Lord Teverson
Main Page: Lord Teverson (Liberal Democrat - Life peer)
Lord Deben
My Lords, I apologise to the Committee for missing the first couple of sentences of the introducer’s speech. I rise only to say that if the Minister were to suggest that there might be some contradiction between the work of the Committee on Climate Change—I declare my interest as its chair—and the work of this group, I would disagree. What is suggested here is an important part of the programme. One of the difficulties is that the Committee on Climate Change is asked to think forward to 2050, to ensure that Britain is able to reduce its emissions by 80%, and yet the necessary mechanisms for delivering that target often operate on a much shorter timescale. Indeed, the two most important proposals that are, or are likely to be, before this Committee, are both about that long-term timescale.
It is quite impossible to imagine a sensible parameter within which people can invest in the necessary improvements in our energy supply that does not go beyond 2020, which is why we propose a carbon intensity target for 2030. It is not possible, either, to continue with a situation in which we spend so little time thinking far enough ahead. My noble friend the Minister will not have had encouragement in this area, particularly from those concerned to ensure that there are no restrictions on what the Treasury may decide. The real problem is that that means the Treasury does not have a say in the long term, because in the long term these decisions are either made or they are not made at all.
My noble friend Lord Jenkin, who again contributed so much of value to this Committee, asked why—this may seem an unfair point, but I make it because it is burnt into me—in that terrible first energy White Paper of the previous Government, every single date was removed except 2050. In other words, every date to which any civil servant, or any Minister, could possibly have been held accountable, was removed—and we know that they were all in to start with. I remember that the White Paper answered none of our problems, because, for example, it would not even face up to the issue of nuclear generation.
If my noble friend looks for a reason, it is the whole of that White Paper and, above all, the attitudes that surrounded it. I do not blame the party opposite for that, although it might have put it right. I blame the whole atmosphere, which was that you must not nail your colours to any mast lest that ship did not sail in the hoped-for direction; you must never be tough about the decisions to be made because you might not turn out to be 100% right. This is the real issue my noble friend raised when he asked about the nature of the governmental process in Britain. Rolls-Royces work only when you have not only covered all the details and very small issues but forecast what the market will be like in five, 10 and 15 years’ time. It does not happen if you work on the basis of a day-to-day operation. I am afraid that we have become the kind of nation that finds it very hard to make long-term decisions. There is an awful phrase about selection, suggesting that we should not back particular solutions. If you do not back anything, you do not get anything in this long-term process. The reason that most people in government do not want to back things is because they are afraid that someone will hold them in some sense liable for it.
I therefore finish by expressing my deep concern that the British have become believers that if you do not do something, that is not a real decision—that real decisions mean doing things. It seems that we all have to learn again that not doing something can be just as serious a decision, with just as much of a long-term effect, as doing something. Yet we have built a system whereby the phrase, “Better not, Minister”, is heard more often than any other. I hope that when I was a Minister I made it clear that it was the one phrase that would never result in the response that was hoped for. My father taught me that there was no point in saying to him, “I want so-and-so because everyone else has it”. That meant I would never get it. I always wanted a cap-bomb, I remember, but I was never allowed it on the basis that I once said that everyone else at school had one. That meant I never had it. “Better not, Minister” is one of those phrases to which all Ministers ought to say, “That means we have to find a different answer from the one you are proposing”. I hope that my noble friend will take seriously the concerns that we all have about the fact that our system does not meet the demands of an energy programme that takes 20 years before anything comes to real fruition.
Lord Teverson
My Lords, I must first apologise to the noble Lord, Lord Oxburgh, for also having arrived a minute after he started. I admit that I am a sceptic about the amendment, but I agree entirely with my noble friend Lord Crickhowell about consultants. For a very short period I was a consultant. Some of my best assignments were when we went into an organisation, they told us who to talk to—probably somewhere near the factory floor—we did so, they told us what we needed to do and then we told senior management what to do. They agreed, and it was a fantastic solution. All they really needed to do was talk to their own staff. They even knew that, but they did not have the credibility as management to do it. There are many lessons there.
