Great British Energy Bill (Second sitting)

Stephen Flynn Excerpts

Committee stage
Tuesday 8th October 2024 Public Bill Committees

[Catherine Fookes (Monmouthshire) (Lab)]

Q I welcome both witnesses to the Committee. Clause 5(5) states that the Secretary of State will consult Welsh, Scottish and Northern Ireland Ministers, so as a Welsh MP I am content—it sounds like you are, too—that our devolved Administrations will be consulted before things happen. I think it was Mr McGirr who said there were bound to be lots of projects in Scotland. I want to flag the fact that Wales is also extremely well placed to receive some of these projects in terms of hydro, tidal and wind energy. What in the Bill would help us to ensure that lots of the investment comes to Wales?

Alistair McGirr: I am very supportive of those projects coming to Wales. Obviously the Celtic sea auctions are another example of the upcoming opportunities in Wales. The reality is that GB Energy is not going to be the vehicle that drives that—that will be the wider policy framework in terms of what happens here in Westminster, and also in the regulatory frameworks that are in place and what happens in the devolved Administrations. My reference to Scotland is not to say that other parts of the country could not have the opportunities for investment. It is just that the sheer scale of the opportunities in Scotland for wind, hydro, some of the grid projects, CCS and hydrogen mean there is a significant opportunity in Scotland. That is one of the reasons why GB Energy has been located up in that area.

Tristan Zipfel: I can only concur. Wales is very important for us. We have onshore wind projects that we are actively promoting in Wales. I think GB Energy could play a role there. I want to emphasise, however, that I do not think GB Energy on its own will be the solution to unlocking the opportunities you describe. I think it is really important in Wales in particular that there is an effort on the policy side to provide more certainty and more visibility of the projects, as well as the question of the grid, which is a problem. But I concur that Wales is very important strategically from our standpoint as a renewable energy developer.

[Stephen Flynn (Aberdeen South) (SNP)]

Q Thank you for coming in, gents; it is always nice to hear positive things about Scotland.

In relation to some of the objects that are detailed in clause 3, I think we are all excited about the potential for the state to take a proactive role in the production of energy, but the Bill is quite clear that it is about

“the production, distribution, storage and supply of clean energy…the reduction of greenhouse gas emissions…improvements in energy efficiency, and…measures for ensuring the security of the supply of energy.”

SSE is investing £40 billion in clean tech over the next 10 years, and EDF is investing £50 billion or so. How far do you think £1.6 billion can go, in real terms, given the breadth of the different things the Bill seeks to achieve?

Alistair McGirr: In reality, it is not going to be the sole investor that is going to deliver the clean energy transition. As you allude to, we have a significant investment programme that we would be keen to bring to fruition over the next 10 years or so. It is about how you best use the money that is available. Where can we accelerate the investment and crowd in the scale of investment that is going to be required? We may be talking about big numbers, and in EDF as well—not only here in the UK but elsewhere—but there will not be just one investor. If you look at the National Infrastructure Commission, for instance, they are projecting in the region of £25 billion to £30 billion of investment in energy infrastructure per year for the next decade. The scale of the investment is going to be much bigger than any single entity, be it GB Energy, SSE or EDF.

Tristan Zipfel: Choices will need to be made—you cannot do everything with that pot of money—and it is really about identifying the areas where they will have maximum impact and where they will be most complementary to the effort of the private sector. It is not about displacing the private sector; it is more about covering the gaps and providing a boost to more investment in the sector.

That is also the spirit of the agreement with the Crown Estate. Looking at offshore wind, what is currently the blocker for more investment? It is the timeframe that it takes to develop a project. The spirit of that agreement is to look at an early stage and make it easier for private investors to invest in projects that are more de-risked than they are at the moment. That is the right approach, in my view, and it could be expanded to the other technologies in the scope of GB Energy.

[The Chair]

We have a couple of minutes left.

--- Later in debate ---

[Perran Moon]

Q In relation to clause 1(5), about the statement of strategic priorities, you just mentioned the Celtic sea round 5 tenders. I think I am correct in saying that they did not have any mandatory social value element. What would be your thoughts on social value being mandated as part of the strategic priorities for local coastal communities, particularly deprived areas such as Cornwall?

Dan Labbad: First, as regards the Celtic sea, there are social requirements as part of the tender process. I obviously cannot talk about them too much, given that we are in a live tender for procurement purposes, but there are social requirements as part of that tender.

To your question, it is fundamental. It will be a real failure if we end up deploying renewable energy on the seabed in the way we need to in the next 20 years and are not able to capture a fair proportion of that industrial complex for ourselves as a country. It would be a real pity if we did not build new jobs and new futures for young people across the country and if we did not support the distribution of that benefit across the country, including to coastal communities.

