Great British Energy Bill

Wera Hobhouse Excerpts

2nd reading
Thursday 5th September 2024 Commons Chamber

[Ed Miliband]

My hon. Friend is a great champion for his area and he is right. I am sure he reflects the feelings of every right hon. and hon. Member, whatever side of the House they are on, that there are huge opportunities in this sector. We intend to exploit them. I look forward to seeing his constituency.

[Wera Hobhouse (Bath) (LD)]

rose—

[Ed Miliband]

I will make a bit more progress. I have set out our case—a case that the British people overwhelmingly support. According to post-election polling by More in Common, Great British Energy was supported by an overwhelming 73% of voters and opposed by just 8%. It appears from the Conservative’s reasoned amendment—so-called—that Conservative Members will vote against the Bill today. If they do that, they will do something remarkable: they will go one step further than refusing to listen to the people who did not vote for them by refusing to listen to the people who did vote for them—quite a remarkable feat by an Opposition—because Great British Energy was supported not just by Labour voters, but by Conservative voters by a majority of four to one—56% to 14%.

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[Ed Miliband]

I will make a bit more progress. [Interruption.] Conservative Members are still in the “the show was great but the audience was poor” stage of Opposition. Let me give them some advice—they will get out of that over time, but they are in the early stages now.

Because I get my kicks in strange ways, for a bit of light entertainment, I have been reading what the Conservative party leadership candidates have been saying. It is really interesting, honestly; it is quite fun reading. [Interruption.] Yes, somebody has got to do it. The right hon. Member for Tonbridge (Tom Tugendhat) said that people

“will never vote for a party that they have stopped taking seriously.”

Well, that is true. He said they should be

“given credit for seeing the errors that we may make and correcting them.”

Correct. The right hon. Member for North West Essex (Mrs Badenoch)—I believe the shadow Minister, the right hon. Member for East Surrey (Claire Coutinho), is the mastermind for her campaign—said it was no good

“having the same policy arguments from the last Parliament.”

The shadow Minister should take those words to heart.

I agree with those candidates that the Conservative party needs to move on. I am in a generous mood, Madam Deputy Speaker. I have been involved in leadership campaigns, so I have some advice. I have a free idea for the not very famous five still left in the Tory leadership competition: back an idea that the public support. Back an idea that Conservative voters support; back an idea that Labour voters support; back an idea that Reform voters support—Reform Members are not here. Back an idea that Liberal Democrat voters support. They should move on from the arguments of the last Parliament, show a bit of bravery—even break the Whip and stand out from the crowd. They should break from the past and back our Bill today.

[Wera Hobhouse]

The Secretary of State knows I share his passion and ambition to get to net zero. One big concern about GB Energy is that it will crowd out, rather than crowd in investment. Will he enlarge on how he intends to crowd in investment into green energy?

[Ed Miliband]

I am very surprised by the Liberal Democrats saying that. It is slightly “orange book” Liberal Democrats, if I may put it that way, for those old enough to remember. I say respectfully to the hon. Lady and all Members of the House: look around the world at what is happening before our eyes. There is catalytic public investment—public investment levering in private investment. The whole old fashioned, free market 1980s argument about crowding out turns out to be wrong. Just look at what is happening in America. Why is the money flowing to the United States? In part, because of the catalytic public investment. [Interruption.] I can see Opposition Members are going to be slow learners.

Great British Energy is at the heart of our long-term plan to accelerate the transition to clean energy and ensure we are never at the mercy of volatile fossil fuel markets again. It will speed up delivery, create good jobs and protect family finances, and we will reap the benefits for generations to come. I commend the Bill to the House.

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[Claire Coutinho]

If the hon. Lady would bravely like to say that the company will generate energy, I am sure that she would like to tell us how much, because no one else seems able to.

[Wera Hobhouse]

Will the right hon. Member give way?

[Claire Coutinho]

I am sorry, but I will make some progress.

Finally—this is really important—the Secretary of State pays lip service to nuclear, but we know that when Labour was last in power it did not start a single nuclear power plant in all its 14 years. All summer, there has been an eerie silence. On the capital raise for Sizewell C, which should be out by now—nothing. On the small modular reactor competition, which should be deciding its final projects now—nothing. We committed to a third large-scale nuclear power plant at Wylfa—again, nothing. We wrote to the Under-Secretary of State for Energy Security and Net Zero, the hon. Member for Rutherglen, but once again he has refused to confirm any detail or, with regard to Wylfa, whether those plans are even in place. Can the Secretary of State say whether the creation of GB Energy is slowing down those projects and causing the timetable of these programmes, which will provide clean, cheap energy, to slip?

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[Claire Coutinho]

That is a very fair question. I hope that the energy Minister, who I assume will wrap up the debate, will be able to provide some detail.

Far from being a super-nerd, the truth is that the Secretary of State is the ultimate career politician. He comes up with big titles and makes big promises to the public, but he has no idea how to deliver. My big fear—[Interruption.] He should listen, because it is an important point. My big fear is that he is losing focus on all the amazing technologies that will come online after 2030, whether it is fusion energy, the next generation of nuclear reactors or carbon capture. These are the innovative new technologies that will not just deal with the 1% of emissions in the UK but the 99% produced overseas. In Government, I focused a lot of my time on speeding up the development of those technologies. We launched the £1 billion green industries growth accelerator specifically to reduce any supply chain constraints, for example on cables. We provided almost £200 million to help the UK become the first commercial producer of advanced nuclear fuel outside Russia. We were making Britain one of the most exciting places in the world for fusion energy development, with £600 million of funding.

[Wera Hobhouse]

I thank the right hon. Member for giving way—finally. She is criticising the Government for the rushed target of decarbonising the grid by 2030. Can she enlighten the House on when the Conservative party would do it?

[Claire Coutinho]

I will. This is a critical point, which I have made in recent weeks. The point about having longer to decarbonise is that it gives time to develop British supply chains. That is exactly what I was doing. The green industries growth accelerator and some of the other things that I have talked about gave us time to set up British companies. Those things cannot be done in five years. There is a need to get project finance, to hire workers and train them, and to get planning permission. There is a huge amount that needs to be done. The fact that the Secretary of State wants to rush the transition and make it happen at breakneck speed is risking British jobs and livelihoods, and making us dependent on Chinese supply chains.

The Secretary of State has promised many things with the Bill, but he simply cannot set out any detail about the things that he wants to deliver. It would be a blank cheque for £8 billion of taxpayers’ money, with no plan, no evidence, and no numbers for the bill savings or profits that he has been promising the British public. That is why we cannot support the Bill as it stands.

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[Wera Hobhouse (Bath) (LD)]

I congratulate the new hon. Member for Clwyd East (Becky Gittins) on a wonderful whistle-stop tour of her constituency, from wonderful dog walks to rowdy cows in fields and fascinating museums that testify to the history of her constituency. We lived in Liverpool for 10 years, many years ago, and we visited her constituency many times and had wonderful days there. I know how beautiful it is.

Championing renewable energy is in our DNA as Liberal Democrats. Renewables are clean, cheap and popular. We welcome the fact that the new Government are turning around the damaging attitude taken by the Conservative Government and are attempting to make the UK once more a global leader in getting to net zero. We are absolutely on the side of the Government when it comes to the ambitious targets that are being set to get to net zero. We are pleased that through the Bill new steps are being taken to restore British investment in the green economy. The Bill must ensure that renewable energy and home insulation can be rolled out at speed so that we meet our climate targets, bring down energy bills and provide green, well-paid jobs in the future.

The previous Conservative Government’s obsession with oil and gas left us in a mess. The dithering, delaying and even denying of the Tory Government held us back. I have often said that net zero is not like a bus that we can miss and say, “Whoops! We’ll get the next one.” This is a target that we cannot miss, and delaying is just as bad as denying that climate change is happening at all.

