Great British Energy Bill (Second sitting)

Josh MacAlister Excerpts

Committee stage
Tuesday 8th October 2024 Public Bill Committees

[Harriet Cross]

Q The Bill, as we have discussed, is pretty light on detail at the moment, which means it could be all things to all people or not offer enough answers to give any reassurance to anyone. From your clients’ point of view, is there a different mechanism that they would prefer? How could this public investment be used in a different manner to actually help drive and retain the private investment coming in at the moment? In other words, is this the best mechanism for keeping and driving investment?

Josh Buckland: On the surface, a range of different countries have publicly owned energy companies of different sizes and scales. Therefore, I do not agree with the concept that private investors are either unfamiliar or concerned at a general level. It will all come down to your point around the design of the actual institution and how it operates with the private market.

I think you are right to say that the Bill is relatively high-level. Looking back at some of the precedents that exist, I would mention the Green Investment Bank again. That was operational for a number of years and was established and grown while the legislation was then taken later down the line. It was easier, if you were a private investor, to understand the role that the Green Investment Bank would play and then have the legislation to effectively inform and solidify that.

The challenge in this context is that the Government have obviously proceeded with the legislation early on, as the institution is being established. That does not mean to say that it cannot be created as an institution that is independent and galvanises private investment but, clearly, the current level of uncertainty around the design and the mechanisms that it will deploy will add to that challenge.

Therefore, the Government have said that alongside the Bill they will look to publish more detail on a framework agreement with Government, and how they will set that out and consult with private industry. That, in tandem with the Bill, is critical at this formation stage. That is not to say that it necessarily leads to all that detail being in the Bill itself, but it is critical that it goes alongside it.

[Josh MacAlister (Whitehaven and Workington) (Lab)]

Q It is good to hear you say that the Bill has the full range of mechanisms within it to mobilise capital. There has been a recurring theme today that the Bill should provide flexibility for future eventualities as the energy system changes dynamically. Do you have any reflections on the past 10 years, and looking ahead to the next 10 years, as to how the mechanisms that get chosen by the executive at GB Energy might have changed had it been in existence 10 years ago? Looking ahead as well, how might the mechanisms that it chooses change over time?

Josh Buckland: It is a fair and good question. I think your substantive point is absolutely right; the mechanisms set out under clause 4 give Great British Energy the opportunity to take different approaches as technology shifts and changes. We have definitely seen, over the past decade, a shift towards different mechanisms deployed by Government. At the early stage, they were largely bilateral, non-competitive and largely done on a kind of long-term contract basis. It is very instructive to look at what the UK Infrastructure Bank is now doing; it is now looking at different mechanisms—earlier stage investment, development capital at risk, and equity investments. Those are the sorts of things that Governments have not traditionally done at the scale that is necessarily required for the energy transition but that obviously Great British Energy could play a role in extending.

There is an interesting question around where you draw the line between Great British Energy and the role of other existing institutions. The Government have already talked about the fact that they are going to evolve the UK Infrastructure Bank to be the national wealth fund, and obviously that will have some crossover with the operations and focus areas of Great British Energy. For me—this may be an issue that is separate from the Bill—how the Government set out how the governance will work between the Department, the Government, Great British Energy, the national wealth fund and other institutions will be critical to making that a success over time, as the executive of Great British Energy looks at new issues and technologies as they come through.

I would stress—I imagine that this point may be made by other witnesses—that the fact that clause 3 is relatively broad, in terms of the sectors and areas that the entity can invest in, is really beneficial, because that also allows some level of independence for the executive to take choices as the energy sector evolves. Clearly, we know the many technologies that we have now, but there will be a range of different issues that come through. I therefore think that that flexibility under clause 3 is quite important.

[Wera Hobhouse (Bath) (LD)]

Q Following on from what you were saying about uncertainties, and how we have the Bill but then there are all sorts of other questions, it is about creating certainties for us as legislators, to some extent, as well as for investors. Clause 5 says that

“the Secretary of State must prepare a statement of strategic priorities”.

Do you think that it would be important to have a timescale for that, so that we know when the Secretary of State is preparing the strategic priorities, and so that it happens quite quickly? That is something that we can do: put a possible time limit or timeframe into this Bill.

Josh Buckland: That is a very good question; I look back to my time as a civil servant. Sometimes timelines can be very useful because they give clarity, externally, as to when priorities will be updated and when there will be new interventions from Government, but sometimes they do not necessarily reflect the external environment as things change. If there were to be a decision to include an additional requirement around the timeframe, I think you would still want the ability to respond to external events as the world changes, to ensure that the priorities set out to the institution could adapt as the external world changes. Obviously, that is very true in the energy transition.

