Fifthly, I think we have already covered the smart export guarantee scheme.
The hon. Member for Strangford (Jim Shannon) asked about Northern Ireland. As he and I well know, it is a unique energy market. I am having a meeting with Gordon Lyons, the Northern Ireland Economy Minister, on wider issues tomorrow, and I will try to feed this into a conversation with him. The meeting is with the three devolved Administrations, but I will find an appropriate time to ask him about how we can work together on community energy schemes.
Mr Betts, I think you said we were finishing at four—
Greg Hands
Fantastic. I will leave some time for the hon. Member for Bath to reply.
Finally, earlier this year, we jointly published with Ofgem our new smart systems and flexibility plan and the UK’s first energy digitisation strategy, which was also developed with Innovate UK. Many of the actions set out in those documents aim to improve locational signals and help to enable smart local energy solutions, such as facilitating further growth of local flexibility markets.
In addition, Ofgem’s access and forward-looking charging review seeks to deliver more efficient choices about where users locate on the networks, and how they use the networks on an ongoing basis. The introduction of better price signals is important in ensuring that local generation is rewarded for the benefits it can bring to the system. It is recognised that, in some parts of the country, the costs of connecting to the grid can itself act as a barrier. Ofgem has therefore proposed to reduce connection costs for generation connections, such as community energy, by socialising more of the network reinforcement element of connection charges. Any changes are expected to come into effect from April 2023.
Many Members have argued in favour of local energy suppliers as an option to mitigate global gas price impacts, which I have already referred to, but risks would continue to exist. For example, local energy suppliers are likely still to need to be connected to the grid during periods of low generation. The failure of a local energy supplier without a grid connection would also leave customers without energy supply in the absence of an effective safety net.
The Government continue to support the development of new business models to supply energy consumers and help achieve our net-zero ambitions. In response to the unprecedented rise in energy prices this year, we are working closely with Ofgem to consider broader reforms to the overall energy retail market regulatory framework. We want a market that will support the longer-term transition to net zero, recognising the need for continued competition and innovation while also ensuring that suppliers have sustainable and resilient business models. That includes Ofgem exploring a move towards a more prudential regulatory regime, recognising that energy suppliers are managing complex financial risks and ensuring that the energy sector is resilient against a wide range of future scenarios, including prices rising further or falling sharply.
This debate is testament to the fact that there is clearly extensive cross-party support for the community energy sector, which we very much welcome. Just as importantly, there is a wealth of innovative schemes—
Peter Aldous
I am most grateful to the Minister for setting out so clearly the obstacles that need to be overcome to mobilise community energy schemes. Can he confirm that he and the Government are committed to overcoming those obstacles and removing those barriers so that, when we come back in a few months’ time, we can say that we have achieved tangible progress?
Greg Hands
I am certainly committed to examining the obstacles and speaking to my hon. Friend; I know his long-standing interest in this, as indeed in all energy questions—he is the Mr Energy of East Anglia. I am very happy to continue to engage with hon. Members, to look at the obstacles and to see what can be overcome, ameliorated or worked around. I am very keen to meet and continue the engagement with hon. Members. It is a little difficult for me to agree to remove the obstacles until we have scoped them out. The Department is well aware of the obstacles, but if my hon. Friend has suggestions for how to overcome some of them, I am interested in working with him and like-minded hon. Members.
Just as importantly, there is a wealth of innovative schemes across the country, run by passionate people who are committed to creating a cleaner and greener future for us all. I close by thanking the hon. Member for Bath once again for securing the debate.
Offshore Renewables Wind Sector
Greg Hands Excerpts(2 years, 4 months ago)
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The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
I think, Mr Betts, that as they have given us quite a bit of time, I am happy to let the Member speak.
Mr Clive Betts (in the Chair)
The rules of the House are that if a Member wishes to speak in a 30-minute debate, they should inform both the mover and the Minister in advance and then I should be notified. Nevertheless, it is all sorted out now.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
I begin by congratulating the hon. Member for East Lothian (Kenny MacAskill) on securing this important debate.
We know that renewable electricity generation is essential to the decarbonisation of the power sector and the UK’s efforts to reduce greenhouse gas emissions and reach net zero, which was recently discussed in Scotland at COP26 in Glasgow, which I was delighted to attend on behalf of the UK Government. Offshore wind will be a vitally important tool in creating the low-cost, net zero energy system of the future.
We can be enormously proud that the UK offshore wind industry has already made great strides, in terms of both the production of major turbine components and their deployment, moving from installing about one turbine every week to about one every single day. Turbine sizes have grown by 700%, from 2 MW to 15 MW. Alongside this, the costs of offshore wind have fallen dramatically since 2015. The first contract for difference allocation round cleared at around £114 per megawatt-hour. In the last round, in 2019, that fell to less than £40 per megawatt-hour. That is a reduction of around two thirds to 70% in the cost of offshore wind. It has been a resounding success, and we expect both the increasing scale of turbines and cost reduction to continue.
I agree with the hon. Member for East Lothian that it is absolutely right that local communities should benefit economically from major new manufacturing infrastructure projects. We want to see thousands of people all over the country working in new green, high-quality jobs in our renewables sector. Therefore, the Government are investing heavily to support the offshore wind sector, from innovation to the manufacture of major wind turbine components, all the way through to the deployment and connection to the grid.
Let me deal with a few of the points raised. I will first stress that these decisions taken by the UK Government have brought huge benefits. When I was at the Treasury in 2015, a lot of the decision making behind contracts for difference was controversial. Working with the Department for Business, Innovation and Skills, as it then was, we thought that the CfD regime would lead to a big boost in the UK’s renewable energy and, by scaling up, would reduce costs, both of the energy produced and that of building the infrastructure. We turned out to be right on that.