[Graham Stuart]

Will the hon. Lady give way?

[Wera Hobhouse]

I am happy to give way; the right hon. Gentleman and I have had many discussions on this issue.

[Graham Stuart]

I wonder whether the hon. Lady knows of a single major economy on the planet that went faster than the previous Conservative Government in cutting emissions.

[Wera Hobhouse]

I am happy to respond to that, because I do believe that the UK was a global leader. There was cross-party agreement about net zero, but the last Government broke that agreement. That is our problem. Each year and each month matters when it comes to setting the pace to get to net zero. Instead of producing our own renewable energy, we were left reliant on fossil fuels—the energy of the past—and on dictators such as Vladimir Putin. In this unstable geopolitical environment, that was a death sentence and led to the catastrophe of the recent energy crisis.

Families are once again worried about another dramatic energy bill increase—we say that honestly to this Government and want to work with them on this issue—this time of £140 on a typical family’s annual energy bill. Pensioners are also rightly concerned about the Government’s plan to cut the winter fuel allowance for millions of the poorest and most vulnerable people. I raised the matter in business questions earlier and said what is important to us. We of course recognise that through the pension increase next April there will be relief for pensioners, but this winter, when things have become really difficult for pensioners, the Government should not make cuts before we have seen the benefits. We have been making that point and hope to work constructively. It is a political choice and, in our view, it is the wrong one, but it is pretty rich of the Conservative party to complain.

It is clear that if we are to hit our net zero targets, we must drive up investment in renewable energy. The Climate Change Committee’s 2024 progress report found that policy reversals and delays, together with inconsistent messaging, hindered progress just when acceleration was needed. Only around one third of the emission reductions required to meet the 2030 target are covered by our current plans. I challenged the shadow Secretary of State on what the Conservatives’ plans for decarbonising actually are, but we have had no answers. We must, for example, at least triple the operational capacity of offshore wind installations to meet our 2030 targets—and we Liberal Democrats absolutely believe in the 2030 targets.

New first-in-class renewable energy technologies are coming on the scene thick and fast, and the Government must find better mechanisms for funding them than we currently have in place. One example, if I may bring it up, is DRIFT Energy, which is based in my Bath constituency. I hope the Secretary of State is listening. DRIFT uses sailing ships to travel to the deep sea to harvest deep ocean wind and generate green hydrogen. Interesting technology is coming on board, but these new technologies still face many investment problems. The green hydrogen is then delivered to ports around the world—they are essentially fishing ships for energy. Truly novel technology like this does not fit neatly under a Department, so it becomes exceptionally hard to win grants, let alone multimillion-pound grant support. It is important that we are aware of that.

[Max Wilkinson (Cheltenham) (LD)]

Does my hon. Friend agree that we need the Bill to look at and include schemes like the Cheltenham green deal, run by Cheltenham borough council, through which local organisations that could not otherwise fund green schemes are able to access funding borrowed by the local council? Such schemes will then make money and provide a return for the taxpayer so that local areas can start producing more renewable energy for themselves—for example, through the investment in solar panels on the roof of Cheltenham Town football club.

[Wera Hobhouse]

As I progress with my speech, my hon. Friend will hear that our focus on local authorities, local decision making and local involvement is crucial. Let us ensure that our emerging technologies, which have the potential to be hugely valuable, are not overlooked or forced to seek support from abroad.

[Mr Gideon Amos (Taunton and Wellington) (LD)]

Does my hon. Friend agree that the Secretary of State should take on board one of the emerging technologies that could deliver the most for Great British Energy: the potential for tidal range energy? In a previous life, I was responsible for the consenting of the Swansea tidal lagoon, which unfortunately the previous Government failed to fund. It is the second biggest tidal range in the world and could be a massive success story for Great British Energy and the UK. Does she agree that the Secretary of State should take that on board as a key objective of Great British Energy?

[Wera Hobhouse]

I totally agree, and I am sure that the Government will agree too. A lot of these decisions are ultimately about value for money; as these tidal range technologies come on board, they can become cheaper. I hear the Government are saying that this is exactly the plan: that, where it is currently expensive, Great British Energy can come in and provide support. We understand and support that principle.

This new Government must ensure that they have clear and consistent messages. Delays to the phase-out dates of fossil-fuel vehicles and boilers, as we saw under the last Government, have sent mixed signals to investors, businesses and consumers. We hope that GB Energy will go some way in providing confidence to other investment bodies and the wider industry that Britain’s green economy is open for business.

We Liberal Democrats realise the importance of community buy-in. The new Government must put local voices at the centre of the journey to deliver net zero. We need to win hearts and minds to persuade people that net zero projects are good for their communities, for their pockets and for our future national economy.

[Sarah Dyke (Glastonbury and Somerton) (LD)]

The Government have said that they believe communities that host renewable energy infrastructure should benefit from it, but there are currently no ways to force developers of on-ground mounted solar panel farms to provide community benefits. Does my hon. Friend agree that the Government should use this Bill to make provisions for guaranteed community benefits in these circumstances?

[Wera Hobhouse]

We have already had some detailed discussions about what we are doing with communities that have to host vital infrastructure, and it is important that the Government assure local communities and the Liberal Democrats that this will happen. As the Bill progresses, we need to discuss how we can get legal assurances and whether the Bill is the right place for this.

As I have said, we need to win hearts and minds to persuade people. Only with local consent can we successfully deliver the path to net zero, which is why we have called for communities living near large-scale infrastructure projects to receive community benefits—for example, through reducing energy costs and funding local initiatives. We are keen to work collaboratively to ensure that these benefits are in place in legislation.

We Liberal Democrats welcome the inclusion of clause 3, which lists specifically all the objects of GB Energy. Although those aims all have their merits, the Government have failed to include anything on community energy. That is especially disappointing—[Interruption.] May I continue? I will lay this out as I understand it—I worked on the all-party parliamentary group for community energy, and I will get to my point. It is especially disappointing that the new Government have failed to include anything on community energy, given their welcome words in the House about how important it is to enable community energy—I hear it again and again. It is no longer about words; we now have a Bill before us in which we can make this happen.

I will lay out what I think is necessary. Without the inclusion of community energy, the Bill will be a major missed opportunity. In the past, the now Secretary of State and his Ministers have been vocal champions of community energy. In a previous debate on making Britain a clean energy superpower, the Under-Secretary of State for Energy Security and Net Zero, the hon. Member for Rutherglen (Michael Shanks), stated:

“One of the missions of GB Energy will be around the idea of community-owned power.”

He has also advocated for local communities to have

“some sense of ownership of the assets”—[Official Report, 26 July 2024; Vol. 752, c. 942.]

that they generate. Last year, the Secretary of State himself tabled two enabling amendments on community energy to the then Energy Bill; his new clause 53 specifically would have required large-scale energy suppliers to offer a special agreement to small-scale energy companies. He has spoken at length about Labour’s local power plan, much of which we are in agreement with, but where is the commitment to community energy in this Bill?

The biggest issue we identify is that energy supply licensing conditions hinder small community energy projects from selling directly to consumers. In turn, this makes it difficult to retain advantages for local communities—discounts on their energy bills, for example, or raising new money to invest in new projects. The high burdens and costs currently involved in being a licensed energy supplier mean that not a single community energy project in all the UK can sell its power directly to local people. Locally sourced energy does not travel further across the nationwide grid, and therefore reduces that constraint on it, but the cost-benefits of selling locally produced energy to local consumers are not going to community projects and nor do they benefit the consumer. That must change. Regulatory changes are required; the Government must put them in place or stop talking about their support for community energy.

