Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order 2026

Lord Whitehead Excerpts

Wednesday 11th March 2026 Lords Chamber

Moved by

[Lord Whitehead]

That the draft Order laid before the House on 26 January be approved.

Considered in Grand Committee on 9 March.

Motion agreed.

Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order 2026

Lord Whitehead Excerpts

Monday 9th March 2026 Grand Committee

Moved by

[Lord Whitehead]

That the Grand Committee do consider the Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order 2026.

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

My Lords, this draft order was laid before Parliament on 26 January 2026. This Government remain fully committed to ensuring that households, particularly those on low incomes or at risk of fuel poverty, can live in warmer, more energy-efficient homes that are affordable to heat. At the heart of this endeavour lies the new warm homes plan, a comprehensive and long-term strategy to reduce energy bills, alleviate fuel poverty and enhance energy security. We have committed to investing £15 billion—the biggest-ever public investment to upgrade British homes and cut energy bills. Of this amount, £5 billion is allocated to support low-income households.

The energy company obligation—ECO—has played a key part in helping households to reduce their energy bills. The energy company obligation was first launched in 2013. Since its launch in 2022, ECO4 has delivered slightly over 1 million energy-saving measures to approximately 300,000 households. The scheme places an obligation on the larger energy suppliers to deliver energy-efficiency improvements to vulnerable and fuel-poor households that result in measurable bill savings.

While ECO4 has delivered a significant volume of home energy-efficiency improvements, it has not been without challenges, as set out recently by the National Audit Office, among others. There have been widespread, systemic issues in the delivery of solid- wall insulation, which we have taken urgent steps to tackle. We are bringing forward comprehensive reforms to the retrofit consumer protection system to make it stronger, more transparent and more accountable so that this cannot happen again. We expect all installers to ensure that households receive timely and high-quality remediation of any non-compliance identified.

Given these systemic issues and inflation that is still too high, we have taken the considered decision not to replace ECO4, therefore easing pressure on household energy bills. This, in combination with the Government funding 75% of the domestic cost of the legacy renewables obligation, will remove around £117 of costs on average from household energy bills across Great Britain.

This statutory instrument introduces a small and necessary change to the existing scheme by extending the end date of ECO4 by nine months from 31 March to 31 December 2026. This extension provides obligated suppliers with additional time to meet their existing targets and, most importantly, it allows them time to focus on remediation of non-compliant installations. I emphasise that the instrument does not change targets, impose new obligations, or increase supplier costs or consumer bills.

As I conclude, I thank the Secondary Legislation Scrutiny Committee for its consideration of this instrument and for not drawing it to the special attention of the House. The changes made by this instrument, which is in essence a very simple one, are limited but important. By extending ECO4, we are ensuring a stable period of delivery and an orderly closure to the scheme, and are safeguarding consumers. I beg to move.

[Earl Russell (LD)]

My Lords, I will respond on the Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order. While appearing to be only a minor adjustment today, this SI is important, as it involves the need to protect the most vulnerable in our society from poorly insulated homes and fuel poverty.

The ECO4 scheme has been a fundamental component of our national strategy to address the dual crisis of fuel poverty and the climate emergency. We have always supported its ambition to reduce the costs of heating for low-income households. This amendment seeks to extend the scheme’s duration by nine months to 31 December 2026. The reasons for doing this require a little bit of scrutiny. The Government say that this extension is necessary for the remediation of non-compliant installations and to ensure the orderly closure of the scheme.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank the Minister for his introduction of this statutory instrument. This order extends the energy company obligation end date by nine months to ensure an orderly transition for consumers and suppliers to help meet existing targets. This extension was determined following consultation and following the calls of business. On that basis, we on these Benches support the order.

The ECO was established to help households reduce energy consumption and lower heating costs. Since it was launched in 2013, around 4.4 million measures have been installed in 2.6 million properties, up to the end of September 2025. ECO4 is the latest version of that scheme, beginning in 2022. It has meant that approximately 949,800 measures have been installed in around 281,000 households.

It is of course right that, where there were non-compliant installations, installers fund the repair work, overseen by Ofgem and insured by further on-site audits. We have already committed to working cross-party to ensure that affected households receive the remediation they deserve. We understand that the Government now seek to end this scheme and replace it with their warm homes plan to provide loans and grants to households instead; indeed, they have claimed that this will result in a £150 cut from the average household bill.

However, although the end of the ECO scheme means that households will no longer pay the levy through their energy bills, the new plan will be funded through taxation. There is no clarity, therefore, that this will end up saving taxpayers money in the long term; indeed, the new taxpayer funding initiative, coupled with rising energy costs—particularly now—and already high installation costs, mean that it looks increasingly unlikely that the Government will be replacing the ECO with an improvement. Have the Government made any assessment of how much taxpayers will save overall? To what extent are these projections reliant on projected energy costs, which will now be redundant? Oil prices are already 50% higher than in the OBR’s projection last week.

I appreciate that these questions are about issues that are outside the Minister’s control, but they have ramifications for the Government’s policy. Is it really wise to push forward with tax-and-spend green policies, which will likely do little to reduce costs, at a time of global instability? I understand that these are also developing events and that they do not directly relate to the functioning of the ECO.

Returning to that, it would be helpful to clarify how much money taxpayers will now be expected to pay to cover the cost of this new extension period. As I have stated, I support the extension to ensure an orderly transition, but the public must know what they will pay. I restate our support for this order to help consumers and suppliers but, more broadly, we remain concerned that the Government’s plan will, ultimately, not save taxpayers money. I look forward to hearing the Minister’s response.

[Lord Whitehead (Lab)]

I thank noble Lords for their constructive contributions to this afternoon’s debate; I hope to respond to their points in a similarly crisp and succinct fashion.

First, the noble Baroness, Lady Bloomfield, asked how much taxpayers will pay for the extension of the ECO. The answer is: nothing. The ECO will continue exactly as it has previously, except it will be extended by nine months. There will be no new obligations, only the continuation of obligations that are already in place. Of course, there will be an opportunity to make sure that the remediation that will be necessary for a number of treatments is carried out in good time, and will be sorted out and finished by the time the ECO comes to an end.

Of course, the ending of ECO4 will in itself save bill payers a considerable amount of money. Indeed, as the noble Baroness knows, ECO4 is, in effect, an obligation on energy companies, which they passed on to customers in the form of bills. Alongside the cost of some other legacy obligations, such as the renewable obligation, the removal of that obligation and the end of ECO4 will remove, as I said, around £117 of costs on average from household energy bills across Great Britain.

It is true that the new warm homes plan is underwritten from general taxation, but it is a substantial transfer from direct customer bills to general taxation, with the resulting saving that I have outlined. The warm home scheme is a far more far-reaching programme over a longer period, with a substantial investment of up to £15 billion in it. In the long term, that will be judged by the difference between what has been put in it and what has resulted from the energy savings coming about as a result of the warm homes plan— this will, obviously, be further savings to customers’ bills—as well as by the efficiency with which the warm homes plan is put into place.

The noble Earl, Lord Russell, asked about the arrangements for remediation in properties that the Government consider should be undertaken during the period of the extension of the ECO4 programme for nine months. As I am sure he will know, the NAO report considered that almost all of the external wall insulation measures had major issues requiring remediation; to put that into context, that is about 40,000 treatments, as compared with the 1 million-plus treatments that there were in ECO4 overall, but external wall insulation was a particular problem for the scheme. To a lesser extent, that applies also to internal wall insulation: 29% had major issues requiring remediation, and the NAO considered that a smaller number of treatments had possibly falsified claims attached to them.

Part of the task of this extension is to ensure that those remediations, which are down to the installers to put right, can be done during the period of the ECO extension. The noble Earl raised the possible issue of what the position is if we have got to the end of the period of extension and some of the remediations have not been done. I emphasise that these remediations are being done by obligated installers, first, but also under a strengthened trust mark arrangement for oversight, with increasing audits, site inspections and various other things as regards non-compliance detection and enforcement. So, the people who have to do that remediation will be known about, clearly, and Ofgem has taken the action of writing to all of the people who are possibly in a position where they can have remediation undertaken in order to offer them the opportunity to go on a register for remediation.

This is driven to some extent by installers and to some extent by customer demand for that remediation, and it is backed up by a strong code that makes sure that it gets done. Even if that strays beyond the end of the extension of ECO, it is not the end of the story as far as that remediation is concerned. It will be done. If it is in danger of life and limb it has to be done immediately, but if it is less serious, as it were, it has to be done during the course of that extension.

We think the Government have a good belt-and-braces position as far as those remediations are concerned, and that ECO can come to an end in an orderly fashion. That is quite important in terms of the issues that both the noble Earl and the noble Baroness mentioned about whether there is a cliff edge between what is happening with the end of ECO4 and the beginning of the warm homes plan. Among other things, this extension will mean that there is less of a cliff edge. Indeed, in conjunction with industry, the Government are active in holding round tables to enhance the ability of industry that has invested in ECO4 to transition to activity under the warm homes plan. I hope that it will not be such a cliff edge as the noble Earl mentioned and will run reasonably smoothly—if not necessarily entirely smoothly—into the warm homes plan itself, and therefore a lot of the investment that various companies have put into ECO4 can be realised through the warm homes plan.

Motion agreed.

Energy Markets

Lord Whitehead Excerpts

Monday 9th March 2026 Lords Chamber

[Earl Russell (LD)]

My Lords, I thank the Minister for the Statement on the very serious and fast-moving situation in the Middle East. The recent escalation in the Gulf following President Trump’s deeply destabilising actions risks widening the conflict. Fourteen countries are now directly affected, global shipping supply routes are shut, and once again oil and gas prices have skyrocketed because of geopolitical chaos. With tragic inevitability, the same man who denies the existence of climate change has unleashed another conflict for the control of fossil fuels. If this conflict is not urgently contained, it will shut down oil fields and disrupt global markets, and drive up oil and gas prices, food prices, inflation and government debt alike. We need an urgent halt to the targeting of energy and desalination facilities on all sides.

We have been here before. Despite the progress we are making on our energy transition, the UK remains frighteningly exposed to the harsh economic impacts of global events far beyond our shores. The Energy & Climate Intelligence Unit and E3G estimate that our reliance on fossil fuels has cost this country an additional £183 billion since 2022, because of the increased costs of energy as a result of the war in Ukraine. We cannot afford another lost decade of dependence on global fossil fuels that we neither control nor influence.

While much of the Minister’s Statement is welcome—the co-ordination with allies, reassurance on supply, and commitment to clean power—the real question is whether this Government will now act at the speed and scale the crisis demands. Unlike the last energy crisis, this one includes oil as well as gas. We on these Benches see the Conservatives’ claim that the solution lies in new North Sea licences as the equivalent of trying to fill a swimming pool via a drinking straw. North Sea gas production is down by two-thirds since 2000. It is set to have declined by 97% by 2050, and even with new licences it will decline by 95%.

On oil-related issues, I want to ask about rural constituents who rely on heating oil to heat their homes. Some 1.5 million rural homes and 62% of homes in Northern Ireland depend on it. Prices have rocketed: in some cases, they have nearly doubled. These consumers are the forgotten victims of energy policy, not covered by Ofcom regulation and therefore without price protection and redress. Will the Government now work with the CMA and Ofgem to establish proper oversight, investigate price abuses and ensure that these households are protected?

Disruption to supplies arising from the Gulf crisis has also pushed up the cost of aviation kerosene by more than 80%. What consideration is being given to resilience, as 70% of our kerosene is imported, and how are the Government mitigating escalating costs for consumers and operators alike? On the cost of electricity and gas, we have some stability with the energy price cap, but that is short lived. While our gas supply is more secure than that of oil, gas prices have already reached a 12-month high. There is a very real risk of a renewed cost-of-living squeeze later this year, placing further pressure on families and businesses who are struggling to pay their bills.

The Government must make plans for scenarios where prices stay high and new interventions will be required. Families and businesses deserve reassurance that the Government’s support will not vanish if the crisis endures. I ask the Minister to give that reassurance today. These events bring into sharp relief the deeper issue: the structure of our energy market. Despite our work on renewables, UK consumers remain uninsulated from the global fossil-fuel markets, as our energy market has not been reformed to reflect the increase in renewables uptake. Three years on, we have been told repeatedly that energy market reform is coming. The Government have ruled out the introduction of zonal pricing, but this crisis is a clarion call that urgent action is needed. Why are we still funding crucial decarbonisation and social/environmental levies through household bills rather than general taxation? Moving more of those policy costs into general taxation would help to make the system fairer and more equitable. Will the Government commit to reviewing this balance?

