Energy Price Cap: Residential Buildings with Communal Heating Systems

Matthew Pennycook Excerpts

Wednesday 20th April 2022 Westminster Hall

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

I will be incredibly brief—I think we will be voting shortly—and will pick up on a couple of points made by others in this debate. I have been raising issues about the lack of consumer protection for customers of communal heat networks since I was elected in 2015. It is a very long-standing issue, and there has been a tangible lack of progress in addressing it.

The first issue is the statutory regulation of the sector. We have come a long way. I remember raising this matter when I was a member of the Select Committee on Energy and Climate Change before the Department was abolished, and Ministers would tell me that statutory regulation of the sector was not required, that introducing it risked strangling an emerging industry at birth and that they were not going anywhere near it. I remember asking the CMA—[Interruption.]

[Mark Pritchard (in the Chair)]

Order. I have to suspend the sitting for a Division, and I understand that we will be having a lot of them. The first suspension will be for 15 minutes, but it will be 10 minutes for subsequent votes. If Members could make their way back a little faster after the final vote, we can get off to a quick start.

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[Mr Philip Hollobone (in the Chair)]

The sitting is resumed. Our new finish time is no later than 9.10 pm.

[Matthew Pennycook]

Thank you, Mr Hollobone. As I was saying, I recall asking the Competition and Markets Authority to carry out an area of investigation study into this sector. As the Minister will know, the CMA eventually carried out a market study, which recommended statutory regulation. We then had the “Heat Networks: Building a Market Framework” consultation, which closed in June 2020. We had the Government response in December 2021, but no sign of any legislation.

All I will say to the Minister is that this is an issue that has become incredibly pressing as a result of the energy crisis but, as I have said before, it predates that. For a range of reasons, we need to see statutory regulation as a matter of some urgency and I hope that he can give us some sense that in the next parliamentary session time will be found for it.

This is a pressing issue now, as a result of the energy crisis and the pressures that households are consequently facing. It has already been mentioned by several speakers that, as commercial contracts, these heat networks are not covered by the default tariff Act. Therefore, customers who source their energy from heat networks are not protected by the energy price cap.

That is a serious problem because, as others have said, customers who get their heat from these networks are experiencing shockingly high price rises. I recently wrote to the Minister about one case that is illustrative of what is happening in numerous buildings in my constituency. I have a huge number of buildings that are affected, because of the number of new build properties constructed over recent years, whether that is the Royal Arsenal in Woolwich, Enderby Wharf in east Greenwich or the Greenwich Millennium Village. All of them are facing the same problems.

I put to the Minister a case from the Paynes and Borthwick development in my constituency, where the unit energy charge on the development has gone up by 367%. I repeat: 367%, uncapped. Residents are really feeling those increases in their bills. We need the Government to step in and provide an immediate stop-gap solution for these customers, because they cannot handle the increases in the bills that they are experiencing.

Ultimately, I want to see the energy price cap extended to these customers. I realise the difficulties that would entail, in potentially driving more small energy suppliers out of the market, which we do not want to see. However, it is really for the Government to find a way to support those suppliers if they were to bring in such a price cap.

If the Government are not willing to go there, they need to look at targeted support for these consumers because, as things stand, the warm home discount, the energy bill rebate and the household support fund—where it applies—are not enough to help them to cope with rises of the magnitude that we are seeing. Minister, please ensure that we get legislation, so that the sector is put on a proper regulated footing as soon as possible. However, in the short term, please do something for these consumers, because they are really struggling with these increases and they need help now.

[Mr Philip Hollobone (in the Chair)]

We now come to the Front-Bench speeches.

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[Greg Hands]

Yes, the hon. Lady is absolutely right. Her constituency, and mine probably even more so, will have people in exactly that category. That is why the Government also provided £144 million in funds to local authorities to help those vulnerable customers who do not live in band A to D properties—either they live in a larger property or they do not pay council tax at all. That £144 million fund is available for local authorities to help those who do not fall into the £150 council tax rebate.

We provided a total of £1 billion funding through the household support fund, enabling local authorities to support—on top of that—the neediest households with the cost of living, and all that support will help people in the short term. Clearly, in the long term, we need to see a more sustainable regulatory system for heat networks. That is why the Government have committed to introducing legislation within this Parliament, which will see Ofgem regulate the heat network industry. With Ofgem having regulatory powers over the heat network industry, legislation will secure fair pricing for all heat network customers, as well as ensuring that heat network operators secure the best possible purchasing deals for their customers. Ofgem will also have powers to investigate and intervene when networks appear to be charging customers disproportionate prices.

Heat networks are part of the pathway to decarbonising heat. By operating at scale and, in some cases, by making use of waste heat sources, heat networks can supply heating more cheaply than individual gas boilers. The study commissioned by my Department in 2017 found that heat networks supply heating at a discount of £100 per annum on average compared with individual gas boilers—it is literally a case of economy of scale.

[Matthew Pennycook]

The Minister will be aware of the serious problem of standing and capital replacement charges on many privately owned networks, and that problem continues while consumers on those networks are seeing increases in their unit energy price. I hope that he agrees that that must be tackled, because although tariffs can be well out of kilter and not provide the fair deal he is talking about, which I concede is the case in many schemes, standing and capital charges rise significantly year on year, placing an additional burden on consumers.

[Greg Hands]

I thank the hon. Gentleman for his intervention, and I am very happy to look into that. I will speak with my ministerial colleague Lord Callanan, and perhaps he or I will write to the hon. Gentleman about what has been going on with standing charges on heat networks. It is a fair question and I will get back to him on it.

To conclude, I reiterate the Government’s commitment, first, to providing short-term support to those struggling with energy prices and, secondly, to making the necessary long-term changes to improve the heat networks market and make the UK energy-independent at the same time. The heat networks market is a key sector for our green ambitions, but it must also deliver for consumers daily, so we will continue to ensure that prices are as fair as possible.

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[Dame Meg Hillier]

Thank you very much, Mr Hollobone; it is a pleasure to serve under your chairmanship—hours have passed between the beginning and the end of the debate.

In many respects, the Minister summed up the feeling of colleagues present. It is instructive that a lot of London MPs were present for the debate. For all the talk about levelling up and about other areas of the country being poor, the cost of living in London is very high, and those on average incomes who live in properties with energy supplied by a heat network are doubly hit by the challenges of energy prices.

I am pleased that the Minister has reiterated that the Government are going ahead with long-term change. I am keen, and will continue to push, for additional support to be provided to those consumers because of the extremely large increases in their bills. The fact that local authorities are expected to use the hardship fund to support households is an important point, because that will be an extra drain on local authority budgets in constituencies and boroughs where lots of residents live in such properties. I undertake to do some more number-crunching in my constituency.

[Matthew Pennycook]

indicated assent.

[Dame Meg Hillier]

I see that my hon. Friend is nodding. I think we will come back to the Minister on that, because that money should be distributed in a way that recognises that those households and vulnerable customers are hit hard by the additional high costs and really need support right now.

