Great British Energy Bill

Lord Ashcombe Excerpts

2nd reading
Monday 18th November 2024 Lords Chamber

[Lord Ashcombe (Con)]

My Lords, I declare my interests as an insurance broker for the energy industry, as set out in the register.

The Bill before us, dealing with the creation of Great British Energy, has the laudable aim of decarbonising the power sector by 2030. That is an ambitious target, especially given the broader commitment for the United Kingdom to reach net zero by 2050. Achieving such a transformative goal requires careful handling, not only in its practical implementation but in securing the support and understanding of the population. 

Energy is foundational to growth for any nation, and growth is something we undoubtedly need. As outlined in the founding statement of GBE, published by DESNZ on 25 July, the company’s mission is to

“drive clean energy deployment, boost energy independence, create jobs and ensure UK taxpayers, billpayers, and communities reap the benefits of clean, secure, home-grown energy”.

However, such aspirational language does not appear within the Bill itself, nor are there clear metrics by which Parliament might assess its ongoing success. Other noble Lords, including the noble Lord, Lord Vaux, have addressed these omissions in great depth. I am not going to repeat their arguments here other than to say that I agree.

Instead I shall turn to Clause 3 and the stated objectives of GBE. Electricity generation accounts for approximately 20% of the UK’s overall energy demand. Our current energy mix highlights the challenges ahead: 31% from wind; 28% from gas; 15% from nuclear as a constant baseload; 8% from biomass, largely from Drax, whose environmental credentials merit scrutiny; and 5% from solar, with the balance met by interconnectors with Europe. The other 80% of UK energy is hydrocarbon-based.

The Bill envisages that most of the new clean power will come from offshore wind, onshore wind and solar. However, the scale of expansion is extremely challenging. According to the National Energy System Operator’s report Clean Power 2030, offshore wind capacity must triple and solar capacity must more than triple, while onshore wind needs to double. These are staggering targets that far exceed our historical rate of progress.

As has been noted many times in your Lordships’ House, the wind does not always blow, and the sun does not always shine. Gas, as the swing fuel, is consequently frequently called on, sometimes accounting for 60% or more of generation—it has been 55% this afternoon—during lean or cold periods. Conversely, during periods of overproduction, typically when the wind blows too hard, surplus power must be shed, meaning that the producers are paid a curtailment fee to not generate. The situation will be exacerbated as more renewable power comes online. Hydrogen production, which has been discussed by various noble Lords and which I will address shortly, has the potential to address that issue.

While the construction of fixed wind and solar farms is well understood, it is unlikely that GBE will play a significant role in that technological development. It will need to deploy resources in the floating offshore wind arena, which is still in its infancy but has a significant upside. In addition, GBE might contribute to solving the associated planning, environmental and conservation challenges by encouraging the integration of clean energy production in all new infrastructure.

Equally daunting are the upgrades to our grid infrastructure. An estimated £40 billion will need to be invested annually until 2030 to enable the increased generation targets. I am afraid that collectively that dwarfs the £8 billion available to GBE. I am all for ambition, but one must ask: are these goals realistic and achievable?

Importantly, how does that correlate with the much-touted £300 saving per household that was so widely discussed before the election? It seems increasingly elusive.

It is certain that gas will remain a key component of our energy mix for years to come. The UK currently consumes nearly 1 billion barrels of oil equivalent annually for its energy. We are fortunate to have significant hydrocarbon reserves within our territorial waters. At the end of 2023, the North Sea Transition Authority estimated 3.3 billion barrels of oil equivalent in reserves, which are likely to be produced; 6.1 billion BOE in contingent resources, representing known but undeveloped assets awaiting regulatory or investment approval; and 3.5 billion BOE in mean exploration prospects—that is, potential resources yet to be discovered. These reserves, weighted 70% towards oil and 30% towards gas, could meet over half the UK’s expected energy demand over the next two to three decades. However, production is falling at more than 10% annually, outpacing reductions in consumption and exposing us to increased reliance on imports.

The 200,000 jobs connected to the hydrocarbon industry, both directly and within the supply chain, which will decline rapidly as the industry is shut in, are hugely significant. While some of these skilled workers may transition into the renewable power industry, we must ask ourselves: will it be all of them?

Beyond employment, the economic contribution of oil and gas remains substantial. According to the Office for Budget Responsibility, revenues from offshore corporation tax, petroleum tax and the energy profits levy raised £5 billion in 2023-24. Although those revenues will decline over time, they remain significant. Furthermore, the Office for National Statistics reported that the extraction of crude petroleum and natural gas contributed £27.6 billion to the UK economy in 2023, accounting for 1.2% of the total economic output of £2,369 billion. These figures remind us of the industry’s enduring impact and the need for a carefully managed transition.

Recent gas discoveries, such as the Selene and Baker fields, underscore the remaining potential of the North Sea, yet these projects depend on competitive regulatory and fiscal conditions, which are not guaranteed. Projects already licensed, such as Jackdaw and Rosebank, which are essential to our energy security, are before the courts, resulting in further delays and potential cancellation, which could put further strain on our domestic production.

It cannot be right that we are importing increasing volumes of LNG to satisfy our gas needs when we have abundant resources of our own. Imported LNG is often produced under less stringent environmental controls and must be transported across oceans, increasing our carbon footprint threefold. Furthermore, are we not merely transferring the problems to others rather than addressing them ourselves? This does not reduce emissions, which is the ultimate goal, and it undermines our commitment to true environmental responsibility. That clearly highlights the need for the ongoing issuance of licences in our territorial waters. I strongly urge the Government to reconsider their current position and take action to support this vital initiative.

Other noble Lords have discussed nuclear generation. It is certain that the country needs a smorgasbord of generation types, and nuclear must be an important part.

I see two further areas in which GBE may make a positive impact. First, renewable generation is inherently intermittent and, while battery storage can address short-term issues, it cannot manage significant downtimes. Excess renewable electricity could be used to produce green hydrogen by electrolysis with no greenhouse gas emissions, which in turn could fuel hydrogen turbines during low renewable production periods. Developing the necessary storage and turbine infrastructure should be a priority for GBE, preventing curtailment payments and generating electricity with the cleanest of fuels.

Secondly, the development of carbon capture, utilisation and storage is crucial to the UK and to other countries. Due to geology, the UK has significant CCUS potential, amounting to the equivalent of approximately 200 years of current carbon emissions. Its development will be crucial to UK decarbonisation and that of other countries. It is of course not a single solution to emissions reduction but could provide a crucial route for some sectors, such as large industrial users and gas-fired power generation. GBE should play a leading role in advancing this technology.

While I commend the ambition of the Bill, I fear it may overreach in its expectations of the industry’s capacity to deliver. Simultaneously, it underestimates the continued importance of hydrocarbon resource in ensuring our energy security. Without sufficient oversight or clear metrics, GBE risks becoming an unchecked entity with uncertain outcomes. Nevertheless, we must remain steadfast in our commitment to net zero by 2050. If managed prudently, we may even reach that target sooner, without jeopardising the growth and prosperity of our nation.