Energy Bill [HL]

Viscount Trenchard Excerpts

Committee stage
Monday 5th September 2022 Lords Chamber

[Lord Howell of Guildford (Con)]

My Lords, I shall speak to Amendments 1, 2, 3 and 4, as well as Amendment 5, on which my noble friend Lord Moylan made an extremely interesting speech, as were the speeches just made by the noble Lords, Lord Ravensdale and Lord West. I declare my interest in energy matters as an adviser to Mitsubishi Corporation—one of the world’s largest producers of heat pumps, as well as of all connectors and the switching stations associated with them, both here and overseas—and the Kuwait Investment Office, with which the linkage, through its oil and gas production, is obvious.

I am afraid this sounds suspiciously like a Second Reading debate rather than a Committee debate. That is perhaps inevitable, given that we are in the midst of a first-class energy crisis—the biggest certainly in my active lifetime. Naturally, your Lordships are taking any opportunity—as we are entitled to do—to relate remarks on this enormous Bill to the very difficult dilemmas that the nation now faces, with no obvious way out, a cacophony of new views about what should be done, an absence of views about the international dimension, which I will mention in a moment, and a general bewilderment that, somehow or other, we will have to borrow a great deal more money to prevent real suffering, collapse and bankruptcy across a large part of the enterprise and small business sector, and so on.

I am not going to support Amendments 1, 2, 3 and 4 because they do not add much to the purposes, or indeed deficiencies, of the Bill. If they did, I would say let us support them, but that is not what they do.

I want to comment in passing on my noble friend Lord Moylan’s remarks on pump storage. He mentioned the Dinorwig installation in north Wales. I had the honour and pleasure of authorising not the original installation itself but the expansion in the early 1980s. One interesting fact for your Lordships is that it was capable then of delivering within 12 minutes 2 gigawatts into the system. The remarkable fact is that it never needs to work at all to be an enormous addition to our generating system and an enormous saving. Why? It is because the fact of what it can do enables the rest of the power system and all the power stations to operate at slightly higher capacities, with lower safety margins, than they otherwise would—in the knowledge that this extra is always there. So we have the extraordinary situation of a vast installation that never need actually operate to make substantial savings. That is one of the anomalies of the national energy system that we have to familiarise ourselves with.

As for the amendments—to a Bill that, frankly, does not leave me totally happy anyway—first, I am unhappy about the lack of any address in the amendments, let alone in the Bill, to the international dimension; at most, they very slightly address it. I admit there is a section on interconnectors, and that is very important. In fact, the interconnector element in our future diversity of supply is going to increase substantially; I think the Bill mentions 18 gigawatts of interconnectors. I understand that Morocco is thinking of adding an enormous 3 gigawatts of clean energy—solar energy using linked cabling from Morocco all the way to the UK—and there will be many similar sources. They all raise very complicated issues since they have to be managed under direct current, because you cannot put alternative current underwater; they have to have amazingly extensive energy transformations from direct current back to the AC that we can use inside our system.

The truth is that the resilience and security of our system is going to depend not less but more on the international environment, international supply and the sorts of issues that have been raised by the horrors of Ukraine and Russia’s determination to distort to the maximum the entire energy system of western Europe—and that includes us physically. All these issues need addressing in intense detail, but I do not see that detail mobilised in the Bill.

Secondly, the amendments talk, as does the Bill, about our climate commitments. Obviously our climate commitment in law, in the Climate Change Act, is to achieve net zero by 2050, but what actually are our climate commitments? I would like to hear from the Minister what new thinking is going on in this respect. Surely the aim of our endeavours in our climate commitments is to limit global emissions and greenhouse gases. The question that we have to ask ourselves, again and again, as we struggle towards net zero, is not only whether we can afford it—and many people say it is going to cost a lot of money—but whether, when we have got there, it will have any effective impact on curbing the growth of global emissions, getting to the Paris targets and halting greenhouse gases. There seems to be an assumption that the greenhouse gases will stop at the white cliffs of Dover if we can achieve net zero. It does not work like that. I am afraid the world is integrated, in the sense that greenhouse gases are increasing very rapidly, and our efforts and contribution need to be rethought again and again in order to make a serious impact on that.

