Great British Energy Bill (Second sitting)

Uma Kumaran Excerpts

Committee stage
Tuesday 8th October 2024 Public Bill Committees

[The Chair]

I have three Members on my list already, and we have 15 minutes left, so please be short, sharp and to the point.

[Uma Kumaran (Stratford and Bow) (Lab)]

Q I will keep it short. Thank you both for your insights today. I would like to know what advantages other European countries have from a state-owned energy company.

Tristan Zipfel: If you take the example of France, EDF is indeed state owned, but it is a competitive market. Nowadays, EDF is one actor among others. If you take, for instance, offshore wind in France, EDF competes—sometimes it wins, and sometimes it does not. The benefit for the general public is a sense that that body can execute the strategic vision of the French Government in delivering net zero or a decarbonised future. EDF is very much the arm that executes that vision—independently, at arm’s length, but it does it. I also think there is a creation of long-term value by the ownership of assets. EDF provides dividends to the French state, which I think are valuable.

[Uma Kumaran]

Merci.

Alistair McGirr: If I may add to that, there is the question of the role of the state. Not everything has to be through GB Energy or the national wealth fund. In terms of the GB Energy policy framework, the creation of the National Energy System Operator can help to drive a lot of economic value through the transition here in GB by taking a much more strategic approach to how infrastructure is going to be deployed. GB Energy is one element of that, but I think the wider value can be brought together by a more strategic approach through the policy framework.

[Pippa Heylings (South Cambridgeshire) (LD)]

Q You talked about the objects within the scope of the law, about facilitating and encouraging, and about frontier innovation in technology and energy generation, but you also talked about de-risking. You did not mention onshore wind, so I am wondering whether that would lead also to onshore wind. There are also tidal programmes, such as the reef from Aberthaw to Minehead, that are stalled. Do you see these as part of helping to facilitate and de-risk within the scope of GB Energy, too?

Tristan Zipfel: For sure, yes, they could be part of the scope. Choices will need to be made, of course, on where those investments are directed, and I think it is important to direct the investments where they will have the maximum impact. When it comes to onshore wind, for instance, perhaps it could be a case not of investing where the private sector is already doing a good job on its own, but of looking at areas where there is a need to develop infrastructure to unlock these onshore wind opportunities, or of looking at Government-owned land that could be used to develop new projects. As you said, Alistair, it is going to be complementary to what the private sector is doing, but there will be pockets of opportunities for GB Energy to really make a difference, even in an area like onshore wind, I think—100%.

Alistair McGirr: I agree with that answer. The question would then be: where is the biggest bang for the buck? Is it building large onshore wind projects that actually have developers in that space and have a route to market? That is probably the question for GB Energy: is that the best use of taxpayers’ money, rather than other things that can be done in terms of investment in frontier technologies?

You mentioned tidal. There is the question there of an absence of a business model. If there was this supported business model, there might be an opportunity for private investors to come into that space. There is the issue that just because the private sector is not doing it does not mean that the public sector should do it, because ultimately, if it is a bad deal for private shareholders, it is probably a bad deal for taxpayers as well. I think this is about making sure that the technologies that are useful are brought forward with business models that provide a return for whoever the investor is.

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[Wera Hobhouse (Bath) (LD)]

Q Following on from what you were saying about uncertainties, and how we have the Bill but then there are all sorts of other questions, it is about creating certainties for us as legislators, to some extent, as well as for investors. Clause 5 says that

“the Secretary of State must prepare a statement of strategic priorities”.

Do you think that it would be important to have a timescale for that, so that we know when the Secretary of State is preparing the strategic priorities, and so that it happens quite quickly? That is something that we can do: put a possible time limit or timeframe into this Bill.

Josh Buckland: That is a very good question; I look back to my time as a civil servant. Sometimes timelines can be very useful because they give clarity, externally, as to when priorities will be updated and when there will be new interventions from Government, but sometimes they do not necessarily reflect the external environment as things change. If there were to be a decision to include an additional requirement around the timeframe, I think you would still want the ability to respond to external events as the world changes, to ensure that the priorities set out to the institution could adapt as the external world changes. Obviously, that is very true in the energy transition.

Clause 5(8) states that Great British Energy must have the ability

“to publish and act in accordance with”

that statement. The thing for me—again, it may not be an issue for the Bill itself, but it will be interesting to watch—will be how bound Great British Energy is to the specifics of the Secretary of State’s statement and what latitude it has beyond that, because clearly it will want to take its own commercial decisions. Fundamental to its independence and ability to crowd in private finance will be that it is taking commercial decisions with strong justification. That is an area that may not need any greater clarity in the Bill, but it will be one thing that private investors will look at quite closely.

[Uma Kumaran]

Q Thank you, Josh. Prior to becoming an MP, I worked globally to advance climate action, so I know that there is best practice to learn from countries around the world. As a global corporation, have you seen comparable frameworks in other countries to support the transition?

Josh Buckland: Completely. There are plenty of precedents in various sizes and scales. Critically, they are not necessarily all in the concept of a developer company, which obviously has got most of the attention as a result of the Great British Energy Bill. There are those examples, and there are significant European energy developers and national energy companies right across the world, and quite often they partner with other entities, whether they are private investors or developers. It is welcome that in the broader statement the Government have been clear that, especially at an early stage, they want Great British Energy to partner with other developers. We should not forget that we have a lot of leading companies in this country, both headquartered here and inward investors.

