Marine Renewables Industry

Michael Shanks Excerpts

Thursday 16th January 2025 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

I am tempted to say that, although this debate has been great, it has gone on for so long that Ms Jardine has turned into Mr Betts, so I did not get the chance to congratulate her on her new job.

[Mr Clive Betts (in the Chair)]

I ask the Minister not to comment on the benefits of that.

[Michael Shanks]

I won’t. Hopefully, it was not the upcoming speeches from me and the shadow Minister that drove her from Chamber. In any event, it is a delight to be here.

I thank the right hon. Member for Orkney and Shetland (Mr Carmichael) not just for securing this debate and the customary way that he introduced it, but for the engagement we have had since I came into this post on this issue and many others. He is a great champion not just of marine renewables, but of Orkney and Shetland. In fact, in the last debate we had in this Chamber, he declared that God came from Orkney and Shetland. I am glad that we did not get into the theological nature of the debate this afternoon.

I thank all hon. Members for their contributions to this wide-ranging debate. I pay tribute to the various policy teams and organisations that have clearly done a very effective job of getting a consistent set of lines out to Members of Parliament; they have certainly earned their salary this week. Those are important points, and I will address each of them.

As hon. Members have said, the sector has enormous potential relating not just to energy outcomes, but to the many positive opportunities in skills, supply chains and innovation. The UK can export that innovation to the rest of the world. I will say at the very beginning that the Government are hugely supportive of marine energy, and we want to do what we can to support it.

I will start by giving some context on the Government’s position. As Members will be aware—many have raised it today—we published the “Clean Power 2030” action plan just before Christmas. That was an important step in providing some considerable detail on how the Government will deliver on our mission of clean power by 2030, which is hugely ambitious but achievable. It picks up on some of the strands that Members have raised this afternoon, including how we will deliver more effective grid connections and connections reform, as well as look at the planning system and consenting. It is about all the various things that Members have raised that hold back so much of the delivery of such projects across the country.

Clean power by 2030 is not some ideological project, as the shadow Minister, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), and others in the Conservative party might like to suggest. It is a critical pathway for how we deliver energy security in the long term; all our constituents have been facing a considerable cost of living crisis as a result of us not having home-grown energy security. The clean power mission is about ensuring that we not only have that energy security but tackle the climate crisis and deliver economic growth. I make no apologies for the fact that we are a Government moving at pace, because it is important that we grasp the opportunities for the implementation of both marine technologies and the many other innovative technologies that Britain can be a world leader in delivering. It is also our best opportunity to deliver cheaper energy for people across the country.

I want to pick up specifically on the point made by the hon. Member for South Devon (Caroline Voaden) and the shadow Minister on the clean power action plan. It is right to say that marine renewables are not in the top lines of the pathways to clean power by 2030, because we do not think that that technology is quite at the point where it will be deployed at scale to help us to achieve that mission. That does not mean that we do not hope that projects will come onstream before 2030.

Although we are sprinting to deliver clean power by 2030, that will not be the end of the journey. By 2050, we estimate that the electricity demand in this country will have doubled, so this journey will require us to harness all possible technologies to continue to expand our energy supply over the coming decades. That is where I think marine renewables will start to play more of an important role, as they get past the commercialisation challenges and their price comes down, and as we have some more confidence in the technology.

[Liz Saville Roberts]

I do not know whether the Minister will touch on the Crown Estate, so I am taking the opportunity now. On the point about electricity demand doubling, there is such potential in areas such as Wales and Cornwall, if it so wishes. The concept that the Crown Estate should be so centralised in the United Kingdom works badly in the interests of not only Wales but areas such as Cornwall. What does the Minister tell his Welsh Labour colleagues about why that issue cannot be devolved, when it would make such a difference to our local economies?

[Michael Shanks]

I will touch on the Crown Estate later in my speech. On that specific point, I am afraid that I fundamentally disagree with the idea that devolving the Crown Estate is the answer, and I take issue with the suggestion that the Crown Estate’s considerations in Wales somehow come from Whitehall. I have met a number of representatives of the Crown Estate, and they are in engaged with the Welsh Government and with communities in Wales. If we can do more on that, I am very happy to reach out to the Crown Estate, although I am not directly responsible for it and it is not accountable to me. Of course, it has published a number of strategies recently and there is more coming on the long-term vision for the Celtic sea and other parts of the Crown Estate in Wales. It is about partnership work, which includes not just bringing together the Crown Estate but how we look at the planning system and consenting, as well as the strategic spatial energy plan more broadly to plan for the long term. I will come back to some of those points later.

Although marine renewables are not at the centre of that clean power action plan to 2030, they will hugely benefit from the actions that we will deliver through it, not least on grid connections. Grid connections are all about future-proofing the grid in this country so that it can meet the demand of the future, and prioritising a grid queue that has got out of control with over 700 GW waiting to connect, which is simply not deliverable.

I would like to turn to the issue of funding, but first I wish a happy birthday to the hon. Member for Taunton and Wellington (Gideon Amos), who does not look a day over 21—but that is the last time I will pander to the Lib Dems. He raised a point about Great British Energy, as did a number of other hon. Members, many of whom I cannot help but notice did not vote for it, but now want it to be headquartered in their constituencies and deliver significant amounts of funding. Great British Energy will play a role in this space. It is our first publicly owned energy champion, and it will deliver and deploy clean power across the country and help with some of the innovation and development work.

Marine renewables are exactly the kind of technology that Great British Energy might invest in at an early stage and have a significant impact on, rather than technologies that are at a more confident stage. Hon. Members may not have had the opportunity to reach out to Great British Energy—the Bill is still going through the House of Lords, so it does not technically exist yet—but the start-up chair, Jürgen Maier, has had a number of meetings across the UK, has engaged on questions about a whole range of technologies and is keen to continue to do so. It will be for Great British Energy, as an independent company, to make its own investment decisions based on a whole range of factors, including the return on investment potential, but I see marine renewable technology as a potential benefit for it.

We think that tidal stream energy will play a significant role, particularly beyond 2030. As many Members raised, tidal stream will bring balancing benefits to a future electricity system that will have renewables at its heart. The balancing role that tidal can play—as a baseload, in the traditional way of thinking about the electricity system—would be important. Currently over half of the world’s tidal stream deployment is situated in UK waters. However, this Government want to go further and faster, as the technology has huge potential.

Aside from having one of the world’s best tidal resources, the UK also hosts world-leading marine energy hubs. Many hon. Members spoke about the EMEC. I have been pleased to speak to the EMEC over the last few months; the Minister for Climate, my hon. Friend the Member for Bristol East (Kerry McCarthy), visited recently and I hope to get to Orkney to do the same at some point.

When we came into power, the Government took the contracts for difference option that had been started by the previous Government and increased the budget to try to get as many projects as we could over the line. That led to a 50% increase in the ringfence for tidal stream to £15 million in the last allocation round. That demonstrated our commitment to the technology and ensured that 28 MW of tidal stream was secured in allocation round 6, including 9 MW for projects based in Orkney.

[Mr Carmichael]

The creation of the ringfence in AR4 had an absolutely transformative impact, so my sense is that meeting the industry’s request for a much bigger ringfence in AR7 could do similar. I am not expecting the Minister to tell us today whether that is the direction of travel that the Government are intending to take—although he is welcome to—but could he at least tell us when we might get an answer on that?

[Michael Shanks]

The right hon. Gentleman makes an extremely important point. One of the things we announced before Christmas in the clean power action plan was the broad outline of where we see allocation round 7 progressing this year, alongside the clean industry bonus. We will be saying more about that in the weeks ahead when we launch the initial information on what it will look like, but I am glad that the right hon. Gentleman is not surprised that I cannot announce anything today about what ringfences might be in place.

It is a tricky balance. The aim of the CfD and the reason that it is effective at what we want it to do is that it has to balance the deployment targets that we want to see with the critical role of delivering value for money for those who will end up paying for it—the consumers and all our constituents. Ringfences have an important role to play, but there is a danger that a ringfence could lead to us paying significantly more for a particular technology than we might want to.

[Mr Carmichael]

The Minister is being very generous. Actually, the setting of the ringfence is a process that could be significantly improved by the taskforce being set up, as that would allow the Government to understand what is going on in the industry, which improved understanding could inform decisions such as the setting of the ringfence.

[Michael Shanks]

The right hon. Gentleman is determined to move me more quickly through my speech; I promise that I will come on to the taskforce. He is right that the more visibility we have of projects that might bid, the more aware we can be of what the sizes of ringfences and budgets for each pot in the CfD might look like. A range of factors makes that complex, such as whether projects are at final investment decision stage, or whether planning and consent are in place to allow them to bid into the auctions. There are many factors, but the visibility point is well made. On ringfencing, I hear what hon. Members have said and what has been passed to our Department over the past few months, but we will seek to balance the needs to deliver deployment and to ensure value for money when making these decisions.

A number of hon. Members raised the issues of licensing and consenting, which are at the heart of our aims for reform of the planning system. We want to continue to have a robust planning system in which communities have a voice, but we also want to move much faster in making decisions, so that projects are not held up for years on end.

[Andrew Bowie]

The Minister is being very generous, and I apologise for taking his time, given that I have just spoken. He talks about reforming the planning system so that projects can be built faster. Obviously, a lot of the projects we are speaking about are in Scotland. Can he update us on discussions with the Scottish Government about reform of the planning and consenting provisions in the Electricity Act 1989, which are seen by some—not by all—as an additional burden for companies seeking to develop such projects north of the border?

[Michael Shanks]

I am grateful for the shadow Minister’s raising that point, because that is an important piece of work that we have been moving forward. With the Scottish Government, we launched a consultation, which ran for four weeks, on how the consenting process could be reformed, so that we can change the 1989 Act in a number of key areas. I think the consultation closed a couple of weeks ago; the responses are now being analysed, and we will bring forward legislation in due course.

That is a good example of partnership working with the Scottish Government on attempts to deal with some long-running issues. Across the UK, the key point is that the aim is not somehow to reduce the burden of planning where there are still opportunities for affected communities to contribute; it is about saying that it does not serve communities, developers or the Government well when decisions are held up for years on end. That is part of how we will speed these things up.

Other hon. Members mentioned the supply chain, which is incredibly important. That is why we as a Government have said that we are not agnostic about industrial policy in this country; we want manufacturing to come to these shores. It is encouraging to see that there is already significantly more UK content in tidal stream projects than in some other technologies that we have in this country. That is a real positive. I hope that we can continue that and learn from it for offshore wind and other technologies that we want to expand.

The right hon. Member for Orkney and Shetland and many others asked about setting up a taskforce. I am very open minded about that, and when I met the Marine Energy Council just before Christmas to discuss this and a number of other matters, I said that. I cannot quite remember how many taskforces I am currently chairing—we do like a taskforce, and they are important —and I am extremely grateful for the expertise of those who give up their time to come into Government, to help us to shape action plans and route maps and to understand what the challenges are. I am open to the suggestion, but if we set up something like that it must have a clear purpose, and at end of it we want a set of actions that Government and others can drive forward. That is what my officials are working on, and I am happy to speak to the right hon. Gentleman more about it.

On the technology point, the Government’s position is that overall the wave energy industry is at research and design phase. That is a key step on the journey to potentially achieving commercial viability, but we do not think it is quite there yet. We are aware that it has huge potential, given the nature of this country, and significant strides are being made to take it forward. My officials are regularly in touch with those in the sector and are being kept up to date on the latest developments. We hope that all these technologies will become extremely successful and the Government are happy to do whatever we can to support that.

The hon. Member for Strangford (Jim Shannon) said that he had not had time to write a speech but then, as always, he made a very eloquent contribution. I think that he and the hon. Member for South Devon made the same point about partnership, which is critical to all of this. The coast around this country offers enormous potential in our energy future, in floating offshore wind, in which we are already a world leader in so many ways—I hope we will continue to be so—and marine renewables, in the economic programme that we have already, and particularly in fishing. The point was strongly made that this is not about competing priorities, although it might seem like that; it is about how we can bring industries together to ensure that they co-exist. We can get real strength from that.

[Jim Shannon]

I thank the Minister for his comprehensive reply to everyone who has spoken in the debate. If he is not able to reply to this question right away, I am happy for him to come back to me in writing. I know he is keen to engage with all the regional Administrations, and I wish to make a plea for the Northern Ireland Assembly. I know it was difficult because the Assembly was not meeting, but the Assembly is back and playing the game again. Has he had the opportunity to talk to the Department for the Economy, to see how we can move forward collectively and in partnership?

--- Later in debate ---

[Michael Shanks]

That is an incredibly important point. I told the hon. Gentleman the last time we spoke on this topic that I am going to Northern Ireland soon for the next inter-ministerial working group for Energy Ministers from around the UK; I think that is in March. I hope that while I am there I have the chance to meet different organisations, because I am keen to understand how the energy system in Northern Ireland works, given the separate grid. I do not have responsibility for energy policy in Northern Ireland but I want us to work together and learn from each other.

To conclude my remarks, I am, first of all, grateful—I thought that this debate might finish at 3 o’clock and I was going to have to sum it all up in 30 seconds, but I have a little more time. I thank right hon. and hon. Members again for their contributions. I have come away from every energy policy debate in this place enthused by the real cross-party consensus on so much of this. There is much on which we do not agree, but on a lot of this we do. We need to hold on to that consensus because achieving the future economic and energy benefits of marine renewables will require them to outlive any particular Government. That consensus has been a strength over the past few decades and I hope it can continue. I have always said that I do not have any monopoly on wisdom on these questions and I am keen to hear and learn from projects in constituencies across the country.

It is clear that there is huge excitement in the sector. I hope that we can harness that and drive forward the development of these technologies in the future, and remove the barriers there at the moment. Those barriers will be removed even if they are not specifically barriers to marine projects, although I think marine projects will be affected by many things, such as planning and grid reform, to unlock the immense potential that we have across this country. I thank the right hon. Member for Orkney and Shetland. I hope to return to his constituency soon to see many of these projects and learn more about them. Together we can drive far more marine renewables in the UK, delivering value for money for households and harnessing the abundance of clean energy in this country.