There was also investment brought in by the UK Government. When I was at the Department for International Trade, for four or five years, I was going around getting investment into the UK offshore wind sector, particularly from European countries, such as Spain and Denmark, and companies looking to invest in this country. A key part of that has been to ensure that the supply chain also benefits the United Kingdom overall, including Scotland. About 60% or more of the supply chain is based in the UK. A lot of the key decisions have been the right ones taken by the UK Government.
The hon. Member for East Lothian raised a point about Wick harbour. We have seen that harbour revitalised by the development of the Beatrice offshore wind project. As more projects are developed north of the border, we expect similar benefits to be realised for other harbours. We heard from the hon. Member for Kirkcaldy and Cowdenbeath (Neale Hanvey), who provided a long history—a tour de force—that started with Ted Heath, moved through Margaret Thatcher and John Major, and ended with him describing the Scottish Government as a “supine devolved Government”. The hon. Gentleman mentioned the word “grievance” and said it was not one, but I think he is lumping grievance on to grievance. His latest grievance is with the Scottish Government, not just that of the UK.
Offshore wind has a central role in the Government’s decarbonisation and levelling-up ambitions. Developing the economic benefits that the UK derives from offshore wind took prime position in the Prime Minister’s 10-point plan for a green industrial revolution, published this time last year. The 10-point plan also includes a target to deploy 1 GW of floating wind in the UK by 2030, as a stepping-stone to further growth through the 2030s and beyond.
The hon. Gentleman for East Lothian mentioned the potential of the sector, but it is not just the potential; it is the reality. The UK has the world’s largest installed offshore wind capacity—we are No. 1. As the Prime Minister says, we are the Saudi Arabia of wind. It is not just potential but a realised thing that is happening every day. We are not content with just 10 GW; we have a commitment to quadruple that over the next decade, to 40 GW. Scotland will play a massive role in that commitment.
Last month the Prime Minister announced up to £160 million in new funding to support the development of large-scale floating offshore wind ports and factories all over the UK. That follows on from the success of the offshore wind manufacturing investment support scheme, which has so far this year enabled the announcement of two major port hubs, and six offshore wind manufacturing investments, representing £1.5 billion in public and private sector investment, and set to support up to 3,600 jobs in deprived areas of the UK by 2030.
Scotland, as we know, has a very rich industrial heritage, and I am confident that the skills already present in Scotland, proven over the decades in the oil and gas sector, will be transferred into a world-leading capability in manufacturing for the offshore wind sector— a key part of our North sea transition deal. Yesterday I chaired the North Sea Transition Forum with the industry, Oil & Gas UK, the Oil and Gas Authority and the Scottish Government.
The point is that to make that transition means recognising the fantastic skillset. One of my first visits in this role was to Aberdeen, where I saw that skillset at first hand, working with a lot of the incredible universities—I visited Robert Gordon University, for example, whose transition unit is working on how we transfer the skills that have been vital for the UK as a whole and Scotland in particular for the past 50 years over to sectors such as offshore wind. The answer is that there is a lot of overlap between offshore hydrocarbons and offshore wind, but making that transition is a key part, and there are many people helping to deliver that.
That is why the North sea transition deal announced in March contains key commitments on skills, including a commitment from the oil and gas sector to develop an integrated people and skills plan by March 2022, to support the sector’s transition and diversification. Both Government and the sector have also committed to supporting the work of the Energy Skills Alliance. Its work will address, among other things, future skills demands of new energy sectors, all-energy training and standards and all-energy apprenticeships.
In particular, Scotland could benefit greatly from nascent technologies on the horizon. I mention floating offshore wind again, but just last week we announced a £20 million ring-fenced contract for difference fund for tidal. There is huge potential for Scotland to take advantage of its excellent geography. The same extends to parts of Wales and the Isle of Wight and other particular parts of the UK that have excellent tidal resources. We announced a ring-fenced pot within the next CfD auction for tidal energy.
Greg Hands
I do not think I have time—I am afraid I only have one minute, and the hon. Gentleman got a pretty fair crack of the whip earlier, to be frank.
Floating offshore wind is an area that has already inspired huge interest from developers in Scotland—hardly surprising, given the rich deep-water resource and manufacturing capability in Scotland. It is no coincidence that the world’s two largest floating offshore wind arrays, Hywind and Kincardine, have been developed in Scottish waters. The Celtic sea is also a major development opportunity.
Decisions on how specific projects can deliver local benefits are generally a matter for developers—a point raised by the hon. Member for East Lothian. However, we want developers and operators to provide community benefits consistent with relevant guidance and good practice principles, building on experience in other renewables sectors.
This debate is testament to the strong cross-party agreement that we want to leverage the UK’s world-leading offshore wind sector, to maximise the economic benefits enjoyed by our coastal communities across the UK, including in Scotland. I close by thanking the hon. Gentleman again for securing this enlightening and important debate.
Motion lapsed (Standing Order No. 10(6)).
Nuclear Energy (Financing) Bill (Sixth sitting)
Greg Hands ExcerptsThursday 25th November 2021
(2 years, 5 months ago)
Public Bill CommitteesRead Full debate Nuclear Energy (Financing) Act 2022 View all Nuclear Energy (Financing) Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 November 2021 - (25 Nov 2021)
The Chair
I welcome Members back to the line-by-line consideration of the Nuclear Energy (Financing) Bill. I will not trouble you with the parish notices that you have heard before, with the exception of reminding you that Mr Speaker has encouraged us to wear masks when we are not speaking, which I will do, but of course it is a matter for individual choice.
Clause 31
Relevant licensee nuclear company administration orders
Question proposed, That the clause stand part of the Bill.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
May I welcome you to the Chair, Mr Gray? It is a pleasure to serve under your chairmanship. I will be brief.
Clause 31 is the first clause of part 3 of the Bill, which establishes a special administration regime for relevant licensee nuclear companies, or RLNCs. In the unlikely event that such a company becomes insolvent during the construction or operation of the power plant, the Secretary of State, or the authority—that is, Ofgem—with the Secretary of State’s permission, may apply to the courts for the appointment of a special administrator. The objective of the administrator would be to ensure that electricity generation commences, or continues, until it is unnecessary for the administration order to remain in force for that purpose.