Community energy schemes need to receive a guaranteed, discounted price for the clean electricity that they contribute to the energy system. If the costs of selling their power to local households and businesses were proportionate, many more community energy schemes would become financially viable and we would get many more than we have; I urge the Government to really look at our concerns and what we can include in the Bill to make these regulatory changes. Clause 3 is the ideal place to add community energy and ensure that it is one of Great British Energy’s objects.

To conclude, we Liberal Democrats welcome the steps being taken to restore British investment in renewable energy after the mess left by the previous Government. These steps will help us to bring down energy bills, create high-quality jobs, increase our energy security and, of course, reach net zero. However, there is a clear gap in this Bill for community energy, despite Labour’s manifesto committing to it, and we urge the Government to listen to our concerns.

[Several hon. Members rose—]

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[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

Let me be the first to congratulate the hon. Member for Northampton South (Mike Reader) on his maiden speech. He has demonstrated in two ways that he is quite a rare beast. Being an engineer is not a widely held profession in this House, and he will no doubt bring great value with that expertise and experience, but his business experience is also extremely valuable. I am afraid that if he looks around him on the Labour Benches, he will see precious few people with any business experience—as the Secretary of State has shown with his Bill.

The Bill is about setting up a shell company. That is it. The idea that that constitutes an energy policy is a complete myth. In fact, the Government have not even produced an energy policy. There has not been a White Paper on UK energy policy under this Government. There are no pages full of data and numbers to give us any confidence that the Government know what they are trying to achieve, how they will achieve it, or what the risks are.

In fact, that was given away in an astonishing letter that the Secretary of State wrote to the director of the electricity system operator, asking for all the information that one would expect the Government to have given that this was a major platform in their manifesto. [Interruption.] The Under-Secretary of State for Energy Security and Net Zero, the hon. Member for Rutherglen (Michael Shanks), shakes his head—I will give way to him if he wants to intervene—but where are the numbers? Where is the data backing up this wild assertion that just going all out for renewables will provide security of supply and lower energy costs? It is a mantra that Labour Members keep repeating to themselves with increasing enthusiasm and vehemence to make up for the fact that they have no numbers to back up their assertions.

Let me be clear about one thing: I am an advocate of achieving net zero. I believe in the target of net zero by 2050—indeed, I am a member of the net zero all-party parliamentary group. When Members hear me speak, they are not listening to some luddite or climate change denier. I want this policy to work, but there are very considerable risks, which are evidenced by reading between the lines for what is not in the Secretary of State’s letter and what is clearly flagged in Fintan Slye’s response to it.

[Wera Hobhouse]

Does the hon. Member not recognise that under the previous Government, the UK was falling badly behind on investment, when other countries— particularly the US—had transformed the investment that they were drawing in by making very big Government commitments to some projects, particularly nascent ones? Does he not recognise that that sort of Government support makes a big difference to business confidence?

[Sir Bernard Jenkin]

I do not agree with that, simply because we have seen massive investment in renewables over the past 14 years, as the former Minister, my right hon. Friend the Member for Beverley and Holderness (Graham Stuart), and the shadow Secretary of State, my right hon. Friend the Member for East Surrey (Claire Coutinho), set out. We have been making fantastic progress with bringing renewables on stream, but there are considerable questions to ask. I wish it were as simple as setting up a shell company and saying, “We are going to get the state to do everything”, but I am afraid it is not. As the shadow Secretary of State pointed out, Ørsted and EDF make massive losses, and either the taxpayer has to pay for those losses or those costs go on to electricity bills.

The Secretary of State announced on Tuesday that we have got all this renewable capacity coming on stream—enough to power 11 million homes. That is if we match the maximum capacity of the renewables with the average annual demand of those homes, but of course renewables are intermittent. It seems such an obvious thing to say, but we have to say it: sometimes the sun is shining, sometimes the wind is blowing, and sometimes we have enough water for hydroelectric power, but sometimes not. In the winter months, solar makes very little contribution—it makes no contribution in the dark, at night. [Interruption.] It may seem obvious, and the hon. Member for Stroud (Dr Opher) may laugh, but we need to point these things out, because when the Secretary of State says that renewables are cheaper than fossil fuels, he is comparing the strike price with the cost of buying marginal supply capacity when we need that extra marginal supply.

The strike price will not be reflected in our electricity bills, because we have to add in other things, such as system balancing costs. We have to add in grid infrastructure costs, because renewables require massive investment in grid infrastructure. We have to add in the costs of importing through interconnectors when we do not have enough domestic supply. We have not begun to factor in storage costs—the storage capacity of our electricity system is still miniscule. Members should read the Royal Society paper on creating electricity storage in this country: it is going to be astronomically expensive, and will probably still not be enough. Then there are constraint payments—oh, yes, the constraint payments. This year, we are paying £500 million to renewable producers under the contracts for difference scheme not to produce electricity when they can produce it, because that is how the system works. That is how we have attracted so much investment, but those payments are going to be about £1.5 billion next year.

I would like the Government to produce some forecasts. How much will the balancing costs be in each year over the next 10 or 15 years? How much grid infrastructure investment will need to be funded? That appears on our electricity bills—it is the standing charge, and boy, that charge is going to go up with all the infrastructure investment that we will require. How much will we have to spend on importing electricity? The two interconnectors coming into East Anglia as part of the Norwich to Tilbury programme will be importing electricity. They are not for exporting, because the only security of supply we will have if we have shut down all our combined cycle gas power stations by 2030 is from other places.

Great British Energy Bill (First sitting)

Wera Hobhouse Excerpts

Committee stage
Tuesday 8th October 2024 Public Bill Committees

[Torcuil Crichton]

And economic benefit too, we hope.

Juergen Maier: Of course.

[Wera Hobhouse (Bath) (LD)]

Q Good morning, Mr Maier. It is very good to see you here. I have some questions about the overall aims that the Bill and the company are trying to achieve. You have just said that it will be an enabler, so we have to imagine it as something that will happen before any contracts for difference are attributed. It is an enabler to make people and companies ready to bid into the CfDs, for example. Is that how you see the role? People are used to the status quo, and the CfDs have been very successful. Some companies are wondering how it is all going to fit together.

Juergen Maier: Certainly the enabling part of what we do will be pre-CfDs, as you say. That is also where our partnership with the Crown Estate comes in. This is where we will be doing a lot of the early consenting and engaging on the willingness to co-invest and give confidence, but we will also be there past the CfDs. As and when the schemes get developed, there may be opportunities to come in and be a co-investor. We would also be supporting that.

[Wera Hobhouse]

So—

[The Chair]

Order. Is this within the scope of the Bill? Our last question will be at 9.47 am, and four more Members have indicated that they wish to come in.

[Wera Hobhouse]

Q Does the Bill give us enough clarity? How will other financial institutions, such as the UK Infrastructure Bank or the British Business Bank, support what GB Energy is trying to do? The Bill is very short, so I wonder whether there is enough scope within it to explain that to investors.

Juergen Maier: There will be two things. The Bill clearly sets out the structure of how we will set up Great British Energy and the key areas of focus. Obviously there will then be a business plan and a framework agreement between us and the Secretary of State, in which we will have to clarify exactly those questions and where Great British Energy and the UKIB take their role. Those are things that will need to be clarified, but I do not think that putting them in the Bill would particularly help us to do that.

[Wera Hobhouse]

Q I have one last question about the timeframes, which are very vague. The Bill states:

“The Secretary of State must prepare a statement of strategic priorities for Great British Energy.”

Do you have any idea of when we can expect that statement to be laid before Parliament?

Juergen Maier: I am not sure of the exact timings. Maybe when you get evidence from the Minister he will be able to put a time on that.

[Perran Moon (Camborne and Redruth) (Lab)]

Q Mr Maier, you have talked about how local communities will benefit from community energy; you mentioned floating offshore wind off the east coast of the United Kingdom. Down in Cornwall, we are very close to the Celtic sea opportunity, which is between us and Wales. Could you elaborate on the benefits, particularly the social benefits, that may come from the Celtic sea development in an area like Cornwall, which is one of the most deprived in the UK?

