Heathrow Substation Outage: NESO Review
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
With permission, Mr Deputy Speaker, I would like to make a statement on the publication of the report from the National Energy System Operator following its review into the fire at the North Hyde substation on 20 March. NESO’s review was commissioned jointly by the Energy Secretary and Ofgem in the immediate aftermath of the fire, which disrupted power supply to over 70,000 customers, including, of course, Heathrow airport, which closed operations on 21 March. While power from the grid was restored quickly to customers, there were significant secondary impacts to the aviation sector due to the associated closure of Heathrow airport.
My right hon. Friend the Secretary of State for Transport made a statement to the House at the time, where she committed that the Government would update the House as soon as the relevant investigations had concluded. That is why I am making this statement before the House on the day that NESO’s report has been published.
Before I update the House on the key findings of the review, I reassure hon. Members that the Government are taking action in response to the report. We will urgently consider the findings of the review and have committed to publish a Government response that will set out a plan on how the issues identified will be addressed in order to improve our energy resilience.
Having reviewed the report, I am deeply concerned—I am sure hon. Members will agree—that known risks were not addressed by National Grid Electricity Transmission, a key operator of our electricity system. NGET’s own guidance is clear, and based on the elevated moisture samples that NGET took in 2018, the asset should have remained out of service until mitigating actions were put in place, or the asset should have been carefully monitored until it could be replaced. NGET failed to take action appropriate to the severity of the risk at North Hyde. That was most likely the cause of the catastrophic fire on 20 March.
I spoke to NGET this morning and made it clear that the findings are unacceptable and that action must be taken to ensure that maintenance work on critical assets is prioritised appropriately. Fire suppression systems must not be left inoperable.
I am pleased to see that the regulator is taking swift action in response to the findings, announcing today that it is opening an official enforcement investigation into NGET. Ofgem will consider any possible licence condition breaches relating to the development and maintenance of National Grid Electricity Transmission’s electricity system at North Hyde. I spoke with Ofgem yesterday to express my support for that investigation and the planned audit of National Grid’s critical substation assets. That will be essential to understanding any other potential risks on the network and ensuring that those are being mitigated appropriately.
The report also highlights that North Hyde substation, which was built in 1968, is subject to different design standards than newer sites that were built during the 1990s. There was not sufficient distance or a physical barrier between two transformers at North Hyde, which allowed the fire to spread. It is essential that we consider the potential risk created by differing design and standards across the electricity network, particularly as we move towards clean power 2030. That will be a key focus of the Government’s response.
My Department and Ofgem will hold NGET to account for its role in the incident at North Hyde, but the extent of the impact of the incident on Heathrow operations must also come into focus. Heathrow Airport Ltd commissioned its own independent review, the Kelly review, which was published on 28 May and investigated the circumstances that led to the airport ceasing operations for most of 21 March. The review highlighted several recommendations to further improve the resilience of the airport’s internal electricity network. Those align with NESO’s findings that there are options to improve Heathrow’s own power resilience, which is the responsibility of Heathrow and not National Grid, and reduce the risk of further disruption at this scale.
Heathrow benefits from three separate supply points to the electricity network. It is rare for any site to have such a resilient connection to the network. As no energy system can ever be free from disruption, this is an opportunity for Heathrow to consider investing in its internal electrical distribution network to take advantage of those multiple supply points. I welcome the continued effective collaboration between Heathrow and energy operators as part of the review. My Department and the Department for Transport will work to ensure that that collaboration continues across those critical sectors.
Although such incidents are rare and the UK has a robust and resilient system, there are always wider lessons to be learned. The majority of recommendations made by NESO in its report suggest potential improvements that could be considered by operators across the energy sector. In collaboration with NESO, Ofgem and other industry partners, my Department will ensure the delivery and implementation of those energy recommendations. However, the report findings are also applicable to wider Government policy on resilience, both in the energy sector and across other critical national infrastructure sectors.
Ensuring the protection and resilience of critical national infrastructure continues to be a key priority for Government, with action already being taken. The Government’s recently published 10-year infrastructure strategy committed to strengthening resilience standards across critical national infrastructure. Further, the Cabinet Office will imminently publish the UK Government resilience action plan, which will articulate Government’s new strategic approach to resilience and is the outcome of the resilience review announced by the Chancellor of the Duchy of Lancaster in this place last year.