The introduction of a special administration regime will reduce the risks of customers being deprived of the benefits of the building of a nuclear power plant using a regulated asset base model compared with normal insolvency proceedings. It also reduces the risk of requiring a replacement source of electricity generation, which may further increase the cost of electricity to consumers. The clause defines the relevant terms for this part, which are necessary for the effective functioning of the legislation. I therefore urge that the clause stand part of the Bill.
Dr Alan Whitehead (Southampton, Test) (Lab)
I thank the Minister for setting out what the clause is about. Hon. Members will recognise that the clause is deeply embedded with the rest of the clauses in this part of the Bill. Further clauses spell out in greater detail what clause 31 talks about. Hon. Members will also be aware that we have an amendment to the following clause to be discussed, which, were it to be agreed, would have implications for clause 31. Although we do not wish to oppose clause stand part, we would like it to be noted that when we discuss the amendment to the next clause we will refer back to clause 31 as one of the reasons why the amendment was tabled and the difference that might make to the whole part, should it be passed.
Alan Brown
New clause 5 does relate to clause 32. I will refer to it just briefly. All I would say is that the new clause sets out considerations that would need to be addressed before anyone contemplated taking over a nuclear power station. I will return to that when we debate the new clause.
I have concerns about clauses 32 and 33, when considered together with clause 41. We will return to this, but clause 41 possibly gives the Secretary of State an open-ended blank cheque to do what he wants to keep a power station operational; I dare say that ensuring security of supply will be the excuse given.
The hon. Member for Southampton, Test, referred to the provisions relating to the special administration regime under the Energy Act 2011, which have now been applied to Bulb Energy. It would be good if the Minister could enlighten us on how those provisions will operate with regard to Bulb Energy, and how the similar provisions in clause 32 would operate if they had to be used. Also, will he commit to reviewing how the special administration regime operates in the Bulb Energy scenario, and to making improvements to the Bill, if they are required, following that process?
Greg Hands
I thank hon. Members for their speeches for and against amendment 18. I remind the Committee that a relevant licensee nuclear company, or RLNC, is one that has had its licence modified under part 1, clause 6(1) of the Bill and has entered into a revenue collection contract. An RLNC administration order is made by the court in relation to an RLNC and directs that, while it is in force, the company is to be managed by a person appointed by the court. That is defined in part 3, clause 31(1), which we have just debated.
Amendment 18 addresses the course of action that the Government must take if an RLNC administration order is in force, but an RLNC cannot be rescued or a transfer envisaged by clause 32(4) effected, namely a transfer of the undertaking of the RLNC to a subsidiary that results in a going concern. The amendment seeks to ensure that, in this scenario, the plant will commence or continue electricity generation under public ownership. The amendment would require the Secretary of State to move the assets, liabilities and undertakings of the RLNC to a Government-owned company, even if a transfer envisaged by clause 32(3) to one or more companies would achieve the objective of the administration order. The amendment would put in place a new process. Although the amendment does not address who must make the assessment that the objective cannot be achieved by the means specified, it appears to limit the available options before the power plant is moved into public ownership.
First, obviously, I thank the hon. Members for Southampton, Test, and for Greenwich and Woolwich for their clear desire to ensure that a nuclear power station will commence or continue the generation of electricity—on the face of it, that seems a very reasonable objective—and for recognising that the special administration provisions add a valuable layer of protection in this area. Ultimately, that is why they are in the Bill. However, I do not consider it necessary to place a statutory requirement on the Government to take ownership of a plant in the unlikely event that a special administration fails in its objectives, because the provisions for the energy transfer scheme, applied by clause 33, already serve this purpose. The amendment may even inadvertently lengthen the period of an RLNC administration order, as one assumes that the Government-owned company would, for example, need to apply for a new nuclear site licence.
In the unlikely circumstance where rescue cannot be achieved and it is unnecessary for the administration order to remain in place, the Secretary of State—or the authority, Ofgem, with the consent of the Secretary of State—may apply to bring the administration order to an end. Once the administration has ended, the Secretary of State may prepare a nuclear transfer scheme, which would bring the plant under the control of a public body, or, for example, the Nuclear Decommissioning Authority. In such a scenario, it is envisaged that the plant would then be decommissioned and cleaned up. However, the Government would still retain the option to move the power plant into public ownership and, if deemed in the best interests of consumers and taxpayers, commence or continue the operation of the plant.
Let me say in response to comments made by the hon. Member for Kilmarnock and Loudoun that there may be circumstances in which discontinuing the project and having it safely decommissioned is in the best interests of both consumers and taxpayers. That will ultimately be down to a value-for-money process that asks: what is the best deal here for consumers and taxpayers? The Office for Nuclear Regulation may have shut down the plant for safety reasons; there may have been an environmental or security incident, or maybe something else happened that meant that trying to make that plant commence or continue to generate electricity was not in the interests of consumers or taxpayers. It is important, then, that the Secretary of State retains discretion to act in whatever way will achieve the best outcome for consumers and taxpayers during the insolvency of a relevant licensee nuclear company.
I stress to the Committee that the likelihood of those scenarios is, of course, very remote, as indeed is the likelihood of a nuclear administrator ever being appointed. I thank the Opposition for their forward thinking and consideration of what would happen in such a scenario, but I hope that I have assured the Committee that it would not be sensible to tie the hands of the Government in such a way that they had to commit further taxpayer money to a project without being able to balance that against the merits of doing so. The amendment would create an automatic process, but the Bill provides sufficient flexibility to allow the Government to pursue the option that the amendment provides for if they consider such a decision to be in the best interests of consumers and taxpayers. I therefore ask the hon. Member for Southampton, Test, to withdraw the amendment.
