Energy Update

Debate between Greg Hands and Alan Brown

Monday 5th September 2022 Commons Chamber

[Mr Deputy Speaker (Mr Nigel Evans)]

I call the SNP spokesperson.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The only aspect of this rehashed statement to welcome is the acknowledgment from the Minister that the current proposals are insufficient to avoid a catastrophe. What we should be getting today is a proper updated statement on energy security and a net zero update that would reflect additional investment in renewables such as pumped storage hydro, Peterhead carbon capture and storage, what is happening with the Rough gas storage facility, the decoupling of renewables from gas, and grid upgrades.

The reality at the moment is that 6.5 million households are in fuel poverty, and if the energy cap increase goes ahead as planned, then 9 million households will be in fuel poverty. What is the Minister’s red line for the acceptable number of households that will be left in fuel poverty? What does he say to the businesses that have had no support to date? Does he agree with Make UK, which says that 60% of manufacturing businesses are now at risk? What assessment has he made of the impact on agriculture and the food and drink industry, and does he agree that the tax cuts proposed by the incoming Prime Minister will adversely help the rich and do nothing for the lowest-paid workers? The incoming Prime Minister has talked of scrapping the green levy. Has he explained to the incoming Prime Minister that there is no single green levy, and that doing so would not actually be a solution for reducing household bills?

On nuclear, will the Minister confirm that Hinkley Point C is now nearly 50% over budget and is years late, and that EDF now wants a delay to the payment start dates? For Sizewell C, will he confirm that the upper estimate for construction and finance is £63 billion? That is £63 billion to be added to bill payers’ bills, and it will not actually reduce energy bills in the future. In 2019, the Nuclear Decommissioning Authority’s estimate for the nuclear clean-up cost was £131 billion. When will we get an updated figure? Surely that in itself indicates that we need to end this nuclear folly and madness.

Finally, does the Minister agree that his Government need to introduce a freeze in the energy cap and urgent support for businesses, and to review budget allocations to councils and devolved Governments, so that energy cost pressures on schools, the NHS, transport and care services can be properly funded during this time of emergency?

[Greg Hands]

I commend the hon. Gentleman on his ability to squeeze in so many questions. On additional investment in renewables, the Government are moving to annual allocation rounds on our renewable options. That is a strong achievement. The Government have invested a huge amount in renewables, particularly through the contracts for difference system, which I would urge him to support. He will know that we made an announcement recently on where we are with Centrica and Rough gas storage, and that continues to proceed.

I remind the hon. Gentleman that fuel poverty is a devolved matter, so he may wish to have a word with the Scottish Government, which I have reason to believe he may be close to. He also mentioned businesses, and I remind him that the cost of energy for businesses is right at the top of the in-tray of our new Prime Minister. He mentioned the food and drink sector, and I am sure that is also the case for that sector. He asked about tax, and that will be a matter for the Treasury and for future announcements.

The hon. Gentleman mentioned nuclear budgets, and I am getting a bit fed up with the SNP’s obsessive anti-nuclear behaviour. It is exactly that kind of no-saying that got us into the problem of not having enough nuclear power in this country. Thankfully, earlier this year the Prime Minister rectified that with the British energy security strategy, making sure that we get to 24GW of nuclear power by 2050. As for the cost of Hinkley Point C, the hon. Gentleman will find that the strike price, which was negotiated by the then Chancellor of the Exchequer, George Osborne, and by me, as Chief Secretary to the Treasury, compares very favourably with energy prices today.

Finally, I think I heard a complaint from the hon. Gentleman about budget allocations to councils, which was extraordinary, coming from the SNP. It is the party that has been hammering council budgets in Scotland, and then expecting them to collect the rubbish with vastly decreased levels of budgetary contribution. I again urge him to have a word with his friends in Edinburgh who are running the Scottish Government, to see whether they might be able to do something to improve the budget allocations for Scottish councils.

Draft Electricity and Gas (Energy Company Obligation) Order 2022

Debate between Greg Hands and Alan Brown

Monday 18th July 2022 General Committees

[The Minister for Energy, Clean Growth and Climate Change (Greg Hands)]

I beg to move,

That the Committee has considered the draft Electricity and Gas (Energy Company Obligation) Order 2022.

It is a pleasure to serve under your chairmanship, Mr Sharma. This year, we have witnessed an extraordinary and global increase in the cost of energy. The Government recognise that millions of households across the UK need further support with the cost of living this year, which is why we announced additional support worth over £37 billion, including targeted help for those on the lowest incomes.

In that context, the energy company obligation, or ECO, scheme remains key to tackling fuel poverty and helping low-income households with their energy bills. In the sustainable warmth strategy 2021, the Government committed to extending, expanding and reforming the scheme in line with our statutory fuel poverty target. Since 2013, the ECO scheme has ensured much-needed support for low-income households to improve the energy efficiency of their homes. Over the last decade, since it began, it has delivered over 3.5 million energy efficiency and heating measures to around 2.4 million households.

The draft order provides for that expanded and reformed energy company obligation scheme in Great Britain until March 2026, and therefore succeeds the previous energy company obligation order in Great Britain. Its main provisions are, first, the scheme’s extension by four years, to 2026, and expansion from around £640 million to around £1 billion per annum. Secondly, there is an increased focus on support for low income and vulnerable households in the least efficient homes. Thirdly, mandatory minimum energy efficiency improvements will be required. Under the scheme, those in energy performance certificate bands F and G—the least energy efficient homes—will be improved to a minimum band D. B and D and E homes, in turn, will be improved to a minimum band C.

Fourthly, the introduction of a new minimum requirement will see at least 150,000 energy performance certificate band E, F and G private-tenure homes upgraded. Fifthly, the solid wall minimum requirement will ensure that solid wall insulation is installed in at least 90,000 homes. The draft order introduces minimum insulation requirements for all homes receiving any heating measure, subject to certain exceptions, to encourage a fabric-first approach. Broken boiler replacements will continue to be limited but available under the scheme, capped at 20,000 homes, to encourage the transition to renewable heating and align with the Government’s long-term plan for reaching net zero.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I understand what the Minister says about capping the number of gas boiler replacements, which will transition us away from reliance on fossil fuels, but what happens if that cap is reached? How will costs and alternative solutions be managed for other customers who have broken-down gas boiler systems?

[Greg Hands]

If I understood the hon. Gentleman’s question correctly, it is about dealing with people who have no choice but to have a new gas boiler, and what the cost of that might be. We recognise that some homes will not be suitable to be upgraded to something like a heat pump. That is one of the reasons that we are putting these measures in place: to ensure that funds are available to help those who need a boiler upgrade. However, we are saying that ensuring that that is available is not the priority of the Government going forward. The priority is to align with our net zero requirements and make sure that people can be upgraded to heat pumps wherever possible.

[Alan Brown]

What is to prevent companies taking the easy option of the gas boiler replacement to get up to the 20,000 threshold? I am trying to see what checks and measures are in place to make sure that gas boilers are installed only when they are really required and other options have been exhausted.

[Greg Hands]

It would be a matter for the supplier to make sure that the energy efficiency upgrade is carried out in accordance with the scheme and Government policy. It will ultimately be a matter for the supplier under the ECO4 regulations. The Government will of course speak with suppliers to ensure that they are delivering according to the Government requirements. What we are saying is that we are not encouraging gas boiler upgrades, but that if there is no other available source of heat and a consumer is vulnerable, there should be the possibility of upgrading the gas boiler.

The scheme’s eligibility criteria are reformed, placing greater focus on households on the lowest incomes. Households in receipt of means-tested benefits will continue to be eligible. The proportion of a supplier’s obligation that can be delivered under the flexible eligibility element of the scheme will increase to 50%. Under that, multiple options are introduced to encourage improved targeting of low-income and vulnerable households that may not be in receipt of benefits. Those flexible eligibility provisions will enable local authorities, energy suppliers, Citizens Advice and the NHS to work together to identify households vulnerable to the effects of living in a cold home.

A new scoring framework will apply to incentivise multiple measure delivery, along with a series of score uplifts to steer measures and delivery where they are needed most. Installation quality will be governed under the Government-endorsed TrustMark compliance and certification framework. As part of that, the quality of installations, alongside a whole assessment of the property, will continue to rely on independent industry standards, the publicly available specifications PAS 2030 and PAS 2035.

The impacts will be as follows. Thanks to the reforms, we estimate that some 800,000 measures will be installed in around 450,000 homes. Of those 450,000 homes, around 360,000 will be upgraded to EPC bands B and C, removing those households from fuel poverty. We will continue the Government’s excellent record of improving the energy efficiency of people’s homes. The percentage of homes in Great Britain in energy efficiency bands A to C has risen under this Government from 10% to 46% of the total housing stock. That is a quadrupling of the number of homes in the most energy-efficient categories.

Those measures are expected to save £300 on average over the lifetime of the measures and up to £1,600 for those living in the least energy-efficient homes. However, those savings could average around £600 next winter, given future prices—or prices according to the futures market, I should say. That will provide crucial, long-term help when it is needed most this coming winter. To help deal with what might seem to be a gap between the ECO schemes—between the end of the ECO3 at the end of March this year and the start of the ECO4—the order permits measures installed since 1 April to count toward the suppliers’ obligation target.

Those measures are split into two elements. First, there is interim delivery for measures installed between 1 April and 30 June—so over the last three months—to slightly amended ECO3 rules. Secondly, there is early delivery for measures installed to the new rules. Nearly 33,000 measures have already been installed since 1 April. The fact that there might appear to be an interregnum between the ECO3 and ECO4 schemes is no cause for concern. The 33,000 measures have been introduced in those three months will be accounted for either in the ECO3 scheme for the interim delivery or early delivery under ECO4 in that seamless process.

The Government held a consultation on the reforms last summer and published a response in April. The majority of consultation responses supported extending and expanding the scheme as well as the proposals for reform. Government are proceeding with the main proposals, with some key changes in the light of the response received and the final impact assessment. One change is that we have increased the minimum requirement for bands E, F and G from 100,000 to 150,000 private tenure homes.

More of the least energy-efficient properties must be upgraded, focusing more help on those with the highest energy bills. We are providing extra incentives for the installation of measures in rural off gas grid areas in Scotland and Wales, which will be of particular interest to Members representing rural parts of Scotland and Wales. Wales has the largest percentage of homes off the gas grid, and that is the subject of frequent questions to the Department for Business, Energy and Industrial Strategy from my hon. Friends the Members for Brecon and Radnorshire (Fay Jones) and for Montgomeryshire (Craig Williams). They are specific measures in place to help rural homes that are off the gas grid in Scotland and Wales.

England has the separate home upgrade grant, so is covered by an existing scheme. That will account for the extra costs of delivery.

--- Later in debate ---

[Alan Brown]

rose—

[Greg Hands]

I know that the hon. Member for Kilmarnock and Loudoun, on behalf of every person in rural Scotland, is about to stand up and welcome the extension for rural homes off the gas grid in Scotland.

[Alan Brown]

I welcome the uplift and the recognition that Scotland and Wales have more homes off the gas grid. How does that impact on the overall budget allocated to Scotland and Wales? By their very nature, they have a greater need, which is recognised. Has the overall budget envelope increased for Scotland and Wales, or is it still done on a per capita basis?

[Greg Hands]

The scheme is Great Britain-wide. One of the key responses from the consultation was to ensure that, wherever possible, the rules across Great Britain are made the same. Exceptionally, Northern Ireland has its own electricity market. On the extra incentives for the installation of measures in rural areas off the gas grid, I will find out for the hon. Gentleman if there is a specific budget allocation—[Interruption.] There is no specific budget allocation set per nation. He will see that the policy is designed to help. We recognise that rural Scotland and Wales are off the gas grid and not eligible for the home upgrade grant—there ought to be devolved equivalents in Scotland and Wales for that. That is why we have taken the action that we have.

The repair of efficient or inefficient oil and liquefied petroleum gas heating systems will be allowed as a last resort in homes that are off gas grid and where it is not possible to install low-carbon heating measures. That will help to ensure that people are not left without a functioning heating system.

The energy company obligation scheme remains important to support low income and vulnerable households to improve the energy efficiency of their homes and help reduce the energy bills of an estimated 450,000 households. The Government can take great pride that we are providing real help and energy efficiency measures for low-income and vulnerable households, as we have for the last nine years and will for the next four. The order extends and expands the scheme, focusing on the lowest-income households living in the least energy efficient homes. The scheme remains a key contributor to meeting our fuel poverty and carbon reduction goals and is consistent with the heat and buildings strategy and the transition to net zero. I commend the draft order to the Committee.

--- Later in debate ---

[Alan Brown]

The Minister spoke about solar and how the renewables obligation will be protected. Does he know how the renewables obligation will work for Bulb Energy, which is obviously in a special administration regime but still supplying a large number of customers? Will it be eligible to pay RO and will that just be an additional burden that is picked up with the administration costs?

[Greg Hands]

The hon. Gentleman asks a reasonable question. Obviously, that will be a matter for the Bulb Energy administrators. I am happy to write to him with more detail on how they might look at that in terms of ECO4.

