Lord Whitty
Main Page: Lord Whitty (Labour - Life peer)(13 years, 10 months ago)
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Lord Whitty
“Secretary of State not to grant petroleum licence incompatible with offshore renewable energy site
(1) In this section, “offshore renewable energy site” means a site in United Kingdom territorial waters or the REZ which is developed or operated, or is intended to be developed or operated, for—
(a) generating electricity from wind, wave or tidal energy, or(b) transmitting electricity generated in that way,in respect of which the Crown Estates have granted a lease, licence, agreement to lease or agreement to license for that purpose.
(2) The Secretary of State may not grant a licence under section 3 of the Petroleum Act 1998 (licence to search and bore for and get petroleum) to the extent that the licence would permit an activity within an offshore renewable energy site, unless the person entitled to the benefit of the lease, licence or agreement in respect of that site so agrees in writing to the grant.”
Lord Whitty
My Lords, as the noble Lord, Lord Oxburgh, said on the previous amendment, it is clearly the general target of the Government—as shown by providing the ROCs incentive—to increase the amount of renewable energy in this country by 2020, and to make offshore wind the major component of the provision of that quota. We have already done reasonably well, in that there are already 1.3 gigawatts of offshore wind operating around our coasts, and other projects are in the pipeline. However, the process takes considerable time. For it to happen—again, as the noble Lord, Lord Oxburgh, said—we need not only the incentive of the ROCs in place, but the means of mobilising substantial sums of private capital. That private capital needs to minimise risk. At the moment, the problem for an offshore wind facility, either in operation or provisional—with a lease granted by the Crown Estate or with an agreement to lease—is that the prospect of an oil or gas facility being put in the same area will kill that investment stone dead. It would certainly put off prospective investors in that scheme or potential scheme.
The amendment therefore seeks to ensure that investors in the industry and the supply industry—an important economic by-product of offshore wind—have sufficient confidence to invest sums of money in offshore facilities that are not threatened by effectively being displaced by a future oil or gas facility. That is needed because of the present disparity of provision in the rules governing offshore oil and gas consents. The amendment would prevent a forced intervention by the Secretary of State to consent to an oil and gas works on top of an existing lease, or agreement to lease, for an offshore renewable project. It would allow the offshore oil or gas project to occur were consent to be given by the operator or potential operator of the offshore activity—in other words, provided that negotiations could operate and an agreement could be reached, there could be coexistence. Although theoretically both sides of the equation recognise the need for coexistence, there is no balanced system for dealing with them.
It is not that we are creating a special, privileged position for offshore wind, because the consenting system for offshore renewables in general—tidal and wave power would also be covered by the amendment— includes a requirement to negotiate with other sea users. The offshore operator is required to negotiate with the potential gas operators and other users of the seabed. On the other hand, the current guidance from the Infrastructure Planning Commission—which, until the Government get their way, is the planning authority—requires that the views of other sea users must be sought out, that action taken in response to those views must be reported and that justification must be given where no action is taken. However, the Petroleum Act requires oil and gas activity to take due regard of other projects, such as renewables, but there is no requirement to negotiate in those circumstances. We are not talking about a level playing field at the moment, and I therefore hope that the Minister and the Government will recognise that there is an issue here.
There is particularly an issue about discouraging the substantial amounts of private investment that will be needed in these offshore technologies in order to meet the Government’s targets for renewables. It is already public policy to reach those targets, but the present system threatens confidence in investments in those targets. It is certainly the case that for those seeking finance from the City and elsewhere for these projects—particularly as we go further offshore, as we will need to do—questions of confidence and the possibility of the leases being overridden by a subsequent decision on oil and gas facilities are major considerations and some of the reasons why such investment is inhibited. I hope that the Minister will at least recognise that this is a problem. If he is not prepared to accept the exact wording of this amendment, I hope that he will recognise that this is something that the Government have to address and that some degree of equal treatment will be needed down the line.
I think all sides of this Committee recognise the importance of meeting these renewable targets and want to remove any inhibition in doing so. Therefore, this amendment, or something like it, is a necessary step to ensure that the investment is there to meet those targets. I beg to move.
Lord O'Neill of Clackmannan
Is the basis for this amendment that somehow it is preferable for us to have offshore wind rather than access to oil and gas? For many of us, it is as important in this country that we have access to the reserves of oil and gas in order to sustain a number of our vital industries. They will depend on electricity for a lot of their fuel sources. If I were still speaking as a constituency MP representing a seat near Grangemouth, the last thing I would want to do would be to support offshore wind at the expense of adequate supplies of gas and oil to go into the oil refinery and the chemical processing plants that are a major source of employment for my constituents. My noble friend needs to be rather more frank with us. Is it just for the convenience of investors or it is based on the assumption that somehow oil and gas are bad and windmills are good?
