Energy Bill [HL]

Lord Lennie Excerpts

Committee stage
Monday 12th December 2022 Grand Committee

[Lord Teverson (LD)]

My Lords, I welcome the Bill’s return to Committee; I am very pleased that that is the case. I have no comments to make on the amendments, but I note that during that interregnum, as the Minister described it, the Government gave planning permission for a coal mine. Although we are not going to debate it here today, that is a hugely retrograde decision which flies in the face of the Bill and the general way in which it looks forward. However, I have no comments on the amendments that the Minister has tabled.

[Lord Lennie (Lab)]

My Lords, I am also delighted to be debating the Energy Bill again. I am delighted that the noble Lord is still the Minister so that we at least have continuity on the Bill; it remains much the same as it was before we left it some three months ago.

As the Minister said, the amendments refer to Clauses 84 and 85 of Chapter 2 of Part 2 on “Decommissioning of carbon storage installations”. This gives the Secretary of State a power to make regulations regarding the financing and provision of security for decommissioning and legacy costs associated with carbon capture utilisation and storage. The decommissioning of offshore installations and pipelines used for carbon dioxide storage purposes is modified by Section 30 of the Energy Act 2008, which modified Part 4 of the Petroleum Act. Clause 84 enables further modifications to the modified Part 4 in relation to the definition of carbon storage installation, and the establishment of decommissioning funds and legacy costs as set out in Clause 82, “Financing of costs of decommissioning etc”.

Clause 85 relates to Sections 30A and 30B of the Energy Act 2008, which make provision for a person to qualify for change of use relief on installations and submarine pipelines converted for CCS demonstration projects—as defined by Energy Act 2010. This relief removes the ability for the Secretary of State, in some circumstances, to take steps under the modified Part 4. This clause makes amendments to Section 30A of the Energy Act 2008 by broadening the scope of change of use relief so that it applies to eligible carbon storage installations more generally, amending the trigger point to qualify for such relief.

Amendments 99 and 100, which the Minister referred to, were tabled by my noble friend Lady Liddell, who unfortunately cannot be here and therefore will not be able to move them. They reflect value-for-money considerations in the decision-making process, meaning that the Secretary of State could accept provision of security in respect of amounts to be contributed on account of decommissioning costs—costs likely to be incurred, as the Minister said, many years after the establishment of the fund—rather than requiring such amounts to be paid simply in cash.

[Lord Callanan (Con)]

I thank the noble Lord, Lord Teverson, and the noble Lord, Lord Lennie, for their comments, but I do not think there were any points for me to address, so I will leave it there.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

It could be a commercial company. It depends who gets the contract for the funds. Then they will be invested.

[Lord Lennie (Lab)]

Are the funds held in escrow so that they cannot be used for anything else, or can they be used as part of the normal purposes?

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Moved by

[Lord Lennie]

113: Clause 90, page 83, line 25, at end insert—
“(aa) the Official Opposition;”Member's explanatory statement
Under the Bill, the Secretary of State has to produce a CCUS strategy and it has to be reviewed after 5 years. However, they have the power to review it before the end of this 5-year term if certain circumstances have taken place (including a general election) but must consult certain people if it is outside the 5-year period. This amendment seeks to include His Majesty’s opposition in that consultation.

[Lord Lennie (Lab)]

My Lords, these amendments refer to Clauses 90 and 91. They concern consultation over the CCUS strategy and its periodic review. I am grateful to Drax for providing definitions. Carbon capture and storage traps and removes carbon dioxide from large sources and most of that CO₂ is not released into the atmosphere. That can be either pre or post combustion. If it is post combustion, the storage usually takes place underground in large silos, the largest of which is in Texas and which is currently processing 5 million tonnes of CO₂ a year. As an advert for Drax, it reckons that it would be able to process 20 million tonnes in North Yorkshire by 2030 or thereabouts.