My Department is already taking steps to enhance our current approach to the designation of critical national infrastructure in the energy sector. We recently introduced specific licence conditions that give NESO responsibility for data gathering and technical analysis to independently inform the Government’s decisions on the designation of CNI, ensuring our most critical infrastructure in the energy sector is always as resilient as possible. We will work with the Cabinet Office and wider Government to develop a full response to the North Hyde report and set out how we will tackle some of the cross-sector resilience challenges highlighted, particularly given the importance of the energy sector for the continued operation of so much of our critical national infrastructure.
I want to restate that Great Britain continues to have a resilient energy network. Even though incidents such as this are rare, it is essential that we learn the lessons to maintain and, where possible, improve our resilience. The Government response will set out our plans for how we will continue to do so.
I thank NESO for carrying out such a comprehensive review over the past three months. The report shows the value of learning from past emergencies such as this. NESO’s newly established functions in energy resilience will enable Government, the energy industry and the regulator to truly understand whole energy system risks and mitigations, proactively ensuring that Great Britain continues to have a reliable energy supply, which is critical to the whole of society. I commend this statement to the House.
Mr Deputy Speaker (Sir Roger Gale)
Before I call the shadow Secretary of State, may I take this opportunity to welcome her back to her place in the House?
Michael Shanks
I was going to start—and I will, regardless of the rest of that speech—by warmly welcoming the right hon. Lady back to her place as the shadow Secretary of State. I will miss sparring with my Scottish colleague, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), although I am sure we will still have opportunities to do so. The right hon. Lady might come to miss the lack of sleep at home compared with the noise in this place, but she is very welcome back. She has obviously taken the last few months to write a wrap-up speech on a whole range of issues, and I am glad to give her the opportunity to pontificate here on many of those things, but let me stick to the questions that related to the statement that I have delivered to the House today.
The right hon. Lady asked about the role that National Grid has played. Ofgem has opened an enforcement investigation into this incident to get to the bottom of exactly what National Grid has or has not done, and whether there are possible breaches of licence. That investigation should now take its course. There are clearly serious questions to answer, and that is exactly the point that I put to National Grid today. I have asked for an immediate response on what action it is taking and for assurances that there are no further maintenance backlogs that it has not acted on, and I expect that by the end of this week. Ofgem has also instructed a wider audit of maintenance work across the energy system, which will identify if there are any similar issues. On the point about being held accountable, clearly I am going to wait for the outcome of Ofgem’s investigation. It is the responsibility of Ofgem as the regulator to determine whether National Grid is in breach of any of its licence conditions and what the appropriate action should be if it is. I will wait for those findings to come through.
The right hon. Lady raised an important point about the physical barriers. Clearly there are differences because the time at which some of our infrastructure was built and the different standards that were in place at different times. We need to make a wider review to see what is actually possible with some of this infrastructure; it was not always possible to build to the standards we now expect, but everything that is being built now is being built to the highest standards. I want the same assurances that she has called for: to know that anything that was built previously is safe.
On the wider resilience questions, I am not going to get into a back-and-forward on the frankly quite ludicrous claims that the right hon. Lady made. I hope this is not an indication of the tone we can expect in the years ahead, because there are some difficult decisions for us all to wrestle with. There is the really important question about delivering our energy security in, as she says, an increasingly uncertain world. We are sprinting towards clean power to remove the volatility of fossil fuels from our system. She opposes all of that investment. There is also a critical role to play in upgrading the network infrastructure across the country, which her party also opposes.
There are some really searching questions for the Conservatives—who were, of course, in charge of this infrastructure for 14 years—about their role and what part they want to play. It is easy to shout from the sidelines with accusations. It is far more useful and important for a party that was in government for 14 years and is now the official Opposition to come up with some credible questions about how we deliver the energy system of the future. We are going to get on with delivering it.
Mr Deputy Speaker (Sir Roger Gale)
I call the Chair of the Energy Security and Net Zero Committee.
Bill Esterson (Sefton Central) (Lab)
It beggars belief that no action was taken after the risks were identified in 2018 at the North Hyde substation. The NESO report highlights a lack of information-sharing internally at National Grid and externally between organisations. It draws attention to the energy companies not knowing that Heathrow had a 10 to 12-hour arrangement for switching supply, and that National Grid did not appear to know that Heathrow was a customer of the substation. It is a matter of immense luck that the explosion and fire took place at 11 o’clock at night and that no one was present; otherwise, this would have been a very different discussion, with people having died. The Minister highlighted the unacceptable lack of action by National Grid. Will he ensure proper oversight and information sharing internally at National Grid and externally between organisations, so that we have safety and resilience in our national energy system, where it applies to critical national infrastructure and beyond?
