State of Climate and Nature
Lord Lilley Excerpts(1 week, 6 days ago)
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Lord Whitehead (Lab)
My noble friend is absolutely right to draw attention to what is sadly likely to be a large number of deaths directly attributable to the recent heatwave we have had in this country. Those deaths can quite possibly be attributed to the lack of readiness that we have in our building fabric and our homes for the consequences of climate change and what will happen with temperatures in future. I hope she can take some comfort from the fact that the Government are actively reviewing how we make sure that building standards are fully compliant with climate change resilience for the future. If we build our buildings so that they can undertake those future climate shocks rather than be victims of them, we will have done a good deed for the future.
Lord Lilley (Con)
My Lords, the Statement in another place said that reducing emissions would lower bills. This country has reduced emissions by more than any other country, yet our bills are now higher than any other OECD country, nearly all of which rely on gas like us. Can the Minister explain this? If he is going to say that, in future, renewables will be cheaper than fossil fuels, then why do they need subsidies, and, if they need subsidies, how can he say that they are basically cheaper?
Lord Whitehead (Lab)
The noble Lord is substantially but not entirely correct about OECD prices; however, he is not entirely correct that other OECD countries are reliant on gas to the extent that we are in this country. A very substantial driver of electricity prices is the volatile price of gas, as he will know, and the reliance that we still have in this country on gas as a market-maker for electricity very substantially leads to those high prices. Therefore, on the idea of getting off that wheel we are on, of volatile gas prices leading to volatile electricity prices and to high energy prices, it is quite right that we resolve that by making sure that our energy arrangements are as low carbon—and, hence, not gas based—as they can be.
Carbon Budget Order 2026
Lord Lilley Excerpts(1 month ago)
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Lord Whitehead (Lab)
My Lords, first, let me thank noble Lords for their valuable—that is what it says here in my brief—contributions to this debate. I cannot say that I endorse that entirely. I also cannot quite get my mind around the parallel universe that some noble Lords seem to have been inhabiting while making their points this evening.
On that parallel universe, I draw noble Lords’ attention to a very significant speech that was made today just a few hundred yards from this building. It was given by the Secretary-General of the United Nations, who, as part of London Climate Action Week, made an impassioned speech on climate change, including what we need to do about it, how quickly we need to do something about it, and what we need to do on electrification and low-carbon economies in particular.
I hope that noble Lords will go away and look up that speech, because among other things it completely gives the lie to the idea that no one else in the world is terribly interested in this climate change business, that no one else is doing anything about it, that the activities we are undertaking on climate change are just blowing in the wind, and that we are giving away our industries to other people who will take advantage of them. A number of the industries that they are talking about are sunset industries that are being replaced by low-carbon industries which, if we are not careful, the rest of the world will run away with. They would then overtake the advantages that we have at the moment in green industry, which we are doing very well in. The green economy has grown three times as fast as the general economy in the last few years.
The people who live in this fantasy parallel world appear to be saying that none of that counts. We are making tremendous changes to how energy is distributed in the low-carbon economy. This is a good thing for climate change purposes and will bring people’s bills down in the long term. The energy we will be using will inevitably be cheaper, more affordable, less volatile and more stable than the energy we are using now. It will produce a very large number of jobs: £100 billion in green investment has come into this country over the last two or three years.
However, none of this appears to have any effect whatever on the parallel facts that are put forward. The noble Lord, Lord Frost, appeared to be saying that the rest of the world was moving away from action on climate. I was at an international meeting this morning where people from around the world were standing up and saying what they were doing about this, how committed they are to a low-carbon future and how important it is for their own countries and for the world that we continue down this path.
This climate budget has to be set in the context of the real world of facts and information about where our world is going and what we need to do to make sure that it does not continue in the direction that it appears to be going at the moment, rather than in the context of quite a lot of what we have heard this evening about why all of this is a waste of time. I am afraid that I must single out the noble Lord, Lord Redwood, in this respect. One really cannot make a serious case that, because we cannot completely know the future, we should do nothing whatever about it and just hope that the market somehow sorts it out. We have got to take action.
As the noble Lord, Lord Deben, mentioned, we took action with the Climate Change Act, which was carried by everybody in the Commons except five people. I can name them.
Lord Whitehead (Lab)
Indeed, the noble Lord, Lord Lilley, is with us this evening. At least I can say that the noble Lord is consistent. He did not sign it in the first place and I do not think he would sign it now if he had the opportunity.
That Climate Change Act, which requires us legally to carry out these carbon budget examinations, set up the Climate Change Committee to advise us on the science behind the proceedings and tell us what we need to be doing, not just now but in the future, so that we have time to make policy for what we will be doing to match what is required in those carbon budgets. We have that legal obligation, because we passed the Climate Change Act together in that year.
It has stood us in very good stead. It has directed what this country tries to do, without telling us what we do in detailed policy. Some of the discussions this evening have set up what the Government are apparently going to do and then said, “We don’t like it very much”. No, the Government are not going to go around shooting cows and rounding up livestock for slaughter. The Government will be doing what it is doing now and investing £5 billion over two years in farming. This is perhaps the largest investment in sustainable food production and nature recovery in this country’s history.
