Energy Bill [HL]

Lord Lucas Excerpts

Committee stage
Monday 19th December 2022 Grand Committee

[Lord Whitty (Lab)]

My Lords, noble Lords may have noticed that I extracted my amendments to the second group, when they were originally suggested to be tabled in this group. They relate to the protection of consumers.

I am grateful that the Minister emphasised protection, for both domestic and non-domestic consumers, of the commitments to district heating, decentralised energy and community energy. I am strongly in favour of that move, but I do not think the Bill, as first drafted, or as I read the amendments proposed in the Minister’s group, entirely meet the need to protect consumers of district heating et cetera to the same extent that consumers of other suppliers are protected. I was gratified by some of the Minister’s words this afternoon, but I still do not feel that this combination of what is in the Bill and the Minister’s own amendments will deliver for consumers of district heating the protections, that have been absent for so long, which are supplied via Ofgem to consumers of other forms of electricity supply. I think it will need a bit of tweaking and I shall come to that in the following group.

I do, however, want to register my appreciation for the role of decentralised energy being recognised here. We have some tidying up to do, but I welcome the Government’s commitment to extend support both for consumers in this sector and for the sector itself.

[Lord Lucas (Con)]

My Lords, I wonder whether rounds one to three of the green heat network fund are throwing some light on the potential for expansion in this sector. Are the Government viewing heat networks as something that we will see a lot of, or just little bits and pieces? Coming back to the amendment spoken to by the noble Lord, Lord Ravensdale, if we are going to see a lot, are we seeing green heat sources coming into play in this area? If we are to see a lot of networks, and since the ones I am familiar with, at least, require serious street works, is there a possibility of combining those street works with separating sewage from storm water?

[Lord Teverson (LD)]

My Lords, I want to reflect the comments of the noble Lord, Lord Whitty, in welcoming the fact that the Government really are concentrating on this area and giving it the attention that they have. We are one of the lackeys on heat networks, certainly in comparison with the rest of Europe.

One thing that struck me, though, was that on the occasions when I meet the Minister before a Bill goes through, he normally asks me to keep the number of Liberal Democrat amendments to a minimum. I think he has broken the record on this occasion, but I will keep my side of the bargain.

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[Lord Callanan (Con)]

I thank all noble Lords for their contributions to this brief debate. I acknowledge the point made by the noble Lord, Lord Teverson: it will be difficult for me to ask him in future to limit the number of Liberal Democrat amendments after tabling all these. I quite take his point there; all I will say is that I flagged up to noble Lords at Second Reading that these amendments would be coming forward. There will be more on other subjects, as I also flagged up at Second Reading, which are still being drafted and will be tabled as soon as possible.

I first remind noble Lords, in acknowledging the point made by my noble friend Lord Lucas, that heat networks will play a crucial role in the UK reaching its net-zero targets, as they are one of the most cost-effective ways of decarbonising heating, particularly in built-up areas, where it would be more difficult to have individual property solutions. Noble Lords will probably be aware that the Climate Change Committee estimated that around 18% of UK heat will potentially come from heat networks by 2050—up from around 2% currently—to support the cost-effective delivery of our carbon targets. However, the sector is currently unregulated.

The Bill will provide regulation for that sector and give Ministers a power to introduce, among other things, consumer protection rules and carbon emission limits on heat networks. The majority of heat networks are performing perfectly well and often run by local authorities, housing associations and others, but one or two small, private networks are abusing their customers. Of course, once you are connected to it, that is effectively a monopoly. You have no choice but to take your business elsewhere, so regulation is required in the sector.

I will now talk to Amendment 162. The Bill already allows the Government to control heating sources by providing for authorisation conditions to contain emissions limits; this is contained in paragraph 14(3)(f) of Schedule 15. By gradually lowering emissions limits, authorisation conditions will drive changes in the types of fuels and technologies used to power various heat networks.

Using emission limits allows for dynamic, ongoing regulation. I submit that mandating specific heat sources is a more limited approach that risks the Government and this House picking winners. The exact approach for implementing emission limits will of course be subject to further consultation with industry and stakeholders. Settling on a pathway ahead of that consultation would, at this stage, be unwise.