Michael Shanks
First, on the point about joining up, my hon. Friend is absolutely right. The response that I have seen from National Grid identifies that as one of the points it will take away. It will look at information sharing and joining up the data in various systems, and at how to ensure that is followed through on. It is important to say that there is also learning, not just for National Grid but across the energy system, through looking at what other transmission owners do and at what the Government do around sharing information where we can. There is a lot of learning and a lot of recommendations will be taken forward.
On the question of Heathrow, much was identified in the Kelly review, which looked specifically at these operations. On the question of whether there was a single point of failure at Heathrow, the airport is one of the biggest consumers of electricity in the country and one of our most important pieces of critical national infrastructure. It is important that those at Heathrow reflect on this report and take some lessons from it.
The report has shown—this is a lesson for everyone—the importance of investing in electricity resilience and preparing for the worst, even if we think there is a low chance of the worst actually happening. I completely agree with my hon. Friend’s final point: it is in all our interests to spend time, effort and investment in making sure that our energy system continues to be as resilient as possible.
Luke Taylor (Sutton and Cheam) (LD)
This report is an utterly damning assessment of our national resilience, this time through decay but also through a lack of readiness as the climate crisis changes the dynamics, with old equipment operating at higher temperatures just as the loads for climate control and air conditioning are at their peak. The British people will rightly be alarmed that the problem that caused this substation failure was known as long ago as 2018, but there is a much wider point here. Beyond the technicalities of this failure, the resilience of critical national infrastructure has been neglected for far too long.
As an engineer, I came to this place for precisely this reason: we are too short-termist and too narrow in our vision. We cannot possibly expect to remain a world leader in infrastructure if we cannot future-proof and seriously invest in the resilience of our assets. Building and maintaining infrastructure might not get pulses racing. There is no ribbon to cut when something just continues to operate efficiently, but that long-termism is an ideology that we should all get behind if we are serious about Britain’s future. The report outlined the many missed opportunities to fix the issues at the substation, and we will all have to look seriously into Ofgem’s consequential investigation into National Grid once it is published.
This is not just about grid resilience, though. This time it was a fire caused by a fault, but next time it might be a deliberate cyber-attack or an act of terrorism, which could have a more disastrous impact. We must look beyond the short term, with a strategic and long-term plan to join up national infrastructure and make it safe and reliable for all. The Government must bring about a strategy and act quickly to review the resilience of all similar assets, including every UK airport—they are all critical to our national economy and our society.
With that in mind, can the Minister confirm whether an assessment has been made of the likelihood of a repeat of this incident, at Heathrow and at all other pieces of critical national infrastructure? Also, are the Government taking this opportunity to finally pick up the National Infrastructure Commission reports from 2020 and 2023, which were ignored by the previous Government, and the report from 2024, which was not implemented quickly enough, and to implement standards and frameworks for resilience in key sectors such as aviation, telecoms, water and energy, which will future-proof our ageing infrastructure to make it reliable and safe?
Michael Shanks
The hon. Gentleman is absolutely right to broaden this beyond the electricity system and North Hyde to take in wider questions around critical national infrastructure. He is also right about investing in the future. I always think that grids and networks set the heart racing a little faster, but that is just me. This is important, and this Government are investing in this infrastructure; just this week Ofgem announced record investment in it. I hope, given the importance of this statement, that Members on all sides of the House will recognise the importance of that investment.
On the points around wider resilience, the Cabinet Office is leading on trying to bring together what I think it is fair to say has been too fragmented a landscape in resilience across Government. My Department is responsible for a number of key risks in the national risk register. It is right that the lead Departments have expertise in certain areas, but if that information is not shared coherently across Government, we increase the chance of not getting the answers right. A lot of work is being done in that regard. We are also looking at how we share data across all sectors of critical national infrastructure within Government. We will say more about that in the resilience action plan, which the Cabinet Office is working on at the moment. Of course, the 10-year infrastructure strategy is also about how we will invest for the long term in the infrastructure that keeps our country running.
Mr Deputy Speaker (Sir Roger Gale)
I call the Chair of the Science, Innovation and Technology Committee.