Alongside that, the Government are actively exploring ways to reduce livestock-related greenhouse gas emissions, including through scientific research on mitigation strategies and management, feed, such as the increasing adoption of methane-suppressing food products, and breeding. There are many alternative ways of making sure that agriculture and land use plays its part in climate change emission reductions without the straw man that some of the opponents of climate change action seem to have set up in this Chamber—that the Government are somehow going to chase livestock out of the country in order to meet climate change restrictions. To produce alternative theories, I am afraid you need alternative facts.
The impact assessment has, among other things, a fairly exact examination of the costs of doing nothing, as opposed to the costs of doing something. This has been a long-standing theme. The University of Cambridge, for example, estimates that climate damage will reduce global GDP by up to 24% under a high emissions scenario by 2100. There are pages of other information about the costs of doing nothing, as opposed to the cost of doing something, and I always advise noble Lords to go to impact assessments if they want to know the truth about what is happening on any piece of legislation.
My noble friend Lord Hunt underlined that the regret amendments that we have in front of us are big on things that are not liked very much and tiny to insignificant on what, if anything, to do about it. Indeed, one has a responsibility, if one does not like what is being done now, to say what should be done alternatively. Alternatively, if one does not like, say, the climate change legislation, stand up and say that, and say what else you will do instead, or, as some Members have said, just deny that the whole thing is an issue and have an alternative universe of facts to try to underpin that.
I am conscious that I will have to write to a number of noble Lords on specific issues, but I thought it necessary to put what we are doing tonight in the right context. What we are doing is making sure that our futures are secure in this world.
Carbon Budget 6
Lord Lilley Excerpts(4 months, 3 weeks ago)
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Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
We will hear from the Cross Benches and then from the Conservative Benches.
Lord Lilley (Con)
My Lords, given that the pursuit of carbon budgets has so far given us the highest electricity prices in the OECD, can the Minister confirm that the pursuit of decarbonisation has so far primarily resulted in the deindustrialisation of Britian, and that our carbon budgets do not take account of the fact that we have simply exported carbon emissions to the rest of the world?
Lord Whitehead (Lab)
It is certainly not true that the pursuit of a low-carbon economy has led to deindustrialisation. The noble Lord need only look at the £60 billion of investment that is coming into the green economy and all that goes with it. Indeed, the low-carbon economy is growing three times as fast as the general economy. Many of the things that are coming in concerning low-carbon energy are very much concerned with industrial plants, grids, new forms of electricity generation and so on, which will not only produce large numbers of jobs but a very sound industrial base for the country.
COP 30
Lord Lilley Excerpts(7 months, 3 weeks ago)
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Lord Whitehead (Lab)
My noble friend Lord Rees has a tremendous record of taking action on global warming and low-carbon economies in his own city of Bristol. The question of how cities bring to bear the enormous potential of their action alongside Governments nationally and internationally has long been recognised in terms of the Curitiba commitment and other things, where cities across the world have banded together to take local and sub-national action alongside national and international action. My recipe for this continuing is to encourage UK cities to take part in those international joint city arrangements and become partners in global green gas carbon emissions reductions, which can take place at all levels. COPs have increasingly recognised that and have enabled cities to play a much greater role in discussions as those COPs progress.
Lord Lilley (Con)
If the noble Lord, Lord Rees, my noble friend Lord Deben and the Secretary of State are right that the cost of renewables is on a declining curve and already cheaper than fossil fuel alternatives, that will be a wonderful thing, but can the Minister explain why, if they are cheaper, we need to guarantee for 20 years a price in real terms for renewables backed up by subsidies in the shape of state-financed back-up power for when renewables are not producing and therefore cannot compete with fossil fuels?
Lord Whitehead (Lab)
It is because the model of how renewables develop is precisely the opposite of how fossil fuels develop. They are very capital-intensive and, after that, the power that comes from them is, in essence, free. Therefore, we need to establish, through capital support in particular, those renewable arrangements which can give us in perpetuity that cheap power for the future. These things in essence are not subsidies; they are investments in how that power reaches us for the future. I am sure, as the noble Lord, Lord Lilley, and I have had debates in the other place, that this discussion will continue, but I very much stand by my view—and accept he stands by his view—that non-fossil fuel power is inevitably going to be cheaper, more secure and more reliable than the fossil fuel economy we have at the moment.
Lord Whitehead (Lab)
Indeed. At COP 30, the essential integration of nature and climate change was emphasised both in the communique at the end and during discussions. I can assure the noble Baroness that the UK Government are absolutely alive to this. In terms of investment in nature funds, we have shown practically that we are willing to, as it were, put our money where our mouth is and make sure that we are full players in the international integration of nature and climate change action.
Lord Lilley (Con)
I still did not understand the answer from the Minister. If renewables are cheaper, why do they need a subsidy and a guaranteed price, just because they need a lot of capital up front? The same is true of most industries and it is simply not a convincing reply.
Lord Whitehead (Lab)
As the noble Lord will know, these underwritings are not permanent.
Lord Whitehead (Lab)
They are usually for 15 years, which means that a renewable development that is subject to that underwriting has, at the end of 15 years, a fully amortised and free energy solution for the future. Therefore, it is tremendously good long-term value, as far as that energy supply is concerned, to have that initial undertaking, which reduces and goes down to zero after that 15-year period.