Oral Answers to Questions

Debate between Greg Hands and Alan Brown

Tuesday 12th July 2022 Commons Chamber

[Greg Hands]

My hon. Friend is a consistent champion for his York constituents, and I assure him that we remain committed to delivering on the fastest sustained uplift in research and development funding, reaching £20 billion per annum in just two years’ time, from £15 billion today. That is a huge uplift, and of course we are going to make sure that all parts of the UK benefit from it. I am sure that part of that will be in and around York.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

T5. Last week, I asked the Secretary of State about support for pumped storage hydro, and he let the cat out of the bag when he responded: “It should be stressed that this is a very specific technology to Scotland.”That was a disgraceful comment. It probably explains why Scotland has been overlooked for carbon capture and storage and excluded from the hydrogen village trials. But we do have the highest grid charges in the whole of Europe and we have contributed £400 billion in oil and gas revenue. Scotland is getting exploited, not supported. Is not that the case?

Draft Contracts for Difference (Allocation) and Electricity Market Reform (General) (Amendment) Regulations 2022

Debate between Greg Hands and Alan Brown

Tuesday 28th June 2022 General Committees

[Greg Hands]

I am glad that we are in alignment on the need for supply chain plans. It is key to note that in its first phases, floating offshore wind will typically consist of significantly smaller projects. Therefore setting a different limit at which the supply chain must be submitted makes perfect sense if we are to capture floating offshore wind projects and make sure that there is taxpayer value for money. That is in all of our interests, not just the Government’s. We must make sure that we able to develop and cement our advantage in the UK. We have a fantastic technological advantage when it comes to wind. To start with, we have a fantastic geographic advantage, and making sure that we can cement our world leader position will depend upon making sure that there are good supply chains for those projects, which are necessarily smaller than fixed-bottom offshore projects. That is the reason for the different threshold.

Floating offshore wind is a technology on the verge of significant commercialisation and deployment within the next five years. Being at a key juncture in terms of its deployment means that certain emerging technologies, like floating offshore wind, have the potential to play a really important role in helping us to meet net zero. Bringing those projects into the supply chain process will allow BEIS to support the development of the associated supply chain at the earliest stage, by encouraging the industry to invest in competitive supply chains and accelerate cost reduction.

The hon. Member for Southampton, Test asked about engagement with the Crown Estate. I engage with it all the time, probably on a weekly or almost a fortnightly basis. I am happy to consider his specific point about the Celtic sea. That sea will be very important for us. At the moment, offshore wind has been a huge success for this country, but it has been predominantly an east coast and Irish sea phenomenon. It is very strong in Scotland, the north-east of England, Yorkshire, Humberside, East Anglia, the Irish sea, and north Wales gets a piece of the action. But the developments in the Celtic sea enable us to bring extra places around the United Kingdom, most importantly south Wales and the west country of England, into the offshore wind industry. Our position as the world leader, and as Europe’s largest installed capacity for offshore wind, is one of this country’s really great success stories of the past 10 years. To bring the Celtic sea into that development will help to level up and make this an all-UK effort.

[Alan Brown]

I do not have a problem with the development of the Celtic sea, but obviously we cannot forget about the North sea. For the record, there has been a discussion about the Crown Estate of England and Wales allowing for the generation of 4 GW, and there is also Crown Estate Scotland and the ScotWind leasing round. That latter round had bids for 25 GW of offshore energy, but National Grid ESO is only allowing for 10 GW of that in its forward planning, so that is a real disconnect. Will the Minister allow for the full deployment of that 25 GW of ScotWind leasing?

[Greg Hands]

The hon. Gentleman is quite right; BEIS and the UK Government put a lot of effort and support into the ScotWind process. Of course offshore wind off Scotland is incredibly important to the country as a whole, and floating offshore wind will be a big part of that. On Crown Estate Scotland, the hon. Gentleman may be aware that I was involved in a lot of the legislation for the devolution of the Crown Estate to Scotland under the Scotland Act 2016. I am familiar with a lot of the issues in relation to Crown Estate Scotland. We have an excellent relationship with it. While recognising that Scotland has been a massive part of the delivery of our fixed-bottom offshore wind, and will be a massive part of the delivery of offshore floating wind, it is good to get all of the UK in on the action when it comes to offshore generation.

We are investing up to £160 million for new, large-scale floating offshore wind ports and manufacturing. That is a big investment of Government money to make sure that we have a great future when it comes to floating offshore wind. The funding, boosted by private sector investment, will develop port infrastructure capable of mass-producing floating offshore wind turbines and installing them out to sea, reducing the need to import from overseas. That will create thousands of new jobs in the UK’s industrial heartlands and around our coasts. We have recently announced £31 million of UK Government funding to be matched by industry for research and development in this sector.

The hon. Member for Southampton, Test asked about the light-touch regime. Again, I think it is a question of balance. For the smaller projects, and to start with it will be predominantly smaller projects, we want to look at their supply chains. That is really important to us, but, equally, we do not want to make a regime that is too onerous on those smaller projects. That is why there is a lighter touch regime and questionnaire, but a deeper down, if you like, in terms of the size of the companies that must make supply chain plans. The consultation on the new supply chain questionnaire closed on 14 June. The Government’s response detailing the new approach will be published in due course, and the updated questionnaire and guidance will be published this summer.

I think I have covered the removal of the 300 MW threshold from floating offshore wind. I think I have answered a few of the points raised by the hon. Member for Kilmarnock and Loudoun, and I think the anticipatory grid will be a key part of the debate. The criticism is that National Grid does not currently allow for anticipation of when projects will come on and provide for the grid. Ofgem is actively looking at that, and I expect that might be a key part of future debate. There will be a big scale-up in electricity generation, especially as our electricity demand will double by 2050. We need to have more grid, more network, more transmission network and more distribution network to make that happen. To make sure that our system is fit for that will be a key part of the energy security Bill to be considered in this parliamentary Session.

I hope that my responses have provided the necessary assurances so that Members can approve the SI. The changes in the regulations are essential to ensuring that the next CfD allocation round, which will start in March 2023—the first annual round—is a really important reform to drive through more renewable energy in this country. The regulations will help to make sure that our supply chains and other parts of the process are as best supported as possible, to make sure that we support the pace of renewable deployment while continuing to ensure value for money for consumers. That is why I urge the regulations to be made now, ahead of the next CfD allocation round in next March, so that developers have certainty as to who will be eligible to take part and on what basis. I therefore urge the Committee to agree to the regulations.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Contracts for Difference (Allocation ) and Electricity Market Reform (General) (Amendment) Regulations 2022.

Shale Gas Production

Debate between Greg Hands and Alan Brown

Tuesday 15th March 2022 Commons Chamber

[Mr Speaker]

I call the Scottish National party spokesperson, Alan Brown.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a rare thing in the Chamber but I completely agree with the hon. Member for Fylde (Mark Menzies) and the Minister’s opening remarks: now is not the time for knee-jerk reactions. Given that we have this energy crisis, now is the time to stay strategic and not make daft decisions. Clearly, doing fracking would not do anything to change the west’s reliance on gas, even if, as the Minister’s says, the UK does not rely on Russian gas. He can reconfirm that fracking would not release enough gas to change the international market price, so we would still be paying the same wholesale prices. Is it not the case that there is not enough geological and scientific coring information, to the right depths, to understand the viability of extraction, let alone the risks of seismic tremors, which, as we have already heard, occurred at Preston New Road? Therefore, fracking should be ruled out, in the way the Scottish Government have done. Do we not need to invest heavily in renewables? We keep hearing about nuclear from those on the two Front Benches, but committing £63 billion of capital and financing costs to Sizewell C is madness. Our approach should be straightforward renewable energy. I keep going on about pumped storage hydro. Last week, the Secretary of State said that I had been going on about it for 18 months and that it is a good solution but he needs to assess value for money. When are we going to get that value for money? When are we going to get a change to the transmission grid charging system, which is blocking the deployment of Scottish renewables? We need to invest more in tidal stream, to increase the floating offshore target and to set an onshore wind target as well. Let us maximise investment in renewable energy.

[Greg Hands]

I thank the hon. Gentleman for that response. He is right in the first part of what he says: fracking is unlikely to change gas prices—or UK fracking is unlikely to do so. It is certainly unlikely to change it quickly, which is what I said in my opening statement. He is also right to point to the importance of following the science, and geological information is really important. However, I have to say to him that on nuclear he continues to be wrong. The SNP’s ideological hardcore opposition to nuclear is against Scotland’s interests. We have just seen the closure of the Hunterston nuclear power station, which provided enough nuclear energy to supply every home in Scotland for 31 years. It was a great Scottish, as well as UK, solution. Our other great source of gas is the North sea, where I would like to see the SNP approach becoming more constructive and supportive of the North sea transmission deal that the UK Government did a year ago.

Oil and Gas Producers: Windfall Tax

Debate between Greg Hands and Alan Brown

Tuesday 1st February 2022 Commons Chamber

[Greg Hands]

I would say this: we are providing support. We have the warm homes discount, we have winter fuel payments, we have cold weather payments, we have the household support fund, and, of course, we have the energy price cap itself to protect customers.

The latest CfD round is the largest yet, with a goal of about 12 GW, more capacity than the last three rounds combined. The offshore wind that this round will deliver could be enough to power up to 8 million homes.

[Alan Brown]

All the policies that the Minister has described as helpful are policies that already exist. Is he having any discussions with the Chancellor about new Treasury-funded policies that will kick in to mitigate the cap rise in April?

[Greg Hands]

I have been clear that matters of taxation are for the Chancellor, but of course the Government continue to monitor the situation very closely. I was answering a specific point about what support is already available for consumers.

I did not hear a word from any of the Opposition parties in support of our incredible North sea transition deal, concluded just last March, between the UK Government and the oil and gas sector. It will support workers, businesses and the supply chain through this transition by harnessing the industry’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as hydrogen production, carbon capture, usage and storage, offshore wind, and decommissioning.

Oral Answers to Questions

Debate between Greg Hands and Alan Brown

Wednesday 19th January 2022 Commons Chamber

[Greg Hands]

I thank my hon. Friend for his question. We welcome yesterday’s judgment. I, probably like he, wonder whether the SNP and the Scottish Green Government in Edinburgh would share our welcome. There will be an ongoing need for oil and gas as we reduce demand amid the transition to lower carbon energy, which, in the end, is the solution. I know from my visit to his constituency just last month how important renewables are for delivery in his constituency of Banff and Buchan.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

4. What assessment he has made of the potential role of carbon capture and sequestration in delivering the UK’s COP26 commitments to reduce emissions.

[The Minister for Energy, Clean Growth and Climate Change (Greg Hands)]

The UK can become a world leader in technology to capture and store harmful emissions away from the atmosphere. In the net zero strategy, the UK Government announced their ambition to capture and store 20 to 30 megatonnes of CO₂ per annum by 2030, with 10 megatonnes to be delivered by track-2 clusters.

[Alan Brown]

The Scottish carbon cluster site would address Scotland’s two biggest greenhouse gas emitters. It would unlock 30% of the UK’s carbon dioxide storage capability and combine hydrogen production, direct air capture and a shipping terminal to serve the rest of the UK in terms of carbon dioxide storage. Why then was the Scottish cluster relegated to reserve status and what representation has the right hon. Gentleman had from the “lightweight” Scottish Tory leader about this disgraceful decision?

[Greg Hands]

As ever, I thank the hon. Gentleman for his question. As he knows, Acorn is the first reserve, which means that it met the eligibility criteria and performed well in the evaluation criteria. As for the Scottish Conservatives, I speak to my hon. Friend the Member for Moray (Douglas Ross), the leader of the Scottish Conservatives, frequently. I also speak to the local MP, my hon. Friend the Member for Banff and Buchan (David Duguid), and others. The Scottish cluster, Acorn, has a good future. I have also recently met with Storegga, INEOS and Shell to discuss specific aspects in relation to the cluster, which moves ahead.

Oral Answers to Questions

Debate between Greg Hands and Alan Brown

Tuesday 11th January 2022 Commons Chamber

[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.

Nuclear Energy (Financing) Bill

Debate between Greg Hands and Alan Brown

Report stage & 3rd reading
Monday 10th January 2022 Commons Chamber

[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.

[Alan Brown]

Will the Minister give way once more?

[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.

--- Later in debate ---

[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.

Storm Arwen: Power Outages

Debate between Greg Hands and Alan Brown

Monday 6th December 2021 Commons Chamber

[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.

Nuclear Energy (Financing) Bill (Sixth sitting)

Debate between Greg Hands and Alan Brown

Committee stage
Thursday 25th November 2021 Public Bill Committees

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

Tidal Energy Generation: Ringfenced Funding

Debate between Greg Hands and Alan Brown

Thursday 25th November 2021 Commons Chamber

[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—

[Alan Brown]

Will the Minister give way?

[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.

Nuclear Energy (Financing) Bill (Fifth sitting)

Debate between Greg Hands and Alan Brown

Committee stage
Tuesday 23rd November 2021 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Fovargue. Like the Minister, I would like to spend a moment announcing, as it were, this part of the Bill, which I hope we can get through in an orderly and suitably speedy fashion. It is however important to share an understanding of what we think this part is about. As the Minister said, it concerns the setting-up of revenue collection contracts; the setting-up of a counterparty to hold the revenue collected from suppliers to underpin action by the nuclear company in terms of construction; and, importantly, as he said—he seemed a little concerned when I mentioned this in our previous sitting—revenue collection and distribution during both the construction and production phases of a nuclear project.