We have to bear in mind that there is a role for developers and a role for Government and the Crown Estate. For example, in the Celtic sea a 4.5 GW tender does not build a supply chain. It is not enough; the critical mass is not there. Again, that is why it is so important that Great British Energy and the Crown Estate work together, with our additional powers and being able to provide forward commitments to, for example, the Celtic sea. We estimate at the moment that it has the potential for another 12 GW of offshore wind, predominantly floating but also fixed. You need that type of scale so that both Government and private sector investment in the supply chain, including in coastal communities, will stick. That is why this partnership is so important and why we have to remember the size of that prize, so to speak.

[Stephen Flynn]

Q GB Energy’s objectives as set out in the Bill make it quite clear that it is intent on becoming a producer, distributor, supplier and storer of energy, and to achieve that the Crown Estate will be absolutely crucial. Can you provide a little insight on the recent powers on borrowing provided to the Crown Estate, and how that will help you and GB Energy to meet the Bill’s aims?

Dan Labbad: First, from the Crown Estate’s perspective —I know this is a little out of scope—we operate under an Act of Parliament and have an obligation to enhance the value of our portfolio nationally, on behalf of the country, into perpetuity. We must ensure that we, like any business, balance safe investments with more risky investments. There is no doubt that investing in the seabed in the way we are talking about is a higher risk activity than other things that we do.

The increased borrowing powers do two things. First, they give us the capital throughput to do more—to accelerate and offer more. Secondly, because we know that we will have a line of credit, they allow us to make commitments. To use the Celtic sea as an example, as we move from what we envisage we can do about 12 GW to the reality of knowing that we can do that, we can then say to the market that we are committed to that leasing programme over the next 10 years. That is huge. From a developer perspective, they are not chipping away. For argument’s sake, let us say that we have 4 GW divided into three bits. You are talking about small gigawattage for companies of the scale of Equinor, for example. Being able to provide a pipeline where we know there is more to come means that they invest more—that is what that does.

The other thing that comes with the borrowing powers is a broader investment remit, which allows us to turn our attention to supply chain opportunities and to support the industrial complex and jobs. Again, we have been restricted in what we can do there in the past, so that is fundamental. With regard to GB Energy, as I said earlier, the Crown Estate cannot do it all on its own. We need additional capital support, support with co-ordination and support with policy evolution. All those things are required, which is why the partnership is so fundamental.

[The Chair]

Order. The issue of scope has raised its head again. I gently say that while this Chairman is not in the business of seeking to tell witnesses what they can and cannot say, he is in the business of making sure that Members, at least, stay within the scope.

--- Later in debate ---

[The Chair]

I call Stephen Flynn.

[Stephen Flynn]

My question has just been answered.

[Perran Moon]

Q My question is along similar lines. Thinking about attracting that capital investment, we are currently in a scenario where, in relation to clause 4, there is a need to de-risk some UK energy projects to unlock additional capital investment. Can you describe how you see the specific role of GB Energy in unlocking some of that capital investment?

Josh Buckland: I have looked through the project life cycle, and clause 4 gives a lot of flexibility around it. There is the early-stage development capital, which is quite difficult at this stage to develop at the scale required. Developing large-scale energy projects costs not just tens of millions, but potentially hundreds of millions through the development phase, so there is a role there that GB Energy could play in the deployment of development capital.

Potentially more important in a development phase is the ability to help projects to de-risk other things that they cannot control, such as their ability to access a grid connection, to get planning approval and to access the right supply chain domestically, to go back to the point about unlocking economic potential here. That could potentially be a significant role for GB Energy. That comes back to the governance question of where Government draw the line between a role for Great British Energy and the Government, because a lot of those issues are effectively for the Government to deal with, but that is an interesting dynamic to watch.

If we move through to the construction phase, there is slightly less of a role, in truth, because the level of capital required in building out projects once they have got over the initial financing barrier is potentially lower. I know the Government have talked a lot about that separately from the Bill. The exception is local and community energy projects, where clearly the barrier to unlocking investment is higher, and there is potentially a role there for Great British Energy that the Government have talked about.

The final piece is whether, once an asset has been built out and is operational, Great British Energy should have a role there. Again, that is potentially more a question about how you want the capital to be deployed. The Government could take a stake in a project, or invest to then seek a return, and utilise that money either to reduce energy bills or to reinvest. That is a question around prioritisation of public spending, because that might be a sensible thing to do, but there is a range of other things you could invest in that might look beyond the energy transition. Hopefully that gives you a bit of a feel. The role will definitely change depending on where you are in the asset life cycle.

