Lord Oxburgh
Main Page: Lord Oxburgh (Crossbench - Life peer)
Lord Oxburgh
Lord Oxburgh
My Lords, I shall speak also to Amendments 3, 4, 6, 9 and 14. I begin by declaring my interests as listed in the register, but with a small renewable energy company and a small energy efficiency company. It would also be appropriate to start by thanking the Minister and her team for the way in which they have made themselves available to brief any Member of the Committee who has approached them on the complexities of the Bill. It certainly is a complex Bill and, indeed, that is part of the problem. The complexity of the Bill arises from the multiplicity of its objectives, which are to achieve decarbonisation, to achieve energy security and to do both of those at the lowest possible cost.
Some of us had the opportunity yesterday, courtesy of the noble Viscount, Lord Ridley, to attend a briefing given by an investment manager on his view of the costs and complexity of the Bill. Although I think that not everyone agreed with everything that the briefer said, the talk was extremely informative in the sense that it emphasised the enormous capital that will have to be raised if the aspirations of the Government, as seen through the climate change committee, are to be achieved over the next 40 or so years. It also emphasised the relative unattractiveness of the UK utilities market compared with those in competitor countries and therefore the difficulty in persuading investors to put money into these proposals.
Of course, one of the problems is that the proposed way forward cannot be regarded as the cheapest way forward. In fact, it is relatively expensive by comparison with ways forward that do not decarbonise and which pay much less attention to security of supply. Given that investments in generation are long-term investments, for 30, 40 or even 50 years, investors have to be absolutely clear that the Government are of firm intent.
It was around 50 years ago that the late Lord Franks, in describing the inability of Oxford University to reform itself internally, introduced the expression “infirmity of purpose”, which occurred frequently throughout his reports. Fundamentally, the concerns of the investment community are that there may be a degree of infirmity of purpose between this Government and their successor Governments. Given the overall difficulty of investing in UK utilities, for the reasons that I have just outlined, the least we can do is to do everything possible to indicate that not only the present Government but, as far as possible, across parties, that subsequent Governments will support this approach.
That is the reason for putting forward this group of amendments. Because of the drafting of the Bill, they may appear a little complicated, but there are really only a couple of words that are important: the substitution of “must” for “may” in terms of the obligations of Ministers to declare a target range; and the insertion of the dates 2030 and 2014.
The obvious cause for inserting 2030 is that, although in one sense it is arbitrary, it is an extremely important date in the Government’s decarbonisation plans: if the 2050 target is to be achieved, there has to be really very substantial decarbonisation of electricity generation by 2030 because the second phase of achieving the 2050 target is pervasive electrification of the rest of the energy economy. Unless you have decarbonised your electricity generation before that, the second phase makes no sense. This is part of the reason for 2030 but it is also a matter of emphasising the Government’s firmity of purpose.
The reason for inserting 2014 relates, at least in part, to a second objective, which comes from Brussels and has to do with the proportion of renewables that we need to have in our generation by 2020. To digress for a moment, last week I spent several days reverting to my roots at an energy professionals’ conference in Edinburgh. Although shale gas was a very important topic of conversation there—probably the most important—a secondary topic of conversation was the failure of Governments to understand how long things take, to understand the timescales of change. One constructor said to me, “It’s fine. We can build a power station in three years, or put up wind turbines very quickly, provided we have all the components ready”. He said that the Government seemed not to understand the importance of the supply chain. An important development that may appear quick to implement may be delayed for several years if key components such as bearings are not available in the necessary timescale. The message was that if the 2020 target is to be achieved, it is extremely important that that should be made clear now, as soon as possible, so that those who will be involved in achieving it can start placing orders and can take their place in the queue for components to get the thing going. Two years’ delay would be extremely important. My second point is that if one leaves this to the last few years of the decade, there simply will not be enough civil engineering capacity to build the requisite generating capacity, whatever its character, in time.
Clearly there are broader questions of industrial competitiveness, which certainly have bothered me a lot. However, I will not touch on them now because amendments that we will debate later will provide a better opportunity to discuss them. So in conclusion, the only important point is that we cannot take investment in our energy sector for granted. It will be difficult, and we have to do everything we can to strengthen investor confidence. The amendments in this group do nothing other than strengthen that confidence, and there is no significant downside, given that the information that will be necessary for the Government to meet these commitments will be available to them by December this year. I beg to move.