Amendment 113 is about the requirement to include His Majesty’s Opposition in the list of organisations that must be included in stakeholder consultation. These reviews must happen either every five years or more frequently if certain circumstances take place, including a general election or if there is a material change of policy on CCUS. These reviews are to ensure a stable and predictable regulatory landscape for investors. I would have thought that the amendment to include the Opposition in the consultees’ list would be quite attractive to the Government, given the current state of the political landscape in the UK—but there you go. This new requirement would clearly be of overall benefit to the development strategy by involving a wider parliamentary group beyond just the Secretary of State when a review is required. If the Secretary of State seeks to amend the statement, they will have to follow the requirements in Clause 91, which include the requirement for the statement to have been approved by a resolution of each House of Parliament before the Secretary of State can designate it as a strategy and policy statement.

The amendment tabled by the noble Baroness, Lady Liddell, in this group would ensure a requirement for consultation on the CCUS strategy and policy statement, if the Government should seek to amend it. It sets out the process that would have to be followed, and the Opposition support this amendment. I beg to move.

[Lord Teverson (LD)]

My Lords, I was getting ahead of myself on the last group, and I apologise to the Grand Committee for that. I would have thought that the Government would like to accept this amendment, as they are likely to be in opposition in five years’ time. I wait to hear from the Minister.

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[Lord Callanan (Con)]

I do not think that is the case. As a Minister, I have issued many consultations. In my experience there is never a problem with anybody contributing who wishes to, even if they are not statutorily listed in the legislation. They are normally public consultations in any case, with a large number of stakeholders. The advice from officials and others is always to extend the scope of consultation to be as wide as possible because you then minimise any potential legal challenges as a result. I understand the noble Lord’s concern but I do not think it is warranted on this issue.

[Lord Lennie (Lab)]

My Lords, the amendment that seeks to include the Opposition as part of the formal consultation would avoid what we get in Parliament, which is the “ayes and noes” and the “take it or leave it” approaches to policy development. This is an area where we have pretty much a common interest. It seems a sensible approach to throw open the consultation at least to the Opposition—who knows, maybe even to the fourth party—but to make it as wide as possible to avoid that prospect of Parliament rejecting or accepting in total whatever is put before it. It is about buy-in. As the Minister said, there are plenty of examples where buy-in has been part of the Government’s approach to consultation. It seems strange that this is not one of them. With that, I beg leave to withdraw the amendment.

Amendment 113 withdrawn.

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[Baroness Worthington (CB)]

My Lords, I too am glad to be back debating energy. As has been noted, we find ourselves in a completely different sent of extreme weather events today, but I am glad that we have all been able to make it here to resume this important discussion.

Since we last met, emergency legislation has gone through on some of the issues that we raised in Committee and at Second Reading on the need for a short-term response to the energy crisis bearing down upon us. The Bill is very much about long-term measures, so it is right and proper that the Government supplemented that legislation with faster-paced legislation. However, there were many provisions in that rather hurried legislation, which I know has caused concerns in the market, so the Government have to work hard to deliver the right signals to investors and to businesses around the country that the transition will be orderly and consistent and can encourage investment across the piece. I am sure we will come back to debating the net effect of all the Government’s measures on energy in later clauses.

Amendment 117 relates to the setting up of a low-carbon heat scheme. Specifically, the amendment would change the provision that the Secretary of State “may” by regulations make provision for the scheme to “must” and apply urgency to the challenge of bringing forward those regulations by requiring that they are passed within 12 months of the Bill being enacted.

The reasons are self-evident. If we are to solve the problem of our reliance on volatile fossil fuels, which are also contributing to air-quality problems and climate change, we need to get on with the electrification of heat. The scheme would move us along in that direction and give investors confidence that there is a market that they can plan for and invest in. We therefore urge the Minister to reassure us that the regulations will be passed with all due haste and brought in in good time, and I look forward to hearing from him on the timetable within which we might see the regulations.

Amendment 118 seeks to add to the Bill statutory requirements for and deadlines by which we will stop selling the gas-based boilers currently going into properties. I support that in principle, although I imagine that there will be concerns about the specificity going into primary legislation. However, it is essential that we give clarity to the manufacturers of existing boilers that the Government are serious about ending their current dominance.