Juergen Maier: Indeed. The earlier question was pointed at the north-east and Aberdeen, hence my response, but you are right. As a matter of fact, the two key areas where floating offshore wind will be developed are in the north-east and in the Celtic sea. From a logistics point of view, you could not put them further apart, so it is not exactly ideal—

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[Wera Hobhouse]

Q Good morning. I want to come back to clause 5 of the Bill, which is about the statement of strategic priorities. Most of what I have heard this morning is that we are a bit worried about there not being enough detail on certain things. Should there be more detail about the strategic priorities in the Bill, such as job creation, or should there be a precise timeline for when we can actually expect that? The whole purpose of the Bill is to speed up all that energy transition, and currently we do not know when we will see a statement. Is it important that we actually get some timelines in the Bill?

Mike Clancy: The simple answer is yes. The longer there is a concept phase, albeit a positive concept phase, the more that we are talking about a multiplier effect from GBE in many respects. If GBE is delivered, starts to operate and gives confidence to the direction of energy policy, other investors will see this as a serious proposition and therefore we will be engaging in this huge process of energy transition.

As I said just a moment ago, it also means that talented people can see a future. We want to be part of that. So, within the process of parliamentary drafting, the more that we have a clear set of objectives—actually differentiating it as a public entity and setting the tone for what you want from energy assets in the future—the better, because that will give that confidence. That also has a knock-on effect for the confidence of private investors in other parts of the energy environment.

[Uma Kumaran]

Q Thank you both. I really welcome hearing the views of trade unions in this session, especially about keeping workers at the heart of this. Do you think that GB Energy can help to drive the demand for skills and apprenticeships and prepare our workforce for a just transition?

Mika Minio-Paluello: There is a lot of demand at the moment, and a part of the challenge is a significant lack of supply. Part of the reason for that lack of supply is that there is a lack of investment. We as a country have not invested into our workforce sufficiently over time, which is why you get into a situation where different sectors effectively end up poaching people who are most in demand.

GB Energy provides a mechanism as part of solving that. It will not solve it as a whole—the Government have other plans as well to try put that investment in— but it can have a significant role in going, “Yes, here, we are going to provide that long-term investment directly.” Also, clearly, GB Energy will be partnering with the private sector. In that co-operation, it can then say, through its procurement powers, “Okay, in our joint project on this big offshore wind farm, we are going to require the supply chain across the board to be investing into apprenticeships, whether that is one, two or three tiers down,” so that we get that overall growth. It therefore can play a significant role there.

Mike Clancy: I have already touched on this. It might sound strange, but we probably have a bit of a mission at present because of the constraints applied by the previous Administration to remove our members in technical occupations in the energy field from the public sphere, because the labour markets that they operate in reward better in the private sector. The private sector is in a war for talent in this area because, in this country, over the many decades, we have not valued STEM skills and engineering. I speak as a humanities graduate who is always in awe of people who actually go to institutions and learn things that matter and are then applied for the health of the nation.

We have to start with valuing STEM—valuing it on a diverse basis, ensuring that the workforce reflects our diversity objectives more generally—and having a clear understanding that, even within Government, there can be an element of robbing one to pay for the other, such as with defence and aviation. Lots of areas need these STEM skills, which are then easily transferable into digital skills, and there are better salaries for some of those elsewhere.

If you want to deliver that promise about high-quality jobs, you really have to think and have a labour-market strategy for GB Energy that works in this competitive context at all levels—from apprenticeship, through to technical, through to engineering and even through to doctoral level. Again, in terms of the direction and objectives of the Bill, it is about being an exemplar for the entire energy sector in relation to the skills matrix, with how people are employed and the diversity objectives that any public company should have. That is what the Bill should try to address in sufficient detail.

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[Torcuil Crichton]

Yes, what can the Bill and GB Energy itself do?

Ravi Gurumurthy: I have already articulated what it can do on the development side to get rid of some of the risks to do with planning, consenting, grid connection and so on. On the more novel technologies—small modular reactors, floating wind, tidal range and so on—I think we have also talked about how if the state is co-investing in some way, it signals a degree of commitment and insulates companies slightly from the risks. In both the investor and developer roles, GB Energy can play a role in accelerating things. The biggest way in which the state can de-risk investment and increase private sector contribution is through the National Energy System Operator, providing a clear, strategic plan and forward visibility of what is happening in terms of technology and location. That is how I think we will get the investment—not just in the assets, but in the supply chain as well.

Shaun Spiers: On clean, flexible power, what Green Alliance has proposed is a sort of vaccine taskforce-style operation to crowd in all potential technologies for this. It is not clear who would fund it, if GB Energy did not. That is a really important part of 2030 power decarbonisation. There is also the local power plan. The previous Government had a plan—I think it was in 2014—to power 1 million homes by community energy, which was abandoned four years later with about 67,000 homes powered. There is a clear remit here for making community energy economically viable and getting local investment in community energy.

[Wera Hobhouse]

Q I want to come back to what Shaun said a little earlier about the slight risk of the great power that the Secretary of State has. Do you think that there should be some protection in the Bill for communities, so that they can have a say? We also know that quite a lot of the delivery of our new transition infrastructure might be delayed because communities are not entirely certain, for instance. Is there a risk, and should there be something in the Bill that protects communities, so that they can be confident they are part of the transition and are being listened to?

Shaun Spiers: I think a nature recovery or nature protection duty in the Bill would be helpful in reassuring communities. The investment in community energy, where people really have a stake in the energy, will take some of the sting out of the opposition to renewables, but I would not overload the Bill with things that are better dealt with in the planning system. This is a Bill to enable a lot of investment in achieving a decarbonised power system and long-term energy security. To try to overload it with things that are best dealt with in other parts of government, or other legislation, would be a mistake.

[Wera Hobhouse]

So the Bill is sufficient in protecting communities?

Shaun Spiers: I would like to see a nature recovery duty in the Bill.

[Catherine Fookes]

Q Welcome to the participants. My question follows on beautifully from Shaun’s comments around community. How do we think that GB Energy can accelerate and drive investment in the development of community enterprise and community energy?

Shaun Spiers: One thing that is necessary to say is that this is a major part of the transition and a priority of the Government. That was the case for periods during the coalition, when there was a really vibrant community energy movement and a sense in which people were coming around to supporting renewable energy—which otherwise they would have opposed—because they could see they had a financial stake in it but had also been engaged in developing it. What snuffed that out had more to do with planning issues than with investment, but there are ways in which GB Energy can pump-prime some of the investment.

I am trying to think back to the community energy manifesto we put together in 2018. I cannot think of any specific things, but I can write to the Committee, if that is helpful. There are specific financial incentives that would help get this off the ground. To be honest, though, communities across the country were really keen on community energy. It was a vibrant movement and could be again, with the right political framework as much as investment.

--- Later in debate ---

[Josh MacAlister]

Q Dan McGrail, this is a question for you. What are the views of your private sector members about the role that GB Energy can play in de-risking investments and crowding in private sector investment? What are they saying at the moment?

Dan McGrail: Occupying space where there is a highly liquid market for private capital is unlikely to bring much additionality. Offshore wind is one of those places —fixed-bottom offshore wind, to be precise. That is a mature market; there is capital that will flow to projects if the wider investment conditions of those projects are right, and that is more Government policy-related. However, there are other markets. For example, onshore wind in England has basically been under-invested in for the past decade. There will still be nervousness within the private sector: “Do I want to be the first developer to test local planning? What does the risk profile of that look like?”

I see a clear role for GB Energy to partner with the private sector to help to accelerate the return of investment in that market, or for example within the growth of the floating offshore wind market, where there are clear opportunities that go beyond just the energy sector and into transition, such as floating offshore wind in Scotland or in the Celtic sea, where we know that there is a much bigger economic growth story. Those are areas where I think we could see public and private capital working very comfortably together.