There is another British disease, beyond what my noble friend Lord Deben and the noble Lord, Lord Oxburgh, have described: when there is a problem, you add another layer to the organisation without solving the fundamental problem. I have seen it in business and I have seen it in government. You do not have the guts, knowledge, determination and maybe the time to fix the real problem, so what do you do? You invent something else. When I used to deal with one of the world’s disasters, the common fisheries policy, they started off with quotas when they had a problem. They then started decommissioning, because that was not good enough. When decommissioning did not work, they introduced days at sea. When that did not work, they gave up for 10 years and finally decided to try another tack, which may give us the answer.
In Europe, when something is not quite right, they invent another body, such as the Committee of the Regions. That is an advisory committee, and I always get even more concerned when these organisations are advisory. If they have executive power, that means that you are putting your money where your mouth is: you are putting your belief behind an organisation and saying, “Yes, get on with it. We weren’t good enough. You go and do it”. At that point, you show commitment and it tends to prove that there is a real problem.
Lord Cameron of Dillington
The noble Lord was talking about the common fisheries policy. The North Sea regional advisory committee has been a huge success, and probably is the greatest success, of the common fisheries policy in the past 10 years.
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 Roper
My Lords, my noble friend knows that I do not agree with all the views that he has just put forward on this amendment; indeed, I have my name to the amendment that the noble Lord, Lord Oxburgh, has already moved. As the Committee will know, unlike others present I have extremely little experience of this matter. However, I believe that this as an additional body would be value added to the way in which the decision was made.
I came to that conclusion three weeks ago. I was having lunch in the Home Room and found myself opposite the noble Lord, Lord Tombs. I was talking to him about the Energy Bill and indeed this Committee, and mentioned the proposal from the noble Lord, Lord Oxburgh. He said, “Yes, the reason I am not really taking any part in the Committee is that I have been trying to solve that problem for a very long time and have never got anywhere with it. I had a number of debates every year in this House from 2002 to 2009 in which I argued for something similar, but never got anywhere”.
He then recommended that I should read his book Power Politics, which I did the following weekend. Having read it, I realise the problem that the noble Lord, Lord Oxburgh, set out: the lack of any long-term understanding of the problem by Ministers who, on the whole, spend a relatively short period dealing with these issues; and the fact that it is in the nature of the Civil Service that there is no specialised knowledge of both the economic and technical aspects of the industry’s problems. I believe that, as the noble Lord and my noble friend Lord Jenkin have said, this would be a significant addition to the way in which the real problems to which my noble friend has referred would have a better chance of being solved. I therefore hope that the Minister will be able to give a favourable response to what I think is an important idea.
Lord Teverson
“Part 6AGeothermal energyLicensing system
(1) Within eighteen months of this Act coming into force, the Secretary of State shall, after a period of consultation with industry, geological experts, the devolved administrations, local authorities, energy producers and other interested parties, put into place for the United Kingdom a licensing system and supporting regulations for the exploitation of heat from deep geothermal sources for both direct use and for the generation of electricity.
(2) The licences shall relate to—
(a) individual, geographically delineated areas of land; and(b) the heat held by rocks greater than 500 metres below the local surface level.(3) The licences shall confer exclusive exploration and production rights for the purpose of energy production to the licensee for that area, for a specific period of time for both direct heat and electricity generation.
(4) The Secretary of State shall put in place regulations governing the allocation of licences and the conduct of holders of licences.
(5) The Secretary of State shall undertake the first round of allocations within six months of the licensing system being put in place.
(6) Any organisation already in possession of—
(a) a water abstraction licence for the purpose of developing deep geothermal energy resources;(b) planning permission for the development of deep geothermal energy resources,at the time the licensing regime comes into force, shall be entitled to preferential bidding rights to that licence area and any licence fee or other consideration for that licence area as a part of the licensing regime will then be determined by arbitration under rules determined by the Secretary of State reflecting the fees or other consideration paid for licences deemed to have similar potential.(7) The holding of a licence for the exploration or exploitation (or both) of deep geothermal heat shall not convey any automatic rights to planning permission for surface development or surface access.”