Nuclear Regulatory Taskforce Review
Lord Lilley Excerpts(8 months ago)
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Lord Vallance of Balham (Lab)
As the noble Baroness will know, we have a very large nuclear waste store in this country. There are ongoing discussions about geological disposal facilities, which is a very key area. I will keep the House updated as we progress that.
Lord Lilley (Con)
Will the noble Lord bring some sense of urgency and drive to the development of small nuclear reactors? It has been over 12 years since the Select Committee in the other place on which I served recommended that the Government bring in a programme. The Minister is now talking about three months to look at a report and two years to implement it. It was barely 10 years after the explosion of the atomic bomb that this country built its first nuclear reactor for peaceful uses, and within 20 years we had more than the rest of the world put together. Please bring back some drive—this is not a party-political point—as it has been lacking in recent years. I look to the Minister to bring it to bear.
Lord Vallance of Balham (Lab)
I am absolutely delighted that the Opposition Benches have a feeling of urgency about this, because we certainly have not had it for the past 13 years. We have urgency; we have announced that we will have small modular reactors, and they are going ahead. Work will start on them next year and they are not dependent on the read-out from this review, which is also urgently needed for the reasons stated: we have a far more complicated system of regulation than we need.
Grangemouth Oil Refinery
Lord Lilley Excerpts(1 year, 4 months ago)
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Lord Lilley (Con)
My Lords, the closure of Grangemouth will make us more dependent on imports, as will the Government’s policy of not giving licences to extract shale gas or new licences for oil in the North Sea. The Government think that we can cope with being less dependent in normal times—I do not agree—but surely the Government must accept that there may come a time, in an emergency, when we will need to exploit our own resources. So why are the Government, on Saturday, cementing in the only successful shale wells on land in Lancashire, meaning that we will not be able to take advantage of them in future? Is that not an act of vindictive vandalism?
Lord Hunt of Kings Heath (Lab)
So why then did the party opposite, when in government, not allow fracking to take place? It is pure hypocrisy to attack us for a decision that we have made firmly that we will not allow fracking to take place. I take the point about energy security and reliance on imports, but I say to the noble Lord that the UK Government are required to hold stocks of oil as a member of the International Energy Agency. At the end of January 2025, we had the equivalent of 130 days of net imports, substantially higher than the required 90 days set by the IEA. There is no complacency here at all: we of course keep that under very close review and energy security is always going to be our number one priority.
Internet Activity: Energy Use
Lord Lilley Excerpts(1 year, 6 months ago)
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Captain of the King’s Bodyguard of the Yeomen of the Guard and Deputy Chief Whip (Baroness Wheeler) (Lab)
We will hear from the Green Party.
Lord Hunt of Kings Heath (Lab)
My Lords, in wishing to develop their projects, these are the matters that data centre operators have to keep under consideration. If we are interested in the growth of the UK economy, we should welcome the potential in the UK, and build on what has already been achieved, through data centres and through artificial intelligence. We should look at the amount of money that has been spent in those areas and at the number of highly skilled jobs that are being used to employ many good people.
Lord Lilley (Con)
My Lords, will the Minister explain why electricity in this country is more expensive than in any other OECD country?
Lord Hunt of Kings Heath (Lab)
My Lords, I think the noble Lord is in a better position to explain, since that was the position we inherited from his Government. It is our view, as well as that of the Committee on Climate Change, NESO and many other bodies, that the best way to get stability and then reductions in prices is to move fast to clean power.
Electricity Capacity Mechanism (Amendment) Regulations 2024
Lord Lilley Excerpts(1 year, 6 months ago)
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The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)
My Lords, this instrument was laid before the House on 18 November 2024. It seeks to revoke and alter several provisions in assimilated Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity, relating to the capacity market. For ease, I will refer to this as the assimilated electricity regulation. The instrument makes targeted, technical amendments which are intended to support the continued operation of the capacity market, Great Britain’s main mechanism for ensuring security of electricity supply. It does not introduce any practical changes to the operation of the capacity market.
Before outlining the specific provisions of this draft instrument, I will briefly provide some context. Great Britain’s electricity capacity market was introduced in 2014 and is designed to ensure that sufficient electrical capacity is operational and on the system to meet future predicted demand, thereby maintaining security of supply. The capacity market scheme provides all forms of existing and new-build capacity with the right incentives to be on the system to deliver when needed. It covers different types of electrical capacity, including generation, storage, consumer-led flexibility and interconnection capacity.
Through capacity market auctions held annually one year and four years ahead of delivery, the aim is to secure the capacity needed to meet future peak demand under a range of scenarios. This is based on advice from the capacity market delivery body—the National Energy System Operator. Capacity providers which are successful in the auctions are awarded capacity agreements, which range in duration from one to 15 years.
The capacity market was introduced in 2014. Since then, it has contributed to investment in just under 19 gigawatts of new, flexible capacity needed to replace older, less efficient plant as we transition to a net-zero economy. The capacity market was originally approved under European Union state aid rules for a period of 10 years. Following the United Kingdom’s withdrawal from the European Union, a requirement in EU law for approval of up to 10 years was brought into domestic law as part of the assimilated electricity regulation. To date, the capacity market has been successful in ensuring that Great Britain has sufficient electrical capacity to meet demand and continues to be required to maintain security of supply and provide confidence to investors.