Gas Storage Levels

Michael Shanks Excerpts

Monday 13th January 2025 Commons Chamber

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

(Urgent Question): To ask the Secretary of State for Energy Security and Net Zero if he will make a statement on gas storage levels.

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

Energy security is a key priority for this Government, and at no time was there any concern about Britain’s energy system being able to meet demand. Our systems worked entirely as intended. We had capacity to deal with market constraints, and that has been backed up by the two authoritative voices on this issue in the country—National Gas, which runs the gas network, and the National Energy System Operator.

We have sufficient gas supply and electricity capacity to meet demand this winter, due to our diverse and resilient system. While storage is an important flexibility tool in the gas system, our varied sources of gas supply mean that the UK is less reliant on storage than some other European countries that have a more limited supply options. Our diverse options include the UK continental shelf, our long-term energy partner Norway, international markets via the second largest liquefied natural gas onshoring capacity in Europe, and two interconnectors.

Gas storage is used throughout the year, but typically operates in winter to help meet peaks in demand. Through colder spells, storage levels are expected to fluctuate across the winter period. That is what happened last week following the severe cold weather, and it is a sign that the gas and storage markets are working exactly as they should. That is precisely why we have those systems in place. In their winter outlooks, National Gas and the National Energy System Operator assessed that there is sufficient supply to meet winter demand, including the role of storage. On Friday, National Gas, the owner and operator of Britain’s gas networks, confirmed that

“the overall picture across Great Britain’s eight gas storage sites remains healthy.”

We will continue to work closely with National Gas, NESO and storage operators to maintain continued security of supply. I reiterate: Britain’s energy system is working to continue to meet the demand of consumers across the country.

[Andrew Bowie]

All our constituents will be aware of the freezing temperatures experienced across the United Kingdom last week, dipping to minus 18° in the north of Scotland. However, many will not be aware of just how close this country came to an energy shortage, blackouts, or demand control—closer than at any point in the past 15 years. On Friday Centrica, the owner of British Gas, issued a stark warning that freezing weather and a spike in demand had reduced our gas storage to “concerningly low” levels—26% lower than this time last year. At a time when temperatures dropped below freezing for an extended period of time, our stores were set to last for less than a week.

Earlier in the week the National Energy System Operator issued a call for electricity providers to step in to provide extra electricity to meet demand and limit the risk of blackouts, paying 10 times the average daily amount to keep the lights on, all of which will end up on the energy bills of our constituents. With an incredibly tight margin between demand and available power generation, we were once again forced to rely on reliable gas power plants to keep the lights on in this country, showing that gas is and will be a vital component of our energy security for decades to come.

With their rush to meet the Secretary of State’s ideological target to decarbonise the entire electricity grid by 2030, this Government are playing fast and loose with our ability to keep the lights on. They are rushing headlong into a renewable energy dominated system—a Chinese renewable energy dominated system—but Ministers cannot escape the fact that when the wind does not blow and the sun does not shine, wind turbines and solar panels will not keep the lights on in Britain. We should be in no doubt that this Government’s ideological plans for our energy supply will leave the UK dependent on foreign imports, send bills soaring, and leave us teetering on the brink of blackouts.

Interestingly, when Labour was last in government in 2010, the Secretary of State whipped his then Ministers to vote against Conservative proposals to increase gas storage capacity in the United Kingdom, with a Labour MP on the Energy Bill Committee saying that

“the climate of this country, other than in the past month, is usually such that we do not quite need the same storage facilities as other countries in mainland Europe?”––[Official Report, Energy Public Bill Committee, 19 January 2010; c. 282.]

Does the Minister think the Secretary of State regrets not backing that proposal in 2010? Does he accept that the push towards renewables will lead to higher levels of intermittency, and does he accept that we will need to urgently review our gas storage capacity in the immediate future?

[Michael Shanks]

The shadow Minister’s point would be well made were it not for the fact that it is completely untrue. If we look at the facts, the capacity market notice that he mentions was cancelled—

[Mr Speaker]

Order. The Minister has made a direct hint that what the Member said was untrue. Is he sure of that, or does he want to rephrase it?

[Michael Shanks]

I apologise, Mr Speaker; I think the shadow Minister was confused in the facts that he gave to Parliament today. I am happy to set that right.

Let us look at the facts. The National Energy System Operator—the people who run the system—stated clearly:

“At no point were electricity supplies less than anticipated demand and our engineers were able to rebalance the system without the need to consider any emergency measures.”

If we listen to the experts—to National Gas and to NESO—they both confirmed over the weekend that there was resilience in the system. I reiterate the point that the system operated exactly as it was intended to do.

If the shadow Minister has complaints about how the system operates in the country and the gas storage situation, he may want to look at some of his colleagues who were in power over the past 14 years. He knows the truth about his party’s record. He is a very smart guy, and he knows they left us exposed. He knows they did not do enough to build the system that we need and he knows what caused the worst cost of living crisis in living memory. While his party is busy crowdsourcing policy advice on Twitter from net zero sceptics, it would be far better if they looked at their own record in government and, instead of criticising us, recognised that we are getting on with building a resilient energy system for the future.

[Mr Speaker]

I call the Chair of the Select Committee.

[Bill Esterson (Sefton Central) (Lab)]

The shadow Minister missed from his story the role of Liz Truss. When she was the Chief Secretary to the Treasury in 2017, she made the decision to close our gas storage facility. Does the Minister agree that if we want energy security and lower prices, that all depends on reducing our reliance on the volatile nature of the international fossil fuel market? Does that not mean that his clean power action plan for 2030 is exactly the right policy to address the events of the past few days?

[Michael Shanks]

My hon. Friend is absolutely right. The decisions that the previous Government took on storage are for them to answer, and anyone who looks at their record will rightly raise questions about that. On the broader point, he is right. The only plan for how we can get off the volatile fossil fuel markets, to which the previous Government left us far too exposed, is the clean power action plan that we have announced. If the Tories oppose that, they need to come up with their alternative to deliver the resilience in the system that we are fighting for every single day.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

--- Later in debate ---

[Mr Speaker]

I think the Minister has got the point.

[Michael Shanks]

The hon. Lady is right; this is an incredibly important issue that gets to the heart of the fact we inherited from the previous Government not just an economic mess but a series of policy decisions not made, and an energy system that needed us to take serious decisions quickly to build resilience for the future.

On the broader point about consumers, she will know that my hon. Friend the Minister for consumers is doing a lot of work on exactly what the warmer homes scheme will look like, to ensure that people have as warm a home as possible. She is right that at times such as this, the people in the poorest households struggle the most. We are doing what we can to ensure that homes are insulated and, in the long term, to bring down bills. The only way to do that is to deliver clean power by 2030—faster than the previous Government would ever have managed.

[Ms Polly Billington (East Thanet) (Lab)]

The shadow Minister comes to the House with no shame. As has been referred to by my hon. Friend the Member for Sefton Central (Bill Esterson), the shadow Minister’s party closed Rough in 2017, leaving us exposed. I commend the Minister on taking urgent steps through our clean power mission to secure our energy system, and I urge him to ignore the political distractions of the Conservative party.

[Michael Shanks]

My hon. Friend is right that this Government are moving as fast as possible to build a more resilient system to get the country off the rollercoaster of volatile fossil fuel markets. The Conservatives seem to oppose that, but they have been on something of a journey in all these questions: they used to champion net zero and recognise that climate change was a clear and present danger to the world, but now they are drifting further away from that, looking for more extremist views on Twitter and elsewhere to crowdsource their policy. We are getting on with building the energy system to bring down bills, deliver energy security and, yes, to deliver climate leadership.

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

The National Electricity System Operator issued a warning of a 1,700 MW shortfall at the evening peak. It revised that down to barely more than 1,200, and it was running at one point with only 580 MW of margin. How are the Government so complacent about this? It is astonishing. As someone who has followed the energy debate for the past 30 years or so, I warn the Minister that this is almost unprecedented. For him to say that everything is absolutely fine is incredibly irresponsible, when his own Government’s policies are contributing to the tightness of the generating margin. If the lights go out, will he resign?

[Michael Shanks]

That is the kind of extremist scaremongering that we have come to expect from the shadow Secretary of State on Twitter, but we are now hearing it in the House. It is thoroughly irresponsible to use such language. In my answer, I read the very clear view of the National Energy System Operator, which runs the system and is the expert. I repeat it for the benefit of the House:

“At no point were electricity supplies less than anticipated demand and our engineers were able to rebalance the system without the need to consider emergency measures.”

The shadow Minister and Back-Bench MPs can repeat the phrasing around blackouts all they like, but at no point was that a concern. The reality is that while the Conservatives are happy to throw around such phrases without any evidence, we are building the resilient system of the future, and we will get on with doing that.

[Luke Murphy (Basingstoke) (Lab)]

In government, the Conservatives saw the closure of Rough and reduced gas storage. In opposition, they oppose our proposals for clean power, and would see this country more reliant on volatile gas markets and higher energy prices. Is it not the truth that the Conservatives want us more reliant on gas, with higher bills and more likelihood of blackouts, because they oppose our plans for clean power and tackling runaway and accelerating climate change?

[Michael Shanks]

The decision on whether to run gas storage sites is a commercial one for Centrica. The storage site at Rough was closed between 2017 and 2022—hon. Members may remember that that was when the “beast from the east” was attacking the country. The previous Government will have to answer for the decisions that they made on that. We are making it clear that the only way to build the energy system that we need in the long term is the clean power action plan. The Conservatives used to support much of that but, increasingly, they have decided to walk away from it. They will either keep us attached to the volatile fossil fuel markets, with all the price spikes that our constituents continue to pay the price of, or they will have to come up with an alternative plan. We are getting on with doing the work.

[Sir Julian Lewis (New Forest East) (Con)]

Can I encourage the Minister to come out of combat mode for a second and consider a constructive proposal? If we are not to become re-dependent on gas when the wind does not blow and the sun does not shine, and we do not want to be dependent on foreign countries indefinitely, can he see a future role for modular nuclear reactors?

[Michael Shanks]

If I am in any kind of attack mode, it is because the Opposition do not seem to be dealing with reality, and I think it is important to correct that. The right hon. Gentleman is right that the future energy mix, as we outlined in the clean power action plan, will involve a range of technologies. We outlined the range we would expect for each of those, and nuclear—in particular small modular reactors—will play an incredibly important part in that. We are moving forward with the programme we inherited from the previous Government, which was yet another incomplete process. We will make it happen as quickly as possible, and SMRs will play a key role in our energy mix.

[Derek Twigg (Widnes and Halewood) (Lab)]

Following on from a previous question, clearly, the previous Government did delay investing in and starting up more nuclear power opportunities and options. What progress has been made since this Government came into power on plans to take forward nuclear power as part of our supply?

[Hon. Members]

When?

[Michael Shanks]

Conservative Members ask, “When?” —they had 14 years in power, and in 14 years did not build a single new nuclear project. The former Minister for nuclear, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), loves to shout about all the consultations that he launched, but he did not build a single new nuclear power station.

My hon. Friend is right to make the point that we should move forward with nuclear—we want to see nuclear projects move forward as quickly as possible. My hon. Friend the Minister for nuclear is moving forward with two of the biggest projects, as well as the small modular reactor competition. We are quite rightly going through a process to ensure that it is as robust as possible, but we will have more to say in due course.

[Wera Hobhouse (Bath) (LD)]

Last Friday, I met Wales & West Utilities, which runs the gas grid in my constituency and beyond, where I heard that hydrogen is still a very viable option for home heating. Although there have been a number of pilots, the Government have recently gone quite quiet on hydrogen in home heating. Will the Minister update us on the steps he is taking to progress hydrogen for home heating?

[Michael Shanks]

The hon. Lady raises the potential of hydrogen in our energy mix. Of course, one of the real strengths of the gas network is that it can be changed into other things in the future; that is a real strength of what we have, and we are looking at what those options might be. There is a mix of options available with hydrogen, including home heating, but it could still play a really key role in industrial projects, for example, in the shorter term. We are looking at those projects. We need to ensure that it is financially viable and that we have worked out all the technological details on how we would make it happen. We will have more to say on that in due course.

[Clive Efford (Eltham and Chislehurst) (Lab)]

My understanding is that these notices are issued at times of high demand, and that they are evidence of the system working in order to prevent power cuts or the system breaking down. I would have thought the Conservatives would have learned their lesson from the spike in international gas prices that caused the crisis in people’s fuel bills and led to a cost of living crisis, but they have learned nothing from that. Does my hon. Friend the Minister agree that this really underlines our policy of ensuring that we have a secure provision of renewable energy, which leaves us less open to spikes in prices on the international market?

[Michael Shanks]

My hon. Friend is absolutely right. It is worth saying that electricity margin notices are not unexpected, particularly at this time of year. They mean that there is enough generation available to meet demand, but that NESO would like to see a larger safety cushion; that is the important point for people to understand what margin notices are about. The notice was cancelled, of course, because there was sufficient supply to ensure that cushion.

My hon. Friend’s broader point is important. We have outlined in great detail how we will deliver clean power by 2030. The Conservatives now claim to oppose that; in fact, they oppose much of net zero full stop. They will have to answer how they would deliver a secure and resilient energy system of the future that brings down bills and delivers on climate leadership.

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

I am unconvinced, to use parliamentary language, by the Minister’s reassurance that the lights did not almost go out last week. I am also unconvinced by his saying that the system is robust and resilient. This is the Minister who told electors in Scotland that energy bills would come down by £300 under this Government. They have gone up, and will go up twice more. Given the perilous gas storage situation—it is at 1%, compared to the 25% the EU enjoys—what steps will he take to de-stress the system by accelerating investment in long-duration energy storage?

[Michael Shanks]

I thank the hon. Gentleman for his characteristic question. On the first point, let me just say that it was not I who said anything about what the margins were. I quoted the National Energy System Operator, which actually delivers in this country—and will quote it again for the benefit of the hon. Gentleman:

“At no point were electricity supplies less than anticipated demand and our engineers were able to rebalance the system”.

He can take or leave my words—I am not particularly bothered—but those are the words of the people who actually operate the energy system.