I receive, as I am sure everyone does, a lot of correspondence about hydrogen-ready boilers. That needs to be unpacked. I do not know what can be done to prevent the mis-selling of that concept, but it is borderline mis-selling because it is very unclear whether hydrogen-ready boilers are even possible. I therefore think it has more to do with the manufacturers preserving the status quo than with their genuinely seeking to be involved in the transition. Lots of technical advisers tell me that simply saying that something is hydrogen-ready is not sufficient and that it is very difficult and complex to achieve, so I have some sympathy with Amendment 118.

Amendment 121 seeks to except hydrogen if it is compliant with the low-carbon hydrogen standard. In previous debates I have made it clear that I do not deem the low-carbon hydrogen standard sufficient. It is a number that has been put out there, but I do not think it takes into account all the effects of hydrogen on the climate specifically. Hydrogen is a greenhouse gas, as we have talked about previously. The global warming potential of hydrogen needs to be taken sufficiently into account when we consider a low-carbon hydrogen standard, and I do not think it has been, so I am a little nervous about us putting the provision in as it stands because I do not consider that standard tight enough.

The Government’s amendments on opening up the opportunity for the regulations to apply to manufacturers seem entirely sensible. We have to decide the right point at which regulation would be most efficient to drive this. The manufacturers may well be the right place for this, or they may not, but having that option seems correct to me.

In Amendment 122, the Opposition Benches seek to include specificity in relation to the heat pump market. Again, I can see the logic of that. I am sure it is probing amendment, more than anything else, to get clarity on the scale of the market that we expect. I doubt that it could survive in primary legislation, but I am sure it is there to try to elicit positive statements so that the heat pump sector can move in this regard.

Amendment 119 concerns cases where it is not possible to fit heat pumps. It is a difficult amendment to legislate on. Very few of the properties where a large enough heat pump or geothermal source can be installed cannot electrify heat. Therefore, I believe that the amendment is not necessary.

I very much look forward to hearing the response to the group. As I have said, it is of primary importance to get moving, and to get investors moving, so that we can start to have a manufacturing sector that is enabled by those regulations as quickly as possible. I beg to move.

[Lord Lennie (Lab)]

My Lords, 95% of UK homes are centrally heated and most CO₂ emissions come from burning fossil fuels, contributing to about 30% of the UK’s total greenhouse emissions, about half of which is from heating our domestic properties. Will gas boilers be banned in 2025? As part of the future homes standard, new homes will be able to install only energy-efficient heating systems and will produce 31% lower emissions compared to the current levels. The standard will come into effect in 2025. The International Energy Agency has also stressed that no new gas boilers should be sold after 2025. The UK’s official climate advisers recommend that all gas boilers should be banned by 2033 to end the UK’s further contribution to climate change. That is the background to the amendments being moved.

We support Amendment 117 tabled by the noble Baroness, Lady Worthington, which adds a bit of the oomph by replacing “may” with “must” in relation to the low-carbon heat scheme. Amendment 119, in my name, would ensure that the Secretary of State, in making a low-carbon heat scheme, must

“provide a plan for low-carbon heating in homes where it is uneconomic or unfeasible to have a heat pump (large, rural, off-grid homes etc.).”

Amendment 121 seeks to allow

“heating appliances that use hydrogen produced to the Low Carbon Hydrogen Standard (blue hydrogen) to be included in low-carbon heat schemes.”

I note what the noble Baroness, Lady Worthington, said about hydrogen in general, but if we are going to have hydrogen, let us have blue hydrogen at this stage.

Amendment 122 states:

“Sub-paragraph (i) seeks to include the Government’s own figures for heat pumps in the Bill. Sub-paragraph (ii) seeks to include the number of heat pumps in the latest figures on recommendations from the CCC. And sub-paragraph (iii) seeks to oblige manufacturers producing gas boilers to turn to minimum 25% production of heat pumps by 2028 to facilitate the clean heat transition.”