Dame Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)
Speaking as a chartered electrical engineer and as the Chair of the Science, Innovation and Technology Committee, I am absolutely amazed that such an important and large part of our critical national infrastructure in the National Grid was not properly maintained for seven years and that Heathrow—the busiest airport in the world—had a single point of failure. The Minister has outlined some of the processes and procedures that will follow, but will he say how he intends to improve the standards of engineering maintenance culture and excellence in our critical national infrastructure, which have clearly been allowed to fall significantly under successive Conservative Governments?
Michael Shanks
I thank my hon. Friend for the question and for her thanks to NESO, which has done a comprehensive job on this report in a fairly short space of time. There are lessons to be learned for Heathrow, and it will be learning those lessons. I am in communication with the Transport Secretary, who of course has immediate responsibility for Heathrow as a piece of critical national transport infrastructure. It is worth saying that its back-up generators did operate in the way they were supposed to, but Heathrow is a huge piece of infrastructure, and it is not intended that those back-up processes would continue to run normal operations in a huge airport beyond the immediate situation of being able to land planes safely and ensuring other critical systems within the airport.
The question Heathrow has to answer is on having three points of electricity generation coming into the airport. It clearly needs to look at the way the network is configured and take forward the wider question of its resilience and ability to adapt to such situations. The Government have an incredibly important role, as my hon. Friend rightly says, and we will do all we can to ensure that National Grid is doing its bit, that the distribution operator is doing what it needs to do, and that Heathrow Airport Ltd is also meeting the expectations that we would expect from our most important piece of transport infrastructure.
Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)
The report by NESO has clearly uncovered serious structural failings at National Grid, but let us not forget that the Government’s response to the outage was severely wanting as well. On the Monday following the outage, the Transport Secretary confirmed that she was relying on the contents of a three-day-old conversation with Heathrow, with no assessment from the Government and no conversations with National Grid. Can the Secretary of State assure the House that sufficient lessons are being learned in Government to ensure that, when the power supply to critical national infrastructure is affected in the future, the Government are not left without answers again? Additionally, Members will understand the phrase “Quis custodiet ipsos custodes?”, meaning “Who guards the guards?” Why did it take such a serious outage for the National Grid to be audited like this? Surely better oversight may have identified the shockingly poor risk management.
Oral Answers to Questions
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Ed Miliband
I love my hon. Friend’s idea; it is such a good one. Local sports clubs and lots of other community organisations can benefit from that project. I will suggest the idea to Great British Energy.
Sir Roger Gale (Herne Bay and Sandwich) (Con)
Mr Speaker, The Times has told the world how old you are today.
Sir Roger Gale
I do not propose to write it into the record, but I note that you are catching up on me. [Laughter.] Happy birthday.
Sir Roger Gale
Yesterday, a Minister said from the Dispatch Box that only 1% of farmland was being damaged by development, yet solar panels are smothering east Kent’s best farmland. It must stop. Given what the Secretary of State has said, what further steps will he take to protect our farmland and really do move solar panels on to rooftops, car parks and public buildings?
Ed Miliband
There are a few questions in there, and I will try to answer them as briefly as I can. Even for the biggest solar ambitions, less than 1% of land would be covered. The right hon. Gentleman is absolutely right that we need solar rooftops too. That is why we have put an end to years of dither and delay, and last week announced that new homes will have solar panels fitted as standard. It makes total sense.
Nuclear Power: Investment
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Ed Miliband
I thank my hon. Friend for his advocacy for Derby and for Rolls-Royce. It is important to say to the House that this was a fair and open competition, conducted at arm’s length from Ministers. Rolls-Royce came out as the winner and I am incredibly pleased about that. The possibilities for Rolls-Royce are huge in what it can do for SMRs in this country, in the export opportunities and in the jobs in the supply chains. That is the thing about nuclear: it is about the jobs not just at the top of the tree but right across the supply chain that we have the potential to create.
Sir Roger Gale (Herne Bay and Sandwich) (Con)
While I fear that the development of Sizewell C may prove to be a multibillion-pound investment in yesterday’s technology, I welcome the commitment to SMRs in so far as it goes, which is probably the way forward for tomorrow. We have to get from where we are today to there. Why are we going to spend billions of pounds and accumulate masses of wastage importing carbon fuels from overseas instead of developing our own North sea resources?
Ed Miliband
On the nuclear point, there is real potential at Sizewell. I understand the implication of his views on that: to learn from what happened at Hinkley—because it is a replica of Hinkley—and therefore to cut the costs and do it quicker. The aim is to deliver it cheaper and faster. On the wider picture, we may have a difference of view. Mine is that we have to get off insecure fossil fuels as quickly as possible. That is why nuclear has a role and renewables have a role, but the existing North sea fields will be kept open for their lifetime, so oil and gas will continue to play a role in our energy system.
