Great British Energy Bill

Lord Swire Excerpts

Committee stage
Monday 13th January 2025 Lords Chamber

[Lord Lilley (Con)]

My Lords, I rise to move my Amendment 85I and to speak to Amendment 131 in my name and that of my noble friend Lord Reay. Nature abhors a vacuum and Parliament abhors a blank piece of paper, which is what the Bill, in effect, creates in the way of the GBE company. It is a company that has no clear purpose, limits or functions, so it is our duty to write in some clear purpose and constraints, and that is what my amendments, like many tabled by other noble Lords, try to do.

Amendment 85I requires the Secretary of State to review

“the use of long duration energy storage by Great British Energy and its projected costs”.

Amendment 131 says the Act may come into force only when the Secretary of State has published the review.

The Science and Technology Committee of your Lordships’ House produced a report entitled Long-Duration Energy Storage: Get On With It, which we debated last Thursday. This recognised—indeed, took it as axiomatic—that, if we replace fossil fuels entirely with intermittent wind and solar, we will need storage to meet periods when demand exceeds supply. It will be absolutely essential to have that storage. It is not just short-term storage to cover daily peaks in demand, nor even for the medium-term periods the Germans call Dunkelflaute, when it is cold, windless and sunless, which it invariably is at night; there can also be whole years when supply is below average. So some storage needs to be of long duration.

As well as establishing that there will be a need for such long-duration electricity storage, the report evaluated different technologies providing that storage. It concluded that the best approach would be that, when wind and sun are generating more electricity than we need, instead of turning off the windmills, we should use the excess electricity to electrolyse water to create hydrogen that could then be stored in large salt caverns—largely under Chester, I gather—to be used when needed. The committee acknowledged that, by the time the electricity has been converted into hydrogen and then burned to generate electricity again, about 60% of the energy has been wasted—but that is better than wasting all the excess electricity that would be produced by wind.

Unfortunately, the report of the Select Committee provided only the widest possible range of estimates of the likely need for storage. It is literally almost a priceless report, in the sense that it reaches no conclusions of its own as to the likely price of storage, let alone the amount by which it will increase the price of electricity. So Great British Energy will not be able to rely on the Select Committee’s report and will need to carry out its own review, as specified in these amendments, into the amount of storage needed and its cost.

The Select Committee report does however cite a report by the Royal Society that indicates that the potential scale of costs is huge—the capital costs in particular. It says that the capital expenditure required for wind and solar to meet the increased demand when transport and heating have been electrified will be some £210 billion. On top of that, there will be additional capex for long-duration storage of some £100 billion, and investment to strengthen and extend the grid to reach the storage of an additional £100 billion. So, the cost of storage plus grid strengthening will effectively double the capital costs of a fully renewable generating system based on wind and solar. It is, incidentally, hard to see how that can reduce our electricity costs, as the Government originally proposed and claimed ahead of the election was the purpose of GBE. So I am not surprised that the Minister rejected the amendment from my noble friend Lord Offord requiring Great British Energy to set out how it would contribute to the objective of reducing costs.

Clearly, investments on the scale that the Royal Society envisages should not be undertaken lightly. It is highly unlikely that GBE, capitalised at £8.3 billion, will be remotely capable of crowding in private sector capital of £100 billion just for long-duration energy storage alone.

Indeed, witnesses to the report and noble Lords in the debate cast doubt on whether a credible way could be devised to remunerate private sector investors to make it worth their while to provide the storage capacity. The suggested scheme involves setting a floor and cap for the revenues generated by providers of stored hydrogen when they sell and buy electricity during periods when it is needed. Unfortunately, owners of storage will want to maximise their revenues by arbitrage trading as frequently as possible when electricity prices rise and fall. This may mean that they have insufficient gas when a period of shortage of renewable energy continues for a long time, which is precisely what this long-duration energy storage is intended for.

Those in the debate and, indeed, on the committee who pointed out that this problem exists tended to conclude that the logical option was that long-duration electricity storage would have to be provided and owned by the state. I am not an enthusiast for nationalisation but nor am I a doctrinaire opponent if it is indeed the least bad option, as may well be the case. If it is the case, can GBE be the vehicle that would help create such a state holding company? It scarcely seems credible given its capital base of £8.3 billion and potential investment required of £100 billion. Yet, without long-duration energy storage, it will be impossible to replace fossil fuels by renewables. So, the Government must somehow tell us how, through GBE or otherwise, they are going to finance this long-duration energy storage.

The Royal Society report on which the Select Committee relied made some heroic and barely credible assumptions. The costs and deficiencies of electrolysers and gas turbines needed to convert hydrogen back into electricity would fall dramatically, in some instances by up to 90%, over the period between now and 2050. The report that this amendment would require would also surely have to consider whether it might be more cost effective to defer investment in these technologies until those reductions in costs and efficiency improvements had materialised.

That would mean relying on gas, purely as a backup, for a few extra years, but the extra emissions would be small and negligible in the grand scheme of things. The Secretary of State for Energy Security and Net Zero has already reinterpreted decarbonising electricity production by 2030 to mean that, rather than reducing emissions by 100%, it will involve reducing emissions by only 95%. There is a precedent for anticipating a degree of flexibility. I hope, therefore, that any report that this amendment requires GBE to produce will consider that option.

We should remember that when Dieter Helm analysed the Government’s energy policy, he concluded that we have wasted up to £100 billion of taxpayers’ money so far by investing prematurely in immature technologies rather than waiting until they became sufficiently efficient for us to get advantage from that greater efficiency. These amendments would enable us to know the answers to some of those questions before GBE goes ahead and spends any taxpayers’ money.

[Lord Swire (Con)]

My Lords, I rise briefly to support the noble Lord, Lord Lilley, who makes some extremely good points in trying to put more meat on the bone of the Government’s proposals. It seems to me in a macro way that the Government’s energy policy is all over the place, not least their new desire to attract Chinese investment—have we not been there before? It is causing great concern, not least now to the Security Service.

That apart, whatever the Government decide to do, they will have to dramatically increase storage, as we have heard today. However, there is precious little in this Bill to tell us how that storage will be dealt with, where it will be located, or how that will be handled by planning. We have just heard that some of the storage will be below ground in Cheshire. Other storage will, of course, be above ground.