On the detail of the instrument, it revokes and alters a number of provisions relating to capacity mechanisms in the assimilated electricity regulation, including Article 21.8, which requires that
“Capacity mechanisms shall be temporary”
and
“shall be approved … for no longer than 10 years”,
and other references to such mechanisms being temporary. The instrument also revokes provisions that either are no longer considered to be necessary or require minor correction following the UK’s withdrawal from the European Union. We are seeking to make these changes so that our post-EU exit legal framework reflects the continuation of current arrangements for maintaining a secure electricity supply, since there remains an ongoing need for the capacity market to ensure sufficient investment in reliable electricity capacity.
Furthermore, following the UK’s withdrawal from the European Union, the domestic subsidy control regime was introduced. The subsidy control regime does not require subsidy schemes to be granted an approval or limited for a specified period. Therefore, the approval requirement in the assimilated electricity regulation does not reflect our post-EU exit arrangements. Of course, it is important that we keep the capacity market under review and there are multiple controls set out in domestic legislation, all of which will be retained. This includes a statutory requirement for my department to review the capacity market regulations every five years, which provides an opportunity to review the need for the scheme. Ofgem also undertakes an independent five-yearly review of the capacity market rules. Furthermore, the Secretary of State can decide not to hold a capacity market auction. These embedded controls all remain as part of the wider domestic capacity market legislative framework.
In conclusion, this draft instrument revokes and alters certain provisions related to the capacity mechanism in the assimilated electricity regulation. This includes a requirement for an approval lasting no more than 10 years, as well as references to capacity mechanisms being of a temporary nature. These changes are being made to ensure that our domestic legislative arrangements reflect the continuation of the capacity market, which is Great Britain’s main mechanism for ensuring electricity security of supply. I beg to move.
Lord Lilley (Con)
My Lords, I want to use this as an opportunity simply to ask a question of the Minister. Why do we not take the advice of Professor Dieter Helm, in his review of energy policy, which was that instead of us providing the capacity mechanism centrally, we require anyone providing electricity into the system—wind generator, solar generator or whatever—from an intermittent source to provide firm power, in other words to pay for some capacity for the times when the wind is not blowing? If that were done, this whole arrangement would be unnecessary. We would have a much clearer idea of the total cost of intermittent energy if the supplier were also paying for some of the back-up capacity that is necessary to meet the occasions when intermittency prevents delivery of the power.
The only argument I have heard against this is that, if you do it wind farm by wind farm, the aggregate amount of capacity would be statistically greater than is necessary to meet the fact that some wind farms will be producing when others are not, but that surely can be overcome by saying that a certain statistical proportion of the necessary capacity should attach to any intermittent generator. Then we would have a more rational, more credible and more manageable system than the one that we have under these regulations.
Earl Russell (LD)
My Lords, this instrument revokes and alters several provisions of the assimilated EU regulations relating to the internal electricity capacity market. The draft regulations make changes necessary for the operation of the capacity market following our withdrawal from the European Union and they revoke the 10-year approval requirements. We do not oppose these changes—I just say that to start with.
Our electricity capacity market was introduced in 2014. The measure is designed to ensure that maximum output is always available and thus that we can maintain sufficient electricity capacity to meet future predicted demand, always ensuring the security of electricity supply. As we have heard, the capacity market covers generation, storage, consumer-led flexibility and interconnector capacity. It is about ensuring the security of this supply at all times. Auctions are held annually, one year and four years ahead of delivery, to ensure that we have supply when we need it and can meet future peak demand in a range of scenarios, based on advice from the capacity market delivery body, the National Energy System Operator.
The capacity market was originally approved when we were part of the EU and was made under the European Union’s state aid rules for a period of 10 years. Following our withdrawal, this requirement was brought in and enshrined in our domestic law as part of the assimilated electricity regulations. The capacity market will continue to be required to maintain the security of supply and investor confidence. This market will be of even greater importance as we seek to decarbonise our electricity generation by 2030 and, at the same time, see an ever-growing increase in electricity demand. The draft regulations revoke the requirement that
“Capacity mechanisms shall be temporary”
and
“shall be approved … for no longer than 10 years”,
and other references to such mechanisms being temporary. The draft instrument also revokes several provisions that require minor correction. As I said, we do not oppose the recommendations in the instrument, but I wanted briefly also to turn to some broader points.
As we seek to reach net-zero carbon generation by 2030 and beyond, the Government have a continued dependency on unabated gas and propose that carbon capture and storage should be used as a key part of our energy mix. Indeed, the clean power 2030 plan has around 35 gigawatts of unabated gas on standby for security of supply, and this requirement for gas capacity will remain throughout the early 2030s until more low-carbon dispatchable power comes on board to replace it. Although required, back-up reserve gas generation that is used intermittently and only when necessary is also very expensive, understandably. The Government have agreed to invest some £22 billion over the next 25 years in carbon capture technology to help make sure that we can have this unabated gas without adding to our greenhouse gas emissions.
