Energy Bill [HL]

Lord Moylan Excerpts

Committee stage
Monday 5th September 2022 Lords Chamber

[Lord Moylan (Con)]

My Lords, I rise to speak to Amendment 5 in my name, and thank the noble Lord, Lord West of Spithead, and my noble friend Lord Frost for their support, and to speak to Amendment 231, also in my name. Before doing so, I should say that since I joined your Lordships’ House, my entry in the register of interests has shown my membership of the advisory board of Stirling Infrastructure Partners, a relatively new corporate advisory boutique. Stirling Infrastructure seeks business with a wide array of major corporations, some engaged in the energy field, and it struck me after speaking at Second Reading that I should perhaps have specifically drawn the House’s attention to my registered interest at that point. I have not received any remuneration during my time on the advisory board, and I have since then terminated the interest.

I congratulate the noble Baroness, Lady Blake, and the noble Lord, Lord Lennie, for bringing forward Amendments 1 to 4 as a matter of general principle, because they are right that a Bill which seeks to articulate and implement our energy strategy, particularly our energy security strategy, should have a preamble that is strategic in character and should provide a setting so that we know where the Bill is heading and what it is trying to achieve. My difficulty with their amendments is that they are rather general in character and not entirely strategic. I hesitate to say this, conscious as I am that the noble Lord, Lord West of Spithead, may choose to speak, but simply aiming to win the war is not a strategy. A strategy requires something on resources, a plan and a general conception of how you are going to do it. If we are to achieve net zero, there are certain knotty issues that the Government need to be clear about so that we understand exactly what their strategy is at the level of detail appropriate to strategy. I, for one, am rather confused about the whole thing.

The purpose of my Amendment 5, which I have to admit is drafted in a rather convoluted way, for today’s debate is to elicit from my noble friend on the Front Bench some answers to three particular knotty questions. The first is the cost of net zero by 2050. One would have thought that we knew what the cost was going to be, but my understanding is that the only estimate the Government have had available to rely on was produced by the Climate Change Committee, which estimates that it will be in the order of 1% of GDP a year.

I do not have an objection to dedicating government expenditure on the basis of a certain percentage of GDP. If the Government want to say that they will spend 2% or some other percentage of GDP on defence, or they will spend 0.7% or 0.5% on international aid, for example, that is perfectly legitimate. But, of course, the figure of 1% a year from the Climate Change Committee is not of that character. We are pledging to spend not 1% a year but whatever it takes to deliver net zero by 2050, and 1% a year is an estimate. Moreover, it is an estimate that relies to a high degree on certain built-in assumptions, particularly that things are going to get cheaper—that the various inputs will fall in price over time. While that might be true of some, there is no reason to think it is going to be true of all. Part of the purpose of this amendment is therefore to call for the Government to commission an independent assessment of the cost of meeting net zero by 2050.

Then, we come to the question of affordability. Achieving it by a certain date—the date set in statute—doubtless has one cost attached to it. This amendment also calls on the Government to consider as part of that assessment what it would cost to achieve it. Would it be cheaper—more affordable—especially in the current crisis we are facing, if the terminal date were not 2050 but later? I put in two particular dates but if the Government choose others, I would be happy to go with those. The issue is the principle of whether achieving net zero over a longer period would be more affordable for the people of this country.

That is the first thing this amendment is trying to elicit the Government’s views on: do they have a reliable cost for achieving net zero by 2050, and would it be affordable if we took longer over it? As I said at Second Reading, bearing in mind that this country contributes a very small fraction of global emissions, the idea that achieving it by 2065 or 2050 will save the planet is simply self-delusion. We are doing this principally for exemplary purposes, rather than because of its practical effect.

Secondly, I do not wish to cause the slightest difficulty or embarrassment for my noble friend on the Front Bench, but I find the Government’s existing strategy, particularly the energy security strategy, the 10-point plan and so forth, rather weak in terms of strategic content and cost assessment. What are they going to cost? Also, implementation dates are largely lacking. We also need to know the relative contribution that each of the Government’s proposed measures will make to achieving net zero. Some might be very significant and others not, but we do not understand that from the documentation. That is the second purpose of this amendment. It is an important strategic question and I hope my noble friend will be able to say something about it.

