Energy Bill [HL]

Lord Foulkes of Cumnock Excerpts

Committee stage
Monday 5th September 2022 Lords Chamber

Moved by

[Lord Foulkes of Cumnock]

8: Clause 1, page 2, line 2, leave out second “may” and insert “are or are likely to”
Member’s explanatory statement
This amendment requires there to be an actual impact or likelihood of an impact on the consumers whose interests are being protected, whilst retaining discretion for the Secretary of State and the economic regulator to exercise their judgement. This would enable Ofgem to better justify and evidence decisions enabling strategic anticipatory investment.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, it is my responsibility and pleasure to move Amendment 8 and to speak to Amendments 9, 14 and 16 in the unavoidable absence of the noble Baroness, Lady Liddell, who will be with us from Wednesday onwards. She sends her apologies but I am pleased to speak on her behalf, and my own, and to thank the Carbon Capture and Storage Association for its excellent briefing about this issue and the implications involved and the help it has given us with drafting these amendments.

I have two points before I go on to the detail of the amendments. As others have said, the UK has one of the largest potential carbon dioxide storage capacities in Europe. This is a very important issue that we are dealing with today, and it should not be underplayed and underestimated. It extends throughout the whole United Kingdom—Scotland, England, Wales and Northern Ireland. Also, as I understand it, it will support 50,000 jobs—a not insignificant number, given the current situation.

Turning first to Amendments 8 and 9, these deal with the importance of a net-zero principal duty to enable rapid network expansion. If we in the UK are to meet our emission reduction targets, carbon capture and storage will need to be rolled out rapidly across the UK during the rest of this decade. To capture and store 30 million tonnes a year by 2030, as the Net Zero Strategy says, we will need to go from nothing to building significant CO₂ infrastructure in a short space of time. It is therefore vital that the regime set out in the Bill enables initial oversizing of CO₂ pipelines, increasing their size, which will allow for the subsequent rapid network expansion to connect more capture sites to the growing suite of storage sites.

The National Infrastructure Commission’s 2019 regulation review, Strategic Investment and Public Confidence, recommended that the economic regulators’ duties be updated to facilitate long-term investment in networks. It recommended implementing updated duties that will enable network operators to deliver the best results for the public by building and investing in networks that are resilient and fit to deliver net zero while also providing value to current and future users of those networks.

The Government should be commended—it is unusual for me to commend them—for proposing that the duties of the economic regulators include consideration of the needs of existing and future users, but this seems a missed opportunity to include a duty to deliver net zero by 2050, to help the regulators to effectively balance these two equally important factors.

It should be noted, however, that outside the regulators’ core duties, the Bill includes a further requirement for the regulator to support the Secretary of State in having regard to the Climate Change Act 2008, and the new CCUS strategy and policy statement should go some way to addressing this. However, in practice, these mechanisms are not as strong as the regulators’ own duties.

This amendment is therefore essential to give the regulator the necessary powers to make decisions that enable the required strategic anticipatory investment on the network. Ofgem will need to be empowered to make well-justified decisions that balance the interests of current and future transport and storage network users with delivering net zero.

That deals with Amendments 8 and 9. I now come to Amendments 14 and 16, which would ensure that all types of permanent storage are included. Of course, geological storage is not the only type of permanent storage of CO₂. This can also be achieved by types of usage where the carbon dioxide is used in a way that it is chemically bound in a product and not intended to re-enter the atmosphere. As currently written, this clause allows only for geological storage, so this amendment is intended to recognise that there are other methods of permanent storage. However, it is important to qualify in this drafting that only carbon capture and usage where it is intended to be permanent—and therefore subject to monitoring and verification—can qualify for this.

It is worth noting that in other areas of the Bill a wider definition of storage is used, and the question could be asked: why are there different definitions for each clause of the Bill? Perhaps the Minister could explain that in his reply. This amendment aligns with Clause 63(8), where the Bill defines “storage” as

“any storage with a view to the permanent containment of carbon dioxide.”

Would it therefore be possible to have a common definition of storage used throughout the Bill?

I hope that the Minister will give a positive response to these amendments and I beg to move.

[Baroness Worthington (CB)]

My Lords, I will speak very briefly in support of Amendment 14 and reiterate the question of why there may be inconsistent definitions of storage in the Bill.