Lord Whitty
I think it is just as well that the MP for Grangemouth does not determine our energy policy. It is important to recognise that there are substantial employment opportunities in renewables.
Lord Whitty
Indeed. Many of those jobs have the skills that will be required in renewable technologies as well. However, at the moment it is the Government’s policy, the previous Government’s policy and the policy of all parties in this House to reach the target for renewables in this country. That is not saying that we should close down oil and gas opportunities; it is saying that in future we should give the renewables industry, whether wind, tidal or wave, equal opportunity with gas and oil facilities. When offshore wind providers are seeking private investment in a relatively new technology, the confidence of those investors and the realisation of government policy in this area are inhibited by the threat of the oil and gas facilities trumping them. To look at it the other way around, if proposers proposing a renewables process operation are faced with the possibility of an oil and gas facility coming in, they have to negotiate. At the moment, there is no obligation on the oil and gas companies to negotiate, which is the injustice that I am addressing.
To be frank with my noble friend, I think that, yes, it is a matter of public policy to give some preference to renewable industries and that we reduce the carbon content of our energy supply. It is therefore important to reduce the reliance on carbon-based fossil fuel. But that is not quite what this amendment is addressing. It is to address the disparity of treatment between the two sectors and to ensure that confidence can be inspired for developing renewable technologies offshore.
We believe that both the offshore wind industry and the oil and gas industry are needed and can successfully coexist to ensure the nation’s energy needs are met. DECC is working with both industries and their trade associations to encourage effective co-ordination and co-operation in their respective development processes. Our expectation is that suitable consultation, planning and phasing of the respective operations will in most cases allow both developments to achieve their objectives in full, or with only minor compromise. I note what the noble Lords, Lord Oxburgh and Lord Jenkin, said on this.
At the stage of formal consent, an application from either industry to exploit the natural resources of our marine environment would be considered as part of the standard procedures of the relevant authority and be consulted upon with interested stakeholders. Any user of the sea—including oil and gas and offshore renewables industry players—is able to make representations at a number of stages, including the formal consent process and the environmental impact assessment. We recommend that interested parties do so, so that their views can be taken into account in any decision-making.
It is worth noting that the Government are well aware that this issue is causing concern, particularly to the offshore wind industry. Therefore, the department is working on a solution that is acceptable to all parties. I hope that that will help to reassure the noble Lord, Lord Whitty.
Clearly, in terms of the financial compensation that has been referred to, if the oil company is not prepared to offer appropriate compensation, there is no question of the Secretary of State intervening to override what is happening there.
We understand the motivation behind what the noble Lord, Lord Whitty, is proposing, and it is extremely important that there is equal treatment. I am a great believer in equal treatment. Therefore, we understand why he has brought this forward. We do not think it appropriate at this stage to agree this amendment to primary legislation—to hardwire it in—but we understand the issue. It is being looked at currently in DECC. Obviously we do not want any situation to develop that will disadvantage what we are trying to do with the Bill as a whole. As the noble Lord, Lord Judd, pointed out, it is the vision of where we are going as a whole that is important in this Bill. That is apparent from the Bill and everybody's involvement in it. If we bear that in mind, it is important that these issues are resolved and DECC is looking at that at the moment. I hope that in the light of that explanation, the noble Lord will feel able to withdraw his amendment.
Lord Whitty
My Lords, I thank the Minister and everybody who took part in what was a rather wider debate than I originally envisaged. I thank particularly the noble Baroness, Lady Parminter, and my noble friend Lady Smith for their support for the amendment. My noble friend Lord O'Neill, not for the first time and I suspect not the last, provoked me into saying more than I ever intended and more than was particularly helpful to this amendment. As my noble friend Lord Lea said, the preference or otherwise is largely a matter for the fiscal system, which is already there. But if there is in addition a disadvantage to one sector as against another in the process, we should address that as well.
I am grateful to the Minister for saying that this is at least on the radar screens of the department. But it has been on the radar screens of the department and predecessor departments for at least eight years to my knowledge. We need to hurry this up.
Whatever I may have said earlier, this is not about giving a preferential position. Nor is it dealing with the whole of the ocean. It is dealing with those areas where a licence or lease has been given or is about to be given or where a project is already operating. The rest of the ocean is open to the oil and gas industry in any case. Nor is the amendment saying that in no circumstances will oil and gas be allowed to operate there. All I am requiring them to do is to negotiate to reach an agreement. I hope that the Government can help to set up a process whereby that happens and thereby to equalise the hoops that any new developer will have to go through. There are two different forms of consenting and they are not the same. Some would say that they slightly—I think they are significantly—disadvantageous to renewables as against oil and gas.