Achieving net zero by 2050 with clean power and electricity requires a multiplication by about seven or eight times of our existing clean power sector—that is, wind, solar and now of course nuclear, which is recognised by the European Union as part of the ESG group and therefore clean energy. That needs to be multiplied by six or seven times, including a vast increase in wind power and solar power, as well as in our nuclear power. That would mean several new nuclear power stations, but they are not being built and are not going to be. No one is planning on building them. We are building one now but it is in considerable difficulties. The ex-Prime Minister said in his outgoing speech that he wanted to build a lot more, but that would be 10 or 15 years away, and the chances of the system working and doing so efficiently, if it is a replication of Hinkley C, are very slight indeed.

All that is just to get to net zero. Beyond that, we must have legislation—and understanding in that legislation—to achieve a genuine contribution to climate change curbing. That is not going to be done. Adaptation is going to be needed on a massive scale to prevent really bad heat in summer, really cold winters and enormous flooding that will affect us as well as many others. That is the element that is not in the Bill, and the amendments would not add very much to it.

As to minimising costs, which the amendment mentions—it is also mentioned in the Bill itself and in the explanatory documents for it—how is this to be done? We will not minimise costs by trying to build, very rapidly, these enormously expensive new, large-scale nuclear stations. We will not minimise costs unless we remain totally integrated into the world energy supply system or unless we deal, day by day, on a sensitive basis, with our Norwegian suppliers of natural gas and electricity. If we take our mind off that for a moment, that gas will probably go elsewhere, as is happening now as Germany tries to fill up its strategic gas storage tanks, as are many other countries. All this is creating not stability, resilience or security but the opposite.

I therefore ask the Minister that when he turns down this amendment, as he no doubt will—he is quite right to do so, because it is unnecessary and adds nothing—he gives us a little assurance that in this new and changing situation, this long-term future which we have to build on and in which, by failing to build on that of 40 years ago, we have now plunged ourselves into this terrible crisis, these things are being addressed and will be taken account of. Perhaps as we go through the Bill clause by clause, we will hear something from him about how the new situation is to be addressed. I do not think this amendment does it; nor, frankly, does the Bill.

[Viscount Trenchard (Con)]

My Lords, I must declare my interest as a member of the advisory board of Penultimate Power UK Ltd. By the Government’s own admission, the Bill introduces 26 separate measures, based roughly on three pillars, which aim to give the Bill a modicum of coherence. Many of the amendments in this group, however, seem also to be intended to serve as a kind of preamble to the Bill, which, as my noble friend Lord Moylan and others have said, would improve it.

Amendment 1, as eloquently spoken to by the noble Lord, Lord Lennie, seeks to add a principal purpose to the Bill. Amendment 7, spoken to by the noble Lord, Lord Ravensdale, aims to do the same thing. However, these amendments would add not one principal purpose but three. Furthermore, I consider that principal purposes (a) and (b) in Amendment 1 are in conflict with each other, in the sense that while delivery of the country’s climate change commitments is obviously highly desirable, it conflicts with purpose (a) in that resilience and reliability are not served, at least in the short term, by abandoning natural gas as a source of energy with unnecessary haste. Actually, purpose (b) is also in conflict with purpose (c), because it is hard to argue that maintenance of the climate levy helps to minimise costs to consumers or protects them from unfair pricing.

I therefore urge my noble friend the Minister not to accept this amendment, or indeed Amendments 2, 3 and 4 in this group in the names of the noble Baroness, Lady Blake of Leeds, and the noble Lord, Lord Lennie. I understand why they want to introduce a requirement for a strategy and policy statement in line with the Bill, but I regret that the Bill does not cover the whole of the country’s energy strategy or policy. Furthermore, these amendments give a higher priority to meeting climate change commitments than they do to developing reliable sources of energy, which protect the consumer against the risks of intermittency.

That is why I support Amendment 5 in the name of my noble friends Lord Moylan and Lord Frost, and the noble Lord, Lord West of Spithead. This amendment recognises that the Government must have regard to the Ten Point Plan for a Green Industrial Revolution, the Net Zero Strategy, the British Energy Security Strategy and all the other strategies; but that, crucially, they need to compensate for the huge reliance on wind and solar energy contained in those strategies by ensuring that we will have electric power to replace that generated by renewable sources, which are subject to intermittency.