Government Amendment 123

“makes it clear that a low-carbon heat target set by virtue of clause 100(1)(c) or (d) may be set, in the case of a manufacturer, by reference to heating appliances of the manufacturer that are supplied or installed, whether by the manufacturer or someone else.”

Government Amendment 124 simply corrects a drafting error.

Amendments 117, 119 and 121 relate to Clause 98 in Chapter 1, on low-carbon heat schemes, of Part 3, on new technology. Clause 98 provides the Secretary of State with powers to set up a regulatory scheme through secondary legislation to encourage the sale and installation of low-carbon heating technologies, such as electric heat pumps. Clause 98(3)(b) allows for this to include, for instance, hybrid heat pump systems that involve both a heat pump and a fossil fuel boiler. This is welcome, but our primary concerns are when and how the powers will be used. Amendment 117, tabled by the noble Baroness, Lady Worthington, requires the scheme to be set up within 12 months of the Bill becoming law, and we agree with that.

Amendment 119 seeks to ensure that the Government are aware that there are a number of homes where heat pumps are not the solution, and to address filling this large gap. There is one fundamental flaw with this clause that Amendment 121 seeks to address: it effectively prohibits the deployment of either hydrogen-ready boilers or boilers that use blue hydrogen under low-carbon heat schemes.

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[Lord Teverson (LD)]

My Lords, I particularly support the proposal to take out Clauses 108 and 109. I did not put my name to that, but it seems the obvious solution. As the noble Baroness, Lady Worthington, said, we have all been on the receiving end of massive lobbying by the hydrogen lobby. I will not go into hydrogen extensively, but clearly there are areas where hydrogen will need to work. It will be important in some energy-intensive industries and some long-term transport solutions, but we seem to have overreached in terms of those applications.

For heating, it just cannot make sense to use green hydrogen, which would have to be produced by renewable electricity, as electricity could be used anyway. Scientifically and in terms of the laws of physics and efficiency, it does not make sense. Heating is an important area—as we said, it represents some 40% of UK emissions—so surely it must be electrification directly, geothermal technologies or air source heat pumps, as we have discussed before. That is why I think these clauses not standing part is the best solution. If that is not agreed, I thank the noble Baroness for supporting my amendment; the noble Lord, Lord Lennie, has a similar one. This should not be compulsory and those consumers should be very aware of all the other repercussions.

My second amendment, Amendment 126, is less important. As with previous amendments, it just makes sure that only people who really benefit from these trials should have to pay for them and that those who do not should not. I do not understand how BEIS and the Government have become the victims of the lobbying that takes place.

Finally, perhaps I can cite a gentleman whose work I have been reading, Jan Rosenow. He takes his statistics from BEIS’s Hydrogen Production Costs 2021 and Ofgem’s wholesale market indicators. He is very clear that, depending on how you look at the timescale between now and 2050, hydrogen will cost three to 11 times more than fossil fuel gas at its present levels. Clearly, this is not an acceptable solution or route for decarbonisation.

[Lord Lennie (Lab)]

My Lords, these amendments relate to Clauses 108 and 109—Chapter 2 in Part 3—on hydrogen grid conversion trials, covering modifications of the gas code and regulations for the protection of consumers. The background to this is that in 2021 the Government launched a consultation on facilitating a grid conversion hydrogen heating trial. The Government’s Ten Point Plan for a Green Industrial Revolution sets out the ambition to support the industry to deliver hydrogen neighbourhood and hydrogen village trials by 2025. This consultation sought views on proposals to legislate to allow gas distribution network operators to carry out activities needed to deliver a grid conversion.

It would be unfair to say that the Government did not alert people to the complexity of the trial, because the consultation document announced that it involved replacing gas supplies with hydrogen in consumers’ premises. It also said:

“Existing in-home appliances and devices such as boilers and meters will need to be replaced with hydrogen-compatible equivalents. Pipework may need to be replaced if it is not already suitable for hydrogen. Additional internal work may also be required to make the property ‘hydrogen-ready’.”


