Lord Oxburgh
Main Page: Lord Oxburgh (Crossbench - Life peer)
Lord Oxburgh
“Long-term energy policyEnergy Investment Advisory Board
(1) There shall be body corporate known as the Energy Investment Advisory Board.
(2) The role of the Board shall be—
(a) to take a panoramic and long-term view of the country’s energy needs and opportunities;(b) to provide Parliament and Ministers in the department responsible for energy with advice in implementing Government policy objectives for energy, that advice based on the continuity and experience of its members.(3) The remit of the Board would include all energy matters including generation, distribution, energy storage, inter-connectors, and new energy sources and include implementation of the reformed energy market and early recognition of unforeseen problems.
(4) The Board should report annually to Parliament and the minutes of its meeting should be published.
(5) The Board should comprise four or five expert members appointed for their experience in or knowledge of the energy industries with the relevant Permanent Secretary in attendance; they should serve for staggered terms of five or seven years; and the Secretary of State and Minister of State for Energy may attend meetings of the Board at their discretion.”
Lord Oxburgh
My Lords, I think we can all agree that our energy system is a vital part of our infrastructure. It is a part that is technically and commercially complex, and it is long-term. It is slow to build but, when we have built it, it tends to last for 40, 50 or even 60 years.
Clearly it is for the Government to set objectives for energy infrastructure, but implementation strategy depends on expertise, experience and continuity at a high level within the department. Unfortunately, that is not something that is readily available at present. It is partly because there has been relatively quick changeover of Ministers in the past decade or so. Also, at a high level, among officials in the Civil Service, we have very capable people who move from department to department but are not specialists. This means that others in the department, who are working hard, lack a coherence of view that could come from an expert and experienced top-level group.
The complexity of an energy system is perhaps hard to explain to those who may not be fully familiar with it. However, in my judgment, it is probably more complicated than, for example, designing an aircraft engine. Who would like to fly in an aircraft whose engines had been designed by intelligent people working on the basis of consultants’ reports and public consultations but who had never done it before? This is, in essence, what we are doing with energy policy in general and, I might comment, with this Bill in particular.
I have suggested a solution to this problem. I will not elaborate on the problem, which I did at Second Reading. The solution I put forward may or may not be the right one, but I propose that we have an energy investment advisory board which, above all, brings continuity at a high level to departmental strategy. It would comprise people of commercial and technical experience and, most importantly, it would report to Parliament. This could be a very valuable resource for Ministers. It is the kind of body that could see problems coming ahead of time in a way that typically does not happen today. It could see implications across the system for a decision here and a consequence there. It could look at generation, transmission, interconnectors and energy storage right across the spectrum, not to mention the markets and market interactions. Reporting to Parliament would be extremely important because it would give Parliament confidence that this piece of infrastructure was being properly looked after.
Those who feel unable to support this proposal have three choices. One is to say that there is no problem. In that case, I refer them to Power Politics, the slim volume published in 2011 by the noble Lord, Lord Tombs. In it, he describes decades of struggling with bureaucracy over industrial strategies and the energy industry, and he is trenchant, indeed mordant, in his criticism of the present system. If people do not like that, they might look at the London School of Economics Growth Commission’s report on infrastructure, which comes to very similar conclusions. Alternatively, they might look no further than the pre-legislative scrutiny group of this House, which I had the honour to chair informally and which was extremely critical of the current situation. It is, therefore, hard to make a case for saying there is no problem.
A second option is to say, “Yes, there is a problem but we’re going to deal with it differently”. That would be great, as long as it is actually dealt with. However, it cannot be dealt with in the way that the Minister suggested in her reply to my Second Reading speech, in which she said that in the department there are lots of consultative groups helping the Government with EMR. That is not really what this is about; it is about something much more long-term and strategic.
Finally, it would be possible for the Government to say that they think that this, although perhaps not precisely right, is a possible way forward and that they are prepared to sit down and discuss ways of tackling the problem. Perhaps over the summer or before Report stage, an amendment could be introduced. It would need a degree of cross-party support and, indeed, there is significant expertise in this area—way beyond mine—on the Cross Benches.