Our gas storage capacity—just 12 days—remains among the lowest in Europe, so will the Minister consider the case for a greater strategic reserve? The price of gas still sets the UK electricity price 97% of the time. Do the Government agree with Greenpeace’s call to bring gas plants into a regulated asset base, creating a strategic reserve administered by NESO to break the link and save customers an estimated £5.2 billion by 2028?

We must double down on the rollout of renewable energy, grid upgrades, long-term storage, diversity of supply and greater energy interconnection with Europe, so that we can gain energy security and price control. Investors need predictability on planning, on grid connection and on the carbon pricing framework. Britain must move to a continuous pipeline of renewable projects: built faster, connected sooner and supported by modernised transmission networks. Every insulated home, every electrified heat pump and every community-scale battery gives us energy independence.

True energy security for Britain will not be won in the North Sea. It will be won on our rooftops, in our grids, in our offshore wind fields and in our insulated homes. If this latest conflict teaches us anything, it is that energy dependence is a choice, and energy independence through clean energy must now become our utmost mission.

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

I thank the noble Lords for their contributions this evening and I will attempt to address the questions that they have put to me. I must say, however, to be absolutely frank, that there appears to have been one sensible contribution and one not-very-sensible contribution. I will attempt to answer them just the same, but what I thought we were talking about—and I think we are talking about—is the really difficult situation everyone finds themselves in now as a result of the Iran war: what that is likely to do to energy prices, what the likely effect will be on supplies for consumers and industry, and what we can reasonably do to make sure that we have indeed the security that noble Lords have talked about tonight, for our own supplies for the future but also in such a way that we have a secure future ahead of us as well.

In that context, I would have thought that the particular lesson we should draw from the events of the last few days is that we cannot get away from, for various reasons, enormous volatility in the fossil fuels and gas markets abroad. That itself, for various reasons, directly leads to volatility and difficulty with energy prices and energy supplies and various other things. The lesson surely has to be that we should ensure that we have secure, homegrown energy that is not subject to international volatility in the way that we are finding right now, but is also secure for our suppliers and for our consumers, and builds an industry on the back of that which actually creates jobs and businesses and energy arrangements that are secure for the long-term future.

That, of course, is to continue with the moves towards renewables and low-carbon energy, getting the role of gas as far as possible out of our markets and securing a future where our homegrown energy is not only not subject to dictators and petro states but is entirely under our own control: not only under our own control but under our own control as far as the sources of that are concerned.

We have a number of worries and concerns right now about what no one in this Chamber knows too much about—exactly how long this war will continue. Obviously, one earnestly hopes that the war comes to an end fairly soon or that, as the UK Government are pushing, we have a negotiated diplomatic settlement on particular issues for the future. However, we know that prices are going up rapidly at the moment and that there is a bit of a differential between different areas of the oil and gas economy. For example, heating oil, which is not subject to the energy price cap, is going up rapidly. We have to deal with a number of such issues on different fronts pretty immediately, regardless of the long-term future that should be in place for our energy economy.

As far as customer security is concerned, we have the energy price cap in place. That means that, for three months at least, customers of electricity and gas will have cheaper prices than they had over the most recent period. That is protected to that extent. Heating oil is not as protected; we have seen considerable spikes in that, which are also associated with jet fuel, because they are essentially the same thing—kerosene—and we have seen considerable spikes in that. The UK has considerable reserves of jet fuel but does not have the same reserves of heating oil. We have taken action just today in writing to the CMA and leaders in the heating oil industry to make sure that they keep a cap on prices, that they are not price gouging and that they are keeping their prices as modest as they can.

However, all this depends on what happens over the next period with the progress of the war and whether the Strait of Hormuz will be opened or we are at least in a position such that oil and gas can get through it, so that we can start talking about a reasonably reliable supply for world energy coming through in a way that it is not at the moment. Mark my words: this crisis is not about supply. The UK has ample supplies of gas of all sorts—50% of which is from UK fields, assuming it stays in the country. We will perhaps touch on that. We also have supplies from Norway and of liquefied petroleum gas; three terminals have been built and a number of LPG vessels are on their way to the UK, as we speak.

It is not so much about supply but about price and what happens to it if the war continues for a long time. For example, we take only about 1% of our gas in the form of LPG from Qatar—very small supplies—as most of it comes from other sources. But other forces in the world are trying, literally, to turn those LPG vessels around, so that they go to their parts of their world to supply them with LPG at an increasingly high price.

We are clear that we need to take firm action to make sure that we have the right prices for the future, the ability to protect our own energy interests and the ability to make sure that supplies, which are reliable at the moment, continue to be reliable in the longer term.

One thing this is not about is the idea that we should suddenly start drilling for gas or oil and translating a lot more gas and oil back to the UK, which the noble Lord opposite appears to think should be the next move. First, that would take a very long time to happen. Secondly, as I have previously mentioned, it is not the case that this gas would just come to the UK; it goes all around the world at a world price. It would make no difference to the world price, as we have only 0.7% of global oil and gas production in the UK, in any event. It would make no difference to the outcome. The outcome on which we need to work is to continue with our low-carbon policies to get us off gas as quickly as we can and to secure renewable, low-carbon and firm energy through renewables policy in the longer term, so that we are not dependent on gas and this kind of situation never happens ever again. That is clearly the task ahead of us, so I therefore commend to the House this Statement and what it says about the future, despite the situation that we find ourselves in at the moment.

--- Later in debate ---

[Lord Foulkes of Cumnock (Lab Co-op) [V]]

My Lords, I am really sorry that I cannot be there in person this evening, but I am also really grateful that I am being allowed to participate virtually. Does my noble friend the Minister agree with me that, in the current crisis, it is even more important that we have nuclear-powered generation to ensure that the energy supply is guaranteed? Will he consider what can be done to extend the lives of the current generators and to bring new nuclear generation forward earlier than is currently intended? Perhaps most difficult of all is to work towards finding a Government in Scotland who also agree to have nuclear generation.

[Lord Whitehead (Lab)]

I very much welcome my noble friend Lord Foulkes back to his place, as it were. Although he was speaking from a place that is slightly remote, I nevertheless have a real feeling that he is, in essence, in the Chamber with us this evening.

I absolutely endorse what my noble friend had to say on this subject. After all, nuclear is low-carbon, essentially renewable, essentially homegrown and stays with us for a very long time—and, in case anyone had not noticed, this is firm power. Having nuclear in our low-carbon arsenal is very much part of the process of getting ourselves off high-carbon fossil fuels and into a situation where we can control our own energy destiny in this country.

My noble friend will know that work is under way to procure a small modular reactor with Rolls-Royce, which is going very well, and there is the possibility of life extensions to one or more of the existing nuclear power stations, which, again, would be a very good contribution to the energy security of this country for the future.

[Lord Fuller (Con)]

My Lords, this is the week in which the well-meaning but naive approach to net zero finally hit the buffers. It is not just oil—I should know, as a 40-year veteran of the fertiliser industry—it is the gas that produces ammonia and the CO₂ that drives our economy forward. There is no domestic production of ammonia or fertilisers any more; we are reliant on the kindness of strangers. A third of the world production of fertilisers is now stranded beyond the Strait of Hormuz at the moment the crops need it the most. The reality is that farmers will pay a quarter more for their fertiliser immediately, driving food price inflation on beer, bread, biscuits and butter, just like in 2022.

But there is worse. I know that the UK’s cement and steel industries need support for the CBAM. But, from 1 January, farmers will see the prospect of fertiliser going up by a further 25%, turning a calamity into a food security catastrophe. Will the Minister urgently review the fundamental basis for the CBAM, to stop this food disaster being visited on our shores?

[Lord Whitehead (Lab)]

The noble Lord talked about the CBAM and ammonia production in one and a half breaths. On the question of the CBAM, it is a very important part of the low-carbon economy in terms of making sure that there is not carbon seepage from our economy elsewhere and that the low-carbon industry that is being developed is not undermined by rogue dumping and various other things in this state from elsewhere. The CBAM is certainly an important part of the green transition, not an impediment to it.

As far as ammonia is concerned, I am sure the noble Lord knows that there are ways to produce it for the UK market other than relying on gas for it. Certainly, low-carbon ammonia can be quite a substantial chemical for the future. That is, of course, not something that will happen overnight but, clearly, as the noble Lord said, we have no ammonia production in this country on a high-carbon basis, so perhaps we should encourage it on a much lower-carbon basis.

[Lord Reid of Cardowan (Lab)]

My Lords, in the context of media reports over the weekend, can the Minister tell us the most recent assessment that has been made of the adequacy of the UK’s current gas storage capacity to meet demand in the event of a prolonged supply disruption and the absence of an imminent return to a negotiated settlement, which all of us would of course like to see but none of us really expects in the near future? What confidence does the Minister have in that assessment? Finally, can he tell us what recent discussions have taken place with operators of the Rough gas storage facility on its future capacity and role in the UK’s energy security strategy?

[Lord Whitehead (Lab)]

I thank my noble friend for that question, because he alluded to one of the key points about the future of gas storage—the Rough field—and what will happen with that in the future. He will know that there were suggestions that the Rough field should be used for hydrogen storage. That is now not happening, and the Rough field is available for quite a large expansion in overall gas storage.

Having said that, we do not have enormous amounts of gas storage. On the other hand, we do have access to very secure forms of gas, albeit traded on the international markets, with the pipeline interconnectors that we have, the Norwegian gas supply that is freely available to us and, as I mentioned, with the development of LPG terminals in this country, we have the ability to land large amounts of LPG and to store it as well.

My assessment of gas security would be that, although we do not have a huge amount of gas storage, we have, collectively, a pretty secure gas security arrangement. I just drop in the point that we are producing increasing amounts of biogas in the UK, which is beginning to come to a few percentage parts of the gas supply overall. Again, that is a homegrown, secure way of doing it. That I think means that, although we will have a future management issue of declining gas in the system—and there is much less gas going into the system now than a few years ago—we nevertheless have a pretty secure gas arrangement in the UK.

[Lord Howell of Guildford (Con)]

My Lords, having been a Minister through six energy crises rather similar to this one, I cannot resist a bit of sympathy with Ministers having to go through it all again and explain the difficulties over which we have very little control.

Is not the simple truth behind all this that Governments, and this Government certainly, have persistently underestimated the amount of clean electricity that we are going to need for any kind of serious green transition? The data centres—I gather 71 of them are planned—are going to drink it all up. We simply need massive new investment at a pace that does not seem to be contemplated or considered at all. At the moment, we are still talking about 10 years until we try out the SMRs that the noble Lord, Lord Foulkes, referred to. We are still arguing about whether Sizewell C, another giant replica, can possibly be afforded and who is going to pay. We are still facing the fact that we are going to need to draw energy of every kind and every source, including particularly gas, from wherever we can get it through interconnectors, neighbours and LNG—the lot—in order to have a modern economy and recovery and growth. It that not the reality?

Can the Minister assure us that the Department for Energy, which seems so lost in all this, has got a grip on the pace at which we need to accelerate our nuclear decisions, storage, which the Minister has been talking about, and all the rest? We seem to be wandering along, with the next crisis almost looming up while we are standing here.

[Lord Whitehead (Lab)]

The noble Lord, who has great experience in these matters, makes important points about how we have to cope with substantial additional electricity demand, particularly as we electrify the economy as a whole, and for new things such as data centre demand and so on. Certainly, calculations suggest that the UK low-carbon energy economy, and the tremendous steps forward in procuring offshore and onshore wind, floating wind and various other things, is beginning to inform the quantum of energy that is needed. There are a lot of difficulties in that process, such as connections which we need to get on with very rapidly and various other things, to make sure that we can decongest the system and that the energy that we are producing gets to where we want it to be. Overall, the low-carbon energy revolution is up to the task of producing the additional electricity that we are going to use in the system for the future.

[Lord Teverson (LD)]

My Lords, the person smiling this evening is President Putin of the Russian Federation, because an economy that was hugely under pressure is going to be relieved when it comes to oil prices. In fact, I read this evening that Putin has offered to help Europe out with its gas shortage. I hope that will not be the case. Will the Minister speak to his Ministry of Defence and Foreign Office counterparts to put much more emphasis, work and pressure on stopping the shadow fleet of the Russian Federation being able to operate, which is its supply line that enables it to continue fighting the war against Ukraine that is a threat to us all?

[Lord Whitehead (Lab)]

I agree with the noble Lord that Putin may well be smiling a little at the prospect of sky-high energy prices benefiting his beleaguered economy, and that some of the sanctions may be taken off him because people would rather like some of his oil and gas for the future. It is doubly important, therefore, that we keep those sanctions in place, that we sanction the shadow fleet, and that we make sure that the oil from Russia does not get out, by hook or by crook, into various places where it should not go. The UK Government are determined to keep that process under way. It is very important that Putin is not the unwitting beneficiary of this.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I congratulate my noble friend the Minister on the Statement that has been made. In supporting the Government’s policy on alternative renewables, I ask that particular attention is given to Northern Ireland, where two-thirds of the population is reliant on fossil fuels, particularly oil, for central heating. I declare an interest in that, along with many other people. Will the Minister, along with his colleagues in the Northern Ireland Office, discuss ways to mitigate the impact on consumers in Northern Ireland, who will face high electricity bills due to the current global market conditions as a result of the war in Iran?