Lord Teverson
My Lords, I have a sense of déjà vu about this amendment. With every energy Bill in which I have been involved since I was honoured to become a Member of the House in 2006, I have tried something similar. Each time I refine it slightly more until I think that it is perfect, but of course perfection is no use if there is no application. However, we will see.
I thank the Minister for the support that the department has given geothermal energy recently. It has been slow and difficult but it is getting on to the agenda, particularly in terms of the industrial renewable heat initiative and the contracts-for-difference strike prices. It is starting to appear far more regularly than previously without prompting, which is very good. Geothermal is a technology that works and I will not take a long time describing it because I am sure that Members are all well aware of it. Globally, it is a very important source of energy for hot water, direct heating and electricity generation. As we mentioned in a previous sitting of this Grand Committee, there have been discussions between Britain and Iceland over the use of geothermal energy from that area.
However, it is a lot easier when hot water comes to the surface of its own accord, as it does in many parts of the world, such as New Zealand and Iceland. It is different when one has to drill down five kilometres, 10 kilometres and sometimes a very long way in order to circulate it and bring it up. In the UK, there are examples of shallow geothermal energy but not much deep geothermal energy yet. This technology is credible and possible. It is a source of renewable heat that has a small footprint and acts as a base load rather than being intermittent, which is why it can be particularly attractive. Again, there is a choice between hot water and heating or electricity generation.
Why is this amendment necessary? It is because this issue is a bit like the oil industry. There are noble Lords here who know far more about the petroleum industry than me. However, basically, when you have put a major investment into drilling, as soon as you make your strike on a viable geothermal hot water well, you do not want someone 100 yards along buying the plot next door, extracting the water and then leaving you with all the exploration costs and only half the benefit. That is why a credible regulation infrastructure includes having a licensing regime over a suitable area of land. I particularly emphasise that this does not of its own right mean that there would be planning permission or surface access. That would all have to be sorted out by the exploration companies.
This is a major area where Britain, particularly the south-west but other areas of the UK as well, could benefit by building up its renewable energy resources of heat and electricity. For that to move forward, we must have a licensing system. I do not believe that there will be a great cost to producing this. It has already happened in Ireland and other parts of the world. In the past, we have had positive discussions with Ministers about this but they have never got far—hence this amendment. In due course, I look forward to hearing the Government’s thinking on this from the Minister. In the mean time, I beg to move.
Lord Grantchester
My Lords, the noble Lord, Lord Teverson, is to be congratulated on his persistence in tabling amendments on geothermal energy. He correctly identifies the huge contribution that this could make to the UK’s energy mix. I think this may be the third time that he has come forward with his amendment. The last time was in February 2011 during Committee on the previous Energy Bill. At that time, the Government had just slashed the remaining £2 million of a £6 million allocation for research from Labour’s time in office by 50%—plus ça change. Also at the time, the then Energy Minister, the noble Lord, Lord Marland, explained that two ROCs already in place were available for geothermal, which his department deemed to be sufficient to bring forward investment. However, of course, he rightly identified that it is not the ROCs that are important but the regulations to maintain the returns for the investor. At that time, the Minister spoke positively about this power source while saying that DECC would continue to work on the complexities of introducing a licensing system. That was well over two years ago. Perhaps the Minister will update the Committee today on how those regulations are proceeding.
Lord Teverson
My Lords, I thank the Minister for that very positive response. There are two things that I would like to say. First, in the county of Cornwall we actually have two planning permissions for deep geothermal projects, which were obtained with no local resistance of any significance, which was a very positive sign. Indeed, one of them received a grant from the regional growth fund but was unable to find the matching funding.
Secondly, I very much welcomed the Atkins report. When I was in a meeting with my right honourable friend Greg Barker, the Minister of State, the timetable was rather quicker than it is turning out to be. It is very important to keep the momentum going. I know this is nothing to do with Ministers but I get the impression that it has been rather tough going within the department. Let us get it to a conclusion and if the feasibility study says, “Let’s get to the next stage”, we should move it on. On that basis, I am happy to withdraw this amendment.