Viscount Hanworth
My Lords, I strongly support the amendments tabled by the noble Lord, Lord Oxburgh. Amendments 2 and 6 are of prime importance. The Bill prevents the Secretary of State setting a carbon intensity target for the electricity industry before 2016, which is when the UK’s fifth carbon budget is due to be set. It states that the Secretary of State may set a target but does not compel him to do so. If he were to set a target, the earliest date from which the target range would be effective would be 2030. The amendments tabled by the noble Lord, Lord Oxburgh, would compel the Secretary of State to set a target by 1 April 2014. Here, we are revisiting territory that has already been fought over on Report in the House of Commons. An amendment with the same intentions and similar wording to the one we are considering was proposed by a cross-party alliance consisting of a Conservative ex-Minister, Tim Yeo, and the Labour MP Barry Gardiner. The outcome, after a long debate, was that the amendment was disagreed by 290 votes to 267. However, for the coalition it was a whipped vote, and it is clear that numerous Liberal Democrats, and quite a few Conservatives, defied the whip by voting in favour of the amendment. We may surmise, therefore, that a majority was in favour of the amendment, but that the expression of their opinions was limited by the imposition of the whip. One might wonder why the leaders of the Liberal Democrats agreed to the imposition of the whip. We must assume that it was a matter of political expediency, and that a quid pro quo was on offer.
Lord Oxburgh
Perhaps I might ask the noble Lord whether the provisions of the Climate Change Act and in the present Bill that allow Ministers to change targets and adjust things in the light of changed circumstances are not sufficient to meet the real questions that he has raised.
Lord Jenkin of Roding
I can only reply that if the noble Lord thinks that that is all that is necessary, I cannot think why he has moved the amendment. He is quite right. The committee of my noble friend Lord Deben recommends but does not decide. It is the Government who decide. As I said a moment ago, I want to leave the Government with the flexibility to make decisions in the light of the latest circumstances. However, at the moment the customer is bearing all the risk, and this is unsustainable.
Baroness Verma
Of course, the point is that we have to make sure that this happens against the backdrop of what else is going on in the economy. We cannot set targets solely on one part of the economy. That is why we have been very clear that the investment in climate that we have made to 2020 through the levy control framework has already given certainty. We are putting £7.6 billion into low-carbon renewable energies to introduce that certainty to investors. We have already said that National Grid will be given an indicative range of decarbonisation scenarios for the power sector for 2030 consistent with the least-cost approach to the UK’s 2050 carbon budget. The fourth carbon budget will run up to 2027 and requires the UK to halve total emissions in the whole economy. We have set out in the carbon plan the likely implications for the electricity sector.
Lord Oxburgh
My Lords, I thank all those who have taken the time to give us a very interesting and rewarding debate this afternoon. I cannot possibly reply to all the comments that have been made and will refrain from discussing climate change, even though I would like to do so with certain noble Lords—perhaps we will do that in private.
Quite a number of noble Lords have made Second Reading points this afternoon rather than points which relate to this particular amendment. Be that as it may, it is worth commenting on shale gas, which has come up several times. It is worth pointing out that shale gas is about the most expensive gas to exploit that we know about on the face of the earth. You have to use a whole range of technologies which are mostly at the top of, or almost beyond, the range of conventional gas exploitation. The noble Lord, Lord Lawson, is absolutely right when he says—or implies—that gas is the least transportable of the fossil fuels. If you get your shale gas from abroad, you pay a premium of something close to $2 or $3. The real advantage of shale gas is to those who have it themselves and can put it straight into their national grid. If, in due course, we can do that, that will certainly be a help to the national economy. However, I do not see anything in this Bill that actually inhibits the future use of shale gas.
Lord Howell of Guildford
The noble Lord is an enormous expert on this but is he talking about just shale gas itself or about hydraulic fracturing and horizontal drilling technologies? The latter, of course, release all sorts of other resources as well, including oil, tight oil and other forms of offshore gas, which are going to be, by all current assessments and estimates, in very plentiful supply. The whole world will want to sell us this gas.
Lord Oxburgh
I was restricting my comments to shale gas, and in the interests of time I will continue to do so. However, there are other possibilities, as the noble Lord, Lord Howell, suggested.
The consensus view in the industry is that the price of shale gas in America, where there was effectively a bounce downwards associated with transient overproduction, will come back up to something like $7 from the $8 that it was previously. That will reflect the costs of extraction, with a modest premium for those who do it. The broader view is that shale gas will mean that there is more gas to go round. The result of its abundance will probably be that gas prices do not rise nearly as much as they would have done in its absence. However, I do not think that we can look forward to a great price reduction.
