Great British Energy Bill (Second sitting)

Olivia Blake Excerpts

Committee stage
Tuesday 8th October 2024 Public Bill Committees

[Andrew Bowie]

Q Thank you very much for joining us, Mr Buckland. Obviously you come from the perspective of a company that is investing—alongside others that are investing—in the future technologies that will guide us towards net zero and a clean future. One of the objects of Great British Energy, as clause 3 states, is that it should be involved in

“the production, distribution, storage and supply of clean energy”.

Do you see the Bill and the creation of GBE as an assistance in unlocking private capital and the investment that we need in the new technologies, or are you worried, as some are, that this might be a blockage and get in the way of the private sector?

Josh Buckland: I think that that is the right question to ask. Ultimately, the amount of capital we need to invest in the energy transition is so significant that we will have to deploy and leverage in private finance at a scale that has not really been seen before, and any intervention from Government needs to play a role in unlocking that private capital. The Government have set out that Great British Energy will be mobilised with £8.3 billion of public capital. On the surface, that is a significant amount of money, but in comparison with the hundreds of billions that we will need to deploy through the overall transition, the way that it crowds in greater levels of private investment will be the key test of its success.

The Bill sets out a range of roles that Great British Energy could play, some of which could have a bigger impact on mobilising capital than others, and a range of different mechanisms that it could deploy. It is probably too early to tell whether the structure and the decisions it makes will mobilise capital at the scale that the Government intend, but the framework set out in the Bill will definitely give it the potential to do so.

[Olivia Blake (Sheffield Hallam) (Lab)]

Q I am interested to know whether there are any conditions that you would like to see put on the financial assistance provisions and their scope under clause 4, given your unique placement within the system.

Josh Buckland: The financial assistance statements set out in clause 4 are relatively broad; they give Great British Energy the ability to invest in a variety of ways. It comes back to the question of how you create value through Great British Energy. One of the key tests will be whether it can drive additionality, so whether it can deploy capital in a way the private sector cannot. That usually rests on two issues. One is whether it can invest earlier in the development curve when private investment at scale is tricky, so where there is technology risk or development risk. An alternative is whether it can invest on a sub-par basis, so effectively whether it can create catalytic capital—that is the terminology often used—in a way the private sector would not be able to.

Clause 4 could potentially do those things, and there is no restriction on its ability to do them, but obviously the Government have not yet said much about exactly what format these investments will take. That is not necessarily an issue from a legislative perspective. I have looked back at the legislation that underpinned the UK Infrastructure Bank and the Green Investment Bank, which I was involved with when I was in government, and both those Acts are relatively high-level in terms of the interventions and mechanisms that they can deploy. On the surface, there is nothing that restricts that. As the Government think about the deployment of Great British Energy, I imagine that they will want to set out how it will give more clarity to the private market on the sorts of interventions and mechanisms that it will look to deploy at scale.

[Olivia Blake]

Q Is there anything that you feel is missing from the Bill that would provide clarity, or do you think it will be covered in subsequent documentation?

Josh Buckland: My personal view on financial assistance is that it is fine to keep it relatively broad. Having been a civil servant in government for a long time, I know that primary legislation, if it is relatively broad, gives you the ability to think commercially, and clearly the energy transition will be set out with a range of different technologies. Innovation will come through, and the ability for the Bill to be flexible will assist that.

There are other questions about things that are referenced less in the Bill—let’s put it that way. In some of the previous legislation—for example, the Enterprise and Regulatory Reform Act 2013, which set out the Green Investment Bank—the Government talked about the need for operational independence undertakings and gave more clarity on the importance of creating an independent institution that can act in a way that ensures it can partner with the private sector and can take investment decisions that mobilise private investment and do not distort the market. Although that is not necessarily linked to clause 4, there are some interesting questions around whether the independence framework set out goes far enough to give that reassurance to the private market.

[Harriet Cross]

Q The Bill, as we have discussed, is pretty light on detail at the moment, which means it could be all things to all people or not offer enough answers to give any reassurance to anyone. From your clients’ point of view, is there a different mechanism that they would prefer? How could this public investment be used in a different manner to actually help drive and retain the private investment coming in at the moment? In other words, is this the best mechanism for keeping and driving investment?