Dr Whitehead
I thank the Minister for his consideration of the processes by which a power plant might need to be rescued and/or decommissioned and/or discontinued. I think he will recognise, however, that the circumstances in which he says ministerial discretion would need to be exercised are an unlikely part of an unlikely scenario of an unlikely future.
The Minister gave the example of an accident, or something else, closing the plant down, so that it would have to be decommissioned and could no longer produce power. That would need to be done anyway, even if the company was placed in Government hands, so I do not think that those circumstances affect the path I have set out relating to Government interest in a plant that could not be bought out of administration because it was a going concern, or because it had been sold to another company—unless the Minister has it in mind that the sale of a nuclear company to another company would be done on a peppercorn basis, in which case the nuclear plant would lose all the value that the bill payer had invested in it.
In any event—this is what concerns me about the intervention by the hon. Member for Kilmarnock and Loudoun—the whole purpose of the RAB model is to produce a working nuclear plant that was invested in up front by members of the public and bill payers. That plant would then produce power as a reward for that up-front investment. If we easily closed a plant down because it was insolvent, we would be overthrowing the whole purpose of the RAB scheme, which is for the public to get something back, and we would be back to the instance that we talked about early on in Committee.
Dr Whitehead
I have a brief question for the Minister on clause 33(7)(b), concerning the application of section 171(1) of the Energy Act 2004. It says:
“omit the definition of ‘non-GB company’.
I am slightly mystified as to why that is in the clause, because so far as I can see, the definition in section 171(1) of the 2004 Act of a non-GB company is perfectly reasonable and should continue to exist. Perhaps the Minister can shed some light on that.
Greg Hands
I have to confess that I am not able, at this moment, to shed light on subsection (7)(b) and why section 171 of the 2004 Act should be so amended. I pledge to write to the hon. Gentleman—I will copy in Committee members—to clarify why omission of that part of the 2004 Act is proposed.
Dr Whitehead
I suspect that the Minister may also want to write to me on this. Paragraph 4 deals with consequential repeals. I am familiar, as I am sure everybody is, with the works at the back of any Bill amending various Acts to bring them in line with the amendments made in the Bill, or in some instances repealing measures that are replaced by provisions in the Bill. I have no dispute with the way that various Acts are to be amended in the schedule.
However, the consequential repeals—I have tried to follow them through in the way I described to the Minister in our recent discussion on form guides—include repeals of section 6(10)(b) of the Smart Meters Act 2018 and section 11(2) of the Domestic Gas and Electricity (Tariff Cap) Act 2018. These actually do the same sort of thing: delete sections of various Acts regarding licence modifications. Having looked through how these two provisions apply and why they are being repealed, I cannot see what on earth they have to do with nuclear energy financing. While I am sure that this would not have anything to do with somebody trying to put a couple of repeals in the back of a Bill even though they are not strictly in scope, I would like some assurance that these repeals are actually relevant to the forthcoming Act. If they are relevant, how? Why is it necessary to repeal two provisions that, on the face of it, do not appear to have anything to do with the Bill? I am sure the Minister will be happy to write to me to set out why that is the case.
Greg Hands
Yes, I think I will write to the hon. Gentleman, if I may. I am told that it is to remove a double label in the legislation, so it is purely a tidying up exercise. I will write to him, copied to members of the Committee, and for convenience I may combine it with the letter mentioned in the previous debate. It would be convenient for the Committee to have that letter well in time for Report, in case Committee members wish to consider following up with an amendment on Report.
Question put and agreed to.
Schedule accordingly agreed to.
Clauses 43 to 45 ordered to stand part of the Bill.
New Clause 1
Report on expected costs
“(1) Prior to exercising the power under section 6 (1), the Secretary of State must lay a report before Parliament.
(2) The report must set out—
(a) the expected overall capital cost of the prospective projects;
(b) the expected up-front cost of the prospective projects.” —(Alan Brown.)
This new clause would require the Secretary of State to set out (a) the overall capital cost; and (b) the expected up-front cost of the prospective projects prior to exercising the power under Clause 6 (1).
Brought up, and read the First time.
Greg Hands
As the hon. Gentleman just explained, new clause 1, tabled by himself and the hon. Member for Aberdeen North, seeks to place additional reporting requirements on the Secretary of State. In particular, it will oblige the Secretary of State to lay a report before Parliament outlining expected overall capital and up-front costs of the project, before the licence modification powers are exercised. I want to thank the hon. Member for engaging with the substance of the Bill. He is right that I challenged him on the first day because he had not tabled any amendments; now he duly has, and it is our job to debate and scrutinise those amendments.
While we agree that it is important for the Secretary of State’s decision making with respect to a RAB to be transparent, a requirement to publish details of a negotiated deal prior to the licence modifications could jeopardise our ability to complete a successful capital raise—that is the point here. That could in turn impact our capacity to secure value for money for consumers; at the end of the day, that is what this Bill is all about. I want to reassure the hon. Member—
Alan Brown
Can the Minister explain more fully why giving detail on what the anticipated capital costs of the project are will somehow endanger the sign-off of that deal?
Greg Hands
At the point of the licence modification, we then go into the raising of the capital. Raising the capital may be more difficult, or be jeopardised, if that information has been published. It must be in the best interests overall for the Secretary of State to make the judgment as to how they can best effect best value for money for consumers, and ultimately for the sake of the taxpayers.
Alan Brown
I am still not clear how putting in the public domain what the capital cost is would make it difficult for somebody to secure private investment. First, they will have already looked at securing investment; and secondly, once the costs are known it would surely be easier for them to secure additional private investment.
Greg Hands
The hon. Gentleman may be mixing up what is in the public domain and what is part of the negotiation. You will know, Mr Gray, that it is important for the Secretary of State to be able to, in the negotiation, get the best deal—that is what we are looking for here. That is the whole purpose of the legislation; the purpose of the RAB model is to save consumers money overall. It responds to the National Audit Office report that mentioned Hinkley Point C, and said that there ought to be the ability to save money overall by sharing costs between consumers and taxpayers. That is what the RAB model is seeking to do. What we are debating overall with this legislation is how to best effect a saving for the consumer, which we estimate to be in the region of £30 billion overall. That is a very effective saving for consumers.