[Lord Whitehead (Lab)]

My noble friend is right that, quite uniquely within the UK, Northern Ireland has a preponderance of oil used for heating, as opposed to the relatively small percentage in England, Wales and Scotland. It is particularly important that we get a grip on heating oil and kerosene in general at an early stage in this process. That is why the Government have undertaken the initiative today to make sure that the industry is very clear about how it manages the price of heating oil for the future and does not engage in price gouging as a result of this particular energy crisis. But prices in general will probably be subject to the duration of this war. Part of the process has to be to make sure that this war comes to an end as soon as it can, that supplies are secured, and that confidence is restored in the fact that energy can pass reasonably unhindered from the site of the war to its destinations. The UK Government are very involved in doing that.

[Baroness Bennett of Manor Castle (GP)]

My Lords, an investigation today by the Guardian finds that a series of government announcements to

“mainline AI into the veins”

of the UK economy are riddled with “phantom investments” and what the Guardian describes as “shaky accounting”. In the light of this Statement on energy markets, is this not perversely a good thing? Does the Minister agree with me that we need to be thinking about the kind of energy use that is truly beneficial and efficient, both environmentally and economically, given that, as Ofgem concluded last month, 140 proposed data centre energy projects could need more power than the current peak demand? I agree with the noble Lord, Lord Moynihan, that we have to keep powering the incubators for ill babies in hospitals. That is surely more important than generating AI slop of pictures of Jesus Christ made up of shrimps.

[Lord Whitehead (Lab)]

I thank the noble Baroness for that interesting image of what we do not want to happen, as opposed to what we do want to happen. Of course, what we want to happen is real, low-carbon energy projects, and there is an enormous amount of investment—£90 billion is the figure from 2024—going into the low-carbon green economy at the moment, running three times as fast as the general economy. However, that investment has to be in real things. An issue that Ofgem is dealing with at the moment is distinguishing between what you might call tyre-kicker projects that want to come online in order to fund a speculative project, and those that really are necessary for our energy renaissance as a low-carbon energy superpower. The only way to become an energy superpower is to have a super-powered energy economy of real projects with real connections that actually do the business in the way the noble Baroness suggested, rather than being diverted into things that may or may not happen and are largely speculative at the moment in their promotion and origin.

[Viscount Trenchard (Con)]

Can the Minister please tell the House why the Government have delayed publishing their response to last November’s report from the Nuclear Regulatory Taskforce? Are they going to act and implement the review’s recommendations, and if so, when? It is hugely regrettable that we have thrown away our former leading position in nuclear power. Why have this Government stopped the AMR competition after phase B? Will there ever be a phase C? No update has been published on the government website since July 2023. We know that small high-temperature gas-cooled reactors could be playing a large part in meeting our electricity and industrial energy needs much sooner than currently envisaged. They also enable the production of hydrogen at scale, which is also a priority for our future energy mix.

[Lord Whitehead (Lab)]

I may have to write to the noble Viscount on aspects of that question that I am not fully sighted on. If he is referring to the Fingleton review, for example, then a great deal of work is being undertaken on that. Part of the issue with that review is how it translates itself into legislation for the future, and that is being fully considered. However, I assure the noble Viscount that that is not a particular cause of delays; it is a question of getting it right and making sure that what is in the review can properly inform the debate for the future.

[Lord Hunt of Kings Heath (Lab)]

My Lords, can we come back to the North Sea and the Opposition’s obsession with it? Can my noble friend confirm that between 2010 and 2024, production in the North Sea halved? It is a super-mature basin that, even if new licences were to be granted, would have a marginal impact. On the issue of gas being used to substitute for renewables when the wind is not blowing, would we not be in a much better position if the Opposition, when in government over 14 years, had actually managed to open one single nuclear power station?

[Lord Whitehead (Lab)]

My noble friend is right that the North Sea is not just a mature field but a very mature one. Indeed, as we are seeing, one of the opportunities for the North Sea is not so much getting oil out of the ground but putting carbon back into it, in terms of exhausted fields that are presently near their demise or thereabouts.

There is no magic wand that we can wave to suddenly produce lots of new oil and gas in the North Sea; we are talking about small pools, small fields and so on, if at all. The emphasis clearly has to be on making sure that production continues, not on ensuring that exploration—chasing a bit of a will-o’-the-wisp in terms of the field—is under way.

My noble friend is also right that the previous Government did indeed fail to produce a single nuclear power station during the entire time of their regime, whereas now we are on the cusp of making sure that small nuclear modular reactors are a thing of the future and that we have the sort of nuclear economy that is fit for a low-carbon economy—generally dispatchable, smaller, nimble and part of the energy economy.

Carbon Budget 6

Lord Whitehead Excerpts

Tuesday 3rd March 2026 Lords Chamber

[Baroness Jones of Moulsecoomb]

To ask His Majesty’s Government what assessment they have made of whether their policies and plans will deliver Carbon Budget 6.

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

Carbon budget 6, which was set out in 2021 and is current from 2033 to 2037, was subject to several legal challenges. It is now in the hands of the present Government. The Secretary of State carried out a full and rigorous assessment of the package, policies and proposals prior to publishing the recent Carbon budget and growth delivery plan and concluded that they will enable carbon budget 6 to be met. He will continue to monitor policy delivery and keep the package under review.

[Baroness Jones of Moulsecoomb (GP)]

I thank the noble Lord for the Answer. You can imagine this is something that concerns me, because the previous Government lost two court cases about this as they were not going to achieve what they were aiming for. We have just had carbon budget 7. I am quite curious about whether this Government have really done the right risk assessments. The previous national security assessment said that nature damage will cost 12% of GDP by 2030 relative to what could have been achieved. If Labour are interested in GDP, it really ought to sort itself out on the issue of the environment.

[Lord Whitehead (Lab)]

We do not have the announcement of carbon budget 7 until the summer. The noble Baroness might care to think about what the process of looking again at carbon budget 6 was after those legal judgments. Indeed, the Government have taken a much more robust approach to developing the plan, which has allowed us to make a much clearer and more rational assessment of the savings that will enable carbon budgets to be met and to quantify them fully.

We have also quantified a number of real-world trends that are rather important today, and which are shaping our society and economy. That means our assessment reflects how we would expect the world to change as we accelerate towards net zero. None of these things were done when the previous Administration set out carbon budget 6—indeed, they were part of the legal challenge to those budgets. That is the reason why we consider that carbon budget 6 can be met, in addition to which a number of new policies and directions have come forward since this new Government took office.

[Lord Hunt of Kings Heath (Lab)]

My Lords, if we are going to meet our carbon budgets, clearly, the challenge of getting low-carbon electricity generation as quickly as possible is crucial. The latest figures I have for Q2 2025 suggest that nuclear power was about 15.1% of electricity generation. How do you square that with the Greens’ manifesto, which says that they want to get rid of nuclear power in this country?

[Lord Whitehead (Lab)]

The continued presence of nuclear power as a low-carbon power source is, and will be, an integral part of carbon budget 6 being met. It would be very difficult to catch up with those carbon budget 6 figures without nuclear power. It will come and go a little bit, in terms of retirements of nuclear power stations by the mid-2030s and new nuclear power stations coming online, but it will come back to at least that 15% figure. It is very difficult to see how carbon budget 6 might easily be met without that power in place.

[Baroness Boycott (CB)]

My Lords—

--- Later in debate ---

[Baroness Boycott (CB)]

My Lords, I am very pleased to hear that the Government continually reassess carbon budget 6, but I would like to hear the Minister’s response to the concerns of Ofgem, which has said that the volume of grid connection applications

“exceeds even the most ambitious demand forecasts”.

Further, last week, the Energy Secretary said that energy demand “remains inherently uncertain”. What is the Minister’s department doing to try to work out how much energy will be needed by data centres? Can the Government commit to using only low-carbon sources of power for these operations?

[Lord Whitehead (Lab)]

In terms of the Government’s clean power 2030 plans, pretty much only low-carbon power will be used for operations in the future. As far as data centres are concerned, this is one of the real-world trends that I mentioned has been analysed out in the carbon budget considerations. While AI will certainly considerably reduce the amount of electricity that is being used, the overall trend towards a large number of data centres will increase its use, so you have trends going in either direction. However, that is within the modelling that has been done so that we can consider how the budget can be met.

On grid connections, among other things, Ofgem is very much under way in reducing the number of people in the queue and making sure that the grid is far better able to accommodate the early connections and consequences of the rollout of new grid bootstraps, for example.

[Lord Lilley (Con)]

My Lords, given that the pursuit of carbon budgets has so far given us the highest electricity prices in the OECD, can the Minister confirm that the pursuit of decarbonisation has so far primarily resulted in the deindustrialisation of Britian, and that our carbon budgets do not take account of the fact that we have simply exported carbon emissions to the rest of the world?

[Lord Whitehead (Lab)]

It is certainly not true that the pursuit of a low-carbon economy has led to deindustrialisation. The noble Lord need only look at the £60 billion of investment that is coming into the green economy and all that goes with it. Indeed, the low-carbon economy is growing three times as fast as the general economy. Many of the things that are coming in concerning low-carbon energy are very much concerned with industrial plants, grids, new forms of electricity generation and so on, which will not only produce large numbers of jobs but a very sound industrial base for the country.

[Earl Russell (LD)]

My Lords, to return to the Minister’s original Answer in relation to legal challenges, what assessment has been made of the electric vehicle rollout and boiler replacement mandates and their timeframes, and the Government’s ability to meet the building and transport emission cuts and the sixth carbon budget in good time?

[Lord Whitehead (Lab)]

On EV rollout, the noble Earl will be aware of what has been put in place for ending internal combustion engine use in vehicles and the phase-out of hybrid by 2035. The rollout of electric vehicles continues unabated, and the number of electric vehicle charging points in this country, currently at more than 80,000, is well on target for what we think necessary over the next period to ensure that the fleet works as well as it should.

[Lord Moynihan (Con)]

Does the Minister accept that in the UKCS we have a far smaller carbon footprint for our own North Sea gas than the full life-cycle emissions of imported LNG from Qatar and the United States? Given that the Government’s energy security is challenged with growing dependency over the next 10 years on LNG ships passing through the Strait of Hormuz, why are we the only country in the world that is failing to accelerate development of our own gas reserves, in the North Sea, for energy security and environmental objectives so that we can deliver firm and affordable power to all our high-energy-use industries, which currently face crushing energy costs, four times higher than in the United States?

[Lord Whitehead (Lab)]

I think the noble Lord knows that, even if we were substantially to increase the footprint of gas production in the North Sea, that would not come on stream for many years. Secondly, gas is traded on international markets at a particular price, so it would make no difference to energy costs in the UK, because the gas would go to one of the three international gas markets and bringing down that price would be beyond the control of the UK—unless we introduced draconian measures to prevent the price discovery of the particular levels of gas being undertaken on international basis, which I am sure the noble Lord would not be happy with.

Fire and Rescue Services: Clean Energy Projects

Lord Whitehead Excerpts

Thursday 26th February 2026 Lords Chamber

[Baroness McIntosh of Pickering]

To ask His Majesty’s Government what consultation they have carried out with the fire and rescue services in England regarding clean energy projects such as battery storage plants; and what assessment they have made of the combustibility and flammability of such projects.

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

The Government work closely with the National Fire Chiefs Council on battery fire safety. In October 2025, Minister Shanks held a round table on battery safety with industry, regulators and academics, including NFCC representatives. In the last five years, there have been four grid-scale battery fires in Great Britain. Analysis from the Department for Energy Security and Net Zero suggests that these fires appear less likely than fires in non-domestic buildings.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am grateful to the Minister for that Answer, but it is unacceptable, given the fire risk posed by something as highly combustible, flammable and at risk of thermal runaway as these battery energy storage facilities, that fire and rescue services should not be statutory consultees to the planning application. To look at one constituency alone, the former Vale of York constituency that I represented, there are BESS plants to be built in Scotton and Lingerfield, Bedale and South Kilvington. That will put enormous stress on the fire and rescue services of north Yorkshire, which last year had to deal with one of the most aggravating and long-term wildfires that we have seen to date. Will the Minister use his good offices to ensure that, forthwith, in any current planning application, fire and rescue services will be statutory consultees, so that they can advise on the fire risk of each individual site with a view to mitigating the fire risk?