[Wera Hobhouse]

Q We had a line of questioning around research and development. Do you think it is important that the Bill is future-proofed in that way—that GB Energy really focuses on those markets and those projects where the private investors would not come in behind? Is there any way in which the Bill could strengthen that? Research and innovation is probably one of the main focuses of what GB Energy can deliver successfully.

Adam Berman: A fundamental conundrum with GB Energy will be the extent to which, through legislation, you want to constrain its investment activities. Clearly, from an industry perspective, we are very keen that there be an emphasis on additionality, on complementing and not duplicating private sector capital that is already there.

Dan mentioned wind. The recent CfD allocation round 6 auction crowded in about £20 billion of private sector investment—that is one year and one auction. That is not to say that £8.3 billion capitalised over a Parliament is not a significant sum of money; it is to say that if we want the most bang for buck, it is absolutely about thinking about those areas where it can be complementary to the private sector. On the one hand I am saying that, yes, industry would be very happy for GB Energy to have that as a focus, but it is also fair to say that it would be a restriction in GB Energy’s activities if it were only to engage in a space that enabled additionality, because it would restrict some of the investment portfolio that it could end up with.

Dan McGrail: The private sector and the industry in general have been quite clear that we see a real benefit in the participation of GB Energy in emergent technology, such as tidal energy. However, even within the five founding statements, there is nothing specific about fostering UK home-grown innovation. I would err on the side of caution within legislation, or at least I would not put it as a boundary condition. It should not be the only thing, but if it were somewhere in the plan—either in the founding statements, if they get modified, or in the plans brought forward by the Secretary of State—that would be healthy.

[Catherine Fookes]

Q It is good to see you both. You were not here for the earlier sessions, but there were a lot of questions about whether there is enough detail in the Bill. Before I was an MP, I used to be the CEO of a charity; if the objects of that charity had gone into an incredible amount of detail telling me exactly what to do, it would have been very difficult 10 years down the line, when I joined the charity, to pivot and do what we did. I think you are absolutely right: we are hearing from every single witness that the Bill needs to be general enough to allow the business plan to be developed by the experts running the company. You are chiming with everyone else, which is interesting and good.

My question is about tidal power. I represent a Welsh constituency, Monmouthshire. We have the River Severn in the south of the constituency, which is a tidal river, and we have the Celtic sea. What opportunities will the Bill give to generate more tidal power?

Dan McGrail: The Bill allows space for GB Energy to take quite an activist role in the sector. I am aware of tidal power companies that are already very keen to engage with GB Energy on specific proposals. One thing about tidal power is that we have seen the success of many projects through the CfD auctions. We need to see them come to investment decisions. The more we can see a state actor enabling companies to take decisions, the more it will help to scale up the industry and then the technologies. From the technologies, we can hopefully deliver the kind of supply chain growth and jobs in local communities to which we all aspire.

Great British Energy Bill (Second sitting)

Wera Hobhouse Excerpts

Committee stage
Tuesday 8th October 2024 Public Bill Committees

[Torcuil Crichton (Na h-Eileanan an Iar) (Lab)]

Q Welcome, gentlemen. In relation to clause 3(2)(a) and

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

you have welcomed state intervention and the role of GB Energy in that. How would you feel about communities taking a direct stake in your onshore and offshore developments—say, 20%, as they do in Denmark?

Tristan Zipfel: On our side—I am sure SSE does the same—we are definitely looking at that. We are trying to develop some schemes that go exactly along those lines. We have not done it so far. The link and the reward to communities have been through the community benefits fund linked to our projects. I live in Teesside: we have an offshore wind farm there, and I can tell you that the community benefit fund, over the last 10 years of operation, has helped dozens of local projects and initiatives. You are absolutely right to think the next frontier is to have more local ownership of wind farms. That could be through GB Energy, but it could also be through direct ownership schemes. We are looking at those options at the moment.

Alistair McGirr: As I mentioned at the start, we partner with a number of different organisations; I mentioned Equinor, which is a state-owned entity. We are open to working with any kind of party on a commercial basis, be it a community or another developer. In that sense, the communities taking a stake in some of the projects is something that could be done. The question is: what are the terms of that arrangement? There is the critical point that any community ownership should be focused on co-investment. It should not just be the case that 20% of a project is passed on to a community, because that will be value that is basically taken out of the project, which then inflates the cost of the project. So the co-investment piece is very important. Whether it involves another developer, another state-owned entity, GB Energy or a community, I think that is a useful way of bringing capital into the UK’s low-carbon infrastructure.

[Wera Hobhouse (Bath) (LD)]

Q Thank you for answering our questions. In the morning sitting we struggled with the fact that although we all hope the Bill will do something, it has relatively little detail. We have already discussed the merits of not having too much detail, because then GB Energy would be hampered, and of having more detail. We have to try to find a balance in what we agree to in legislation. When you look at clause 4, are you content with the scope of the financial assistance provisions?

Alistair McGirr: Yes, frankly. I think there will be other protections in place—what was in old money called state aid protections but is now subsidy control. There will be wider provisions that ensure that GB Energy does not have adverse impacts on investment into the competitor space, be they state aid provisions or subsidy control provisions. That will ensure that what GB Energy is effectively legislated to be able to do does not adversely impact a competitive playing field. It is important to make sure that that is maintained. Ultimately, if there is a tilting of the playing field towards GB Energy, that will be a bad deal for either the taxpayer or the consumer.

Tristan Zipfel: I concur with what was said. It is really important that the establishment of GB Energy does not disrupt the dozens of billions of pounds that are going to be directed by the private sector into the renewables sector, or the clean energy sector in general, over the next decades. For that it is important to maintain trust in the fact that it is indeed going to be a level playing field and that GB Energy is not going to benefit from forms of assistance that would disrupt competition. That being said, I think GB Energy will have its own criteria, strategy and approach, which is absolutely fine. But it needs to be in the context of a level playing field from a competitive standpoint. That is really important.

[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.

--- Later in debate ---

[Josh MacAlister (Whitehaven and Workington) (Lab)]

Q It is good to hear you say that the Bill has the full range of mechanisms within it to mobilise capital. There has been a recurring theme today that the Bill should provide flexibility for future eventualities as the energy system changes dynamically. Do you have any reflections on the past 10 years, and looking ahead to the next 10 years, as to how the mechanisms that get chosen by the executive at GB Energy might have changed had it been in existence 10 years ago? Looking ahead as well, how might the mechanisms that it chooses change over time?

Josh Buckland: It is a fair and good question. I think your substantive point is absolutely right; the mechanisms set out under clause 4 give Great British Energy the opportunity to take different approaches as technology shifts and changes. We have definitely seen, over the past decade, a shift towards different mechanisms deployed by Government. At the early stage, they were largely bilateral, non-competitive and largely done on a kind of long-term contract basis. It is very instructive to look at what the UK Infrastructure Bank is now doing; it is now looking at different mechanisms—earlier stage investment, development capital at risk, and equity investments. Those are the sorts of things that Governments have not traditionally done at the scale that is necessarily required for the energy transition but that obviously Great British Energy could play a role in extending.

There is an interesting question around where you draw the line between Great British Energy and the role of other existing institutions. The Government have already talked about the fact that they are going to evolve the UK Infrastructure Bank to be the national wealth fund, and obviously that will have some crossover with the operations and focus areas of Great British Energy. For me—this may be an issue that is separate from the Bill—how the Government set out how the governance will work between the Department, the Government, Great British Energy, the national wealth fund and other institutions will be critical to making that a success over time, as the executive of Great British Energy looks at new issues and technologies as they come through.