In my time exploring carbon capture and storage over the years, I have become somewhat cynical about its ability to scale. The sheer cost of it and the presence of alternatives that may be cheaper and more secure mean that its role will be relatively limited. I am sure that it will play a role, but only if we enable it to be pursued in its widest possible senses. It is absolutely the case that you can store large volumes of carbon dioxide underground; we have aquifers and other underground storage facilities that could be used for this, including in the North Sea and on land, and we should explore those where they make sense. However, there are other mechanisms through which you can enable the use of other stored forms of carbon. Novel techniques are coming to market now involving plasma torches, which, applied to natural gas streams, deliver pure streams of hydrogen plus black carbon. That black carbon can then be used as a manufacturing commodity. Therefore, it would be foolish of us not to include that as a potential option. Similarly, CO₂ is used as a binding agent in the production of building materials. In fact, currently the CO₂ has to be bought at an extortionate rate, so using pure waste streams of CO₂ for the production of building materials will again be a permanent form of storage and it should be supported in the Bill. I fully support this amendment.

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[Lord Foulkes of Cumnock (Lab Co-op)]

I hope the Minister does not think I have gone soft—heaven forbid. It may be that I am not putting my foot on the pedal at the moment because of the reshuffle that is under way. I would like to see the Minister back so that we can re-engage in our usual hostilities, which we both enjoy. His reply has been very full but it needs careful consideration, looking at what he said in more detail in Hansard and discussing it among ourselves; I will discuss it with my noble friend Lady Liddell. The noble Baroness, Lady Worthington, has made some very good points that need to be taken account of. I hope that the Minister will continue discussions with the Carbon Capture and Storage Association about the points that it has been making. In view of the further discussions that might take place, I am willing to withdraw my amendment.

Amendment 8 withdrawn.

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Moved by

[Lord Foulkes of Cumnock]

17: Clause 2, page 3, line 30, leave out “a licence” and insert “an economic licence issued pursuant to subsection (2) or a licence issued by another competent authority”
Member’s explanatory statement
This amendment ensures consistency with the existing regulatory regime, namely the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010, which provides for the granting of geological storage licences by the Oil and Gas Authority (now the North Sea Transition Authority). This amendment would enable private operators to develop merchant models to transport and store carbon dioxide in the longer term. This will also enable cross-border transport and geological storage of carbon dioxide to develop in time, without having to rely on exemptions being granted to allow private networks to develop.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, it is me again. In moving Amendment 17, I shall speak also to Amendments 18, 20 and 26.

Amendment 17 would create a licensing regime fit for the future because it would ensure that there was the necessary consistency with the existing regulatory regime—the granting of geological storage licences by the Oil and Gas Authority, now the North Sea Transition Authority, under the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010—and that it did not operate in isolation.

The amendment would future-proof the regulatory system by enabling private operators to develop merchant models to transport and store carbon dioxide in the longer term. That would enable cross-border transport and geological storage of carbon dioxide to develop in time without having to rely on exemptions being granted to allow private networks to develop.

Designing a new licensing regime to develop successful at-scale transport and storage networks for CCUS is challenging, and the industry welcomes the Government’s rapid work to develop that in the Bill. As we have seen in other regulated industries, the first licences awarded are likely to be very different from those awarded a few years down the line, and the economics of the technology and market drivers will change too. Ofgem, as the economic regulator, will therefore need to amend and refine licences as necessary and collaborate with other regulators, such as the NSTA, which is already able to award licences to operators to store CO₂ under the Energy Act 2008.

If a merchant arrangement developed where a CO₂ store was run privately outside of the regulated network, would that not be something to encourage, provided that the safety of the CO₂ stored was regulated as it is presently by the NSTA? It would be sensible for the legislative framework to be sufficiently flexible to facilitate that.

The United Kingdom has significant geological assets, with one-third of Europe’s entire offshore CO₂ storage potential. That is equal to that of all the other EU states combined; in Europe, only Norway has more. This enormous potential to offer CO₂ storage services to European and other countries presents the opportunity for the UK to become a global leader in CCUS, as it should be, and accelerate the global efforts to prevent CO₂ emissions. The legislative framework should avoid any future barriers to cross-border transportation of CO₂.