[Lord Whitehead (Lab)]

The Government already have moved to make sure that the fire services and developers are closely involved in applications as far as large batteries are concerned. The planning practice guidance has been updated to ensure that developers consult fire services in the pursuit of their applications. The fire service itself considers that to become a statutory consultee would prove enormously bureaucratic and additional to its particular work, and is in line with that particular planning practice guidance update.

[Lord Roe of West Wickham (Lab)]

My Lords, I declare an interest as the chair of the national Building Safety Regulator and the former London Fire Commissioner. I thank my noble friend the Minister for his Answer. Given the comprehensive new guidance that the Government have published with the National Fire Chiefs Council in December 2025 to directly address the issue of battery energy storage system consultation with fire services, if I was in my former role I would certainly agree that we would have preferred that, rather than the bureaucracy of being a statutory consultee. However, on a related matter, what action are the Government taking following the serious substation fire at Heathrow Airport, which my colleagues at the time fought for many days under very dangerous circumstances, and which closed the airport? Could my noble friend provide an update on how his department intends to implement the 12 recommendations arising from the subsequent National Energy System Operator investigation?

[Lord Whitehead (Lab)]

My noble friend, to whom I pay tribute for his enormous service in the fire service over a number of years, really ought to be the person who knows what he is talking about on this subject. He refers to the fire in North Hyde a little while ago, which, as noble Lords will know, caused considerable problems at Heathrow Airport in 2025. That was subject to a NESO investigation into the circumstances around that particular fire, which related to faulty maintenance in a substation. As a result of that investigation by NESO, the Government have accepted all the recommendations that were put forward in the report and are working closely with other government departments and the energy industry in implementing the 12 recommendations and 20 related actions, detailed in the Government’s response to that investigation. Among other things, that ensures a joined-up approach across organisations to improve energy resilience, emergency response and recovery. The majority of actions are forecast to be delivered by the end of 2026.

[Earl Russell (LD)]

My Lords, long-duration energy storage is an extremely important part of our energy transition, providing much-needed stability to our future energy systems. Falling prices and evolving technology are also helping. I welcome the Minister’s response, and we recognise that robust safety systems are in place. However, Ministers have previously spoken of considering additional measures to enhance the regulation of the environmental and safety risks of BESS. Does the Minister feel that more work is needed to reassure the public on public safety concerns?

[Lord Whitehead (Lab)]

The Government are actively exploring additional measures to manage safety risks on the grid-scale battery energy storage sites. That is important in the context, as the noble Earl mentions, of the substantial expansion that there will be in batteries as an essential part of the UK’s balancing energy system for the future. In August, Defra published a consultation on modernising the environmental permitting regime for industry, which included proposals to include BESS within scope of environmental permitting regulations. The Government are currently reviewing industry feedback and will publish a response in due course. That would require battery developers to demonstrate to the Environment Agency how specific risks were being managed while also providing for ongoing regulatory inspections of battery sites.

[Lord Mackinlay of Richborough (Con)]

My Lords, I declare my directorship of the Global Warming Policy Foundation. When I was the MP for South Thanet, we had a proposal for one of these battery farms—let us call them that—in the constituency. I wrote to Kent Fire and Rescue Service with my concerns, and it wrote back with its own. As my noble friend Lady McIntosh quite rightly states, fire and rescue services really have very little part in the process. I ask the Government to consider a statutory Section 106 requirement applying to each and every one of these battery farms, so that they have to pay for the specialist equipment that local fire and rescue services need to put such fires out. Once they start to go, there is very little that you can do with usual water systems to put them out. It requires specialist equipment and, not least, a local evacuation, because the fumes that come off these lithium-powered fires are very serious and deleterious to health.

[Lord Whitehead (Lab)]

I think that we should get this into some proportion. As I have said, the number of battery fires over the last five years is four. The percentage of fires that you might encounter in an industrial premises or commercial premises is higher than the proportion per thousand of battery fires. Battery fires stand within the general problem of fires across industry. As far as the extinction of those fires is concerned, there is protocol already in the fire service about how to deal with those particular fires. It is a process of enabling burnout, so that the battery does not self-reignite. The noble Lord is correct to say that there are issues relating to battery fires, particularly the ability of that battery fire to reignite itself even in the absence of oxygen. There is a protocol now to surround the fire with safety measures and allow it to burn out. That, as far as the fire service chiefs are concerned, is a perfectly adequate and safe response to those fires.

[Lord Moynihan (Con)]

My Lords, can the Minister revisit his figures on battery fires? On 6 September 2024, the noble Lord, Lord Redesdale, led an outstanding debate in your Lordships’ House on lithium-ion battery safety. Superb contributions were made across the House, particularly by the noble Lord, Lord Winston. Since then, battery fires in bin lorries and at waste sites in the UK have reached an all-time high—not four, but more than 1,200 in 2024. That is an increase of 71% from 700 in 2022, which was described by the Environmental Services Association as an “epidemic”. Will the Minister take this opportunity to go back to his department and agree that, at a minimum, we need the fire service, the Environmental Agency, and the Health and Safety Executive to be statutory consultees for all planning and new stand-alone battery energy storage systems? There is urgent action required in this sector.

[Lord Whitehead (Lab)]

I do not intend to go back to the department and tell it that its particular concerns are wrong. What we are talking about today are fires in large stand-alone battery storage plants, of which there have been four in the last five years. If the noble Lord would like the individual addresses and locations of those four fires, I have them here. It is not the case that this covers every battery fire there has ever been. We know that certain batteries—for example, illegally imported batteries in scooters—tend to be a little less safe than other batteries. There is proper concern about some areas of battery safety and maintenance, but not about this particular sector, which is very well regulated and safe now. As I have set out today, there have been further measures to ensure that the safety and integrity of those stand-alone batteries is maintained.

Local Power Plan

Lord Whitehead Excerpts

Wednesday 11th February 2026 Lords Chamber

[Earl Russell (LD)]

My Lords, on these Benches we very much welcome the publication of the local power plan. This is a landmark moment: up to £1 billion of funding from Great British Energy for local community energy. This is the largest public investment to date. Our communities stand ready to generate their own power, cut bills and keep wealth circulating locally. They have been waiting for the Government to back them with serious funding and a level playing field.

We, and many others across the House, campaigned to secure community energy on the face of the Great British Energy Act 2025. We are pleased to see that commitment transformed into this concrete plan. Our communities should rightly be able to partner in, and directly benefit from, the renewable revolution. The vision is one we support.

Great British Energy aims to support an initial 1,000 local and community projects by 2030. However, I would like to see these plans going beyond programmes that the private sector can deliver itself; for example, a programme of community wind energy for our coastal communities. I would also like to see a broader range of technologies used, and greater integration with the warm homes plan. The four pillars—direct funding, expert advice, market innovation, and regulatory reform—are what community groups have asked for.

Delivery is where this plan will stand or fall. Although the plan is launched this month, the first grant schemes will not open until the spring and the new Great British Energy local products will not be piloted until the summer. There are hundreds of shovel-ready projects just waiting for capital finance. Will the Minister commit to an early fast track for schemes that can demonstrate that they are ready to build this year?

We welcome the commitment of up to £1 billion, but there is a clear gap between this figure and the £3.3 billion previously promised for community energy. Has this ambition been scaled back? How much of this fund is expected to go to actual deployment and how much on facilitation, advice and central programme costs? We recognise the importance of help with these processes but want reassurance that this will not become a scheme where too much is swallowed by planning and too little reaches the projects themselves.

The Government acknowledge that a lack of fair routes to market has held back community energy for too long. Without a genuine right to local supply, underpinned by statute, community groups will remain disadvantaged. The local power plan refers to developing new local energy supply models and a local energy platform, including smart community energy and virtual PPAs. When will the Government bring forward the regulatory changes needed to make them a reality? Can the Minister also confirm that legislation to create a clear right to local supply remains part of the Government’s programme?

The Government are right to recognise that delays and the cost of connections to the grid are among the principal reasons why community schemes have failed. The plan speaks of obligatory response times from DNOs, and of working groups with network companies, but what concrete powers will Ministers use to ensure that these things happen in practice? This matters especially when the technical and regulatory thresholds are already stacked against smaller schemes.

We strongly welcome the intention to introduce a mandatory shared ownership offer for larger renewable developments, and the indication that shared ownership templates and guidance with be published this spring. This could enable fairness into the next generation of large-scale infrastructure. What minimum stake will communities be guaranteed? How will the Government ensure that the offer is genuinely attractive rather than nominal? When will the Government publish the full community benefits framework, so that communities are not left at the mercy of voluntary schemes and of whatever crumbs are left over from the big companies? Will the framework include clear criteria on what counts as meaningful benefit, and will it be underpinned by statutory guidance?

One of the most promising elements of the plan is the commitment to build up local community capacity through expert teams and a “community energy in a box” toolkit, providing standardised documents and advice. Our most underserved areas have previously had the least spare capacity. Communities facing high deprivation, or with small and overstretched councils, lack the volunteers and technical skills needed even to begin. What criteria will Great British Energy use to define these underserved areas? Will they benefit from higher grant-to-loan ratios and more proactive outreach so that they do not miss out?

In the June 2025 spending review, £2.5 billion was allocated for small modular reactors—almost a third of Great British Energy’s existing budget of £8.3 billion. That decision pre-dated the finalisation of the local power plan and of GB Energy’s strategic plan for local energy. Does the Minister accept that the Treasury’s raiding of the Great British Energy budget has constrained what could otherwise have been a more ambitious and better-resourced programme for local power? It may have delayed the scaling up of exactly the projects the Minister is now bringing forward.

The local power plan has the potential to be transformative. Local, community-owned energy is one of the most powerful ways to cut bills, rebuild trust and take people with us on the journey to net zero. To realise this promise, we must move swiftly from plan to practice, getting money out of the door quickly, cutting through grid and regulatory barriers, and ensuring that every community has a fair chance to generate, own and—crucially—sell its own energy locally.

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

I thank the noble Lords for their thorough and constructive response to this Statement on the local energy plan, and for their general support, particularly for the local power plan itself. I particularly thank the noble Earl, Lord Russell, for his forensic analysis of the detail of the report and for the various questions he asked, over and above what I took to be his very strong support for what the local power plan is trying to do: substantially to enhance the ability of communities to own and run their own energy arrangements and to distribute the benefit of those arrangements back to the local communities themselves. I know the noble Earl has been looking into and opining on this issue for a very long time, and I too have something of a track record in it.

I understand, therefore, why it is necessary to get the detail of this right. I hope that this evening I will be able to say one or two things about how that detail is going to be got right, but if there are things that I have missed, I will certainly be happy to write to the noble Earl, putting some of those things exactly into the place they should be. But I think I can give him an assurance that we have thought about most of the things that he has raised this evening.

Indeed, we see those things as an essential part of the move forward with the local power plan, so that communities can, for example, start to trade in local energy, have security and resilience in their local plans and benefit from a substantial hand-holding operation that is designed into Great British Energy’s approach to the 1,000 projects that it is hoped we will be able to get under way in this Parliament. We hope that those will be as robust as they can be with the sort of support that Great British Energy will give them—not just by throwing a little bit of money for a local community project and hoping it works, but actually being with those local communities right down the line, from development and first thought to the “valley of death”, where it gets to operation. I hope that the noble Earl can take some assurance from the fact that we have thought out the whole process, not just the first part of it.

As far as the ambition of the local power plan is concerned, the £1 billion is based on what we think can be reasonably accommodated, invested in and sorted out, and that is the 1,000 projects in this Parliament. That is not the end of the matter; there is potentially a lot more to come. Even within that £1 billion, there are other sources, from the National Wealth Fund and various other things, that can come into play to add resource to the investment. So the idea that a large part of what was supposed to be the original investment has been lost, I am afraid, is not correct; it is more about how we get through the process of this over the period of time, making it work constructively as we go forward.

The noble Lord, Lord Moynihan, for the Opposition, concentrated much more on the other part of the Statement, which concerned the results of the second part of AR7, which was the solar, tidal and onshore wind pots that came within AR7. He was, I think, generally supportive of the results of AR7. In AR7, we have secured a fantastic step forward in terms of the deployment of solar, a very substantial and encouraging initial deployment of tidal stream and the beginnings of the establishment, or re-establishment, of onshore wind, which, as the noble Lord will recall, was banned, in effect, by the previous Administration. So it is perhaps not surprising that we are building onshore wind back up again in this round, when it had been dormant for a long time previously. Overall, these are really good results, which, by the way, will in their own right lead to the development of a very large number of additional jobs in this sector. Indeed, overall, it is thought that the programmes that are under way will lead to perhaps 10,000 direct and indirect jobs over the next period.