On the face of it, the Government understood the complexity. They also said that the trials would be carried out by the gas distribution network operators in partnership with local authorities, and that, in the trial of hydrogen, safety

“will be of paramount importance”—

that is good news—with the Health and Safety Executive being consulted and involved in any measures of conversion.

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[Lord Callanan (Con)]

Let me finish, then the noble Baroness, Lady Worthington, will be able to come back.

I will start with Amendments 125 and 126. With Amendment 125, the noble Lord, Lord Teverson, calls for an adequate level of information to be provided to consumers in the trial area concerning safety, long-run bill impacts and opting out of the trial. I agree that these are important issues. Support from local people will be crucial to the success of the trial, and gas transporters are already working closely with communities in the potential trial locations. In fact, the relevant Members of Parliament have already been in touch with me, and I already have meetings in my diary to talk with them and residents from the local areas about this.

Steps have already been taken to ensure that people have all the information required to make an informed choice about whether they wish to participate. Both gas transporters have opened demonstration centres in the two shortlisted local communities to raise awareness of what the trial would involve.

Clause 109 provides the Secretary of State with the power to require the gas transporter running the trial to take specific steps to make sure that consumers are properly informed about the trial. In meeting their responsibilities to inform consumers, we fully expect gas transporters to provide clear information about each of the important topics listed in the noble Lord’s amendment.

I turn to Amendment 126. The Government have been very clear that no consumer in the trial location should be financially disadvantaged due to taking part in the trial. Last year, the Government published a framework of consumer protections that will underpin the trial. Consumers in the trial location will not be expected to pay more for their heating than they would if they had remained on natural gas or to pay for the installation and maintenance of hydrogen-capable appliances.

The village trial will be paid for through a combination of government and Ofgem funding and contributions from the private sector. All gas consumers pay a very small amount towards Ofgem’s net-zero funding for network companies, which supports projects to decarbonise the energy sector; that includes this trial. All gas consumers will benefit from well-informed strategic decisions on how to decarbonise the way we heat our homes.

I hope that I have been able to reassure the noble Lord that the important issues he has raised, about which I agree with him, are already effectively addressed by the Bill, and therefore that he feels able not to press his amendments.

I move on to Amendment 127 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. As I have said, local support will be crucial to the success of the trial. Gas transporters are already working closely with communities in the potential trial locations to develop an attractive offer for people who want to convert to hydrogen. However, we understand that not everyone will want or be able to connect to hydrogen, and the Government are clear that nobody will be forced to do so. The gas transporter running the trial will have to provide alternative heating solutions and appliances for people who do not take part in the trial. In May 2022, this requirement was clearly set out in a joint letter from BEIS and Ofgem to the gas transporters, alongside the other requirements that must be met before any funding is provided for the next stages of the trial. The gas transporters will need to demonstrate that they have a viable plan for providing alternatives to hydrogen. There is already an effective way to ensure that they provide alternatives to hydrogen, through the Government’s funding requirements.

We therefore do not believe that this amendment is necessary. I fully appreciate the noble Lord’s intention—which I share—to ensure that the trial is conducted properly, with alternative heating systems offered to people who do not take part. With that information, I hope he feels reassured that there are already steps in place to ensure this and will therefore feel able not to move the amendment.

I will say a few words about the stand part notices on Clauses 108 and 109. I know that the noble Baronesses, Lady Jones and Lady Worthington, and my noble friend Lord Moylan, who is not here now, have registered their intention to vote against these clauses. I have already established that the overall intent of these clauses is to support a safe and effective trial for hydrogen heating.

Clause 108 allows the Secretary of State to designate a hydrogen grid conversion trial, ensuring that both this clause and Clause 109 are narrow in scope and would apply only for the purposes of such a trial. Importantly, the clause expands the duty to participants of the gas transporter running the trial to undertake the required work without charge. It also makes certain modifications to the Gas Act 1986 to build on existing provisions concerning powers of entry. This will ensure that the gas transporter running the trial has clear grounds to enter private properties to: carry out any essential works, including replacing appliances and installing and testing safety valves; undertake inspections and tests for the trial, such as safety checks; and safely disconnect the gas supply in a property.