My understanding is that during the production phase, the nature of the revenue collection changes. During the construction phase, within the overall allowable costs architecture, the nuclear company is likely to absorb whatever comes its way from the counterparty for the purposes of underpinning the construction costs of the nuclear plant. Obviously, there are debates to be held on that and further regulations to be put in place concerning how the revenue stream for a nuclear company is carried out and the requirements of the construction at various phases.

We have debated to some extent the instance whereby the allowable costs ceiling is breached because of rising costs, particularly during production; whether the regulator would have the opportunity to revisit the allowable costs ceiling; and what effect that would have on the run through the regulated asset base process to customer bills as a result of those recalculations. However, there are issues with what revenue stream goes into the nuclear company, and at what stage during construction, but that is within the overall costs ceiling, or should be, in the first instance.

During the production phase of a nuclear plant, the relationship between collection, distribution and re-disbursement becomes a little more complicated. I would be obliged if the Minister could shed a little light on some of the things that happen during the production process, which are still slightly unclear. That is important because, in the production process, the receipt of funding under the RAB process becomes a comparative issue. The company is making money and producing electricity, and one would expect that, as a result of the RAB model, the money that is being made by the company would sit within the parameters of what has been agreed for the regulated rate of return under the RAB model. If the company is making more money from its production of electricity than is allowed within the overall model’s parameters, that money starts coming back to the counterparty or, at least indirectly, through to customers.

Conversely, if the company is making less money from its production than is allowed within the RAB model for production purposes, money continues to come in under the allowable costs ceiling. The best explanation is given on page 21 of the consultation document on a RAB model for nuclear, which suggests:

“Suppliers could pass the cost of the payment obligation onto their consumers, as they do with other regulated costs and could likewise reimburse their consumers (as happens under a CfD) in periods where suppliers receive payments from the project company (e.g. when the Allowed Revenue is lower than the project company’s revenue from power sales). The design process would need to consider how these charges could be made in more detail, in consultation with suppliers and consumer representatives.”

That is essentially the model during the production phase: it is potentially a two-way process.

That issue reflects, at least to some extent, the amendments that we wish to discuss this afternoon —an understanding of how the money goes into the counterparty, what the counterparty does with the money, what the counterparty does when the money is held, and what the counterparty does if that money may not be needed, or money has been paid back into it by the nuclear company during the production phase. Consideration of how that happens, where that money goes and what sort of requirements one should place on that process are at the heart of some of our amendments.

I thought it important to check whether we have a shared understanding with the Minister of how the process works. Assuming that we do, we can discuss the amendments on the basis of that shared understanding of what this part of the Bill sets out to do. That is essentially a contribution to the clause stand part debate, but I hope that it clarifies how we will proceed with part 2 as a whole, and that it will be helpful to the Committee.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship again, Ms Fovargue. It was interesting that the hon. Member for Southampton, Test spoke about a shared understanding. I wish I had one; I do not think that the Bill is good enough to have any shared understanding of what it is about. Part 1 is clearly all about the definition of designating a nuclear company, and then a blank cheque in terms of defining costs. It seems to me that part 2 is all about how the blank cheque moneys are recouped in revenue collection.

I have one point to put to the Minister. Explanatory note 119 states:

“The terms of a revenue collection contract will be bilaterally negotiated between the Secretary of State and an eligible nuclear company to be designated under Part 1.”

Would he enlighten me on what expertise the Secretary of State has in negotiating a revenue collection contract for a new nuclear power station, how that will be undertaken in a transparent manner, and what options are available for scrutiny of that?

[Greg Hands]

I thank both hon. Gentlemen for their contributions. I will try to be as helpful as I can. Rather than setting any hares running, it is essentially a very similar process to how contracts for difference work under the Energy Act 2013. There is nothing essentially different here, other than the fact that it is about nuclear power generation and has the RAB model. What we are talking about in this part of the Bill is essentially the same process that is being used for contracts for difference under the 2013 Act. I am always slightly reluctant when an Opposition Member asks whether we have a shared understanding. It strikes me as often being slightly dangerous to give a blank cheque on that. My understanding of the process, and I think the Opposition would agree, is that it is essentially the same process that we have been using for contracts for difference through the collection company.

--- Later in debate ---

[Alan Brown]

The other point that I was making was about transparency. What options are available for the likes of me, an opposition MP, to scrutinise and challenge what is being signed off as a good deal?

[Greg Hands]

The regulations will be subject to the affirmative procedure, which, as the hon. Gentleman knows, will mean a debate in a Committee Room like this, and the potential to take the legislation to the Floor of the House and have a Division of the House of Commons. In that sense, the scrutiny available to Members of Parliament—if that is what he is referring to—is considerable. That is why the regulations will be subject to the affirmative procedure. I think it is reasonable for Parliament to see the regulations when they are made, although we do not envisage that further technical changes to those regulations will be subject to the affirmative procedure. As laid out in later clauses, those changes will be subject to negative procedure. I hope that the Committee will agree to clause stand part.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16

Designation of a revenue collection counterparty

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Dr Whitehead]

I beg to move amendment 15, in clause 19, page 16, line 11, at end insert—

“(4A) Revenue regulations may make provision to prevent electricity suppliers from recovering the costs of paying a revenue collection counterparty from customers who qualify for the Warm Home Discount Scheme.”

This amendment would mean that electricity bill payers who qualify for the Warm Homes Discount scheme would not be liable for levies on their bills that pay into the RAB revenue collection fund.

Amendment 15 relates to the latter end of clause 19. Hon. Members will see that the clause suggests that revenue regulations may make provision for electricity suppliers to pay a revenue collection counterparty for a number of purposes, including

“to hold sums in reserve; to cover losses in the case of insolvency or default of an electricity supplier.”

According to our shared understanding of how the RAB would work, the regulations would require electricity suppliers to pay into a revenue collection counterparty for those purposes. Thereby, as the RAB consultation makes clear, if that company has been required to pay into the revenue collection counterparty, the company could make restitution for the money it had paid into the revenue collection counterparty by adjusting its bills to reflect that fact.

We are in exactly the same territory as contracts for difference, where there is a levy on customers and the supply company recovers the money that it has paid into the levy fund by passing that levy on to customers in their bills. We have a problem with placing additional levies on already sky-high bills, but that is how this arrangement will work. We question how that process will work. As hon. Members will also know, we currently have within our electricity supply arrangements a warm home discount scheme, which provides for a number of bill payers to get £140 off their bills each year if they qualify. There are some issues about the size of the company relating to that obligation but, in principle, pretty much all customers on a low income or a guaranteed credit element of pension credit will, or should, receive that warm home discount.

The energy company has to supply that discount to its customers. It may socialise the costs through its overall bills as a sort of secondary levy, but it gives a proportion of electricity customers a permanent reduction in their bills due to their particular circumstances, such as—as the discount suggests—particular fuel poverty-type issues in heating their homes and meeting their fuel bills.

The effect of a levy—in this instance, quite a substantial levy—to customers under these circumstances, particularly during the construction phase of a regulated asset base operation, would be to put, say, an extra £10 on the bill of someone who is already receiving a warm home discount, so that their fuel bills go up. A number of people would be placed in fuel poverty as a result of that difference, and therefore, ironically, it is quite possible that more people would be eligible for the warm home discount as a result.

When and if this levy comes on stream, we do not think that the process should include the supply company passing on that increase to those people who are already paying their bills but have a warm home discount. Those companies should not be able to recover the cost of payment into the revenue collection counterparty by passing it to those people receiving warm home discount. This would mean a socialisation of that cost to other bill payers, but the warm home discount would nevertheless remain at the right proportion of the bill, not diminish in value because that person was required to pay that levy to the energy company so that it could recoup its costs related to the revenue collection counterparty.

This is quite a simple amendment to try to return that warm home discount to the position that it would have been in before that levy was introduced. I would suggest that it is in line with what the Government intended for that warm home discount in the first place. Although other customers may pay a little more on their bills, it would maintain the relative billing position for the poorest and most vulnerable customers, including those in receipt of a guaranteed credit element of pension credit, helping those who have considerable difficulties in paying bills and are perhaps in fuel poverty as a result. We would like this power to ensure that energy companies do not incorporate those customers into the arrangements for collection and distribution of money coming into the revenue collection counterparty.

[Alan Brown]

I will just say a couple of things. I was listening to the arguments and if the amendment goes to a vote, I will be happy to support it and do anything I can to try to support the most vulnerable and not create any more fuel poverty. Listening to the arguments, they seem to confirm that the concept as a whole is a costly burden on consumers. As the shadow Minister said, it creates a levy that will put more people into fuel poverty. The levy will not just last for a few years; it starts with a construction period of 10 to 15 years in all likelihood and then a 60-year contract. Rather than tinkering at the edges, protecting some people and pushing other people into fuel poverty, the heart of the matter is that this is a costly white elephant exercise. That said, I would still support the amendment for what it aims to do.

[Greg Hands]

As has been stated, amendment 15 looks to make provision to exclude from the RAB charge those consumers who are eligible for the warm home discount scheme. I understand the good motive and the effect of what the hon. Member for Southampton, Test is proposing. For background, the warm home discount is a Government initiative to take £140 from the energy bills of consumers who receive the guarantee credit element of pension credit, or who are on a low income and receive certain means-tested benefits. We have already proposed increasing the value of the rebate to £150 per annum in any case.

As we have discussed, if a new project is funded through the RAB model, suppliers will be obliged to pay towards it. It is expected that the suppliers will pass these costs on to consumers. While I do not intend to go back over the arguments in favour of the RAB model, we believe the arrangement will facilitate private investment while also reducing the costs of delivering new nuclear projects. I understand the Opposition’s desire to protect consumers on the lowest incomes, which is what the Government are already doing. The Opposition are proposing to increase that element of protection. Of course, these consumers can spend a disproportionate amount of their income on energy costs. As we all know, energy bills are regressive.

However, a large-scale project funded under the scheme will add, at most, a few pounds a year to typical household energy bills during the early stages of construction and less than £1 per month on average during the full construction phase of the project. The Government have taken a number of actions to protect low-income households from energy costs, as laid out in our updated fuel poverty strategy. That includes not only the warm home discount but cold weather payments and the household support fund.

[Alan Brown]

Isn’t the problem with some of the schemes aimed at protecting the most vulnerable that they are paid for by other consumers? By default, the schemes are always creating another cohort to move into fuel poverty, because actual schemes to help people are paid for by other consumers.

--- Later in debate ---

[Greg Hands]

I thank the hon. Members for Kilmarnock and Loudoun and for Aberdeen North for tabling their amendment. Of course the Government welcome all Opposition parties tabling amendments; that does not necessarily mean that we will agree with the aforementioned amendments, but it is a useful process to test and probe the Bill, and I think our publics would like to see a process whereby all Opposition parties tabled amendments to test the Government’s proposition. I fully buy into that process, but I do not happen to agree with this amendment.

The amendment addresses how the interests of suppliers and their customers should be considered when making provision in regulations for the supplier to pay the revenue collection counterparty. It would also require the Secretary of State to have regard to the other liabilities of electricity suppliers—the hon. Member for Kilmarnock and Loudoun talked with topicality about that—as well as to the impact that collateral requirements will have on a supplier’s operation. I thank the hon. Gentleman and the hon. Lady for ensuring that the Government consider the impact on suppliers and consumers when establishing the RAB revenue stream.

I reassure Members that the Government intend to act in a way that effectively manages the payment obligations on suppliers and, through them, consumers. We do not believe, however, that the amendment is the best way of ensuring that. First, the provision of collateral by electricity suppliers is a form of security that has been administered very successfully in the contract for difference regime. As I said on clause 15, the regime seeks to replicate that tried-and-tested regime, which has functioned effectively to bring investment into new energy projects for the last eight years.

We have been clear that in designing the RAB revenue stream we are seeking to replicate many of the provisions of contracts for difference to help to provide a familiar and workable framework for suppliers, but it is not just about supporting investment. We will protect suppliers from paying unreasonable amounts of collateral and ensure that overpayment of collateral is returned to suppliers.

[Alan Brown]

What is there in the Bill that protects suppliers from having to pay too much collateral?

[Greg Hands]

The protection in the Bill is through the regulation of the process and the oversight, for example by the authority, in this case Ofgem, which will ensure that any amounts paid to the generation company are reasonable. The hon. Gentleman is right to ask who will set the parameters, the Secretary of State or the regulator. The Secretary of State sets the initial licence conditions; however, it is the authority, in this case Ofgem or its equivalent, that will ensure that any amounts are reasonable and in the interests of existing and future consumers. That is very much in the Bill.

[Greg Hands]

That is a reasonable request. I am saying that this is a tried-and-tested process that has been there throughout the contract for difference regime. Paying in collateral, and the way that collateral operates, is something that has been around for decades, but if it is helpful I am happy to write to the hon. Lady and copy in members of the Committee to explain in more detail how it works in the CfD regime and the Energy Act 2013. I should also make it clear that the Bill provides a framework for the RAB revenue stream and requires that the detail of suppliers’ payment obligations is set out in the secondary regulations that will need approval from both Houses. Ahead of that, and as required by the Bill, we will publish and consult on the draft regulations. We will include British energy suppliers within the consultation, so they will have the opportunity to feed in any views from an energy supplier perspective.