The third point concerns the crucial issue, which I raised at Second Reading, of the intermittency of renewable sources. What do you do when the wind is not blowing or the sun is not shining? An obvious source to use to make up for that at the moment is gas, and that is largely what we do. Will we continue to use gas? That is one option. At Second Reading I quoted Professor Sir Dieter Helm saying that that makes the gas expensive in itself, because switching it on and off all the time is very inefficient and increases costs. However, is that the strategy? When I said that at Second Reading, the noble Baroness, Lady Bennett of Manor Castle, drew my attention to a recent report from a Finnish university that said that intermittency can be dealt with without recourse to gas. Afterwards, she kindly gave me a link to it, and I have studied it. The solution suggested—it is not unique to that university; it is fairly widespread—is that intermittency should be dealt with by way of battery power. When the wind is blowing and you do not need the electricity, you charge up the batteries, and when it stops blowing—it is the same for solar—you take the electricity out. That seems plausible at one level, and maybe it is the solution the Government are coming to; there is stuff about batteries in the Bill. However, it raises questions about the environmental consequences of extracting the minerals needed for the batteries, and about their disposal, siting and so forth. Can the Government tell us what role they see for batteries—if it is to be batteries; maybe it is not—in dealing with intermittency?

The third suggestion I have heard is that pumped water should be used. This involves using surplus electricity to pump water up so that, when you need it, it falls down again. I believe that some installations do that—indeed, one of them is hidden inside a mountain in Snowdonia—and that a couple are to be built in Scotland shortly. My understanding is that they produce very little power. They are an interesting idea. Is it the Government’s intention to roll them out at scale? What is the cost? Where are they to be sited? These are the things on which we should have some indication before we give the Government these powers. I note that there is stuff in the Bill on exactly this.

Finally, I have heard that we should use surplus power to produce hydrogen, but that assumes that there is a distribution network to take the hydrogen where it is needed when the wind is not blowing. So there are serious potential solutions to this problem. All of them have costs, both financial and environmental. Which do the Government prefer?

I have spoken quite long enough so I will come to Amendment 231 in my name, which asks a question that has been on many people’s lips over the past few weeks: how do we price wholesale electricity? At the moment, as I think noble Lords are aware, the price paid to generators is the price of the highest input needed to achieve the demand that exists in the system in a particular half-hour period. In recent weeks and months, that has become gas. Whatever they use to produce electricity—be it wind, solar or whatever—everybody is receiving the same price as for gas.

To be perfectly clear, though, not everybody is receiving the same price because many of those producers will have entered into a contract for the difference—a swap arrangement—with a government-owned company. Effectively, this means that they have a guaranteed price, and it does not matter what the price is in the pool. At the moment, this is something that the European Union is looking aggressively at in terms of whether it should be changed, whether we should have a different system and whether there should be two separate pools, with one for carbon and one for renewables.

These are all things that I would like to hear the Minister say something on. I sympathise with him because today is the last day of the current Administration. Tomorrow, there will be a new Prime Minister. It may be that the Minister does not have the answers to all these questions at his fingertips in the way we would all like to hear at the moment, so an answer in due course as Committee goes on would be extremely welcome.

[Baroness McIntosh of Pickering (Con)]

My Lords, I will speak to Amendment 6 in this group; I am grateful to the noble Lord, Lord Lennie, for his reference to it. It is intended as a probing amendment. I like to think that it is short and perfectly formed; I am grateful to the clerks for their assistance in drafting it. I remind the Committee that I am the president of National Energy Action. As the noble Lord, Lord Lennie, referred to, there are worries about households that have already fallen into fuel poverty and the strong likelihood that, by October this year or January next year, 1.5 million more households may be at risk.

Some further background to this amendment is my concern that most of the talk in the White Paper and the British energy security strategy from April, most of the talk in the recent leadership election campaign and most of the concentration of the press and media seem to focus on household fuel bills and the price cap relating to them. We must not lose sight of the impact of fuel and energy costs on small, medium and large businesses. Many have recently cited the instance of launderettes, which may not be big employers but serve a particularly useful function and are obviously highly intensive users of energy.

However, there are many others. In what was previously the Vale of York constituency, there is the York brick company, which has kilns to make its clay bricks on the go for probably two-thirds of each day—often over weekends, I imagine, if it is trying to complete an order. If we lose many such small and medium-sized companies, this especially will have a grave impact on the UK economy going forward.

--- Later in debate ---

[Lord Moylan (Con)]

My Lords, did I hear my noble friend say 2023? Did I hear that correctly?

[Lord Callanan (Con)]

Yes, it is a complicated area that requires proper and detailed policy analysis, but that work is under way, and we will do so.

Splitting the wholesale market would a necessitate a fundamental and irreversible design of our electricity market arrangements, and without the appropriate consideration of the potential costs and any potential benefits and without sufficient stakeholder input, it could well lead to higher bills for consumers, and it would create an investment hiatus which would jeopardise our ambitions for decarbonising the power sector by 2035—which is exactly the point I was making to my noble friend. So, this is an important issue, but it is one that needs to be looked at thoroughly, properly and professionally. I hope that my noble friend is assured that the issue is being closely examined and will therefore feel able to withdraw his amendment.