A number of noble Lords commented on technology. The first thing to recognise is that in the sorts of technology about which we are talking, the characteristic time between the inspiration of a new technology and its coming into use is about 20 years. That is the timescale in which we have to think of new technologies. There are two technologies that will transform the energy scene in this country and worldwide. The first is cheap and readily applicable carbon capture and storage, which we do not have yet. However, there is a range of possibilities in that area. I suspect that this is what the noble Lord, Lord Dixon-Smith, was referring to in his comments. Cheap carbon capture and storage, applied to gas, would be a transformative change. The other transformative change would be the ability to store energy. That would transform the role of our intermittent renewables, which at the moment have to be managed effectively on the grid.
To pick up a comment made by the noble Lord, Lord Jenkin, the price of energy and its security of supply are fundamental to the community and to the country as a whole. Politically, they are very important. Fundamentally, what the Government’s approach offers is somewhat higher prices than we would have preferred in the short term, but probably much more stable prices—and lower global prices—in the medium and longer term. It is a matter of whether we want jam today or jam tomorrow. The Government have sensibly decided that jam tomorrow is what a responsible Government should work for.
In conclusion, the main argument against our amendment has been Cornford’s principle of unripe time. If we defer this for another two years, we will be having exactly the same argument, with exactly the same reasons for procrastination presented. There is ample scope within the Bill—and, as I pointed out, within the Climate Change Act—for the Government to change. I will draw noble Lords’ attention to Clause 2(1) and (2) of the Bill, which state:
“The following matters must be taken into account by the Secretary of State in setting or amending a decarbonisation target range … scientific knowledge about climate change … technology relevant to the generation and storage of electricity”,
and so on. In other words, the powers to change this are there. For example, if, between 2014 and 2017, new technologies miraculously shot onto the scene—and I believe, for the reasons I have given, that that is very unlikely—it would be possible for the Government to change their position.
In conclusion, I come back to the noble Lord, Lord Jenkin, and one or two others who effectively implied that this amendment was otiose because investors do not care. However, I have learnt, not through a miracle of technology but through a note handed to me during this debate, that the chairman of a £5.5 billion investment fund has said, “I think that this amendment is very important to us”. I beg leave to withdraw the amendment.
Lord Deben
My Lords, perhaps I might counsel the Minister to be very careful about accepting these amendments. They seem to confuse a range of different things. They also demand a degree of reporting that might get in the way of the action that I hope will be carried through. The reporting system we have at the moment was designed by Parliament. It stipulates that there should be reports from outside the ministry on the ministry’s and the Government’s performance. If there are areas where it is not done properly, I, as chairman of the climate change committee, would want to know that, in order to see whether we should produce reports in areas that we do not cover at the moment.
I am very concerned about the current desire to report so often as we go along that we do not actually do things. I see this throughout government. We have to be extremely careful. There are two kinds of issue here. The idea that we should have reporting more often than once a year, and that we should have real-time reporting, are issues of such concern that it would perhaps be better if we did not proceed down that route during consideration of the Bill, where there are many decisions to be made on specifics.
I am also unhappy about the proposed constant series of carbon intensity targets. That would be a totally different way of looking at the matter from the suggestion that we needed an interim target to give some kind of parameter and scale to what we are looking at. If we are going to start tying people down to very much closer targets, it will raise issues that go much further than the Bill, towards the way in which government and industry interrelate. I hope that on this occasion the Minister will feel that this is something that should be thought about more carefully before we take on board what is proposed.
Lord Oxburgh
My Lords, I will not take up much time. The noble Lord, Lord Deben, may be right that this level of reporting may be a little excessive at this stage. However, it is important that the Government should recognise, if they take seriously the 2050 decarbonisation target, that it is almost certainly unachievable without CCS. That is a crucial technology if the target is to be achieved.
Baroness Verma
My Lords, on Amendment 12, Clause 1(8) gives the Government the power to repeal the reporting requirements in Section 5 of the Energy Act 2010 only if and when the power to set a target range is exercised. If the power is exercised, Section 5 in its entirety could be repealed. Section 5(1)(b) of the 2010 Act requires the Secretary of State to report on the development and use of carbon capture and storage technology. If it was decided to repeal Section 5, we would expect any progress on carbon capture and storage to be included in the annual statement on the decarbonisation of the electricity sector as a whole. This would occur under the requirements of Clause 3.
The power to repeal Section 5 of the 2010 Act has intentionally been framed as a power. It reflects the need to leave open any decision in this respect, as we will be better placed to take the view at the time of making a decarbonisation order because of the greater level of information that will be available. For example, we could expect good progress to be made between now and the making the first decarbonisation order, which will further develop our understanding of carbon capture and storage, and of its future prospects for deployment. If in due course there are reasons to believe that retaining the duty in Section 5(1)(b) of the 2010 Act is appropriate, of course those reasons will be borne in mind when we consider whether to exercise the power to repeal Section 5.