In the context of protecting our most vulnerable energy consumers, which was the subject of the previous amendment, I refer Members to my comments in that debate setting out the numerous actions that the Government are taking to help low-income households, including the warm home discount, cold weather payments and the household support fund. I hope that I have assured the hon. Member for Kilmarnock and Loudoun that the design of the RAB revenue stream will ensure that the interests of consumers are protected and that mechanisms are in place to protect suppliers from disproportionate requirements that would affect their ability to operate. As such, I believe that the amendment is unnecessary, and I hope that he will withdraw it.

[Alan Brown]

It was no surprise that the Minister did not accept the amendment. It will be no surprise to him that he has not completely satisfied me either with his explanation. We keep hearing the argument that we are trying to replicate the CfD model, which is interesting considering that we are introducing the RAB model. It was said that CfD would not work for nuclear, but now we are trying to replicate certain things. He said that there will be consultation and secondary legislation, but there are no guarantees on what the Government will do or how they will respond to any consultation. Secondary legislation can easily get steamrollered through this place anyway. Given that, I would prefer to press my amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Greg Hands]

As the hon. Members for Southampton, Test and for Greenwich and Woolwich laid out, amendment 17 addresses the situation in which funds held by the counterparty may be paid into the Consolidated Fund, which of course is the Government’s general bank account at the Bank of England. Currently, the legislation allows the revenue regulations to provide for sums to be paid into the Consolidated Fund. The intention of the amendment is to narrow the scope of that so that the regulations can provide for sums to be paid into the Consolidated Fund only where there is no alternative.

I thank the hon. Members for the amendment, which they explained well. It certainly echoes my sentiment that consumer funds should not generally go into Government accounts. I reassure Members that we envisage the power to have limited but important uses. For example, it could be used to ensure that the counter- party repays a loan given by the Government—by the taxpayer—to respond to an emergency. That is not a hypothetical situation. We saw the importance of it quite recently in the course of covid, when the Government did indeed have to provide a loan to the counterparty for the contract for difference regime: to the Low Carbon Contracts Company.

The taxpayer should be able to be repaid that loan, but the amendment provides that sums cannot be paid into the Consolidated Fund where there is an alternative. I could see a number of people making an argument that different things that could be done with that money would provide alternatives to what is being envisaged: in this case, repaying the taxpayer. If passed, the amendment would unnecessarily narrow the scope of the power in a way that would limit its use. I hope that my explanation has shown Members the importance of the power, which is in my view unlikely to be used. However, I have given a real example from the last couple of years of where exactly such a situation arose.

[Alan Brown]

The Minister has given the example of an emergency loan, but surely the regulation is all about

“apportioning sums…received by a revenue collection counterparty from electricity suppliers under provision made by virtue of section 19”.

Clause 19 is about collecting money from electricity suppliers; ergo, the example of a loan does not equate to what this is about.

[Greg Hands]

I disagree with the hon. Gentleman. My understanding is that the loan would not be repayable if an alternative were there. The ambiguity of an alternative would unnecessarily narrow the scope of the power, though I appreciate where he is coming from.

[Alan Brown]

I ask the Minister to read clause 21(1)(a), which contains the reference I quoted to clause 19, which I do not think covers the emergency loan situation.

[Greg Hands]

We will just have to agree to disagree. I think the amendment unnecessarily narrows the scope of the power in a way that we would not wish to see in terms of protection of the taxpayer. I therefore ask the hon. Member for Southampton, Test to withdraw it.

Nuclear Energy (Financing) Bill (Fourth sitting)

Debate between Greg Hands and Alan Brown

Committee stage
Thursday 18th November 2021 Public Bill Committees

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I will come to this in my own comments, but is it not the case that the Secretary of State gets to sign off whether he thinks a project is value for money and sufficiently advanced, and then a statement is published giving the reasons for that? However, the Secretary of State gets to write the rules for the sign-off. Is it not the case that no clear structure or checklist will be gone through so that the Secretary of State can sign off such projects?

[Greg Hands]

I disagree with the hon. Gentleman. I think that the process and the checklist is set out pretty well. If he would like, I can run through how the process works when we get to the later clauses and look at the specifics of the process. It might appropriate to take him through that.

When considering value for money, the Secretary of State is expected to have regard to the cost to consumers, future security of supply and our decarbonisation targets. The Secretary of State can designate multiple nuclear companies at any given time, so more than one project can be designated for a RAB at the same time, but the designation criteria, project status and likely value for money will be applied individually to each project.

[Alan Brown]

Following on from my intervention, I have real concerns about the clause—we will come later to clause 3—and the lack of transparency in what constitutes value for money. In signing off projects, the Secretary of State has to give an opinion on whether they are suitably advanced to justify a designation, but what constitutes “suitably advanced”? What considerations must the Secretary of State be compelled to make to ensure that a project is suitably advanced to give the correct level of detail and analysis for cost definition in sign-off? We should bear in mind that sign-off for a 60-year contract ties up consumers.

I do not see those considerations in the Bill. The Minister said that he would take the Committee through them, but how does the Secretary of State consider how suitably advanced a project is? Does there have to be a working prototype? There is no working prototype of the evolutionary power reactor model generating electricity to the grid. The projects in France and Finland are years late, over cost and still not connected to the grid—and, as I said earlier, the Taishan 1 EPR is now offline due to safety concerns. How can the Secretary of State have any confidence that a project such as Sizewell C is suitably advanced when there is no working prototype?

What other permissions need to be taken into account to determine whether a project is suitably advanced? Does it need to have planning permission? Does it need to have gone through all its environmental appraisals and have all its environmental approvals in place? Are there other things to consider? How far is outline design to be developed? Is there a level of detail to consider to determine whether a project is suitably advanced? How much site investigation work needs to be undertaken before a Secretary of State can have confidence that a project is suitable advanced, bearing in mind the cost of a 60-year contract? Should consideration be given to a company’s track record on deliverability? That takes us full circle to how there is not an EPR up and running. In a way, that touches on what the shadow Minister said about having confidence that a project can be delivered when not one project has yet been delivered successfully.

The Government are in advanced negotiations on Sizewell C, which is the most well developed nuclear project at the moment. Does it come close to the definition of “sufficiently advanced” or does a lot more work need to be done? That takes us full circle back to the discussions earlier about the £1.7 billion allocated in the Red Book. The Minister has still not given us any clarity on what the £1.7 billion is for. Is it to allow the Sizewell C company to develop the project further to get it to a position that the Secretary of State thinks is sufficiently advanced? That would mean that, by default, the Secretary of State knows what “sufficiently advanced” means, so we should be able to understand what the £1.7 billion is going to pay for. Hopefully, all that can be explained.

EDF has claimed it is using Hinkley as a prototype that it will replicate at Sizewell C. It will accrue savings and just move the design almost lock, stock and barrel from Hinkley into the footprint at Sizewell C. I would have thought that, by default, that means the project is sufficiently advanced such that we do not need the £1.7 billion to advance it any further. A bit of clarity on that would be useful.

We need a lot more clarity on subsection (3)(b). What is the process for the Secretary of State assessing and giving the opinion that

“the project is likely to result in value for money”?

What are the intended governance and transparency protocols? We have spoken about the designation in a statement, but there is no clarity on what the Secretary of State will consider and what will be provided in the statement.

In recent months we have had the dodgy covid contracts. How do we ensure good faith rather than backroom negotiations and that there is public trust in what goes on in the signing-off of contracts? When I asked the Treasury a written question about the £1.7 billion and the discussions the Chancellor has had, the answer I was given was:

“Details of any meetings with companies regarding funding are commercially sensitive.”

If the Treasury will not even tell me who it is meeting and when, how can we have any comfort about what goes on behind closed doors in respect of the negotiations and the assessment of value for money? I hope to come back to value for money later in Committee, because I have tabled a relevant new clause.

It seems to me that as it stands, subsection (3)(b) means nothing, other than that the Secretary of State can rubber-stamp something that he believes to be value for money. Let us bear in mind that this is the Government who told us that Hinkley was value for money, even though everybody argued that the strike rate was too high. With this Bill, they are telling us that Hinkley was actually a rubbish deal, so we need the RAB model in the Bill to save taxpayers’ money.

The Government explained on Second Reading that a contract for difference had to be used for Hinkley because it was the first of a kind, so all the risk was on the developer, but that raises further questions. If a CfD was needed for Hinkley because it was the first of a kind in the UK, how on earth can the Government make a final decision to proceed with Sizewell C under a RAB model before Hinkley is even operational?

Hinkley is 25% over budget and at least a year late, with a possible further 15-month delay on top of that. How can the Government have any confidence in signing off on something like Sizewell C, for which the impact assessment talks about a 2023 construction start date? How can that project be anywhere close to “sufficiently advanced”? How can the Secretary of State do a proper value-for-money assessment given all the outstanding issues with Hinkley?

As I said, we need a lot more clarity on that £1.7 billion. Is that going to be the way forward in future? Is it the intention that, for a project to get to a stage where it is sufficiently advanced and the Secretary of State can make a value-for-money assessment, something like £1.7 billion will be allocated to each developer that is in the mix for a new nuclear project? That is crucial for value for money overall.

Paragraph 50 of the explanatory notes gives four criteria that might be used to consider value for money, but three of them are just the traditional Government tropes to justify nuclear in the first place: security of supply, low-carbon electricity and net zero targets. The Minister alluded to that in his opening speech. Those same arguments have been put forward to justify new nuclear for the past 15 years. We still do not have a new nuclear plant operational, so when the Secretary of State looks at the reasons for value for money, it will be very easy because those are the arguments that they will use.

In particular, the security of supply argument was used to justify Hinkley, but Hinkley was supposed to be required by December 2017 to stop the lights going out. It will not be operational for at least 10 years after that original date, and the lights have not gone out, so security of supply is almost a nonsense argument for value for money. That confirms to me that the criteria are too loose and will be too easy. There will be a lack of transparency, but the Secretary of State will sign it off and say, “Yes, I think the project is value for money.” Again, we have this Bill because they are desperate to get Sizewell signed off at any cost.

In conclusion, for me the clause is too loose and too vague. It is set up to encourage backroom negotiations without transparency. At the very least, it would be nice if the Government conceded to an independent assessment of the risks and value for money for consumers. That was suggested in the witness session on Tuesday by Citizens Advice. I look forward to the Minister’s response, but he will have to go a long way to satisfy me that there is a robust procedure in place to assess value for money and how suitably advanced the project is for designation.

[Greg Hands]

I thank the hon. Gentleman for that varying and detailed speech on clause 2. I will try to deal with each of his points. First, he raised a series of additional factors that could be considered by the Secretary of State. He might have tabled an amendment, for example, on what those additional factors might be. I do not think I have seen any amendments tabled by the Scottish National party, but he might have perhaps tabled one in the same way that the official Opposition did as a test. My initial response is that the additional factors he raised would be covered by the two criteria on whether it is value for money and sufficiently advanced, so his additional criteria would be encompassed by the two processes that are already there. Perhaps he can table an amendment to deal with where he would specifically like something added.

The hon. Gentleman asked about the £1.7 billion. We have been clear, while remaining consistent with the fact that this is a commercial negotiation, that the funding is to bring a project to a final investment decision in this Parliament, subject to value for money and all relevant approvals. That could include development stage funding to support the maturation of the project to de-risk it. It could also include some Government investment at the point of a transaction, helping to mobilise other private sector capital. It is already laid out in detail in the Budget document. It was debated at Budget, and I reiterate it today. That there is a limit to how much additional information I can put out on something when ultimately the background is that it is a commercial negotiation.

--- Later in debate ---

[Alan Brown]

Earlier, the Minister talked about UK pension funds as well in terms of levering in capital. Is some of the £1.7 billion going to be matched funding with pension funds, for example, or is it to provide some guarantees so that the pension fund can invest at a guaranteed rate of return, where the guaranteed rate of return comes from the taxpayer?

[Greg Hands]

I am not going to add anything on the £1.7 billion, which is a separate process and a separate factor to the Bill. I have nothing further to add. I have given sufficient detail of where the £1.7 billion might be spent. Where it will be spent is properly a matter for which the background is the commercial negotiation.

The hon. Gentleman mentioned delays at Hinkley Point C. He is in danger of arguing with himself at times. At one point he argued that we had not brought a nuclear project to a final investment decision, or we had brought only one in the last decade. Then he said that we should wait to make a decision on Sizewell C until we had Hinkley Point up and running. It sounds to me as if he wants to have it both ways—

[Alan Brown]

I want it no ways.

[Greg Hands]

He is saying we are either moving too quickly or too slowly. Ms Fovargue, it reflects back to the starting position. If the hon. Gentleman does not mind me saying it, I think he is opposed to nuclear power per se. I suspect he is less interested in whether it is going too quickly or too slowly, to be frank, and it would be helpful if he gave us a straight view as to whether we are being too quick or too slow.

--- Later in debate ---

[Greg Hands]

My hon. Friend makes a very strong point—one made by quite a few people who were in Glasgow just two weeks ago. Ironically, in Scotland, making that argument strongly were not just the UK Government, but countries from all over the world. They were making the argument for nuclear power being part of our low-carbon future.

The powers of the Scottish Government are unchanged. The Bill makes provisions for the Secretary of State to consult named persons and organisations prior to the specification of any project under a nuclear RAB, and to consult those persons or organisations before he or she amends a projects licence to insert RAB conditions. Ministers in devolved Administrations will be captured—in scope, I should say; not physically—by this consultation.