As my noble friend Lord Moylan pointed out, it is necessary for the Government and the public to understand how much achieving the objectives of net zero by 2050 will actually cost. The Government have been, and continue to be, far too cautious in their policy towards nuclear power, but Amendment 5 will require the Government to support nuclear to a far greater extent than they have done so far, because nuclear is completely reliable and not subject to intermittency. One of the points in the 10-point plan covers the delivery of new and advanced nuclear power, while the subsequently published strategies increasingly recognise its greater importance.

Much has been made of the Prime Minister’s commitment in May that we will build one new nuclear power station every year, instead of one every decade. But he did not clarify whether he was talking about a new power station such as Hinkley Point C, with two large reactors each generating 1.6 gigawatts of electricity, or perhaps a bank of NuScale reactors, producing 77 megawatts, or of U-Battery reactors delivering 4 megawatts each. Could the Minister clarify how much new nuclear capacity the Government expect to commission every decade or year?

Energy Bill [HL]

Viscount Trenchard Excerpts

Committee stage
Wednesday 7th September 2022 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I strongly support Amendment 225, which seeks to introduce a requirement to construct gas storage facilities to hold 25% of forecast consumption by 2025. I understand that past Governments have not believed that the country has any particular need for gas storage facilities, given that we have extracted large amounts of gas from the North Sea. I am sceptical that we will find it possible, or indeed necessary, to reduce our reliance on gas as quickly as the Government’s net-zero policy currently requires.

However, the extreme volatility in the price of natural gas on the international markets means that British consumers are much more exposed to massive and rapid price increases than consumers in countries that maintain much more significant gas storage facilities, such as Germany. Even if the Government accelerate the development and commercial deployment of more new nuclear reactors than they have planned so far, we will still need large amounts of reliable energy that is not subject to intermittency. Increasing gas storage facilities as an urgent priority will mitigate the risks we face today, and I hope that the Minister will support this.

My noble friend Lord Moylan explained why he selected 25% as the proportion of forecast demand each year beyond 2025. My noble friend Lady McIntosh suggested that this should be defined in days—I think it would be 91 days at 25%, as an average, but surely we use much more gas in winter than summer. I doubt that our consumption of gas will steadily decline in the years beyond 2025 but, so far as it does, I am not saying that it is not a good thing. If the Government are correct and reduced demand in 2028 or 2030 is realised, storage facilities holding 25% of forecast demand may hold 30% or 35%. I look forward to hearing the Minister’s thoughts on this very useful amendment.

[Baroness Worthington (CB)]

My Lords, I will briefly speak to this group of amendments. It is clear that the resilience of our energy system is absolutely crucial. As recent events have shown, a non-resilient system poses great threats, in both rising costs and vulnerable people suffering.

I will ask about the best approach to delivering the enhancement of gas storage that I think we all agree on. It seems clear to me that, in Clause 10, the Government are considering making an intervention into energy markets to guarantee a certain volume of fuel supply, because of the perceived worry that investment into these sectors is slowing—quite rightly in my view, because they have a limited lifespan. The fossil fuel industry will have to quickly adapt to a rapidly electrifying energy system in which its product will be less needed. So, in time, we will see a diminishing market, in part because of government policy—and that is completely correct, as we move away from polluting forms of energy. But this opens up the risk that there will be a gap between private sector investment and our needs, as we will still rely on these fuels during the transition. It seems to me that the Government have convinced themselves that an intervention on core fuels for transport is necessary for this reason—the fear that a gap will open.

Has a similar analysis been done on the gas market in light of recent events? Would it not therefore make sense to consider some kind of holistic intervention into the market for energy security purposes, rather than a piecemeal, fuel-by-fuel approach? Does that complement, or supplement, the approach of the noble Lord, Lord Moylan, providing some way through this that we can perhaps discuss during Committee and then come back to on Report?

I support Amendment 240, but would the VAT exemption apply to larger systems, like schools and other buildings, or is it just for personal home use? It seems to be sensible to try to level this up so that people can make use of it.