Baroness Worthington
I thank the Minister for his encouraging response and for saying that he will take the amendment away. Today’s contributions have underlined the importance of CCS. Here we stand a chance of the UK really capitalising on our natural assets, in terms of both the storage capability that we have in the North Sea and our engineering prowess and experience in offshore matters. I am hopeful that we will see CCS projects coming forward in the UK very soon.
In response to the question from the noble Lord, Lord Kerr, about whether or not CCS has been demonstrated anywhere, I refer him to the helpful report that the Government produced on CCS. Every three years the Government are legally bound to report on CCS developments. This Bill will actually repeal that but my noble friend Lord Grantchester is suggesting that the report should stay. In that helpful report we learn that investment is indeed going on today in CCS in the UK, and it details two plants that are very close to being commissioned in the US, due to come on stream in 2014. I am hopeful that then, at least, we will be able to put the lie to the idea to that CCS cannot be commercialised. If the US shows the way, I am sure that many others will quickly follow, including China, which, as we know, is investing in a number of CCS projects and, I am sure, is racing to get there too.
We need to up our game and get on with it, and this amendment is designed to ensure that there are no unnecessary hurdles in the way. I am encouraged by the Minister’s response so I am happy to withdraw.
Lord Teverson
Before the noble Baroness does so, the Minister mentioned 2020 in terms of commercialisation. Given the current stage of the tendering process, when might we perhaps predict that the first full-scale CCS demonstration project will be operating? Do we have a date for that now? I think we are all concerned. We all want this technology to win. We are aware, as the noble Baroness, Lady Worthington, has said, that it has taken a huge amount of time to get momentum, despite all the good will that there is for it.
Lord Gardiner of Kimble
I thank my noble friend. My understanding is that we may be working on this as early as 2015.
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.
Lord Teverson
My Lords, I, too, have great concern about the very late date here. It seems that this, perhaps ironically, is the one area where I would hope to put a maximum, which might be 450, in primary legislation but give the Secretary of State discretion to tighten that standard through secondary legislation as years go by. I would expect to do that in most other areas of life, perhaps through European legislation for car emissions, white goods and all those things where we expect to tighten emission and efficiency limits over time. If a number is put in the Bill for the next 31 years, obviously it could be changed by primary legislation but that would take time and would be difficult. Rather than mess around with an EPS, we might as well just say, “We want to stop any coal generating after 2020 and we will let the rest of it do what we want”. That is the effect of writing the Bill as it stands.
Lord Deben
Does my noble friend find it rather curious that we are prepared to put a date 31 years from now on this issue when we find it so difficult to give any long-term assurance that we need on any issue relating to reducing our emissions? In other words, it seems that we will do this for something that manifestly undermines our aims but we will not do it, even to the point of 2030, on things that might support our aims.
Lord Teverson
Indeed, although we have the situation, as I understand it—my noble friend will be closer to this—whereby the Government have to agree carbon budgets as they go along, this is contradictory to that same thing. I agree with him completely on that. I hope we can find a way to follow this amendment or to take out this very late date for a fixed emissions limit as high as that. In any other area of machinery or equipment, we would not accept this level of longevity for an emissions target.
Lord Gardiner of Kimble
My Lords, I am grateful to the noble Baroness for tabling this amendment, which has prompted a further debate on this additional aspect of EPS. During our debate so far, there has been a good deal of consensus among noble Lords on ensuring that the UK remains an attractive option for those looking to invest in a low-carbon electricity sector, and on the importance of gas generation. Noble Lords have also noted that the key to meeting that objective is providing investors with certainty about the regulatory environment that will govern their assets.
