Energy Bill [HL]

Lord Purvis of Tweed Excerpts

Wednesday 22nd July 2015 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, it is always a genuine pleasure to follow the noble Lord, Lord Foulkes, in this Chamber. I have learned to enjoy these opportunities to follow his contributions. He may be thrifty but he is also a crafty politician, able to secure east Ayrshire mining within the subject area of this debate, although I question his pouring a dram of hospitality in darkened rooms as he rambles from one to another, but that is a whole separate image of his thriftiness.

Part of this Bill is forward looking, provides for long-term planning, offers business certainty and encourages a stable investment environment. The other part of the Bill does the reverse. Most colleagues who have spoken in this debate so far have drawn the same broad conclusions that there are some elements that are to be wholly welcomed and other areas where we have cause for very considerable concern. I want to start by thanking the Minister for his courteousness in meeting colleagues to brief us on the Bill but I can only assume that the Government work so fast and efficiently that the announcement that I heard on the “Today” programme this morning was done overnight and he was not in a position to at least alert me to it. However, I respect his sincerity on climate change and it was interesting that he started his contribution on climate change and the ambition that the United Kingdom should have. I will return to that later.

With regard to the first part of the Bill on the Oil and Gas Authority, it is clear that the industry—predominantly based in north-east Scotland but having provided support across the United Kingdom for the past 40 years, explored for oil and gas for the past 50 years, and produced gas since the late 1960s— will be entering a considerable next phase. With decommissioning and the harder exploitation of the resource within the UK continental shelf, we require a different regulatory framework. That was set by the outstanding Wood review, whose conclusions the previous coalition Government accepted in their entirety. This Government are carrying on honouring the commitments provided by the previous one with genuine cross-party support, and that is to be warmly welcomed. When I spoke in the debate on the then Infrastructure Bill, the consensus was there in that legislation and it carries on. I therefore think that the Government will see that there is lots of constructive support for those clauses within the Bill.

I shall highlight some areas before moving on to the renewables sector. Clause 4 indicates the areas that the OGA must have regard to. However, since the predominance of Scotland within the oil and gas industry has been commented on so far in this debate, I wonder whether Clause 4, which says that the OGA must have regard to operating closely with the Government, should now say “all the Governments across the UK”. Of course I recognise that it is a UK authority and it will be under the auspices of this Parliament and this Government, but I think that its working effectively with the Scottish Government as well as with the UK Government would bode well for its efficient delivery of its own duties.

In addition, given that the principle behind the clause is to establish the independent operation of the Oil and Gas Authority, I highlight my observation that there is considerable scope in Clauses 5 and 6 for very wide ministerial direction. While the Bill says that ministerial direction will be given on public interest grounds only in exceptional circumstances, it would be helpful if the Minister could give us, if not today then with further briefing material, some further illustrations of what the public interest grounds may be, and some examples of what those exceptional circumstances might be that would bring the Government to direct the OGA.

Noble Lords have also mentioned the fee levels. Again, I think there should be some clarification of the ministerial powers within this area. Currently in the Bill, Ministers hold the powers to change fivefold the levels of fines that can be imposed by the OGA, except it is not clear whether this can be on an individual fine or whether they can simply increase the power of the OGA to do this. Again, clarification on that would be helpful.

I understand that further amendments are being considered for this element of the OGA. It would be helpful to know when the Minister expects the Government to bring those forward so that we will be able to see them. In the wider sense, the Bill further develops the consensus and the process that was started on the basis of the consensus in the previous Government, and with wide input from the sector. That is why I think these aspects of the Bill are to be welcomed.

I turn to the elements on renewable energy. I say “elements”, as today we are debating only partial government policy; we have not had sight of the criteria that were announced by press release through the BBC this morning. I was hoping that in the Minister’s opening remarks at the Dispatch Box he would outline clearly what would be the timetable for the legislative measures on solar that we heard about through the press release, and whether they would be part of this Bill or whether the Government intend separate legislative measures for that. It would be helpful if he did so in responding to this debate. The noble Lord, Lord Cameron of Dillington, and others made a persuasive case that much clearer information is not only necessary for industry but is of necessity for this Parliament.

Many noble Lords have raised issues relating to planning. I think that I heard the Minister say that communities would have a final say on planning—I think he said it twice. He has been asked to clarify that point. I echo those requests; it would be helpful to know how many schemes he anticipates this would cover. Also, given that he said that communities would have the final say, I was interested to read the Peers’ briefing that was given to Peers on 16 July, which says about planning:

“We want to see local communities having a greater say on the development of onshore wind in their area”.