In addition to that, the Government are quite earnestly engaged in what we might call a just transition process, which the noble Lord will know is under way, of making sure that those people who are working in the high-carbon industries, which will largely be replaced by these low-carbon industries, are able to transfer their skills and their contribution to the development of the low-carbon industry. Indeed, there are active retraining and reskilling programs under way. Examination of the skills in the high-carbon and low-carbon sectors show that something like 70% to 80% of jobs in the high-carbon sector are certainly transferable to the low-carbon sector, provided the skills are in the right place. It is not just a question of creating lots of new jobs. It is a question of making sure that as many of the jobs in the high-carbon sector—which, yes, will go as gas, for example, retreats in front of the new low-carbon regime—that can be translated to the low-carbon sector are indeed supported to do so over the period.

The noble Lord was also at pains to talk about how supply chains can avoid becoming involved in slave labour and abuses of human rights in the production of those supply chains. He was quite right to mention that, and it is something that we are obviously very concerned about on this side, as the supply chains for low-carbon power establish themselves. Certainly at the moment, the world supply of solar panels rests substantially with China. Of course, there are a large number of initiatives around the world to diversify that supply chain from China to other solar panel manufacturers, such as solar panel developments within the UK. That is the first point.

The second point is that GB Energy has established an ethical supply chain unit to support robust human rights due diligence and transparency in line with the UK’s legislation on modern slavery and the international human rights framework, including the UN guiding principles on human rights. GB Energy will be exploring alternatives to diversify high-risk supply chains and collaborate with partners to improve renewable supply chain transparency and accountability in the UK. Work is at hand to make sure that we are as robust as we can be in terms of those concerns about modern slavery and exploitation of human labour. The noble Lord will be aware that it is often very difficult to trace supply chains accurately as to exactly where they are coming from and going through, but I hope he will agree that we are doing and will do as much as we can to ensure, within that difficulty, that there is proof against those concerns about modern slavery and other practices.

[Baroness Gill (Lab)]

My Lords, this is a most welcome initiative. Energy poverty and security of supply have been a real concern for years for people in many parts of our country. I have three short points that I would like my noble friend the Minister to address. Does this mean that the consumer will get improved energy security and resilience? Will it save them money on their energy bills once the scheme is up and running? How does the local power plan balance affordability, reliability and decarbonisation under the worst-case scenarios, and what trade-offs are we prepared to make if there is a conflict in our goals?

[Lord Whitehead (Lab)]

I thank my noble friend Lady Gill for her carefully thought-out contribution. These are questions that we need to make sure we have got right as far as a local power plan is concerned.

The first thing I can say is, yes, the local power plan will start saving people substantial amounts of money on their bills. That will not necessarily be absolutely everybody under all circumstances, but certainly, provided that the local power plan is carried out properly, there will be lots of opportunities for the return on the investment that has been put into local communities through those schemes to come back in some instances directly off people’s energy bills.

As I mentioned in response to the noble Earl, Lord Russell, one of the things that we are doing is making sure that we have all the back-up material for the local power plan, which would give effect, for example, to people’s ability to trade locally, although that may require legislation. But that will mean, in conjunction with code changes, for example, there will be an ability of local power projects to deliver direct benefits, not just in the traditional way of the developer giving a little bit of money to the local community to help the village hall or whatever. This is about real changes not just in people’s energy relationship; the fact that they own the energy themselves and can get direct benefit from it will, I think, quite transform the local scene.

By the way, because that is all local and if it can be integrated with local power systems generally, it will add quite considerably to the resilience of the country’s energy supplies. It is all based in the UK, it goes around in the UK, the benefit comes out in the UK and it is a considerable addition to the energy security of our country. I hope that my noble friend can take some assurance that we have thought about all these issues and are determined to make sure that they are firmly a part of the local power plan as it rolls out.

House adjourned at 8.23 pm.

Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026

Lord Whitehead Excerpts

Tuesday 3rd February 2026 Lords Chamber

Moved by

[Lord Whitehead]

That the draft Order laid before the House on 16 December 2025 be approved.

Relevant document: 47th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 28 January.

Motion agreed.

Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026

Lord Whitehead Excerpts

Wednesday 28th January 2026 Grand Committee

Moved by

[Lord Whitehead]

That the Grand Committee do consider the Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026.

Relevant document: 47th Report from the Secondary Legislation Scrutiny Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

My Lords, this order was laid before Parliament on 16 December 2025.

The UK Emissions Trading Scheme, or UK ETS, was established—perhaps I should say “re-established”—under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme, contributing to the UK’s emissions reduction targets and net-zero goal. The scheme is run by the UK ETS Authority, which is a joint body comprising the UK Government and the devolved Governments acting as one. Our aim is to be predictable and responsible guardians of the scheme and its markets.

Under the UK ETS, operators are required to monitor, report on and surrender allowances in respect of their greenhouse gas emissions. Although most allowances are purchased at regularly held auctions, operators in certain sectors at risk of carbon leakage are given a number of allowances for free; there are referred to as “free allocations”. Free allocations reduce the exposure to the carbon price for sectors at risk of carbon leakage and reduce the risk that decarbonisation efforts could be undermined by production and the associated emissions moving to other countries.

Under the UK ETS, an operator is the person or company with control over an installation. Installations are stationary units at which regulated activities take place. Sub-installations represent operations carried out at an installation for which operators that receive free allocation are required to report activity levels for the purposes of the UK ETS.

We have brought forward this statutory instrument to enable important changes and improvements to the scheme. The first change it makes is to enable operators of installations to be able to notify their regulator that they wish their activity data for the 2020 scheme year, or 2020 and 2021 scheme years, to be excluded from the calculation of their historical activity levels for the 2027-30 free allocation period. This is in recognition of the fact that production levels may have been impacted during the Covid-19 pandemic. These operators will be able to notify their regulator during the second stage of the 2027-30 free allocation application, from 1 April 2026 to 30 June 2026, that they wish to exclude their activity data for 2020, or 2020 and 2021.

A legal change to the free allocation regulation is needed because existing legislation would require regulators to calculate historical activity levels using activity data from all five years of the baseline period from 2019 to 2023. So, if amendments are not made, there will be no legal basis for regulators to exclude data from 2020, or 2020 and 2021, from the historical activity level calculation for any applicant. Using activity data for these years could result in historical activity levels that do not reflect normal activity, meaning that operators would receive less free allocation than they would otherwise be entitled to receive.

The second change the instrument makes is to gradually phase out free allocation for sectors covered by the UK carbon border adjustment mechanism—the UK CBAM—starting over the 2027-30 allocation period. This phase-out will be implemented through applying a UK CBAM reduction factor to the calculation of free allocation, and will apply at sub-installation level. To do this, operators will be required to report on which of their sub-installations serve the production of UK CBAM goods. This will enable regulators to apply the UK CBAM reduction factor to the relevant sub-installations.

A legal change is needed as operators currently classify their sub-installations only by a specific benchmark and the corresponding carbon leakage status of that sub-installation. This instrument requires operators also to classify each sub-installation as “UK CBAM” or “not UK CBAM”. Benchmarks are the efficiency standards used to calculate each installation’s free allocation entitlement. Installations closer to their benchmark have a higher proportion of emissions covered by free allocation, rewarding more efficient installations and incentivising decarbonisation.

The third change the instrument makes is to use current benchmarks for the purpose of calculating free allocation for stationary installations for the 2027 scheme year. This instrument also provides for the ability to update the benchmark values used to calculate free allocation for the years 2028, 2029 and 2030 of the 2027-30 allocation period. Maintaining current benchmarks for the 2027 scheme year will allow time for industrial participants to adjust to the changes.

A legal change to the free allocation regulation is necessary because, under existing legislation, there is no provision to update benchmarks during an allocation period. The principal intent is to use the updated ETS phase 4 benchmarks in the 2028, 2029 and 2030 scheme years; this will be decided once the EU benchmark values are available and will be subject to assessment of the impact.

Installations that permanently cease to operate are required to report on their activity in the final year of operation so that free allocation can be recalculated to reflect the cessation of activity. This amendment clarifies that operators must report on their activity levels in instances of permanent cessation or the surrender or revocation of their permit.

These intended changes follow comprehensive engagement and consultation with stakeholders. The UK and devolved Governments carried out consultations that covered the provisions included in this statutory instrument. The free allocation review consultation ran between 18 December 2023 and 11 March 2024, seeking views on proposals to alter the free allocation methodology for UK ETS stationary sectors to better target those most at risk of carbon leakage and ensure that free allocations are fairly distributed. The free allocation review carbon leakage consultation ran between 16 December 2024 and 10 March 2025. It sought views on a draft UK-focused carbon leakage list compiled by applying UK data to the existing carbon leakage list, as well as the trajectory for phasing out free allocations for sectors that will be covered by the UK carbon border adjustment mechanism. The relevant responses to these consultations were summarised in the UK ETS authority’s response.

In conclusion, the changes in the draft order will deliver on commitments made by the UK ETS authority, improve the fairness of the scheme and increase certainty for both regulators and operators. These changes will ensure that free allocation continues to provide meaningful support to UK industry while maintaining the incentive to decarbonise and rewarding efficient installations. The amendments to the UK ETS will support its role as a key pillar of the UK’s climate policy. They demonstrate that we will take action to improve the scheme where necessary. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am grateful to the Minister for so comprehensively outlining the contents of the SI. Once again, I welcome him to the House and his position. We knew each other in the other place over a number of years and I was a great admirer of his during that time. I also welcome my noble friend to his Front Bench position, and I look forward to working with him in that capacity. I congratulate the noble Earl on the Lib Dem Benches for his conversion to a life peerage. We are now equals in that regard.

I will take the opportunity to put a few questions to the Minister. I understand that the year 2026 is a stand-alone year before we proceed to 2027 onwards. Is that of particular significance in regard to the changes that the Minister outlined? I understand from paragraph 11 of the Secondary Legislation Scrutiny Committee’s report that, in response to a number of concerns that were raised, the department

“emphasised that UK industry and wider stakeholders had ‘repeatedly’ called for linking with the EU ETS”.

The committee went to great pains to say:

“According to the DESNZ, linking does not mean re-joining and is expected to reduce costs for UK businesses by giving them access to a larger, more liquid market”,


and it said that it had published the submission.

Perhaps I ought to say that I am a pro-European Conservative, so it would not bother me if we rejoined the EU ETS. I know that I am in a minority of one in the Conservative Party on this point, but I want to put that on the record. It raises the question of why industry will be concerned. As I understand it, the UK ETS is very ambitious and operates with a stricter emissions cap, initially set at 5%, which I understand is higher than that set by the EU ETS. If that is the case, does the Minister agree that there are very strong arguments that the UK industry would wish to follow the EU ETS in this regard?

--- Later in debate ---

The changes proposed here may be presented as technical, but their effect is clear. The UK already has some of the highest industrial and domestic electricity prices in the world; those high costs are holding back growth, weakening competitiveness and making households poorer. This is the wrong measure for the wrong time. For those reasons, I ask the Government to think again.

[Lord Whitehead (Lab)]

I thank noble Lords for their contributions to this debate, which were absolutely up to the rather technical nature of this SI—although I would say that the noble Lord, Lord Moynihan, managed to take in a large landscape on the whole question of whether a decarbonisation policy is good or not. I suggest that that debate is for another day because we are talking about some specific changes that are being made to a specific policy.

That policy relates, of course, to an overall adjunct to decarbonisation policy in general, which is to secure a good carbon price to underpin moves towards developing a more sustainable, low-carbon, green economy based on making sure that fossil fuels are at the margins of the energy economy, rather than at the centre of it; and that incentives are put in place for that to happen and for the economy to run on low-carbon energy in general.

If the noble Lord, Lord Moynihan, considers that a bad idea overall, perhaps he might say so; he has moved a little way along that path. I do not think that the Bank has yet cashed in all its good will, but we need to set one or two things straight about how that relates to this SI. The free allowances that are presently in place for a number of energy-intensive industries that are in danger of carbon leakage as a result of low-carbon policies are being continued for 2026 but are being tapered down—not because the Government think that they are a terrible idea and that we ought to stop giving out free allowances but because we are on the road to CBAM, which is in itself a comprehensive shield against carbon leakage.

Having a series of free allowances running alongside a CBAM arrangement would therefore duplicate the protections that are, and should be, in place. Having a mechanism that enables the CBAM process to come into place, while making sure that the industry has the free allowances it needs to move towards CBAM, seems a very sensible thing to do to keep the overall low-carbon energy show on the road in the longer term. I have not heard from the noble Lord, Lord Moynihan, whether he thinks that CBAM is a bad idea; the industry generally thinks that it is a very good idea.