I would like to reassure the hon. Member that the allowed revenue for the project will be calculated by the authority throughout the construction period, thus helping to ensure that the company is spending money efficiently and economically. In response to that part of the new clause looking for detail on capital costs, these will be a key input to a project’s value for money assessment as it goes through relevant approvals. As set out in our consultation on RAB, when assessing the value for money of new nuclear projects, the Government would be focused in particular on whether the project was expected to contribute to the target of net zero emissions by 2050 and deliver security of supply at a lower total electricity system cost for consumers than alternatives without the project, so additional considerations do come into play.
In response to the part of the new clause that asks about the up-front costs of a project, we have suggested elsewhere that any initial costs to the project financed under a RAB model would be very small. For example, a project beginning construction in 2023 would cost only a few pounds per dual-fuel household in this Parliament.
The new clause is not necessary, given the steps that we have taken elsewhere in the Bill to ensure that the modification procedure and the designation process that precedes it are as transparent as possible. We believe that sufficient transparency is already embedded in the Bill. The Secretary of State will be obliged to publish the designation statement setting out how they will assess nuclear companies against the designation criteria, including value for money, for a RAB project. The Secretary of State will also need to consult with a list of key independent bodies, including Ofgem as the RAB regulator, the UK’s nuclear and environmental regulators and the devolved Administrations, on their draft reasons for project designation, which will include the Secretary of State’s assessment of the project’s value for money. They will then be obliged to publish these reasons at the point that a project is designated.
The Secretary of State is also required to consult named persons prior to making any licence modifications, which will allow expert voices to input on whether the licence modifications are effective in facilitating investment. Following the consultation, the Secretary of State must then publish the details of any modifications made as soon as reasonably practicable after they are made. This approach—of consultation followed by publication—is well precedented in other licence modification powers.
I turn to a couple of points raised by the hon. Member for Kilmarnock and Loudoun. He asked some questions about potential the savings of Sizewell relative to Hinkley. First, of course we are expecting there to be savings—learnings from the Hinkley process to be transferred to the Sizewell process. Secondly, going back to what I said earlier, we would expect that the RAB model would also lead to savings overall for the consumer over the life of the plant.
The hon. Member then asked about the strike price reduction. Under the RAB model, it is not appropriate to talk about a strike price, because it is a fundamentally different financing construct, without a strike price, which is applicable under a contract for difference regime. It would not be appropriate to use a strike price in this case. It is fundamentally different.
Alan Brown
My point was that part of the original strike rate deal agreement for Hinkley Point C was that if Sizewell C followed on, there would be a consequential reduction in the strike price for Hinkley. I know this is about a RAB model; but I am asking, will that consequential price decrease in the strike rate nevertheless be made—or, because of the RAB model, does Hinkley remain at £92.50?
Greg Hands
The hon. Member raises a very good question. The negotiation is ongoing at the moment with Sizewell. I reiterate the point made by the Secretary of State that the learning process from Hinkley is ultimately transferable to Sizewell. There are also aspects of the supply chain that were established for Hinkley that are transferable to Sizewell. If I understand correctly, there have been savings during the construction of Hinkley, with learnings from the earlier part of the construction going into the later part. We expect those savings to go forward to Sizewell. However, I stress again that comparing a RAB model strike price with the strike price of a contract for difference is not appropriate. There is no strike price with a RAB model.
By following this model and allowing the Secretary of State to lead on negotiations, as is standard for a project of this type, we will be able to achieve the best deal for consumers and taxpayers. I hope that demonstrates to hon. Members the Government’s commitment to transparency in the licence modification and the processes that support it. I hope they will withdraw the amendment.
Alan Brown
I have listened to the Minister and I am still not convinced in any way that what he outlined will provide the transparency that I am looking for. Again, the argument is, in terms of construction costs, “Well, it is only a few pounds per dual-fuel household per month for the duration of this Parliament.” That is one of the points I keep returning to. “We are talking about just a few pounds per month per consumer” is a way of trying to minimise the actual costs that are being committed, and I do not think it is sufficient. That is why I want to see much more transparency on the actual costs that are committed.
It is also interesting that the Minister made an assessment about security of supply and the whole-system cost, and looking at the value for money of a nuclear power project on that basis. I would like to understand a bit better how the Government actually undertake that. I refer him to the Imperial College report that demonstrated that using pumped storage hydro would save £690 million a year compared with nuclear energy. So, clearly, it is all about how we look at the metrics and which other technologies we consider when looking at the whole system and looking ahead to 2050.
I will not press the new clause to a vote at the moment. We will look at bringing back something on Report to try to encapsulate what we are looking for in terms of that transparency. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Report on agreed strike rate
“(1) When granting an electricity generation licence to a nuclear company in relation to a nuclear
energy generation project, the Secretary of State must lay a report before Parliament.
(2) The report under subsection (1) must set out—
(a) whether the Government has offered the nuclear company a guaranteed strike price for the sale of electricity onto the National Grid;
(b) the strike price included in any such arrangement;
(c) the duration in years of any such arrangement.”—(Alan Brown.)
In respect of new nuclear projects, this new clause would require the Secretary of State to publish details of any agreement reached offering a guaranteed strike price for the sale of electricity onto the National Grid.
Brought up, and read the First time.
Alan Brown
I beg to move, That the clause be read a Second time.
I will be very brief because most of my new clauses are quite self-explanatory. This new clause seeks full clarity on any commitments that we undertake in a new nuclear project. It has previously been suggested that once a new power plant is operational, the actual cost of the electricity will be deducted from the RAB payments and, arguably, somehow the RAB payments could then be nullified by that arrangement. I do not see how that is credible.