I thank the Minister and the shadow Minister, my hon. Friend the Member for Southampton, Test (Dr Whitehead), for their responses, and I thank all colleagues who have been supportive, including those who were unable to attend today.

Question put and agreed to.

Resolved,

That this House has considered the energy price cap and residential buildings with communal heating systems.

Nuclear Energy (Financing) Bill (Fifth sitting)

Matthew Pennycook Excerpts

Committee stage
Tuesday 23rd November 2021 Public Bill Committees

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

The Minister has just mentioned the obligation on the Secretary of State that is in the Bill. My hon. Friend the Member for Southampton, Test made the point that this levy may be £10 a year on average, or it may be more. Have the Government made any assessment of the number of customers that that increase will potentially tip into a qualifying benefit, therefore making them eligible for the warm home discount? Have they assessed what a nuclear RAB might do to the number of people who are eligible for that discount? The argument we are trying to make is that there is potentially a saving for Government here by socialising the risk among non-warm home discount consumers when it comes to funding these types of projects.

[Greg Hands]

The hon. Gentleman asks a fair question, which I would answer in a couple of ways. First, this issue is best considered in the round as part of the process we have outlined, with the consultation and decisions to be made next year. Secondly, the actual amount would depend very much on the nuclear project in question. What we have shown is that we believe the RAB model will make bills overall less expensive to the consumer by roughly £10 a year for an average dual-fuel bill payer, as the hon. Gentleman has rightly pointed out. However, that amount will ultimately depend on the size and scope of the nuclear plant that is proposed. I think a better way to deal with this issue is to deal with it in the round, in the way the Government are proposing. I stress that the RAB is designed to save consumers money over the life of the plant; that is one of the key reasons why we are proposing it.

I am grateful to the hon. Member for Southampton, Test for tabling this carefully considered amendment and for raising the important issue of energy costs for low-income households. Nevertheless, I hope that I have shown both that the Government are already taking action to help this group and that this clause forms part of a wider conversation about how we transition our energy system away from fossil fuels in a way that is fair and affordable for all. I therefore hope that the hon. Gentleman will withdraw his amendment.

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[Greg Hands]

I will try to deal with the two questions that the hon. Gentleman raised. First, he asked whether the funds can be held for a long time, and about the period over which they can be held. Obviously, the regulations will be laid before Parliament in due course, and will be subject to the affirmative procedure. However, I point him to how the contract for difference regime works under the 2013 Act. My belief is that in this case, the reconciliation takes place after a period of months—that is probably the best way to describe it. It depends on what the hon. Gentleman means by somebody holding on to funds, or indeed having a shortfall of funds, for “quite a long time”, but we always have to strike the balance between what is operationally straightforward and what prevents somebody from holding on to funds, or from having a shortfall of funds over a period of time. However, the workings of the contract for difference regime might give the hon. Gentleman the most likely pointers as to what the regulations may look like; they will obviously be subject to consultation in due course anyway.

The hon. Gentleman also asked what happens to the money, and whether the supplier is obliged to return the money to the customer. He raises a fair point. The difficulty is that there is no obligation on the supplier to take the money for the RAB from the customer in the first place. The assumption is that the supplier will bill the customer for the cost of the RAB, but there is not an obligation to do so, so I am not sure that creating an obligation in this legislation to send back money the other way would be appropriate. Again, I refer the hon. Gentleman to the workings of the contract for difference under the 2013 Act.

[Matthew Pennycook]

That raises an interesting, and quite concerning, point: what in the legislation prevents a supplier from overcharging its customers on the basis that it is levying the RAB? Is there a limit to which a supplier can levy the customer? On the basis of what the right hon. Gentleman has just said, the supplier could overcharge the customer, make the payment owed to the counterparty and find itself with additional funds raised from those customers.

[Greg Hands]

First, the whole process will be regulated by the authority—in this case Ofgem—which would have oversight. Secondly, that would also be a matter for the regulations that are to be published in due course. Thirdly, the frequent reconciliations would obviate risk of that happening in the way the hon. Gentleman describes.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Application of sums held by a revenue collection counterparty

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[Matthew Pennycook]

I rise to speak briefly to amendment 17, because it relates to an important matter that builds on our earlier discussions. I listened to the Minister and heard what he said about the revenue collection contracts arrangement seeking to replicate the tried and tested CfD arrangement, as he put it. The thing that makes what we are talking about different is that there has never been a CfD arrangement of the size of the RAB nuclear model. The scale of the capital commitment involved in a nuclear project dwarfs anything that we have seen before. The changes in total nominal amounts that are likely to happen from year to year in the scale of that capital value could mean that we have large fluctuations in the amounts being collected by the counterparty.

The Minister has said that regulations will address that and are forthcoming via the affirmative procedure. He expects that the reconciliation process of attempting to ensure that the revenue stream matches the allowed expenditure will happen twice a year, but there is the possibility that very large sums will sit within the counterparty, even if just for months. The amendment tries to address the possibility of those funds, or a proportion of them, finding their way into the Consolidated Fund.

It surely has to be the case, and I assume that it is the Minister’s intention via regulations, that the reconciliation process should be as frequent as possible so that the revenue stream matches the allowed expenditure at any point in the construction. I foresee circumstances in the production phase, however—perhaps not in the construction phase, because it is unlikely that a future nuclear project will come in under budget given their history—in which a company’s revenue from power sales might exceed the allowed revenue. There is a chance that we could see large mismatches and, therefore, lots of funds being stored up in the counterparty.

The central thrust of what the Opposition are trying to do with the Bill is to protect consumers and ensure that they pay the lowest possible amount to get a project such as the one that we are talking about onstream. It is therefore really important that we ensure that the Treasury cannot in any circumstances, unless it has exhausted all other options, take part of the funds that may sit with the counterparty for relatively brief periods. The Treasury could decide to take sizeable amounts, and it is important that they flow back to suppliers and, ultimately, to customers. That is the thrust of the amendment.

[Greg Hands]

As the hon. Members for Southampton, Test and for Greenwich and Woolwich laid out, amendment 17 addresses the situation in which funds held by the counterparty may be paid into the Consolidated Fund, which of course is the Government’s general bank account at the Bank of England. Currently, the legislation allows the revenue regulations to provide for sums to be paid into the Consolidated Fund. The intention of the amendment is to narrow the scope of that so that the regulations can provide for sums to be paid into the Consolidated Fund only where there is no alternative.

I thank the hon. Members for the amendment, which they explained well. It certainly echoes my sentiment that consumer funds should not generally go into Government accounts. I reassure Members that we envisage the power to have limited but important uses. For example, it could be used to ensure that the counter- party repays a loan given by the Government—by the taxpayer—to respond to an emergency. That is not a hypothetical situation. We saw the importance of it quite recently in the course of covid, when the Government did indeed have to provide a loan to the counterparty for the contract for difference regime: to the Low Carbon Contracts Company.

The taxpayer should be able to be repaid that loan, but the amendment provides that sums cannot be paid into the Consolidated Fund where there is an alternative. I could see a number of people making an argument that different things that could be done with that money would provide alternatives to what is being envisaged: in this case, repaying the taxpayer. If passed, the amendment would unnecessarily narrow the scope of the power in a way that would limit its use. I hope that my explanation has shown Members the importance of the power, which is in my view unlikely to be used. However, I have given a real example from the last couple of years of where exactly such a situation arose.