This is an important area, and there is now an opportunity to deal with it. I am sure the Government would rather not deal with something such as this at the moment, but in one sense this is both the worst and the best of times, given that we face the problems arising from the lack of a body like this. I beg to move.
Lord Jenkin of Roding
My Lords, the noble Lord, Lord Oxburgh, who moved his amendment with great clarity and force, has discussed this with me, and I was a member of the informal group that he chaired on the draft Energy Bill.
I, too, at Second Reading reflected the increasing anxiety in this country over the security of supply over the next four to five years. Since then, the latest Ofgem capacity assessment report has confirmed the fears that we face several years of very low margins. This has been widely interpreted as posing a distinct risk of interruption to supplies. You need only two major power stations to go out of commission for even a few hours—as happened a few years ago with Sizewell B and Longannet—to create considerable alarm as to whether we have enough. If that happened again in a year or two years’ time, we would be in very serious difficulties.
This is what lies at the heart of the noble Lord’s amendment, to which I was very pleased to add my name: how on earth have we managed to get into such a perilous position? Is it something in the current structure of the electricity industry or in the current attitudes of the departments in charge? As the noble Lord, Lord Oxburgh, suggested, is it to do with the experience and expertise of those whose job it is to advise Ministers? Which of these has led to this difficult situation—or is it all of them?
I will draw a parallel. The noble Lord, Lord Oxburgh, and I were both co-opted on to the Science and Technology Committee to look at the capacity of the nuclear industry in this country for research and development. It is not an overstatement to say that we were dismayed by the very poor level of understanding among DECC Ministers and most of the officials who gave evidence to us. Happily, they appear to have read our report but some of the solutions remain to be worked out. This is not the occasion to go into the details of that but the experience convinced me that something has to change if we are not to face similar failures in the future.
Last month, my attention was caught by an article in the Financial Times by Professor Anthony King, who is, I have to say, a good friend of mine, and for whom I have a great deal of admiration. His sub-headline was:
“British government is no Rolls-Royce. It is barely motorised”.
He went on:
“British government used to be regarded as one of the wonders of the world: intelligent, decisive and sensible, with democratically elected leaders supported by a Rolls-Royce civil service”.
A lot of people think it is still like that, but he said that the only possible response to that attitude is,
“that of John McEnroe addressing a harassed Wimbledon umpire: ‘You cannot be serious’.”.
He then analysed what has happened. The noble Lord, Lord Oxburgh, mentioned some of that. I particularly want to draw attention to what Professor King called,
“the resulting loss of institutional memory”,
which he described as “immense”. It used to be said that the Civil Service is the memory of the Government, in many cases going back not just decades but centuries. I have a horrid feeling that that is no longer so. Perhaps that is why we are where we are.
Turning to the issues before us, tributes have been paid, quite rightly, to my noble friend the Minister and the Bill team for their strenuous efforts to help us to get to grips with this very complex piece of legislation. Without them, we would have been in some difficulty. Thanks to the work of the Delegated Powers and Regulatory Reform Committee, to which my noble friend Lord Roper drew our attention at a previous sitting, we have now been given a glimpse of just how much of a policy that is supposed to be enshrined in the Bill is left to regulations, which are still being drafted or in many cases are still being worked out.
I spent part of the weekend reading the DPRRC memorandum on Part 2 of the Bill. It sets out the position in lurid detail: 60 pages of descriptive material, complex tables of content and timetables, and nine detailed annexes. It filled me with a dreadful sense of foreboding. How can anyone possibly be sure that that will all work or even that it will be ready in time?
My noble friend will no doubt, as she did at Second Reading, give a description—but I hope a fuller one on this occasion—of the plethora of consultants’ reports, advisory groups and expert panels on which the department relies for advice on developing the very complex electricity market reform that is embodied in the Bill. I will certainly listen very carefully to what she has to say but I must warn her that she faces an uphill task in persuading us that Ministers have all the advice that they need and ought to have. I ask again: how is it, after years of taking all this advice from consultants, panels and experts, that over the next two or three years we face the possibility of cuts? To put it crudely, this country is not replacing the generating capacity that is being closed down. I gave a list of the stations that have been closed since only last December when I spoke at Second Reading.