It markedly does not say “final say”. I was interested to see that in another place Kit Malthouse MP asked the Secretary of State, with regard to whether communities would indeed have the final say:

“Can she reassure those worried communities that that means that they cannot now be overruled by the Planning Inspectorate?”—[Official Report, Commons, 22/6/15; col. 627.].

Ms Rudd responded:“Yes, I can”

That led to him tweeting:

“I asked a question today about planning permission for wind farms and got the perfect answer”,

but a spokesman for the Department for Communities and Local Government said that developers would still be able to appeal to the Planning Inspectorate. Could the Minister confirm whether Ms Rudd or Mr Malthouse was correct? Could he confirm exactly what that situation is?

The Bill seems to suggest that the competence of the grace periods will be determined by regulations. I am unclear what additional provisions the Government might make relating to the closure via regulation, subject to the affirmative procedure, which I understand is in the Bill, especially as DECC officials have been clear in a number of public forums in saying that the grace periods are to be introduced in primary legislation. That confusion is further compounded by the announcement this morning with regard to solar. Not only would it be helpful for the Minister to clarify this; it is absolutely necessary for him to do so.

The Government have said that they were going to consult colleagues in the Scottish Government—we have heard from the noble Lord, Lord Foulkes, and others about the predominance of this relating to Scotland —but they published a policy paper that said:

“We will not be holding a formal consultation on our proposals because they will be subject to full Parliamentary scrutiny”.

How can that be when we do not have the measures in front of us at the beginning of the Bill? How can we properly scrutinise the proposals when we have only partial proposals there? We will not be able to scrutinise views submitted by people to the Government’s process on the grace periods, to allow us to inform our views and scrutiny of the Government. Surely that cannot be the correct way of going about our business, especially in the context that it is the grace periods that are absolutely fundamental to the business opportunities.

I do not think that the Government have a mandate to bring forward the shortening of the support for industry. The Government’s tools for doing so are becoming quite clear: they are using uncertainty and disruption for the investor community to end a practice, and they are seeking not to be clear on bringing that forward in Parliament. These are not trifling sums: £1.3 billion of capital expenditure, with £350 million of sunk costs, is at stake. I had to chuckle slightly this morning when I saw that the press release was concerned about “supporting hard-working businesses with their energy costs”. These are hard-working businesses that have put £350 million of investment into schemes that may not come to fruition.

On top of that, there is now much greater uncertainty for the investor community. Let us remind ourselves what the investor community is: it primarily consists of United Kingdom pension schemes that are looking for long-term ethically secure investment opportunities to support British industry and British energy. That should be exactly the kind of investment environment that we wish to see, not harm.

Yesterday in another place, Amber Rudd, the Secretary of State, responded to this question:

“Scottish Renewables say that this decision, the early closure of the renewables obligation, risks £3 billion of investment and compromises two gigawatts of projects. Is that correct?”,

by saying: “It may be correct”.

She was then asked:

“So you would not anticipate onshore wind being part of the next CfD?”.

She replied: “I would not, no”.

I do not think that Parliament yet has sufficient information to fully scrutinise these aspects of the Bill. As the noble Lord, Lord Oxburgh, and my noble friends Lady Maddock and Lord Teverson have said compellingly, not only are we undermining the cheapest source of renewable energy, the cheapest source of growth in renewable energy and the cheapest way of gaining electricity growth as part of the whole energy mix but we are also undermining the crucial consensus which has been developed over the last few years and which has not set one energy technology against another. An overall consensus has been built. Nor do I believe that the Bill is part of the wider consideration of climate change that the Minister referred to in his opening remarks. This would be a climate change Bill and an Energy Bill true to its name if it included measures for reducing consumption, improving energy efficiency and maintaining zero-carbon homes, as my noble friend indicated. The consensus has been broken and uncertainty has been put into our manufacturing industry, and that cannot be good for the British economy.

--- Later in debate ---

[Lord Bourne of Aberystwyth]

My Lords, first, I thank your Lordships very much indeed for what has been a debate of extremely high quality with some important contributions, to which I shall try to do justice, on subjects ranging from the Oil and Gas Authority and wind to the old chestnut of the East Ayrshire coalfield. I am very grateful for the advance notice of that question, otherwise I might not have been able to deal with it; I will certainly try to as I address the points raised within the suggested time.

Let me begin by dealing with two general points. The first was raised by the noble Lord, Lord Purvis, at our meeting yesterday, when I also met the noble Baroness, Lady Worthington. I was of course aware of the likelihood, although not of the certainty, of announcements today at that stage, but I could not share anything because of market sensitivity. The only conversations that Ministers are allowed to have are with devolved Administrations—which brings me on to the second issue. We have very good avenues of communication, and such things continue to be shared, as they were yesterday, with Scotland, Wales and Northern Ireland. That does not mean that we agree, but we of course continue to do what previous Governments have done.

