Energy Bill [HL]

Lord West of Spithead Excerpts

Committee stage
Monday 5th September 2022 Lords Chamber

[Lord Ravensdale (CB)]

My Lords, I shall speak to Amendments 7 and 242. I declare my interests as a project director working for Atkins, which is in the energy industry, and as a director of Peers for the Planet. I thank the noble Baroness, Lady Worthington, who I have worked with to develop these amendments.

Amendment 7 has similar objectives to Amendment 1 in the name of the noble Baroness, Lady Blake, and spoken to by the noble Lord, Lord Lennie. I concur with his comments on the necessity of clearly setting out the purpose of the Bill and legislating for a strategy and policy statement on its implementation. Amendment 7 brings out two specific aspects that are further detailed in Amendment 242. These are the importance of a plan for delivering against the 2035 target to decarbonise our electricity system and for the electrification of energy use in the UK.

The reason that electrification is so important stems from the second law of thermodynamics. As my favourite physicist, Richard Feynman, said in his superb analysis of the “Challenger” disaster in 1986, “Nature cannot be fooled”. Whatever options we come up with for decarbonising our energy system, and whatever laws and policies we make, we run up against fundamental constraints from the laws of thermodynamics. For example, using hydrogen to fuel road transport will always be much less efficient and use far more energy than electrification, no matter what technical advances are made in hydrogen production. Similarly, using electricity to heat homes via a heat pump will always be more efficient than producing hydrogen for the same purpose. This is not to say that hydrogen production should not be pursued as a matter of urgency, as it will be vital in some areas, but its use should be focused on areas that are absolutely necessary. The efficiency gains and the reductions in primary energy use from electrification mean that this is a vital metric to consider as our energy system evolves.

The enabler of all of this is a decarbonised electricity system. We have a world-leading target to decarbonise our electricity system by 2035, but I worry about delivery. Atkins has undertaken a calculation of the rate of new capacity required to hit the 2035 target. This is not anything complex: it simply divides the capacity in the BEIS scenarios by 12 and a half years, allowing for an estimate of the capacity that will be decommissioned over that timeframe.

As I stated at Second Reading, this calculation results in a minimum of an average of 12 gigawatts of annual installed capacity being needed every year between now and 2035 to hit that target, so the next question is, with a baseline of 12 gigawatts, what have we managed in recent years? In 2019 we managed 2.8 gigawatts of new installed capacity. In 2020 we managed 1.1 gigawatts and in 2021 we managed 1.6. If we go on like this, it is very hard to see how we will meet the 2035 target. The upshot is that to replace ageing power plants and ensure that enough generation is built to meet peak demand requirements, the UK needs to build a minimum of 159 gigawatts of new generating capacity by 2035—the equivalent of building the UK’s entire electricity generation system one and a half times over in slightly more than 12 years. It is not only generating capacity but all the grid infrastructure to support it, as well as energy storage and data management.

This says to me that there is a significant risk that the Government will not be able to meet their 2035 target. I work on the coalface, as it were—I am not sure that is the best analogy. The industry has a long way to go to gear up for this pace of delivery, so alongside the 2035 target we urgently need a strategy for delivery. This reflects one of the priority recommendations from the CCC’s 2022 progress report: we need a delivery plan to provide visibility and confidence for private sector investors, to reduce costs and to build up supply chains. There is a key gap here in comparison to other sectors. We have the Heat and Buildings Strategy and the transport decarbonisation plan, but we do not have a plan for electricity decarbonisation, despite it being so important as an enabler for those other plans. I would be grateful if the Minister could, in summing up, state that the Government will bring forward such a delivery plan for electricity system decarbonisation.

Amendment 242 details our approach to legislating for this strategy. The noble Baroness, Lady Worthington, pointed out to me that we already have a toolkit to approach this via the Energy Act 2013—the mechanism of a decarbonisation target range and decarbonisation orders. If we take these existing powers and modify them, we can set a range for carbon intensity of electricity production in the UK each year and targets for electrification of the energy system. The report must also include the expected volumes of installed capacity and energy produced by electricity energy source for each calendar year to 2035. This rigorous approach will deliver the required strategy and plan to give industry and investors a clear road map to 2035, which, lest we forget, is only slightly more than 12 years away.

There is a great opportunity in this Bill for the Government to legislate for a strategy to give industry and investors the confidence they need to reduce costs and build up supply chains for 2035, significantly reducing delivery risk, with efficiency and minimising primary energy consumption at the forefront. I strongly support the Government in their ambitions for 2035 and the target that they have set, but there is much to do in a short time, and I hope the Government will take this opportunity to ensure that there will be a clear plan for delivery to ensure the success of their ambitions.

[Lord West of Spithead (Lab)]

My Lords, I stand to support the rather convoluted, as was stated, Amendment 5 in the name of the noble Lord, Lord Moylan. Sadly, we have shied away from a national energy strategy for some decades. As head of the National Security Forum in 2009, I pushed to produce a national energy strategy but was stopped and shot down in flames by the Cabinet Office—and indeed the Cabinet—as the Government were unwilling to identify all the various things that were needed to achieve that.