The week before last there was a debate in the Chamber on the Science and Technology Committee’s report on long-term energy storage. We have also had a couple of Questions about the Russian shadow fleet and the attack on Baltic power cables. Of course, renewable energy is not always reliable, and everybody knows that it needs to be backed up by a wide variety of other sources to help ensure the security of supply. On that basis, can I ask the Minister about the Government’s proposed energy mix going forward to net zero and beyond? I am a little concerned that we continue to have this requirement: it is basically solar, wind and dispatchable gas backed by CCS and nuclear. Will the Minister say a word about how the Government will keep this mix under continuous review? I encourage them to invest in alternative renewable technologies, such as wave, tidal and geothermal, that are able to provide the dispatchable power that we need. What is the Government’s thinking on that?
We must also ensure that all the wind energy we generate is available and can be used. As I said, there is also a need to radically increase our medium and long-term energy storage, which is available to help us get through periods when other sources of renewable energy are not on tap. I hope that the reforms to the capacity market already announced will help make that happen. More must also be done to reduce demand; as the Government know, the best energy is the energy we never use.
Turning to this SI, I note that, as the Explanatory Memorandum says,
“there is a requirement to review the Electricity Capacity Regulations … at least every five years to determine whether they are meeting their objectives and remain fit for purpose”,
and I note that the Minister said the Government will continue to keep the controls in place. As we are going through such a rapid period of change, we welcome the fact that the Government have brought forward the plan to decarbonise our power generation by five years, but what consideration have they given to the need to review these mechanisms more than every five years? What might trigger that? What is the Government’s thinking on those matters?
Clean Heat Market Mechanism Regulations 2024
Lord Lilley Excerpts(1 year, 6 months ago)
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Lord Lilley (Con)
My Lords, here we have it: 32 pages of regulation to introduce something that some would consider a mere mouse in terms of its impact on this market. After all, it introduces a £500 fine for selling each excess gas boiler, relative to the proportion that is prescribed in the regulation. That £500 is actually quite big relative to the cost of a gas boiler, which is typically around a couple of thousand pounds, even though it is relatively small relative to the cost of a heat pump. None the less, I ask the Minister this: will that £500 fine, which then becomes a marketable instrument, be available to importers? If I have correctly understood how the system will work, someone who exports to this country heat pumps from abroad could sell the certificate that this measure will give them to a domestic producer who has not sold enough electric heat pumps for up to £500—that is a jolly nice subsidy for importers of heat pumps into this country, even if it is not massive.
It is expected that this measure will raise the number of heat pumps sold from roughly 40,500 last year, nearly 3% of the boiler market, to 77,000 pumps—6% of the expected market this year. That is not a huge increase. The Minister said that last year, without the benefit of this measure, the number of heat pumps sold increased substantially. So it will not be a huge increase in the coming year. Why do we think this measure is necessary if these things are proving so attractive and the market is growing anyway? Can the Minister confirm that the 6% target is what is introduced, and that it will continue and persist unless and until he introduces, via further legislation—I also ask him to confirm that this will require further legislation—a higher target?
Failing the introduction of a higher target, any future growth in the market will depend on hopes on the cost of heat pumps coming down as manufacturers find more efficient ways of making them. When I was still in the House of Commons I had a meeting with Octopus Energy, which reckoned that the materials involved in making a heat pump cost about £2,000. Obviously, a huge amount of processing goes into making a heat pump, but it suggested that the potential for bringing down the cost over time was significant. One hopes that will happen. Failing that, the only other thing—we are stuck with the 6% target and this £500 fine—will be the lure of subsidies for consumers to buy heat pumps instead of fossil fuel boilers.
The costs and benefits of the whole procedure are spelled out in the impact assessment. It says the net present value of the costs involved is £195 million. The benefits were put at £220 million, of which those that result from the main purpose of the operation, to reduce carbon, were less than the costs. The total benefit is above the costs only if you allow for the impact it will have on cleaner air. As well as reducing the amount of CO2, which is a very clean thing that we breathe all the time, the reduction in the other impurities put in the air by fossil fuels just about brings it to a net benefit. We are talking about the costs and benefits being roughly the same order of magnitude. Once again, an almost religious fanaticism, which does not take the costs and benefits into account, is driving this policy.
I will make a few observations about the situation in France, because I have a house in France and I observe what is happening there. Two of my French neighbours have installed heat pumps. One in a comparatively small cottage cost over €20,000—not for the pump but for the insulation—all paid by the French taxpayer. Bully for him. Another friend has a rather more substantial old house. It cost the French taxpayer €100,000 to install the heat pump and the necessary insulation. In his case, it would not work for a year because the installers were so busy—because it is free to users—that they would not come back and tell him how to make it work. It took him a long time to find anyone who would. I noticed, when I went round to enjoy his hospitality over the new year, that he had wood fires burning as well.
I sincerely hope that we do not go down the path of subsidising something at the huge costs that the French taxpayer is having to absorb, when the costs and benefits of the whole process, even without subsidies, are so marginal. We do not want to put ourselves as near bankruptcy as the French state is.
Baroness McIntosh of Pickering (Con)
I am grateful to the Minister for setting out the contents of the regulations before us. I am afraid that I share some of the scepticism of my noble friend Lord Lilley. I am grateful to the noble Lord, Lord Hunt, for referring to the warm homes scheme. He is aware of my disappointment that the discount is not going to be revisited, and I say that as honorary president of National Energy Action.