[Alan Brown]

The Minister has already said that energy generation is a reserved power. Is he confirming that if the devolved Administrations say no in a consultation, that could be overruled by Westminster, with the imposition of a nuclear power plant?

[Greg Hands]

The hon. Gentleman is inviting me to go down a hypothetical road. The devolved Administrations have powers in other areas, and if the devolved Administration was strongly minded about having a nuclear power plant in that particular part of the UK, it is difficult to envisage circumstances in which the UK Government would proceed to do that. I hope that gives him enough reassurance.

I will deal with the point made by the hon. Member for Aberdeen North. On the question of a project near a border, it is reasonable then that the UK Government would consider the appropriateness of consulting with the devolved Administration. I return to my earlier point about specifying those who must be consulted and those who the Secretary of State would think it reasonable to consult. That would be within the scope of who the Secretary of State would think it reasonable to consult.

--- Later in debate ---

[Greg Hands]

As the hon. Gentleman says, this amendment addresses the process for modifying a designated nuclear company’s licence, particularly which documents should be published before the power is exercised. We recognise that designating a nuclear company and subsequently modifying its licence is a significant decision. That is why the legislation lays out a clear process, which provides transparency and builds confidence in the decisions that the Secretary of State will make when exercising these powers. The process in the Bill is strongly based on existing licence modification powers; it is well precedented.

The amendment obliges the Secretary of State to publish a document setting out how the licence modification would facilitate investment in nuclear projects before modifications are made. I do not believe that is necessary. The Government have already set out a clear process and strong transparency provisions in the legislation. Currently, the Secretary of State is required to consult named persons prior to making any licence modifications, and must then publish the details of any modifications as soon as reasonably practicable after they are made, with material excluded only when necessary—for example, for purposes of commercial confidentiality or national security.

[Alan Brown]

Could the Minister give an example of an existing licence that the Government have granted that could likely need to be modified to facilitate the investment that the Government are looking for? Could he explain what that process looks like?

[Greg Hands]

The process is as described. It is based on a very good precedent on these sorts of licence modifications. This would not be the first Bill to come along to look at how to modify a licence, and we have based that entirely on existing precedents. There is nothing unusual in this process or this structure.

The approach of consultation followed by publication is well precedented, as I said, in other licence modification powers. We think that the amendment proposes an unnecessary additional process. Moreover, the consultation provisions will allow expert voices to input on whether the licence modifications are effective in facilitating investment, which, of course, is exactly the purpose of the clause. I therefore hope that the hon. Gentleman will withdraw the amendment.

--- Later in debate ---

[Greg Hands]

I will try to speed up a little. As we know, the clause allows the Secretary of State to make the necessary licence modifications to apply a RAB model to a designated nuclear company. Subsection (2) clarifies that the effect of a licence modification is that the company would benefit from being able to receive an allowed revenue to construct, build, commission and operate a new nuclear power plant. Subsection (3) requires that the power be exercised only in relation to a nuclear company that is designated in accordance with the provisions of the Bill.

Licence modifications will not take effect unless the nuclear company whose licence has been modified subsequently enters into a revenue collection contract with a revenue collection counterparty, as set out in subsection (9). The modifications will be subject to negotiation between the Government and the nuclear company. It is therefore not possible to describe the exact modifications that would be required; however, subsection (5) highlights possible examples, such as the revenue that a company is allowed to receive, how that revenue is to be calculated, and the kinds of activities that may be undertaken by the company.

When making any modifications to a licence, subsection (4) requires the Secretary of State to take into account both our commitment to decarbonising the power sector and the interests of existing and future consumers with respect to the cost and supply of electricity. Alongside that, and to ensure that any RAB project is financeable, the Secretary of State, when making modifications under the clause, must have regard to the costs incurred in delivering the project and the need for the company to finance that activity. Together, those obligations will ensure that the modification powers are used so that the project contributes to a transition to a low-carbon, low-cost energy system.

As set out in subsection (3), the power to make modifications to a licence will last while the designation for a nuclear company is in effect. That is important to allow the Secretary of State to make modifications to the licence to take into account developments in negotiations and engagements with the financial market. When making any modifications in that period, the Secretary of State will need to continue to take account of the consultation that he undertook with all bodies named in clause 8. In addition to the modification of the designated nuclear company’s licence, subsections (7) and (8) allow him in very limited circumstances to modify the standard conditions of generation licences if necessary. The Secretary of State can make those modifications only if he considers it appropriate for consequential, supplementary or incidental purposes.

[Alan Brown]

I will be brief, because I know that time is getting on, and far be it from me to speak to a clause that both Front Benchers have agreed adds transparency to the Bill—albeit that, being facetious, I would say that doing so is a low benchmark. Subsection (2) clearly states that the licence can be modified only to facilitate

“investment in the design, construction, commissioning and operation of nuclear energy generation projects.”

Given that clause 1 states that a company can be designated only if it already has a generation licence, I would like the Minister to provide more clarity on what could be in a generation licence that prohibits the investment that he says that we are seeking to unlock by modifying it. That is the part that I am not quite clear on.

Clause 6(5) says that it is all about being able to change the revenue mechanism to allow a company to create more money. The Minister rightly said that subsection (4) lists some of the things that need to be considered as part of a licence modification. I ask him to consider that in the light of what I said earlier about clauses 2 and 3, and about there not being enough information in the Bill about what the Minister or Secretary of State should consider. We could also look at that in the round on Report, but we would like a wee bit more information about why the licence would need to be modified to release this so-called investment.

--- Later in debate ---

[Alan Brown]

Again, I will be brief. I have a few comments on clause 7 stand part. Subsection (2) and paragraph 83 of the explanatory notes confirm that a licence can be modified to allow the cost cap to be exceeded, but also, critically, so that additional revenue can be collected. The Minister spoke about transparency. How can that power be applied transparently? Clause 7 references clause 6(4), but that subsection does not provide enough scrutiny of governance.

I will give an example. What is to stop a nuclear company begging another £1 billion? With the costs of a nuclear project, £1 billion here or there does not make much difference in the overall scheme of things. If the Secretary of State thinks, “I am so worried about security of electricity supply”—that is an argument we keep hearing on nuclear—under clause 6(4)(b), they can then decide, “Yes, this power station is so critical for future energy security, I will just throw more good money after bad.” It is an easy step, and one that could be repeated several times—£1 billion here or there makes no difference.

This Government have already proven to be so pro-nuclear that they signed up to the most expensive power station in the world, Hinkley Point C, and so pro-nuclear that, after market failure, we are here debating this Bill, and, as was said earlier on, they have committed £1.7 billion just to develop Sizewell C to the final investment stage. We know they are so desperate to get Sizewell C over the line for the final investment stage, they are making that the newest, most expensive power station in the world, which we will be paying for for 60 years. So I do not understand how the clause gives protection and transparency for consumers, if costs go up. Invariably, costs will go up. It is unlikely that the risk is going to be carried by the developer. The risk under the RAB model is going to be carried by the consumers.

[Greg Hands]

Clause 7 provides the Secretary of State with the power to modify the allowed revenue of a relevant nuclear company where that is required to complete the construction of the nuclear RAB project.

I stress that this is a narrow power. Subsection (2) makes it clear that it can be exercised only where the expenditure to complete construction is likely to exceed a cap under the licence and to make modifications to the allowed revenue of the company. Subsection (4) means the power can only be used before the completion of construction, the point at which the plant is ready to enter commercial operations. That refers back to our previous debate. That is the right point at which this power ceases to be exercisable. The use of the power is at the discretion of the Secretary of State.

[Alan Brown]

Will the Minister explain how he sees the cap being set? Obviously, on a construction project, there is usually agreed risk sharing and that effectively sets a cap, but presumably, given the way the Minister is talking, there will be even more headroom here. How is that headroom going to be set and how transparent will that be, in terms of understanding what costs have increased to reach the cap?

[Greg Hands]

The financing cap will be set out at the beginning of the project by the Secretary of State. It will be available to be scrutinised. The purpose of the power in the clause relates to what happens in the event that we approach the financing cap.

The clause would have relevance in the very unlikely situation that, during construction, the project is likely to breach its financing cap under a RAB. The financing cap is the point at which investors are no longer required to put money into the project. What happens then? The cap is set at a remote overrun threshold. This means that before committing to a company having a RAB, the Secretary of State should be confident that the prospect of costs hitting that threshold is really very unlikely. Under the RAB licence, mechanics will be in place to incentivise investors to minimise costs and schedule overruns, such as overrun penalties. That will ensure that the breach of the financing cap is a remote risk.

When deciding whether to exercise the powers, subsection (3) means that the Secretary of State will need to have regard to the achievement of carbon targets and the interests of consumers, and whether the company is able to finance its activities. Those are the same considerations as when deciding whether to amend the company’s licence to insert the RAB conditions in clause 6. Given the strategic importance of a new nuclear plant, and the wider considerations, such as our need to secure resilient low-carbon energy, it is more appropriate that such a decision is made by the Secretary of State in this instance.

The Secretary of State is also the most appropriate person to balance the interests of consumers, taxpayers and investors. It is not about putting additional burdens on consumers. The RAB is designed to protect consumers by giving them a more cost-effective nuclear power plant, as shown by the steps that we have taken in the Bill. That includes robust due diligence before the final investment decision to be confident that the project will be effectively managed, incentives on the project in construction, penalties for investors in any overrun scenario, and the option for the Government to step in if the project hits extreme overruns.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Procedure etc relating to modifications under section 6 or 7

Nuclear Energy (Financing) Bill (Third sitting)

Debate between Greg Hands and Alan Brown

Committee stage
Thursday 18th November 2021 Public Bill Committees

[The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)]

Thank you, Ms Fovargue. It is a pleasure to serve under your chairmanship. I look forward to working with Committee members as we scrutinise this important and timely Bill. To begin, I want to briefly remind Members of the purpose and background of the Bill.

As all Members will agree, it is vital that the UK continues to lead the world in tackling climate change. That is why we have committed to a 78% reduction in emissions compared with 1990, as well as fully decarbonising our power sector by the year 2035, which will mean ensuring that the UK is entirely powered by low-carbon electricity, subject to security of supply. To deliver that, we will need new nuclear power plants, which are the only proven technology deployed at scale to provide continuous, reliable, low-carbon electricity.

[Alan Brown]

The Bill is mainly about Sizewell C. Can the Minister tell me where any European pressurised reactor is operating at scale connected to the grid at this moment in time? He is talking about proven technology.

[Greg Hands]

I am speaking in a general sense about nuclear being a proven technology, deployed at scale. That has been the case since 1957 or ’56, with the very first nuclear power plant in the world here in the United Kingdom at Calder Hall just by Windscale.

However, it is clear that we need a new funding model to support the financing of large-scale and advanced nuclear technologies. The Bill will deliver that, in the form of the regulated asset base model. I am sure the Committee will discuss the detail throughout our sittings, so I do not intend to go into the minutiae now, but I want to outline the Government’s position that this is the best way of delivering new nuclear projects while delivering value for consumers.

I am glad that the Opposition recognised that point through their support for the Bill on Second Reading. That support has been reiterated today by Her Majesty’s official Opposition, if not by the Scottish National party. I am grateful for their useful contributions on Second Reading and look forward to further discussions in Committee. Similarly, I recognise the interesting points raised by the SNP in that debate. I recognise that the SNP has a principled—if, in my view, irrational—objection to new nuclear projects. Nevertheless, I am pleased to subject the Bill to the SNP’s careful scrutiny as well.

I hope that as we move through Committee and the rest of proceedings on the Bill, we can work in collegiate and co-operative ways, considering the individual clauses of the Bill to ensure that it can meet its objectives. I think that was the position laid out by Her Majesty’s loyal Opposition at the start of the debate.

I turn to amendment 1, tabled by the hon. Members for Southampton, Test and for Greenwich and Woolwich. It is linked to amendment 2 to clause 2, and I am happy to debate both together. The amendments seek to insert as a criteria for designation that the company is not wholly or partially owned by a foreign country. I want to touch briefly on the implications that the proposed definition could have for the wider policy of financing nuclear projects in this country.

If the definition as drafted could rule in all companies that were seen to be controlled by state sponsors, it could thereby rule them out of eligibility for a RAB. The RAB allows us to bring new sources of financing into nuclear projects and reduce our reliance on overseas developers, but it is not credible to introduce a blanket exclusion on developer participation in RAB companies, many of whom are to some degree state-sponsored, including some of our closest international partners. One has already been named during proceedings on the Bill and in Committee this morning.

I am sure that the intention of the hon. Members does not lie in that direction, as that could make it much harder to bring new, appropriate projects to fruition. We should never forget that the Bill’s purpose is to make it more possible to finance nuclear projects in the future, not less so. However, I welcome the focus on national security in one of the UK’s key infrastructure networks, a point made by Her Majesty’s Opposition. We will no doubt focus on that matter fully in our consideration of all the amendments.

I will take the points raised in turn. The hon. Members for Southampton, Test and for Greenwich and Woolwich both asked what the £1.7 billion in the Budget and spending review is made up of. We had an extensive debate on the Budget—I think it was four days in all—and there was a chance to examine this, but I will now reiterate the purpose of the money.

--- Later in debate ---

[Alan Brown]

The Minister will have noticed in the evidence session on Tuesday when I put the question to the Sizewell C company about the derivation of the £1.7 billion and what discussions the company had had with the Government about that, the lady did not seem to know, or to believe there had been discussions with the Govt. How does this £1.7 billion get defined if the Sizewell C company does not know its derivation?