I will try to deal with the issues in the way that they were set out—the Oil and Gas Authority, wind and then miscellaneous. I am not in any way denigrating the importance of the miscellaneous questions, but they are not directly represented in the Bill. I will try to do justice to the contributions that have been made. I start with a general point about what will be forthcoming as we go through the Bill. We are certainly hoping for an impact assessment by Committee stage. We very much trust that that will happen, as we trust that there will be a settled position on the grace period, an issue raised by many noble Lords and by the noble Baroness, Lady Maddock, in a briefing meeting. As soon as I am in a position to give information on that, I will ensure that it is circulated to all noble Lords because I am cognisant of the fact that they will need to be aware of it in the Recess.

Turning to the Oil and Gas Authority, the noble Lord, Lord Grantchester, raised the question of how the environmental importance issue will be dealt with. DECC will continue to be responsible for that in relation to the Oil and Gas Authority, but it will of course work alongside it. The decommissioning strategy will be delivered; indeed, it is the prime issue that will be dealt with by amendments that we will introduce. That is not yet in the Bill and we hope to come back in Committee with more detail on that.

Many noble Lords raised the issue of carbon storage—I have it under the heading of oil and gas, but also under miscellaneous—including the noble Baroness, Lady Worthington. I thank her for her kind comments and I understand her passion and share many, if not all, of her climate change goals, so I am sure we will have a good working relationship. The noble Lords, Lord Grantchester, Lord Oxburgh, Lord Whitty, and Lord O'Neill, the noble Baroness Lady Worthington, and others raised the issue of carbon storage, which it is important we look at. It would be a responsibility of the Oil and Gas Authority, although not its core responsibility. I hope we will be able to look at that as the Bill proceeds through Committee and beyond.

On Norway and Scandinavia, again, I agree that a lot of this draft legislation is based on the experience of Scandinavia, which is a good example for us. I am sure that we will continue to learn lessons from there and exchange good practice.

Moving on to a general point about the Oil and Gas Authority and the tribute to Sir Ian Wood paid by noble Baronesses, Lady Worthington and Lady Liddell, the noble Lords, Lord O’Neill and Lord Purvis, and others, I quite agree. We have not really done anything other than present the report as it is. We believe that it is a good report and we are giving it legislative strength. The timing—2014—might not have been of our choosing, I agree, but we are where we are and we have to make sure that the authority is smart, nimble and able to take on new challenges as they develop.

I am happy to look at and engage with the example of transferable skills and research given by the noble Baroness, Lady Liddell. It was a helpful suggestion, so we will be in touch and make sure that noble Lords are aware of what we are doing in that regard.

The noble Lord, Lord Oxburgh, asked about the number of staff who would be transferred. The current figure is 103, which is an increase from the figure I was given earlier this morning, so we are obviously recruiting at a rate of knots. The majority will come from the Department of Energy and Climate Change, but expertise is retained in the department and of course we are continuing to recruit. There was a suggestion that the industry was trying to do this on a small budget, but that is not the case. We will obviously continue to recruit.

My noble friend Lady Byford raised some specific issues about the stable and predictable regulation regime set out in Clause 4 and asked for more information about that. I am happy to write her and copy noble Lords in on the detail that we have.

The noble Viscount, Lord Hanworth, talked about the regulatory role of the Oil and Gas Authority. Yes, it is of course the regulator and is subject to controls, but the oversight will be with the Secretary of State, who will be the sole shareholder of the company. No doubt we can look at that as the Bill goes through Committee. Those are the prime points on the Oil and Gas Authority. It seemed to receive a general welcome, and no doubt we can look at the detail as we proceed.

Obviously, we will not all agree about wind. There are differences even within party groups. I notice that some are more enthusiastic than others about onshore wind. Clearly, the fundamental point is that industry should not have been taken by surprise by the attitude of the Conservative Party to wind. One thing we cannot be accused of is ambiguity: the manifesto made our stance very clear.

A general point was made about the affordability of bills. My noble friends Lord Howell and Lord Ridley rightly said that affordability is an issue. Looking at the figures, the action we have taken has trimmed bills by £7 annually, which is not something that we should dismiss. But there is a concern and we should not categorise it as tawdry. We may disagree with it, but there are people who feel that there are sufficient land-based wind farms and they affect the quality of their lives, so let us put that in perspective. We have just had an election in which that was an issue.