Josh Buckland: On the surface, a range of different countries have publicly owned energy companies of different sizes and scales. Therefore, I do not agree with the concept that private investors are either unfamiliar or concerned at a general level. It will all come down to your point around the design of the actual institution and how it operates with the private market.

I think you are right to say that the Bill is relatively high-level. Looking back at some of the precedents that exist, I would mention the Green Investment Bank again. That was operational for a number of years and was established and grown while the legislation was then taken later down the line. It was easier, if you were a private investor, to understand the role that the Green Investment Bank would play and then have the legislation to effectively inform and solidify that.

The challenge in this context is that the Government have obviously proceeded with the legislation early on, as the institution is being established. That does not mean to say that it cannot be created as an institution that is independent and galvanises private investment but, clearly, the current level of uncertainty around the design and the mechanisms that it will deploy will add to that challenge.

Therefore, the Government have said that alongside the Bill they will look to publish more detail on a framework agreement with Government, and how they will set that out and consult with private industry. That, in tandem with the Bill, is critical at this formation stage. That is not to say that it necessarily leads to all that detail being in the Bill itself, but it is critical that it goes alongside it.

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[Stephen Flynn]

Q We have heard a great deal today, and rightly so, about the potential investment that GB Energy could make, whether that is in production, storage or generation and so on and so forth. I am particularly interested in the innovation space and in your experience with the Net Zero Technology Centre. Do you think that GB Energy’s focus should be on that, given the relatively small quantum that is available, or do you think that it should be broader and more focused on the de-risking of projects that might already be in the pipeline but might require assistance in relation to consent, planning or further capital investment?

Myrtle Dawes: I suppose it would have to be towards the impact. Naturally, the budget we are looking at is well suited to innovation. The crowding in of money that we could get around that from investors—the impact that we could have by moving on a lot of projects—is quite significant.

To take the example of floating offshore wind, we have some of the best wind resources in Europe and actually the world. We are sitting with one of the best supply chains for subsea in the world, because the North sea has been the harshest place in the world to do business. If we are ever going to get an effective floating wind business, with technology and jobs here in the UK, we need to start and move on it now. Not only is there an opportunity to get electricity here in the UK, but we are very close to the heartland of Europe, which is also looking for electricity and for hydrogen. We can do lots of things where the impact, if we were to move now, would be great.

I have also worked on de-risking in major projects. They do need de-risking. I do not think that those in the supply chain are necessarily looking for a handout; they are looking for clarity, for investable business cases and for things where they can do the commercial work that they normally do. I can tell you that at the heart of this is technology that has to be sufficiently robust and reliable, and cheap enough that the product is cheap for the customer, who in this case is those who are using our energy.

Olivia Powis: I support everything that has been said. I think GB Energy offers the potential for targeted investment and support in areas of the value chain, for new innovations and across the supply chain. In particular, we look at some capture technologies with lower TRLs that would benefit from some investment, enabling them to move forward from what we refer to as the valley of death, to be able to compete on the open market. There are many opportunities within the innovation space.

Jack Norquoy: A big part of what GB Energy will do is the local power plan, to which a sizeable contribution of that £8 billion allocation has been made. You raised a point about how the rest of it will be spent; I echo the comments that have been made about innovation.

There will be a need for GB Energy to have a balance. That has been outlined in what we have seen so far, in that there will be a need to generate revenue in order for there to be a public return, but it is important that that money be targeted at high-risk areas where we need the longer-term strategic view to support innovation. Sectors in Scotland such as the marine energy sector would very much welcome that targeted support. So we have a balance between GB Energy being willing to take more risk than perhaps we have seen so far and some investment going towards the local power plan, developing the stable revenue that we will want to see coming through.

[Olivia Blake]

Q I have two questions for Ms Powis. The first goes back to the definition. Before you arrived, Ms Dawes mentioned that she felt that it was covered in clause 3(2)(b). May I ask why you do not think that that sentence is sufficient to cover CCUS?