On the hon. Gentleman’s final point, I absolutely agree with him on the importance of long-duration energy storage. That is why, for the first time in 40 years, this Government announced a new cap-and-floor regime to deliver new long-duration energy storage schemes. That is a huge step forward from the position under many previous Governments, and it will allow the building of the pumped hydro schemes and new innovative technologies that will deliver that energy storage. We are moving as fast as possible. I hope that he and his hon. Friends will support those decisions.

[Matt Rodda (Reading Central) (Lab)]

I thank the Minister for updating and reassuring the House and residents on the robustness of the system, and for his work taking forward a wider diversification of energy supply. Will he update the House on support for the take-up of heat pumps, to ensure that, in the long run, we are far less dependent on gas from overseas? Will he also say something about the importance of insulation and what the Government are doing to support further measures to encourage insulation?

[Michael Shanks]

My hon. Friend is right that as well as building an energy system that will deliver generation capacity for the future, we need to work as fast as possible to reduce demand. Part of that is about moving away from gas to heat pumps. That is important not just for our energy system and climate, but for individual households in reducing their bills. We already see a huge shift in the uptake of heat pumps across the country. There is, of course, much more to do on that if we are to reach our target, but the Government are committed to that, and it is important for households right across the country. I echo his points on insulation. Those in fuel poverty are more likely to live in houses that are cold. The more we can do to create warmer homes—that is what the Under-Secretary of State for Energy Security and Net Zero, my hon. Friend the Member for Peckham (Miatta Fahnbulleh), is doing—the better for everyone.

[Harriet Cross (Gordon and Buchan) (Con)]

Last week was the coldest week of the winter. Also last week, 41.9% of our energy mix was gas and just about 25% was wind. We have heard about issues with gas storage, and the Government are penalising the oil and gas sector by extending the windfall tax, not allowing new licences, and removing investment allowances. It feels like this Government are not taking our energy security seriously. Can the Minister reassure the House that that is not the case, and that he will engage with our oil and gas companies to ensure that we are secure in our energy today, despite what they are trying to do for the future?

[Michael Shanks]

I can give that assurance. Indeed, every month I have been in this job, I have been in Aberdeen, meeting oil and gas companies to discuss the issues. We are not going to agree on everything, but I have been very clear that there will be a long future for oil and gas in the North sea. Yes, we absolutely have said that we do not want to issue any new licences for new fields, but we will not revoke any existing licences. That means that there will continue to be work in the North sea for a long time to come.

I repeat that it is categorically untrue that our electricity or gas supplies have been at risk over the past week. We have robust systems in place, and they worked exactly as they should. Consumers lost absolutely no supply over the last few days, nor will they in the weeks and months ahead.

[Laurence Turner (Birmingham Northfield) (Lab)]

I draw the attention of the House to my entry in the Register of Members’ Financial Interests about my membership of the energy unions, GMB and Unite. In 2017, the then energy Minister, the noble Lord Harrington, said:

“the closure of Rough will not cause a problem with security.”—[Official Report, 27 June 2017; Vol. 626, c. 446.]

Will the Minister confirm that the five wasted years that followed before Rough was reopened at reduced capacity continue to impose restraints on the network? Will the Government take an open-minded approach to Centrica’s proposals to gradually convert that storage capacity to hydrogen?

[Michael Shanks]

These are commercial decisions for Centrica, although if it brings those decisions to us, we will of course look at them. Let me reiterate that the UK has a robust set of storage facilities to ensure security of supply. Rough is one of them, but at moments such as this, in the winter, it is not the most important, because it is the slowest to move gas into the system. The remainder are in an entirely robust state and will continue to deliver, but as I have said, what it chooses to do with its site is a commercial matter for Centrica.

[John Cooper (Dumfries and Galloway) (Con)]

We have heard in the House today about an over-reliance on gas, but surely, in reality, it is an over-reliance on imported gas. The forces of this Government seem to be driving us into the hands of foreign suppliers, and as much as 80% of our gas may be imported by 2030. Should we not support domestic sources of oil and gas, and back the 200,000 industry jobs found in constituencies across the land, rather than pushing those people off a cliff?

[Michael Shanks]

I take issue with two of those points. First, in the past decade, 100,000 jobs have already been lost from the oil and gas industry, and that happened under a Government whom the hon. Gentleman supported. The industry is changing. We are putting in place a robust set of plans to help the workforce into the jobs of the future, rather than burying our heads in the sand and pretending that the basin in the North sea is not super-mature. Secondly, even if we were to extract more gas from our continental shelf, given that it is traded on an international market, and the pricing is set not by us but by the international market, we would continue to pay more for it, whether or not it came from the North sea, so that would not deal with the pricing issue reflected in the hon. Gentleman’s question.

[Sammy Wilson (East Antrim) (DUP)]

Did the Minister assume that after the Government had robbed pensioners of the winter fuel allowance, gas consumption would go down, or are this Government so obsessed with their net zero policy that they do not really care whether we have enough gas to meet our energy needs? Does the Minister not realise that being reliant on foreign suppliers will push up fuel prices in the UK? How does he justify the fact that under his net zero policy, the Government are ignoring the fact that we have 150 years-worth of gas naturally stored in the United Kingdom, and will not use it?

[Michael Shanks]

Let me repeat what I said a moment ago: even if we were to take much more gas from our continental shelf, it would still be traded on the international market. The reason why the right hon. Gentleman’s constituents and mine still face a cost of living crisis is our exposure to petrostates and dictators around the world. He would clearly like to expose us to them even more, and I think that the Conservatives would support him in that, but we want to get ourselves off the rollercoaster of volatile fossil fuels and deliver a clean power system that is cheaper in the long run and delivers energy security. That is what is best for consumers, and for all our constituents.

[Sir Alec Shelbrooke (Wetherby and Easingwold) (Con)]

The Minister has several times mentioned energy security, and has said that the drive to net zero will make us more energy-secure, but now that Europe has learned the lesson of taking fossil fuels from Russia, we will take our renewable resources from China, which manufactures and processes the vast of majority of the materials needed. What contingency plans has the Minister made in case China decides to get into a trade war with the UK on renewables, or to cut off supply? The threats that could come from China are exactly the same as those that came from Russia about fossil fuels.

[Michael Shanks]

Let me say two things to the right hon. Gentleman. First, our approach to China is that we will co-operate when it is in our interest to do so, and will challenge when necessary. That is the point that the Chancellor is making. Secondly, the way to ensure that what he describes does not happen, and that we build as much as possible in this country, is to build an industrial base in this country and to bring clean power jobs to the UK. The last Government failed to do that. We are driving forward an industrial strategy that will ensure that the jobs that arise from the clean power plan that we designed are in this country. The Opposition can either support that or oppose it.

[Lisa Smart (Hazel Grove) (LD)]

This whole discussion underlines the importance of electricity storage, including at the battery energy storage system in my constituency, the Bredbury substation. How can we encourage more communities to welcome BESSs to their area, perhaps by considering community benefits, such as district heat networks?

[Michael Shanks]

The hon. Lady makes a really important point about energy storage in its various forms. Battery storage technology is moving forward extraordinarily quickly, and the short duration that we can get from batteries is improving quite considerably, so batteries will have a key role to play. Importantly, there is the potential for communities to drive some of that. We have been really clear in our local power plan that we want communities to be in the driving seat as much as possible, so that they can secure community benefits. We also want them to own some of the infrastructure. In a few weeks’ time, I will visit a scheme in Scotland where the community would be able to own not just a battery storage project, but a wind turbine that fills the battery. They would get a double benefit from the energy that they are generating and able to store. We would like to see more such schemes right across the country.

[Lincoln Jopp (Spelthorne) (Con)]

I have a certain amount of sympathy for the hon. Member for Widnes and Halewood (Derek Twigg), whom the Minister slightly fobbed off with his answer. Now that he has had a chance to calm down and check his notes, I will ask the question again on the hon. Member’s behalf: what have the Government done to advance the case for nuclear energy since they took power?

[Michael Shanks]

That is a very good question. I thank the hon. Gentleman for giving me a second chance to reiterate that we inherited a whole series of plans that were not delivered. We have moved forward as quickly as possible to deliver significant projects, but we have also moved forward the competition on small modular reactors. [Interruption.] The shadow Minister says, “All you had to do was sign it off.” Maybe he forgets the state in which he left some of his policies when he departed office.

[Ann Davies (Caerfyrddin) (PC)]

As well as improving energy storage, we should be improving energy efficiency in our homes. The average energy performance certificate rating for properties in Caerfyrddin is D; it comes fourth-lowest in Wales in that respect. The Government plan to increase the EPC rating for rented properties to C by 2030. If we are to meet that aim through insulation, what lessons can be learned from previous schemes, such as the ECO4 scheme, which has been beset with problems, including contractors carrying out poor work on the properties of older and vulnerable people?

[Michael Shanks]

That is a really important point. My hon. Friend the Minister for Energy Consumers is leading a review of some of this work, and will have more to say about it soon. We need a scheme that rolls out far more insulation to retrofit homes. We have also driven forward a higher standard for new houses, but the delivery of the schemes has been questionable in places. I recognise some of her points, and that is part of what we have been reviewing. I recently met my Welsh counterpart to talk about planning regulations that are being brought forward in Wales, which will also make a difference to these kinds of projects.

[Richard Foord (Honiton and Sidmouth) (LD)]

In 2022, following the full-scale invasion of Ukraine, we saw a huge Government subsidy for household energy bills and an extra £15 billion per year in additional support for households. I appreciate that gas is traded globally and that the gas price moves globally, but if storage had been greater in 2022, could any of that £15 billion have been saved for taxpayers?

[Michael Shanks]

That is a really interesting question that I asked myself when I came into this role. Logically, we might assume so, but we do not empty the gas storage and then wait to refill it; we refill it constantly. That topping up will be done at whatever the price in the market at the time. The main reason why we would have used the gas in storage is that there is such demand in the system that the price is likely to be higher anyway. The hon. Gentleman makes a really important point, but I do not think that gas storage would have been the issue. I reiterate the point I made at the beginning: part of the reason why we have less gas storage than other European countries is that we have a different mix of routes to get gas in, and far more reliable supply chains for it, so we do not need to store quite as much as our European neighbours.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for his answers and for what he has said so far. Approximately 330,000 homes and businesses in Northern Ireland are connected to gas, and there is also a scheme to enable social housing to use gas. That means that some of our elderly and most vulnerable people have no access to heating other than gas. How can the Government ensure that the most vulnerable in our society are guaranteed their gas supply over the next weeks, and how can the Government keep those in priority need at the top of the supply chain?

[Michael Shanks]

Characteristically, the hon. Gentleman raises an important point, and he has raised similar points with me before. It is important that the most vulnerable on the priority registers are prioritised for any additional support, and that is what we continue to do. Energy is a transferred matter in Northern Ireland, so I do not have a direct role to play in the gas system there, but I continue to engage with both Ministers in the Northern Ireland Executive that have an interest in this topic, and we have talked about these issues most recently.

Draft Electricity Capacity Mechanism (Amendment) Regulations 2024

Michael Shanks Excerpts

Tuesday 7th January 2025 General Committees

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

I beg to move,

That the Committee has considered the draft Electricity Capacity Mechanism (Amendment) Regulations 2024.

Good morning and happy new year to all members of the Committee. It is a pleasure to serve under your chairmanship this morning, Mr Efford.

The instrument revokes and alters several provisions of the assimilated regulation 2019/943 of the European Parliament and of the European Council of 5 June 2019 on the internal market for electricity relating to the capacity market, which from now on I shall refer to as the assimilated electricity regulation. Before I outline the provisions of the draft regulations, I shall briefly give some context.

Great Britain’s capacity market was introduced in 2014. It is designed to ensure that sufficient electricity capacity is available to meet future predicted demand, to maintain security of electricity supply. It is our main tool for that purpose, providing all forms of existing and new-build capacity with the right incentives to be on the system when we need them. It covers generation, storage, consumer-led flexibility and interconnection capacity. Capacity markets auctions are held annually one year and four years ahead of delivery to ensure that we have supply when we need it and to meet future peak demand in a range of scenarios, based on advice from the capacity market delivery body, the National Energy System Operator.

Since its introduction, the capacity market has contributed to investment in just under 19 GW of new, flexible capacity needed to replace older, less efficient plant as we transition to the net zero economy. The capacity market was originally approved under European Union state aid rules for a period of 10 years. Following the UK’s withdrawal from the EU, a requirement in EU law for approval of up to 10 years was brought into our domestic law as part of the assimilated electricity regulation. To date, the capacity market has been successful in ensuring that Great Britain has adequate electricity capacity to meet demand, and it continues to be required to maintain security of supply and investor confidence. This will be increasingly important as further sectors of the economy are decarbonised through the transition to net zero, increasing demand for electricity.

The draft regulations revoke and alters certain provisions relating to capacity mechanisms in the assimilated electricity regulation, including article 21(8), which requires that

“Capacity mechanisms shall be temporary and shall be approved for no longer than 10 years”,

and other references to such mechanisms being temporary. The draft instrument also revokes several provisions that require minor correction following changes made for the UK’s withdrawal from the EU, or that impose requirements that are no longer considered to be necessary. We are making these changes now because of the ongoing need for the capacity market to ensure sufficient investment in reliable electricity capacity.

The domestic subsidy control regime was introduced after our withdrawal from the EU. It does not require subsidy schemes to be granted an approval or to be limited for a specified period. The approval requirement in the assimilated electricity regulation does not, therefore, reflect our post-EU exit arrangements. It is of course important to keep the capacity market under review, and there are several controls in domestic legislation, such as the Secretary of State’s discretion not to hold auctions, as well as a statutory requirement to review the capacity market every five years, which provides an opportunity to review the need for the scheme. They will all be retained in the domestic capacity market legislative framework.

The draft instrument revokes and alters certain provisions related to capacity mechanisms in the assimilated electricity regulation, including the requirement for an approval lasting no longer than 10 years and references to capacity mechanisms being temporary. The aim is to ensure that our domestic legislative arrangements reflect the continued operation of the capacity market, which is Great Britain’s main mechanism for ensuring security of electricity supply. I commend the draft regulations to the Committee.

--- Later in debate ---

[Michael Shanks]

I thank the shadow Minister for his support. I have no doubt that in 2025 we will have many debates on the “Clean Power 2030” action plan, and I look forward to hearing his support for our work. As I said in opening the debate, the draft regulations are technical in nature. They are about ensuring security of supply long into the future, and I hope the Committee will support them today.