Now we are moving slowly towards a policy, but the devil is in the detail and broad, sweeping statements of commitment based on no solid evidence of cost and impact are highly dangerous. The aim of this amendment is to quantify the cost and risk of achievement and to monitor and assess performance as the plans move forward. Too often there is a willingness to move ahead hoping for the best rather than forensically analysing what is, can be and has been achieved and what the true costs are—both financial and in terms of their impact—on other policies and commitments.

I feel particularly strongly about analysing the shortfalls in electricity generated by renewable sources. Our nation has a clear demand for a constant base loading of electrical supply and needs to manage intermittency of supply from wind and solar. I am clear that only nuclear power can ensure that need in a clean way.

I will be very interested to hear the Minister’s views on this requirement to monitor and quantify the measures being enacted.

Energy Bill [HL]

Lord West of Spithead Excerpts

Committee stage
Wednesday 7th September 2022 Lords Chamber

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

I must counsel the noble Lord, Lord Foster, that he cannot move his amendment at this stage but only when the Committee comes to it sequentially.

[Lord West of Spithead (Lab)]

My Lords, I support the amendment in the name of the noble Lord, Lord Moylan, which relates to resilience. We are very bad at spending money on resilience. The Treasury hates to spend money on resilience, as I know from my time as a Minister.

[Lord Callanan (Con)]

It hates to spend money full stop.

[Lord West of Spithead (Lab)]

Well, yes, it hates to spend money full stop, but especially on resilience. Whether it is the loss of our GPS system and how we would counter that or PNT, there is a whole raft of areas where it is really unwilling to move and spend money even though these things are crucial. In this case, it is extremely important that we have the ability to store gas as we move into the future. I agree totally with the noble Lord, Lord Moylan, that the amount we have to store may vary quite dramatically.

Earlier, the Minister spoke about how we have infrastructure built to bring LNG into this country. We certainly do—I was heavily involved in ensuring that we got the right ships from the North Dome in Qatar to Milford Haven and setting up the infrastructure there. It was meant to provide 15% to 30% of our LNG. That was fine when people were not outbidding us for that LNG. That is the problem now; we cannot guarantee that that LNG will come to us, so we need some form of resilience. I believe that resilience should be our having some gas storage capability.

I have to get a naval thing in. It is interesting that, between the two wars, we forced the Treasury to ensure that our then 850-ship Navy—it is a bit smaller now—had sufficient fuel stored in this country to fight at war rates for six months. Someone in government had calculated it. We have to have a calculation; 25% might be wrong, but there is a requirement for some storage. We need to think very hard and the Government need to come up with a view from their experts on how much that should be. It may dwindle in time, but we certainly need it in the near term as quickly as possible. I very strongly support Amendment 225.

[Baroness McIntosh of Pickering (Con)]

I join the noble Lord in his support for my noble friend Lord Moylan’s Amendment 225. I have been minded to table something similar, so I was delighted when my noble friend was able to fill the gap. I believe that the amendment seeks to address not just resilience but security of supply, and I am delighted that it is in the form of a probing amendment and that we leave open the amount of storage that we seek.

My concern, which we touched on in Oral Questions, is the woeful shortage of gas storage at this time. I understand the reasons why Centrica closed its gas storage, which I understand was in Yorkshire, in 2017. But, as my noble friend Lord Callanan said in response to the Question today, the circumstances then were very different from today. I understand that, currently, the facility could possibly store between 10 and 12 days at full capacity. I understand that talks are ongoing in this regard; what status are they at? If they are successful and Centrica, or indeed another operator, was minded to open or reopen these facilities, what is the optimum number of days of storage? I prefer to talk about this in days of storage rather domestic consumption, but I will leave that to those more expert than me. What is the current capacity for gas storage? Back in March, I understood that Germany had something like 120 days’ storage and we had only a possible maximum of 30, which may even have been an overestimate of the capacity.

What percentage of gas is currently being supplied to this country by interconnectors from Norway and perhaps other suppliers? Also, what is the percentage being delivered by tankers? For the reasons of resilience and security of supply, and given that there are European countries that are more dependent on Russian sources of gas than we are, can we be absolutely sure about the threat that the current supplies to this country through interconnectors and tankers might be diverted to other European countries if the situation in Russia were to deteriorate further? I understand that this is a source of some concern. Germany is one of the countries most dependent on Russia for current gas supply. I understand that it reached its target for days of gas storage ahead of schedule. It has also stored underground just over a fifth of the gas used in the whole of last year, 2021.

Finally, the flip side of gas storage and the potential cap on spending, which we might learn of tomorrow, is trying to encourage all of us to use less of the finite resource of electricity and energy. Could my noble friend shed some light on that? Will we hear more tomorrow?