My understanding is that the heat pumps that are the subject of this measure simply are not as efficient as oil-fired central heating. I say that as where I live in the north of England, it is all oil-fired central heating; we are off grid and we cannot use gas. I walked past a surgery in the north of England that did not have just one heat pump; it had fitted three heat pumps, which probably means that one heat pump was not sufficient to generate the heat required.
My understanding—and I would be grateful if the noble Lord, Lord Hunt, could confirm this—is that, without log fires or some other secondary heating, heat pumps heat only to a top temperature of about 16 degrees. If you are retrofitting an existing building, as many of the windows may not be able to accommodate the size of the heat pump or the radiators that connect to it, substantial renovation may be required.
Furthermore, I am grateful to the Secondary Legislation Scrutiny Committee, which highlighted that the starting point referred to by the noble Lord, Lord Hunt, of around 40,500 installations per year is—in its word, at paragraph 56 of its 10th report—“ambitious”. The department expects the scheme to help ensure the installation of at least 77,000 heat pumps a year in existing homes between 2024-25 and 2028-29. I ask the Minister a simple question: is that feasible and realistic?
My noble friend Lord Lilley quoted £2,000 as the cost of an ordinary boiler. I recently got two quotes for a boiler. The boiler itself was not the issue. For the fitting, even that of an oil-fired boiler, you are looking at something in the region of £8,000 to £10,000. I repeat: if you live off-grid in a very rural area, it would be nice to think that heat pumps were an alternative, but, given the state of the current market, I just do not see them as feasible if they heat up to only 16 degrees when, in just the past two weeks, we have regularly had temperatures of freezing or down to minus 10. With those few remarks, I press the Minister to comment on these queries.
Lord Lilley (Con)
They are of course three times more efficient on average—though not necessarily in cold weather. But electricity is four times as expensive as gas per therm.
Earl Russell (LD)
I welcome the intervention and will come back to the noble Lord on his point. During this transition, it will take a huge effort across government and beyond—and beyond the scope of this instrument—to meet the scale of these changes.
The regulations establish the new UK-wide heat market mechanism to promote the development of the market for retrofit installations of heat pumps in existing buildings. The CHMM is to launch on 1 April 2025 and run for an initial period of four years. In the interests of time, I will not go on too much, but there are two big changes from previous proposals. First, they propose to reduce the payment in lieu of any missing heat pump credits to £500 from the first year from the £3,000 proposed by the previous Government. Secondly, the period over which boiler sales are counted has been delayed to give the obligated parties more time to prepare. The Government have said:
“As set out in the consultation response published in November … We have also aligned the periods over which boiler sales and heat pump installations will generate obligations and credits, respectively, providing manufacturers with more time to prepare”.—[Official Report, Commons, Second Delegated Legislation Committee, 13/1/25; col. 4.]
The big change is that the new Minister has engaged and listened to industry and has managed to make some of the adjustments required by working in partnership. This approach has been welcomed by industry. Removing penalties and allowing more time is pivotal to finding common solutions. The approach of giving manufacturers more time to scale up the supply chain and expand sales without penalising customers is good and needs to continue while hitting some very ambitious and fast-approaching targets.
The ongoing relations with manufacturers and industry are clearly key to delivering this policy. How do the Government intend to continue these better relations while making sure that targets are met and that unnecessary costs are not passed on to consumers? I want to make it clear that this is not a boiler tax. The Conservatives, when this was their policy, were very keen that those words were not used to describe it.
Review mechanisms and relations with industry are crucial to delivering this policy. I note that any adjustments would require further legislation and that would change the whole impact assessment. Any increases in the target in future schemes would require further secondary legislation. I note that the Government have said that they will not force consumers and that this is about working in partnership. My worry is about the confidence that the Government have in the ability to deliver the volume of heat pumps required in the time available.
I would like briefly to ask the Minister about some wider points. The cost of getting a heat pump is still a barrier to entry. I welcome the fact that the Government have continued the £7,500 grant, which, to their credit, the Conservatives not only introduced but increased. Since that increase, we have had a remarkable uptake in the number of heat pumps. But, as we have heard, installing a heat pump is about a system-wide change. It is more than just installing a heat pump; often it involves under-floor heating and changing radiators. On average, this seems to be costing consumers at least an additional £5,000.
We have had some conversations as part of the GB Energy Bill about green mortgages. Are the Government considering finding ways that the additional costs, not just of heat pumps but other renewable energy technology, can be added to mortgages? Quality and innovation are clearly important as well, as is making sure that these are good-quality products.
The noble Lord, Lord Lilley, intervened on electricity market reform, and to some extent I agree with him. Our electricity is still very expensive—some of the most expensive in Europe. The Government’s policy is to get people away from gas and on to electricity. What plans do they have to make sure that electricity is affordable and to introduce social tariffs for those struggling to pay their bills?
On disinformation, misinformation and ignorance, according to the Government’s own policy document, only 51% of people in the UK know about heat pumps. There is disinformation and misinformation in this space—for example, that heat pumps do not warm our homes enough—so it is important that the Government have a strong public information campaign for the take-up of heat pumps, about what they are, how they work and what they do.