Solar Farms
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Sir Roger Gale (Herne Bay and Sandwich) (Con)
The only less environmentally-friendly form of power generation than solar panels in the United Kingdom is the Drax power station, which is forest-fed. It is a complete myth to suggest that somehow there is no carbon price to be paid for solar farms. Neither are they efficient: given the lack of sunlight in most of the United Kingdom, the amount of power fed into the grid from solar panels is minimal. We are talking about sacrificing acres of agricultural land—some of it has already gone—to no useful purpose whatsoever. It is time that we grew up and recognised that.
At business questions this morning, I asked the Leader of the House if she would go to the Prime Minister and bang a few heads together, because the Secretary of State for Energy Security and Net Zero and the Secretary of State for Environment, Food and Rural Affairs are not singing from the same song sheet. The argument is simply not joined up. We cannot go on sacrificing agricultural land—such as that surrounding the village of Hoath in my constituency, or the Minster marshes, or the land around Sandwich and in west Thanet—and still expect to have food sufficiency. We are talking about land that this summer is growing bread-making wheat but in two or three years will be growing houses and solar panels. That is simply not compatible in terms of policy.
I urge the Minister to go away and think about this very carefully indeed, to take the message to the Secretary of State and to ensure that there is some joined-up thinking before it is too late. I am afraid that 2030 is dead in the water, and it is time we recognised that. The way forward will be North sea gas and oil to bridge the gap between where we are now and small nuclear reactors. It is time that we recognise that and stop messing around with pie-in-the-sky schemes.
Madam Deputy Speaker
Order. We are not going to have a continuation of the debate via points of order.
Sir Roger Gale
Further to that point of order, Madam Deputy Speaker. In the interests of accuracy—I understand that is what we are trying to pursue—the Minister said during the course of his final remarks that 30% of power is produced by solar panels. The figure for April, produced by NESO, was 10%.
Madam Deputy Speaker
I thank the right hon. Member for his point of order. As I said, these are points of debate, not points of order, and they are certainly not matters for the Chair.
Energy Grid Resilience
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Michael Shanks
My hon. Friend has been a champion of these issues for a long time, and it will not surprise him or the House to hear that I entirely agree with him; clean, cheap and secure is absolutely right. We know that because when we invited many countries around the world to the energy security summit last week, it was clear that it is not just the UK that is on the transition. The rest of the world is also moving at pace to divest from fossil fuels and invest in the renewables that deliver the secure energy system and remove the volatility that all our constituents continue to pay the price for. It is the only way forward, and the Government are determined to continue with it.
Sir Roger Gale (Herne Bay and Sandwich) (Con)
The Minister is fully aware of my total opposition to the construction of a 90-foot-high converter station on the Minster marshes in east Kent. National Grid’s sea link project is very vulnerable to physical attack and cyber-attack, and it is largely based on the provision of power from weather-related sources. Is it not time that we revisited all this and looked seriously at speeding up the process of acquiring small nuclear reactors?
Michael Shanks
I am happy to agree with the right hon. Member on his final point. Small modular reactors will play a really important part and are an exciting proposition that the UK can be at the forefront of. The technology competition will conclude shortly.
On the broader point, we get to the heart of the contradiction. The Conservative party wants to talk about resilience of the network but does not want to build any new network infrastructure. I am afraid that the two go hand in hand. If we want to have power and a resilient network, we cannot stay in the same place we were 60 years ago. We actually have to build some stuff.
Oral Answers to Questions
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Ed Miliband
I congratulate my hon. Friend. He is a fantastic advocate for the Acorn project, of which we are hugely supportive. Track 1 projects were agreed in last year’s Budget—a fiscal event, a fiscal moment—and the Government are considering those projects ahead of the next phase of the spending review, which will come in June; but I do not think that anyone doubts the potential value of the Acorn project, not just to Scotland but to the whole United Kingdom.
Sir Roger Gale (Herne Bay and Sandwich) (Con)
No one who cares about the future of our children and our grandchildren will gainsay the importance of carbon capture, but does the Secretary of State not understand that he is undermining that good work—notwithstanding his answer to my right hon. Friend the Member for Hertsmere (Sir Oliver Dowden)—by continuing to subsidise the Drax power station, which is cutting down forests in Canada, turning the wood into pellets, and shipping it thousands of miles across the Atlantic to burn here? That makes nonsense of what he is trying to achieve.