The Government’s gas generation strategy, published in December, set out our view that, along with low-carbon generation, we expect gas generation to continue to play a major role in our electricity mix over the coming decades as we decarbonise our electricity system, providing flexible back-up to increasing levels of intermittent generation. It also said that we are likely to need significant investment in new gas plants, in part to replace older coal, gas and nuclear plants as they are retired from the system, with much of that investment likely to be in the 2020s. It is therefore vital that we provide investors in new gas plants with the degree of certainty needed to ensure investment comes forward. Certainty over the EPS is part of that, and grandfathering the EPS limit until the end of 2044 will—
Lord Cameron of Dillington
A gas power station produces emissions of 300 grams per kilowatt hour, coal 600 grams. Hence we have the target of 450 grams. So, if we are trying to encourage more gas, why must we have an emissions target of 150 grams per kilowatt hour more than the 300 that gas emits?
Lord Teverson
Perhaps there is something I misunderstand here in the argument. This is not just about grandfathering, as I read it, it is about new plants in 2044. It will still only be 450. To get investor certainty, yes, we need the grandfathering, because once you have built the plants, as with cars, you are stuck with that. I would accept that once you have built them you would expect them to go through their normal life before any major refurbishment; you would expect that to stay at the emissions limit applying when that plant was first operated. However, this includes new plants, as I understand it, right up to 2044. That is not related to investor certainty, because plants at the moment would have grandfathering rights, but if we moved this date later on we could have different rules, and that would not affect investor certainty.
Lord Gardiner of Kimble
I thank noble Lords for their interventions. I think all will be revealed in due course.
I want to return to the matter of investors and business, because certainty over the EPS is part of that. The grandfathering of the EPS limit until the end of 2044 will, we believe, give investors in new gas plants certainty that the operation of their assets will not be constrained by the EPS for a period considered sufficient to make a return on their investment.
I am particularly mindful of what my noble friend Lord Deben said about business. It is important to note that business has made it clear that these grandfathering provisions are essential if the EPS is not to deter or increase the cost of investment in new gas plants.
Lord Gardiner of Kimble
As I say, I am quoting the CBI specifically on this matter, and it cites the year 2045. Although I understand what my noble friend is saying, I cannot renege on the fact that the CBI is specifically citing that particular year in the quote that I wanted to mention to the Committee.
There has also been a query, although we are going to discuss the 300 grams in further amendments, about the 450 grams. That figure represents a significant reduction in the emissions of a new coal plant. This level builds on and supports the planning requirement for any new coal plant to be equipped with CCS while being above the level of carbon emissions for a new gas plant. The 450-gram limit also provides some flexibility for CCS projects to help manage the uncertainties associated with first-of-kind technology. As I say, though, we will have a separate debate on this matter with the amendment of the noble Viscount, Lord Hanworth.
If I may continue, I say to noble Lords who may be concerned that we are locking in high levels of unabated gas generation well into the future, while grandfathering will give investor certainty over the regulatory regime under which their assets will operate in relation to EPS, it does not permit a right to emit. This is because as levels of low-carbon generation increase, with its use effectively prioritised due to its low generation cost, unabated gas generation will increasingly be displaced. The role of gas will therefore be to balance an energy system that includes greater amounts of inflexible and intermittent generation. Analysis for our gas generation strategy shows average overall load factors for gas plants at around 27% in 2030, based on achieving 100-grams-per-kilowatt-hour grid average emissions intensity.
The role of government is to strike a balance between the three objectives of energy policy: to decarbonise our electricity system, to maintain security of energy supply to the country and to keep costs to consumers to a minimum. I understand that the intention behind this amendment is to provide greater certainty for decarbonisation but, for the reasons I have set out, I believe that shortening the grandfathering period of the EPS would introduce uncertainty and risk to the new gas plants we will need to build up to 2030, and that the better way to balance these three objectives is through the approach that we are taking in the Bill.
I will study the references that have been made during this short debate, particularly my exchanges with my noble friend Lord Deben. As this is a technical matter, it would probably be better if I wrote to him and other noble Lords on this. I appreciate that the noble Baroness will be disappointed by my reply but I hope she understands that the Government cannot support her proposed approach because of the three objectives that we need to balance. On that basis, I hope that she will withdraw her amendment.
