Net Zero (Industry and Regulators Committee)

Lord Whitty Excerpts

Friday 20th January 2023 Lords Chamber

[Lord Whitty (Lab)]

My Lords, I thank my noble friend Lord Hollick for the report. I remember that, when it first came out, I was deeply impressed by it. Since then, we have had a global energy crisis, and in this House we have considered, but have yet to complete, two enormous and constantly changing energy Bills to try to set out government policy more clearly.

Regrettably, those Bills do not answer many of the problems which the report originally raised. That includes, as others have said, the storage of gas and the production of renewable energy; the early deployment of carbon capture and storage; our much clearer nuclear strategy, including the role of small modular reactors; and the question of whether hydrogen will play any role in the heating of housing and other buildings, and the business model needed to support hydrogen. No decision has been made on the connectivity of the various arrays of offshore wind, the funding for heat pumps or the enhanced money for energy efficiency in homes to ensure that energy efficiency both benefits consumers and reduces the use of gas in our homes. There is also the question of how that will be paid for, whether by private or public funding, and in which way that will be delivered.

Those strategic questions have yet to be answered. The two Bills we have had since then have done some useful things, many aspects of which I agree with, but they have not answered many of these fundamental questions, including the role of the regulator as we go forward. This report focuses very much on the regulator and we do not yet have a clear indication about the relationship between Ofgem’s central role of looking after consumers and the net zero strategy. In Committee on the current Bill that is still going through—Committee has not yet finished—I tried to add a commitment where the role of Ofgem is extended to the consumers of heat networks. This is much needed, I agree with that, but we need to write into the terms of reference of Ofgem and other regulators the need to support and not to undermine the Government’s net zero strategy.

Like other regulators in the wake of privatisation, Ofgem was given the responsibility of looking after consumers, quite rightly, but that has to be expanded. We have to be clearer than we are in the current regulations and the Bill that is now going through about the relationship between Ofgem and the proposed future systems operator for the energy sector. It is important that not only Ofgem but the rest of our regulators have a relationship with the net zero strategy. Ofcom and Ofwat, in particular, need to have a relationship with net zero, as, frankly, do the financial regulators, to ensure that we are deploying finance and our whole financial system to support the overriding importance of net zero. Although this report rightly relates to Ofgem, we need to take the wider lessons on how regulation now operates in this day and age.

We also need to take up the point of cross-government co-ordination. That was repeated in the report just recently received from Chris Skidmore, and I hope that, while he may not be able to give a reply today, the Minister will be able, by the time the noble Baroness, Lady Hayman, has her QSD on Thursday, to give us an indication of how the Government will respond to Chris Skidmore’s report.