[Lord Moynihan (Con)]

The Minister has put two points back to me. First, I have no dispute with that; I think that decarbonising the industrial sector over time is a sensible policy. The problem is that, if you try to accelerate that decarbonisation into 2030 and you must raise electricity prices to the level the Government have done through a carbon tax, you make industry uncompetitive. If you make industry uncompetitive on the altar of long-term decarbonisation, you will have serious employment problems; that precise point was made by an MP in another place in speaking on behalf of ceramics.

My issue, therefore, is not with the long-term decarbonisation of industry; I am totally at one with the Minister on that point. My point is that, if you hurry this along on an artificial timescale of three years, you will have to put up carbon taxes and you will put businesses out of business, in effect, from the moment when they must face these carbon taxes, which are not imposed by their competitors around the world; they may, therefore, find themselves uncompetitive.

I am not arguing against CBAM but I am making the obvious point that, if you then remove these allowances—say you have free allowances of 10 out of 100, and you take 10 of those free allowances away—you have to acquire the other 10 allowances from the market. There is a significant additional cost; that is outlined very clearly in the impact assessment before us today. Indeed, paragraph 18.8 of that document states:

“These factors combined can lead to domestic prices being consistently higher than import prices, enabling substantial price pass-through”.


It is right here in the very document that we have been considering today, and it proves my point about an increase in prices—a significant increase from what are already very expensive electricity prices—that must then be passed through. Also, the nature of that pass- through goes even further than what I have said. Paragraph 18.7 of the impact assessment says:

“The results suggest that most sectors could pass about 80-90% of cost increases to consumers”.


It is the consumers who will feel the pain of this measure; that is the Government’s own clear statement on page 70 of the impact assessment.

[Lord Whitehead (Lab)]

The Government are of course very well aware of the whole question of how energy prices should be kept within reasonable bounds. By the way, the noble Lord went on a bit about gas a moment ago. He should remember his own period in government, when the Government spent something like £70 billion trying to bring prices back down when they had got completely out of control with the spikes in the price of shipped gas coming into the UK, which rose to 600p per therm at one stage in the mid-2020s.

You could say that, because the Government at that time did not control international gas prices in the way that the noble Lord seems to think can be done— I very much doubt that the various measures he is proposing to regulate international shipped gas prices would have the effect on volatility that he thinks they would have—we are still open to that enormous volatility in gas across the world. Indeed, just recently the price spiked quite substantially—probably not to the extent that happened in the early 2020s, but that is a spectre that continues to haunt us with reliance on international gas and not going to a low-carbon economy.

I am on the side of insulating the UK economy from those enormous global changes in gas prices, particularly by moving, broadly speaking, not to a no-gas economy but to a low-gas economy as far as the future is concerned. That will be of tremendous benefit to UK industry and exports, and jobs and industry in general, because we will have a stable energy economy for the future, which will allow us to plan ahead properly without the spikes, volatility and panics that we have seen over the last few years. I think the noble Lord wants me to give way again.

[Lord Moynihan (Con)]

May I say how flattered I am that the Minister thinks that I was in government on this side of the turn of the century? I must look a lot younger than I thought I did. I have to go back to 1990, to be precise, when I was Minister for Energy and we started the offshore decarbonisation of gas. In fact, we stopped flaring at that time, at the same time as we set up a non-fossil fuel obligation to encourage renewables. We had low domestic and industrial gas prices in the United Kingdom because we encouraged combined-cycle gas turbines. I just wanted to place that on the record, but I say it in a spirit of deep gratitude to the Minister for thinking that I was in government only recently and that I obviously look far too young to have been a Minister in 1990—or perhaps I look far too old.

[Lord Whitehead (Lab)]

I thank the noble Lord for that correction as far as his status in previous Governments is concerned. I was making a point not about his own distinguished period as an Energy Minister, which I appreciate was much earlier and perhaps in a rather happier energy era than we have today, but about the mangled response from the Conservative Government to the last gas volatility crisis in this country, and what resulted in terms of the money going out of the Exchequer for the attempts to protect domestic consumers and businesses from that spike, since he raised it as one of his concerns about this SI.

I ought to add, by the way, that, in the Government’s industrial strategy—yes, we have an industrial strategy, unlike previous Administrations—we announced additional support for 7,000 energy-intensive firms through the British industrial competitiveness scheme, which will reduce electricity costs by up to £40 per megawatt-hour. Through the British Energy supercharger, the Government are increasing support for the most energy-intensive firms by covering more of the energy network charges they normally have to pay. From 2026, the discount on these charges—namely, legacy costs, capacity market feed-in tariffs and so on—will be discounted by 90% from their present 60% level. That is a substantial boost to industry, as far as prices are concerned, by the direct actions of the Government under these circumstances.

I am conscious that I have spent rather too long addressing what the noble Lord, Lord Moynihan, has perhaps wound me up to talk about more than I might otherwise have done. I have to now address the questions that were put to me by the noble Baroness, Lady McIntosh of Pickering—who I applaud for being, as it were, on the side of these particular measures and ideas from the other side—and the noble Earl, Lord Russell.

I have, to some extent, covered the questions that the noble Baroness put to me. The first allocation period will be extended to 2026 to ensure that the changes implemented from the free allocation review come into force in 2027, to align with the introduction of UK CBAM. On her questions on bills, emissions trading has been a key element of power sector decarbonisation. Therefore, maintaining a strong UK ETS and, dare I say it, aligning it with the much wider market that we can enter into, for the stability of the ETS, will not be a joining of the EU ETS but a linkage of the UK ETS to the EU ETS. The UK ETS will continue. It has been determined following a recent consultation discussion that it will continue until at least 2040.

[Baroness McIntosh of Pickering]

I want to press the Minister. We are being more ambitious under his scheme than under the original scheme, the EU ETS to which the UK originally subscribed. We are going for a stricter emissions cap, initially of 5%, and will probably be more ambitious as we go forward. We also have a shorter timeframe in which to subscribe. We are all being clobbered by this. It impacts on the Government’s growth agenda, as I mentioned, and on the cost of living that my noble friend mentioned from the Front Bench. I am honorary president of the warm homes front, and I know that particularly those living in challenging circumstances in heating their homes and in fuel poverty will find this incredibly difficult.

[Lord Whitehead (Lab)]

The issue is fairly complex because of the benefits and disbenefits that apply from having a really ambitious carbon pricing target. On the one hand, it drives the decarbonisation of home heating, domestic electricity delivery and all sorts of things like that in a low-carbon way, and, arguably, that is a substantial reducer of the price of household bills in the longer term.

[Baroness McIntosh of Pickering (Con)]

If it is going up from £100 to £138 per household, when are we going to see the reduction that we were promised in the general election?

[Lord Whitehead (Lab)]

The Government recently introduced an average reduction of £150 off electricity bills, through placing legacy bills into Exchequer arrangements rather than putting them back to households through obligations. We will continue to look at that on a wider basis. That is a good start for reducing energy bills, as it changes the nature of how the low- carbon economy works.

The noble Lord, Lord Moynihan, asked why we are changing these arrangements in a fairly rushed way. Part of the answer is that, if we are to have a good CBAM in place—after all, it is coming in a year after the EU CBAM—we have to get our skates on. We also have to get our skates on in linking the UK ETS with the EU ETS. The noble Earl, Lord Russell, is aware that, just six months after the linkage arrangements were agreed in principle at the EU-UK summit last April, the November negotiations and discussions started, and they are still under way at the moment. There are a number of answers on timescale and so on that I cannot give right now, but I assure the noble Earl that these are clearly under way and that there is a clear out from those negotiations.

I am conscious that we have spent a long time on this. I will write to the noble Earl and the noble Baroness on the remaining outstanding issues. I hope that I have been able to give a reasonably reassuring position on the need for this SI and the wider context of the underlying direction of all this policy and why this SI leads to a much better and more stable series of arrangements for both the UK ETS and CBAM, as it comes forward.

[Earl Russell (LD)]

We have had a good debate on this. We may have strayed slightly off the topic into some broader areas, but it is important that these issues are discussed and that, when we disagree, we disagree well. I thank everybody and the Minister for their responses.

[Lord Whitehead (Lab)]

I commend this instrument to the Committee.

Motion agreed.

Warm Homes Plan

Lord Whitehead Excerpts

Tuesday 27th January 2026 Lords Chamber

[Earl Russell (LD)]

My Lords, I welcome this Statement. Promised nearly two years ago as a “flagship response” to soaring energy bills and poor home efficiency, it has taken some time. Delays have consequences, particularly for the millions of families living in homes that are cold. They are paying the price.

That said, this plan brings forward welcome innovation and greater policy coherence, particularly through its focus on climate adaption and mitigation. It marks a significant milestone amid a national affordability crisis and an accelerating climate emergency. But if warm homes are one side of the equation, cheap, clean energy and market reforms are, indeed, the other. We need both to succeed.

The commitment to £15 billion of public investment is ambitious and right. Ministers forecast upgrades for 5 million homes and relief from fuel poverty for 1 million families by 2030. These are the benchmarks by which this plan will be judged. Too many families still live in cold and damp homes, causing ill health and rising health costs. Labour is right to call out the “lost decade” under the Conservatives, when investment collapsed and home upgrades fell by 90%. Greater vulnerability followed Russia’s invasion: 85% of our homes were still dependent on fossil fuels, and £40 billion in emergency support was required. This was the cost of the Conservatives’ delay.

Against this backdrop, the plan’s innovative pathway is welcome. Partnerships with British climate tech firms could, if implemented well, build a world-class retrofit industry, but SMEs need support, predictable regulation and open markets to bring products from design to real homes quickly. The proposed retrofit innovation panel and sherpa approval models are positive, if they deliver.

I am concerned about the six-month cliff edge gap between previous schemes winding down and new schemes starting. I ask the Minister for greater clarity, particularly on the use of the £1.5 billion reserve to help fill this gap.

I welcome the focus on climate adaption. Increasing heat will be a slow-motion killer, so homes must be built for cooling as well as warmth. Including air-to-air heat pumps and supporting communal ground source systems is vital. Passive measures are also needed. The plan’s emphasis on consumer-led energy flexibility is encouraging, with an ambition to triple solar by 2030. Integrating solar batteries, EVs and smart meters can turn homes into virtual power grid participants, cutting bills and easing pressures on the grid. However, this “rooftop revolution” will falter without faster grid connections, planning reform and more resources for local authorities.

The transition must create good jobs and uphold ethical standards. I supported the amendment from the noble Lord, Lord Alton, to the Great British Energy Bill on forced labour. Our clean energy revolution must not rest on exploitation. What measures are we undertaking with our EU partners and others to build our solar manufacturing capacity?

Despite the promising direction and other areas of overlap, this plan stands in isolation from Great British Energy and our community energy plans. This is a missed opportunity. We welcome the support for the UK heat pump industry but question whether £19 million will be enough. The dilution of deployment ambition is troubling—well below the 600,000 a year target by 2028. Even with a £7,500 grant, typical households still face a £5,000 shortfall, which will be too costly for many.

I reiterate the Liberal Democrats’ call for free heat pumps and insulation for low-income families. We welcome the innovation financing models but ask for greater details. Can the Minister assure the House that these will be properly regulated and transparent, and will not put people’s homes at risk?

The new rented sector standards, benefiting some 3 million over the next four years, are also welcome, but how will their effectiveness be measured? We welcome the warm homes agency as a single point of leadership. What more can be done to make sure that people are not the victims of energy scams? Can the Minister explain how the plan will be monitored and reviewed, and confirm some level of flexibility?

Too often in the past, insulation was missing or simply done badly. Government must work to restore confidence. It is essential that we do insulation and we do it well. Without insulation, the best technology cannot prevent heat loss.

Finally, I agree with the Opposition: we need energy market reform, and clean energy needs to be affordable. Electricity costs are too high; while they are that high, households will not change from fossil fuels, so we must balance levies and take them off bills.

To conclude, we welcome the ambition and the funding, but ambition must now be met with urgency, coherence and fairness. Ministers must close the funding gap, put insulation back at the heart, reform markets to make clean energy affordable, and back British workers and innovators. If Ministers rise to that challenge, this plan can deliver not just warmer homes but a fairer, cleaner and more secure future for Britain.

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

I thank the noble Lord and the noble Earl for their contributions on this Statement. I think I can say that both of them were pretty supportive, which is nice for something as large as this. I therefore bank that support, as it were, and will address myself to the very pertinent questions that the noble Lords put forward.

In banking the support, it is worth reflecting on the real scale and the extent to which there are winners all round in the proposal before the House. As the noble Earl, Lord Russell, said, it is £15 billion altogether. I might add that in respect of the total commitment by this Government, this is, all things considered, about two and a half times the total commitment of the previous Administration regarding overall energy-efficient measures. The noble Earl is also right to point out the collapse in measures that took place under the previous Government. Overall, this scheme is determined to get it right not only this time but for all sections of society.