Lord Teverson
I know that I am stretching the patience of my noble friend but I want to get this clear in my mind. Does the legislation mean that in 2043 I can build a completely new gas plant as long as it emits under 450 grams per kilowatt hour, and operate it thereafter?
Lord Gardiner of Kimble
My understanding is that the answer to that is yes.
Lord Teverson
“( ) for determining how the duty imposed by subsection (1) should apply to carbon dioxide emissions associated with the lifecycle of production and use of biomass fuels in all generating stations”
Lord Teverson
My Lords, I move into an area that on the whole is pretty contentious. I do so almost reluctantly because I am a great supporter of biomass. The question is: what should the characteristic of that biomass be? What is the truth behind the sustainability of that biomass? What does it mean in terms of major changes in the way in which we produce electricity, particularly from existing fossil fuel plants in the UK, in the context of the Bill?
We have already seen some of the effects of burning biomass. The major effect of course is in deforestation in developing countries. It was previously estimated that some 20% of global emission were produced by deforestation—by burning trees while they were standing in forests. That figure has been reduced to something like 10% to 12%, but it remains a major amount, and that is clearly adding to the stock of carbon in the atmosphere. More than half of it is accounted for by Brazil and Indonesia.
The low-carbon route map for our generation suggests that by about 2017 we will have some 6 gigawatts of biomass generation within the UK. Most of that will be around the use of coal plants as they are at the moment, co-firing or moving on to dedicated biomass generators instead. This is a major change to make while we are still trying to understand the whole-carbon cycle effect of that change. The amount of biomass required to feed that capacity of some 6 gigawatts is of course much larger than our own harvest of wood within the UK.
I do not necessarily oppose importing by ship from abroad. That is a very efficient and low-carbon way of bringing fuel into the UK, depending on where it comes from and on its road routes at either end. What concerns me is to understand the thinking of the Government on looking at the whole life cycle of biomass, in terms of it being used on that scale, within the United Kingdom. As I understand it, there is a rule before the ROCs can apply—and future financial benefits for renewable energy—stating that the biomass must be at least 60 % of emissions, as previously.
How are the Government looking at this now? Can the Minister describe the situation with European legislation, as I understand there are moves in this area to restrict or reduce the amount of fuel or biomass that can be used towards renewable targets? I want to understand how this Bill will fit within that potential scenario. Unfortunately, in many ways I am now convinced that it is not quite as straightforward as it was and that burning biomass is not a zero-carbon sum. If you reduce the stock of wood in the world, it will take some time to replace it. If that is within the current forestry limits or within the current limits in cutting down and using that wood, then that is sustainable. However, if we are going to increase it beyond that amount, then that sustainability becomes questionable. We need to pay rather more attention to these factors than we have done in the past, and I look forward to the Minister’s explanation of how the Government are looking at this and how we can ensure that this harvest is sustainable over its whole life rather than necessarily looking at it as a carbon-free, completely renewable resource for electricity generation. I beg to move.
Lord Deben
I should say to my noble friend Lord Teverson that having not perhaps been easy in my comments up to now, on this I say to him that this is a real and very difficult issue that I am sure the Government are thinking about very hard. This is because levels of sustainability differ in different circumstances. The Committee on Climate Change discusses this on a regular basis because it is extremely hard to keep up with the developing circumstances. What we do not want is to think that we have changed to a low-carbon alternative and discover that actually it is nothing of the sort. That is the worry that people have.
There is a second worry, which is that we are facing ever greater shortages of food. The one thing we do not want is to have a situation in which our battle against climate change—climate change itself causes some of the shortages of food—is then seen as a kind of competition with the provision of food. That is of course why biomass in those circumstances is so complex a matter. However, I say to my noble friend that no one has a simple answer to this and I am sure he is not going to give us one today; we would not expect one.
No one has a simple answer because we all started off on the wrong basis. For example, the green movement was very much in favour of biomass. It was therefore almost unquestionably a good thing until they began to recognise the potential downside. That meant there was a huge swing to the opposite direction. If we are not careful, we will find ourselves in extremes rather than finding some sensible place for the pendulum to stop.