I am grateful to the department for the terms in which the Minister has responded. However, I ask her and her officials to hurry up because this is an outstanding issue. In a sense, the oil and gas industries can go to their boards—the noble Lord, Lord Oxburgh, used to sign these off himself. Yes, they have the option of going anywhere in the world, but so does the kind of City finance that, by and large, offshore, wind and certainly the newer technologies of tidal and wave will have to go for. They also have the option of going elsewhere and it is important that the element of risk is reduced and that coexistence is a reality. It must be coexistence between equal partners in the delivery of our energy mix and not one that gives an advantage to one sector as against another.
Having said that, I accept the Government’s good faith in looking at this. I would be grateful if in a month or two we could complete that process and come back with a system that addresses the problem. In the mean time, I beg leave to withdraw the amendment.
The Lord Bishop of Chester
My Lords, whether one takes the view that current government policies will lead to an unpleasant, unfortunate and regrettable increase in energy prices through the renewables obligation and so forth or one takes the line of the noble Lord, Lord Deben, who is not back from the vote yet, that this is all in order to save the universe, the public needs a certain amount of transparency on the issue.
Another reason it is important concerns the great increase in energy prices since the youth of the noble Lord, Lord Dixon-Smith, who must be even older than me if it was that cheap when he was young. The key question going forward is how energy prices in this country relate to energy prices in other countries. If such prices in this country get out of step internationally, that would have profound implications precisely for the people in the pub in Burton upon Trent who would find their jobs under threat if they were dependent on energy usage.
Whichever way you look at it, a consistent, annual process of reporting should be as far as possible value-neutral. We can all then make our minds up on a fair and accepted basis of available information, which is important for going forward. It would be very hard to say that that is available at the moment. As has been said, there is a great deal of confusion. One way or another, I do not doubt that this amendment is not right in its present form—perhaps this is not the Bill for it—but we need to have information or there will be misinformation. It needs to be a priority as we go forward with our energy policies.
Lord Whitty
My Lords, I broadly support the thrust of these amendments. It seems to me that there are four separate issues. First, on transparency, most people who have spoken think that there should be more transparency. The noble Lord, Lord Deben, is not in his place, but it would not be that difficult for the Treasury to provide more transparency in this area. Between DECC, the Treasury, Ofgem and DWP, a lot of information needs to be pulled together. It should be presented in such a way that debate can be focused and different policy options can be properly addressed. That does not exist as effectively as it should. The first of these amendments attempts to address that issue.
The second issue is, faced with that information, what is the policy? To address the point made by the noble Lord, Lord Deben, we clearly all agree that if you are going to have behavioural change, somebody has to bear the price. It is a question of who bears that price, what the social consequences are of bearing it, what the structure of tariffs is—to go back to the point raised a few days ago by the noble Earl, Lord Cathcart and the noble Lord, Lord Teverson—and how they affect people’s behaviour and energy use. We can draw different conclusions. We can have a proper policy debate as long as we have the basic information in a form that is understandable, at least at some level, not only by us but in a public bar in Burton upon Trent.
The third dimension is the narrative. Wearing my consumer hat until very recently, I have argued that the narrative to consumers about where we are going on energy has been missing. Without that narrative, we are not going to convince the public in general that we have an energy policy that works for them and which has a clear outcome. From their different perspectives, the energy companies, consumer groups and the Government are in desperate need of a clear narrative, but it depends on having clarity of figures.
The last point addressed by the second amendment is about where we discuss this. Whether or not the exact form that my noble friend Lord Lea proposes is suitable for our approach to government, clearly there has to be somewhere where energy policy issues are addressed from the different objectives of energy policy: decarbonisation, fuel poverty, climate change, energy security, investment necessities, the structure of regulation and other government interventions. Of course, there are going to be definitional problems even with regard to the basic information. Is road fuel duty an environmental tax or not? It was started by Lloyd George when climate change was not a well known problem. It is difficult to say that it is entirely an environmental tax as distinct from a general tax-raising power. Likewise, is the winter fuel payment really to address fuel poverty or is it a supplement to social security policy?
There will be serious definitional problems, but let us get them out in the open. We can then move on to clearer policy discussion and to a narrative that the public might eventually be persuaded to understand. Although noble Lords will no doubt have some problems with aspects of the amendments as down, it would behove all of us to recognise that these four issues need to be addressed. At the moment, one of the problems of energy policy is that people have got hold of part of the problem but cannot see the totality. One of the reasons for that is the lack of agreed and clear statistics and information on the basic facts about energy.
Lord Judd
I agree with my noble friend that our noble friend has opened up huge issues, but does he not agree that what this exchange really illustrates is that we limit ourselves by talking about energy as though it were a commodity, when it is not? Like water and the atmosphere, it is a public good, in effect, because human societies simply cannot operate without it. From that standpoint, these strategic considerations and how they come together are crucial.
Lord Whitty
It is a public good, but public goods also have a price, and somebody has to bear that price. The public good of energy is a variable commodity in the form in which it comes, in the way that water and air are not. Therefore, there are more policy options and more complications.