I would stress—I imagine that this point may be made by other witnesses—that the fact that clause 3 is relatively broad, in terms of the sectors and areas that the entity can invest in, is really beneficial, because that also allows some level of independence for the executive to take choices as the energy sector evolves. Clearly, we know the many technologies that we have now, but there will be a range of different issues that come through. I therefore think that that flexibility under clause 3 is quite important.

[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.

--- Later in debate ---

[Perran Moon]

Q On clause 3, you mentioned the supply chain. I totally agree with you about the value of the UK supply chain. You referred to the North sea a lot in relation to that, which I completely understand given your membership, but what about the other areas of the UK? I am particularly thinking of Wales and Cornwall where there is a huge renewable energy opportunity but where, perhaps, the supply chains have not yet been as well established as they are in the North sea. Could you comment on how we can fix that problem through GB Energy?

David Whitehouse: I think it will and should be one of the priorities of GB Energy that our drive for clean energy must be done in a way where we create those supply chains. How do we do that? We already have—we can provide it to the Committee—a good assessment of the quality of the UK supply chain and what its capabilities are. We have a good understanding of what those future renewable opportunities are, and you are absolutely right that there are supply chain opportunities across the country, in essentially every constituency. We have that knowledge.

Now we need GB Energy to recognise what those opportunities are. There are projects to be invested in that GB Energy should be part of, and it should be directing and working with industry and the supply chain to make sure that we take the opportunities to grow our supply chain. We have a lot of significant companies that we should grow. It is a fantastic export but also delivers in our own country. Myrtle will have touched on it: we have a whole host of acorns around this country that could be grown into massive oaks. It will probably use less flowery language, but that should be one of the principles of GB Energy. We have supply chain acorns that we can identify, and we must turn them into the oaks that this country needs.

[Wera Hobhouse]

Q We have been round the houses several times today. We need to see whether we can add anything to the Bill, whether something is missing from it or whether a lot of this will become clearer once the Secretary of State prepares a statement of strategic priorities or we understand the governance structures—all that. You are identifying all the stuff to do with future development of technologies that we do not even know about.

There was a question this morning about whether the Bill should specify that GB Energy should look at the gap in financial markets when it comes to support for new technology companies that otherwise would not make it through the valleys of death. As I understand it, there are not enough financial products out there, from private equity, ordinary banks or other investment opportunities. Can we put anything in the Bill to make addressing that particular gap more of a priority?

David Whitehouse: I am sorry; I wish I could give you a better answer. I have spoken with our members. In some way, shape or form, we think the Bill as it stands is broad and provides the opportunity for the Secretary of State and others to bring forward the statement of principles. That is where we would see some of that.

The Government will also bring forward an industrial strategy, and linked to that will be our energy policy. I think there is such a good opportunity within those—we will have representation from industry, which understands some of the issues, and there will be representatives from our investors across the sector. From our members’ feedback, I think that is where they would see that input: in those broader ways.

[Wera Hobhouse]

Not in this Bill?

David Whitehouse: Not in this Bill—sorry.

[Catherine Fookes]

Q Mr Whitehouse, you mentioned inclusivity; I think you were referring to including the different devolved Governments in the UK. But when it comes to skills and inclusivity, I am interested in the important work of getting more women and a greater diversity of people into this sector. I was really pleased to see Ms Dawes and Ms Powis give evidence earlier. I purposely did not ask them—the two women in the room—how to get more women into the sector, but how can we get greater inclusivity and diversity into the sector through the strategic plan for Great British Energy? This relates to clause 5(8)(a), so it is in scope.

David Whitehouse: Let me talk about inclusivity in general terms. I am studying for a master’s in renewables; I am the energy transition, albeit slightly older. When we talk about inclusivity, those who come from an oil and gas heritage are sometimes excluded from the conversation. You need all those voices. When I talk about inclusivity, it is about “bring all the voices”.

How do we improve what we are doing? I have a couple of brief comments. Speaking personally, I thought the legislation on the gender pay gap was excellent. What does it do? It makes conversations and debates happen. Last week in the sector, we spoke about Vision 2030—how we are going to deliver on a sector that is truly inclusive, that looks like the future, not the past, and that is attracting the next generation, with commitments about targets that we wish to achieve.

There are seven pillars on the path to getting there. How do we do that? You need commitment from leaders in the sector; I think we can give you that. You need some targets; I think we can give you them. We also need a plan of action that holds us to account. I come back to the path to net zero: we will not do this if we are not inclusive and not attracting across the entire spectrum, the entire country.

--- Later in debate ---

[The Chair]

Thank you. That is a matter of record, and I gently advise any other Members who have a similar interest to declare it.

[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?

--- Later in debate ---

[Olivia Blake]

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

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

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

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

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

[Wera Hobhouse]

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

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

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

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

[The Chair]

I want to get everyone in, but we are playing beat the clock a bit.

Great British Energy Bill (Third sitting)

Wera Hobhouse Excerpts

Committee stage
Thursday 10th October 2024 Public Bill Committees

[Pippa Heylings]

I thank the hon. Member for making that point about the cost for communities of connecting to the grid, which makes it completely unviable for them to do so. It is not about capacity; the communities know what they want to do and are ready to do it. Unfortunately, although there is a right to sell energy locally, the cost of connection makes it completely unviable.

[Wera Hobhouse (Bath) (LD)]

An additional problem is that small community energy projects cannot provide directly—cannot sell directly—to the consumer. That is one of the major problems. Therefore, the Government should really put their mind to it and accept our amendment, so that we can assure our communities that the Government are really serious about this issue. Does my hon. Friend agree?

[Pippa Heylings]

I very much agree. Indeed, I find it very hard not to agree with my hon. Friend, who tabled the amendment.

We are obviously waiting to see the local power plan. We hope that it contains detail not only about the benefits, as with the Scottish and Welsh examples, but about the ownership model empowering local communities to do this work.

Given the cross-party support for the amendment, I will not withdraw it.

Question put, That the amendment be made.

--- Later in debate ---

[Perran Moon (Camborne and Redruth) (Lab)]

Although I entirely agree with the importance of the warm homes plan, I am getting really concerned that we are losing focus. We are looking to create a Bill that allows the scope and flexibility to ensure—I am glad the Minister mentioned this earlier—that the UK taxpayer gets the best bang for their buck. As the expert witnesses consistently testified, one of the key benefits of the Bill is that it is not overly or unnecessarily prescriptive and allows the scope to develop the strategic priorities, referred to in clause 5, that focus on ensuring that we get this right. I look forward to speaking to the Minister in due course about those priorities. GB Energy will work alongside and in partnership with the private sector, but we must avoid trying to be too prescriptive in a specific Bill focused on this area.

[Wera Hobhouse]

The hon. Gentleman is a new Member of Parliament; I have been here a little longer. Those of us who have been here longer always want to ensure that something is in statute—in law—because we parliamentarians are always a little wary of leaving it to a further document that may or may not come. We would like to see some assurances in law to ensure that whatever has been promised will actually happen. Does the hon. Gentleman share my concern?

[Perran Moon]

I am absolutely delighted that the Government are already talking about the warm homes plan. We have a plan, and it is coming through; we have talked about it coming through in spring. Today we are talking about the Great British Energy Bill, and it is really important that we retain the focus on ensuring that the Bill has flexibility, so that we can see the strategic priorities delivering on GB Energy specifically.

--- Later in debate ---

[Michael Shanks]

That is an important point. We will announce more about allocation round 7 in due course, and how our industrial work and British jobs will work together to create those supply chains. It is an important point about the broad nature of what we want to do: to give confidence to industry that a pipeline of projects will be coming long into the future—beyond 2030, actually, although that is our initial key target—so that it is worth investing in and building the factories and supply chains in the UK. Great British Energy will be part of that, but it will certainly not be the entirety of it. We are working with the national wealth fund and the UK Infrastructure Bank to deliver more of those projects in the UK.