Lord Teverson
I absolutely agree that there are places for advisory boards. There are examples of where that works and I am a member of some advisory boards. However, they tend not to do quite what I believe this body is around to do. I accept much, although not all, of the analysis of the noble Lord, Lord Oxburgh. The issue is that we have to get a much better way of governing at department level. We probably have to reform how the Civil Service works in terms of corporate memory. I have spent much of my life in the private sector and my experience is that its corporate memory is probably far worse than that of government. Perhaps it is not true of some in the oil and energy industries, but certainly in many industries there is not a lot of corporate knowledge. Certainly, there is no more than there is in government departments.
It may have been more of an executive authority but in the rail industry, which perhaps has similar levels or timeframes for investment, the Strategic Rail Authority was brought into existence by the previous Government and abolished because it did not work in relation to departments. Ultimately, departments had to take control. Of course, we have now seen problems with franchising but I do not think that the SRA was the answer to that.
Another area in which I would criticise the detail of this amendment is that the list of areas it looks at avoids energy efficiency and demand management, which are fundamental parts of how we think about the economy. Although I agree that it could be varied in the way it is written, from the description of this committee, I worry that it will again look particularly at building or planning energy in terms of capacity and generating capacity. It is interesting and dispiriting that two weeks ago, when the National Grid asked for tenders for demand reduction and for the demand-side response to looking at the future possible energy crisis, there was generally a very negative reaction from the press and wider than that. That is exactly how we should look at this area. We should not necessarily look at planning for more and more plant, although that would be part of it, but look at the demand side as well.
As regards why we are in the situation we are, I suspect that we will get through it although I entirely accept that the margins are less than we would want them to be. Through the Climate Change Act and the whole area of the climate change challenge, we have changed direction quite substantially in what we expect our generating and our energy industries to do. With not a U-turn but certainly a 45-degree turn on what we expect from our generating industry, it does not necessarily surprise me that, through that policy change in areas where there are long gestation periods in investment and planning, we have this difficulty at the moment. That is not necessarily a function of the way in which government works—necessarily imperfect though it is.
My noble friend Lord Deben mentioned the climate change committee. To me, that is the most important committee in this area by far. It may not be a complete substitute and it clearly is not for the energy side, but the Government really need to take notice of it. On the broader agenda, the climate change committee as set up and put into legislation is a good way of doing it. In terms of infrastructure planning, the case is far from proven.
Lord Oxburgh
Before the noble Lord sits down, I am not clear from what he said whether or not thinks there is a problem. If he thinks there is, precisely what does he propose the Government do about it and on what timescale?
Lord Teverson
No, absolutely. First, this will not solve the problem that we have. There is not time to solve the problem that the noble Lord outlines to this Committee. As he said in his speech, given the timescales involved, we are already too late. What we are trying to do here is to mend the future. I think I said that what I felt should be done was not to add another layer but to fix the way in which the Government and the Civil Service work within departments. To me, that is the challenge, rather than putting a sticking plaster over the top.
Lord Oxburgh
My Lords, I add my thanks to all who have taken part in this debate. I shall reply very briefly indeed.
The noble Lord, Lord Kerr, missed the beginning of the debate, when I made the point that this was simply a cock-shy to stimulate discussion. The precise wording—the precise form that the body would take— was all for discussion. The noble Lord asked what the Permanent Secretary might get from attending meetings of this board. I would say simply: education. The noble Lord, Lord Teverson, was concerned about an added layer. Of course, he speaks as a consultant who has probably added layers in the past. This is not an added layer.
The Minister started with, I think, a total misapprehension. She said that the proposal was for a body to be established within DECC. That is precisely the point. It would not be within DECC. It would be outside DECC. It would be a parallel and complementary body to the climate change committee. It would in fact monitor and report on DECC’s performance, as well as giving advice. I agree that there is an immense amount of advice from a series of committees within the department. On the other hand, they do not have long-term continuity. They do not meet the strategic challenges that I and many noble Lords feel that we face.