Ed Miliband
I do not agree with the right hon. Gentleman, for whom I have great respect. The situation that we inherited from the last Government meant that we had to consider matters such as security of supply and how we could secure the best deal for bill payers. That is what we did, and that is why we made the statement that we made on Drax. On longer term, however, the right hon. Gentleman is entirely right. We need to move away from unabated biomass and consider all the possibilities to enable us to move towards net zero, and that is what this Government are doing.
Biomass Generation
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Michael Shanks
My hon. Friend makes an important point. I think we should consider two aspects of the analysis of the importance of Drax to the system. First, in comparison with the counterfactual of building new gas-fired power stations, our analysis is that the deal we have agreed, which involves the use of gas on the system for 27% of the time, costs £170 million less. Secondly, on energy security, the assessment is that even if we wanted to go down that route, there would be risks about whether we could build that capacity in the time that we have.
This is all about the decisions taken by the last Government, who did not look far enough ahead and did not have that capacity on the system. Even if we did want to proceed with new gas stations, there would be questions about whether we could build them in time. This deal is about protecting bill payers, halving the subsidy from £1 billion and ensuring that there is dispatchable power when we need it as we build the clean power system.
As we move towards the 2030s, what comes next is long-term planning for a clean power mix, but also about the long-duration and short-duration storage mixes that will help us to make decisions that are different from the one we were forced to make this time.
Sir Roger Gale (Herne Bay and Sandwich) (Con)
I suppose we shall be told that half a loaf is better than none, but this strikes me as a half-baked half-loaf, to say the least.
The Minister has spent an hour this afternoon lecturing the House about why it was better to import oil and gas from overseas than to extend the production of at least some home-grown material. The bottom line is that, clearly, the Minister has not read the KPMG report, the Prime Minister has not read the KPMG report, and we are still going to pay billions of pounds in subsidy to import pellets created in Canada and then shipped across the Atlantic at God knows what carbon cost. Where, please, is the sense in that?
Michael Shanks
First, let me say that I have spent the last hour answering questions from Members on both sides of the House. I have not lectured anyone. I have, however, stated the facts—for instance, that if oil and gas are extracted from the North sea, they are sold on the open market for whatever price the international markets have at any given moment. That delivers neither energy security nor confidence to bill payers. While Opposition Members may want us to go back to the fossil fuel casino and hope we can play a better hand this time round, I think we should be building a secure power system that delivers both energy security and confidence that we will not be exposed to the price spikes we have been exposed to in the past. If the right hon. Gentleman wants to take that as a lecture, he can take it as such.
On the role that Drax will play, of course we looked at all the assessments around Drax to date. Frankly, we have put in such a robust process on sustainability, and independent assessments of some of that, because of the questions that the right hon. Gentleman raises: we know that there have been questions in the past, and we want to make sure that there are tough penalties if Drax does not comply. Raising sustainability from the level under the previous Government—70%—to 100% means that we will not pay a penny of subsidy if Drax fails the sustainability tests that we have set out for it. That protects consumers right across this country and delivers the dispatchable power that we need.
Oral Answers to Questions
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Ed Miliband
I thank my hon. Friend for his question and congratulate him on his advocacy. Members across the House have a decision to make here. As the Under-Secretary of State for Energy Security and Net Zero, my hon. Friend the Member for Peckham (Miatta Fahnbulleh), said earlier, we are exposed to fossil fuels and we see what is happening in global markets with prices going up. If we want to change that and have clean home-grown power that we can control, we have to build the infrastructure we need. I congratulate my hon. Friend the Member for Bury St Edmunds and Stowmarket (Peter Prinsley) on supporting it and on supporting our planning reforms, and I urge Members across this House to do the same.
Sir Roger Gale (Herne Bay and Sandwich) (Con)
Given that the British taxpayer is paying billions of pounds in subsidies to fell trees in Canada and ship the wood across the Atlantic to burn in the Drax power station, can the Secretary of State tell the House where the clean energy lies within that? Has he read the KPMG report? If he has, will he come to the House and make a statement on his assessment of it?
Ed Miliband
The last Government consulted on what, if any, future support there should be for biomass power stations. We are studying that consultation and we will make a statement in due course.
Draft Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024
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Sir Roger Gale (in the Chair)
Members may remove their jackets if they wish to, if they are hardy or foolhardy enough.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Kerry McCarthy)
I beg to move,
That the Committee has considered the draft Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024.