The noble Lord, Lord Moynihan, pointed out what will happen to the 80% who he thought would not be particularly affected by this. When you look at the breadth of the proposals in the warm homes plan, there is indeed something for everybody in it. There are low-cost and interest-free loans for the private sector. For the private rented sector, there is the quite dramatic commitment to make sure that landlords spend £10,000 uprating their properties to what will provisionally be band C EPCs by 2030. By the way, there is no real evidence that landlords have put rents up in relation to their commitments to the previous level of spending £3,500 to increase to band E.

For the social housing sector, there will be grants and particular investments in that form, and, of course, substantial investment in seeking out those in fuel poverty and bringing treatments forward for their homes that will substantially uprate their warmth and decrease their bills. We really will decrease their bills, sometimes quite dramatically, and make sure that those are permanent changes, not just ones that go with the volatility of the energy market.

The noble Earl asked about the whole question of forced labour and solar panels. I appreciate his point. We live in a world in which it is difficult to assess accurately who is doing what as far as forced labour is concerned. In the Modern Slavery Act we already have the wherewithal to take action, if we can identify those circumstances. Certainly, this Government would want to do that. We are collaborating with the Solar Stewardship Initiative, which seeks to have a more accurate spotlight on the issue of forced labour. It is something we are very well aware of. The noble Earl will understand that this is a difficult area to get absolutely right straightaway, but it is work that is ongoing.

The noble Lord, Lord Moynihan, mentioned the ambition for heat pumps. I have a memory, from another time in the other place, about what happened with that ambition. The previous Administration declared a three-year programme for a total of 90,000 heat pumps, underwriting 30,000 per year for three years, up to 2025. Then there was a gap of three years, when nothing would have happened. Suddenly, in 2028 or 2029, there would then be 600,000 heat pumps installed per year—a piece of Guillermo del Toro magical realism, if ever there was one. That is what we are seeking to avoid on this occasion.

We want to have real targets, which we can actually meet. That is also important in terms of investment in UK heat pump manufacture, for example. We need to know that there is a steady market for those heat pumps, where they are increasingly manufactured in Britain—boiler manufacturers turning to heat pump manufacture—and that we have that target in place and we can reach it. With the measures in the warm homes plan—the £7,500 underwriting for heat pumps currently; the new underwriting for air-to-air heat pumps; the ability of heat pumps to be put into area schemes; and low-carbon loans and grants—there is every prospect that we can get to the target of 450,000 in an organised and effective way.

I am conscious that I have not been able to reply to every point that noble Lords made in response to the Statement. If I have missed anything, I will be happy to write to both noble Lords, so that we can have a full set of answers to their questions today.

[The Deputy Speaker (Lord Ashton of Hyde) (Non-Afl)]

The noble Lord, Lord Campbell-Savours, is taking part remotely. I invite the noble Lord to speak.

[Lord Campbell-Savours (Lab) [V]]

My Lords, I welcome the Government’s emphasis on solar. Is my noble friend following developments in the use of perovskite, a material that potentially greatly increases solar panel efficiency by as much as 30%, while reducing panel manufacturing costs? Are we monitoring the work being carried out by Oxford PV, a company—among others—at the forefront of the development of this technology? Can we be assured that, if it turns out to be commercially viable, we will back manufacture of the product in the United Kingdom and not leave it to the Germans or Chinese to take control of the market?

[Lord Whitehead (Lab)]

I thank the noble Lord for his question. It might be helpful if I go into a brief disquisition on perovskite and its qualities, to inform the House about the noble Lord’s question.

Perovskite is, quite simply, a wonder product in terms of solar development. It is a mineral, but largely made synthetically, and manages to trap a wider spectrum of the sun’s rays than traditional silica does. So-called tandem panels which have a silica panel underneath and a perovskite film on top have an increased efficiency of 20% to 30%—which is a fantastic addition. With solar on a field basis, far more power can be got out of a smaller series of solar arrays. As far as home solar is concerned, an enormous boost can be achieved—perhaps half the power used can be got from the roof, with the same amount of solar panels than would have been put on previously. It is a very exciting development.

Oxford PV is the company spin-out from Oxford University, which is engaging in the development and commercialisation of those tandem panels. There is also a pilot production line under way in Germany.

The Government have been very supportive of Oxford PV in its journey. There was an original grant for Oxford PV of, I think, £668,000 in 2014 and there have been grants from UKRI subsequently. Oxford PV is presently in some discussions with the Department for Business and Trade, as this is something that we very much look forward to developing for the great advantage of the solar world generally. I assure the noble Lord that the Government are active in this pursuit, with the prizes that it can bring.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I thank my noble friend the Minister for his very extensive Statement on the warm homes plan today. Does he agree that heat pumps are most effective when paired with insulation? Could he say a little more about what the Government will do to increase insulation in existing homes now that the ECO scheme is ending? If the future homes standard is going to be published and implemented, when will that take place? Bearing in mind all the floods that we have seen over the last number of weeks and days, what further climate change adaptation measures will be considered? Maybe the Minister would write to me on that final issue.

[Lord Whitehead (Lab)]

I thank the noble Baroness for that contribution. The question of heat pumps and insulation is very clear: heat pumps do not work as well as they should if a property is poorly insulated, so increasing insulation hand in hand with heat pump installation is a very wise thing to do. However, among other things, the warm homes plan tries to take a measured view of where fabric improvements are perhaps necessary and needed, and where other forms of enhanced energy considerations could take their place. There are properties that are very difficult to insulate to the right standards but, with solar, batteries, heat pumps and such things, they can come up to the sort of standard you require. So this warm homes plan is a little more careful about the combination of various factors. Elements of the plan will involve fabric—probably about 700,000 homes will continue to get fabric uprating—but other factors will be coming into being.

I will be happy to write to the noble Baroness about the future homes plan and how that will work out. It is under way at the moment and will, among other things, ensure that new homes, when built, will be of a sufficient standard that they will not need fabric uprating for the future, because it will be in the definition of those new homes. That is going to be produced shortly and I will certainly inform the noble Baroness about its progress as soon as I can.

[Lord Grantchester (Lab)]

This is great news, my Lords. It would be good to be reassured that the warm homes agency will act as a one-stop shop to provide advice to consumers to help them navigate through the best options for their homes. The fuel poverty strategy rightly recognises the importance of using and sharing data to support more effective targeting and delivery of fuel poverty interventions, such as energy efficiency upgrades and installations of low-carbon technologies. Can the Minister outline how the Government intend to use anonymised and aggregated smart meter data to enable those interventions to reach those households in greatest need?

[Lord Whitehead (Lab)]

There is a large number of applications of anonymised and aggregated data from smart meters, assuming that you have enough smart meters installed in any one place to make the data meaningful. We still have some problems with that and the smart meter rollout but, in general, it can be used for a variety of applications. For example, the warm homes programme is looking to develop area-based applications wherever possible: having the data on where people in fuel poverty are and what areas have a concentration of such people gives you a very good chance of making sure that you can relate the investment that you are putting in with actually making a difference on fuel poverty. Previously, one of the problems with schemes was that we just did not know where those people were. Quite often, the schemes operated a scattergun approach that did not really hit the target as they should have done.

[Baroness Young of Old Scone (Lab)]

My Lords, I welcome the Statement from the bottom of my heart because, for a long time, I have been very uneasy that we have approaching 1.6 million children living in conditions that can only be described as Dickensian. It simply should not happen in a modern UK. We are uniquely exposed to the volatile gas price and we have the least energy-efficient houses in Europe. It is a litany of failure and I think that this plan goes some way to turning that around, at long last.

It tackles three very important issues as far as I am concerned. I want to explore one in particular with the Minister. It tackles the cost of living issue, which is going to be even more important in view of the volatility of the global political situation. It tackles the health impacts on poor families and of poor building standards, and it creates UK jobs. But when the Environment and Climate Change Committee took a look at some of the issues to do with consumer behaviour and change to new systems, the lesson that came out loud and clear from all the witnesses we saw was that they wanted help to make it easier and cheaper to switch from inadequate, polluting and ineffective standards to modern technologies. The role of the warm homes agency is very welcome and is really important. Can the Minister tell us a bit more about how that agency will be tasked with ensuring that the schemes that are in place do not fail and that the sort of consumer confidence to make the change that is going to be really fundamental to this is going to be promoted?

[Lord Whitehead (Lab)]

My noble friend is right to focus attention on the extent to which consumers and the general public will have confidence in the changes that are afoot and will be able to make decisions as to how they participate in those changes in the best way possible. I think that is one area where, as a country, we have been quite lacking in the past—although I exempt from this the nation of Scotland, which for quite a while has had a national advice agency in place, giving impartial advice and assistance and seeing that through to installation.

One of the functions of the warm homes agency will be to provide unbiased, informed advice and assistance to ensure that what is being proposed for individuals’ homes—and after all, they are the things that are most important in their lives and the things they are most concerned to get right—are done with a high degree of transparency, reliability and effectiveness. I hope that will be an early development of the warm homes agency as it comes into place. In the context of what we have seen just recently with the problems that ECO4 has had and the Public Accounts Committee report on it, we really do have to have that advice in place, and also that regulation to make sure that the standards that we think we are delivering to people really can be applied properly.

[Lord Whitty (Lab)]

My Lords, I put on record my profound support for this very significant commitment, which meets not only the fuel poverty objectives but the environmental and economic objectives in developing our energy policy. The Minister may dimly recall that many years ago I was the Minister who brought in and developed the Warm Front programme, which was so tragically cut off in 2010.

In parallel to the information to consumers—and in particular to the least well-off consumers—about their options on insulation and heating, there needs to be a commitment to an effective employment policy, because a lot of new skills are going to be needed. To ensure quality control, we need to ensure that those who are working for the installers under the authority of the warm homes agency are effectively trained and that there is a forward plan for them. At the moment we do not have adequately skilled people on the ground, and a lot of those who are there are getting on a bit. So a new, significant programme of training and retraining is going to be needed in parallel with this commitment, which in general is a fantastic one. I congratulate the department on it.

[Lord Whitehead (Lab)]

My noble friend is quite right. We are going to need a great deal of upskilling of individuals who are participating in this programme to make sure that they provide the best possible service that they can. Indeed, to return to that PAC report on ECO4, that was perhaps an element of the process whereby people were putting, in particular, external home cladding into place without really knowing what they were doing. It is very important that we do that and that we see the jobs that are going to come out of this programme—200,000 or so of them—as permanent, long-term, skilled jobs and not fly-by-night little contract jobs. We want to make sure that we are investing in real jobs and good jobs.

I bear the scars of the previous things and congratulate my noble friend on his hand in Warm Front, which he will recall, along with programmes such as CERT and CEFs, really made a difference at that early stage. It is tragic that they all collapsed in the way they did. The opportunity now not only to bring back the lessons learned from those programmes but to expand them in the way that has been done warms the bottom of my heart.

Offshore Wind

Lord Whitehead Excerpts

Monday 19th January 2026 Lords Chamber

[Earl Russell (LD)]

My Lords, I start by welcoming the noble Lord, Lord Moynihan, to his position, and I look forward to working with him.

On these Benches, we welcome the results of allocation round 7, which has secured a record 8.4 gigawatts of future offshore wind capacity, including 192.5 megawatts of innovative, floating offshore wind, and seen £22 billion in private investment. This marks an important step forward on our clean power journey and towards our future energy independence—enough clean energy to power the equivalent of some 12 million homes or roughly equivalent to 12% of national energy demand.

This shows that, when properly managed, Britain can lead the world in clean, secure and affordable energy. After the chaos of the previous Government’s failed allocation round 5, which delivered no offshore energy contracts at all, this progress is indeed an enormous relief. This auction confirms what my party has long argued—that offshore wind is the future backbone of our energy electricity system.

Projects such as Berwick Bank in Scotland—set to become the largest offshore wind farm in the world—and the one in Wales, the name of which literally means “sea breeze” and is the first major Welsh project in over a decade, show that progress is being made.

But this is not only about climate targets; it is about our future national energy security. In an increasingly unstable world, every turbine we build reduces our reliance on volatile fossil fuel markets. Securing Britain’s wind power means freeing ourselves from the price shocks of the global gas markets. We should recall that the Office for Budget Responsibility estimated that the UK’s energy support response for the war in Ukraine, driven by fossil fuel prices, cost us £78.2 billion over 2022-23 and 2023-24. In contrast, CBI figures show that the green economy grew by 10% in 2024, and AR7 secures an important future pipeline of continued and sustained green jobs and green British jobs.

