Draft Electricity and Gas (Energy Company Obligation) (amendment) Order 2017

Debate between Jesse Norman and Callum McCaig

Wednesday 22nd March 2017 General Committees

[Jesse Norman]

As the hon. Gentleman will know, the Government made clear in a debate last Thursday and in other remarks that they would bring forward a consumer Green Paper and a response to the Competition and Markets Authority. A specific response on the issues he raises will be addressed in those documents.

The order will reduce the overall spend of the scheme from £860 million a year now to £640 million a year. That has been done to constrain the impact of Government policies on all consumer bills. In making the change we have also sought to ensure that the support offered by the ECO is focused more on those in more need.

[Callum McCaig (Aberdeen South) (SNP)]

In this and any future scheme, has any consideration been given to putting the burden on to the taxpayer as a whole, as that would be far more progressive and would go some way to reducing fuel poverty? As the Minister will know, those with lower incomes pay more on fuel bills and therefore a bigger share of the contribution to schemes that are meant to reduce fuel poverty.

--- Later in debate ---

[Jesse Norman]

There are two points to make on that. First, the way to think about all these things is as part of a wider energy mix that is designed to solve the trilemma of security, affordability and decarbonisation. On the contribution of offshore wind, for example, it is true that there is some question as to its total cost when including intermittency. It is also true that, had it not been for the substantial Government investment in this area, we would not have the situation in which costs for this technology are falling faster and further than anyone would have anticipated.

[Callum McCaig]

On intermittency, I understand—and I put a question to the Minister’s colleague at Energy questions last week—that the Government are refusing to publish a report that they commissioned to look at that very thing. If there are questions on the cost of intermittency, publishing that report would greatly help us to have that debate in an informed manner. Will the Minister look at publishing the report by Frontier Economics on the full cost of electricity generation?

[Jesse Norman]

I am happy to look at the hon. Gentleman’s suggestion. On the point I was making to my hon. Friend the Member for Reigate, we are not starting from the position he described. That position has the effect of disguising costs. The reason why we have carbon emissions issues is precisely because of the externalities built into previous models of industrial development. Those substantial costs were not included in the true cost of production of the goods and services concerned. It is simply untrue to suggest, even by implication—I am not suggesting my hon. Friend was suggesting this—that there had been some Elysium or status beforehand in which costs were explicit and are now not; there were costs before that were not explicit and there may be costs now that are not. From a Government standpoint, there is no hiding of costs as regards expenditure by either consumers or the Government.

Let me say a couple of other things. The overall energy market approach my hon. Friend describes was well outlined recently in a report by the House of Lords Economic Affairs Committee, as he may know. It remains an important part of the accountability of Government that we respond to it and are aware of it as an alternative. However, it is worth saying that it would do nothing as such to alleviate the issues of fuel poverty that concern us today. In my judgment, it is not an answer to say that local authorities are somehow a go-to alternative. The truth is that the delivery of those and related measures by local authorities has historically been quite mixed.

On the setting the 10% figure, that was designed, based on the consultation, to allow for a period of experimentation during the transition period, precisely to assess whether that number could be raised in line with the suggestions that have been made. The number involved—even at 10% of £45 million—is not a trivial amount of supplier obligation. I think that is a reasonable and proper justification.

I will say a couple of things about the matters raised by the hon. Member for Southampton, Test. He asked why we were presenting the order so late. I share his concern about that. My preference would be for measures to be presented to Parliament as early as possible. The difficulty has been—in part, this refers to a couple of earlier points—last year’s changes in Government and knock-on effects, which have delayed the process. It is certainly not something that any Government would want to make a habit of, so I take the point.

I have a couple of comments to make in response to what the hon. Gentleman said about a reduction on a reduction: first, the number of homes in fuel poverty has continued to fall since 2010, and it is clear that the measures continue to have a powerful effect. It is also important to bear down on consumers’ bills. If the hon. Gentleman wants to introduce specific costed proposals for restoring the funding that he criticises the Government for reducing, it is incumbent on him to state by how much he would be prepared to put it up, and how much he would be prepared to burden taxpayers or consumers. In addition, we expect, by September 2018, to have met a target of 850,000 homes insulated. That leaves 150,000 by 2020, which is in line with the manifesto commitment made in 2015. The Government believe that they are on track.

As for the fourth carbon budget, the hon. Gentleman was talking about totals—and the challenge for the Government is to meet the fourth carbon budget in total. The support and advice that the Committee on Climate Change offers is always welcome and of interest to us, but the focus is on the total. The hon. Gentleman painted a beguiling picture of towels being tightened and retightened in the bowels of the Department; but I think it is fair to describe the process of aligning all the different carbon saving measures required to meet the budgets as complex and difficult. That is what the clean growth plan, which will be published in due course, will do.

UK Decarbonisation and Carbon Capture and Storage

Debate between Jesse Norman and Callum McCaig

Tuesday 24th January 2017 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)]

It is a delight to serve under your chairmanship, Mr Betts. I absolutely welcome this debate and congratulate the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) on securing it and on his very interesting opening remarks. The hon. Gentleman is a strong proponent of carbon capture and storage—he has professional experience and expertise—and this has been a valuable discussion.