Nuclear Energy (Financing) Bill (Third sitting)

Matthew Pennycook Excerpts

Committee stage
Thursday 18th November 2021 Public Bill Committees

[Mark Jenkinson (Workington) (Con)]

Ms Fovargue, I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests. It is a matter of public knowledge that I worked in the nuclear industry before my election to this place.

Clause 1

Key definitions for Part 1

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

I beg to move amendment 1, in clause 1, page 1, line 15, at end insert—

“(6) ‘Owned by a foreign power’ means owned by a company controlled by a foreign state and operating for investment purposes.”

This amendment is a definition of “foreign power” set out in amendment 2.

[The Chair]

With this it will be convenient to discuss amendment 2, in clause 2, page 2, line 14, at end insert—

“(c) the nuclear company is not wholly or in part owned by a foreign power.”

This amendment prevents the Secretary of State designating a nuclear company owned or part-owned by the agents of a foreign power.

[Matthew Pennycook]

It is a pleasure to serve with you in the Chair, Ms Fovargue. The amendments you have grouped stand in my name and that of my hon. Friend the Member for Southampton, Test.

Taken together, the purpose of amendments 1 and 2 is to ensure that in enabling nuclear companies to benefit from the RAB model and for the Government thereby to bring a large-scale nuclear project to a final investment decision by the end of this Parliament, as they are committed to do, the Bill nevertheless makes it clear what kind of companies it would be inappropriate for the Secretary of State to designate for that purpose. In moving the amendment, my assumption—Government Members may correct me if I am mistaken—is that the Committee as a whole would accept that it would be inadvisable to allow some nuclear companies to own and/or operate a nuclear reactor on British soil. That is because civil nuclear power is, without question, critical national infrastructure, the compromise of which would have real implications for national security, given that any company owning and/or controlling such infrastructure would have direct access to the national grid.

Conservative Members, or indeed the Minister when he responds, may argue that the amendments are unnecessary, because no Secretary of State would choose to designate a nuclear company to benefit from the RAB model that posed any threat to national security. Yet it is precisely because previous Secretaries of State have been content to allow companies that the Opposition would argue should never have been given the opportunity to own and operate UK nuclear plants that we believe we need such additional safeguards in the Bill.

Put simply, we want to ensure that the legislation is amended so that this Government, or any future Government who might wish to use the RAB model for new nuclear, cannot make the kind of error that was without doubt made in recent years. Namely, a company owned and directly controlled by a foreign state—a state that the integrated review is clear poses a systemic challenge to our security, prosperity and values—was given the opportunity to own and access critical national infrastructure.

I will touch on the way in which the Government might, if they were minded to accept our amendments or table modified versions of their own on Report, differentiate companies owned and directly controlled by a foreign power and those in which a state merely has a majority financial stake. Before that, I will examine the error that I have mentioned and the lessons we might draw from it to improve the Bill.

On Second Reading, we made it clear that our strong view is that although the Bill has the appearance of a general piece of enabling legislation, it is in practice concerned solely with the future of Sizewell C, as the last potential nuclear project that could conceivably begin to generate by the end of the decade.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I note that the hon. Gentleman was choosing his words carefully. We all know that it is about the China General Nuclear Power Corporation; many people have concerns about its involvement in the nuclear sector, which I echo. He talked about when a state is a majority shareholder, which includes EDF in France, but surely the amendment says

“not wholly or in part”.

As France is a majority shareholder in EDF, would that not eliminate EDF from participating in the RAB exercise for Sizewell C?

[Matthew Pennycook]

The hon. Gentleman pre-empts what I will come on to say. We are keenly aware of the need to differentiate different types of companies, which is why, thankfully, the Chair has allowed me to group this amendment with amendment 1, which clearly defines what we mean by “owned by a foreign power”. It is not just owned by in terms of a majority stake, but directly controlled by in the way that I would argue EDF is not.

To return to the involvement of the China General Nuclear Power Corporation in UK nuclear more widely, we believe that the case of Sizewell C illustrates precisely why amendments 1 and 2 are required. Driven by an almost embarrassing enthusiasm for Chinese investment, which was shared and arguably surpassed by the coalition Government that preceded it, the Cameron Government eagerly embraced Chinese involvement in UK civil nuclear energy. As a result, Hinkley Point C, while largely financed by EDF, is underpinned by effectively foreign Government part-financing in the form of a 33.5% interest on the part of China General Nuclear Power Corporation.

When the final investment decision for Hinkley Point C was approved, associated heads of terms were agreed for CGN to take a 20% stake in Sizewell C and to secure majority ownership, complete control of planning and financing, and unfettered operation of the nuclear plant at Bradwell-on-Sea in Essex that would incorporate, subject to generic design approval, a Chinese-designed Generation III Hualong One reactor. Bradwell B was always the ultimate prize for CGN and why it was willing to take a significant stake in the Hinkley plant and a minority stake in the development work to progress Sizewell C toward a final investment decision.

As far as we can ascertain, although the present Conservative Administration have never said as much—I invite the Minister to remedy that if he wishes—there is now a general acceptance that acquiescing in the construction of a piece of critical national infrastructure at Bradwell that would be designed, planned, owned and operated by a subsidiary company of a Chinese state-owned enterprise, and, as all SOEs are in China, controlled ultimately by the Chinese Communist party, was perhaps not the wisest decision that the Cameron Government made.

Furthermore—I do not believe a Minister has said this explicitly, so I urge the Minister to provide greater clarity to the Committee when he responds—I take it as read that the present Government now take the view that such an arrangement is no longer tenable, and that it is their intention to remove the influence of the People’s Republic of China from the Sizewell C project entirely, and, should any new nuclear view on that project prove necessary, the future UK nuclear programme more widely.

The press release accompanying the publication of the Bill stated:

“The RAB model will reduce the UK’s reliance on overseas developers for financing new nuclear projects”.

The Committee will appreciate that that statement is not a clear declaration of intent when it comes to rolling out foreign Government part-financing, ownership and control of civil nuclear power in this country. If it is the Government’s intention to end foreign Government part-financing and ownership of new nuclear projects, the Committee should be told what that means in practice for the October 2016 Sizewell C strategic investment agreement, as well as what the Government’s reneging on that deal would mean for CGN’s 33.5% stake in Hinkley Point C. More specifically, it is right that the Committee is also given a sense of how, assuming it has been determined, the Government intend to remove the CGN minority stake from the Sizewell C company, or, if it has not, the various options being considered.