The final function, which the shadow Minister will appreciate, is that Great British Energy will help advance the work of Great British Nuclear. We will say more in due course about exactly how those two organisations work together. Those five functions enable Great British Energy to deliver on its clear mission of driving forward clean energy deployment, boosting our energy independence, creating good jobs and ensuring that UK taxpayers, bill payers and communities reap the benefits of clean and secure home-grown energy.

[Wera Hobhouse]

Will the Minister confirm that he said that we might cross-reference the five functions in the Bill? In that way, people will be clear, for example, that community energy is cross-referenced in the Bill as one of the five functions. Did he say that earlier?

[Michael Shanks]

No, I did not say that. What I was saying was that the context of the objects in the Bill is given by the functions that we set out in the founding statement. It is clear that those founding principles of Great British Energy, which the Secretary of State announced in that founding statement along with the start-up chair, Juergen Maier, will be largely what drives the initial statement of priorities for the company.

The objects themselves are around creating restrictions on what Great British Energy can do. We have left them deliberately broad so that the company is able to move in and out of different spaces. I am not sure whether the hon. Lady was here earlier, but we said clearly that there is nothing in the Bill that precludes community energy at all. I have repeated a number of times our absolute commitment to that and to the local power plan.

We will turn to clause 5 in due course, but it is relevant to the point we are discussing. Great British Energy will, of course, be operationally independent—a model adopted by a number of different companies; it is important for it to have its own board of experts in their fields. However, the Secretary of State will be able to set the company’s strategic priorities, which we will debate later. That is to ensure that although Great British Energy is operationally independent, it is setting out the functions in its founding statement while remaining agile to the Government priorities of the day. Importantly, it is a vehicle for delivering the central points of Government policy, including community energy, energy efficiency and many of the other things we have talked about. I commend the clause to the Committee.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4

Financial assistance

Question proposed, That the clause stand part of the Bill.

Great British Energy Bill (Fourth sitting)

Wera Hobhouse Excerpts

Committee stage
Thursday 10th October 2024 Public Bill Committees

[Andrew Bowie]

It is a pleasure to serve under your chairmanship, Sir Roger. The amendment would bring to the Bill a concrete objective for Great British Energy to reduce the wholesale price of electricity. I am pleased to move this amendment, which will introduce a specific strategic priority to reduce wholesale electricity prices and to require that an annual report is produced on how Great British Energy’s activities are affecting wholesale energy prices and therefore consumer electricity bills.

Further to the discussion earlier about the impact of Great British Energy on bills, notable by its absence, sadly, is a purpose for GB Energy to reduce wholesale electricity prices. As we noted earlier, the Bill states that the objects of GB Energy are only to facilitate, encourage and participate in the production of energy, the reduction of greenhouse gas emissions, improvements to energy efficiency, and measures for ensuring the security of supply. It would be remiss of the Government not to include the ambition to reduce the wholesale price of electricity as a strategic priority of the company.

Why is reducing wholesale electricity prices important? Wholesale costs account for about 60% of a customer’s energy bill and are a major consideration in suppliers’ retail pricing decisions. In the two years since Vladimir Putin’s invasion of Ukraine, we have seen the sizeable impact of the international energy crisis on bill payers in the United Kingdom. Tensions rising in the middle east could very much affect our domestic energy costs, so it is more significant than ever that we take into account the impact that Great British Energy could have on wholesale electricity prices to reduce consumer bills as much as possible.

It should be incumbent on Great British Energy, through its investments and its part and full ownership of projects, to drive down wholesale electricity prices to the benefit of UK bill payers and businesses. In winter 2022-23, the Conservative and Unionist Government paid half the country’s energy bills to protect households from the worst of the energy shocks triggered by that war in Ukraine. Energy bills, alongside the pressures of inflation, have been a consistent worry for all our constituents. We also have the highest energy costs for industry in Europe.

The Government have outlined that their plans to tackle future energy security, to reduce bills and to lower wholesale prices for electricity hinge on the creation of GB Energy. Therefore, it would be prudent to write into the Bill the strategic priority to reduce wholesale electricity prices. On Tuesday, we heard from the chair of GB Energy that

“Every megawatt and gigawatt of renewable energy that we put on the grid will help to bring bills and prices down.”––[Official Report, Great British Energy Public Bill Committee, 8 October 2024; c. 6, Q5.]

I agree. Therefore, it has been intimated that that is indeed a strategic priority for GB Energy, and the Bill ought to reflect that.

This group of amendments also introduces the requirement for the Secretary of State to give a specific direction to Great British Energy that it must report on its progress.

[Wera Hobhouse (Bath) (LD)]

I have an honest question. Since energy is sold in a daily, 10-minute or whatever market, and that market operates, how can the Government ensure that the market behaves in the way they want it to behave? Is that question useful? I want to understand what the hon. Gentleman’s amendment will actually do to guarantee the price, since British energy operates in a market.

[Andrew Bowie]

That is an important question. I think we all agree that the reason the United Kingdom was so exposed to the energy price shocks that the entire western world has experienced over the past two years was our overreliance on the highly volatile fossil fuel market. Building new technologies to drive us towards a cleaner future and lower bills is therefore important. Our exposure to the market to which the hon. Lady refers had an adverse impact here in the United Kingdom. Just as stating in the Bill that a reduction in bills is important, the reduction of wholesale electricity prices should also be a stated object in the Bill. If GB Energy is to do anything, alongside all its other strategic objects, surely it must be working towards a reduction in electricity prices. We would therefore like to see that on the face of the Bill.

[Wera Hobhouse]

The hon. Gentleman is being generous in giving way. Would that not be a clear state intervention in the market?

[Andrew Bowie]

I do not think so, but the creation of the company is a state intervention in the market. That is one reason we on the Conservative Benches disagree with the Bill. We think that we can drive up investment in renewables and new technologies in this country by allowing companies the freedom to invest and by creating the best environment for private investment in this country. That is what we did when we were in government. That is why we have the first to the fifth-largest offshore wind farms in the world, and that is why we cut emissions faster than any other country in the G7, at the same time as growing the economy. That is a record that I am very proud of, and I worry that this state intervention in the market will have a negative effect.

We are debating the creation of GB Energy and this Bill. As part of that, a reduction in electricity prices should be one of the strategic aims.

--- Later in debate ---

[Michael Shanks]

I think my hon. Friend the Member for Peterborough has a lot to answer for, with the metaphors that have now started, but the hon. Lady makes a serious point. I would just gently challenge one point that she makes. The statement of strategic priorities is not about giving every detail on all the objects. The direction of the company is already very clear. The reason that the objects have been left broad is so that the company can explore opportunities in all those areas without having to come back and get direction on every single point.

[Wera Hobhouse]

Will the Minister give way?

[Michael Shanks]

I will answer the previous intervention first. The point of having an independent company—this is why it is used as a mechanism by Governments of all types—is that it can have the flexibility to move. That flexibility is within the very strict parameters set by Government, but with a broad scope to move into opportunities as they arise.

[Wera Hobhouse]

I thank the Minister for giving way. The second part of his reply answered what I am worried about, and what we as a Committee have been worried about all along, which is parliamentary scrutiny. Will the Minister advise at what point that parliamentary scrutiny can be exercised?

[Michael Shanks]

The hon. Lady is well versed in how Parliament works, and there are a number of mechanisms already open to Parliament to scrutinise the work of the Department and the Secretary of State. Indeed, the transparency around clause 5 is that this will be laid before Parliament in the same way that the priorities for the UK Infrastructure Bank and various other independent companies are laid before Parliament.