Question put and agreed to.

Oral Answers to Questions

Michael Shanks Excerpts

Tuesday 17th December 2024 Commons Chamber

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

Community energy will play a pivotal role in our mission for clean power. Last week, we published the clean power action plan, which contained more information about how we will meet this world-leading mission, and the report confirmed that community energy will play an important role, particularly through Great British Energy.

[Olly Glover]

Renewable energy schemes on community buildings in my Oxfordshire constituency of Didcot and Wantage, supported by the Low Carbon Hub in Oxford, have mostly benefited building owners up to now. Would the Minister support more flexibility in local energy systems and allow local energy trading to get more support for renewable energy schemes in our communities, so that more local people can directly benefit?

[Michael Shanks]

The hon. Gentleman makes an incredibly important point about how local community groups can benefit from not just hosting the community energy, but from being able to sell locally. We have had a number of conversations on this topic already. I most recently met the community energy contact group, which does a lot of work to look at what regulations there might be, and we are happy to look at any proposals that come forward. We want to see a revolution in community energy right across the country so that more communities can benefit.

[Mr Toby Perkins (Chesterfield) (Lab)]

Under the previous Government, we had an energy market that worked for nobody. It was bad for consumers, and we also saw many energy companies go out of business as the Government lost any grip on the industry. Does my hon. Friend agree that with the greater stability we have under this new Labour Government, there are opportunities for community energy coming forward as part of the recovery of our whole energy infrastructure?

[Michael Shanks]

It will not surprise the House that I agree wholeheartedly with my hon. Friend, who, as always, makes an incredibly important point. He is right that stability is key, but so too is this Government’s commitment to invest in community energy. We have committed to upwards of 8 GW of energy from community sources over the course of this Parliament up to 2030. That commitment ensures not just that we have an energy mix where communities benefit, but that they benefit from the economic and social advantages of owning the energy they produce.

[Sarah Dyke (Glastonbury and Somerton) (LD)]

Community energy schemes provide a great opportunity for local communities to take ownership of clean energy production. In Glastonbury and Somerton, we have seen the benefits as Avalon Community Energy projects around Glastonbury are projected to save 1,000 tonnes of carbon per year. How will the Minister support community energy schemes and ensure that they play a fair and full role in creating clean energy?

[Michael Shanks]

The hon. Member has raised community energy on a number of occasions in this place, and I know she is a champion of it. She is right to highlight the examples of where community energy can make a huge difference. One of the key areas we want to drive forward is the local power plan, which will be delivered by Great British Energy. Unfortunately, her party did not in the end support the creation of Great British Energy, but I hope they will change that position and see the huge advantages of investing through Great British Energy in schemes like the one she mentioned, but also of helping to build capacity in community groups so that they are capable of driving those projects forward.

[Brian Leishman (Alloa and Grangemouth) (Lab)]

I declare the interest that I am a Unite the union member.

Communities all across Scotland rely on the Grangemouth refinery for their energy. As closure looms, Unite has given the Government a plan that will save jobs, help hit sustainable aviation fuel targets and build new green industries for the future. It is not too late to save those jobs and achieve the just transition that my community desperately needs. Will the Secretary of State agree that the plan has great potential and agree to meet Unite to see what the Government can do to achieve a truly just transition for the refinery workers and keep Scotland’s only refinery working?

[Michael Shanks]

As my hon. Friend knows, we have met Unite on a number of occasions over the past few months since Petroineos made the disappointing decision to follow through on its closure plans for the Grangemouth refinery. It is important that we look at every possible option, and we have done.

It is also important that the Government are clear that we want to see a long-term sustainable future for the refinery site. That is why we invested in Project Willow, which at the moment is coming up with credible investable propositions for the site. We want to protect the workers and do whatever we can to ensure a just transition at Grangemouth and for industry right across the country, but those options need to be long-term and sustainable so that we do not drive workers back into this process again a few years down the line. We are committed to ensuring that we invest in long-term sustainable propositions for the site, and of course we will meet anyone and discuss any propositions to help make that happen.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

[Pippa Heylings (South Cambridgeshire) (LD)]

It is so good to hear the Minister affirm the need to bring the public onside, as well as private sector investment, to achieve the transformation towards green power and net zero. The Liberal Democrats support Great British Energy if community energy is at the centre of the Great British Energy Bill. Our colleagues in the Lords are debating amendments relating to direct participation in and benefit from community energy. Will the Minister agree to those proposals if they come to this House?

[Michael Shanks]

In the spirit of Christmas, I thank the hon. Lady for all the engagement and discussions we have had—[Interruption.] The Conservative Front Benchers groan, but I have joy for their party at Christmas as well. We are absolutely committed to community energy, which was in our manifesto. At every stage of the Bill, we have committed to community energy being right at the heart of what Great British Energy will do. If their lordships make any amendments in their consideration of the Bill, we will of course consider those amendments when the Bill comes back to this place. However, I say gently to the hon. Lady that her party did not support Great British Energy, so it cannot now claim credit for the things that Great British Energy will deliver.

[Robbie Moore (Keighley and Ilkley) (Con)]

5. If he will make an assessment of the potential merits of establishing a community benefit scheme for households near new energy infrastructure.

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

We have made clear, through the clean power action plan that we announced last week, that where communities host clean energy infrastructure, we will ensure that they benefit from it. There are many options in that area, including community funds and direct support for households, and we are exploring all those options to ensure that communities can benefit from the clean power mission.

[Robbie Moore]

There is a proposal to build 65 wind turbines on protected peatland in the neighbouring Calderdale council area, which I am staunchly against. To make matters worse, if the development is approved, my constituents will not benefit from any community benefit scheme, despite being on the periphery of the proposed location. How will the Secretary of State ensure that my constituents get their fair share of any community benefit scheme should the proposal be approved?

[Michael Shanks]

I cannot comment on the specific details of the case. However, I would like to know more about why the hon. Gentleman’s community might not benefit, because the aim is for all communities affected by hosting infrastructure to benefit in different ways. We are looking at the options—be they money off bills, or the community benefit funds that exist at the moment—as we work through the answers to the consultation launched by the previous Government. However, we are clear that if communities host infrastructure that is nationally important and benefits the whole country, they should benefit from doing so.

[Melanie Onn (Great Grimsby and Cleethorpes) (Lab)]

Community benefits come in many different forms—in my constituency, Ørsted has contributed £1 million towards Horizon Youth Zone, and RWE is supporting Projekt Renewable, which is a box park learning zone—but the most wide-reaching benefit is to people’s pockets. Schemes such as the Octopus fan club bring down people’s bills when the use of renewables is at its highest. How can other energy retailers deliver similar savings for consumers?

[Michael Shanks]

My hon. Friend asks an extremely important question. All communities should benefit from the transformation that we want to make to the energy system. Part of the answer is improving how we use smart systems right across the energy system, so that people have much more consumer-led flexibility in their options—we are moving forward with that. In the clean power action plan that we published last week, we committed to doing much more to give people the power to take advantage of some of the opportunities she mentions.

[Mr Speaker]

I call the shadow Minister.

[Joy Morrissey (Beaconsfield) (Con)]

Community engagement and funding are important. With large-scale solar farms planned for agricultural land, does the Secretary of State think that there are any circumstances in which local communities might know better than him?

[Michael Shanks]

Communities are, and will always be, able to speak about the plans for their local area, and to contribute to consultations and planning applications—we will not change anything about that. However, it is important to say that nationally important infrastructure will need to be built somewhere if we are to have the clean power future and energy security that everybody in this country needs. I gently say to the hon. Lady that, even in the most extreme statistics, less than 1% of land in this country would be used to build for solar. Either the Conservatives are in favour of keeping us on the rollercoaster of volatile fossil fuels, or they are in favour of building clean power. Her party used to be in favour of net zero, but now it seems to be running away from it at speed.

[Amanda Hack (North West Leicestershire) (Lab)]

7. What steps he is taking to introduce a warm homes plan.

--- Later in debate ---

[Perran Moon (Camborne and Redruth) (Lab)]

T9. In the Government’s policy paper “Clean Power 2030 Action Plan”, floating offshore wind was labelled a key emerging technology, and developments were promised for future rounds of contracts for difference. Will the Minister please consider going further, and geographically ringfencing contracts for difference funding, to ensure that the massive potential of projects such as floating offshore wind in the Celtic sea is unlocked?

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

My hon. Friend is right to suggest that offshore wind, especially floating offshore wind, will play a critical role in our pathway to clean power. We will consider any option to ensure that we get many “test and demonstrate” projects through to delivery, and we will say more in coming weeks about what the next round of contracts for difference will look like.

[Monica Harding (Esher and Walton) (LD)]

More than 24,000 homes in my constituency have an energy performance certificate banding of D or worse, which means 50,000 tonnes of avoidable carbon dioxide emissions and higher energy bills for my constituents. However, the rate of insulation upgrades is too slow for us to meet the Government’s goal of universal band C ratings by 2035. Will the Minister commit herself with more urgency to an emergency home insulation programme with targeted support for those on low incomes?

[Amanda Hack (North West Leicestershire) (Lab)]

T10. In my constituency, there has been strong growth in the purchase of electric vehicles, but we have only half as many public charging points per person as the national average. How can we secure more charging points in public spaces in rural communities?

[Michael Shanks]

My hon. Friend makes an important point about rolling out charging infrastructure to all parts of the country, and we are working on that with colleagues in the Department for Transport. Local distribution networks in rural areas are incredibly important, and introducing greater access to the grid—including through Ofgem’s approval of £22 billion to improve distribution networks—will enable us to roll out EV infrastructure in rural areas throughout the country.

Capacity Market: December Publications

Michael Shanks Excerpts

Monday 16th December 2024 Written Statements

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

I am tabling this statement to inform members of three publications relating to the capacity market. The publications consist of a consultation on improvements to capacity market rules and treatment of consumer-led flexibility in the capacity market; a call for evidence inviting further views on improvements to consumer-led flexibility in the capacity market; and a statutory report summarising the capacity market’s performance over the last five years.

This Government have committed to delivering clean power by 2030 and accelerating progress towards net zero, while ensuring the security of supply. Making Britain a clean energy superpower by 2030 is one of the Prime Minister’s five missions. To deliver this mission, we will increasingly rely on renewable power. The Government have set targets to double onshore wind, treble solar and quadruple offshore wind by 2030.

Introduced in 2014, the capacity market provides Great Britain with its ultimate safeguard to ensure security of supply. It serves to ensure enough capacity is available to provide a reliable electricity supply during peak demand periods and system stress events. The funding provided through the capacity market incentivises investment in new and existing generation, interconnectors, batteries, and demand side response mechanisms that enable consumer-led flexibility to ensure sufficient available capacity when required. This capacity is acquired through annual auctions held at intervals four years ahead and one year ahead of its delivery years. The Government regularly amend the capacity market prior to auction cycles to ensure it is cost-effective and meets broader strategic objectives such as clean power by 2030.

The transition to clean power will see changes in the patterns of energy production and consumption, with flexibility playing an increasingly important role. In October, we published a consultation and call for evidence exploring proposals to maintain security of supply and to enable flexible generation capacity to decarbonise. Today, we build upon this work by publishing a consultation and call for evidence on proposals to modernise the capacity market rules and improve consumer-led flexibility within the capacity market.

Consumer-led flexibility involves voluntary actions taken freely and directly by energy consumers to shift their electricity use. This includes residential customers using smart technologies, such as smart-charging EVs and heat pumps, as well as industrial and commercial units adjusting demand and utilising behind-the-meter generation or storage. This enables consumers to be rewarded with cheaper electricity by flexibly adjusting their usage to times of lower demand on the grid.

The consultation sets out policies to streamline how consumer-led flexibility, delivered by demand side response mechanisms, participates in the capacity market. As participation in the capacity market from aggregated domestic demand-side response portfolios increases to enable increased consumer-led flexibility, it is important that capacity market rules are updated to better incorporate and enable access from emerging technologies that can respond flexibly to times of high energy demand. It also seeks views on the introduction of a termination fee for new demand-side response mechanisms that fail to demonstrate agreed capacity, improving delivery assurance to enable the capacity market to fulfil its central principle of ensuring security of supply.

The consultation also outlines proposals on capacity market rule improvements. The capacity market rules govern how the capacity market operates. It is integral that the rules are clear and consistent in their operation to ensure the market remains accessible for new entrants seeking to invest in new sources of capacity. The consultation outlines proposals to improve the accessibility and clarity of the capacity market rules to ensure greater understanding and adherence to them. The proposed changes will enable capacity market units to change their opt-out status following a change in their operational circumstances, and will remove rules on transitional and coronavirus arrangements that are no longer required. These changes should ensure the capacity market rules remain fit for purpose and continue to allow new, innovative technologies to participate in the capacity market without facing unnecessary administrative hurdles. The proposed changes also extend a policy to allow existing generators to use data older than 24 months to pre-qualify for auctions held in 2026. This will further increase auction competitiveness and lower the costs of the capacity market for consumers’ energy bills.

The call for evidence seeks views on potential changes to the capacity market to improve consumer-led flexibility. It builds on proposals laid out in the capacity market phase 2 consultation, which was published in October 2023 to invite views on how the demand-side response mechanisms that enable consumer-led flexibility could be better categorised and integrated into the capacity market. It also seeks feedback on how these mechanisms can be better supported through improved portfolio management, while maintaining the high levels of delivery assurance expected within the capacity market.

Finally, we have published the second statutory five-year review, covering the years 2019 to 2024 of the capacity market’s performance—referred to as the 10-year review. This review provides a summary of how the capacity market has performed against its original objectives. It draws on evidence gathered from a Government-commissioned independent process and impact evaluation of the capacity market scheme in September 2021, and on responses to a call for evidence published in October 2023.

The review has taken place as the Government consider larger strategic questions through the review of electricity market arrangements programme, whose remit includes how a future capacity market can meet Government objectives on security of supply. The review does not seek to pre-empt the outcomes of the review of electricity market arrangements.