The Minister has kindly said that she will take this away and think about it. If in 2015 or 2016 there is an electricity supply problem, it might be sensible for the Government to have said, “We saw that there might be a problem and we have begun to fix the long-term strategy”. I beg leave to withdraw the amendment.
Lord Oxburgh
Gas capacityPower to make gas capacity regulations
(1) The Secretary of State may by regulations make provision for the purpose of providing capacity to meet the demands of consumers for the supply of gas in Great Britain.
(2) Regulations under this section are referred to in this Chapter as “gas capacity regulations”.
(3) In subsection (1) “providing capacity” means facilitating and promoting the provision and use of gas storage infrastructure to secure the availability of gas at prices which are lower and more stable insofar as is reasonably practicable and mitigating the consequences of gas supply interruption.
(4) The provision that may be made in gas capacity regulations includes, but is not limited to, the provision described in this Chapter.”
Lord Oxburgh
My Lords, I hope that we can deal with this amendment a little more expeditiously, and that it will be more attractive to the Government.
I listened very carefully to the responses given by the noble Lord, Lord Gardiner, in our previous Committee session. I think he used the expression “We put consumers first” no fewer than five times on that occasion. That is a sentiment to which we can all subscribe and this is precisely what this amendment attempts to do. Furthermore, it does not necessarily involve any expense, nor does it compel any Minister to do anything. In that sense, it is innocuous. It seeks to give Ministers the power to leverage the annual swings in gas price to consumer advantage; in other words, to facilitate the purchase of gas when prices are low in summer and to release when prices are high in winter.
I will give a little background. This is a new situation for DECC—and the country—because of two factors: first, the growth of the liquefied natural gas market internationally and its increase in importance means that today there is effectively a spot market, as there is in oil; and secondly, our increasing dependence on that spot market. I cannot remember the exact figures; I think it is around 40% that we need to buy of LNG, and that will progressively increase as the availability of North Sea gas declines. So there have been two changes.
As far as we are concerned, these have a good consequence and a bad consequence. The good consequence is that we shall probably never get really short of gas. We have two important gas terminals in the UK and should be able to import what we need. The down side is that we are exposed to the vacillation of global prices. For example, when Fukushima happened there was a massive spoke in global gas prices because people realised that Japan would require a great deal more gas. We would be exposed to other international pressures of that kind, as well as the seasonal variation of the surplus in the summer and the inadequacy of supply in winter.
I do not think that it is worth going into the economic detail of this at all today. However, one or more companies are interested in exploring this from a commercial point of view. I have discussed this with DECC officials, who were extremely helpful. It is clear that DECC, Ofgem and the national grid have been very concerned about supply availability. That has been their main concern, rather than the question of price, which has really come in in a big way recently. The first of two comments from DECC officials was, “We do not think that this will be commercial”. With respect, that is not their decision. If a business thinks that it might be commercial, that is what we should test. The other comment was, “We think we might be able to do this without an amendment anyway, with existing powers”, but I could not get a definitive decision on that.
The important thing is that we know from discussions with at least one company that, if there was something in the Bill which allowed the Secretary of State at his or her discretion to use the capacity mechanism or the contract-for-difference mechanism within the Bill to purchase gas under prescribed circumstances, that would be sufficient for the companies concerned to approach potential investors again with a better proposition, with a view to coming to the Minister to explore what might be arranged. It is not clear that this will be feasible, or that it will make sense to use this mechanism. It is simply a little bit of insurance.
Finally, it is worth pointing out that if the Government do not take this initiative, no one else will. Gas suppliers do not care. They simply pass on any fluctuations in the international gas price to consumers. This is therefore something that the Government could do to smooth and lower prices for consumers. I beg to move.
Baroness Verma
I am extremely grateful to my noble friend for allowing me to write to him and to the Committee, because inspiration is slightly slow in coming forward.
Lord Oxburgh
My Lords, I thank noble Lords who have spoken on this. I am certainly gratified to hear from the Minister how much effort and concern the department has put into the question of gas supply. However, we were more concerned about price security than about supply security. That is the important point to emphasise. The Minister said that she thought that additional powers were not necessary to achieve this, but I am not entirely clear from what she said whether that is the case.