Amendment 25 proposes that the reporting of grid carbon intensity should commence following enactment. The Government’s view is that it is logical for the annual reporting of grid carbon intensity to be triggered by the setting of a decarbonisation target range. Until such point as this is set in a decarbonisation order, the three-yearly reporting requirement under Section 5 of the Energy Act 2010 will remain, meaning that the Government will continue to report on grid intensity, even ahead of a decarbonisation target range being set.
The noble Lord touched on consumers getting real-time information on energy usage. He will, of course, be aware that the Government are working on the smart meter mass rollout, which will be completed by 2020. Consumers will have an opportunity to have real-time information on their energy consumption, helping them to control energy use, save money and reduce emissions.
Lord Oxburgh
I want to rectify an omission from my previous intervention. I should have declared a non-financial interest, as president of the Carbon Capture and Storage Association.
Lord Grantchester
My Lords, it has been interesting to hear the comments around the Committee this afternoon. I am interested in the words of the noble Lords, Lord Deben and Lord Oxburgh, on the subject. CCS is a very young technology and reporting does not necessarily mean that it will stop things happening. If we do not start monitoring this new activity, how will it inform and clarify actions? I am slightly hesitant to accept some of the Committee’s comments, but, nevertheless, the Minister gave a rather technical response to some of the issues. In large measure, she gave an explanation about supporting how reporting may change. I shall study her words in greater detail, reflect on the Committee’s comments and in the mean time, I beg leave to withdraw this amendment.
Lord Teverson
My Lords, I put my name to the amendment of my noble friend Lady Maddock. In three areas of the draft Bill there were major omissions—omissions as opposed to emissions. One such area, which we will probably come to on day 7, 8 or 9, is demand-side management. We have started to discuss decarbonisation. The Government have started to rectify both those omissions. The third area is fuel poverty. I will not go through the arguments again. As the noble Baroness, Lady Liddell, said, 4.5 million people are affected. The figure is slightly lower than the previous year for which statistics are available, but it is still atrocious for a civilised society that expects a certain standard of living and of life for its citizens.
The other area, which is slightly more contentious, is the excess number of winter deaths. The figure for the winter before last is estimated at 24,000. That is an even greater indicator of a failure of policy, and a failure to look after the citizens of this country. As the noble Lord, Lord O’Neill, said, the Green Deal is absolutely the right instrument, but it is taking time. I can see that the noble Lord is looking sceptically at me. However, the Green Deal will not rely on national budgets if we can make it work. It will be primarily privately financed and self-funding, so at the end of the day political decisions will be taken out of it. However, it still has to prove itself.
One area of the Bill that has to be strengthened—I am aware that this is a probing amendment—is the fuel poverty agenda. It is mentioned in this one line. This amendment would strengthen it. But the Government have to take this back, not just to the Department of Energy and Climate Change but to other departments, and really try to balance this change in legislation within a context of rising energy prices. I believe that it will bring down those rising energy prices in the future, but they are certainly going to be there in the short term. As has been said, rightly, they discriminate against those who are stuck with a completely electric household in terms of heating.
I look forward to hearing from my noble friend the Minister how the Government want to approach this as the Bill proceeds through the House. I hope that we can find a way in which this can be taken into account when this Bill goes on to the statute book.
Lord Oxburgh
My Lords, I, too, am extremely sympathetic to the objective of this amendment. But perhaps I am alone in not really seeing why fuel poverty is different from other kinds of poverty. For example, why do the Government not put one point on the rate of VAT on fuel and simply direct the proceeds towards dealing with fuel poverty as part of the general poverty issue?
The difficulty here is that we already have a complex Bill and a complex situation, and we are making it even more complicated if we try to solve a real and very important social problem at the same time. Unless there is something that I have not seen about this, I would much prefer to see this dealt with directly.
Lord Whitty
My Lords, we on these Benches strongly advise the Government to accept something like this wording in this part of the Bill and to reflect on what has been said. Some greater reference to fuel poverty needs to appear at some point in the Bill, probably in Part 6, which deals with tariffs. I certainly will be coming back to it in that respect.
If memory serves, the noble Baroness, Lady Maddock, was one of the progenitors of the warm homes Bill. She says that Ministers should consider this amendment, which they absolutely should, and my noble friend Lady Liddell says if they find something is going wrong, they should do something about it. Again, if memory serves, my noble friend Lady Liddell and I were the two Ministers who signed off on the original fuel poverty strategy in 1999, and we did very well on it for about six years.