These publications consider actions to improve accessibility to and functionality of the capacity market, while continuing to uphold its primary objective of ensuring security of supply. As the capacity market reaches its 10-year milestone as a key pillar at the heart of the Government’s strategy for ensuring security of electricity supply in Great Britain, these proposals seek to ensure that it remains fit for purpose and continues to play a crucial role in achieving the clean power mission.

[HCWS314]

Floating Offshore Wind: Celtic Sea

Michael Shanks Excerpts

Thursday 12th December 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Efford. I congratulate my hon. Friend the Member for Truro and Falmouth (Jayne Kirkham) on securing this debate and for all the work she does in championing her area, and the Celtic sea more broadly. We have had a number of conversations and debates on energy-related policy and she is a real champion for her constituency.

I thank all hon. Members this afternoon for their passionate contributions to the debate. I do not know what the collective noun is for a group of Cornish Celtic tigers and one Welsh one, but they made fantastic contributions and I think that gives us a sense of how seriously new MPs are taking the future of their constituencies. We should be proud of that.

The key issues that have been raised today, of the grid, supply chains, skills, planning, and getting the balance right so that we bring communities along with us in much of this—the hon. Member for North Cornwall (Ben Maguire) put that well—are important. It was nice to hear the hon. Gentleman speak about the coalition Government, as we do not hear enough about them these days. I encourage him to say much more about them in future debates, but I suspect that he will not.

Let me first speak about the context of the debate and I will then answer some of the specific questions. I think the “why” of our being in this race and transition is important. Why are we pushing to deliver clean power by 2030? The truth is that it is an imperative if we are going to meet our long-term goal of a net zero economy and deliver economic growth and energy security. They are intrinsically linked.

A number of hon. Members have raised the point about the potential of jobs in industry in communities that have, in many cases, been forgotten for a long time. The rates of poverty and underemployment in those communities underlines how important it is that we bring about new opportunities. I think the point about legacy raised by my hon. Friend the Member for Mid and South Pembrokeshire (Henry Tufnell). This is not just a transition for the sake of a transition; the aim is to deliver good, well-paid jobs for future generations and to make it a prosperous transition for many communities.

We are in no way missing the scale of the challenge. Delivering clean power by 2030 will require us to rip up the rule book on how Governments deliver big projects and to take a radically different approach to how we deliver change at pace. It means working in lockstep with communities and with the private sector to rapidly address the barriers that hold us back, which have all been raised today, so that we can deliver unprecedented levels of new clean energy infrastructure.

The Government received the National Energy System Operator’s advice on achieving a clean power system by 2030. It shows that this is not only achievable, but can create a cheaper, more secure system. The advice will inform the Government’s clean power 2030 action plan, which will be published imminently and will set out our route to decarbonising the electricity grid with the aims of protecting billpayers from volatile gas prices, strengthening Britain’s energy security and accelerating us towards net zero.

I hope all hon. Members will agree that we are on the cusp of a once-in-a-generation transformation of our energy system, led by a Government that is determined not to be a passenger on the big questions of the day, but, as my hon. Friend the Member for Camborne and Redruth (Perran Moon) put it, to drive forward radical change. The infrastructure that we deploy now and in the years ahead will set in train decades of energy security, stability, and prosperity for every part of the UK. Key to that will be the role played by offshore wind and, in particular, floating offshore wind. I will focus on that in the rest of my remarks.

Offshore wind will play a crucial role in our mission to make Britain a clean energy superpower and deliver clean power by 2030. At 14.8 GW of generation, we have the highest deployment in Europe and the second highest in the world. As my hon. Friend the Member for Camborne and Redruth said so eloquently, the UK is a global leader. These days there are not many things in which we can still have a claim to be that, but this is one that we must ensure we maintain.

The new technology unlocks deeper areas of the seabed that can benefit from stronger and more consistent winds, helping us to secure our energy supply and to deliver on our statutory decarbonisation obligations. Our floating offshore capacity is second only to Norway. At around 25 GW, we have the largest pipeline of floating offshore projects anywhere in the world. Of course, in the Celtic sea, there is enormous potential for floating offshore wind, and we are determined to take advantage of the opportunities that that represents. Earlier this year, the floating offshore wind taskforce estimated that floating offshore wind could contribute £47 billion in GVA to the UK economy by 2050 and support up to 97,000 jobs across the country, so we are hard at work, right across Government and in the private sector, to make sure that we realise the vast potential of this opportunity.

The test and demonstration projects, which a number of hon. Members have rightly raised, total 432 MW of capacity in development in the Celtic sea. They are crucial not just for the capacity that they generate, but for helping us to understand the supply chains and the development and for building the skills in the future. We want to see many of these projects succeed, and Government are doing everything we can to support the projects.

Under the offshore wind leasing round that the Crown Estate recently launched, a further 4.5 GW of floating wind capacity in the region will have an impact of up to 5,300 new jobs and a £1.4 billion boost to the economy. We are determined that by working together with the Crown Estate on an innovative approach to this leasing round, we can ensure that there is new industry that provides social and economic opportunities for communities right across the country. It is important for us to say that this is this Government’s absolutely key priority, that we are not agnostic on the industrial future of this country and that we want to see the good, well-paid jobs here as well. My hon. Friend the Member for Camborne and Redruth rightly highlighted the example of Kincardine, and there are other projects where all the parts were manufactured abroad and towed into our waters simply to start generating. That is the part of this that we do not want to see again. We want to see the good, well-paid jobs here.

That is why the Crown Estate has launched a £50 million supply chain accelerator to fund and accelerate supply chain projects. The 13 successful organisations are set to receive funding in the initial round. Just yesterday we were able to announce more details on these. It is the case that £5 million of funding was awarded to kick-start a range of projects across Great Britain, contributing to a combined development investment of more than £9 million, with £400 million of capital investment. As has been mentioned, the partnership that Great British Energy, the first publicly owned energy company in 70 years, has with the Crown Estate is about trying to drive forward even more of those opportunities right across the country.

The issue of ports has been mentioned by a number of hon. Members. They clearly will play a vital role in the deployment and maintenance of offshore wind infrastructure. Up to £4 billion of investment is required by 2040 to support the roll-out of floating offshore wind. That is why the FLOWMIS scheme, which is providing grant funding to support the development of port infrastructure, is so important.

The shadow spokesperson, the hon. Member for Weald of Kent (Katie Lam), rightly referenced the importance of Port Talbot and the port of Cromarty Firth in the FLOWMIS scheme. We are moving forward due diligence on that as quickly as possible. It is one of a number of in-progress decisions that we inherited from the previous Government, on which we are moving as quickly as possible to actually deliver, so that the funding can be put to good use as quickly as possible. It goes hand in hand with the creation of the national wealth fund, which will invest at least £5.8 billion of capital in the five sectors announced in our manifesto, including port infrastructure. That comes alongside some of the work already being done by the NWF in Ardersier port, the port of Tyne and Teesworks. To understand the barriers to port infrastructure, we are working closely with the ports task and finish group, led by RenewableUK, to ensure that we are building on the work that has already been done.

On the wider point of working together, which my hon. Friend the Member for Truro and Falmouth raised earlier, DESNZ has a standing invitation to the Cornwall FLOW Commission, which Cornwall council is involved in. Officials regularly engage with all councils, including Cornwall council, on this and many other issues, and we are very happy to do more.

Let me turn, finally, to the point about industry. In the spring, we will publish the Government’s industrial strategy, which is our commitment to ensuring that good, well-paid and trade-unionised jobs come to these shores to deliver the energy transition as well as to a number of other sectors. Most recently, we announced the clean industry bonus as part of the CfD scheme, which rewards fixed and floating offshore wind developers that choose to invest in the UK’s poorest communities or in cleaner manufacturing facilities. A portion of that budget is ringfenced for floating offshore wind components.

On the broader points that hon. Members raised about the next contracts for difference rounds, we will say more about auction round 7 in due course. Clearly, it is important to recognise how much the industry has moved since the abject failure under the previous Government in auction round 5, in which much of the sector was flat on its back. We have moved as quickly as possible on AR6 to get projects over the line. We want to see more of these projects succeed, and we will have more to say imminently on AR7. There will also be a consultation on that process.

I once again thank my hon. Friend the Member for Truro and Falmouth for bringing forward this debate, and I thank all hon. Members for their contributions and their real commitment to this issue. This is a Government who are determined to ensure that we realise our potential in communities right across this country and drive towards clean power by 2030. That is not as an end in itself, but because it will make energy in Britain cleaner, cheaper and more secure for our entire nation, reinvigorate long-neglected supply chains in clean energy and engineering, and return a sense of pride and prosperity to all parts of this country.

The road ahead will be challenging—no one comes into government just to tackle the easy stuff—but we are determined that together we will ensure that we achieve the most difficult task of all: by 2030, we will have a secure, cleaner energy system. The prize at the end is worth all that effort, and there is no point being in government if we are not going to tackle some of the long-term, difficult challenges. I once again thank hon. Members for participating in this debate and encourage them to keep up the challenge to Government as we ensure that we realise every single opportunity available to us in this most important sector.

[Clive Efford (in the Chair)]

We have 27 minutes remaining, but this is not an invitation to make a 27-minute speech. The hon. Member for Truro and Falmouth (Jayne Kirkham) should take a few minutes to emphasise the key points that she wants to take away from the debate.

Electricity Grid Upgrades

Michael Shanks Excerpts

Tuesday 26th November 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

That was almost a year ago.

[Andrew Bowie]

Quite. Regardless of the technologies that are selected, of whether the pylons and associated infrastructure are built and of any right hon. or hon. Member’s view, communities out there want to know what the community benefits package and the trade-offs will be, and what they will receive as a result of having to host infrastructure in the national interest. An update on that would be delightful.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

It is a pleasure, Sir Christopher, to serve under your chairmanship. I thank the hon. Member for Harwich and North Essex (Sir Bernard Jenkin) for introducing the debate, for his approach, and for the engagement we have had on the topic in the short time that I have been in this job. While I suspect we might disagree politically on a great many things, his repeated commitment to the need for net zero is important, and separates him from some hon. Members who might make the issue of grid updates part of an excuse to avoid dealing with the climate issue. I welcome that, and I was pleased to meet him and his colleagues recently to discuss the matter.

I also thank all others who have contributed to the debate. I welcome the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) to his new role. He is not just a shadow Energy Minister now, but shadow Secretary of State for Scotland. Clearly, he did not have enough on his plate before. I do not know what it says about the Scottish group of Conservative MPs that he has two jobs, but I will leave that to one side. The debate this morning has been wide-ranging, although I confess I did not anticipate an existential question from the right hon. Member for South Holland and The Deepings (Sir John Hayes) about the nature of beauty and the environment. I learned a lot from that, but I will leave the theological debate about pylons to others in the House.

I want to pick up on the general context first, and then some of the specific issues that have been raised. When it comes to the security of our energy future, few matters face us as a Government more important than the delivery of network infrastructure. It was the topic of the very first meeting I had as a Minister, and has been the topic of almost every other meeting I have had in this job, with a range of different people looking at it. Our network infrastructure is in dire need of upgrading.

I will start with the point that the shadow Minister finished on. I recognise that the impact of delivering these upgrades, while important to our national infrastructure, will be felt in individual communities; that is the nature of this. I recognise that there will be communities across Great Britain and Northern Ireland that will have to host energy infrastructure. We thank them for doing so and, while recognising the importance of upgrading infrastructure for the whole country, also recognise the need to get the balance right.

[Jim Shannon]

The Minister is always incredibly helpful with questions that I or anybody asks, which I appreciate and thank him for. For Northern Ireland to be successful, it needs support from Government here. The shadow Minister reiterated that. I ask the Minister to say something perhaps similar for the record, so that it is in Hansard. We in Northern Ireland need to be very much part of the strategy for the future. As others have said, it is the United Kingdom of Great Britain and Northern Ireland. We are always better together, but there are advantages—let us see some of those advantages.

[Michael Shanks]

While I thank the hon. Gentleman for his intervention, me repeating “better together” is sometimes tricky in my political party. I do, however, reiterate my commitment to the whole of the United Kingdom. He will know that I take that very seriously, and I have had a number of meetings on the topic with the Economy Minister in Northern Ireland, who is responsible for energy. Clearly, the role I have is different in Northern Ireland, given the transferred nature of energy policy and the whole island grid, but I take the issues very seriously and commit to that today.

The delivery of a reinforced modern electricity network is critical for every home and business across the country. It is a critical enabler for our Clean Power 2030 mission, which is designed to deliver not just energy security but economic growth, skilled jobs and cheaper energy, which the country so desperately needs. In short, transforming the network underpins our shared commitment to energy security, prosperity and the low-carbon future that the country needs. It is fair to say that this transformation is extremely long overdue. The last significant modernisation of the grid took place in the 1960s. New investment into industries of the future, such as data centres, will play such an important part in the economy of the next few decades. We need to deliver jobs around that, unlocking growth, but electricity demands will increase by an expected 60% by 2035 and double by 2050.

[Deirdre Costigan]

I want to bring the Minister’s attention to issues being faced in west London. He mentioned data centres; we recently had confirmation of a great investment from CyrusOne, but it has to get power from Enfield because there are huge constraints on the energy system in west London. Does the Minister agree that we need to ramp up the work on connecting these new investments to the grid? We must not allow the tactics of the Opposition, which are about delay and going back 14 years to decisions they should have made but never did. Now is the time to take action; people should not be required to pay higher energy fees than they should, which is another aspect of this issue.

[Michael Shanks]

I agree with my hon. Friend on that important point. Connection dates on both the generation and demand sides are much too far in the future. We need to build more of the network structure across the country and reform the way we deal with connections, which is ongoing.

I am conscious of time and want to give the hon. Member for Harwich and North Essex time to respond. We have heard from a number of hon. Members about the impact of grid expansions on their communities. I want to make three key points. First, I do not accept that grid expansion is riding roughshod over communities. Communities will have a say in these projects. Secondly, I take a less dismissive view than some hon. Members about the importance of genuine community benefits. If communities host infrastructure and generation, they should benefit. The shadow Minister referred to work under way, which he said the previous Government spent a year on and we have moved on in five months. We are moving quickly to work out what effective community benefit looks like. We are developing guidance on that, particularly for hosting transmission network infrastructure, which will be published in due course.