Olivia Powis: We have proposed instead that the statement must provide that Great British Energy’s objects are restricted to facilitating and encouraging investment in, and participating in, one or more of the production, distribution, storage and supply of clean energy, and the reduction, directly or indirectly, of greenhouse gas emissions from energy derived from fossil fuels, where that clean energy definition means energy and molecules produced from sources other than unabated fossil fuels. It is just about being clear about that clean energy definition. We have been told that, as drafted, it would exclude those with fossil fuels.

[Olivia Blake]

Q On CCUS, we want Great British Energy to have a broader portfolio once it is established—lots of witnesses today have said that. Where would you place CCUS, from a risky to a non-risky investment, for the £1.6 billion?

Olivia Powis: CCUS, as an industry, very much welcomes the announcements from Government last week and the further detail provided yesterday. There is lots of private sector investment helping to drive forward these projects. The funding commitment from Government is for projects once they are operational. Obviously there are still first-of-a-kind projects here, so I would not classify it as a very high risk. This is not a new technology; it is an industry that has been deployed elsewhere, and there is an understanding of how it will work.

There will be first-of-a-kind projects in the UK, and there could therefore be areas in which GB Energy could play a critical role. We have yet to really explore the extent—we would welcome further discussion on that—but there could be a role in enabling infrastructure, oversizing pipes, import terminals and port infrastructure. There is a role it could play in driving forward that enabling infrastructure investment.

[The Chair]

Ms Dawes and Mr Norquoy, have you anything to add?

Myrtle Dawes: I am glad to get the clarification. We also invest in CCUS; it is really important technology for industrial decarbonisation. As an engineer, I will tell you that there is risk involved in that, because we are used to steady state, and we will want to stop and start things. It is a refrigerant, so it will not like it.

There is quite a lot to do to reduce costs. The monitoring and verification of the stores is super-important. If we can turn a waste stream going to store into a product stream that is being utilised, that will be fantastic. That has to be the way we need to go. There is lots of technology to look at, both on the capture of emissions—direct air capture has its role, especially if we are going to look at some kinds of synthetic fuel—and on some of the emerging technologies around capturing carbon dioxide from seawater. Apart from the fact that we might also be able to mine some minerals from doing that, these are things that we should be looking at. It is all about getting the security of doing these things closer to home.

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[Stephen Flynn]

It was about the quantum that is available. You referred to IRA and the EU’s corresponding investment. The quantum for GB Energy is £8.3 billion over the course of five years, or £1.6 billion per year. Do you think that is sufficient to meet the objectives laid out in the Bill?

Andy Prendergast: I think it is sufficient to make some of them and sufficient to make a difference; it is not sufficient to make as much of a difference as we would like it to, but compared with what we had beforehand, it is light years ahead of where we have been.

[Olivia Blake]

Q I have two questions. First, how important do you think it is to have clause 3(2)(d)—

“measures for ensuring the security of the supply of energy”—

in the Bill for your members, given the global situation in which we find ourselves? Secondly, which of the objects in the Bill will have the most impact, or in what ways will the Bill have an impact on your members?

Andy Prendergast: The first point about energy supply was really brought home around the start of the Ukraine war, which exposed how unprepared we were. Whereas your average European country had months of gas supplies, we had a matter of weeks. We went into that war with the largest gas supply place in the world, Rough, unused. One thing we must understand, with the evolving nature of Government, is what is the very minimum that we expect Government to do. I think the very minimum people expect Government to do now is to keep the lights on and keep us secure. That is how important energy is. Sometimes, when you speak to some politicians, there is almost a view that energy is an optional extra, but I do not think that that has been the case for about 150 years. God forbid we go back to that.

When we talk about energy supply and security, it is about two things—[Interruption.]

[The Chair]

Order.

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[The Chair]

Mr Prendergast, I am sorry that you were interrupted. It was very good of you to stay. I believe I am right in saying that Ms Blake had a second question.

[Olivia Blake]

Q Before we were interrupted, my second question was about what the biggest impact of the Bill will be on your members. I do not think we have covered that.

Andy Prendergast: Both in terms of shoring up the jobs we currently have and potentially creating the jobs we so desperately need, one of our real concerns about net zero is the fact that, in a lot of countries, there is a perception that net zero is something being done to people, not with them. Look at the response in America, which is very much typified by “Drill, baby, drill”; look at Germany, where, bizarrely, Alternative für Deutschland is organising around heat pumps. We already have Reform UK talking about fighting the next election on the basis of net zero.