It is important to emphasise that gas transporters already have powers of entry into properties through the Gas Act. We are merely extending these powers in a very limited way to conduct the necessary work to set up and deliver the trial. Gas transporters will only ever use these extended powers as a very last resort once all other attempts to contact property owners and reach an agreement are exhausted. The existing rules on powers of entry requiring a gas transporter to obtain a warrant from a magistrates’ court will continue to apply, of course. I reiterate once again that nobody will be forced to use hydrogen. I have already covered the plans for alternative arrangements in my comments on the amendment earlier.

Finally, I draw noble Lords’ attention to the fact that the majority of responses to the public consultation the department ran last year on facilitating a hydrogen village trial were broadly supportive of our proposals to change legislation in this way. I therefore urge that Clause 108 stands part of the Bill.

Clause 109 provides the Government with the powers to establish consumer protections for people taking part in this world-leading hydrogen village trial. It will do this by giving the Secretary of State two delegated powers to make regulations which require the gas transporter running the trial to follow specific processes to engage and inform consumers about the trial, and ensure that consumers are protected before, during and after the trial.

The department is of course working closely with the gas transporters as they develop their plans for consumer engagement and protection. It is worth saying that there is quite a bit of support in these communities for the trial. The council leaders in the areas concerned have expressed their support and one MP in particular is actively campaigning for their area to take part in the trial. Opinion is obviously mixed in both communities, but we want to make sure that it has the maximum level of support required. I have already highlighted the importance of consumer engagement and support in my earlier comments. Regulations made under this clause will ensure that people will have all the information required to make an informed choice about whether they wish to participate.

The second power in this clause, to introduce regulations for consumer protections, will work alongside existing protections such as the Consumer Rights Act 2015 and the Gas (Standards of Performance) Regulations 2005. This recognises that it is a first-of-its-kind trial and will allow the Government to introduce additional protections for consumers in the trial area. These might include regulations to ensure that consumers are not financially disadvantaged by taking part in the trial.

I am sure that all noble Lords will agree that these provisions, which—as I said, again—were well received by stakeholders when we consulted on them last year, are crucial to ensure the fair treatment and protection of people in the selected trial area.

[Lord Lennie (Lab)]

The Minister said that no one would be forced to take part in the trial. I appreciate that but, first, it seems like the place for that statement to be made is within the Energy Bill. Secondly, will they be given an alternative low-carbon solution?

[Lord Callanan (Con)]

The answer to both of those questions is yes. No one will be forced to take part in the trial. If they do not take part in the trial, they will of course be given an alternative low-carbon solution.

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[Baroness Worthington (CB)]

With a Bill of this magnitude, if we are saying that it is a principle that there is a right to refuse, that principle should be in the primary legislation. That is where you put principles—and then the details can be worked out. Nothing in the Bill says that consumers have the right to refuse. I am sure that we are going to revisit this, as it is fundamentally important that principles are enshrined in primary legislation.

[Lord Lennie (Lab)]

Can I briefly support that? The place to put it is under protection of consumers in the Bill. There is a clause entitled “Regulations for protection of consumers”, and the right not to take part in the trial would be one of those protections.

[Baroness Sheehan (LD)]

I completely agree with the noble Lord, Lord Lennie, and the noble Baroness, Lady Worthington, on this—but could I ask the Minister a separate point about how the trials will be carried out? The Minister said they were going to provide evidence. I want to ask how long the trials will last. One of the issues with hydrogen, if I understand it, is its impact on the pipes that carry the gas to the boilers, et cetera. Those pipes perish in time, because the hydrogen makes them brittle in a way that natural gas does not. Of course, that will lead to cracks and leakages. Will the trial take place over a long enough period to see whether that is indeed the case and what the jeopardy from those pipes might be?