On the point about modern technology, delivery of the network is underpinned by the latest technology, tailoring it to locations that urgently need reinforcement. It relies on upgrading existing power lines first, and uses innovative strategic design and options to find solutions that balance ecological impacts and, crucially, cost. That is important, given that the cost is borne by billpayers across the country.

Hon. Members will be under no illusion that we have to expand the network considerably, rewiring and connecting to new areas of demand in future. That is why we have outlined our mission of clean power by 2030. We will publish our response to NESO’s report soon. The mission will be achieved by investment in renewable generation, including onshore and offshore wind, solar and storage. There can be no transition to that clean power future without the grid upgrade. That work will take us to 2030 but, given the increase in demand to 2050, it will have to continue far beyond that.

I want to pick up a point about NESO’s advice on cost. NESO’s advice on the project in East Anglia concerns whether it will be cheaper or more expensive. A number of hon. Members should review that advice more carefully. I would have gone into more detail but I have only 40 seconds to wrap up. It is worth clarifying that delays in delivering the undergrounding part were not factored into some of the points that the hon. Member for Harwich and North Essex made.

To conclude a wide-ranging debate, we are on the edge of an industrial and energy revolution. We want to reduce bills and deliver energy security. To do that we need to upgrade the grid infrastructure, which must be hosted in some communities. We want to bring them with us but that work has to be done, and that is the commitment of this Government.

Oral Answers to Questions

Michael Shanks Excerpts

Tuesday 12th November 2024 Commons Chamber

[Joe Morris (Hexham) (Lab)]

20. What progress he has made on achieving clean power by 2030.

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

In just four short months, we have made rapid progress on achieving our mission for clean power by 2030. We have set up Great British Energy and announced its headquarters in Aberdeen, secured a record-breaking 131 renewables projects, and consented to record amounts of solar. We are getting on with delivering lower bills, energy security, good jobs and climate action.

[Catherine Atkinson (Derby North) (Lab)]

Rolls-Royce in Derby is an international leader in research on and the development of small modular reactors, and it is fantastic that the Government have acknowledged the role that SMRs will play in clean power generation, energy security and green jobs. In the Budget, we heard that the final decision on Great British Nuclear’s SMR competition will conclude next spring. Does the Minister agree that it is important for this opportunity to be seized as soon as possible?

[Michael Shanks]

I agree with my hon. Friend that nuclear will play a central role in our clean power mission, and will continue to be a critical part of our energy mix as we progress towards 2030 and far beyond. Great British Nuclear is continuing to drive forward the competition on small modular reactors, with bids currently being evaluated by the Department, and I look forward to having more to say about this in due course.

[Mr Speaker]

I call the Chair of the Energy Security and Net Zero Committee.

[Bill Esterson]

The last Government held a consultation on electricity market arrangements, but despite having said that that was their flagship policy in this area, they did not publish the results of that consultation. Does my hon. Friend agree that electricity and, indeed, energy market reform is crucial to achieving the Government’s stated 2030 clean energy targets and to reducing bills, and can he say whether this Government will publish the results of the last Government’s consultation and if so, when?

[Michael Shanks]

I congratulate my hon. Friend again on his appointment as Chair of the Select Committee—he brings a huge amount of knowledge and experience to the role—and I agree with him about the importance of reviewing electricity market arrangements. We are building on the last Government’s consultation, and we will have more to say in the months ahead. This is a crucial element of how we achieve clean power by 2030 and ensure that our energy system of the future is fit for what will be a different way of managing energy throughout the country. We will have more to say about that in the months ahead.

[Baggy Shanker]

Last week a report published by the National Energy System Operator noted that although the programme to roll out new small modular reactors was being developed for the mid-2030s, a 2030 roll-out date would in fact be possible. Given that SMR technologies hold exciting and significant potential for investment in jobs and infrastructure in constituencies such as mine, has the Minister considered the value of bringing the roll-out forward to 2030?

[Michael Shanks]

My hon. Friend is right to say that nuclear will play a vital role, and that it not only delivers on our energy security but creates good, well-paid jobs. Unlike the last Government, who in 14 years did not deliver a single nuclear project—there were many consultations and processes, but not a single nuclear power station was built—this Government are getting on with delivering a nuclear future.

[Joe Morris]

Last week’s report from the National Energy System Operator showed that not only is clean power by 2030 achievable, but it can lead to lower bills and more secure systems. Does the Minister agree that the only way to protect bill payers permanently is to go as far and as fast as possible towards our clean power mission by 2030?

[Michael Shanks]

My hon. Friend is absolutely right. The report published by the independent National Energy System Operator laid out not only that reaching our clean power mission is entirely achievable, but that it will bring down bills. The importance of the report is that it set the course for how that is possible. The reality, which the Conservative party refuses to accept, is that the only way to get us off the rollercoaster of high bills is to deliver at pace the clean energy that we know will deliver energy security and climate leadership, and bring down bills for people right across the country.

[Tom Tugendhat (Tonbridge) (Con)]

I am delighted that the Minister is setting out that the report promises an extra £40 billion of investment a year in the energy sector and, presumably, the taxes to go with it, which will of course come from the businesses that are paying for everything else in the Budget that has just gone by. Is there anything at all in his proposals that will actually bring down the cost of energy and not be replaced by taxpayer funding? It appears at the moment that there is nothing, and energy prices are already going up.

[Michael Shanks]

I would encourage the right hon. Gentleman to read the NESO report, because it sets out in great detail not only that clean power is achievable by 2030, but that it will lead to lower bills. What he says about investment misses the point: in the last few weeks, we have announced billions of pounds of private sector investment in these projects; indeed, Scottish Power has announced today that it will provide £1 billion. Companies are choosing to invest in this country, whereas they did not under the Conservative party. The reality is that once upon a time, the Conservatives recognised that the drive to net zero was important. They have abandoned that commitment now.

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

I thank the Minister for agreeing to meet the OffSET—offshore electricity grid taskforce—group of MPs later today; we are very much looking forward to the meeting. Does he recognise that achieving the 2030 deadline set out in the NESO report requires an acceleration of the process, which, in turn, is dependent on much higher levels of public consent?

[Michael Shanks]

I recognise the hon. Gentleman’s point, and I am looking forward to meeting him and his colleagues this afternoon to discuss the particular issues in his area. We need to build more network infrastructure across the UK to make this endeavour a reality, but he is right: we want to bring communities with us on this journey. That is why we have said that we are looking again at what community benefits will look like, building on some of the work that the previous Government did in consulting on this issue. Crucially, however, if want to bring down bills and deliver energy security, we will have to build the infrastructure, and that is what this Government are committed to doing.

[Wera Hobhouse (Bath) (LD)]

The Minister knows well the Liberal Democrats’ commitment to community energy. Will the Government establish a clean community energy scheme, look at the barriers that currently face community energy projects and look at supporting the National Grid to deliver community energy?

[Michael Shanks]

The hon. Lady and I have had a number of conversations, and I recognise her commitment on this issue. We have committed in the local power plan to delivering investment in community energy across the country. Importantly, we want not only to invest in schemes, but to deliver across Government the mechanisms needed to make it more possible for communities to deliver such schemes. That will build capacity in communities so that we can see more community energy.

[Sir Desmond Swayne (New Forest West) (Con)]

What is the beef behind the Government’s reluctance to embrace with enthusiasm locally generated community energy? Why did they vote against the amendment tabled to the Great British Energy Bill by the hon. Member for Bath (Wera Hobhouse)?

[Michael Shanks]

I think the right hon. Gentleman thinks that was a “gotcha” question, but, of course, the Conservative party did not vote for the Bill at all. Amendment or not, I do not think he can really speak about what Great British Energy might deliver, because, despite it being one of the most popular policies at the last election, the Conservatives failed to bother to vote for it.

[Mr Speaker]

I call the shadow Secretary of State.

[Claire Coutinho (East Surrey) (Con)]

Last week, the National Energy System Operator published a full systems cost analysis of the Secretary of State’s flagship project to carbonise the grid by 2030. This morning, the Secretary of State said on several media outlets that the report shows that his plans will lower bills. I remind the House that the report assumes that gas prices are 40% higher than the Department’s own estimates, that the price of carbon price is at least double what it is now, that the Government can commission more offshore wind in the next two years than in the last six combined without moving prices, and that they can build the grid at a pace we have never seen before in this country, without any delays. Even if all that is achieved, page 78 of the report shows that the cost of the system will be higher. For clarity, would the Minister like to repeat at the Dispatch Box the Secretary of State’s claim that the NESO report shows that Labour’s system will lead to a lower cost of electricity?

[Michael Shanks]

What the shadow Secretary of State has just outlined quite coherently is that the Conservatives have no ambition in this space whatsoever, but we do. I am very happy for the right hon. Lady to outline where our ambition is. We will build faster than the previous Government, although I have to say that that would not be difficult. The shadow Minister sitting next to her, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), said quite clearly at their conference that the previous Government had built infrastructure far too slowly, and their former Energy Minister, the right hon. Member for Beverley and Holderness (Graham Stuart), said that their onshore wind ban was “always mad”. We are quite happy to pick up where they left off and deliver the clean power that this country needs.

[Claire Coutinho]

This is the ministerial team who told the electorate they were going to cut their bills by £300, without doing any homework to find out how those plans would work. They voted against our amendment to hold them to account on their own pledge just two weeks ago, and now they are trying to claim that the NESO report shows that their approach will lower bills when in fact it shows in black and white that the system will be much more expensive. Does the Minister not see that if they follow this plan, we will be a warning, not an example, to the rest of the world and that the British people will be colder and poorer as a result?

[Michael Shanks]

Time and again, the Conservatives run away from their record on this in office. The reason why people right across this country are paying more on their energy bills is that the Conservatives did not get us off the rollercoaster of fossil fuel markets, but we are now moving at pace. The right hon. Lady may want to keep us in the vulnerable state where we are reliant on international gas markets, but we are determined that we will not do that. We will bring down bills and deliver energy security. I am not ashamed to say that we will move with great ambition to deliver what this country needs and to deliver the good jobs that go with it.

[Douglas McAllister (West Dunbartonshire) (Lab)]

4. What steps he is taking to establish Great British Energy.

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

We are moving at pace to set up Great British Energy. So far we have appointed the start-up chair, Jürgen Maier, we have announced that the headquarters will be in Aberdeen and we have progressed the Bill through the House of Commons. This builds on the first partnership announced for Great British Energy, with the Crown Estate, and on a recent new deal to collaborate with Scottish public bodies. We are getting on with the job of delivering 21st-century public ownership for the British people.

[Douglas McAllister]

Every family and every business in my constituency paid the price of 14 years of Conservative failure with rocketing energy bills because the last Government failed to invest in clean energy. The Opposition continue to oppose Great British Energy. Does the Minister recognise the absurdity of their argument that they are quite happy with foreign public ownership as long as it is not UK citizens who own our energy?

[Michael Shanks]

My hon. Friend makes a good point. It is important to remember that, despite what the Conservatives might have us believe, Great British Energy is overwhelmingly popular with the British people. That includes the people in Scotland, because of course it was not just the Conservative party who did not vote for Great British Energy; surprisingly, the Scottish National party also failed to vote for a publicly owned champion in our energy space. We are getting on with delivering jobs and growth, delivered with public ownership through Great British Energy.

[Neil O’Brien (Harborough, Oadby and Wigston) (Con)]

Before the election, Labour said that Great British Energy would cut electricity bills by £300. After the election, the Labour Government voted against writing that into law and instead took away people’s winter fuel payments and made their bills more expensive. The Institute for Fiscal Studies has now said that their policies are fundamentally raising prices for consumers to the tune of £120 per household, and we know from the NESO report that this will get worse. Even if they triple the pace of wind roll-out, double the pace of grid connection and make other heroic assumptions, all of this is going to bump up costs further, is it not? We are doing this from the basis of having the high electricity prices in Europe. What assessment has the Minister made of the impact on British industry?

[Michael Shanks]

Question after question from the Conservatives shows that they do not recognise the part they played for 14 years in why we are paying higher bills than ever before. We are the only party with an ambitious plan to get us off the volatile fossil fuel markets. The Conservatives used to believe that, in our drive to net zero, we should build this infrastructure for the long term. They are now opposing it, but they will have to tell their constituents why they want to leave them exposed to rising bills.

[Jo White (Bassetlaw) (Lab)]

5. Whether he plans to support the development of fusion power plants connected to the grid.

--- Later in debate ---

[Dr Andrew Murrison (South West Wiltshire) (Con)]

8. Whether he has had recent discussions with National Grid on diversifying the energy mix of its network.

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

The Government regularly meet stakeholders to discuss the development of our energy infrastructure. Last week, the Government received advice from the National Energy System Operator outlining its advice on the pathway towards clean power by 2030. Later this year we will publish our 2030 action plan, which will set out details on the future of our energy mix.

[Dr Murrison]

Offshore wind has been a real positive for our energy security and grid independence, but unfortunately not when the wind does not blow. Given the election of a President who tells us he is going to “drill, baby, drill,” what revision does the Minister anticipate to his timetable towards net zero?

[Michael Shanks]

As I said in my previous answer, later this year we will outline our action plan on how we will deliver on the 2030 target; there is no change to our timetable in that regard. The right hon. Gentleman raises a good point about what happens when the wind does not blow and the sun does not shine, and about ensuring we have a mix in our energy system. That is why we remain supportive of nuclear and why we have recently announced investment in long-duration energy storage, to ensure we can capture energy and use it when we need it.

[Jenny Riddell-Carpenter (Suffolk Coastal) (Lab)]

I was delighted by Ofgem’s announcement this morning that it now recommends that the proposed Nautilus interconnector should be located at the Isle of Grain, not on the Suffolk coast. Since I have been elected, I have made firm representations to the Minister and Ofgem, including via its consultation, that the Suffolk coast should not have been considered and brownfield sites should have been considered first. Will the Minister meet me to discuss other National Grid projects in my constituency?

[Michael Shanks]

Ofgem has announced today decisions on a number of interconnectors. Those are decisions for Ofgem and not for the Government. We have recently announced the launch of a strategic spatial energy plan, to ensure that we plan such projects holistically, across the whole of the United Kingdom, and take into account a number of schemes when planning future energy, such as those my hon. Friend mentions in her constituency. I will continue to have discussions about that with Members from across the country.