--- Later in debate ---

[Andrew Bowie]

Q This will be my last question, Chair, I promise. Mr Norquoy, you represent Scottish Renewables. In the past, there have been moments when the aims and objectives of the UK Government and those of the Scottish Government have not been entirely aligned. Your members operate in a devolved administrative area, Scotland. How content are you, given the provisions of the Bill, that GB Energy—an arm of the UK Government, a company established by the UK Government and answerable to the UK Secretary of State—will have the autonomy and power to work constructively with and under the auspices of the devolved Administration in Edinburgh?

Jack Norquoy: The Bill includes a reference to working with Scottish Ministers, which is welcome, as part of improved relations at the moment, which are welcome too. On governance and devolved competency, as we heard in earlier evidence from the Crown Estate, the partnership with GB Energy is welcome. There will have to be development across the UK to support our net zero targets, but we want to ensure that there is parity with Crown Estate Scotland too. At the start, I highlighted the pipeline that we have sitting in Scotland. On the point about the competency of the Scottish Government, we would like to see some more detail—again, probably outwith the Bill—on how we can ensure parity between extra powers to the Crown Estate and to Crown Estate Scotland.

[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.

--- Later in debate ---

[Stephen Flynn]

Q In terms of the opportunities that exist in the Bill and GB Energy, would the appetite of your members for projects related to production or the generation of net zero energy be increased by the quantum that is available as part of GB Energy, which is relatively small in real terms—£1.3 billion per year, less the money that is already likely to be allocated to local plans and community projects—or by the ability to de-risk? If it is the latter, could you expand on your earlier answer?

David Whitehouse: I think we all recognise that on the journey to net zero a huge amount of investment is required to get us there—the Climate Change Committee says that £1.4 trillion is required. The lion’s share will come from the private sector, so GB Energy will help, but actually we need to create the conditions more broadly where we have investment in the energy sector that turns into enduring value. That is what we need to deliver, and we can talk about that.

Where GB Energy can play a role is in those opportunities that would not otherwise have happened, such as through the opportunity to de-risk projects. If we look at things such as carbon storage, de-risking and understanding the nature of the carbon stores and using that as an opportunity to buy into future investments is a role that GB Energy can and should play.

We have spoken about connectivity with Europe. Scotland and the UK’s future will be hydrogen pipelines to Europe, and there is a role for a state player to crowd in private sector money make those projects happen. We often talk about GB Energy as an investment vehicle but, if we work in partnership with industry, it should be much more than that. Getting money is difficult, but it is not always the most difficult thing that we have to do, so it is about unblocking the other issues. There are 13 years from consent to the delivery of the first electrons. It is in those areas where we can have a state player sitting with industry that understands our challenges and what we need to do. We often talk about GB Energy as an investment vehicle, but it should have a bigger vision than that.

[Harriet Cross]

Q The statement of strategic priorities set out in clause 5 does not have a timescale on it. I wonder how important it is from your members’ points of view that that timescale is narrowed down, particularly given that a lot of your members will be international companies. Obviously investment and personnel—that is, skills—flow abroad, and we cannot guarantee that they will wait for a strategic priorities document to come forward.

David Whitehouse: There is no doubt that the UK and Scotland are in a global race for investment, and we need to create an environment where we are attracting investment. I sit in a sector that has been battered to some degree by public perception and by tax changes. There are things that are happening outwith GB Energy that, as a country, we need to look at. We need to make a great environment for investment.

Time does matter; GB Energy will start to come to life when the Secretary of State puts forward priorities. The thing that we would ask—I think you have heard it from others—is about bringing forward the strategic priorities for GB Energy. The statement should be something that we are engaged in and are bringing forward now. It should come forward in a timely manner, but it must make sure that it has taken on board the necessary engagement with industry, Governments and other key stakeholders. Time is always of the essence.

--- Later in debate ---

[Wera Hobhouse]

Q It is good to hear from you again, Andy—we had a discussion a few weeks ago. At the beginning of your remarks today you said, as others have said, that GB Energy should not just be an investment vehicle; it should be so much more. We have to deal with this Bill and see whether it will meet the ambitions of your members for GB Energy to be more than just an investment vehicle. Is there anywhere in the Bill where you think, “Hmm—there’s a gap where this could be emphasised to make sure that GB Energy doesn’t become just an investment vehicle?”

Andy Prendergast: From a lot of the conversations we have had, talking about a one-stop shop, assistance in planning and further regulatory support, I think that is something that will evolve over time and will be matched by the funding. An investment vehicle is badly needed on its own because it is something we do not have, which makes us almost unique among advanced economies. Looking at the Bill itself, there are parts that could be fleshed out. We would like to see more about skills, as I just mentioned, and there are some parts that we need to look at, but that is an evolutionary process as opposed to something we definitely need in the Bill now.