Clause 5(8) states that Great British Energy must have the ability

“to publish and act in accordance with”

that statement. The thing for me—again, it may not be an issue for the Bill itself, but it will be interesting to watch—will be how bound Great British Energy is to the specifics of the Secretary of State’s statement and what latitude it has beyond that, because clearly it will want to take its own commercial decisions. Fundamental to its independence and ability to crowd in private finance will be that it is taking commercial decisions with strong justification. That is an area that may not need any greater clarity in the Bill, but it will be one thing that private investors will look at quite closely.

--- Later in debate ---

[Andrew Bowie]

Absolutely. By the end of the year would be great.

[Josh MacAlister]

Q Welcome, Andy. Thousands of your members are at Sellafield, involved in one end of the energy system, doing brilliant work in the decommissioning field. You have touched on the relationship between GBN and GBE. The Bill does have flexibility for future involvement with nuclear. What I imagine the Government have tried to do, which I think the Bill achieves, is to get the relationship right so that GBN can continue with its programme of work without being disrupted, while opening the door in the future for a bringing together of the two endeavours. Does the GMB have views on how best to enable the multi-gigawatt-scale programmes in the future, and reflections on the experience with GBN today that would inform the Bill?

Andy Prendergast: The most important thing to say about nuclear is that the nuclear industry in Britain is, to a degree, a tragedy. We invented it. The first civil nuclear site in the world was British, and yet when we came to Hinkley Point, we had to import the know-how and technology and reinvent the wheel. What we have done in Hinkley Point has been amazing. The site employs tens of thousands of people and provides real, skilled jobs—the kind of jobs people are proud to do, which is very important.

If we look at the lessons we learned from Hinkley and transfer them to Sizewell, we start speeding up the process. If we then go on to Wylfa, it becomes easier to take them through. The key thing it shows is that we cannot have those huge gaps. When we have gaps, we lose the skills. What is frightening for us in so many areas is that we are talking about an energy transformation, but we simply do not have the skills to transform at the speed we need to.

There is an estimated lack of 40,000 welders in this country. In the near future we will need more pylons, a huge amount of work on the water mains, SMRs, CCS and hydrogen. I sat on a load of Government bodies with the last Government, and all I kept hearing was, “We need more welders.” You had to take a view that, sadly, repeating “We need more welders” does not magically lead to a lot of welders showing up. We need the investment in the skills and in the supply chain to ensure that we get the right people in the right place.

It is important to say that welding jobs are fantastically well paid. They are jobs that get paid more than most people in this room. There should not be a problem employing welders in this country if we simply resort to capitalism, so if there is a problem, how do we identify it and how do we get around it?

[Josh MacAlister]

Thank you. I think I should have declared an interest at the start of that question as the chair of the all-party parliamentary group on nuclear energy.

[The Chair]

Thank you. That is a matter of record, and I gently advise any other Members who have a similar interest to declare it.

--- Later in debate ---

[Olivia Blake]

Q If we are to learn the lessons of coal and the 1980s, South Yorkshire would be a perfect location for a satellite office—just to put that on your agenda, Minister.

[Josh MacAlister]

He has had this from every Scottish MP for the past six months.

[Olivia Blake]

Well, we have not heard enough about God’s own county here today.

There has been a lot of positivity from witnesses; some of them seemed quite excited about the Bill. I want to understand, from your perspective, why it has taken a change of Government to see this sort of Bill come forward, and what your ambition is for it.

Michael Shanks: That is really important. Last week, I visited Ratcliffe-on-Soar power station, the last coal-powered station in the UK, and it was a good example of the just transition in practice. It was the right thing that we phased out coal; the TUC itself confirmed that that was exactly how to deal with workers in such a difficult situation where you are moving people from one industry and transitioning them into something else. It was a properly planned process, which is what we want to see in industry.

You are right: we absolutely want to avoid what happened with coalmining in the 1980s. It goes back to what I was saying earlier: this Government are not agnostic about the future of jobs and manufacturing in our industrial communities right across the country. It is important that we invest in them not only because, frankly, we are in a race against the world for all the parts we need to deliver the future of energy, and we will need to produce some of them in this country, but because good, well-paid, skilled jobs are how we will manage the transition in a fair and prosperous way. It is critical for us.

I think it matches other policies. Yes, GB Energy will be a key part, but the industrial strategy will also be important. The national wealth fund and a whole range of levers will be important. The office for clean energy jobs is all about saying that, as a Government, we are committed to the future of this workforce and to creating tens of thousands of new jobs that do not currently exist.