I will make some general statements before responding specifically to the concerns raised. We have not got much time, so I will have to move relatively quickly. As I am sure the House understands, the Government remain very committed to tackling climate change, and remain very committed to the Climate Change Act 2008 and the implications it has and will have for the coming decades. Climate change remains one of the most serious long-term risks to our economic and national security.

As a country, we have made great progress towards our goal. Indications are that UK emissions in 2015 were 38% lower than in 1990, and 4% below those in the year before. It is appropriate to recognise that, as well as to look ahead to the future to the emissions reduction plan, which we will publish in due course. I am happy to respond to the question from the hon. Member for Southampton, Test (Dr Whitehead). My colleague the Minister for Climate Change and Industry mentioned to the Business, Energy and Industrial Strategy Committee that that would be in the first quarter. I can do no better than echo his words.

As a Government, we remain committed to exploring all technologies that can support the process of decarbonisation, including carbon capture and storage. As has been recognised today, CCS has a wide range of potential applications in which it could contribute to the reduction of carbon in our environment. Those include not merely decarbonising heating and transport, but providing a pathway for low-carbon hydrogen and producing negative emissions when biomass is combined with CCS in power generation. CCS offers a wide array of potential strategic benefits. It has been rightly noted that it has the potential to help energy-intensive industries in this country to remain competitive.

I understand some of the concerns that were raised about the cancellation of the project last year. The project was absolutely not without benefits and, as the Committee recognised, there had been investments in front-end engineering and design. It was an ambitious scheme. Everyone in the Chamber believes that the Government should be ambitious in their expectations for climate change improvement and carbon reduction, so I think it is odd to criticise the Government’s ambition, when they have sought to be precisely that.

[Mr Philip Hollobone in the Chair]

The Government absolutely believe that CCS has a potential role in long-term decarbonisation, but it must be affordable. It is worth noting that we are not by any means the only country seeking to crack CCS from a cost perspective. Projects have been deployed, particularly in north America. However, the United States, Canada and Norway have all cancelled projects, so we are taking the time to look hard at CCS to see whether we can find a cost-effective pathway.

That does not mean we have not been investing in the meantime. As colleagues know, we have made a range of investments across the piece, including in Carbon Clean Solutions, which the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) mentioned—I would be delighted to meet him when officials can set it up—and in storage appraisal projects in the Northern Irish seas and the Summit Power CCS project at Grangemouth.

The Government continue to be very active. We commission research and provide support for innovation, and we remain engaged and seek to continue working with and learning from others, such as the United States, Canada and Norway. The hon. Member for Coatbridge, Chryston and Bellshill mentioned the Toshiba CCS plant in Texas. Officials have already met the promoters of that scheme and are contemplating visiting it when it is up and running to learn more as part of our overall picture. We remain part of a series of international initiatives designed to understand CCS better, and to learn from and deploy it as effectively as possible.

Therefore, we have not closed the door, by any means. Indeed, Lord Oxburgh was asked to set up and lead his parliamentary advisory group—I very much recognise the contributions made by Members in the Chamber towards it—precisely because we have not closed the door to CCS but are looking to use it, if possible, affordably and effectively. I put on record my thanks to Lord Oxburgh and the group’s members for their work.

On the specific issues raised by colleagues in the debate, I was invited by the hon. Member for Coatbridge, Chryston and Bellshill, who opened in the debate, to consider CCS as part of the industrial strategy. As I hope has been understood, we absolutely are doing that and will continue to do so.

My hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter), who is no longer in his place, asked whether we, as a country, would be affected by Brexit in this regard. I point out that, as a country, we are a signatory to the Paris agreement independently of the EU as well as through it, and it is therefore far from clear that Brexit will make a difference.

The hon. Member for Stockton North (Alex Cunningham) is right that we need to get the EU emissions trading system correct. My hon. Friend the Member for Waveney (Peter Aldous), in a very eloquent speech about the offshore potential for the UK continental shelf, said that we must be pioneers in CCS, but I slightly disagree with him on that point. There is an honourable place for us as an early mover, but not necessarily a first mover, in CCS. Such people often reap the benefits in technology and cost without taking a lot of the additional risks. That is a perfectly honourable position for this country to be in.

Hon. Members spoke about the Oxburgh report. I point out to the hon. Member for Aberdeen South (Callum McCaig) that even that report contemplates very substantial capital expenditure of potentially more than £1 billion and perhaps even £2 billion, as well as the CfD. The hon. Member for East Antrim (Sammy Wilson) asked who pays for these things. Well, that would be the cost, and the payment would be borne respectively by taxpayers and bill payers. The incentive structures would have to be determined in future discussion, but there would be a CfD, and the framework regulation is something that Lord Oxburgh properly discussed.

[Callum McCaig]

rose—

[Jesse Norman]

I am sorry, I cannot take interventions because I am really short of time, but I hope I have at least addressed the core point the hon. Gentleman made.

