Energy Bill [HL]

Lord Teverson Excerpts

2nd reading
Tuesday 19th July 2022 Lords Chamber

[Lord Teverson (LD)]

My Lords, it is always a real pleasure to follow the noble Baroness, Lady Jones of Moulsecoomb, because of her rather special style in this House, which I think we genuinely welcome, and her plain speaking.

I must declare a couple of interests. I chair a company called Aldustria Ltd, which is into energy storage—I say to the noble Lord, Lord Moylan, that that is actually one of the answers to variability on renewables—and I am a trustee of the Green Purposes Company, which holds the green share in the Green Investment Bank.

I want to go back into history, not as far as the noble Viscount, Lord Hanworth, did, to Baldwin and Chamberlain, nor to the OPEC crisis that my noble friend Lord Bruce mentioned, but to 2013 and the last major energy Act, which was presented and introduced by Ed Davey as the Liberal Democrat coalition Secretary of State. It did a number of things but there were two key measures. First, it introduced contracts for difference, which were a major step forward at the time. Again referring to the noble Lord, Lord Moylan, to some degree, CfDs now produce money for both the contract company and, effectively, the Treasury; the present reference price is much higher than the strike price, so the taxpayer does really well at the moment in that area. We do not have to worry about levies on producers because it is a self-balancing mechanism that comes back to the taxpayer when energy prices are high. The second thing introduced by that Act was the capacity market; it had its issues, particularly with diesel generators, but a lot of that has been solved now.

The 2013 Act changed the way that the energy market worked in this country and it has been very successful. The Bill before us does not change that but is an evolution of it. The noble Lord, Lord Haworth, talked about the weight of the Bill. It might be a thick book but it is not a blockbuster in what it is trying to achieve. It does a number of things and it is a bit of a Christmas tree Bill; I hope we will not have thousands of amendments as we go through eight days of Committee, but there are a lot of areas where we can add things in.

I have referred a couple of times to the noble Lord, Lord Moylan, but I liked seeing decarbonisation and net zero as a constraint. That is an interesting way of looking at this issue and I do not disagree; it is an objective that we are dynamically moving towards but it is a constraint in how we move on energy.

We are looking at energy security, which is particularly important at the moment; decarbonisation of the economy; and, particularly at this time, the cost of energy and the effects that that has. Those of us who were involved in the 2013 Act remember that the big issue we were trying to solve was the energy trilemma of security versus price versus decarbonisation. Amazingly, over the nine years since then, there has been a convergence of those needs. It seems, practically and evidentially, that we can solve all three of them. By decarbonisation and the additional use of renewables and other technologies, we can solve security and decarbonisation, and help to bring down prices, literally, against the fossil fuel crisis at the same time. We have that ability.

We on these Benches welcome the Bill. It has a number of good parts, including on hydrogen—although I entirely agree that its use will be highly constrained. I was interested that the experiment involves gas heating, which is maybe not one of the best areas in which to do it. I shall come to the future system operator later, but it is much more of a strategic look, and I welcome that. On heat networks, heat pumps and carbon capture, storage and usage, I am somewhat sceptical about their overuse but it is good that we move them forward. I also welcome the fact that we are going to continue our interest in fusion.

Let me talk about energy security. One thing that surprises me goes back to a point made by the noble Lord, Lord Howell. Part 10 talks about resilience and the core fuels. I went through that part of the Bill and—the Minister may correct me—it relates only to petrol and oil; it does not refer anywhere to gas. So we still have a resilience problem in an area of energy policy that is very important at the minute. Exactly as the noble Lord, Lord Howell, pointed out, in 2017 we effectively stopped gas storage in this country when the Rough storage facility was closed. To give the Government Benches their due, the cry went up from that side of the House asking why this was happening. I understand that there are now negotiations to try to reopen that facility. I would be interested to hear from the Minister how they are progressing and whether that will happen.

On the speed of transition, let us remind ourselves that we have a target to decarbonise electricity by 2035, which is only 13 years away, and the Prime Minister has said that we should have 40 gigawatts of offshore wind in eight years’ time. That is really quite something. How do we go about meeting that? One of my criticisms is that there is nothing in the Bill to reduce gestation timescales—an offshore wind farm can take 10 years to go from start to finish. I am interested that the Minister said that one of the areas of amendment to the Bill is around trying to reduce approvals from four years, which was optimistic, to one year because of the change of environmental rules. I would be the first to say that the way that environmental regulation works around offshore wind is probably not the best way it could go. We will want to look at what those regulations will become to achieve that sort of level in timescale.

As other Members have mentioned, the objectives of the regulators get in the way on transition—partly the North Sea Transition Authority, but particularly Ofgem not having a zero-carbon objective. I know the Government feel that that is already covered in the remit but it is not, and it gets in the way. That is one area which it is important to change in the Bill.

The other area is the system operator, or ISOP. I read that long section through. The ISOP is called an independent operator, but there is nothing in the Bill guaranteeing its independence or how that regulator—or planner or operator—is appointed. I see no reason why it should have any real authority. It is unfortunate that this detail is not there. I think back to when the Labour Government put in the Strategic Rail Authority, which in the end did not manage to achieve anything because it did not have any real authority, and so it was abolished. I would like to understand how the ISOP will work and have authority, and not be just an animal of BEIS or the Treasury. I was going ask, “Is ISOP a fable?”, but I decided that it would not work in the House.

A number of noble Lords have mentioned onshore wind. From my house in Cornwall I can see 35 wind turbines. That is fantastic. When I go out on my bike I can tell, as they move, whether I will be cycling against the wind or with it. Most people think that they add character to the countryside. The Government are just not brave enough in that area.

One of the areas completely missing in terms of transition, which I see as vital, is electric vehicle charging. We do not have the infrastructure to support the revolution which is happening through market forces as much as anything else. I know that is for the Department for Transport but, if we really want to transition, the Bill needs to achieve it, so let us not get too much into silos.

In terms of grid investment, we have had the announcement that National Grid is going to spend some £54 billion bringing offshore electricity to the mainland, but what about the money required to upgrade the grid in Great Britain? When it comes to getting access to the grid, whether for storage or renewable energy, we are running out of capacity.

I was speaking to one of the DNOs today, and of its 8 million households, only 2 million have smart meters—an appalling ratio. I am sorry, but that is what a DNO told me this morning on the figures for its area. If you include SMETS 1, the figure rises to 3 million. That is a fact.

I will talk about bringing costs down. Clearly this Bill does not deal with immediate issues, but it could be about the near-medium term. Demand reduction—particularly through energy efficiency, as many have mentioned—is really important.

The price cap is still an imperfect mechanism. It may have served its purpose to a degree, but should we not now be moving to something such as perhaps a social tariff? I would be interested to hear from the Minister about what the Government are looking at post the energy cap.

Many have mentioned local authorities and communities. I word-searched the Bill as well, and local authorities are mentioned in regard to heat networks, as obviously you can hardly do these at all without local authorities. They, and local communities, must be involved. Only through these means can we bring costs down in this industry in the medium term. Yet what have we got? We have already passed this year the Nuclear Energy (Financing) Act, which actually puts up energy prices for households. The new Prime Minister might consider scrapping that for a start.

As I said, the Bill is important, and there are many parts that I and these Benches support. It is not a blockbuster, but it is a big Bill. Let us make sure that the really important areas, such as energy efficiency and the systems operator being able to ensure we have a full and proper strategic view into the future, are actually achieved. There is a lot to do.