[Greg Hands]

To be fair, I also listened carefully to Sizewell C’s evidence, and the company will be as aware as we are that this is an active negotiation. I was not in any way surprised that Sizewell C’s representative did not wish to be drawn on the question of exactly where the £1.7 billion would be deployed. We have outlined in the Budget document the sorts of areas that would be in scope. None the less, this is an active financial negotiation.

--- Later in debate ---

[Greg Hands]

I do not think the hon. Gentleman is correct. It is not fair to conclude that the evidence from Sizewell C was incorrect, or that it was ill-informed in any other way. This is an active commercial negotiation. We have laid out the parameters of the £1.7 billion, and is in no way surprising that our negotiation partners may not wish to comment on what they think it is likely to be spent on. After all, it is taxpayers’ money, which will be deployed by this Government to move forward a nuclear project.

[Alan Brown]

The Minister made a key point: this is taxpayers’ money. Surely, we as taxpayers have a right to know, even roughly, what services will be procured from this £1.7 billion. I would still expect the Sizewell C company to have discussions with the Government and say, “We need to do x, y and z in order to de-risk this project and get it to the final investment decision stage”.

[Greg Hands]

I would say two things in response. First, Sizewell C may not feel it is appropriate to comment on the deployment of taxpayers’ money. Secondly, I know from long experience of Government that often the best way of securing taxpayers’ money in a negotiation is not to reveal too much about what approach the Government might be taking. We have laid out in the Budget document, which was quoted by the hon. Member for Southampton, Test, what we think is going to be in scope—what the £1.7 billion might be spent on.

The hon. Member for Greenwich and Woolwich asked a more general question about China. He asked whether this was about sending a message to China, or words to that effect. The answer is no. The UK welcomes foreign investment in our infrastructure, but as we have always said, that should not come at the expense of our national security. It is already the case in UK law that all investment involving critical nuclear infrastructure is subject to thorough scrutiny and needs to satisfy our robust national security and other legal and regulatory requirements. The National Security and Investment Act 2021 also strengthens our powers to act should we need to.

--- Later in debate ---

[Greg Hands]

I think we have already had the debate, but I will say briefly that the clause defines the key terms referred to in part 1 of the Bill. Subsection (2) defines a “nuclear company” as one that holds an electricity generation licence granted by the authority for a nuclear energy generation project. The authority is the Gas and Electricity Markets Authority, the governing body of Ofgem.

The clause goes on to make a distinction between an ordinary licensed company and one that has been designated by the Secretary of State to benefit from a RAB through having its licence modified by the Secretary of State. Subsection (4) defines a “relevant licensee nuclear company”. To become one such, it is necessary for the company to have had its licence modified by the Secretary of State to insert RAB special conditions and to amend the licence terms. It is also necessary for the company to have entered into a revenue collection contract with a revenue collection counterparty, so that RAB funding may flow to the company’s project.

[Alan Brown]

I appreciate that the Minister has been generous with his time. Will he clarify whether Sizewell C has an electricity generation licence? I could not find that on Ofgem’s website.

[Greg Hands]

I will write to the hon. Gentleman on that specific issue, perhaps this afternoon. I need to check whether Sizewell C has such a licence. I will get back to him.

Those steps in the clause are necessary to make clear the different stages that a company goes through under the RAB model.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Designation of nuclear company

Amendment proposed: 2, in clause 2, page 2, line 14, at end insert—

“(c) the nuclear company is not wholly or in part owned by a foreign power.”—(Matthew Pennycook.)

This amendment prevents the Secretary of State designating a nuclear company owned or part-owned by the agents of a foreign power.

Oral Answers to Questions

Debate between Greg Hands and Alan Brown

Tuesday 16th November 2021 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

In the Budget, £1.7 billion was allocated just to develop Sizewell C to a final investment decision. The Government are putting through the Nuclear Energy (Financing) Bill to enter into a 60-year contract for that project, and yet, in terms of tidal stream, there was no Government support whatsoever. Without a ringfenced pot of money, tidal stream will not be able to compete in pot 2, so will the Government urgently reconsider the request for a £71 million pot of ringfenced money?

[Greg Hands]

Since 2003 successive Governments have provided innovation funding of £175 million to wave and tidal sectors, and there has been £80 million since 2010. We are strong supporters of tidal stream. The Prime Minister was explicit from the Dispatch Box yesterday, reiterating his support. What we now need to do is work with the sector to demonstrate cost reductions and the potential for this technology.

Nuclear Energy (Financing) Bill

Debate between Greg Hands and Alan Brown

2nd reading
Wednesday 3rd November 2021 Commons Chamber

[The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)]

I beg to move, That the Bill be now read a Second time.

I want to start by apologising the House for the fact that I will be unable to stay for all of the debate as I am taking the train to Glasgow to be there for energy day at COP and will therefore miss the wind-ups. I have informed Mr Speaker of this, and those on the Opposition Front Bench. The Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Mid Norfolk (George Freeman), the Minister for Science, Research, and Innovation, will be here for the debate and he will respond for the Government.

Two weeks ago, on 19 October, the Government published their net zero strategy. It is our vision for a decarbonised economy in 2050 and the policies and proposals that will keep us on course to reach net zero emissions through our five-year carbon budget. It is a strategy that puts the UK on a trajectory to meet carbon budget 6, a 78% reduction in emissions compared with 1990 levels by 2035, as the Prime Ministers reminded us earlier today. These kinds of ambitious goals are vital as we host COP26. Integral to achieving carbon budget 6 is our new ambition to fully decarbonise the power sector by 2035. This will mean that the UK is entirely powered by low-carbon electricity, subject to security of supply. Of course our electricity system must be resilient and affordable, as well as low-carbon. It will predominantly be composed of wind and solar but, as last year’s energy White Paper made clear, a low-cost, reliable system means that renewables will be complemented by technologies that provide power when the wind is not blowing or the sun is not shining. Large-scale nuclear power plants are the only proven technology available today that is deployed at scale to provide continuous, reliable and low-carbon electricity. Our electricity system needs nuclear power.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Will the Minister give way?

[Greg Hands]

Of course I will give way. Perhaps the hon. Gentleman could explain why the SNP is so resolutely opposed to continuing the strong nuclear tradition in Scotland.

[Alan Brown]

I will do so later, but the Minister knows nuclear waste is a key issue. On proven technology working alongside renewables, he will be well aware that pumped storage hydro can provide that. Why will the Government not give the go-ahead for Coire Glas in the highlands, which has been progressed by SSE?

[Greg Hands]

The hon. Gentleman is right, and we are looking at that technology, but I stress what I just said about deployment at scale. We need something that can be deployed at scale to provide the bulk of our electricity when the sun is not shining or the wind is not blowing. We are always open-minded on other new technologies, but the most important thing is what can be deployed at scale. The measures in this Bill are critical for ensuring we have the option to bring forward further nuclear capacity.

Twelve of the UK’s 13 current nuclear reactors, representing approximately 85% of our nuclear capacity, are scheduled to close by 2030. Although Hinkley Point C is under construction, additional nuclear is likely to be needed in a low-cost 2050 electricity system. That is why we have committed to bring at least one further large-scale nuclear project to final investment decision by the end of this Parliament, subject to value for money and all relevant approvals.

--- Later in debate ---

[Greg Hands]

The Bill does not change the planning process, but it does change the investment case and the ability to bring in private sector investment, particularly institutional funds, including British pension funds, that are currently put off or find it difficult. It also affects the ability to bring in private institutional investors from overseas—we have seen the difficulties at Wylfa and at Moorside. In that sense, my hon. Friend will find the Bill of great encouragement in respect of future nuclear builds in his constituency.

[Alan Brown]

Will the Minister give way?

[Jonathan Edwards]

Will the Minister give way?

--- Later in debate ---

[Greg Hands]

As I have outlined, the Bill is about nuclear. Creating a more diverse potential finance base is exactly what it is about. It is not biased in favour of one technology vis-à-vis another, but, as a Government, we have been absolutely clear about the important, growing role that nuclear will play. On Hinkley Point C, we think that that was the right model for the decision at that time. I think the hon. Gentleman’s problem is with nuclear as a whole rather than specific problems at a nuclear plant. The United Nations Economic Commission for Europe said:

“International climate objectives will not be met if nuclear power is excluded”.

I think his policy is to exclude nuclear power in its entirety.

Members will be reassured that a project starting construction in 2023 will add only a very small amount to the average dual-fuel household bill during this Parliament—on average less than £1 per month during the full construction phase of the project. I believe that these bill impacts are proportionate, given the benefits that nuclear offers our electricity system. Ultimately, nuclear power will deliver a lower-cost system for consumers compared with reliance on intermittent power sources alone. The RAB model will make new nuclear projects cheaper. Our analysis has shown that using this funding model for a nuclear project could produce a cost saving for consumers of more than £30 billion, compared with funding projects through a contract for difference.

[Alan Brown]

Will the Minister give way?

[Greg Hands]

No, I am going to make more progress.

That saving equates to more than £10 a year for an average domestic dual-fuel bill throughout the life of a nuclear power station, which can operate for 60 years.

The UK has a pioneering history in nuclear energy. We were the first country in the world to set up a civil nuclear programme, back in 1956. There are proud communities—I see many Members who represent them here today—who have been working in the industry for more than 60 years. Creating new nuclear projects will support this important sector and help to level up the UK. The civil nuclear sector is already a major provider of high-value, high-skilled jobs across the entire country. It employs approximately 60,000 people, with nearly 90% of those jobs based outside of London and the south-east. New nuclear projects will be important sources of economic opportunity for the whole country. Hinkley Point C has already created well over 10,000 job opportunities. Future nuclear projects bring with them significant opportunities for training the future nuclear workforce through apprenticeships and training schemes to increase skills.

This legislation will vary in application across the UK. The Government are undertaking close joint work with other stakeholders on the potential options for nuclear at the Wylfa site. The RAB model could play a key role in funding any future project there.

Climate Change Committee Progress Report 2021

Debate between Greg Hands and Alan Brown

Thursday 21st October 2021 Westminster Hall

[Greg Hands]

Our position on the sixth carbon budget is unchanged, as the hon. Gentleman knows. However, I am a believer in an active Government, and publishing a set of strategies does not necessarily mean that we have reached the point that we want to reach: it merely lays out the map and sets out the process, which I think is very helpful. In terms of delivery, obviously the onus to fulfil these objectives is on not only the Government, but every citizen of this country and, indeed, the whole world.

We have just unveiled a landmark commitment to decarbonise the UK’s electricity system by 2035, to help us build a secure home-grown energy sector that is not reliant on fossil fuels and exposure to volatile wholesale energy prices, which as we know are very much in the news at the moment. However, the science could not be clearer: by the middle of this century, the world needs to reduce emissions to as close to zero as possible, with the small amount remaining sucked up through natural carbon sinks such as forests and relatively new technologies such as carbon capture. We are proud to lead the world in ending our contribution to climate change, not just because it is the right thing to do, but because we are determined to seize the unprecedented economic opportunity it brings. We want to build back better from the pandemic by building back greener and levelling up our country with new high-skilled, high-wage, sustainable jobs in every part of the United Kingdom. Those jobs will be spread across the UK, with specialists in low-carbon fuels in Northern Ireland, low-carbon hydrogen in Sheffield, electric vehicle battery production in the north-east of England, green finance in London, more engineers in Wales, and offshore wind technicians in Scotland.

The strategy builds on all the progress that the UK has already made. In June 2021, the UK Government set the sixth carbon budget at 965 megatonnes of CO₂ equivalent, a world-leading target that will mean a 78% reduction in greenhouse gas emissions by 2035 compared with 1990 levels. This is in line with the latest science, as the level recommended by our expert advisers at the Climate Change Committee, and is consistent with the Paris agreement’s goal of limiting global warming to well below 2 °C and pursuing efforts to limit it to 1.5°. The target would achieve well over half of the required emissions reductions from now to 2050 in the next 15 years.

Turning to the points raised during the debate, my hon. Friend the Member for South Cambridgeshire has pointed out that a parallel debate on COP26 is taking place in the main Chamber, so anybody watching the debate might wonder why there are not more Members here. The overlap has been considerable. He also rightly pointed out the UK’s huge success—in 2015, we emitted the lowest amount of CO₂ per annum since 1859—and then he got Opposition Members a little bit excited with his reference to the 1926 general strike. I do not think my hon. Friend thought of the 1926 general strike as something we would wish to emulate, but I noted from interventions and comments made by Opposition Members that they perhaps thought it was. It was very important that my hon. Friend quoted the 2019 figure, because emissions obviously went down quite a bit during the pandemic, so it is important that we look at a more robust figure, such as that from 2019. As he said, it was the biggest decline in the whole of the G20 since 1990: we emit less per person than the EU average, and less than Denmark or Norway. All of those were incredibly strong points.

I was thinking back to the 1990 benchmark for all those emissions. The nearest election to that time was the 1989 European elections, which were not memorable for anything other than the fact that they were the high point in the performance of the UK Green party. It was the year when the Green party got more than 10% of the vote overall. It ran on a manifesto that it was impossible to do anything to reduce emissions while still growing the economy. We had to reduce growth in the economy and reduce its size to do something about emissions.