What we have recognised is that we have to make net zero work for people, and we think the best way of making that happen is to ensure that net zero comes with jobs and opportunities. The simple reality is that, if we get it right, those jobs and opportunities are going to be in the post-industrial areas. We have seen the maps put forward by people in the hydrogen lobby and from carbon capture and storage. These are jobs in places that desperately need them. If we are going to be serious about levelling up and making sure that prosperity is spread in Britain, we need to rebuild those industrial heartlands with proper, decent technologies that we can start exporting.

[Andrew Pakes]

Q It is good to have you in, Andy. Do you think there should be anything in the Bill and its priorities on workforce development? Having worked in the sector alongside GMB colleagues, my experience is that lots of these new companies set up, but do not recognise trade unions and do not have the quality of work that we have seen previously in the power and industry sectors, particularly in renewables and others. Indeed, some of the renewables companies, despite being divisions of existing larger companies that do recognise unions, have set up without recognition. What do you think the role is of the Bill, or its strategic priorities, in ensuring we get the right terms and conditions for the new workforce, as we have for existing workforces?

Andy Prendergast: That is a very good question. We have been really pleased to see that the role of trade unions is incorporated in the Bill, although we do need to flesh out exactly how that works.

Your criticism of the renewables industry, particularly for members of the GMB, is absolutely critical. When people talk about our role in industry, what they are often talking about is the white-collar jobs—the ones in universities, getting the technology. They are not talking about the blue-collar jobs, which, at the moment, are the ones in the energy sector that are very well unionised, with good rates of pay and excellent terms and conditions, and which give the security that families and communities need for the long term.

What really concerns us about the renewables industry so far is that it came with the promise of mass jobs that simply have not materialised. Alex Salmond promised 30,000 jobs in offshore wind; 10 years later, fewer than 10,000 have been delivered. Particularly when you are looking at maintenance jobs, you are talking about jobs that are subcontracted with terrible terms and conditions and that are anti-union. When we look at the success that places like America or Europe have had in renewables, trade unions are at the heart of that.

What we have seen so far is a real willingness from the Government to work with both ourselves and employers. One of the bizarre things about it is that those coalitions really have an impact. One of the most surprising days in my job was attending a meeting here and being praised by a Tory MP, which I never thought would happen—it was one of those pinch-yourself moments. It was in relation to Hinkley Point: it was recognised that we had a huge role there in helping to develop the workforce and to manage the process of ensuring both that they benefited and that we got things done quickly and properly.

If we get that right, this is an opportunity to bring not just jobs but good jobs. In a lot of the areas that we are talking about, we have this constant debate about “red wall” and about “post-industrial”. It is not that there are no jobs there; it is just that the jobs being brought in are not very good ones. They are not jobs that offer permanent contracts. They are not jobs that offer good pensions, sick pay or opportunities for advancement. They are zero-hours contracts—got here today, gone tomorrow—that give people very little pride. This is an opportunity to reverse that 40-year decline in our industrial base and do something positive about it.

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[Harriet Cross]

Q We have heard from various witnesses, particularly Ravi Gurumurthy, about the risk management of private investment and how that will sort of coincide within GB Energy. I am just wondering how the Bill is expected to ensure that GB Energy does not just effectively end up as a sink for risky investments, or is that okay? Is the prospect for GB Energy that it provides that full buffer? If not, how will we prevent that situation? Otherwise, we are effectively just making taxpayers’ money the risk management for private investment. I do not have a “yes or no, which side of that fence do I sit on?” answer; I am just wondering what is acceptable within the context of the Bill.

Michael Shanks: That is a really fair question. The question of risk appetite is important; that is partly why setting up GB Energy as a company, regulated by the Companies Act and with a fiduciary board made up of financial experts who have a responsibility as a board of directors for the direction of the company and for its financial results, is so important.

There has to be some risk appetite, and one of the earlier witnesses made a point that I would agree with—if there are absolutely no projects that do not have any risk at all, GB Energy is not really filling the gap. It is really important that GB Energy can move in the spaces where the current investors are not necessarily finding those opportunities. Crucially, however, GB Energy is obviously owned by the taxpayer and therefore, as a backstop, there is a real conviction that it will only invest in things that have a likelihood of producing a return for the taxpayer.