Amendment 18 would ensure that all types of permanent storage were included in the Bill. As with Amendments 14 and 16, I repeat that geological storage is not the only type of permanent storage of CO₂. As the noble Baronesses, Lady Worthington and Lady Bennett of Manor Castle, said, it can also be achieved by types of usage where the carbon dioxide is chemically bound in a product and not intended to re-enter the atmosphere. The Bill as it is currently written allows only for geological storage, so the amendment is intended to recognise that there are other methods of permanent storage. However, it is important to qualify in this drafting that it applies only to carbon capture and usage where it is intended to be permanent and therefore subject to monitoring and verification.

Amendment 20 specifically includes other modes of transporting carbon dioxide, such as shipping. The pipeline will be the primary form of transporting CO₂ but other modes of transport, including ship and rail, are already being developed in the UK and in other jurisdictions. The Bill must therefore be designed in such a way as to not limit future modes of CO₂ transportation. CO₂ transport by ship is almost certain to be part of the Scottish and south Wales clusters—the noble Lord, Lord Wigley, is here today—and subsequent phases of other CCUS clusters.

The amendment would ensure that transportation by ship and all other means of transport were included in the Bill rather than leaving their inclusion to regulations. That would send a strong and positive signal to the investment community that there were no barriers to the UK’s development as a global CO₂ shipping hub.

Amendment 26 is a point of clarification to ensure that if a licence termination event has arisen, the Secretary of State has the discretion to revoke the licence, as opposed to the current wording, which suggests that it would happen automatically. New regimes need a wee bit of flexibility, particularly when they are bedding down. The right—rather than the obligation—to terminate is a useful formulation when facing first-of-a-kind situations. I beg to move.

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[Lord Teverson (LD)]

That would be very useful.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, I say first of all that I agree with every word that my noble friend Lady Blake said in her excellent speech, particularly that she is looking forward to the return of my noble friend Lady Liddell—so am I. After all, on this issue she is the master and I am the apprentice, as has been fairly obvious today.

The Minister has again given us a very detailed and helpful reply. However, what worries me slightly is that I still think it strange that those involved in the commercial operation of this—the CCSA members and the CCSA itself—have different interpretations of the draft of the Bill from the officials advising the Minister. I hope that, between now and Report, there can be some discussions to see whether all those in the industry accept the Minister’s explanations today. Otherwise, we can look forward to further amendments on Report. In the meantime, I withdraw my amendment.

Amendment 17 withdrawn.

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Moved by

[Lord Foulkes of Cumnock]

28: Clause 26, page 25, line 34, leave out “Environmental” and insert “Environment”
Member's explanatory statement
This amendment is to correct a misspelling of SEPA’s name.

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[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, noble Lords will be glad to hear that this is my last contribution today. I hope fervently that the Minister will at last accept one amendment that I have proposed—Amendment 28, which I now move. In reference to SEPA, the Bill says “Environmental”, but in fact that is a typographical error and it should say “Environment”. We should get the name of SEPA right. If the Minister does not accept that, I shall be astonished, disappointed and upset in every way.

Amendments 29 to 31 and 37 are more substantial. They deal with the protection of commercially sensitive information. It is important to establish a framework for the licence holder to seek to protect commercially sensitive information, which may be monitored, gathered or requested by the regulator. Amendment 29 seeks to allow CO₂ transport and storage licence holders to raise concerns regarding protecting potentially commercially sensitive information to be shared with the regulator. It is of particular importance given the long list of persons included in Clause 26(2), as well as the unspecified group of persons under Clause 26(2)(m), which refers to

“any other person the economic regulator considers appropriate who has powers or duties conferred by or by virtue of primary legislation which the economic regulator considers relevant to the exercise of the economic regulator’s functions relating to the regulation of licensable activities.”

That is a big catch-all clause.

Amendment 30, along with Amendment 28, relates to information held by the regulator and seeks to establish a framework for the licence holder to seek to protect commercially sensitive information, which may be monitored, gathered or requested by the regulator or the Secretary of State. The amendment proposes that the Secretary of State will be able to determine that commercially sensitive information can be excepted from the duty to disclose under the power of the Secretary of State to require information in Clause 27.