That brings me to the £1.7 billion committed to nuclear in the recent Budget, the purpose of which, according to the Red Book, is

“to enable a final investment decision for a large-scale nuclear project in this Parliament”—

the very same intention that we are told is the purpose of the Bill. As I am sure Members will appreciate, that statement contained in the Red Book is wilfully obscure. Given that Sizewell C is, as I have said, the last potential nuclear project that could conceivably begin to generate by the end of this decade, and the fact that this Bill creates the funding model that will almost certainly enable a final investment decision on it to be made, the Minister needs to be more transparent with the Committee about the future of the CGN minority stake, because the answer could have real implications for the applicability of the funding model set out in this legislation, and, as a result, the bills that consumers in all our constituencies will pay in the years ahead.

We heard from Professor Stephen Thomas in our evidence session on Tuesday that the cost of buying out the CGN minority stake in Sizewell C is likely to be a tiny fraction of the £1.7 billion allocated to nuclear in the Budget, so what will the rest of that public funding be used for? Will it in whole or in part be used to finance Sizewell C beyond financial closure? If so, how do the Government intend to require the consortium to allow them to participate, and will the investment of direct public funding, if made, have any impact on the amount of RAB financing that will be required for Sizewell C to proceed?

Whatever the £1.7 billion committed to in the Budget is ultimately used for, the involvement of CGN in UK nuclear power over recent years illustrates the risks associated with foreign states, particularly ones of an authoritarian nature, financing and operating critical national infrastructure. We should not only learn the lessons of that, but ensure that clauses 1 and 2 are tightened so that the Bill cannot be used to facilitate such involvement in the future. That is the purpose of amendments 1 and 2. Taken together—this follows on from the point made in the intervention earlier—they would ensure that the Secretary of State cannot designate a given company to benefit from the RAB model provided for in the Bill if the company in question was owned and directly controlled by a foreign power. Their combined effect would not be to prevent the coming together of consortia that are not UK majority-owned. That would almost certainly render future projects unviable or more costly, but the amendments’ incorporation in the Bill would ensure that consortia drawing upon the RAB model could not include investors owned and controlled by a foreign state.

The use of the word “controlled”, as per amendment 1, is critical. This follows on from the point I made in response to the hon. Member for Kilmarnock and Loudoun. We are acutely aware that in attempting to amend the Bill to prevent a company such as CGN from benefiting from the RAB model, we would not wish to prevent all companies in which states have a majority interest—EDF is the most obvious example—from doing so. That is why amendment 1 specifically defines “owned by a foreign power” as one owned and controlled by a foreign state.

I hope the Minister responds to the amendments in the constructive spirit in which they have been tabled and that the Government will see the value of incorporating them into the legislation.

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[Greg Hands]

I would say two things in response. First, Sizewell C may not feel it is appropriate to comment on the deployment of taxpayers’ money. Secondly, I know from long experience of Government that often the best way of securing taxpayers’ money in a negotiation is not to reveal too much about what approach the Government might be taking. We have laid out in the Budget document, which was quoted by the hon. Member for Southampton, Test, what we think is going to be in scope—what the £1.7 billion might be spent on.

The hon. Member for Greenwich and Woolwich asked a more general question about China. He asked whether this was about sending a message to China, or words to that effect. The answer is no. The UK welcomes foreign investment in our infrastructure, but as we have always said, that should not come at the expense of our national security. It is already the case in UK law that all investment involving critical nuclear infrastructure is subject to thorough scrutiny and needs to satisfy our robust national security and other legal and regulatory requirements. The National Security and Investment Act 2021 also strengthens our powers to act should we need to.

[Matthew Pennycook]

I take the point about the National Security and Investment Act. The Minister will know that that was given Royal Assent only in 2021. The strategic investment agreement that applies to Sizewell C was signed off—agreed—in October 2016. I think that I am right in saying that the National Security and Investment Act does not apply retrospectively, so how does it cover the specific arrangements in place as a result of that deal? Can he expand on what regulation is in force to give us assurance about safeguards in relation to foreign states and investment in civil nuclear?

[Greg Hands]

I thank the hon. Gentleman for that intervention. Of course, the final investment decision has not yet been taken on Sizewell C. All the relevant parts of the NSI Act will be in place—he is right to say that it got Royal Assent this year—but that final decision has yet to be taken.

The hon. Gentleman asked about Chinese involvement at Hinkley. May I be absolutely clear? The Bill is not reopening that decision. Hinkley Point C is vital to reducing our reliance on fossil fuels and exposure to volatile global gas prices. CGN is a partner in financing and building that important project. There is no involvement by any Chinese company in any major contract at Hinkley, including the instrument and control system.

As for Sizewell, to be clear, this Bill does not determine the ownership structure of Sizewell C or any other future nuclear project. That is another really important point to understand about the Bill. The Bill increases our options for financing nuclear projects, ending our reliance on overseas developers for finance—we are not excluding overseas developers—which has led to the cancellation of other nuclear projects in the UK. It will ensure that our own new nuclear power plants can be financed by, for example, British pension funds and institutional investors—often from our closest partners. That is the purpose of it.

[Matthew Pennycook]

I would like to pick up and press the Minister on the thrust of amendments 2 and 1, which is a consequential amendment. I take what he is saying about the purpose of the Bill being to attract, potentially, more UK investment—we do not know how much, but potentially—and about not wishing to exclude foreign investment. I take the point that he made earlier about the language used in our amendments and how he sees it as meaning a blanket ban. I would argue that it does not have that intent. There are complexities here, but does he not differentiate in his own mind between state-sponsored companies and state-controlled companies—controlled by foreign powers—that his own Government say pose a systemic challenge, and if he does, why does he not think that it is worth putting this in the Bill? Surely there is a need to differentiate and ensure that those types of companies—the latter—are not able to access RAB funding.

[Greg Hands]

I thank the hon. Gentleman for that intervention. Looking at the amendments, amendment 2 states that

“the nuclear company is not wholly or in part owned by a foreign power”

and amendment 1 states that owned by a foreign power means

“owned by a company controlled by a foreign state and operating for investment purposes.”

To be frank, I have a different interpretation, or at least I am not fully seeing his interpretation as being what he has in the amendment. The amendment strikes me as being worded in such a way that it could, for example, include nuclear operators from some of our closest partners. I look at what I see in front of me, rather than necessarily what Her Majesty’s loyal Opposition say that something might mean.

[Matthew Pennycook]

If the Minister is unhappy with our language, will he undertake to introduce Government language on Report that satisfies that differentiation?

[Greg Hands]

As I have made clear, we think that the Bill adequately addresses these issues, particularly in combination with the National Security and Investment Act, so I do not see it as necessary for us to make any further clarification. Ultimately, the Bill is about bringing in more financial options for future nuclear power, not cutting them.

The hon. Member asked about Bradwell. To reiterate, that is not a decision for now. CGN does not have regulatory approval for its reactor, nor has it submitted any applications to build a nuclear plant in Essex. We are in negotiations for Sizewell C, as the most advanced nuclear project in the UK.

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[Matthew Pennycook]

The Minister is being incredibly generous in giving way, which I appreciate. On the basis of what he just said, could CGN continue to be involved in a future project as long as those two criteria were met for that project, whatever it might be?

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[Matthew Pennycook]

I thank the Minister for his response. I also very much welcome his opining on the sanctity of the UK-EU trade and co-operation agreement—a refreshing change.