Of course, when we get into making individual decisions, that is partly why it is important the Bill does not go into a granular level of detail on every single thing that GB Energy will do, because it is really important that we give that board, those experts and everyone they bring in to advise them, the space to move into opportunities as they emerge.

If we were to go back five or 10 years, we would not have thought that we were about to have the world’s biggest floating offshore wind farm off the coast of the UK. That would not be on the face of a Bill like this, but actually it is a huge potential opportunity for us and we would like those kinds of opportunities to be open to GB Energy to explore.

[Olivia Blake]

Q If we are to learn the lessons of coal and the 1980s, South Yorkshire would be a perfect location for a satellite office—just to put that on your agenda, Minister.

[Josh MacAlister]

He has had this from every Scottish MP for the past six months.

[Olivia Blake]

Well, we have not heard enough about God’s own county here today.

There has been a lot of positivity from witnesses; some of them seemed quite excited about the Bill. I want to understand, from your perspective, why it has taken a change of Government to see this sort of Bill come forward, and what your ambition is for it.

Michael Shanks: That is really important. Last week, I visited Ratcliffe-on-Soar power station, the last coal-powered station in the UK, and it was a good example of the just transition in practice. It was the right thing that we phased out coal; the TUC itself confirmed that that was exactly how to deal with workers in such a difficult situation where you are moving people from one industry and transitioning them into something else. It was a properly planned process, which is what we want to see in industry.

You are right: we absolutely want to avoid what happened with coalmining in the 1980s. It goes back to what I was saying earlier: this Government are not agnostic about the future of jobs and manufacturing in our industrial communities right across the country. It is important that we invest in them not only because, frankly, we are in a race against the world for all the parts we need to deliver the future of energy, and we will need to produce some of them in this country, but because good, well-paid, skilled jobs are how we will manage the transition in a fair and prosperous way. It is critical for us.

I think it matches other policies. Yes, GB Energy will be a key part, but the industrial strategy will also be important. The national wealth fund and a whole range of levers will be important. The office for clean energy jobs is all about saying that, as a Government, we are committed to the future of this workforce and to creating tens of thousands of new jobs that do not currently exist.

[Wera Hobhouse]

Q We have heard a lot of evidence from lots of people with lots of hopes, who understood that in the end the Bill could be all things to all people. I understand that it is not great to put too much detail in it, but I worry that it is very general and that we will end up with nobody being quite clear what GB Energy is ultimately for. For example, because the witness representing EDF came from a country with a different culture of ownership, they talked about public ownership. If we are going very wide, is something like GB Energy ultimately a vehicle to create more public ownership? In that context, are we talking about just community energy products, which we obviously understand are under some form of public ownership, or are we talking about a completely different ownership landscape that we will see in future?

Michael Shanks: I think it is a combination of things. I urge you to read the Great British Energy founding statement document alongside the Bill, because it is important. The Bill is about setting up a company, and what we do not want to do is hamstring that company by putting in so much detail that it cannot move into the right places that give good investment opportunities for the taxpayer and deliver good energy projects.

The statement makes it clear that community energy, for example, is a key part of our local power plan. We want to see many more community-owned energy projects, for a combination of reasons. They have real social and economic benefits for communities. For us, there is the belief that communities having a stake in those projects is important: communities having ownership and feeling part of the mission will help us with some of the arguments for the amount of infrastructure that we will have to build in the next few years. Also, in certain areas we want small-scale generation projects to have access to connections that bigger projects cannot have. Frankly, in a lot of cases, building the power generation near the population is where we have issues with spatial energy planning across the country.

There are huge opportunities. We are committed to increasing community ownership. We have also said in the local power plan that it could look like municipal ownership of certain generation projects, or it could look like local authorities or combined authorities. We are quite open about what it looks like, but we want to create a landscape where Great British Energy can invest and also provide some capacity to help organisations to get over the line. We all know that local government is struggling and is on its knees right across the country, after years of underfunding. The capacity to deliver a lot of the projects is not there, so GB Energy can fill that gap.