Finally, heat pumps can save the average household £300 a year, so they would go a long way towards Labour meeting its manifesto pledge. I wish the Government well, but these things are complicated.
Lord Lilley (Con)
I am grateful to the Minister for letting me intervene and for answering a number of my questions. On his point about costs coming down, is he suggesting that they will come down in Britain because they are artificially high to start with, or because we will discover technological ways of producing it that have not been found in continental countries, where they already have large-volume manufacturing? That is one thing.
Could the Minister also respond to another point I made, admittedly in rather garbled form, so I can excuse him for not replying? The correct figures in his document are that the costs of this process are £195 million, while the benefits from reduced carbon emissions are £187 million—less than the costs—but, fortunately, that is supplemented by £34 million of benefits from cleaner air. The whole thing is pretty marginal. Could he comment on the marginality of the cost benefits of this extraordinary regulation?
Lord Hunt of Kings Heath (Lab)
My Lords, surely the point is this: we have to decarbonise our home stock. At the moment, 80% of homes use gas for heating so, as part of our plans towards decarbonisation and moving on to net zero, this is an essential mechanism that we need to take forward. As for the cost-benefit analysis, I do expect the cost of the heat pumps to come down in relative terms, in future. I am not prepared to engage with the noble Lord on the exact whys and wherefores of how that might happen. I just look in history—
Lord Hunt of Kings Heath (Lab)
No. The noble Lord referred earlier to mystical or quasi-religious belief. I regard myself as a high church Anglican atheist, and I do not bring a fervour to this from belief; I think that the rational response to what we are doing, and to the risk of climate change, is so huge that we have to use these kinds of mechanisms and do something about housing and the current use of gas. This is the way that we think we need to go forward, but we will keep it under review and look closely at costs, manufacturing capacity in this country and the public’s ability to ensure that they have good installations. Overall, I commend these regulations to the Committee.
Great British Energy Bill
Lord Lilley ExcerptsMonday 13th January 2025
(1 year, 6 months ago)
Lords ChamberRead Full debate Great British Energy Act 2025 View all Great British Energy Act 2025 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 43-III Third marshalled list for Committee - (9 Jan 2025)
Lord Lilley
“(1A) The Secretary of State must give a specific direction to Great British Energy that it must carry out a review on the use of long duration energy storage by Great British Energy and its projected costs.(1B) The Secretary of State must lay a copy of the assessment made under subsection (1A) before Parliament.”Member’s explanatory statement
This would require GB Energy to carry out a review on the use of long duration energy storage by Great British Energy and its projected costs.
Lord Lilley (Con)
My Lords, I rise to move my Amendment 85I and to speak to Amendment 131 in my name and that of my noble friend Lord Reay. Nature abhors a vacuum and Parliament abhors a blank piece of paper, which is what the Bill, in effect, creates in the way of the GBE company. It is a company that has no clear purpose, limits or functions, so it is our duty to write in some clear purpose and constraints, and that is what my amendments, like many tabled by other noble Lords, try to do.
Amendment 85I requires the Secretary of State to review
“the use of long duration energy storage by Great British Energy and its projected costs”.
Amendment 131 says the Act may come into force only when the Secretary of State has published the review.
The Science and Technology Committee of your Lordships’ House produced a report entitled Long-Duration Energy Storage: Get On With It, which we debated last Thursday. This recognised—indeed, took it as axiomatic—that, if we replace fossil fuels entirely with intermittent wind and solar, we will need storage to meet periods when demand exceeds supply. It will be absolutely essential to have that storage. It is not just short-term storage to cover daily peaks in demand, nor even for the medium-term periods the Germans call Dunkelflaute, when it is cold, windless and sunless, which it invariably is at night; there can also be whole years when supply is below average. So some storage needs to be of long duration.
As well as establishing that there will be a need for such long-duration electricity storage, the report evaluated different technologies providing that storage. It concluded that the best approach would be that, when wind and sun are generating more electricity than we need, instead of turning off the windmills, we should use the excess electricity to electrolyse water to create hydrogen that could then be stored in large salt caverns—largely under Chester, I gather—to be used when needed. The committee acknowledged that, by the time the electricity has been converted into hydrogen and then burned to generate electricity again, about 60% of the energy has been wasted—but that is better than wasting all the excess electricity that would be produced by wind.
Unfortunately, the report of the Select Committee provided only the widest possible range of estimates of the likely need for storage. It is literally almost a priceless report, in the sense that it reaches no conclusions of its own as to the likely price of storage, let alone the amount by which it will increase the price of electricity. So Great British Energy will not be able to rely on the Select Committee’s report and will need to carry out its own review, as specified in these amendments, into the amount of storage needed and its cost.
The Select Committee report does however cite a report by the Royal Society that indicates that the potential scale of costs is huge—the capital costs in particular. It says that the capital expenditure required for wind and solar to meet the increased demand when transport and heating have been electrified will be some £210 billion. On top of that, there will be additional capex for long-duration storage of some £100 billion, and investment to strengthen and extend the grid to reach the storage of an additional £100 billion. So, the cost of storage plus grid strengthening will effectively double the capital costs of a fully renewable generating system based on wind and solar. It is, incidentally, hard to see how that can reduce our electricity costs, as the Government originally proposed and claimed ahead of the election was the purpose of GBE. So I am not surprised that the Minister rejected the amendment from my noble friend Lord Offord requiring Great British Energy to set out how it would contribute to the objective of reducing costs.