I agree with the Minister entirely that we are aligned on the importance of national security in our critical national infrastructure, but I am afraid he has not done enough to reassure me. From the argument he made, as long as the two criteria that he spoke to are met, it seems that we could still end up, having passed the Bill, with financing from companies such as China General Nuclear in future UK nuclear projects. Also—this is critical—because of the sequencing agreement that has been spoken about at length and has been agreed already, that would allow China in theory to own, plan, finance and operate a site at Bradwell. We might have not only CGN financing involved, but CGN operation.

I remain unconvinced by what the Minister said about the national security regulation that is in place. In essence, he said, “Trust the Secretary of State when the point of decision comes”, but we do not think that that is enough. We think this should be in the Bill. If he is unhappy with the wording of the amendment, I invite him to propose wording more appropriate to his mind, but that does the job. We will therefore press amendment 2 to a Division—not amendment 1, which is definitional in nature and consequential. I beg to ask leave to withdraw that amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Greg Hands]

I think we have already had the debate, but I will say briefly that the clause defines the key terms referred to in part 1 of the Bill. Subsection (2) defines a “nuclear company” as one that holds an electricity generation licence granted by the authority for a nuclear energy generation project. The authority is the Gas and Electricity Markets Authority, the governing body of Ofgem.

The clause goes on to make a distinction between an ordinary licensed company and one that has been designated by the Secretary of State to benefit from a RAB through having its licence modified by the Secretary of State. Subsection (4) defines a “relevant licensee nuclear company”. To become one such, it is necessary for the company to have had its licence modified by the Secretary of State to insert RAB special conditions and to amend the licence terms. It is also necessary for the company to have entered into a revenue collection contract with a revenue collection counterparty, so that RAB funding may flow to the company’s project.

Oral Answers to Questions

Matthew Pennycook Excerpts

Tuesday 16th November 2021 Commons Chamber

[Kwasi Kwarteng]

Perhaps to the surprise of the House, I can confirm that I am always delighted to visit my hon. Friend. I have done so on many occasions and I look forward to doing so whenever he wants and whenever my diary permits.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

In a speech last month to the Energy UK conference, the Secretary of State made the case for a decisive shift towards clean energy and away from what he termed “volatile fossil fuels”, on which he said

“we are still very dependent, perhaps too dependent”.

Will he therefore explain how a decision by the Government to permit Cambo, an oilfield whose anticipated lifespan would see it still producing oil four years before we are legally bound to reach net zero, would be anything other than fundamentally at odds with that vision?

[Kwasi Kwarteng]

The hon. Gentleman will understand that the licences under which Cambo was permitted were actually granted when his own party was in government. He will also appreciate that I have always said that there will be a transition. He and his Labour associates want to shut down the industry and cause mass unemployment among the 250,000 people in this country who work in the sector.

Nuclear Energy (Financing) Bill

Matthew Pennycook Excerpts

2nd reading
Wednesday 3rd November 2021 Commons Chamber

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

My apologies, Mr Deputy Speaker; I thought that another contributor was waiting to speak before me.

It is a pleasure to wind up the Second Reading debate for the Opposition. Notwithstanding the somewhat overly partisan opening from the Minister of State, who came along, as he often does, with a set of pre-scripted remarks that were in danger of being as old as some of the nuclear plants that are presently being decommissioned, it has been a considered and well-informed debate in the main. I thank each right hon. or hon. Member who has taken part.

I will pick up on three points that have featured prominently. First, as my hon. Friend the Member for Southampton, Test (Dr Whitehead) argued convincingly, although the Bill has the appearance of a general piece of enabling legislation, it is in practice concerned solely with the future of Sizewell C; I believe that the hon. Member for Bury North (James Daly) has just conceded that. Sizewell C is a project that EDF has no intention of financing from its own balance sheet and that we know has failed to entice the necessary private investors, as the right hon. Member for Kingswood (Chris Skidmore) mentioned in relation to Moorside and the fact that the current funding model is not fit for purpose.

It is vital that we bear that point in mind as the Bill progresses, because unfortunately for some, and much as the spin might suggest otherwise, it does not herald the dawn of a new nuclear fleet. It is simply a necessary means of resolving the issue of whether Sizewell, the last potential nuclear project that could conceivably begin to generate by the end of this decade, is constructed or not, and—this was referred to by the hon. Member for Morecambe and Lunesdale (David Morris) and, in an intervention, by the hon. Member for Gloucester (Richard Graham)—the issue of whether the cost reductions that will flow from the plant being a clone of Hinkley Point C, and its ability to draw on the skills and workforce associated with that site, are secured.

Several Members, including the hon. Members for Kilmarnock and Loudoun (Alan Brown) and for Richmond Park (Sarah Olney), argued that nuclear should not form any part of the UK’s future low-carbon energy mix. We on this side of the House respect their strongly held views on the subject, but we take the view, as does the Committee on Climate Change, that a limited amount of new nuclear is required to achieve the decarbonisation of the UK’s electricity system within the next 14 years, and to meet our longer-term net zero target. Since Sizewell C is the only power station that can now feasibly come online within that timeframe, we want to ensure that it does, in order to provide the necessary amount of firm power to support a predominantly renewable energy mix.

[Alan Brown]

As I pointed out earlier—and the hon. Gentleman is well aware of this—much of the existing nuclear fleet is going offline before Hinkley even comes online. Does that not indicate that the grid could operate safely and we could have energy security without relying on a new nuclear station?

[Matthew Pennycook]

I listened carefully, as I always do, to what the hon. Gentleman said in his speech. I think what he misses is the fact that the demand for electricity will double, so I do not think that his argument about the amount of baseload or firm power that is required necessarily follows.

[Mr Goodwill]

Will the hon. Gentleman give way?

[Matthew Pennycook]

I will, but then I must make some progress.

[Mr Goodwill]

Does the hon. Gentleman also appreciate that we may need to generate large amounts of hydrogen, or indeed use nuclear energy for direct carbon capture, and perhaps synthesise jet fuel in that way?

[Matthew Pennycook]

I think we will need a range of technologies. Let me return to a point that has been made by several Members. I think we must take a lead from the Committee on Climate Change, which made its view very clear in its balanced pathway scenario for the sixth carbon budget. It estimates that we will need 10 GW of nuclear power by 2035. We will have a predominantly renewable energy system, but we do need the firm power that comes from a limited degree of nuclear to support that.

My second point relates to what has been the elephant in the room today, namely China’s involvement in UK nuclear power. As we debate the principle of the Bill today and scrutinise its provisions in the weeks to come, that issue cannot be set aside. Members in all parts of the House want to understand more fully precisely where the Government now stand on the deeply flawed deal that they struck with China General Nuclear in relation to Sizewell, which has been mentioned several times in the debate.