If we are entering a 60-year contract to pay back a lot of the capital cost of the project, it does not make sense that the electricity would work to counterbalance that. I am concerned that a strike rate or some sort of minimum floor price will be agreed with a company, else it might not want to commit to the £20 billion or £20 billion-plus capital expenditure. That is what the new clause is all about. If there are any agreements on the price for the sale of electricity that is baked into contracts or negotiations—although it might not be called a strike rate—we need to understand that. Again, we need to have that full transparency on the costs that will be committed to consumers’ bills.
Greg Hands
I thank the hon. Member for Kilmarnock and Loudoun for probing, but I will briefly point out two reasons why we cannot include his new clause in the Bill. First, the new clause makes reference to “granting an electricity licence”; to be clear, the Bill does not give powers to the Secretary of State to grant any licences but, instead, to amend existing generation licences. Purely on language terms—important terms—we cannot accept the new clause. Secondly, the new clause proposes that the Secretary of State must report on any strike price agreed in relation to a project and provide further detail on that price. As I have already said, “strike price” is not an appropriate term because there is no strike price in a RAB model. For those reasons, I ask that the hon. Gentleman withdraw his new clause.
Greg Hands
I thank the hon. Gentleman for tabling the new clause. He is right that, in my view, it cannot be accepted into the Bill because it refers to granting rather than amending a licence; however, I welcome his attention to the costs of decommissioning, which is an important issue across all these projects. It is important to note that the Energy Act 2008 legislated to ensure that the operators of new nuclear power stations have secure financing arrangements in place to meet the full costs of decommissioning. Nothing in the Bill would alter in a negative way the provisions of the 2008 Act.
Under the 2008 Act, operators are required to submit a funded decommissioning programme to the Secretary of State for approval. I stress to the Committee that it is a legal requirement to have an approved FDP in place before any nuclear-related construction can begin on site. When making a decision on an FDP to approve, reject or approve with conditions, the Secretary of State must have regard to the FDP guidance, which sets out the guiding factors that the Secretary of State must be satisfied are met. The guidance stipulates key documentation and so on, and consultation with the ONR, the Environment Agency and Ofgem.
All of that is laid out in the 2008 Act, so I hope to have demonstrated that the robust FDP legislation, combined with the RAB model and our insolvency measures, will ensure that the costs of decommissioning are met. For all those good reasons, in addition to the reason that the new clause talks about granting rather than modifying the licence, I ask that the hon. Gentleman withdraw the new clause.
Alan Brown
I will not press the new clause to a vote. Equally, I am not convinced that there is enough transparency on the decommissioning costs. It is certainly something that I would like to revisit. I understand what the Minister says about the process, but of course we have not had a chance to test how robust it is. It has been applied to Hinkley, but decommissioning is some way off. We know how much liability the taxpayer has at the moment in terms of the existing decommissioning, which it is estimated will cost £132 billion over the next 100 years. We have an astonishing nuclear waste legacy that the taxpayer is having to pick up. That is why I am really keen to explore the robustness of the process, and more importantly what costs there are, but I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 4
Report on proposed payments to a nuclear administrator or relevant licensee nuclear company
“(1) Prior to making payments for the purpose described in section 41(2)(c), the Secretary of State must prepare and publish a report on the proposed payment and must lay a copy of the report before Parliament.
(2) Before the payment is made, the report under subsection (1) must be approved by the House of Commons.”—(Alan Brown.)
This new clause would require any payments under clause 42(2)(c) to be approved by the House of Commons before being made.
Brought up, and read the First time.
Greg Hands
New clause 4 would add another new report for the Secretary of State to lay before Parliament, as the hon. Gentleman said, to detail the funding that the Secretary of State would propose to make to a nuclear administrator or relevant nuclear licensee company, and further requires that the report be approved by the House of Commons. As I have already made clear, I think the clear and transparent process that we have already laid out in the Bill achieves the objective overall, but in this particular case such an amendment could have negative implications for the operability of the SAR, or the special administration regime. This may place additional risk on consumers being unable to realise the benefits of the plant that they have contributed to building and significant sink costs. Of course, these are powers that we hope the Secretary of State will never have to use, and money that will never need to be spent.
As well as the need for pace, there is also a need for all relevant parties to be comfortable that the SAR is deliverable. In order to take on the administration appointment, the administrator would need to be assured that funding in the form of loans, guarantees or indemnities would be available from day one of the SAR. That is a crucial part of how a SAR regime operates. The administrator must know that funding is available from day one. The proposed amendment could introduce a degree of uncertainty over the funding pending a report from the Secretary of State to be deposited in Parliament, such that the administrators might be reluctant to take on the appointment.
I remind the House that the objective of the RLNC administrator is to commence or continue the generation of electricity, and we expect that in doing so the administrator must be able to act swiftly. It is imperative that an administrator has quick access to the funding required to ensure that such outages do not occur—we are talking, after all, about a nuclear power plant—and security of supply is maintained. More importantly, such swift action must also be conducted safely, and any lapse in funding could result in safety-critical operational expenditure not being spent. I therefore consider that such a reporting obligation on the Secretary of State would hinder the effectiveness of the special administration regime, so I ask the hon. Gentleman to withdraw the motion.
Alan Brown
I really do not buy the argument that getting approval for expenditure somehow jeopardises getting that expenditure and getting the plan operating. It makes no sense whatever. I think the Minister just wants to retain the open chequebook policy that allows the Secretary of State to do whatever he wants, but he argued it was necessary for security of supply.
It feels as though the end is in sight. I am not going to press this to a vote, given that we will simply lose it, so I am happy to withdraw, but, again, I would like to reconsider it because, to repeat myself, I want greater clarity and transparency on the costs that could be committed in future. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 5
Report on transfers falling within section 32(3)
“(1) Prior to a transfer falling within section 32(3), the Secretary of State must lay a report before Parliament.