In effect, we are proposing a mechanism by which the private sector can come to the Government and say, “Look, we can guarantee a certain amount of gas at a particular price over a particular period”. That would in fact be achieved by gas storage, but I do not think that the Government need to get involved in it; all that they need to do is make a deal with a company or group of companies to supply gas in particular quantities at particular times. That is why the capacity mechanism or the CFD mechanism would be extremely useful. I am not clear that the Minister has the power to use those mechanisms under the legislation as it is currently drafted, which is why I tabled this amendment.
A practical amendment could be extremely simple—probably much simpler than this one. If the Minister is concerned about the resource needed in DECC to draft an amendment properly, I have no doubt that industry would be willing to make legal help available to work under DECC officials to draft something acceptable. I am not entirely sure that the assurances that she gave me were quite relevant to this case but, that said, I beg leave to withdraw the amendment.
Baroness Worthington
We are now discussing the part of the Bill that concerns the emissions performance standard. By way of background, I thought it would be useful to recount where these provisions arise from. It was in response to the Kingsnorth demonstrations, which were a green group response to the threat of a new unabated coal plant being built by E.ON. At that time, climate change concerns meant that there was a great deal of public opposition to the idea that we would be locking ourselves into many decades of unabated coal if a new plant were to be built.
The then Labour Government responded with a new planning restriction that meant that all new coal plants would have to fit at least 300 megawatts of carbon capture and storage, essentially closing the door on unabated coal. The then Opposition stated that they would move to rule out new unabated coal through the introduction of an emissions performance standard. That was prompted in part by a visit by one of the shadow Ministers to California, which is one of a number of US states that already have emissions performance standards in place. When he became Prime Minister, David Cameron stated that he would legislate—he would put an EPS into an energy Bill—and consultation on that began, in conjunction with the rest of the energy market reform package, in December 2010. Here we are today, talking about the detail of that proposal.
The Government did not get everything right in their first draft proposals. One loophole that was quickly identified was that the plan was to give exemptions to any plant fitting CCS. The fear was that this would mean that large plants could be built with only a small portion of the capacity being fitted with CCS. Representations were made. The Government did listen and have closed the loophole so CCS plants will now be caught by the EPS.
We have tabled a number of amendments concerning the EPS. This amendment addresses the concerns of the Carbon Capture & Storage Association. While accepting that plants with CCS will need to be compliant with the EPS, there is a fear that if the industry were required to meet those standards from day one, that would be unduly burdensome and could deter investors. The association has asked that a period of grace of three years be introduced during the commissioning and testing of the new plant, when there would be a derogation of the EPS. This amendment has been tabled to achieve that. We see that very much as part of a package of measures, in conjunction with the EPS. I will shortly talk to two more amendments that we support strongly, and I know that my noble friend Lord Hanworth is going to speak to his amendments too. There is much more to be said about the EPS, but this is a specific amendment and I beg to move.
Lord Oxburgh
My Lords, I declare an interest as honorary president of the Carbon Capture & Storage Association. This is an extremely important amendment if CCS is to go forward. It has not been easy to attract investment to this area; the investment required is heavy. This amendment simply minimises the risk for those who are introducing a new technology. As noble Lords will be aware, the Government’s decarbonisation plan is probably unachievable without CCS, so it is important that this kind of reassurance is given to the industry. I strongly support the amendment.
Lord Deben
The Committee on Climate Change has made it clear that CCS is an essential part of the matters that we have to address if we are to meet our statutory responsibilities. I doubt if anyone on any side of the House would not agree with that, and I thought it generous of the noble Baroness, Lady Worthington, to say what she said about the past history of CCS.
That has been a pretty universal thing; we have not got it right. It is very difficult to get right, and I would not blame the Government for the difficulties. However, we have to solve those difficulties, and this amendment is a most useful way of making it that much more certain for the industry. If we want to use the resources that may be at our disposal—fracked gas, for example—we have to have CCS to meet our 2050 demands.