The CGN stake in Sizewell was without doubt a sweetener for the far larger prize of unfettered Chinese ownership and operation of a nuclear plant at Bradwell, but while it seems certain that the very notion of a Chinese-run UK nuclear plant is now dead, we have yet to hear Ministers say so explicitly, or tell the House how the Government intend to disentangle themselves from the 2016 investment agreement signed by the then Secretary of State, the right hon. Member for Tunbridge Wells (Greg Clark). We deserve to be told, and I hope that the Minister will at least make some reference to that issue in his closing remarks. We also need to know how the Government plan to divest CGN of its minority stake in Sizewell C, and what the estimated impact of that divestment will be on the overall financing of the project, because that issue has very real implications for the mechanism that the Government have chosen to enable Sizewell to progress, namely the RAB model.

That brings me to my third and final point. A number of Members, including the hon. Members for South Cambridgeshire (Anthony Browne) and the right hon. Member for Kingswood spoke clearly and forcefully about the advantages of the RAB model. It is not in dispute that the proposed model will lower the cost of capital on nuclear projects—I fully accept that—and it is also not in dispute that it would lower overall costs, although Labour Members take issue with the frankly heroic assumptions that underpin the claimed £30 billion to £80 billion in long-term savings vis-à-vis coal-fired financed projects. However, it is also undeniably the case that these advantages would be secured as a result of shifting a proportion of risk on to consumers.

It is worth emphasising not only that the RAB for which the Bill would provide, and the risk therefore entailed in it, are of a different order of magnitude from RAB arrangements utilised on other infrastructure projects, but also that when it comes to the yearly surcharges levied on customers on those projects financed via RAB arrangements—for example, the Thames tideway tunnel, which has been mentioned

several times today—there is an inherent degree of uncertainty about the level at which those charges might peak. That is why it is important that the right hon. Members for Vale of Glamorgan (Alun Cairns) and for Clwyd West (Mr Jones) and the hon. Member for Waveney (Peter Aldous) rightly emphasised the need to scrutinise the precise arrangements that will be brought forward and the need for safeguards when doing so.

While we on this side of the House acknowledge the advantages of the RAB model for new nuclear compared with contracts for difference financing, we have concerns about the potential exposure of customers if costs rise significantly or if serious overruns take place. We do not oppose the principle of the Bill, and we have no intention of voting against it this evening, but we intend to look very carefully in Committee at precisely how the Government intend to implement the RAB model in question, at whether its benefits are as significant as has been claimed, and at how many investors the Government expect to return to the UK market if this legislation passes. Most importantly, we want to work with the Government to explore ways in which consumers might be better protected from escalating costs in the event that things go wrong. New nuclear must provide secure and affordable low-carbon energy, but it is still by no means clear that the Bill stands to deliver in both those respects. It is imperative that it should do so.

Oral Answers to Questions

Matthew Pennycook Excerpts

Tuesday 6th July 2021 Commons Chamber

[Anne-Marie Trevelyan]

The net zero strategy will include a focus on how better to embed net zero as a key consideration across all Government activity. Furthermore, infrastructure will play a crucial role in the transition to net zero, and our policies and approach will reflect that. The net zero strategy will continue to build on policies that we have already announced, such as the £1 billion carbon capture and storage infrastructure fund and the £240 million net zero hydrogen fund. We are also supporting underlying investment decisions to mobilise private finance. The national infrastructure bank announced in the Budget will have £12 billion of capital and be able to deploy £10 billion of Government guarantees.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

The 2021 progress report published by the Climate Change Committee last month stated:

“A pattern has emerged of Government strategies that are later than planned and, when they do emerge, short of the required policy ambition.”

Despite the committee’s characteristic politeness, that is a damning critique from the Government’s own climate advisers. I take it from the Minister’s previous answer that the House has this morning been given a cast-iron guarantee that a net zero strategy will be published well in advance of COP26; will she confirm that that is the case? Does she recognise that the credibility of such a strategy is predicated on a substantive Treasury net zero review that sets out precisely how the benefits and burdens of the transition will be shared fairly?

[Anne-Marie Trevelyan]

Of the 92 recommendations made by the Climate Change Committee in its 2020 progress report, 40 have been achieved or partly achieved and another 32 are under way, meaning that progress has been made against more than 75% of the recommendations. Our forthcoming strategies—including on hydrogen and transport and our comprehensive net zero strategy—will set out more of the policies that the committee calls for in its recommendations. I clearly cannot speak for the Treasury, which will publish its own review, but I know that that is also very well advanced.

Draft Carbon Tax Budget

Matthew Pennycook Excerpts

Monday 21st June 2021 General Committees

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to serve with you in the Chair, Mr Davies.

It will not be lost on right hon. and hon. Members that the order is incredibly significant and that it will have far-reaching implications for our economy and all aspects of our society over the next 16 years. For that reason, although the Opposition fully support its passage and have no intention of dividing the Committee, I hope that Members from all parties will forgive me if I make a series of important points and put a number of questions to the Minister. After all, in all likelihood this is the only opportunity the House will have to debate these matters in any detail.

As the Minister made clear, as this is the first carbon budget to be set since the House legislated for a net zero target in 2019, the sixth carbon budget marks a critical point in our country’s contribution to delivering on the ambition of the Paris agreement and thus keeping alive the hope of limiting global heating to 1.5° C above pre-industrial levels.

Labour very much welcomes the Government’s decision to accept the Climate Change Committee’s advice that the budget level be set at 965 megatons of carbon dioxide equivalent for the 2033-37 period. I also put on the record the Opposition’s thanks to the CCC for the comprehensive nature of the advice it produced in December, as well as the road map that it set out alongside that advice for achieving a fully decarbonised economy by mid-century.

We also welcome the Government’s decision finally to include emissions from international aviation and international shipping in the legal scope of carbon budgets. I press the Minister to give the Committee a more precise timescale as to when the separate order necessary to give effect to that decision will be introduced.

That our country must achieve carbon neutrality by 2050 at the latest is not in dispute. Indeed, the Government’s own impact assessment for the sixth carbon budget states that

“there is no alternative to the legal requirement in the Climate Change Act to set a sixth carbon budget level with a view to reducing UK emissions to net zero by 2050”.

Yet it is hard to overstate the challenge posed by seeking to reduce emissions by 78% below 1990 levels over the next 16 years.

As the Minister is acutely aware, the sixth carbon budget target represents a significant scaling-up of ambition relative to the fourth and fifth budgets. For the first time, the whole of society will be required to engage more directly with emissions reduction, in terms of the products we buy and the way we live our lives. However, as the CCC made clear in its advice, if the emissions reductions set out in the order are delivered, that will not only result in the new industrial opportunities that the Minister mentioned, the potential to create hundreds of thousands of well-paying and secure jobs in every nation and region, cheaper bills, warmer homes and a host of other health and environmental benefits, but produce net gains for our economy that offset up-front investment over the long term—for example, in relation to reduced reliance on imported fossil fuels.

The problem is that, as a country, we will achieve net zero by mid-century and realise its promised benefits only if the carbon budget and its two predecessors are met. However, as things stand and as the Minister knows full well, the Government are still off-track not only on the net zero target with which the order aligns the carbon budget framework, but on the less ambitious target that preceded it.