(2) The report under subsection (1) must set out—
(a) the liabilities associated with the nuclear company;
(b) any estimated costs of getting the plant operational again if it has been temporarily shut down;
(c) the estimated lifespan of the nuclear power station; and
(d) decommissioning costs and confirmation of any funding provided by the nuclear company for this purpose.”—(Alan Brown.)
This new clause would require the Secretary of State to publish a report on the matters listed prior to any transfers falling within clause 32(3).
Brought up, and read the First time.
Alan Brown
I beg to move, That the clause be read a Second time.
Lastly and briefly, new clause 5 ties in with the debate that we had earlier on amendment 18 to clause 32. These are the key considerations that the Government would need to consider before committing to maintaining the operation of a nuclear power plant. In the case of a company becoming insolvent, it cannot be taken over as a going concern and cannot be transferred. In terms of the going concern aspect, what liabilities are associated with the nuclear costs? Obviously, there are the actual costs of getting the plant operational again if it has had to shut down. The estimated lifespan of a nuclear power station and the decommissioning costs and confirmation of any funding that is provided by the nuclear company for that purpose again gets into the value for money argument and making a sensible decision. Do the Government take over the operation of the plant, for example, or do they start the decommissioning process and shut it down to get best value for the taxpayer?
Greg Hands
I thank the hon. Member for Kilmarnock and Loudoun for describing his proposed new clause 5. It is important to understand that the new clause, like the previous ones, would oblige the Secretary of State to lay before Parliament a report, in this case detailing the liabilities associated with a nuclear company, the estimated costs of restoring operation in the event of a shutdown, the estimated lifespan of the nuclear power station and the decommissioning costs of the project.
Obviously, I welcome the hon. Gentleman’s desire to increase transparency and the robustness of the Bill. However, I would like to bring to the Committee’s attention that it is of course the court that has the final say, as it is the court that appoints the time at which the energy transfer scheme is to take effect, following approval by the Secretary of State. It is a matter for the court. Therefore, the proposed reporting obligation on the Secretary of State must be considered unnecessary, as sufficient transparency is already offered through the court process. The courts will make an informed decision and will have ultimate responsibility for the decision on when an energy transfer shall take effect.
The proposed reporting requirement might oblige the Secretary of State to publish sensitive material, including of a commercially sensitive nature, which could have implications for the effectiveness of the RLNC administration order, the ability to achieve the objective and also to bring the administration to an end. It might well act against the public interest. The new clause risks the failure of the RLNC administration order’s objective and considerable sunk costs to consumers. I therefore ask the hon. Gentleman to withdraw the motion.
Alan Brown
In each response, the Minister says that he welcomes my desire for greater transparency, but he then rejects all my requests for greater transparency, so it does not quite feel like that. Presumably it means that we will be able to agree something on Report to get the transparency that we desire. Again, I am not convinced that doing this report would jeopardise the process, but I am happy to withdraw the new clause at the moment and to try to find ways to get the answers and transparency that I am looking for. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Question proposed, That the Chair do report the Bill to the House.
Greg Hands
On a point of order, Mr Gray. I would like to thank you and Ms Fovargue for your excellent chairing of the Committee, getting us through this important process efficiently and effectively. This has been a very interesting debate on a very interesting Bill on a very interesting topic, which attracted broad interest across the House. I have to confess that this has none the less been a relatively uneventful Committee, but for connoisseurs of the topic, it will provide many future years of reading as to how nuclear financing was scrutinised by the House of Commons so effectively and in significant detail.
I thank the excellent witnesses whom we heard from last week and all members of the Committee for their constructive debate. That has allowed the Bill to go through significant scrutiny, and facilitated important discussions. I also thank the Whips—the Whips must always be thanked—on both sides for their efforts and their effective management of the time. I offer my thanks to the Clerks, the Hansard reporters, the Doorkeepers and, indeed, all the parliamentary staff, and to my excellent team of Department for Business, Energy and Industrial Strategy officials, for the smooth proceedings and ensuring that we have all been well looked after and have finished with the Bill well scrutinised, but in good time. I look forward to the next stages of proceedings on the Bill and the continued insight from colleagues across the House.
Dr Whitehead
Further to that point of order, Mr Gray. I would like to associate myself with the Minister’s remarks about the passage of the Bill and with the thanks that are due to the many people who took part in its processes, from witnesses to hon. Members here today. A number of them were, I know, somewhat tested on occasion by the detail into which some amendments went. But overall, we have had good scrutiny of the Bill, facilitated by the courteous way in which the proceedings were conducted. I thank the Minister for those courtesies in how our debates proceeded, and I thank you, Mr Gray, for your excellent chairing of our proceedings.
Tidal Energy Generation: Ringfenced Funding
Greg Hands Excerpts(2 years, 5 months ago)
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The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
I congratulate the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) on securing this important debate, and I welcome his support for the UK Government. He said that he came into the Chamber and, unusually, wanted to support the UK Government, and I am very grateful for that. I very much welcome that change of tack.
Marine energy, and tidal stream energy in particular, is of great interest to the Government. Our theme today is the merits of ringfenced funding for the deployment of tidal stream generation, and I shall say first that I agree entirely with the right hon. Gentleman that tidal stream is a homegrown industry of considerable potential. We have Europe’s and probably the world’s foremost tidal and wave energy testing centre—the European Marine Energy Centre on Orkney. We have other exciting testing centres and marine energy hubs burnishing their reputation on Anglesey, the Morlais project, and on the Isle of Wight, with the Perpetuus Tidal Energy Centre. That cropped up two weeks ago in Department for Business, Energy and Industrial Strategy questions, when my hon. Friend the Member for Isle of Wight (Bob Seely) asked about it. We have a raft of brilliant developers designing and building tidal stream devices in the UK, notably in Edinburgh, in Leith.