In a sense, that is less important to the British picture than to the world picture. The biggest contribution that we could make to the world picture is in the development of CCS because that would break through in a series of countries—the mechanism by which we can have the energy we need as well as protecting ourselves against dangerous climate change.
I hope my noble friend the Minister will understand that for us this is a central area, and if the Government are not able to agree to this perhaps they will come forward with some alternative mechanism to make sure that the ends put forward here will be met. I am sure that she will want to know that this issue has been widely tweeted, because it is seen as so important by so many different people across the field. It is very important that we give a proper response to the noble Baroness’s request.
Lord Deben
My Lords, first, I thank the Minister for his response to the previous debate, which was measured and extremely encouraging. My problem with the issue that the noble Baroness has raised is simply that were the late date to produce a very considerable amount of gas-fired generation set at so late a date, we are seriously suggesting that in six years we are going to meet an 80% reduction in our emissions; that is what we are statutorily required to do. I say to my noble friend that I have not yet seen any evidence that this helps the other. This, after all, is a statement by the Government. It is not a statutory requirement. We have a statutory requirement. I hope that my noble friend takes this opportunity to explain to the Committee how this particular date can possibly sit side by side with all the other commitments of the Government.
That is the issue. It is a very simple, quietly put, but absolute issue. If you look at all the other things that the Government intend to do, and insist that they are doing, they do not, could not and will not stand alongside this date of 2044. That is six years before we have to achieve a statutory requirement.
It is hugely valuable to have the opportunity of raising this question with the Minister. I recognise that he will not agree with the amendment; I know perfectly well that that is not what is on his lists. His problem is that the Government have so far been unable to explain the disconnect between these two. I would not like to follow the noble Baroness in her attempts to describe how this came about. The fact is that it ain’t gonna stand up. The great thing about the Bill is that we are trying to ensure that we have a real future basis for action in order to meet our statutory requirements and the increasing threat of climate change. Therefore, we ought to highlight to the Government that this is not a matter of passing interest—a day or two out, a year or two different. This is a fundamental flaw in the present circumstances. The Minister will regret his position, because the discussions should not be taking place here. This discussion should have happened when it was announced. Many of us remember that no discussion could have taken place because of the way in which the announcement was made.
Any policy which was consistent with a grandfathering situation leading to 2044 could not be consistent with the statutory requirements for the reduction in emissions. Any policy consistent with the statutory requirements for 2050’s reduction of 80% could not be consistent with this statement about gas grandfathering. Because I have a great desire that the coalition Government shall succeed in their claim to be the greenest Government ever—a desire which I have independently and as chairman of the climate change committee because I want any Government to reach that goal—I say to the Minister that we shall have to listen very carefully to what he says. So far no Minister who has attempted to answer this question has been able to make these two things consistent. As long as they are not consistent, Ministers cannot blame industry outside. They have to ask themselves whether there is a consistent policy or whether the policy is in fact right at its centre.
Lord Oxburgh
My Lords, I support this amendment and the points made by the noble Lord, Lord Deben. It would be very interesting if the Minister could tell the Committee what he regards the implications of sticking to 2044 as a date would be, because it has totally excruciating consequences for the generation pattern in other parts of the system if our legal obligations are to be met.
Lord Cameron of Dillington
My Lords, I, too, support this amendment. I will not repeat all the arguments that I and others have already given for the 2030 decarbonisation target. I seem to remember the Government’s response to that was, “Yes, probably a good idea but not yet”. Frankly, their emissions target of 450 grams per kilowatt hour in 2044 is just laughable. Bearing in mind that even if all our electricity is produced at that time by unabated gas, in 2044 our emissions would be around 300 grams per kilowatt hour. I cannot understand why this figure has been put in the Bill. It is absurd to set such a target for 2044.
To save me jumping to my feet on the next amendment we will discuss, I would like to say that I would prefer to see a target of 300 grams in 2029. I prefer to combine the two amendments, which would make a lot more sense. As the noble Baroness, Lady Worthington, has said, we have to keep driving this CCS agenda. As I said in the previous debate, we have to be economically ambitious here, so I very much support this agenda and I look forward to hearing the Minister’s response.