As always, it is a pleasure to see you in the Chair, Sir Roger. The draft order was laid before Parliament on 22 October 2024. To give a bit of background, the UK emissions trading scheme was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020, as a UK-wide greenhouse gas emissions trading scheme contributing to the UK’s emissions-reduction targets and net zero goal. The scheme is run by the UK ETS Authority, a joint body comprising the UK Government and the devolved Governments. Our aim is to be predictable and responsible guardians of the scheme and its markets.
We have introduced this statutory instrument to enable several important changes and improvements to the scheme. It resets the UK ETS cap to be in line with the top of the net zero-consistent range. The cap sets a limit on how many allowances can be created over the trading period, which runs from 2021 to 2030, and in each year. That level reduces over time to drive down total emissions. When the scheme was established, the cap for the legislated period of the UK ETS—from 2021 to 2030—was set at 5% below the UK’s expected notional share of the EU ETS cap for the same period. However, that was not consistent with the UK’s net zero trajectory for the traded sector. This statutory instrument brings the overall UK ETS cap in line with our net zero target and carbon budgets under the Climate Change Act.
The statutory instrument also reduces the industry cap, which is the total number of allowances that can be made available to existing installations for free if no cross-sectoral correction factor mitigation is applied. The SI reduces the absolute level of the industry cap while increasing its proportion of the overall cap. While the share of allowances set aside for this purpose will increase from 37% to 40%, the reduction in the overall UK ETS cap means that the industry cap will fall. That will help to mitigate the risk of carbon leakage across participating sectors while maintaining an effective incentive to decarbonise.
The statutory instrument creates a flexible reserve of allowances for maintaining market stability and sufficient carbon-leakage mitigation. In addition to allowances specifically created for the reserve, unallocated free allowances from the industry cap and designated free allowances that are returned by operators due to changes in participant eligibility or activity level reductions will also stock the flexible reserve. The flexible reserve can be used to increase the allowance supply for market-stability purposes if the cost-containment mechanism is triggered. The flexible reserve can also mitigate the application of the CSCF through a uniform reduction to all eligible existing participants’ free allocation if the eligibility for free allocation exceeds the industry cap.
I will move on to venting and flaring. Under current legislation, carbon dioxide released through flaring in the upstream oil and gas sector is included in the UK ETS, as it is within the scope of the regulated activity of combustion. This SI introduces CO2 that is released through venting in the upstream oil and gas sector into the scope of the UK ETS for installations already covered by the scheme. That means that such emissions will also be subject to a carbon price.
The controlled processes of venting and flaring can sometimes be essential for safety purposes. They are also used in more routine situations where the oil and gas hydrocarbons are unable to be used, exported, or reinjected without CO2 being removed. The removed CO2 can then be released in the process of flaring, when waste gas, including the stripped-out CO2 as well as combustible elements, is ignited, or in the process of venting, when unignited gas is released through a vent. The legislation will remove a perverse incentive whereby operators could routinely vent gas that contains carbon dioxide without it being subject to a carbon price, even though it would, if flared, constitute reportable emissions for the purpose of the scheme.
I will now move on to Northern Ireland. In line with the original policy intent, the statutory instrument extends legislative amendments made by the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023 to Northern Ireland. The amendments include capping the aviation free allocation at 100% of emissions, clarifying the treatment of carbon capture and storage plants, and freeing the allocation rules for electricity generation.
In 2022, a memorandum of understanding between the UK and Swiss Governments was signed, setting out the intention to include flights from the UK to Switzerland in the UK ETS. Such flights were brought into the UK ETS scope on 1 January 2023 by the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 3) Order 2022. The statutory instrument extends the scope to cover flights that depart from an aerodrome in Northern Ireland and arrive at an aerodrome in Switzerland.
Scheme regulators are responsible for enforcing compliance, including operational functions such as the issuing of penalties. The statutory instrument makes a number of amendments to the levels of scheme penalties to ensure the consistency and proportionality of enforcement for all operators. It also introduces a new deficit notice, with an associated penalty, to strengthen the enforcement of the fundamental scheme obligation to surrender allowances equal to an operator’s annual emissions.
Finally, the statutory instrument makes several corrections and clarifications to existing legislation. The changes follow appropriate and comprehensive consultation with stakeholders. In the “Developing the UK Emissions Trading Scheme” consultation in 2022, the UK ETS Authority considered proposals on changes to the rules for sectors covered by the UK ETS to ensure that more greenhouse gas emissions were covered by the scheme, along with changes to the cap.