The right hon. Gentleman said that the UK Government funding of £20 million has come “only now”, but the picture is so positive, in large part because we have under successive Governments provided more than £175 million—not just the £20 million announced yesterday by the Prime Minister—in innovation funding to the marine energy industry in the past 18 years, of which more than £80 million has come since 2010. So when he talked about 20 to 30 years ago, this is exactly what we have been doing. Thanks to the extensive support afforded under the renewables-obligation mechanism, we were able to build in 2018 the largest tidal stream generating array in the world in the fast-moving waters of the Pentland firth.
It is fair to say, then, that the Government have a sound track record of supporting the tidal stream industry and helping to get it into the position it is in today, on the cusp of commercialisation and with good export potential. This week, however, is an occasion for looking to the future. We were all delighted to hear the Prime Minister announce yesterday at Prime Minister’s questions that the Government will establish a ringfenced budget of £20 million for tidal stream developments in pot 2 of the upcoming fourth contract-for-difference allocation round. The CfD scheme is our flagship mechanism for supporting the cost-effective delivery of renewable energy. Our decision this week will ensure that the nation’s tidal stream innovators get the opportunity they need to bring their cost of energy down, to ramp up the UK’s capture of the abundant energy flowing along our coastlines and to learn the valuable and exportable lessons that come with being the first in the world to deploy a cutting-edge technology at scale. The decision has been warmly welcomed.
Richard Graham
The Marine Energy Council has said clearly that it is grateful to Ministers for having listened, understood and acted, and so am I. There is now an opportunity for the sector to make a success of delivering on the funding that my right hon. Friend the Prime Minister announced and then of ramping up domestic capacity. At the same time, as the Prime Minister’s trade envoy there, I will continue discussions with Indonesia about perusing potential opportunities. Will my right hon. Friend accept an invitation to come and meet members of the sector and interested colleagues at the next meeting of the all-party parliamentary group on marine energy before the House rises?
Greg Hands
I gladly accept my hon. Friend’s invitation to meet. He does a brilliant job as the chair of that APPG and he does an amazing job as the Prime Minister’s trade envoy to Indonesia. He mentioned one or two of the warm words of congratulation on the announcement yesterday. RenewableUK said it was “a major step forward” and that it
“puts us in pole position to”—
lead—
“the global market in due course.”
RenewableUK also said it would
“unlock private investment and secure green jobs”,
while Neil Kermode of the European Marine Energy Centre on Orkney said:
“This support for the marine energy industry is absolutely pivotal”.
I appreciate the right hon. Member for Ross, Skye and Lochaber having brought this topic to the House. He perhaps might have left one with the impression that just he had made representations to the Prime Minister, but I checked back and found representations from my right hon. Friends the Members for Portsmouth North (Penny Mordaunt) and for Preseli Pembrokeshire (Stephen Crabb), and from my hon. Friends the Members for Meon Valley (Mrs Drummond), for Rother Valley (Alexander Stafford), for Rugby (Mark Pawsey), for Banff and Buchan (David Duguid), for Isle of Wight (Bob Seely), for West Aberdeenshire and Kincardine (Andrew Bowie), for Moray (Douglas Ross), for Ynys Môn (Virginia Crosbie), for Truro and Falmouth (Cherilyn Mackrory), for Gloucester (Richard Graham), for Sedgefield (Paul Howell), for Blyth Valley (Ian Levy), for Workington (Mark Jenkinson), for North Cornwall (Scott Mann), for St Austell and Newquay (Steve Double), for North Devon (Selaine Saxby) and for Barrow and Furness (Simon Fell).
I heard some doubt from the right hon. Member for Ross, Skye and Lochaber as to whether the £20 million per annum is a substantial-enough sum to put the tidal stream sector on its best footing. Indeed, the right hon. Gentleman suggested that £71 million is the minimum required for the job. I am afraid I cannot agree with him on that, because £71 million would mean the awarding of a contract to virtually every developer who shows interest in the auction as long as they bid at a level just a single penny under our stated maximum price. He and I worked together in the City of London in our time. He will know from his knowledge of financial markets—I know that he has since rebranded himself as the simple crofter—that there is no way to run an auction of that sort in that way.
Ian Blackford
I hope that we can dispense with the silly gibes.
What I explained to the Minister was that £71 million would justify 100 MW of output. Perhaps he can explain what he expects to see from the £20 million. Crucially, I did point out that MeyGen has consent for 80 MW and that, within the envelope of that £71 million, it could have been fully exploited and ultimately ramped up to 400 MW. As things stand, MeyGen 2 cannot be fully exploited and that is the impact of not going to the £71 million.
Greg Hands
The right hon. Gentleman is mixing up funding with the process of an auction. It is a contract for difference auction. The idea of £20 million being available is that it allows us to have a competitive process between all of the different parties that may be interested, and then to make sure that at least £20 million goes towards these projects. It is not the same as granting funding, which is what I think he is looking for, of £71 million. It is a competitive auction process. The purpose of the CFD scheme is to support and push for—
Greg Hands
I will try to fit in a response to the right hon. Gentleman.
The purpose of the scheme is to support and push for only the most promising and competitive projects in the offing. My Department’s analysis shows that £20 million is optimal for that purpose and that a larger ring-fenced budget would serve neither the interests of the electricity bill payer, nor the interests of the sector itself, which must be pushed to innovate and find ways of bringing down its costs. So, yes, the Government have, this week, delivered for the burgeoning tidal stream industry and it is for the developers now to really push on and make good on their promises and their potential to demonstrate the value for money and the scalability that we need to see from our renewable energy technologies as we transition to an efficient and net zero-ready power sector.
We all remember the remarkable fall in the cost of offshore wind energy, to which the right hon. Gentleman referred in his speech, once it was able to take full advantage of the contracts for difference scheme. We have, this week, given the tidal stream sector the chance to push on and try to do the same. It will all be to our benefit and to the benefit of our planet and environment if the sector succeeds in this endeavour.
Question put and agreed to.