[Nick Timothy (West Suffolk) (Con)]

China’s largest offshore floating wind turbine company, Ming Yang Smart Energy, plans to build its first manufacturing plant outside China in Scotland. Ming Yang benefits from huge subsidies in China, but there are serious questions about energy security and national security. The Secretary of State says he wants to end reliance on foreign autocrats, but when he was asked about this on the radio this morning, he had no answer. Will the Minister rule out allowing any turbines that might be controlled by hostile states?

[Michael Shanks]

We are encouraging investment in the UK to build the infrastructure that we need in the future. Just today, we have announced the clean industry bonus that will give as much support as possible to companies to build their supply chains here in this country. We will continue to look at supply chains and, of course, we take seriously the companies, across the range of business projects, that are investing in this country. There is a series of processes already under way across Government. Whenever anybody wants to invest in this country, those processes will be followed in the usual manner.

[Ms Polly Billington (East Thanet) (Lab)]

Mr Speaker, will you and the Minister give the House an opportunity to celebrate the £1 billion of investment announced today in offshore wind in this country? It will provide jobs across the country, as promised by this Government, which the British people are not used to after the past 14 years. Will the Minister meet me to discuss the infrastructure required to connect that clean, secure energy to our homes, in particular the Sea Link project that could have an impact in my constituency?

[Michael Shanks]

My hon. Friend is right to highlight the fantastic announcement today by ScottishPower of £1 billion of investment here in the UK, building the infrastructure that we need, and delivering jobs and skills in this country as well. It is one of a number of announcements that we expect, because we are not agnostic in this Government on delivering the industrial strategy that we need. My hon. Friend the Minister for Industry is working on that at the moment. We will deliver the jobs in this country to build the clean power of the future. We will deliver good, well-paid jobs and the energy security we need.

[Andrew Pakes (Peterborough) (Lab)]

9. What steps she is taking to support job creation in the renewable energy sector.

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[Joani Reid (East Kilbride and Strathaven) (Lab)]

12. What assessment he has made of the potential impact of Great British Energy on job creation.

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

The energy transition presents an incredible opportunity for job creation right across the UK, particularly in our industrial and coastal communities. Through Great British Energy, we will build on Scotland’s reputation as a world leader in energy and secure long-term, well-paid jobs in the industries of the future.

[Joani Reid]

I recently had the privilege of opening an extension to the Kype Muir wind farm in my constituency. The extension alone will generate enough power for 53,000 homes for 30 years. My constituency is also home to part of Whitelee, the largest onshore wind farm in Europe. However, not one of those turbines was manufactured in the UK, let alone locally. What steps is the Minister taking to develop UK manufacturing capacity in that area?

[Michael Shanks]

I know well my hon. Friend’s constituency—it is next door to mine—and both wind farms she mentions. She says quite rightly that, for all the expansion in those technologies over recent years, very few of those jobs, particularly in manufacturing, have been in this country. We will do everything we can, through Great British Energy and the clean industry bonus we have announced today, to grow our domestic supply chains, build industry in this country and win jobs for Britain.

[Harriet Cross (Gordon and Buchan) (Con)]

Last week, just days after the Budget, Apache announced that it would exit the North sea by 2029. It said:

“The onerous financial impact of the energy profits levy…makes production…beyond 2029 uneconomic.”

What assessment have the Government made of the impact of those policies on current jobs in north-east Scotland, and how will Great British Energy compensate for the loss of those jobs?

[Michael Shanks]

We are working with industry in the north-east of Scotland to ensure that this is a just and prosperous transition. We have announced our next steps of responding to court judgments, and a consultation is open at the moment. We will have more to say about that in the months ahead. The hon. Lady must recognise that if she wants to see investment from Great British Energy, she might actually have to support its creation in the first place. The Conservatives cannot have it both ways; either they want a public energy company to invest in the jobs of the future—

[Tom Tugendhat (Tonbridge) (Con)]

We don’t.

[Michael Shanks]

Or they do not, as her right hon. Friend has just confirmed from the Back Benches. She cannot have it both ways.

[Christine Jardine (Edinburgh West) (LD)]

T1. If he will make a statement on his departmental responsibilities.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

My hon. Friend is right; there are good projects right across the country that we hope to invest in in the lead-up to delivering in 2030. The NESO report clearly set out that our aim is achievable. The Conservative party wants to continue having the arguments of the past; we are determined, with ambition, to deliver on the arguments of the future.

[Mr Speaker]

I call the shadow Secretary of State.

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[Lee Anderson (Ashfield) (Reform)]

T3. Forests in North America are being chopped down to supply wood to burn at Drax power station, at a cost of £2 million a day in subsidies, while pensioners will perish this winter. Does the Minister agree that it is time to end this net zero madness and admit that fossil fuels are “a gift of the God?”

[Michael Shanks]

It perhaps will not surprise the hon. Gentleman or the House that I am not going to agree with his final point. Net zero is incredibly important to deliver climate leadership, lower bills and the jobs of the future. But on biomass, we rightly expect full compliance with all regulatory obligations on biomass, and consumers rightly recognise the high standard of accountability from generators.

[Lee Pitcher (Doncaster East and the Isle of Axholme) (Lab)]

T6. In my constituency there are nearly 1,500 members of the mineworkers’ pension scheme. I congratulate my hon. Friend the Minister on the superb decision made in the Budget to return the investment of the reserve to them. I understand that this will mean a 32% rise in their weekly pension. Can the Minister confirm that this is correct?

--- Later in debate ---

[Gareth Davies (Grantham and Bourne) (Con)]

Conservative Members will never stop holding the Government to account for their pre-election promise to cut energy bills by £300. Have civil service officials conducted any modelling whatsoever that can legitimise that figure?

[Michael Shanks]

We arrived at the figure through independent analysis. We stand by the reality that the only way to bring down bills is to commit to our 2030 target. The National Energy System Operator backs that, but the Conservative party fails to support that action. The hon. Member therefore must explain what the Conservative plan is for reducing bills for people who are paying more than they have ever paid.

[Tim Roca (Macclesfield) (Lab)]

My constituents understand that tackling the climate crisis and getting lower bills go hand in hand, and they are excited about Great British Energy. Will GBE invest in community energy projects in places such as Macclesfield?

[Michael Shanks]

My hon. Friend is right to make a point about community energy. The local power plan that we are committed to will deliver community energy projects throughout Great Britain. I am sure that Macclesfield has some fantastic projects that Great British Energy will look at. We want to unleash the potential of community energy across the country.

[Greg Smith (Mid Buckinghamshire) (Con)]

National Grid’s rationale for rebuilding East Claydon substation is based on speculative applications, not consented real schemes. Will the Minister therefore meet me to find a way to get National Grid more grounded in reality rather than speculation?

[Michael Shanks]

I am happy to look at specific cases, but the Secretary of State’s role as final decision maker on some planning applications means that I cannot comment on them. However, generally speaking, the hon. Member makes an important point about looking at how we plan projects holistically throughout the country. That is why we have announced the first ever spatial energy plan for the whole of Great Britain.

[Richard Burgon (Leeds East) (Ind)]

The devastating scenes of flooding in Spain remind us all of why urgent investment is needed to deal with the deadly consequences of climate change. Does the Minister agree that that investment should be paid for by the polluting companies that have caused the climate crisis?

--- Later in debate ---

[Alison Bennett (Mid Sussex) (LD)]

Bolney in Twineham parish in my constituency hosts the Rampion windfarm substation, which leads to several battery energy storage solution applications. What reassurance can the Minister give my constituents about the adequacy of the regulatory framework?

[Michael Shanks]

Batteries will play an important role in our energy mix in the short duration storage that we need. We will continue to look at whether the regulatory arrangements are sufficient. Obviously, we want all the applications to be for safe projects. The regulations are in place to ensure that. If we need to do any more work, we will happily look at that.

[Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)]

We had a very successful all-party group meeting last week on floating offshore wind in the Celtic sea. I know the Minister is supportive and ask him to consider mechanisms such as ringfencing contracts for difference and investment in ports to kickstart the investment in the Celtic sea.

[Michael Shanks]

My hon. Friend is right to raise the important potential of the Celtic sea in our green energy transition. I will be in Wales tomorrow to speak at a green energy conference on exactly that question. There is huge potential in floating offshore wind. We want to bring the manufacturing jobs in the supply chain to this country as well, which is why we launched today our clean industry bonus to bring that investment here to build the factories of the future and deliver the good, clean jobs of the future.

[Alicia Kearns (Rutland and Stamford) (Con)]

The wind industry has rightly agreed a standard compensation package for rural communities with big wind plants. The solar industry, however, is, unsurprisingly, busy whitewashing Uyghur slave labour in its supply chains rather than doing that. If it will not act, will the Government step forward and recognise that they must support rural communities by creating a standardised compensation programme?

[Michael Shanks]

The hon. Lady has pursued this and several other issues to do with the solar industry for a long time. We are currently looking at all the options, particularly around community benefits, to ensure that they are at a scale—following on from the previous Government’s consultation on whether they should be compulsory—that genuinely benefits communities.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

My constituent Konnie Huq, with Arts Council and Lottery funding, has compiled a kids’ climate guide, with Jamie Oliver among the contributors. Will Ministers join forces with her to get it out there, preferably to every school in the country, because we have got to start young?

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

I met with National Grid yesterday and communicated my concerns about the Norwich to Tilbury line but we remained constructive and talked about community benefit schemes. Unfortunately, it told me that the Government were dragging their feet on defining community benefit schemes. Can the Minister update the House on when they will bring forward guidance, and can he promise that a community benefit scheme is a real, positive economic benefit for my residents who are impacted by the pylons?

[Michael Shanks]

Clearly I cannot speak for National Grid but I can speak for this Government and in four months we have moved as quickly as possible on what a community benefit scheme will look like for network infrastructure as well as for generation projects. The Conservative party had 14 years to put in place a different scheme and did not; in four months we are moving as quickly as we can.

[Perran Moon (Camborne and Redruth) (Lab)]

As Ministers know, the European powerhouse of critical minerals is Cornwall, including its vast quantities of lithium, essential for our transition away from fossil fuels. Will the Ministers agree with the industry’s call for a target of 50,000 tonnes of lithium?

[Chris Law (Dundee Central) (SNP)]

Ahead of the general election the Labour party was warned that its plans for the North sea in Scotland would lead to up to 100,000 Scottish job losses. Last week this became a reality when the US oil firm Apache said that it would end all its operations in the North sea by the end of 2029, citing this UK Government’s Budget and tax regime. Can the Minister explain why this UK Government sees the jobs and livelihoods of oil and gas workers in the north-east of Scotland as expendable?

[Michael Shanks]

I do not believe that at all. This Government are committed to a just and prosperous transition. The reality is that 100,000 jobs have been lost in the oil and gas industry in the past 10 years. If we do not recognise that there is a transition under way and put in place the measures to produce the jobs of the future, we will have more losses. The party that the hon. Member represents could have done something about that by supporting Great British Energy headquarters in Aberdeen but he failed to show up and vote for it.

[Noah Law (St Austell and Newquay) (Lab)]

I declare an interest as a chair of the all-party parliamentary group for critical minerals. Domestic supplies of copper and, of course, Cornish tin are critical to the UK’s energy security. What consideration has the Minister given to ensuring that copper and tin are recognised as critical minerals?

Energy Rebates: Highlands and Islands

Michael Shanks Excerpts

Wednesday 6th November 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

I thank the hon. Member for Moray West, Nairn and Strathspey (Graham Leadbitter) for securing this incredibly important debate. He has the pleasure of representing one of the most beautiful parts of Scotland, to which I enjoy going on holiday often. It is great to be discussing this long-standing issue for the highlands and islands of Scotland, which, as he mentioned, was also raised by former Members.

The context of this discussion is important. Energy bills are too high for too many people right across the country, not just in the highlands and islands. This Government have made it clear from the outset that we want to put in place an energy system that delivers lower bills permanently; removes the price spikes that all our constituents, including those in the highlands and islands, have faced over the past few years; and speeds up the transition to home-grown clean energy.

The hon. Gentleman made the point, as have others, that the north of Scotland plays an important role in delivering clean energy at the moment. That brings us back to a conversation that we have had in this place a number of times—indeed, in the previous debate, I recruited the hon. Member for Inverness, Skye and West Ross-shire (Mr MacDonald) to help me with it—on community benefits. We need to do much more for the communities that host this nationally important energy infrastructure and the network infrastructure that goes with it to get power across the country. They should feel benefits from that in their bills and their local communities, and we are looking at that.

The creation of Great British Energy, the first publicly owned energy company in this country for 70 years, is about harnessing clean energy and investing in communities, and of course it will be headquartered in Scotland. I know that the hon. Member for Moray West, Nairn and Strathspey and his SNP colleagues did not support the Great British Energy Bill, but I hope that in time they will see the benefit of Great British Energy delivering a greater quantity of cheaper energy right across the UK, which will bring down bills for everyone, wherever they are.

The hon. Gentleman made an important point about locational pricing. If we were to design an energy system from scratch, we would not design the system we have at the moment, which is the legacy of electricity infrastructure being built in different places, at different times and in different ways across this country for a century. Our ambition is to deliver a lower-cost, renewables-based energy system, so we are considering what reforms to the energy market will look like to enable electricity prices to better reflect local conditions. That could have a significant impact on communities like the one the hon. Gentleman represents, recognising that there should be some relationship between where energy is generated and the price people pay for it.

There are potential reforms on the table. The previous Government started the consultation and we have picked it up. Many hon. Members will be aware of the options. They include the possibility of zonal pricing, but it is important that we balance such options with potential capital investment impacts, so there is detailed work going on before we reach any decisions. Reform of the electricity market does not have to be defined simply by locational pricing; we will look at a number of other reforms to the national pricing model, and we continue to work closely with the regulator, Ofgem, and the new publicly owned National Energy System Operator to look at how they might work.