As my hon. Friend the Member for South Cambridgeshire has pointed out, the incredible success in the 30 years since, during which the UK has grown the economy by 78% while reducing emissions by 44%, demolishes the case that was made at that time by the UK Green party and others. He also makes the good point that the hard work is yet to come. It gets more difficult and the low-hanging fruit has already been picked. Now we have the harder job ahead of us. He talked about carbon capture utilisation and storage and I refer, as in yesterday’s debate, to the fact that the Carbon Capture and Storage Association described Tuesday’s news as “amazing”. I will come back to the Scotland issue in just a moment.

On peatland, my hon. Friend rightly pointed out the Climate Change Committee’s recommendation to restore 67,000 hectares. Currently, only 32,000 hectares have been restored. We are committed to restoring 35,000 hectares by 2025 and 280,000 hectares by 2050. Other points included consumer choice and diet style and those also cropped up later in the debate, as well as the importance of nuclear power. I noticed that two Opposition MPs here today, the hon. Member for Southampton, Test (Dr Whitehead) and the hon. Member for Rochdale (Tony Lloyd), were first elected in 1997, running on a manifesto of ending new nuclear power plants in this country. It was part of the new Labour manifesto of 1997, which I think did so much damage to the nuclear industry in this country and effectively cost us a lost generation in nuclear capability.

I agree with my hon. Friend the Member for South Cambridgeshire that the decade of delivery has come.

[Alan Brown]

What is the Minister’s estimate of the capital cost of new nuclear that the Government are willing to commit the UK to?

[Greg Hands]

That is a slightly open-ended question, as the hon. Gentleman knows our commitment is to the existing Hinkley Point C facility. We are committed to bringing forward one further station for its investment case in this Parliament and on Tuesday we also allocated £120 million for a new nuclear innovation fund, which increases the optionality. What are the options for the UK in nuclear capability and capacity going forward? I just wish we had a more positive attitude on nuclear from the SNP. Scotland is part of this country’s nuclear heritage and it disappoints me continuously to see the SNP not seeing the opportunities available for Scotland in so many of our energy and climate change programmes.

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[Alan Brown]

Will the Minister give way?

[Greg Hands]

I will make some progress.

On transport, the hon. Member for Rochdale makes some good points. Let me tell him what we are doing on transport: the zero-emission vehicle mandate, improving consumer choice; further funding of £620 million for zero-emission vehicle grants; allocating a further £350 million of our up to £1 billion automotive transformation fund to support the electrification of UK vehicles; £3 billion on integrated bus networks; and a £2 billion investment to enable half of journeys in towns and cities to be cycled or walked by 2030. Those are big commitments.

The hon. Gentleman talked about homes and the boiler upgrade scheme. It is exciting, but slightly buried in all the news about net zero overnight, that one of the energy companies—it is Octopus Energy, but I expect others are either there or will follow—said that it is confident that by April next year, the installation price of a new heat pump will be equivalent to the price of a natural gas boiler. This is one of the important points about what the Government can do. The Government will not come round to everybody’s home, across the whole UK, and install a heat pump. That would be impractical and it would potentially be beyond the means of the Government and the taxpayer to do that. What we are doing is kick-starting a market and kick-starting private sector innovation to come along and do it, and we are already having an impact in what we are doing on heat pumps.

[Alan Brown]

The Minister is citing Octopus again, but can he tell me, then, what he thinks the installation price of an air source heat pump will be in a year’s time? Did he listen to the points that I made about all the other installation costs that need to accompany an air source pump? Can he give an estimate of what the total cost of that installation would be?

[Greg Hands]

I will not go further down the road of making price or market predictions. What the Government need to be in the business of doing is kick-starting the market, stimulating the market, and getting it going. I do not think it is in my interest to set out predictions of what I think supply, demand or pricing might be in a year’s time.

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[Greg Hands]

I am going to make a bit more progress. We intend to upgrade as many homes as possible to energy performance certificate band C by 2035.

The hon. Member for Kilmarnock and Loudoun (Alan Brown) talked about the heat pump grant scheme. I am amazed by that. It is a devolved matter, but there have been discussions with the Scottish Government about the Scottish Government joining up with us and participating in this scheme; but if I understand the situation correctly, they have refused. The irony is that the Ofgem team that will be administering the England and Wales scheme will be based in Glasgow, with more than 100 new members of staff. Unless they have a very long commute, they will not be able to benefit from the scheme that they are helping to administer, due to the fact that the Scottish Government have said that they will not be joining the UK Government in the scheme. That is a great pity.

[Alan Brown]

Will the Minister give way?

[Greg Hands]

If the hon. Gentleman has some hot news from the Scottish Government, over to him.

[Alan Brown]

I have not had time to get on the hotline to them. On the point about the additional members of Ofgem working in Glasgow, that is very welcome and I hope they will not have a long commute—that would not be good for climate change overall. The more serious point is about what funding is coming to the Scottish Government to run their own scheme.

[Greg Hands]

The Barnett consequentials will of course be enacted in the usual way as we would expect, but why not join with a scheme that has been very well received, that I think will be a market leader and that will, ironically, be administered out of Glasgow? It makes perfect sense for the Scottish Government to come on board with us.

We have made huge investments in offshore wind and other renewables in Scotland. The hon. Member for Kilmarnock and Loudoun mentioned the 5 GW target for hydrogen being less than in Germany. It is the same as Germany’s target—they have exactly the same target. On wave and tidal, we have already put down more than £175 million in innovation funding across this country, with 10 MW already deployed. In many senses, they are still pre-commercial technologies, but we are making the investment to increase the optionality that will be available in wave and tidal.

I welcome the hon. Gentleman’s overall support for the UK’s targets and ambitions. He mentioned reforms to the electricity market. We recently published a call for evidence on actions to align capacity markets with net zero and actions to encourage the participation of more low-carbon capacity. We are committed to accelerating the deployment of low-cost renewable generation through the contracts for difference regime and by undertaking the review of the frequency of CfD options.

The hon. Member for Southampton, Test, in a comprehensive speech, congratulated us on our success in decarbonising electricity generation. I go back to the commitment given to complete that process by 2035. He said that we are ignoring other areas. I do not think that is fair and I do not think that is the case. He talked about adaptation. We are currently developing a national adaptation programme, which is due in 2023. DEFRA published the response to the Climate Change Committee’s adaptation report, which goes into more detail on our progress on adapting to climate change.

On fossil fuels and net zero, of course net zero does not necessarily mean zero residual emissions in all sectors of the economy. It is, after all, a net zero figure. In aviation, agriculture and industry it may not be feasible, practical or cost-effective to eliminate all emissions.

I thank the hon. Member for Southampton, Test for his praise for the hard work put in by my officials on producing the reports.

The hon. Member for Kilmarnock and Loudoun asked, “Where is the Treasury review of the cost of net zero?” I have news for him—I emailed it to him about 15 minutes ago. It was published on Monday night. It is entitled, “Net Zero Review: Analysis exploring the key issues”. There are 135 pages for him to digest before I see him next, when he can ask me questions about it. It was published at the same time as, or just before, the net zero strategy.

In the past few years, the Government have gone further than ever before to ensure that the climate is at the heart of our decision making. We have taken new approaches to embed net zero in spending decisions, including requiring Departments to include greenhouse gas emissions in their spending review bids and their impact on meeting carbon budgets and net zero. As I already said, we have established two Cabinet Committees. The integrated review reflects that and ensures that it is the Government’s No. 1 international priority. We are also using the Environment Bill to require the Government to reflect all these issues in national policy.

We are committed to taking a whole-system approach to the net zero challenge, ensuring that we understand and can navigate the complex ways that our climate goals will interact with other priorities for the country. As I mentioned, we published the heat and buildings strategy, which sets out the required actions to decarbonise buildings over the next decade, helping meet near-term carbon budgets and getting us on track for net zero by 2050.

Net Zero Strategy and Heat and Buildings Strategy

Debate between Greg Hands and Alan Brown

Tuesday 19th October 2021 Commons Chamber

[Greg Hands]

I thank my right hon. Friend for, as always, putting his question very directly, which I have appreciated over many years in the House. I have mentioned our commitment to nuclear and our commitment to the gas sector as a transition fuel. Fortunately, at the moment, we are dependent largely on domestic gas production, in that 50% of our gas usage comes from the UK continental shelf while 30% comes from Norway. The point here is to ramp up our commitment to low and zero carbon fuels. That makes sense for the environment, for our economic security and for our diversification.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The key point in the announcement today is the fact that Peterhead has once again been betrayed. All along, warm words have been paid to the Scottish cluster, but we have been stabbed in the back again. Classing the Scottish cluster as a reserve is an even bigger insult. What representations has the Minister had from the Scottish Secretary of State about what is happening to Peterhead? Can he also confirm that this is a political decision rather than a technical one, given that the Scottish cluster ticks all the boxes and would have contributed to the hydrogen production target?

The Minister keeps going on about nuclear, but the reality is that, at £23 billion, Hinkley is the most expensive power station in the world. Its strike rate is £92.50 per megawatt-hour, compared with offshore wind at less than £40 per megawatt-hour. What is the capital cost in billions of pounds that the Government are willing to commit to, given that it could be better spent elsewhere? What funding is coming to Scotland on the back of the announcement of the social housing decarbonisation fund and the home upgrade grant schemes?

If we look at Scotland in the round, we see that it has contributed £350 billion in oil and gas revenues over the years. Where is the UK Government’s match funding for the £500 million just transition fund that the Scottish Government have committed to the north-east of Scotland? The Minister talks about levelling up, but his levelling up does not include Scotland. We have the highest electricity grid charges in Europe, which puts renewable energy in Scotland at risk, as it is 20% more expensive than in the south-east of England. That also affects the UK’s net zero trajectory. Scottish energy consumers are now made to pay for their nuclear, which we do not want, and Peterhead has been sacrificed for the red wall constituencies. When it comes to Scotland, the UK Government are not helping us tackle climate change but are instead adopting a scorched earth policy as we head towards independence.

[Greg Hands]

I spent significant time in Aberdeen last week, and I did not meet a lot of people who share the hon. Gentleman’s doom and gloom approach to all things when it comes to energy. I had meetings with Oil & Gas UK, Robert Gordon University, Harbour Energy, CHC Helicopter and Jim Milne of Balmoral Group, and I found a region and a city that are enthusiastic about the energy transition and our North sea transition deal.

I have already mentioned nuclear and the new funding that is available, and I am disappointed that the SNP remains resolutely anti-nuclear, which I think it will regret. I think the Scottish people do not agree with the SNP.

Today’s announcement on carbon clusters is for track 1, and it is not the end of the story—far from it. We have always been clear that we will have two industrial clusters by the mid-2020s, and four by 2030 at the latest. We have announced the Acorn cluster as a reserve. It met the eligibility criteria and performed to a good standard against the evaluation criteria, and we will continue to engage with it throughout phase 2 of the sequencing process to ensure it can continue its development and planning. We remain committed to track 2. This morning the Carbon Capture and Storage Association welcomed today’s announcement as “amazing news” for carbon capture and storage.

The hon. Gentleman asked about home grants. Of course, a lot of these policy areas are devolved. He might have a word with his SNP colleagues in Edinburgh and perhaps get them to participate, as they will get Barnett consequentials. Ironically, the heat pumps scheme for England and Wales will be administered by Ofgem out of its office in Glasgow. Those administering the scheme will not be eligible for it themselves unless the Scottish Government take action to match what the UK Government have said.

Finally, on the North sea transition, energy in Scotland and the move to net zero, I urge the hon. Gentleman for once to take a more positive approach and get with us, particularly as we prepare to host the world in Glasgow in just two weeks’ time.

Trade Bill (Eighth sitting)

Debate between Greg Hands and Alan Brown

Committee Debate: 8th sitting: House of Commons
Thursday 1st February 2018 Public Bill Committees

[Greg Hands]

Welcome back to the Chair, Mr Davies; it is a pleasure to serve under you, as ever.

Clause 7, as we know because we debated it at length on Tuesday, sets out the powers that are needed for the Government to collect data to establish the number and identity of UK businesses exporting goods and services. Clause 8, in turn, sets out the powers that are needed for HMRC to share data with the Department for International Trade and other Departments and organisations in order for those bodies to carry out their public functions in relation to trade. Any trade information collected or shared by the Government under clauses 7 and 8 will come at minimal cost to business and the taxpayer—I will go into a bit more detail in a moment—and will be below the threshold needed for an impact assessment and review.

To deal with some of the points raised in the debate, the hon. Member for Kilmarnock and Loudoun asked about the impact on HMRC. I can confirm that HMRC will not require additional staff or resources for this function as a result of the data provision in the Trade Bill. From what the hon. Members for Sefton Central and for Brent North said, it sounded as if they are going to vote for the new clause. The different Opposition parties seem to be attacking the issue from different angles. Although the hon. Member for Kilmarnock and Loudoun said that too much resource is going to some places—I think that he called it the “Brexit gravy train”—the hon. Member for Sefton Central seemed to say that resources were too limited. However, I think that they are both coalescing around voting for the new clause.

[Alan Brown]

To clarify, I was talking about the Brexit process as a whole. It is certainly a gravy train for consultants, because the Government do not have the expertise in house.

[Greg Hands]

Well, I guess we will leave it at that. I accept the hon. Gentleman’s intervention to clarify precisely what he meant by the “Brexit gravy train”, but let us look at the truth.