Amendment 31 mirrors the same protection on information required by the regulator as outlined for the Secretary of State in the legislation, with regard to the licensing of CO₂ transport and storage networks. In addition, a new subsection is proposed to establish a framework for the licence holder to protect its commercially sensitive information, as proposed in the previous amendments.

Amendment 32 is relevant to the regulator’s duty to carry out an impact assessment. It ensures that the regulator must act reasonably when determining that it is not necessary to carry out an impact assessment due to reasons of impracticability or inappropriateness. This is important, as a definition of “urgently” is not provided—nor of “impracticability” or “inappropriateness”. Naturally, there would be a presumption that the regulator would act reasonably. However, inclusion of the word here should provide comfort in this regard.

Amendment 37 seeks to establish a framework for the licence holder to seek to protect commercially sensitive information. As I have previously stated, that is of particular importance, given the long list of persons included in the clause to which I referred earlier. I beg to move Amendment 28.

[Lord Callanan (Con)]

My Lords, the noble Lord will know that I hate to disappoint him on any occasion, so I shall say something unprecedented, which, as far as I am aware, has never been said in this House before: on this specific and limited occasion, the noble Lord is right on this point. I can say with the full force of the Government behind me that we are prepared to accept his Amendment 28, and I thank the noble Lord for pointing out this typographical error.

I move on to the noble Lord’s more substantial amendments, Amendment 29 to 31 and 37, for which I thank him and the noble Baroness, Lady Liddell. These amendments aim to set out further detail on the economic licence for the transport and storage of carbon dioxide. In particular, they concern the protection of a licence holder’s commercially sensitive information from certain disclosure requirements contained in Parts 1 and 2 of the Bill. These provisions, as drafted, enable the Secretary of State and the economic regulator to access information that is necessary for the conduct of their functions. It may be appropriate in some cases for the economic regulator to provide such information to relevant regulatory bodies or entities on which powers or duties have been conferred by legislation, such as the counterparty to the emitter contracts, or to obtain relevant information from those entities to ensure that decision-making is robust and takes into account all relevant considerations. Meanwhile, provision has been made in Clauses 26 and 27 to confirm that appropriate data protection requirements would continue to apply.

The noble Lord can be reassured, I hope, that these provisions were not drafted to facilitate any widespread publication of commercially sensitive information but to enable robust, informed decision-making. Further, the powers limit information requests to those which the economic regulator or Secretary of State consider necessary to facilitate the proper exercise of their functions.

Amendment 32, again tabled by the noble Lord, Lord Foulkes, seeks to ensure that the economic regulator must reasonably consider whether the urgency of a matter makes it impracticable or inappropriate to carry out and publish an impact assessment for major proposals, or to make a statement as to why it is unnecessary for it to do so. Under current drafting of the Bill, it is where the economic regulator is minded to pursue a proposal which could have a significant impact on licence holders, persons engaged in activities associated with licensable activities, or on the general public or the environment. In such instances, the economic regulator is required to carry out and publish an assessment of the likely impact of implementing the proposal, or to confirm that it considers it unnecessary to carry out an assessment, with the reasons being given for this conclusion. This requirement does not apply if it appears to the economic regulator that it would be impractical or inappropriate, given the urgency of the matter to which the proposal relates.

In some situations, the urgency of the proposal would make it impractical for the economic regulator either to conduct the impact assessment before implementing a proposal or to publish a statement explaining why an assessment would be unnecessary. We think that it is important that the economic regulator is empowered to act swiftly without the need to produce such documentation in the unlikely event that that need arises.

I hope that I have been able to offer sufficient reassurance to the noble Lord in respect of the requirement for the economic regulator to conduct an impact assessment where required before implementing a major proposal, except in the limited situation of potential urgency or emergency. Therefore, with the reassurances that I have provided him, I hope that the noble Lord will feel able to withdraw or not press all his amendments, except for Amendment 28, which we accept.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, I am most grateful to the Minister for accepting and agreeing to Amendment 28. I can assure him that I will not let that go to my head, but I will keep on trying with other amendments. I listened carefully to his explanation in relation to the other amendments. I understand what he is saying and I think it is right, so I will not pursue them.

Amendment 28 agreed.