To return to planning, developers can obviously still appeal against a decision from the local authority as they can in relation to shale. The point was made that somehow, the planning regime is fundamentally different in relation to shale. It is not. As we know from the decision recently taken in Lancashire, a decision is taken at local level and then there is the potential for appeal. In a similar way—although not identical because they are different planning regimes—there is a local element and then an appeal in both cases.

Reference was made to the certainty that is needed for British industry and investors regarding the supply chain. I agree. We need a sustainable approach to decarbonisation to 2020 and beyond. There was a Written Ministerial Statement this morning outlining these changes, which I hope that the noble Lord, Lord Purvis, has. There was a press release, too, as is customary practice, but this was not announced only by press release. It makes it clear that there is a levy-controlled framework beyond 2020. I reassure noble Lords that in the autumn, we will say what we will be doing about contracts for difference.

My noble friend Lord Ridley questioned the need for Clause 60(3). It is simply there to ensure that generators who do a credit before the closure date will not be affected. A general concern was expressed about the grace period. There is an ongoing dialogue on that issue, which is why it was not dealt with in the Bill and we will return to it in Committee. That dialogue will finish at the end of July. We will then study the representations made to us and come back with something. I will make sure that noble Lords have sight of any decision as soon as it is made. That is why the measure has not been included in the Bill. I know that noble Lords will want us to look at these considerations with some care.

The number of projects affected is in the region of 250. It is not a precise figure—we cannot be absolutely certain which projects will proceed, so to that extent it is a best guesstimate. Again, that will be covered in the impact assessment. The noble Lord, Lord Cameron, also talked about the grace period and the need for dialogue, which I quite agree with. The noble Lord, Lord Judd, stressed the importance of areas of outstanding natural beauty, and I agree. Some people may well say that some wind farms are already in such areas, but I thank the noble Lord for his thoughtful speech. He asked how the costs were determined. I think they are published, as we will be able to see as we go through the Bill, but they are determined by the Office for Budget Responsibility.

[Lord Purvis of Tweed]

I hope that the Minister will forgive me for bringing him back to the issue of planning. Just after he received clarification from the Box, I took the opportunity of looking again at page 57 of the Conservative Party manifesto, which says that it would,

“change the law so that local people have the final say on windfarm applications”.

The Minister confirmed at the Dispatch Box a few moments ago that that was not the case. The current practice of developers being able to appeal to the planning inspectorate will carry on, so that is not being implemented. Is that true?

[Lord Bourne of Aberystwyth]

Noble Lords will understand that I am approaching this constructively. I am not going for the party knockabout, so let us leave that for another occasion. I am trying to be constructive and explain how we can take this forward.

The noble Lord quite rightly raised a point on public interest and national security grounds; perhaps I may get back to him on that with examples. The two go together. The national security point will be fairly evident, the public interest one perhaps less so. Thinking on my feet, it could involve something like piracy, but that word has connotations of the old type of pirate. However, it could mean someone taking over one of these installations, which, while it might not represent a threat to national security, may demand urgent action in the public interest by the Secretary of State. It could be something like that, and I will certainly write to the noble Lord with more precise information.

As I understand it, coming back to the announcements on solar made this morning, we do not need primary legislation for any action that is taken consequent on that consultation, and therefore I do not think that we will need to amend this legislation. If I am wrong about that, I will write to noble Lords, but I think it can be achieved through secondary legislation.

I shall move on to the miscellaneous points, although that is not to say in any way that the issues are not important. A regular theme of the debate was energy efficiency. It was raised by the noble Baroness, Lady Maddock, and the noble Lords, Lord Oxburgh, Lord Teverson, Lord Judd and Lord Foulkes, among others. It is a vital issue and a lot is already happening that does not demand legislation from us now. I refer to the smart meter programme, the delivery of which in 2020 will make a massive difference. Since April 2010, we have delivered the installation of more than 1.5 million measures such as boilers, insulation and so on which have made a material difference. That links to another area of responsibility, namely fuel poverty. We are currently looking at how to ensure that our fuel poverty measures are more closely allied to improvements in energy efficiency than perhaps they have been in the past. That is something we are looking at and it is certainly important.

On nuclear, a matter raised by my noble friend Lord Howell and touched on by the noble Lord, Lord O’Neill, and others, we are expecting the contract to be concluded at the end of the year. I think my right honourable friend the Secretary of State mentioned this yesterday to the Select Committee in the House of Commons. We are certainly looking at small nuclear, as I think I have indicated previously; it is important. Progress is being made on Wylfa and I discussed it again yesterday with the devolved Administration in Wales. Those matters are progressing. I think I have dealt with carbon storage.