The hon. Gentleman’s point about transmission and distribution costs comes up in debates inside and outside this place. It is important to recognise the difference between the two. Electricity network charges are paid for connecting to, and using, the electricity network. They are paid by consumers across the country, both industrial and domestic, through the standing charge on their energy bill. Transmission charges are based on the costs that users impose on transmission by connecting in different locations, which means that there are higher charges for those areas that require energy to be transmitted a long distance. However, as we have discussed, transmission costs are generally lower in the highlands and islands than in other parts of Great Britain because Scotland is a net exporter of energy.

As the hon. Gentleman pointed out, the difficulty comes with the distribution cost, which is the cost of supplying households in each area with electricity. It is based on the complexities of how we get electricity to individual households, so places like the highlands and islands face higher distribution costs, for obvious reasons: the mountainous terrain, sparse population, distance between houses and poor weather conditions all contribute to those costs being some of the highest in the UK.

[Graham Leadbitter]

On the point about transmission charges versus distribution charges, transmission is, in effect, distribution to the rest of the UK. Energy is transmitted for people to purchase at the other end. It does not cost any less to do that—in fact, it costs more. Purchasing energy hundreds of miles away from where it is created, but paying less to receive it, seems completely inequitable.

[Michael Shanks]

I think that would be true if transmission charges were higher in Scotland than in other parts of the UK, but that is not the case. Distribution charges might be lower in certain parts of the rest of the UK, but the transmission charges are higher, taking into account exactly that point.

We would like to get the grid into a place where we have much more generation capacity being built next to population centres, as well as the investment in the highlands and islands and the North and Celtic seas, but there is no doubt that the grid we will need to build in the future will be very different from the one where we built a gas or coal power station next to a city. We do have to wrestle with these questions of how we get power to the right place.

We also have to take into account how to build in capacity for when renewables are not generating. Parts of Scotland may well generate more electricity than they can use, but not always—not 24/7, 365 days of the year—so the whole grid has to be part of the answer. As the hon. Member referred to, one solution is the hydro benefit replacement scheme. It provides annual assistance of about £112 million to reduce distribution costs for domestic and non-domestic customers in the region, which works out at around a £60 annual reduction in household bills.

Many hon. Members have raised the really important point of standing charges, which are considerably higher in the highlands and islands than in many other places. The setting of standing charges is a commercial matter—they are not fixed by Government—and is regulated by Ofgem. However, the Government have taken the view, as we made clear during the election and in subsequent weeks, that the burden of standing charges on energy bills is far too high. We have had a number of conversations with Ofgem and others about that, including on the amount of variance between standing charges across the UK.

We are committed to lowering standing charges overall, and we have been working constructively with Ofgem on that. In August, Ofgem published a discussion paper addressing many of the issues on standing charges. It sets out the options for how we can reduce them, including moving some supplier operational costs off the standing charge and on to the unit rate, which would rebalance some of the issues raised by the hon. Member; increasing the variety of tariffs available to consumers in the market; and, in the longer term, reviewing how system costs are allocated. That will affect consumers in many ways, but in the meantime we want to work with Ofgem on any practical steps we can take to reduce standing charges as much as possible.

Before this debate, we had a debate on the wider questions around fuel poverty. I will not go over many of those points again, but I will just make the point that many aspects of fuel poverty are devolved to the Scottish Government, which in the autumn Budget last year received the biggest settlement since devolution. We have also announced £1 billion through the warm home discount, which provides an annual £150 rebate off bills for low-income households. That has a Barnett impact and there is therefore money for the Scottish Government to invest if they wish to do so.

The household support fund is an England-only scheme to provide support for those most in need. Of course, it is for the devolved Governments to decide how they want to allocate the additional funding, and the Scottish Government have not implemented a like-for-like scheme, but they do have a wide range of support for households in response to the cost of living crisis.

As I said, we had a very good debate just before this one on fuel poverty. The Government are committed to tackling it. Policy in this area is devolved in Scotland, but this is one of many questions about how we bring down costs for all consumers right across the UK. In our plan for clean power by 2030, we commit to delivering what will be cheaper energy—that was confirmed by the NESO this week. It will require a huge amount of effort, but as part of that we are committed to looking at the review of energy market arrangements as well.

This is a complex issue with a number of layers to it. I thank the hon. Member for Moray West, Nairn and Strathspey for raising it again. The challenge of how we lower bills for all is part of the energy trilemma that we are facing around how we demonstrate climate leadership, improve our energy security and lower bills in the long term. It is one that we are tackling head on, and we are determined as a Government to ensure that we do what we can to lower bills for all households across the country—in the highlands and islands, and right across the UK.

Question put and agreed to.

Fuel Poverty

Michael Shanks Excerpts

Wednesday 6th November 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

I thank all right hon. and hon. Members for participating in the debate. I particularly thank the right hon. Member for Orkney and Shetland (Mr Carmichael) for securing the debate and for his commitment on this issue in debates over many years. I know that it is a considerable issue in his constituency, where I think 31% of households are in fuel poverty, and he is right to raise it in this House. I always appreciate conversations with him, including our recent conversations on many of the topics that have been raised today.

I agree on the importance of this debate on tackling fuel poverty, although I should say at the outset that fuel poverty is devolved across the UK. Certain things that I will speak about relate to the UK Government’s responsibility for fuel poverty, which focuses on England. In the Budget last week, a considerable amount was assigned to the devolved Administrations, including one of the biggest devolved settlements for the Scottish Government in many years. I am sure that the right hon. Gentleman will raise these issues with colleagues in the Scottish Parliament to get much-needed funding to projects in Scotland as well.

On devolution, it is also important to say that we measure fuel poverty in very different ways across the country, with different metrics and targets for how we identify it. In Scotland, the metric for fuel poverty is the same as that used in England to measure energy affordability. It includes deeming a household fuel-poor if it has to spend a certain proportion of its income after housing costs on energy, which is a slightly different figure from the one used in Scotland.

Nevertheless, much of what we have heard today is true across all parts of the UK. Many hon. Members made the point that the choice between heating their home and feeding their family or paying other bills is a stark one for any family. In a country as wealthy as ours, that should not be a choice that families have to make.

I welcome the point made by the shadow Minister and others that we can all work together to move forward on the issue. However, we need to take more action than has been taken in the past 14 years. That is why our manifesto committed to slashing fuel poverty and delivering our warm homes plan. We have already taken the first steps in delivering that. In the Budget last week, the Chancellor committed £1.8 billion to support fuel poverty schemes, helping over 225,000 households to reduce their energy bills by over £200. We have announced that we will consult this year on increasing the minimum energy standards in the domestic private rented sector: 35% of all those in fuel poverty in England are in the private rented sector, so it is vital that we provide as much support as we can.

I will pick up on several points raised during the debate, but the critical point was about trying to bring all the different policies together into a cohesive fuel poverty strategy. That is indeed what the Government have committed to publishing in due course, to ensure not only that we have a clear focus on tackling fuel poverty but that the whole Government are aligned on delivery. That is the approach that the new Government have taken on a range of issues; in my Department that includes clean power by 2030. We making sure that all Ministers, wherever they are—in whichever Department and with whichever responsibility—come together to make the situation better.

I want to provide a little bit of context. I repeat that much of fuel poverty policy is devolved. In 2023, an estimated 13% of households—just over 3 million—were in fuel poverty in England, under the metric that is used here. That remains effectively unchanged since 2022. The Committee on Fuel Poverty, which advises on the effectiveness of policies and scrutinises them in England, stated that progress towards tackling fuel poverty has effectively stalled. In England, the target is to ensure that as many fuel-poor homes as possible achieve the minimum energy efficiency rating of band C by 2030, but 46% of all low-income households in England were still living in a property with a fuel poverty efficiency rating of band D or lower. That shows the sheer amount of work we have to do on the issue.

We are therefore working on a number of policies. In reflecting on the point made by the hon. Member for Mid Dorset and North Poole (Vikki Slade), I accept that there is an urgency to moving forward on all these issues. We have inherited quite a lot of issues that require urgent action. I ask for just a little patience, but I absolutely recognise the point that for someone living in fuel poverty, the impending winter is a crisis. The Government are therefore moving as quickly as possible on the issue.

The warm homes plan, which we announced in our manifesto and on which we are moving forward, is about transforming homes right across the country by making them cheaper and making energy clean to run, rolling out upgrades from new insulation to solar and heat pumps. We will partner with local and combined authorities, and the devolved Governments where possible, to roll out the plan. That was in the Budget speech last week, in which an initial £3.4 billion was announced towards heat decarbonisation and household energy efficiency over the next three years. That includes £1.8 billion to support fuel poverty schemes, which, as I said, will help more than 225,000 homes.

The right hon. Member for Orkney and Shetland raised several points. He rightly notes that the radio teleswitch service situation will be a worry to many people, particularly in rural communities. As he said, a roundtable was held, which was important and brought together the key stakeholders. Ofgem has updated its action plan to make sure that we are pushing forward and in particular that we are putting pressure on the energy companies responsible for delivery, to make sure that the upgrades are made and that targets are in place, including some key milestones that they must meet early next year.

Several hon. Members mentioned community benefits. This is a debate that we have had in this Chamber and across the House before. It is extremely important that if communities are hosting energy infrastructure such as the Viking wind farm in the right hon. Gentleman’s constituency, which I visited not long ago, there should be some benefit. We certainly do not want the communities that host vital energy infrastructure to be those that are most likely to be in fuel poverty. We are therefore doing a lot of work, building on the previous Government’s consultations, on what community benefits might look like. We want to make sure that communities and individuals get a genuine benefit, because some community benefits do not currently deliver quite the change that we would like.

[Mr MacDonald]

Will the Minister allow humble servants such as myself to get involved in that? I have spent several years working with the Highland council and others on community benefits, and I would appreciate a meeting.

[Michael Shanks]

I am always willing to take help from any Member. If the hon. Gentleman can take some of this work off my plate, I will be very happy to work with him. Of course, we will first have to work out the answer to the question of where God comes from, but if we can settle on the fact that it is self-evidently Rutherglen in the central belt, I will be happy to work with the hon. Gentleman. That spoils the joke I was going to make about his comparison of temperatures, which is that seeing him wear a very woolly jumper this morning in London made me wonder what he wears in Skye, but that is for another debate.

Genuinely, though, we want to have an open and collaborative approach, and we want to make this work. The consultation that the previous Government carried out and the feedback we have from a number of partners show that there are really good examples of community benefits working well, along with a lot of examples where they are not working well. If we could build on that approach together, I would very much appreciate it.

While we are discussing the hon. Gentleman, he made a very good point about remembering the different types of fuel that households use, and the real issue for off-grid homes—particularly in the north of Scotland, but right across the UK. Again, fuel poverty is devolved, so some of those questions are for the Scottish Government to answer—I know that the questions will be put to them—but we are aware that in England, for which the Department for Energy Security and Net Zero is responsible, 12% of rural households are in fuel poverty, and those are the ones with the largest fuel poverty gap. Tackling those particular challenges in the rural context is therefore really important.

[Jim Shannon]

rose—

[Michael Shanks]

Ah! I was just going to refer to the hon. Member.

[Jim Shannon]

I am very much listening to the Minister, who was perhaps about to tell us what will happen in Northern Ireland, where 62% of households are dependent on oil. In comparison, the proportion for England—I say this gracefully, Sir Roger—is only 4%. The greater emphasis on Northern Ireland will therefore fall upon us. The Minister says that this is a devolved matter and that money has been set aside by Labour to help, but the differential is massive and cannot be ignored.

[Michael Shanks]

The hon. Gentleman, as always, makes a very good point, although I noticed that he called the shadow Minister his friend but not me. But, over time, I think we will build on that and—

[Andrew Bowie]

Aspire to that.

[Michael Shanks]

I aspire to that—quite. The hon. Member for Strangford (Jim Shannon) made a number of important points, and I have to confess that I was not aware of the statistic that he cited. That puts the difference into stark contrast, so I absolutely take the point.

The hon. Gentleman spoke earlier about engaging with the Northern Irish Executive. I have met both Ministers with responsibility for different parts of the energy policy—most recently, in fact, in the inter-ministerial working group across all the devolved nations. One of the key topics that we discussed was decarbonisation, particularly of such households, so we absolutely are taking that issue forward.

I am conscious of time, Sir Roger, so I will just pick up on a couple of other points that hon. Members raised. The hon. Member for Wokingham (Clive Jones) tempted me to be drawn into Beveridge’s “five giants”. Actually, I think that is an important statement about where this Government have come in, because it feels to me like want, disease, ignorance, squalor and idleness are yet again the five giants that we have to tackle as a country, and we are tackling them all as quickly as we can. I take his point, but it brings into stark contrast the fact that we have come in with some really tough decisions to make. There are pressing needs in the NHS, the education system, housing and energy, and we are doing what we can to improve all those. The Budget last week was about fixing the foundations and investing in our public services again. We can undoubtedly do more, but we are moving forward as quickly as we can.

I want to touch on consumer protection, which a number of Members have raised, and the point of the regulator. The ministerial team in the Department have had a number of meetings with Ofgem over a variety of issues, but there is no doubt—Ofgem shares this view—that suppliers could do much more to protect customers and provide them with a better quality of service. We are therefore looking at how we strengthen the regulator—a consultation is under way—so that it can hold companies to account for wrongdoing, require higher performance standards and ensure that there are much better levels of compensation when providers fail.

Last year, Ofgem introduced much more stringent rules around the involuntary installation of prepayment meters, an issue that I raised in one of my first questions after I was elected to Parliament. That was a shocking situation, but much more stringent requirements are now in place. We continue to monitor the situation to see whether much more is required.

I thank all hon. Members who have participated in the debate. There is agreement across all parties that this issue is extremely important. Progress has stalled in recent years, and we now need to make significant advances. The Government are committed to slashing fuel poverty. We will do that through the fuel poverty strategy for England, and also, we will look across the whole of the UK at what we can do with our energy system to reduce bills and provide more secure energy for everyone, and to improve home standards. We will do that by protecting low-income and vulnerable consumers and by trying to raise households out of poverty across the board. Our strategy on child poverty, the raising of the minimum wage and other factors combine to support households struggling in fuel poverty.

We will no doubt return to this topic again. We do not pretend to have all the answers, so we are open to any ideas from hon. Members right across the House. Together, we can tackle this issue, but it needs concerted effort and investment, and this Government have started that.