On the hon. Member for South Cambridgeshire’s second point, which I did not get to and is a very fair point, we are not seeking to design something behind closed doors that has no engagement. I have taken a lot of meetings in the three months that I have been a Minister, and I am very happy to take many more. We want to hear a broad range of views on this and we are happy to discuss it, but there is a balance between having an open approach to how we create, draft and bring ideas together, and ending up with a document—in the end, it will not be a huge document—that just goes round a process for months on end and stops the company from getting on with what we want it to do.

We heard from all the witnesses on Tuesday that speed is important; we do not want to waste any time, and I think that the Liberal Democrats support that approach. We want to get on and do it, and that is important. As I said earlier, I will come on to the point about the devolved Governments and the engagement that we plan with them in due course.

Furthermore, in setting up a company, the company is subject to all the requirements that other companies are, in terms of Companies House and having to produce annual accounts and an annual report. The activities of the board will also, of course, be available so that people can see what decisions the company is making. It is important that this company is at arm’s length from Government but has all the benefits of being publicly owned, in that it is required to manage the stewardship of public funds in a careful and accountable way.

In my view, the amendment is unnecessary, as the processes are already in place to scrutinise the work of Great British Energy and the work of the Department more generally. We will not be accepting the amendment today.

Great British Energy Bill

Wera Hobhouse Excerpts

Report stage
Tuesday 29th October 2024 Commons Chamber

[Pippa Heylings]

In fact, I said at the beginning of my contribution that I welcomed the constructive debate in Committee.

[Wera Hobhouse (Bath) (LD)]

If the Government have bought into the idea of community energy, does my hon. Friend not think it odd that they are so afraid to put it in the Bill?

[Pippa Heylings]

I could not have put it better myself. I thank my hon. Friend for leading the fight for the Liberal Democrats as the former spokesperson on energy security and net zero. That question goes to the crux of the matter.

We have fantastic examples from many communities of how important community energy is. My hon. Friend the Member for Inverness, Skye and West Ross-shire (Mr MacDonald) led the recent Westminster Hall debate, in which there were fantastic examples from rural communities of how they feel about community benefits. There are also the efforts of my hon. Friend the Member for Edinburgh West (Christine Jardine) in supporting the Aikengall community wind farm, which provides a direct benefit of an amazing £120,000 for the community.

Community energy is not just for Scotland. In my own county of Cambridgeshire, there is the Swaffham Prior community heat network, and the village is the first of its kind to switch to reliable zero-carbon heating. It was started by the Swaffham Prior Community Land Trust, and it addresses fuel poverty and the village’s reliance on oil heating. The Liberal Democrats will continue to promote those who have pioneered community energy schemes, proving their worth and championing their critical importance to our energy future.

While the Government have not previously backed our amendments, which is incomprehensible to us, I am grateful to the Minister for the conversations we have had recently and the assurances he has given us that the Government really do want to make provisions in the Bill for community energy in the Lords. I look forward to supporting our colleagues in the other place in this endeavour, but the interventions from Labour Members—saying that this will be in the founding statement and the strategic priorities, but not in the Bill—are causing us to doubt that commitment. I therefore urge the Government to make good on their promises. We know their commitment to community energy, so let that be understood clearly and let us put it in the Bill.

--- Later in debate ---

[Victoria Collins (Harpenden and Berkhamsted) (LD)]

I refer Members to my entry in the Register of Members’ Financial Interests.

Energy is at the heart of our economy. It powers our homes, our schools, our workplaces and even our democracy. Most importantly, it is at the heart of our communities. This Bill must ensure that it brings those communities and community energy projects with it, which is why I am speaking wholeheartedly in support of amendment 5.

Local to Harpenden and Berkhamsted is the Grand Union Community Energy benefit society, which runs several community energy fund schemes, including solar canopies, and is investigating heating from aquifers. As a not-for-profit, it aims to use its proceeds to help householders, especially the most vulnerable, to reduce their energy bills and energy use. It also supports other community organisations that do not have a regular income. In Berkhamsted, it has worked with Sunnyside Rural Trust to review the energy strategy of its Northchurch site. I have spoken to passionate members, such as Sarah, Paul and John, about why they are making it work and the difficulties they face.

If we are to reach net zero, community energy is needed to fill a gap between individuals, businesses and councils. It was John who reminded me that if community energy is supported, there is a significant resource of people ready and waiting to put their voluntary efforts into getting schemes off the ground. By their very nature, they are embedded in their communities, and we must bring our communities with us if we are to make the change that is needed.

However, our community energy projects need support. Community energy projects face insurmountable costs when trying to sell the power they generate to local consumers. Grand Union Community Energy is nervous about taking on the delivery of projects, as there is uncertainty about how electricity prices may change in the future. Community energy needs stability too. As it stands, community energy schemes find it nigh impossible to sell their power directly to local consumers, which leaves pricing and some projects financially unviable without further support.

Previously, feed-in tariffs helped to provide pricing stability, but when that scheme ended in 2019, many planned community projects were scrapped and the number of new projects slowed significantly. Current access to funding has been vague, erratic and uncertain, especially since the rural community energy scheme ended, and I know many people have not bothered to apply for funding because they find it so difficult.

We must unlock the potential of our community energy projects, and that is why I support amendment 5. There are many ownership models. The Liberal Democrats are calling for large energy suppliers, when they work with community energy projects, to work with them to sell the power they generate to local customers at a discounted rate and provide community benefits. Overall, we must ensure that these projects are financially viable and supported with technical, commercial and legal advice, and we must seize this opportunity to bring our communities with us.

[Wera Hobhouse]

I welcome that the Government are taking renewable energy investment seriously and creating a mechanism for it. In common with many Liberal Democrat Members, I will focus on amendment 5, which would specifically require Great British Energy to support community energy projects as part of its strategic priorities.

Labour Front Benchers have supported community energy for a long time, and cross-party support was clearly displayed on Second Reading, as it is by the large number of Members’ signatures on amendment 5. The same was true of my amendment 2, which was sadly defeated in Committee. To their credit, the previous Government introduced the community energy fund, which made a difference, but more needs to be done to support community energy. Despite strong cross-party support for community energy, the Great British Energy Bill makes no mention of it. Liberal Democrat Members believe that it should be on the face of the Bill.

In Committee, the Minister said that including community energy in the Bill was not appropriate. I understand that GB Energy is not precluded from supporting community energy by the Bill, just as I understand the Government’s argument that if the new company is to be able to work flexibly, it should not be hampered by too many provisions in the Bill. However, our concern remains that unless something concrete is included in the Bill, future Ministers, Governments or chief executives of Great British Energy may decide not to support community energy and the full benefits of local energy may not be realised. Amendment 5 would strengthen the Bill in line with the clear parliamentary consensus in support of growth in this highly promising clean energy sector.

The community energy sector has seen minimal growth in recent years. It has suffered from damaging policies, such as the end of the feed-in tariffs that helped fuel growth. Since 2010, there has been no growth in the sector. Regulatory changes are required to ensure that communities receive the benefits they deserve for hosting clean energy infrastructure. All of these arguments are well understood and the benefits of community energy have been well researched. The new Government have said time and again that they support community energy and that it is a shared aim.

I welcome the conversation and the open debate on this issue. I understand that the Government take issue with putting the term “priority” on the face of the Bill. The passage of the Bill has not reached its final stages, and there is room for further debate. I very much hope that the Government recognise how strongly colleagues across the House feel about including specific support for community energy, and that such an inclusion will create cross-party support for the Bill as a whole.

[Llinos Medi (Ynys Môn) (PC)]

First, let me congratulate the hon. Member for Dewsbury and Batley (Iqbal Mohamed) on his passionate maiden speech.

I rise to speak to amendments 11 and 12, tabled in my name, which seek to provide certainty to particular energy sectors that they will be prioritised by GB Energy. I must declare an interest as an officer of the marine energy all-party parliamentary group, of which the UK Marine Energy Council is the secretariat.