We accept that when it comes to stated ambition, the announcements made over the past year have brought the Government within touching distance of what is required to meet the fourth and fifth carbon budgets, premised as they are on an overall emissions reduction target of 80% relative to 1990 levels. However, when it comes to the commitment in the 2030 nationally determined contribution that the Minister mentioned and in the sixth carbon budget, which we are legislating for this evening, there is still a significant gap between current ambition and what is required to get on track on both those things.

So, for all those commitments that are now aligned with the net zero target—from the pledge to bring forward 40 GW of offshore wind by 2030 to phasing out petrol and diesel cars and vans by the same date—there are scores of other areas, from low-carbon heat networks and heat pumps to peatlands, where ambitions have either not been set or have been set but fall far short of what is required.

In adopting the CCC’s recommended target for the sixth carbon budget, we fully appreciate that Ministers are under no corresponding obligation to follow its specific policy recommendations. However, if the Government choose not to do so, as they have done, the onus is on the Government to make alternative proposals to demonstrate how the budget will be achieved across the economy; how, if ambition falls short in some areas, it will be made up elsewhere; and how, when it comes to up-front costs and distributional impacts, the transition will be made equitably.

Therefore, a huge amount rests on the comprehensive net zero strategy that the Minister mentioned and that we have been promised will be published prior to COP26 in November. That strategy needs to set a coherent vision, filling in the gaps and clarifying the ambiguities that remain. However, if we are to have an effective policy framework to ensure that this carbon budget is met, we also need the full range of detailed blueprints that have been promised by the Government, but not yet delivered.

Where is the heat and buildings strategy, which was promised for spring 2020 and has been repeatedly delayed? Where is the net zero aviation strategy, which was promised for early 2020 and of which there is no sign? Where is the hydrogen strategy that the December 2020 10-point package stated would be published in early 2021? Where is the transport decarbonisation plan, which was announced in 2020 and then delayed until spring 2021? It is still nowhere to be seen.

Crucially, where is the final Treasury net zero review? In an answer to a written question that I tabled on 18 May, the Exchequer Secretary stated that it would be published “this spring”. By my calculation, spring ends today, and there is still no sign of it. As the Minister knows, we need that review, not least because calling any net zero strategy that had not fully incorporated the conclusions of such a review “comprehensive” would be a misnomer.

There is a pattern here. The promises on a given strategy are announced to great fanfare. Some are delivered after significant delay, whereas others fail to materialise, and even those that are published too often fall short of what is required. That pattern points to another problem. Here I sympathise with the Minister—she sits in the lead Department, whose influence clearly does not extend across Government—because several Departments, most notably the Ministry for Housing, Communities and Local Government and the Department for Environment, Food and Rural Affairs, are simply not pulling their weight on emissions reductions. Even those that are doing reasonably well in relative terms are plagued by poor performance in key areas.

The Minister knows that net zero requires a whole-of-Government approach. As it has real implications for giving effect to the order we are about to pass, I would be grateful if she gave the Committee some sense of why certain Departments seemingly get away with lagging so far behind others. Why do the Cabinet Committees on climate action strategy and climate action implementation not appear to be doing what is required in leadership and co-ordination to drive progress across the board?

Finally, even if the Government close what remains of the ambition gap and introduce detailed strategies in each of the remaining areas, meeting the carbon budget and achieving net zero will still require a step change in delivery. As things stand, only a fraction of the emissions savings required to meet the sixth carbon budget are on track to be implemented in full. Given that the Government are not doing what is necessary to ensure that the change takes place at the pace required, any further fiscal opportunities to lock in a genuine green economic recovery from the coronavirus crisis cannot be squandered. From road building to planning, there needs to be a renewed focus on ensuring that all Government policy is compatible with the net zero target, but greater priority must also be accorded to ensuring that well-designed schemes, particularly those that relate to the decarbonisation of challenging sectors such as buildings, are up and running by the end of this Parliament.

The recent green homes grant fiasco is a case in point. It is not good enough simply to scrap the scheme for homeowners and take forward the local authority delivery element. Given the scale of the challenge presented by energy efficiency in the residential sector, Ministers need to introduce a replacement scheme as a matter of urgency—one that draws on the lessons of what has gone before. I ask the Minister to provide some assurance not only that work is being undertaken to that end, but that there is an impetus within the Government more generally to ensure that the gap between delivery and stated ambition is closed at the pace required to comply with the order and get us on track for net zero.

We of course welcome the order, but we remind the Government that announcing targets is the easy bit. The difficulty lies in achieving them. To date, the Government have been long on aspiration but short on tangible progress. We are about to pass the order, so the focus will turn decisively to implementation and delivery, and we look forward to rigorously holding the Government to account in that respect.

Draft Climate Change Act 2008 (Credit Limit) Order 2021

Matthew Pennycook Excerpts

Monday 14th June 2021 General Committees

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to serve under you in the Chair, Mr Mundell. In her opening remarks, the Minister presented the draft statutory instrument as almost a purely technical matter, and the Government’s decision to set a positive limit on the quantity of international carbon credits that can be used to meet the fourth carbon budget as a simple precautionary measure against future uncertainty in relation to accounting for that budget. To the extent that the Government have been clear, and the Minister has been clear again today, that it is not their intention ever to use the international credits for which this order provides, that may well be true, but the Opposition believe that the order is nevertheless problematic.

As the Minister said in her remarks, when placing a limit on the quantity of international credits that can be used to meet any given carbon budget, the Government, under section 9 of the 2008 Act, must take into account advice from the Climate Change Committee and must also consult the devolved Administrations. The CCC’s advice on this matter could not have been clearer. It recommended that international emissions credits should not be allowed to contribute to meeting the fourth carbon budget—that is, that a limit of zero should be set instead of the 55 megatonnes of carbon dioxide equivalent provided for by this instrument. In their response to the consultation, the Scottish Government made it clear that they would support the adoption of a zero limit. Similarly, the Welsh Government stated that they would support a zero limit in principle. The UK Government have determined that they will ignore those views and dismiss the very clear recommendation of the CCC. In doing so, the Government essentially make two arguments in support of setting a positive limit.

The primary argument is that the headroom provided by up to 55 megatonnes-worth of international credits is required to provide—I quote from the impact assessment—

“sufficient flexibility to manage uncertainty in emissions projections”.

The secondary argument is that the purchase of international credits could also enable the UK to support climate mitigation action in developing countries via the carbon budgets framework, and contribute to the development of a global carbon market, thereby reducing the cost of global climate action over the long term.

The second argument can be dealt with very quickly. At any point in the future, should they wish to do so, the Government can purchase international emissions credits to augment the delivery of their own carbon budgets through domestic action. There would be nothing to prevent the Government from bolstering global climate action efforts by means of the purchase of international credits if the limit on use of those credits to meet the fourth carbon budget were set at zero today.