The truth is that collecting the data will involve minimal cost to Government and business. The cost will certainly be below the level at which an impact assessment must be published, which is £1 million. I do not know what the cost of the hon. Gentleman’s assessment might be, by contrast, but the cost of the provision in the Bill will be less than £1 million. The Regulatory Policy Committee confirmed to my Department during the course of our analysis that no impact assessment was therefore needed, due to the low costs associated with the provision.

--- Later in debate ---

[Greg Hands]

I do not think that that is necessary. The work that has been done shows that the cost would be less than £1 million. The new clause is all about trying to work out the cost of this particular measure, not about the wider implications for HMRC.

The hon. Member for Sefton Central asked whether this is a futile exercise. I say to him that we will be able to target support directly and ensure that UK business is at the forefront of post-Brexit opportunities, thanks to the data that this provision may well realise.

Finally, I remind the Committee that the Government currently do not collect any export data at all from about 4 million UK businesses. Our analysis elsewhere suggests that about 300,000 businesses in the UK could and should export but do not. We need this limited data collection and sharing power to be able to find and help them. I therefore urge the hon. Member for Kilmarnock and Loudoun to withdraw the new clause.

[Alan Brown]

I listened to what the Minister said. Clearly, if we stick to the existing trade agreements, nothing will change and everything will be much the same. Although there may be a logic to that, I will press the new clause to a vote because it would allow the Government to print an impact assessment that shows that nothing will change, that everything will be okay and that there will be no impact on HMRC. I would have thought that the Government would be happy to do that, and that it would not take too long.

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

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[Alan Brown]

Far be it from me to suggest that the hon. Gentleman may be a tad naive, but he is certainly optimistic if he thinks the Government have seen the light on this. I have made this point several times, but the devolved Administrations have said that they will withhold legislative consent motions if the Bill is not amended, so realistically, the Government will need to consider further amendments.

[Greg Hands]

The Government have made it clear that we seek to maintain the effects of the UK’s existing trade agreements. We make that commitment in relation to all parts of the United Kingdom, which means that we do not intend Scotland, Wales, Northern Ireland or, indeed, England to be disproportionately impacted by the transitioning of those agreements. Given that we have committed to seeking continuity in the effects of existing agreements, the impact of the transition should be neutral on all parts of the UK.

--- Later in debate ---

[Greg Hands]

I do not mean for us to keep throwing questions at each other, but I again stress that the Bill is about the existing trading arrangements of the United Kingdom as a whole. We will engage extensively with the devolved Administrations about what the future arrangements might be. We are being clear that we will continue to engage with the devolved Administrations as we transition these agreements as well. The devolved Administrations will, of course, have a role in implementing transitioned trade agreements in devolved areas, including, where appropriate, by amending retained EU law.

We have committed to consulting the devolved Administrations on the most appropriate way to implement the transitioned trade agreements and the agreement on government procurement in areas of retained direct EU law that have effect in otherwise devolved areas. We will welcome their input on the best way to do that so that the agreements are implemented effectively for the whole of the UK. We will also work closely with the devolved Administrations on the role they will play in shaping the UK’s future trade negotiations. It is right that we should have the opportunity to take these discussions forward and to engage the devolved Administrations to understand their views.

[Alan Brown]

I welcome the fact that the Minister is outlining the engagement he has had with the devolved Administrations, but can he confirm what the views of the devolved Administrations are on the provisions of the Bill?

[Greg Hands]

I do not think the hon. Gentleman needs me to confirm that. He has said himself what the position of the devolved Administrations is, including on the legislative consent motion. We have listened to them and will continue to listen to them very closely. He has put his point of view on the record as to the perspective of the Scottish Government.

I will come back to some of the points raised in the debate. The hon. Member for Brent North wanted to put devolved Administration engagement on the face of the Bill. I stress again that these agreements are about continuity, not future trade agreements. We have been clear in the White Paper that we will engage. We therefore do not require statutory engagement structures in the Bill.

Trade Bill (Seventh sitting)

Debate between Greg Hands and Alan Brown

Committee Debate: 7th sitting: House of Commons
Tuesday 30th January 2018 Public Bill Committees

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I beg to move, That the clause be read a Second time.

It is a pleasure to serve under your chairmanship again, Ms Ryan. The good news at this stage is that there are fewer notes written in advance—the Committee might be quite relieved about that. New clause 3 was originally drafted by colleagues from Plaid Cymru, and my hon. Friend the hon. Member for Livingston and I were more than happy to add our names in support. Actually, we have been completely vindicated on that given how events have panned out today. There have been no concessions to any Scottish Government or Welsh Government amendments. The Government voted down the Labour amendment that would have allowed impact analysis to be undertaken and at least understood. They have excluded any provisions for devolved authorities to be involved in the Trade Remedies Authority.

The new clause is quite simple: it seeks to propose a sub-committee of the Joint Ministerial Committee, to look at effects in the devolved nations of any international trade agreement implemented by the powers in the Bill. It is simple, effective and it does not create a whole new body, because it just creates a sub-committee of the existing JMC. In terms of administration, it should not be excessive, and so I ask members of the Committee to support the new clause.

[Greg Hands]

I can be brief. The Government have made it clear that they seek to maintain the effects of the UK’s existing trade agreements. We make this commitment in relation to all parts of the United Kingdom, which means that we do not intend Scotland, Wales, Northern Ireland, or indeed England, to be disproportionately impacted by our transitioning of these agreements. As we have committed to seeking continuity in the effects of existing agreements, the impact of the transition should be neutral on all parts of the UK.

In relation to consultation with the devolved Administrations, as we have laid out frequently on Second Reading and in Committee, the Department for International Trade ensures that each of its Ministers, as well as directors and other senior officials, visit the devolved Administrations regularly and continually look for further opportunities to engage with a range of stakeholders across the UK.

--- Later in debate ---

[Greg Hands]

Very briefly, in response to that long speech I have only three points to make. First, there is no serious threat to the devolved Administrations. What we are talking about is the transition of existing free trade agreements. The hon. Gentleman’s points—his parallels with the United States and so on—seemed to relate entirely to future trade agreements and not to the continuity of existing trade agreements. I also point out to him that the Secretary of State for International Trade has not appointed himself President of the Board of Trade. The Prime Minister has appointed him President of the Board of Trade.

Most importantly, the Bill is all about continuity and the technical transition of existing free trade agreements. The hon. Gentleman’s points seem to relate to future trade agreements, which will be a matter for another day.

[Alan Brown]

I take on board what the Minister says and know that logically it is correct in theory: this is just the roll-over of existing EU agreements into UK law. However, as the hon. Member for Brent North said, and as we heard from witnesses, there is still a risk that, even in trying to move over existing agreements, some matters come up for renegotiation. It is not crystal clear how matters will pan out and the new clause would at least give the protection of full analysis of the impact on the devolved nations in terms of any adjustments that end up happening in due process when we move over the existing agreements.

We have previously expressed our concerns about the UK Government getting competency in devolved matters, and the new clause would wrap up that aspect. For that reason, I will press the new clause to a vote.

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

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[Alan Brown]

I beg to move, That the clause be read a Second time.

The new clause is about how the Bill will be managed through the transitional period upon leaving the EU. To date, the Government have not clarified how a transitional period will affect the various legislation related to the UK’s withdrawal from the EU. To be fair to the Government, there is an obvious reason why they have not clarified that: as yet, there are no arrangements in place in terms of a transitional agreement, so they do not know what form a transitional period will take, how long it will be or if there will actually be one.

Assuming that the extreme Tory Brexit is averted and a deal concluded with the EU that includes an agreement on a transitional period, the new clause requires the Secretary of State to lay a report before Parliament ahead of the UK’s EU withdrawal on the application of this Bill during such a transitional period. The Minister might argue that the Bill relates only to existing EU agreements and to bringing legislation over. There have already been discussions about what happens if deals are signed but not ratified or further deals come on board with the EU. Those matters might need to be considered in terms of a transitional period, because they all relate to the terms of that period. This new clause aims to ensure that Parliament fully understands the impact of the transitional period and how the legislation will work.

[Greg Hands]

I am surprised that the official Opposition do not have anything to say to this clause. I thought that they took quite an interest in the application of the implementation period, but it appears not.

In any case, new clause 9 would require the Government to report to Parliament on how the Bill will be applied during the implementation period. I recognise the desire for clarity on how an implementation period will work and, specifically, how the powers in the Bill will be used in that period.

Irrespective of the exact terms of the implementation period, which need to be negotiated with the EU, as it stands the UK will no longer be part of existing EU FTAs or the government procurement agreement on leaving the EU. We will need the powers in the Bill to ensure continuity in our trading arrangements.

I also recognise the desire for clarity specifically on how trade remedies will work during an implementation period. We want to provide continuity to British industries, including retaining meaningful access to trade remedies.

Parliament will have plenty of opportunity to scrutinise an agreement between the UK and the EU, including on an implementation period. We have already committed to a vote on the final deal, and major policies in the withdrawal agreement will be enacted through primary legislation in the form of the withdrawal agreement and implementation Bill. I therefore ask the hon. Member for Kilmarnock and Loudoun to withdraw his new clause.

Trade Bill (Fifth sitting)

Debate between Greg Hands and Alan Brown

Committee Debate: 5th sitting: House of Commons
Tuesday 30th January 2018 Public Bill Committees

[Alan Brown]

I thank the hon. Gentleman for that clarification. I would still contend that there is a confused viewpoint regarding the single market and how it aligns with membership or otherwise of the EU. Again, where the rail franchising system in the United Kingdom has been liberalised, clearly there is no impediment to the Scottish Government making a public sector bid. That proves that it can happen within the EU single market.

In conclusion, I welcome any commitment to strengthen the public sector ethos and public sector ownership, and I will be interested to hear what the Government have to say.

[Greg Hands]

As I have mentioned, the aim of continuity means that this exercise will not be used as a back-door way to alter how the UK delivers public services. I make it clear to the Committee that the protection of public service delivery is written into many EU trade agreements and they already include safeguards to protect EU country Governments from being forced to privatise their services. That protection has worked for 20 years.

I will turn to some of the individual points that have been raised. The hon. Member for Sefton Central talked about the agreement on government procurement. Just to be clear, the GPA operates on a positive list basis—that is, only areas listed by GPA members in their GPA schedules are covered by the GPA’s obligations.

Secondly, the hon. Gentleman will know, as I do, that negotiations on the trade in services agreement are ongoing at the WTO, but are not making a great deal of progress. The UK’s position, as it currently stands, will be represented in those discussions by the European Union.

Trade Bill (Sixth sitting)

Debate between Greg Hands and Alan Brown

Committee Debate: 6th sitting: House of Commons
Tuesday 30th January 2018 Public Bill Committees

[Alan Brown]

Thank you, Mr Davies, and I thank the hon. Gentleman for his intervention. I welcome his opening remarks, and I might have an opportunity to show how much when other amendments go to a vote. I also welcome his support for amendment 35. He talked about the wisdom of co-operation and of working with Government, and the wisdom of devolved Administrations. It is maybe a pity that the wisdom of the devolved Administrations is coming through me rather than directly, but we will just have to deal with that.

Amendment 35 is very modest. All we are asking is that, if the UK Government propose to extend the sunset clause, they must consult the Scottish and Welsh Governments. That does not seem to be too big an ask to me. It is also more pertinent given the five-year period proposed in the Bill. Given that the Bill, as I keep hearing, is to do only with the UK’s access to existing EU trade deals and bringing those deals into UK legislation, it makes me wonder why we would ever need a period beyond five years. We are dealing with legislation that should be coming forward quickly, given the date for leaving the EU, and given that the International Trade Secretary has said that these negotiations will be the easiest in human history. Why we would need Henry VIII powers beyond five years is a mystery. We are just asking for the courtesy that the Scottish and Welsh Governments are consulted if that is the case.

[Greg Hands]

We have had a wide-ranging and interesting mini debate, full of historical references and colourful metaphors. We have had Henry VIII, plenty of sunsets and royal pageants. The hon. Member for Warrington South even introduced a Trojan horse. It has been a helpful debate.

Let me try to explain why we have included the sunset clause for this power, because once I have explained, all will become clearer. It is so that Parliament can have the chance to review its merits once again five years after exit date. However, since this power may be required to ensure the operability of transition agreements beyond the five-year period, potentially indefinitely, it is important that the Government have the option to extend the use of the clause 2 power. That will, of course, be subject to the approval of both Houses.

--- Later in debate ---

[Alan Brown]

To be clear, people appointed on merit by the UK Government will be completely impartial, but people appointed by devolved Governments will suddenly have such conflicts of interest that it will pull the whole TRA system down a hole?

[Greg Hands]

I appreciate the hon. Gentleman’s point, but the point is to have a UK-wide perspective, and for the appointments to be based on expertise in that space, and made following good governance principles. That is the objective for the membership of the TRA.

On trade remedies, I think the hon. Member for Sefton Central impugned my hon. Friend the Member for Corby by saying that he was not sufficiently interested in the steel industry. I have known my hon. Friend for some time, and he is incredibly passionate about the steel industry. He takes a keen interest in the operations of the TRA, and is quite expert in this space. He knows that much of the detail of the operation of the TRA is not in this Bill but in the Taxation (Cross-border Trade) Bill.