Removing whole fuel types risks ignoring other factors that will come into play, such as technological improvements, system efficiencies, varying fuel costs, the replacement cycle of generation assets, and the need for flexibility in a system to provide separately for back-up or peak demand.

The Government are of course committed to net zero by 2050, and we see heat networks playing a vital role in this. The Government wish for the Bill and its secondary legislation to ensure that the heat network sector thrives and expands and is not held back in this goal. Therefore, I hope that the noble Lord, on behalf of the noble Baroness, Lady Worthington, will feel able not to press the amendment.

[Lord Lucas (Con)]

My Lords, I am delighted that my noble friend is so optimistic and shares the Climate Change Committee’s optimism about the future of heat networks. Will he therefore encourage his colleagues to support deep geothermal which, if we are to need that volume of energy, must be a serious contender as it is on the continent. However, in this country, since we have not had the exploration, there is a lot of uncertainty about whether the particular strata will behave in a way that allows heat extraction. It would be a real help to that industry if the Government were to take an interest in how to reduce that first well risk, so that we can get going in the way that the Netherlands and Germany have to take advantage of the deep heat that we all believe—or the British Geological Survey at least believes—is down there and available.

Similarly, is my noble friend content that the regulations governing tidal rivers—such as the one just outside—are such that we can use those as a source of heat for heat networks?

[Lord Callanan (Con)]

My noble friend makes some good points. There is tremendous potential from deep geothermal, and we are funding some exploratory projects. However, the performance is mixed: some projects have drilled and not found any rocks hot enough to power the network. What is perhaps more viable, particularly in mining areas, is the use of waste mine water for powering heat networks. There are a number of exciting schemes that I have visited, particularly in the north-east of England, where they can extract the warm water from existing mine workings, put it through heat exchangers and use it for heat networks. There are a lot of promising developments in this area.

I will get a more detailed answer for my noble friend on his question about tidal waters, but I know that there are some concerns in the industry about over-regulation from the Environment Agency in some of these areas—they have been flagged up to me. I wrote to Defra about a year ago on this subject but, to be honest, I cannot remember what reply I got—if any—at the time. I will write to him on that subject.

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[Lord Callanan (Con)]

I am of course happy to set out to noble Lords the details of our position in writing. We want to reduce bureaucracy as much as possible but we have an overriding need to ensure the stability of the energy system. Certain technical requirements need to be met by these schemes. We want to encourage them as much as we possibly can, but that comes with limits. We will certainly write with as many details as we can provide.

[Lord Lucas (Con)]

My Lords, my noble friend has been very helpful, but I am none the less fairly disappointed by the replies he has been able to give. To illustrate, I live in Eastbourne and, if you stand on the hills above Eastbourne—Britain’s sunniest town—and look down at hundreds of acres of industrial and retail estates and car parks, about the only solar panel you will see is on the local college’s eco training hub. That is because the ownership and commercial benefits of these areas are extremely complicated. No one is in a position to get a cost-effective, reasonable-scale scheme going on their own; it needs something that will work as a whole.

A decent feed-in tariff need not be subsidised—it can be below market rate—but there needs to be something so that there is a base on which you can build. My noble friend’s department was kind enough to send a representative to our recent solar summit. One of the main things that came out of a gathering of local businesses, energy suppliers and so on was the need for a basis on which local collaboration can be built, not to create something that requires a subsidy to produce electricity at a greater cost than would otherwise be the case, but to enable a very complicated situation to come together and be supported into commerciality, allowing local virtuous circles of electricity generation and consumption to emerge. That is not happening in our system at the moment, which is ridiculous. Something needs to happen to enable us to move from 200 hectares of white roof to 200 hectares of black roof, and to get the benefits of that.

[Lord Callanan (Con)]

As I said, a number of suppliers already offer competitive tariffs in the market. They will provide long-term certainty on pricing. There are many examples of industrial units that have already put solar panels on. Obviously, the most cost-effective way is for them to use that power themselves and export any surplus power to the grid using the smart export tariff guarantees. I will answer that question again: the Government are supportive of community energy schemes. We want to see more of them, but we think that is best delivered through the market framework. I will happily provide noble Lords with more detail in writing.