The first argument is, on the face of it, the stronger one. After all, it is surely only sensible, as the Minister has said, for any Government to plan for contingencies and to build in some flexibility to mitigate unforeseen circumstances. The problem with that argument is that the benefit of building in wiggle room of a mere 2.8% to account for potential changes in the methodology underpinning the emissions inventory, or the risk of high emissions relative to current projections, is, we believe, outweighed by the damage that it causes. I do not dismiss it entirely, but I am not primarily referring here to the negative impact of setting a positive limit on investor confidence, which I believe the Government are right to argue is likely to be relatively small. I am thinking more of the harm that setting a positive limit is likely to cause in terms of the signal it sends about the Government’s perception of the degree of flexibility involved in the carbon budget framework, their commitment to achieve the net zero target through domestic action and—as a country that, as the Minister rightly said, has a relatively strong record of domestic emissions reductions—the example it conveys to other countries about the approach they can follow when it comes to their own pathways.

The Minister knows full well that the 2030 NDC that the UK formally submitted at the UNFCCC in December last year under the Paris agreement, and the sixth carbon budget announced in April, will require a far more ambitious pace and scale of emissions reductions over the coming years. If, as a country, we finally begin to do what is necessary to put ourselves decisively on track to achieve net zero, there should be no question that the fourth carbon budget, which—according to the CCC—remains at the right level even accounting for inventory changes, will be met without the use of international credits. Taken together with the fact that the Government’s central projections make it clear that they are unlikely to use the credits provided for by this order, and the likelihood that the cost of those credits will rise significantly in the years ahead, the Opposition believe that the case made by the Government for a positive limit does not outweigh the damage it might cause and is not strong enough to justify ignoring the CCC’s advice.

The Government should have the confidence to set a zero limit and thereby clearly indicate that they will do whatever it takes to comfortably meet, and hopefully outperform—given the more stringent targets that are coming forward—the fourth carbon budget through domestic action alone. For that reason, we intend to divide the Committee this afternoon. While I can see from the numbers here that the order will be approved, I hope the Minister will take on board our very real concerns about the detrimental impacts of legislating for the use of international credits and recommit the Government to doing whatever is necessary to achieve net zero over the coming years through planned government policy.

Oral Answers to Questions

Matthew Pennycook Excerpts

Tuesday 25th May 2021 Commons Chamber

[Kwasi Kwarteng]

With regard to TRID, the hon. Lady will know that the consultation on that closes tomorrow. I would urge all interested parties to feed into that consultation so that we can reach a good decision. She knows that I am on record as having committed to a strategic presence of steel in the UK . I think that is vital and as Secretary of State I will always promote it within Government.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

The crisis at Liberty Steel is yet further evidence of the need to break the cycle of crisis management that has defined the approach of successive Governments to this critical sector. The Secretary of State knows full well that there is a global race under way to green the steel industry and that our country is currently at the back of the pack, with no concrete plans for trialling hydrogen-based primary production and only vague plans for a single carbon capture-based project. With its long-term survival at stake, can he explain why the Government believe that the UK steel industry can afford to wait a further two years for the limited clean steel fund to even begin distributing investment?

[Kwasi Kwarteng]

I completely reject the basis of the hon. Gentleman’s remarks. The idea that we are at the back of the pack in decarbonisation is complete nonsense. We are the first country in the G7 to have come up with an industrial decarbonisation strategy. He and his Labour colleagues were saying, “Secretary of State, why don’t you nationalise Liberty? Why don’t you give Mr Gupta £170 million?”, and we made absolutely the right call. We showed judgment and restraint. Going forward, he will appreciate that I was the Secretary of State who resuscitated the Steel Council. We have had constructive conversations across unions and employers to work out a decarbonised future for the industry.

District Heat Networks

Matthew Pennycook Excerpts

Wednesday 28th April 2021 Westminster Hall

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Ghani. In preparing for this afternoon’s debate, I looked back over my records and discovered that the first time I raised concerns about inadequate consumer protection for customers of district heat networks was in early 2016, a matter of months after I was first elected to this House.

In some ways, the situation has moved on significantly since that date. I recall at the time making the case for greater protection for heat network customers, only to be told by Ministers that statutory regulation would not be appropriate, and that it risked strangling an emerging industry with red tape. There is now at least a consensus that further regulation is required in this area.

I remember pressing the Competition and Markets Authority to open an area of investigation into the industry, only to be told it had no plans to do so. The CMA eventually carried out a market study that determined that many customers of privately operated communal heating schemes are not well served on price and service, and it recommended a statutory regime governing the regulation of heat networks.

Yet, taken in the round, there has been a tangible lack of progress when it comes to doing what is necessary to ensure that heat network customers are adequately protected. That should be a concern to each of us, but it should particularly concern the Government, not only because of their avowed aim to keep customer bills as low as possible, but because low levels of consumer confidence in heat networks, born of consistently poor service and expensive bills, will make it that much harder for the UK to decarbonise heat and reduce our overall greenhouse gas emissions.

In the time I have today, I do not intend to delve into the enormous challenge presented by the urgent need to decarbonise heat, and what more the Government must do to meet that challenge, not least because I know that my hon. Friend the Member for Southampton, Test (Dr Whitehead) will do so with his customary rigour and incisiveness when he responds from the Front Bench. I do want to make the point that we will struggle as a country to take the public with us when making the case for the benefits of large-scale heat network deployment if we continue to put off addressing the systemic problems in the sector.

It is true that for many customers, heat networks offer an efficient supply of heat and hot water, at prices that are close to or lower than other sources of supply, such as gas and electricity. I am sure the Minister will cite evidence indicating that the majority of customers are satisfied with their systems. However, it is beyond dispute that a significant minority of customers of privately owned heat network schemes, including thousands of my constituents, given the number of new build developments in my constituency, are still not getting a fair deal.

Whether it is unreasonably high tariffs; significant variation in unit prices and average bills, not only between schemes but between customers on the same scheme; significant month-by-month variation on standing charges, which are often incredibly high; a lack of transparency in billing; or frequent outages that are the result of sub-standard or poorly installed equipment, far too many heat network customers are being badly let down.

As a voluntary consumer protection scheme, the Heat Trust does a good job. It is a welcome development that a growing number of sites are registering with it, but the protection it affords to customers on such sites are inherently limited. Similarly, the process of attempting to secure redress by means of a complaint to the energy ombudsman is time-consuming, constrained by the fact that the service deems issues such as heat price increases to be commercial decisions that it cannot adjudicate on. Of course, that is not available to customers on sites that, for whatever reason, have not registered with the Heat Trust.



The simple fact is that neither the trust nor the ombudsman is a substitute for providing heat network customers with the same degree of protection that is afforded to gas and electricity customers by means of formal regulation of the sector.

I say to the Minister: no more delay. The heat markets framework consultation closed on 1 June last year, and we have heard nothing since. Every month that passes without legislative action means yet more expensive bills and continued poor service for heat network customers at the sharp end of industry practice, who cannot afford to wait another year or two for the Government to provide them with the protection that they deserve.

I fully appreciate the demands on the Minister’s time, but I urge her to give the matter greater priority and, subsequently to this debate, to forcefully make the case for bringing forward the necessary legislation to introduce a regulatory framework for the sector as early as possible in the next parliamentary Session. In the interim, will she look again at what more the Department might do to cajole reluctant suppliers and operators to register all their communal heating schemes with the Heat Trust?