However, since about 2005, fuel poverty has been increasing by almost any measure. That was not due simply to the fact that I had left the Government and my noble friend Lady Liddell had disappeared to the Antipodes temporarily but that real fuel prices were going up and the effectiveness of interventions on the energy efficiency side were diminishing. As the noble Baroness, Lady Maddock, said, not only is the ending of Warm Front, CERT and CESP affecting the total resources available on fuel poverty but at the moment the ECO, which was supposed to replace them, is not being spent efficiently. It may improve, but the unit price of interventions is going up, supply companies are seriously concerned about the cost of meeting their ECO requirements, companies in the installation business are running out of work, installers and insulators are being laid off, and for many others who are currently working on the back end of the previous programmes, that work is going to run out within a matter of months or weeks.
We have a very difficult situation, which the Government need to address. I agree with the noble Lord, Lord Oxburgh, that it cannot be addressed directly in this Bill but at least when we are talking about the multiple objectives of energy policy, one of them must be the social objective of reducing fuel poverty. I hope, therefore, that the Government can accept something like the wording proposed here and we could perhaps look at the back end of this Bill to try to do something very substantial about fuel poverty. It is an appalling record for both the previous Government and this Government that we have failed to address this problem, which affects the most vulnerable of our citizens. I hope to get a positive response from the Minister.
Lord Grantchester
My Lords, Amendments 18, 19 and 20 all deal with the way in which the Secretary of State will come to a decision on the target level to set, and the level of scrutiny given to this process.
We agree that a greater degree of transparency and independent underpinning is needed in this process. We have already debated amendments in the name of the noble Lord, Lord Oxburgh, and my noble friend Lady Worthington that would ensure this decision is guided by the highest level of independent expert advice—that of the Committee on Climate Change. These amendments would also ensure that should the Secretary of State not follow the scientific advice, the reasons for this decision would be publicly available for scrutiny.
However, Amendment 20 seems to suggest that another independent study should be made. The noble Viscount, Lord Ridley, did not make it clear who would undertake this independent study and what would be the situation were it to come to a conclusion that was different from that of the Committee on Climate Change. But, of course, the Committee on Climate Change already produces the data and it is undoubtedly independent. One only has to look at its continued calls, in the face of government opposition, for a resetting of the decarbonisation target now to secure investment. We are certainly interested in what the noble Viscount believes would be lacking from the advice of the Committee on Climate Change that could feasibly be provided in an alternative independent study, albeit he may claim such a study would be more rigorously scientific and independent in nature.
I humbly suggest that Amendments 18 and 19 are unnecessary and misguided. The Climate Change Act enacted by the previous Labour Government was the first legislation of its kind anywhere in the world. It provides concrete, legally binding evidence to the market and the rest of the world about the UK’s commitment to achieving its climate change mitigation targets. Earlier, the noble Lord, Lord Deben, spoke powerfully about climate change and said that the global network on climate change has shown that 33 countries have already passed climate change legislation, and that this number is growing. The United Kingdom is the world leader in climate change legislation and we must send the strongest possible signal to the market that we wish to continue to lead in low-carbon power by legislating for a decarb target that would bind the Secretary of State and provide certainty for investors as soon as possible.
The extent to which other countries are implementing their carbon reduction strategies is, of course, a concern in global emissions terms, but it should not be a block on the UK taking action. It was said earlier that China is not interested in climate change strategies. However, we contend that it certainly is and is investing huge resources in developing and commercialising low-carbon technologies, as is America. We only have to look at President Obama’s words last week, when he stated that,
“we have to look after our future; and we have to grow the economy and create jobs. We can do all of that as long as we don’t fear the future; instead we seize it”.
On Amendment 21 in the name of the noble Lord, Lord Flight, our understanding is that there is an issue regarding the potential overpayment of support for producers through the RHI, and therefore of funds not flowing through to the transport market. Producers claim that there is an imbalance with an excess going into the natural gas grid. Clearly, it is regrettable that renewables and low-carbon producers should feel at odds with each other in this situation. Therefore, we will be very interested to hear the Minister’s response as to whether any more could be done through the RTFO to support and incentivise the use of biomethane as a transport fuel.
Lord Oxburgh
My Lords, I had not intended to contribute to this debate but several remarks have been made which ought not to go unchallenged. I subscribe to a number of the points made by the noble Viscount, Lord Ridley, but seriously question his methodology. However, that is something we can pursue more effectively outside this Room. It is extremely difficult to talk about the cost in carbon or cash of any single element of a multicomponent system without defining the system as a whole and then looking at its performance with or without the element with which one is concerned.