It is also true that there are many vested interests in this area. The farming industry saw it as a wonderful way in which it could increase its opportunities of reaching markets because this was a new area that farmers could exploit. Of course, as food prices go up and their returns from food production become greater, it is a real issue for them too. While in the United States, I have to declare that I had a visit from the representatives of the so-called—“so-called” because I cannot prove this, as I will explain shortly—sustainable forestry industry. They came to explain to me, as chair of the Committee on Climate Change, that they were unhappy about what we had said about these issues. I said, “Do you have forests that are independently certified?”. “No,” they said, “but we know it’s all right”. I cannot accept that as a reasonable response. In the world out there, we must be careful about how we change our energy supplies and do not undermine the truth of what we are saying.
So I say to my noble friend: this is a difficult area. None of us expects him to have an easy answer, because no one else has. However, I hope he understands that we will have to look at this during the Bill and to come back to it on Report, simply because things are moving so fast that we need to be sure that we have done everything we can to protect the Government from later assertions that they have encouraged the substitution of one form of emission creation with another form of emission creation. That is what we have to guard against.
Lord Teverson
My Lords, I very much agree with the noble Lord, Lord Deben. I have often said that this is the one issue on which the pendulum swings from one extreme to the other—from being the silver bullet, it becomes the devil incarnate. With the sort of issues being looked at at the moment, perhaps at some point it will swing back again. I very much appreciate the Minister going through the thoughts and processes that the Government are having. It is very appropriate that we will have the response to the consultation at the end of this month, which will be well ahead of Report stage. I look forward to that, as well as to how the European situation starts to move forward. We can come back to that area later. In the mean time, I beg leave to withdraw the amendment.
Lord Teverson
“(iii) substantial pollution abatement equipment dealing with oxides of sulphur, oxides of nitrogen, heavy metal emissions or particles is fitted to the generating station”
Lord Teverson
My Lords, I take the emissions performance standard very seriously, as I did at Second Reading. An astounding fact, if we have one in terms of energy generation, is the resurgence of coal to its position of dominance of electricity generation in the UK. During 2012, 43% of electricity was generated by coal; gas, the previous number one, went down to 28%; and nuclear was at 20%. When the Climate Change Bill was passed into an Act, I do not believe that any of us would ever have expected that, as part of this programme towards a 2050 decarbonisation of our economy as a whole, in a few years’ time we would be looking at coal being so important to us in terms of our electricity generation and our economy. That concerned me greatly but we have had assurance that, due largely to the large combustion plant directive, coal will disappear over the next few years as the remaining coal plants in the United Kingdom have to close down, as a large number already have. We all felt very secure in that knowledge and in the fact that that would happen.
However, there is a significant concern if the price of coal stays very low in comparison with gas. I see no reason why gas prices should come down in the short term. Whatever happens with shale or whatever else, it seems pretty likely that gas prices will continue to go up. There will then be incentives for generating companies that own coal plants to modify them to comply with the large combustion plant directive through getting rid of their sulphurous and nitrous gases. Of course, that directive does not deal with carbon emissions. They are completely separate. But there is an avenue, and now a potentially economic avenue, for those coal plants to comply with that directive. They can continue under this Bill to generate coal well into the future until finally they need to have their boilers replaced, at which point the Bill very effectively says that you have to comply with 450 grams until 2044. Therefore, we have had a pathway. The way out of that was meant to be carbon capture and storage. If we had abated coal and it went below that emissions limit, that was a way forward and coal was legitimate within that context. Therefore, I am very concerned that this potential loophole—or gap, or pathway—for coal generation to continue needs to be sealed once and for all.
I was very pleased indeed that my noble friend the Minister, if I could quote him from a couple of amendments ago, said, “No more coal without CCS”. Absolutely—that is what we are here for. For some reason we cannot put that plain language in the Bill. We could just say that, could we not? But we are not; we are giving it a fair chance but trying to make it impossible. I am asking the Minister if he would doubly make sure that that is impossible by looking favourably on this amendment. I beg to move.