The authority response to the consultation was published in two parts, in August 2022 and July 2023. A majority of respondents agreed with the UK ETS Authority proposals on creating a flexible share reserve of allowances, on bringing venting in the upstream oil and gas sector into the scope of the ETS, and on the addition of a new penalty and deficit notice. Several respondents expressed concern regarding the reduction of the cap and the changes to the industry cap; an assessment of these responses informed the decision to set the cap at the top of the net zero-consistent range.
Between 23 February 2024 and 8 March 2024, the UK ETS Authority ran a targeted consultation on the minor penalty amendments. The responses to this consultation were in broad agreement with the proposals, or noted that they were not affected by them. The authority response has been published in advance of the laying of this statutory instrument.
The changes in the draft order will deliver on commitments made by the UK ETS Authority and improve the operation of the scheme. The alterations to the UK emissions trading scheme will support its role as a key pillar of the UK’s climate policy. They show that we will take action to extend and improve the scheme where necessary. I commend the draft order to the Committee.
Byers Gill Solar Farm
Roger Gale Excerpts(1 year, 4 months ago)
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Mr Deputy Speaker (Sir Roger Gale)
Order. I have no notice that the hon. Gentleman has asked permission to take part in the debate. Do the owner of the debate and the Minister agree that Mr Howell should speak?
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)
indicated assent.
Paul Howell
I apologise, Mr Deputy Speaker; you should have had notice. That was an oversight by my office and me.
I thank my hon. Friend the Member for Stockton South (Matt Vickers) for highlighting the scale of the problem, which is clear from the fact that we are both here speaking about this matter. I am sure that if my hon. Friend the Member for Darlington (Peter Gibson) were able to be here, he would contribute, too; he is another constituency neighbour aware of the concerns about this proposal.
As has been said, the proposed Byers Gill solar farm would cover land between Bishopton and Brafferton in the Sedgefield constituency. I am particularly familiar with the area, as I was married in Bishopton nearly 39 years ago. The farm would cover over 1,200 acres of land, and in the nearby region, there are further proposals from other developers that would increase the land affected to well over 2,000 acres. Residents have approached my hon. Friend the Member for Stockton South and me with significant concerns about the scale of the developments individually and in aggregate, as well as concerns about the “consultation process” that has been followed. To be fair, the proposals were refined after an initial round of consultations, and changes were made, reflecting some concerns.
I would like the Minister to be cognisant of the following critical points. Consultation must be real. I got into politics because I felt that the local Labour council was paying lip service to consultation; it was basically just telling people what was going on, instead of engaging and trying to consult properly, so I am particularly sensitive when I hear concerns about poor engagement. After my last meeting with the residents action group, I reached out to the developers to discuss the concerns. They have agreed to meet, but unfortunately I had to postpone the scheduled meeting. I will be catching up with the developers in the next few weeks, and I hope they will listen to what is going on today and react to the concerns. After all, it is not what the developers say to me that matters; it is what they say to my constituents and the people affected at the sharp end. My residents’ feedback concerns me massively, and I will be raising it again when I meet the developers.
Although communication always requires two parties to engage—sometimes people do not listen or hear—I always believe that the primary responsibility for good communication rests with the sender, not the recipient, and I encourage the developers to get on top of their game in that respect. On a slightly linked point, if the Minister caught the farming debate earlier, she will have heard about the concerns of farmers in this space. Farming economics are pushing farmers to accept solar farms on their land when they may prefer to keep farming. It is imperative that this country develops our food resilience, and it is critical that we are robust in our assessment of the land that could be used for solar to ensure that it is not consuming good farming land. I have heard concerns, as has my hon. Friend the Member for Stockton South, that the assessment of land, whether at grade 3a or 3b, is possibly being done by some who may have a vested interest in the process. We must ensure that the assessment has integrity and robustness.
It is of real value to our rural communities that their character is maintained. We need to ensure that the multiplicity of schemes in an area are jointly assessed to be certain that planning creep does not overwhelm that area. As I said, the possibility of more than 2,000 acres being covered in such a small and concentrated area is surely not reasonable.
We also have rules and guidance about the payments made to communities to support them when such schemes are approved; they must be explicitly fair and robust, and not merely bribes for compliance. It is important for the long-term resilience and value of our rural communities that they do not effectively turn into large industrial parks destroying our green and pleasant land. I support solar—it is one of the green power sources that we must develop in the right place—but it cannot be at the expense of the rural community’s way of life.