The other interesting area is the role that the state can play more generally. I might be wrong, but I think that is alluded to in clause 4, which mentions that the financial assistance may be applied “pursuant to a contract”. That is an interesting dynamic. In Denmark, for example, the state in its new leasing process for offshore wind will take a 20% stake in projects as it offers out contracts to the private sector. That is an interesting model that could potentially be applied here and has been applied in other European jurisdictions.

I am not entirely sure about the Government’s intentions on whether that would be a matter for GB Energy or for broader policy, but clearly it creates different opportunities. We should not necessarily think about Great British Energy just as an investor of capital, to go back to the question asked earlier; this is a significant amount of money but, given the scale of investment required, it will be deploying other capital through it that is the key test of success.

[The Chair]

I call Stephen Flynn.

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[The Chair]

Order. I think we can say that that is fairly close to being outside the scope of the Bill. I am absolutely confident that the next question will be within it.

[Uma Kumaran]

Q Thank you, Sir Roger; I will do my best. Thank you, David, for your insights today. You talked earlier about the potential for GB Energy to be much more than an investment vehicle. In your opinion, what are the other barriers that GB Energy and the Government can break down to create an environment to accelerate the transition?

David Whitehouse: I am an engineer, so it is simple engineering stuff. Collaboration: I was pleased to see the Scottish Government and other devolved Governments welcome this. I do not think GB Energy is the convening force in and of itself, but the convening power, which means we have Governments around the country working together for a common goal, is an important part of what GB Energy can provide a focus for.

Collaboration is really important. We need collaboration among our regulators. We have a complex regulatory framework. The view many of our members take is that to change our regulatory framework to be exactly what we require for this journey would take so long that the train would have gone. What GB Energy will do, and what it can see and help with, is alignment between our regulatory bodies—bodies in the devolved Governments and the wider UK Government. It will also see what the other barriers to investment are.

I think there is good cross-party consensus about the journey we need to go on to drive collaboration. Looking at what needs to be done to help with the simple co-ordination between different competing projects can drive down costs and drive efficiency. We should look at what we can do to reduce the cycle time. There is 15 years from licence to electricity—unfortunately, in my experience, I am probably on year 30 from carbon storage to actually injecting it. There is a significant role there that GB Energy should be growing into, and it should be playing in that space.

[The Chair]

I apologise for the slight distraction at this end of the table. We have been trying to juggle timings in connection with the imminent Division.

As there are no further questions, Mr Whitehouse, may I thank you for your contribution? We are most grateful.

Examination of Witness

Andy Prendergast gave evidence.

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[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.

[Uma Kumaran]

Q I declare an interest as a proud member of the GMB. Thanks, Andy. The transition is one that we all care about, and it needs to be a just transition that takes local communities with us. In your opinion, what more can the Government do to ensure that workers and jobs are kept at the heart of the GB Energy Bill?

Andy Prendergast: Part of this is about listening without prejudice. Look, we are going to be absolute clear: we agree with the Labour Government on a huge swathe of things, but one thing we do not agree on is the ending of oil and gas licences. We look at oil and gas licences and every single scenario into the future requires us to have oil and gas. We as a nation have a choice. We either take it for ourselves, with high working and environmental standards, or we import it from a number of frankly disreputable regimes.

Part of that transition has to be listening to those communities and the people doing the jobs and actually take their expertise. We are absolutely clear—and I think it is obvious to anyone with half a brain—that global warming is happening and the speed at which is happening is quicker. It is the biggest challenge that humanity has faced, certainly in my lifetime, and we need to deal with it. The concern for us, and this relates to what I was talking about earlier, is that if we get this wrong and we do not listen to communities and do not bring them with us, we risk getting a reaction against that, which is what we have seen in America and Europe. Then, instead of doing it a little bit slower but in a demonstrable and deliverable way, we end up with an electorate being offered simple solutions and quick fixes, and ultimately due to a mixture of climate pessimism and snake oil salesmen, they take the wrong decision. We have to look at some of this from a pragmatic angle, ask what is best in the national interest and listen to the workers and communities who are currently benefiting.

[The Chair]

I call Perran Moon.

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[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.

[Pippa Heylings]

Q I would like to understand whether you see this as the missing limb in clause 3, on the objects. I heard you mention in the Chamber that the fifth objective of GB Energy is community energy, so we are missing the fifth objective in clause 3 around community energy. We heard from all the witnesses about how crucial this community piece is, both to de-risking and to reducing the delay. I wonder whether you would be open to an amendment and would consider putting it in here. I do not think that this would make it more difficult to hold the flexible, wide-ranging framework that we have had, so I want to see if you are open to that.

Michael Shanks: There are two separate things here: the objects in the Bill, which are around the restrictions placed on Great British Energy, and the five key functions, which are outlined in the founding statement. I was referring to the five key functions, one of which is the local power plan, which is how we think we will deliver a lot more community-owned energy.

The important thing about the Bill is that we do not want inadvertently to create a list of things that we think are good to have—I do not disagree with you at all about the importance of that—but that actually end up restricting it in ways that we do not expect. There is that danger with Bills like this; it was the same with Great British Nuclear and the UK Infrastructure Bank, where they have a clear, focused remit. There is nothing in the objects that prevents community energy projects—in fact, they are intrinsic to several of them—but we think that adding more and more detail, including the amendment that you propose, is not the right way to go. But it is clear in the founding statement, in the evidence from Juergen Maier and in numerous answers from the Secretary of State and me that this is something to which we are absolutely committed.