Baroness Worthington
I thank the noble Lord, Lord Teverson, for tabling this amendment, to which I have added my name.
I have previously described the measures that have been put down as a package. This is an essential component of that. I go so far as to say that I would be less concerned about the gas grandfathering if this amendment was accepted. This amendment addresses a very real risk and need. My worry about our current policy on coal is that a degree of complacency has started to take root, based on the idea that all the old coal is simply going to shut up shop and quietly disappear from the grid. Having worked for a power company that owns coal-fired power stations, I can tell your Lordships that these are incredibly profitable assets and the companies will do all they can to keep them operating for as long as they can.
A lot has been said, in the media and elsewhere, and in statements from the Government, about the lights going out and about this terrible problem of coal-fired power stations closing. Actually, as I have said before, the 8 gigawatts of coal that was required to close under the large combustion plant directive has already gone so we do not have a problem in the short term. In fact, we have 20 gigawatts of old coal carrying on. That is made up of 12 plants—the dirty dozen—that will be carrying on.
When the process of the Bill started, the premise was that new coal was the greatest threat. In fact, it says that in the consultation document. But that is fundamentally wrong. When it comes to managing carbon, old coal is far and away the worst source of emissions. These plants were built in the late 1960s and early 1970s—some of them are older than I am—and they have well paid back their initial investments. They have made the successive companies that have owned them a lot of money and it really is time to let them retire gracefully.
Baroness Worthington
My Lords, the Minister mentioned in his reply that under the gas strategy only two plants would be operating. I am rather dismayed to hear that. I am not a great fan of the gas strategy at any time but that has made me even less confident in its analysis. It is absolutely clear that already four plants have opted in to fit, to be compliant with the IED regulations. That is considerably more than two. Once they have fitted that filtration equipment, they will have a capital cost that they will want to see returned. They are not going to suddenly decide to shut up shop in 2025. There is a high degree of complacency, based on the fact that the analysis and the modelling that were done did not take into account the following important factors. Coal prices are low and are going to stay low. If you own a coal-fired power station today, you can see pound signs ringing in your register for many years to come and that is a huge incentive to comply and go forward with the air quality standards. Also, the filtration equipment is very likely to come down in cost, making that equation even more favourable. Finally, with capacity market payments coming—we will have a chance to debate that on Thursday—that is another financial incentive to keep these plants running. The Government are being complacent and I urge the Minister to think again.
Lord Teverson
I thank the noble Baroness for her expert comments on this amendment. I admit I am perplexed by my noble friend’s response and I will go through it in a very moderate way. All this amendment would do is to put everything back to where the Government actually want it to be, where the large combustion plant directive, conveniently, gradually but fairly imminently shuts down unabated coal. It seems that that has always been a government assumption. However, because of the high price of gas to coal, suddenly being compliant with that directive becomes economic and so we have a different situation. All this is doing is putting it back to where we thought it was, probably when this Energy Bill started out in its long course through the department and stages of consultation and into Parliament.
It also seems to me that ironically, in this area, it is a win for the Treasury and a win for DECC. From the Treasury’s point of view, if there is certainty about coal going out, there is much more certainty for gas investors coming in—far more than probably a 2044 guarantee on investment. From a DECC point of view, we are actually making sure that those high carbon emissions that come out of old coal and that we were not expecting at least fall out of the system pretty quickly. Therefore, we have a win for all those sides as well as for climate change and we get back to what the Government’s policy originally seemed to be.
As the noble Baroness mentioned, we have the added benefit that in terms of energy security, because of the way that the EPS works, these plants can still be available over short periods of time, but not base load, to meet potential blackouts or brownouts within the electricity markets. So we have a win there as well. While I understand my noble friend’s arguments, I just think that they do not actually reflect government policy—not Treasury policy, DECC policy or the coalition agreement policy. Somehow we need to get out of that. However I am very keen to continue discussions, particularly in this area. In the mean time, in anticipation of that, I withdraw my amendment.