[Stephen Flynn]

Q Thank you, Andy: you have spoken very clearly. If I have picked you up correctly, you expressed a modicum of concern about the quantum that runs alongside the Bill to support its potential strategic investments. Could you perhaps elaborate on that more? Secondly, regarding clause 3(2)(c) on energy efficiency, is GMB of the view that GB Energy will bring down energy bills?

Andy Prendergast: If I may take the second part first, one key thing the public want is to see lower energy bills. We know that. A potential issue with GB Energy being so popular is that, to a degree, not everyone knew what it was. Some people think it will lead to an immediate reduction in energy bills. We are likely to see that over a longer period of time, but GB Energy needs to make the investments in new technologies that we have failed to make and that we have too often missed the boat on. If you compare us to Denmark, for example, 14% of its exports are in green technology. That is because it has Ørsted, which is very similar to what we are trying to do with GB Energy, but ultimately it has had a long run into this and has stolen a march. What GB Energy belatedly allows us to do is potentially to steal a march on some of the new technologies that have not been exploited, with a view to supporting those supply chains in the important parts.

Could you repeat the first part of your question, please?

[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.]

--- Later in debate ---

[Catherine Fookes]

Q I draw your attention to clause 5(5) on consulting Welsh Ministers on areas within the legislative competence of the Senedd. I am pleased that, under the Bill, the Welsh Government will be consulted. I wonder whether you have had any intergovernmental collaboration so far to inform the Bill.

Michael Shanks: That is an important question. We have done several different things already. I have had many conversations with my counterparts in the Welsh Government, in the Scottish Government and, to a different degree, in the Northern Ireland Executive. Energy is of course transferred in Northern Ireland, but we are keen that they are still part of the Bill, so that they can benefit from some of the GB Energy possibilities, although it will be a different relationship because they are part of a different grid.

All my conversations with the Scottish Government and the Welsh Government have been about how we collaborate, not just on the formal process of consulting on the statement of priorities, but on how they can be part of helping GB Energy to set its priorities on an ongoing basis. On Monday, I met the Cabinet Secretary in the Scottish Government. We talked about, for example, the Scottish Government having a role in a much wider sense in the company to help with some of the priorities in Scotland.

There are a variety of ways. What is critical is that the devolved Administrations should absolutely be consulted, and we want that to be an open process, but we have also reset the relationships with the devolved Administrations in a way that means that this is not now a combative process. Across the UK, we have broadly the same outcomes in mind for clean power, with slightly different targets here and there, but we are all on the same journey. That allows us to align a lot of our priorities and to deliver for people all across the UK. I want that to be an open and collaborative approach. Consultation is the formal part, but it is not the limit of what we think can happen.

[Stephen Flynn]

Q Thank you, Minister, for your candour so far. Clause 3(2)(c) refers to energy efficiency. Can you clarify to the Committee when GB Energy will reduce energy bills by £300?

Michael Shanks: In the election, we committed that bills would come down. That figure was from independent analysts. We never said that bills would come down overnight; this is a process that will take time. GB Energy is part of delivering that. Without GB Energy, it would be harder to reach our targets by 2030 and to bring down bills for everyone. The reality with bills is that we remain far too wedded to fossil fuels; whether they come from the North sea or not, they are traded on the international market and we are subject to all the spikes, so reducing our dependence on unabated gas is critical. That is why I hope that all Members will vote to support GB Energy as part of the solution, including you.

[Uma Kumaran]

Q It is good to see the UK as a global leader once more, being the first in the G7 to end coal and in ensuring, as you have said, that the transition has been a just one. This is an increasingly perilous time globally to rely on foreign countries for our energy and energy security, and that remains a concern. I am looking at the object in clause 3(2)(d), on

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

For our constituents watching at home, which I choose to believe they are, what does the Bill actually mean for energy security? What does it mean for our constituents in the years ahead?

Michael Shanks: Our constituents and the wider population are watching every moment of this sitting, I have no doubt.

That is an important question. Security of supply is one of the critical questions that we have to answer. We have this challenge at the moment of how we bring down bills; how we move towards our climate targets for clean power, which is essential; and how we ensure security of supply. The only way—the only long-term solution—is for us to move to cheaper renewable energy at pace. Every single year that we are dependent on volatile fossil fuel markets, we open ourselves to the kind of exposure that people have still been paying the price for in the past few years. That cannot continue.

We will not be able to flick a switch overnight. We have come in after 14 years of chaos, frankly, in so much of government, and we are doing as much as we can to move at pace, but this is the journey that we need to be on. As I have said, 2030 is ambitious, but it is absolutely achievable. I was heartened when every single one of our witnesses today confirmed that although this is an ambitious programme, they see GB Energy as a critical part—not a silver bullet; of course it is not, and we never said that it is—in moving us toward energy security, cheaper bills and the climate leadership that the public want.