Clearly, investments on the scale that the Royal Society envisages should not be undertaken lightly. It is highly unlikely that GBE, capitalised at £8.3 billion, will be remotely capable of crowding in private sector capital of £100 billion just for long-duration energy storage alone.
Indeed, witnesses to the report and noble Lords in the debate cast doubt on whether a credible way could be devised to remunerate private sector investors to make it worth their while to provide the storage capacity. The suggested scheme involves setting a floor and cap for the revenues generated by providers of stored hydrogen when they sell and buy electricity during periods when it is needed. Unfortunately, owners of storage will want to maximise their revenues by arbitrage trading as frequently as possible when electricity prices rise and fall. This may mean that they have insufficient gas when a period of shortage of renewable energy continues for a long time, which is precisely what this long-duration energy storage is intended for.
Those in the debate and, indeed, on the committee who pointed out that this problem exists tended to conclude that the logical option was that long-duration electricity storage would have to be provided and owned by the state. I am not an enthusiast for nationalisation but nor am I a doctrinaire opponent if it is indeed the least bad option, as may well be the case. If it is the case, can GBE be the vehicle that would help create such a state holding company? It scarcely seems credible given its capital base of £8.3 billion and potential investment required of £100 billion. Yet, without long-duration energy storage, it will be impossible to replace fossil fuels by renewables. So, the Government must somehow tell us how, through GBE or otherwise, they are going to finance this long-duration energy storage.
The Royal Society report on which the Select Committee relied made some heroic and barely credible assumptions. The costs and deficiencies of electrolysers and gas turbines needed to convert hydrogen back into electricity would fall dramatically, in some instances by up to 90%, over the period between now and 2050. The report that this amendment would require would also surely have to consider whether it might be more cost effective to defer investment in these technologies until those reductions in costs and efficiency improvements had materialised.
That would mean relying on gas, purely as a backup, for a few extra years, but the extra emissions would be small and negligible in the grand scheme of things. The Secretary of State for Energy Security and Net Zero has already reinterpreted decarbonising electricity production by 2030 to mean that, rather than reducing emissions by 100%, it will involve reducing emissions by only 95%. There is a precedent for anticipating a degree of flexibility. I hope, therefore, that any report that this amendment requires GBE to produce will consider that option.
We should remember that when Dieter Helm analysed the Government’s energy policy, he concluded that we have wasted up to £100 billion of taxpayers’ money so far by investing prematurely in immature technologies rather than waiting until they became sufficiently efficient for us to get advantage from that greater efficiency. These amendments would enable us to know the answers to some of those questions before GBE goes ahead and spends any taxpayers’ money.
Lord Swire (Con)
My Lords, I rise briefly to support the noble Lord, Lord Lilley, who makes some extremely good points in trying to put more meat on the bone of the Government’s proposals. It seems to me in a macro way that the Government’s energy policy is all over the place, not least their new desire to attract Chinese investment—have we not been there before? It is causing great concern, not least now to the Security Service.
That apart, whatever the Government decide to do, they will have to dramatically increase storage, as we have heard today. However, there is precious little in this Bill to tell us how that storage will be dealt with, where it will be located, or how that will be handled by planning. We have just heard that some of the storage will be below ground in Cheshire. Other storage will, of course, be above ground.
Lord Hunt of Kings Heath (Lab)
My Lords, first, I welcome so many Members of the Opposition to our debate and I look forward to their continuing interest in our deliberations going on this evening. I must confess to being somewhat at a loss, because all the points raised in this debate have been raised tonight in other amendments. What we are seeing is clearly a filibuster, and the degrouping of so many of these amendments on Clause 6 is the visible evidence of this. We have already had a debate on energy storage, which the noble Lord, Lord Murray, moved. We have already debated power lines and planning environmental protections, and we have discussed nuclear power, SMRs and AMRs. I simply do not understand. What is the point of having yet another debate on these issues, which amount to Second Reading discussions about the Government’s energy policy? We are debating Clause 6 directions. This is a backstop provision, normal in Bills of this sort in relation to the bodies that we are talking about, and it is quite inappropriate for us to seek to micromanage GB Energy in the way noble Lords have suggested.
Lord Lilley (Con)
My Lords, I am grateful to the Minister for his non-reply to the debate. The answer to his point about whether it is necessary is that it is impossible to overstate the importance of cheap and reliable energy to the economic growth of this country. If the only way we can have reliable energy is by having hugely costly energy, either because, as the noble Lord, Lord Reay, said, to ward off delays as we saw in recent days costs eight or 10 times what it normally costs or because to prevent that sort of risk involves spending hundreds of billions of pounds, that is hugely important. I am very sorry that the Minister, whom I normally praise for his replies, which are usually fulsome and effective and substantive, has avoided addressing those points, because they are crucially important and they have many aspects and it is important that those many aspects be investigated in the course of these debates in Committee. Obviously, I shall withdraw my amendment, but I hope that none the less that we will force the Government to think seriously about these issues before carrying us further down a route which could make our already very expensive energy even more expensive.