Let us be clear: the Committee on Climate Change seems to be contemplating a contribution on CCS from this country until 2030. No one can predict the future, so it is not clear that we are behind schedule from its point of view. However, it is very important to recognise that even the Oxburgh report is not just about a CfD, but about a potentially substantial capital cost, which would fall on taxpayers.

My colleague the hon. Member for Strangford (Jim Shannon) raised an issue about cost and effectiveness and was absolutely right. The hon. Member for Middlesbrough South and East Cleveland asked about the NAO report. I absolutely assure him that it has been given—and is being given—a lot of scrutiny within my Department.

Let me quickly wind up my remarks in the time that remains. The Government are actively interested in and engaged with the question of CCS. I very much thank hon. Friends and hon. Members for their wide-ranging contributions to a fascinating debate. This is not an easy issue to crack, but we are focused. The Government will set out our approach in due course and use the opportunity offered by the debate to further inform our thinking.

Tidal Lagoons and UK Energy Strategy

Debate between Jesse Norman and Callum McCaig

Tuesday 6th December 2016 Westminster Hall

[Jesse Norman]

The fairest thing to do is to see what the report says before we come to a view about an appropriate timetable. It would be quite wrong to prejudge the report and its conclusions.

For all the enthusiasm of my right hon. Friend the Member for Preseli Pembrokeshire for tidal lagoons, I note that he has taken a measured approach, respecting the complex issues that are being raised, for which I thank him. As he said to the House when he was Secretary of State for Wales,

“The Swansea tidal lagoon proposition is very exciting and commands wide support across the business community in Wales, but we also need to recognise that the project is asking for a very significant level of public subsidy and intervention. It is absolutely right that”

the Government

“should conduct very robust due diligence in making sure that such projects will deliver value for the taxpayer.”—[Official Report, 13 January 2016; Vol. 604, c. 842.]

That is precisely what we will do. We will take the time necessary to look at the review’s findings in relation to tidal lagoons, particularly in the context of a wider assessment of the nature of the UK’s future energy mix and our plans to reduce carbon emissions.

Last month, the Secretary of State set out his vision for how the energy sector should develop, in the context of our new UK industrial strategy. He recognises that the Government’s role must be to create the right framework for growth, harnessing both existing and new technologies, to deliver more secure, cleaner energy at a lower cost. That is our goal: a reliable, clean and inexpensive energy system.

Of course, new technologies such as tidal lagoons may have a role to play, but not at any cost. My hon. Friend the Member for Eddisbury (Antoinette Sandbach) rightly raised several issues, and we look to the energy review and other discussions to resolve them. She raised not merely the issue of cost, but her concerns about the lack of intellectual property, planning uncertainty and delays. The Government should properly consider those issues as part of a wider decision-making process.

As colleagues know, the contract for difference allocation round, which we announced last month, is under way. Overall, our energy policies and priorities have not changed. It is worth saying, in relation to the remarks of the hon. Member for Aberdeen South (Callum McCaig), that it is not true that CfDs do not include tidal stream technologies, although it is true that there is no ring-fenced allocation for them within the auction. That is because our responsibility is to bill payers. Tidal stream, which is not a technology that we are specifically discussing in the context of tidal lagoons—it is a different technology—has a strike price about three times higher than that of offshore wind. Until those prices fall, it may be difficult for it to compete. When they do, it will come within the policy horizon.

[Callum McCaig]

In fairness to myself, I do not believe that I said it was excluded; I said it is effectively excluded, which the Minister may have touched upon himself. Ignoring the potential first mover advantage for tidal stream technology, how does he expect its price to come down if it does not have the support to deploy and develop a downward price trajectory?

[Jesse Norman]

That is a perfectly reasonable question. Historically, the expectation has always been that technologies have to demonstrate that they are capable of benefiting from support. Given that the distance in the range of cost is so high, a judgment has been made that that technology has not done so at the moment, but other technologies have succeeded in doing so.

Other colleagues raised issues such as the rate at which costs might fall with other lagoons, the degree to which different projects could inspire different learning, and the first mover advantages, all of which should be resolved and discussed in the context of the Hendry review.

Oral Answers to Questions

Debate between Jesse Norman and Callum McCaig

Wednesday 12th October 2016 Commons Chamber

[Jesse Norman]

My colleague is absolutely right to highlight this issue. The UK chemicals sector is a vital part of our manufacturing industry and an important contributor to the economy. The Government are working closely with the industry to implement the desire to grow gross value added by £105 billion by 2030, and a key element of that will be delivering competitive energy and feed stock supplies.

[Callum McCaig (Aberdeen South) (SNP)]

Industry has been crystal clear that more work needs to be done to boost exploration. Will the Government bring forward exploration incentives in the autumn statement to protect employment and boost production?

[Jesse Norman]

Exploration remains very important. The continental shelf is depleting. As the hon. Gentleman will know, the Government have taken some serious steps in Aberdeen with the city deal. I will not comment on the autumn statement, but it is an issue of some focus for the Government.