The UK has some of the best wind resources in the world and, when we harness our renewables—wind, solar and tidal—we strengthen our energy independence. Despite what some may claim, wind power remains the most effective long-term way to bring down energy bills. The Energy and Climate Intelligence Unit reports that, in 2025 alone, wind generation reduced wholesale electricity prices by around one-third. The average strike price in this round, around £91 per megawatt hour, remains extremely competitive. By comparison, building and running a new gas power plant today would cost around £147 per megawatt hour, making wind power roughly 40% cheaper.

However, we must be candid about the challenges that the sector faces: rising bid prices, driven by global supply chain pressures; high interest rates; and soaring material costs, particularly for copper and steel. I therefore ask the Minister what steps the Government are taking to address these issues so that our 2030 onshore wind targets remain achievable.

The contracts for difference mechanism protects consumers and secures inward investment. It is a policy that has stood the test of time, but it can still be improved. Is the Minister considering extending CfD contract lengths from 20 to 25 years? This could provide greater certainty, lower financial costs and ultimately deliver cheaper electricity. Similarly, we think that moving older renewable projects from more expensive renewable obligation certificates to new CfD contracts could save typical households up to £200 a year.

More broadly, urgent action is needed to reduce energy costs by other means. Now that the Government have ruled out zonal pricing, I ask the Minister what alternative market reforms are being pursued to drive down energy bills. Despite rising renewable generation, gas still sets the market price around 97% of the time. Are proposals being assessed to move gas plants into a regulated asset base? As has been suggested, this could save some £5.1 billion a year by 2028, according to calculations done by Greenpeace. If we do not urgently upgrade and streamline our transmission systems, this record capacity will remain stuck in connection queues instead of reaching our homes and businesses. Does the Minister agree that a long-term, properly resourced spatial energy plan is now urgent and essential to ensure that these connections happen at speed?

The Liberal Democrats have a clear vision for 90% of the UK’s electricity to be generated from renewables by 2030. AR7 is indeed a welcome step on the road, but more must be done to ensure that we reach our targets, reduce the cost of energy bills and update our transmission systems.

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

I thank the noble Lords for their contributions this evening. They were deeply contrasting in both tone and content: one I substantially agree with; the other I do not at all. We need no guesses as to which is which. I am particularly disappointed by the contribution from the Opposition Benches and the noble Lord, Lord Moynihan. I think I have already welcomed him to his place in Questions, but this may be the first time we have sat across the Benches for a Statement or other debate, so a further welcome would not go amiss. I hope this, as it is shaping up to be, will be the beginning of a good debate between us in the House.

It is worth just reiterating what actually happened in AR7 for the House to judge whether this was the miserable failure that the Opposition Benches appear to suggest it was or the great success that I and, I think, the noble Earl, Lord Russell, think it was.

In AR7, we procured 8.4 gigawatts of new, clean, low-carbon power for this country. That is new capacity over and above what we have at the moment and, indeed, represents no less than 40% of the installed capacity of offshore wind so far. In one round, the amount of wind capacity we have has leapt. That is at a clearing price 20% below the administrative ceiling price—a very competitive auction was undertaken—and that is within the bounds of present energy market prices. In the likely future that we see, it is not only below or around market prices; it is also a stable cost. Whereas, of course, we do not know where gas and other energy prices are going because of the extreme volatility in the world, and of gas prices over the last five years.

Interestingly, between this Statement being read in another place and repeated now, gas prices have leapt by nearly 40%. We are in a volatile gas market. Do not forget, prices went up as high as 600p per therm in the period just after the invasion of Ukraine. Compare the volatile price of gas fuels if we go down the energy route suggested by the Opposition—more purchases of unabated gas-fired power stations. Do not forget that this is not only an auction about energy prices and capacity; it is an auction about low-carbon energy prices and capacity. Among other things, if the Opposition had their way, we would apparently invest in a huge number of unabated natural gas power stations. That means we would be locked into that high-carbon system of generating power for perhaps another 30 to 40 years, which would be completely insupportable in terms of anybody’s energy ambitions.

The noble Lord says that he wants our energy policy to be characterised by security, affordability and clean energy. In this round, we achieved a great step forward for our energy security: this is all homegrown energy, not energy coming in on ships from elsewhere, or that is the responsibility of a dictator or a cabal of overseas energy organisations. This is British home-grown local energy that we have procured, and with it a bright future.

On affordability, the noble Lord referred to the levelised cost of energy, which he said was no longer the way to compare prices. That is a little bit surprising, because that is exactly what the last Government did in previous rounds. In the previous round—AR5—they secured precisely zero low-carbon energy, so compare and contrast, if you will, with what we are talking about today.

It is true, as the noble Earl, Lord Russell, says, that the clearing price of this auction ought to be put in the context of what you can do to try to get new capacity on board as far as this country is concerned. You can either buy a series of gas-fired power stations at a cost of £134 per megawatt hour—the levelised cost of energy—or you can procure low-carbon capacity which both meets your climate targets and keeps the prices down on a constant basis of affordability for the future.

The result of the auction is actually good for affordability and for the stability of prices in the future. If we are thinking of building new capacity at £134 per megawatt hour levelised cost of energy as against £91, and we have procured something like five gas-fired power stations-worth of energy output with this auction, as far as we are concerned, there is really no contest.

Finally, as I have said, it is clean energy. This is what I thought we were all committed to for a period in the past. It is extremely disappointing that the Benches opposite appear to have decided to move away from clean energy and go back to gas and dirty energy, which we really cannot sustain as far as our future is concerned.

[Baroness Bennett of Manor Castle (GP)]

My Lords, for the Green Party I welcome both this Statement and the decisions that it records.

I have a question about a specific area which is going to need vastly more development. The allocation includes two floating offshore wind projects. They have higher prices but there is a clear strategic intent if the Government are going to meet their target for offshore wind. We do not have enough sites for turbines embedded in the seabed and we are going to need these floating turbines.

If the Government are going to move beyond these demonstration-type levels and deliver pipeline depth and cost reductions, this will need to advance very fast. Can the Minister give us a picture and a sense of where the Government see this going in terms of floating offshore wind?

[Lord Whitehead (Lab)]

I thank the noble Baroness for that intervention. It gives me an opportunity to confirm the two floating offshore wind projects that have been agreed under this auction round. I might add, by the way, that the auction rounds were not a sort of shoo-in for anybody who wanted to come along and invest, as some people have portrayed them. They were very competitive. The number of entrants to the auction was substantially larger than the number of contracts finally agreed. Among other things, this shows that there is a real appetite for this kind of investment going forward.

That is the case with floating offshore wind. Although the two schemes that were agreed—one in Scotland and one in the Celtic Sea—are not, shall we say, final, full-scale arrays as far as floating is concerned, they represent a tremendous step forward in the development of offshore beyond the continental shelf in the UK. Huge new areas offshore from the UK can be opened up to offshore wind.

Of course, that price is not the same as the price we achieved with the mature, bottom-based offshore wind that we have been talking about, but, if we look at the original administrative strike prices when offshore first took off, they were not dissimilar to the sort of prices that we are now seeing for floating offshore wind. I am confident that, once those arrays get larger, and with the flow of fabrication and assistance which the noble Baroness will probably know is already happening very positively, in the Celtic Sea in particular, the net benefit for Great Britain of floating offshore wind will not just be a large number of jobs and more income coming into different areas of the UK than has been the case for bottom-based offshore at the moment. It will represent a technology that really will allow the whole of the UK to participate in the offshore wind revolution, not just the areas which hitherto have had the main developments in their particular zones.

The Celtic Sea, in particular, is just a taster of what is going to come in the not too distant future—and, by the way, it will be a future in floating offshore wind that will be a British future. Home-grown technology will lead in this particular area, which will not only have an impact in UK but will have a substantial export impact as well.

[Lord Teverson (LD)]

My Lords, I also welcome the noble Lord, Lord Moynihan, and his expertise to the Front Bench. He is certainly a very effective parliamentarian, even if I do not agree very much with his narrative. But we will see where we get to there.

I also welcome the Government’s announcement, but it is important that we remember that electricity is only part of this country’s energy need. The other sides are, in particular, transport and heating. I am concerned that, although the Government may remain strong on electricity generation, we are getting whispers of them moving backwards in those other areas, including on electric vehicles, heat pumps and finding alternatives to space heating. I would like reassurance from the Government that that is not the case. I certainly hope it is not. Also, where are we now on the future homes standard? That is absolutely fundamental for how we move forward domestically on energy consumption.

[Lord Whitehead (Lab)]

I am afraid the noble Lord will have to wait for about a week before the warm homes plan comes out. That will contain, so I am reliably informed, a great deal of detail about precisely the areas of heat, efficient low-carbon homes, heat pumps—all the sorts of things that are the other side of the energy revolution. We hope they will begin to be combined together into coherent programmes, working with each other to ensure that, among other things, that greatest piece of low-carbon energy—the energy you do not use—is properly incorporated into overall programmes.

I assure the noble Lord that this is uppermost in our minds. We are aiming, as we always have, to develop a comprehensive palette of policies that will deal with all aspects of low-carbon energy, energy security and energy efficiency. Indeed, the noble Lord will note that the AR7 announcement is not complete, inasmuch as there are further pots to be reported on, including solar, tidal, geothermal and various other things, in the next week or so. So I hope we will come back to this Chamber and compare and contrast notes on the picture that we will have when those two things have actually happened. I think the noble Lord will be pretty pleased with what will result from it.

[Baroness Young of Old Scone (Lab)]

My Lords, I commend the Minister on this Statement and welcome it very much. It is a welcome return from the terrible days when you put out an auction and nobody played the game. It really was quite heartbreaking when we had those dreadful doldrum days.

I shall focus on something that the noble Lord, Lord Moynihan, raised, which is the increased demand for energy, particularly that caused by data and AI centres. The one thing we must not allow to happen is that we accept that that is a given. We have been fairly effective in keeping the whole concept of energy efficiency alive, and the warm homes standard is going to be a good example of that. The question about the predictions of the energy demand of AI needs to be approached in a different way that says we cannot simply see demand increase but must adopt measures that mean that some of these centres are using not only the most up-to-date modern technologies but are encouraging future technologies in order to reduce their impact on the environment, by not only energy use but water use. I would love to say that photonics is the answer if I only knew what photonics is, but technologies are being talked about that will impact on AI demand. I would appreciate a comforting voice from the Minister that at this very new point in seeing a further increase in demand, we will not lose sight of trying to examine seriously possible technologies.

--- Later in debate ---

[Lord Whitehead (Lab)]

My noble friend makes an important point about the amount of work we still have to do and the extent to which we have to integrate what we are doing into a whole low-carbon system that works. For example, one consequence of the previous Administration’s grievous neglect of grid development and of methods of supporting grid development is that, if we can get grid queues shorter and develop the grid itself and use it more efficiently, a lot of the constraints in the system that we are seeing at the moment will fade away. The system will be used far more efficiently with a greater amount of electricity flowing around it, making much more efficient use of what we have already.

I agree that there are some unprecedented demands coming our way, particularly as far as data centres are concerned, and we need to look at imaginative ways in which we can not only make sure that we are ready for that demand, but start to look at how those data centres can fuel their own requirements, for example, by developing data centres in conjunction with heat sources so that their heat requirements can be dealt with on site. Ways in which local grid systems, outside constraints, can feed into data centre development need to be looked at in the context of a whole system analysis of how an efficient energy system is going to work for the future. We recognise that getting a fabulous result as far as offshore wind is concerned is only part of the issue. It is a much wider issue than that, and one we have got to get right in terms of what we know will be a substantial demand for electricity in the years ahead.

[Lord Moynihan of Chelsea (Con)]

My Lord, I congratulate my noble and homonymous friend on his new position, which I am sure he will occupy with distinction. The Minister asked a question about dirty energy and how could we possibly promote it. In fact, the truth is the reverse. The Minister is promoting dirty energy. Having deindustrialised this country with impossibly expensive energy, we now buy our steel, our goods and even the solar panels for this renewable energy from China, which makes them using power from energy generation stations fuelled with coal, of which they build one per week. The dirt is going up into the atmosphere and, amazingly, it travels around the world. It does not just hang over China. That is where the dirt is. It is a complete mistake to believe that this side is against clean energy; we are just for sensible energy.

I noticed also that the Minister did not reply to my noble friend’s remark about intermittency and the fact that, right now, we have quite a lot of offshore wind, but it is not being used much because the wind ain’t blowing. Does he think that these new contracts for difference will make any difference to the wind as it decides whether to blow or not? I do not believe so.

I agree with the noble Earl, Lord Russell, that we can lead the world. We are leading the world in high electricity prices right now. Regardless of whether we have offshore wind, we will need gas, as the noble Lord implied earlier, and we are closing down our gas; we are refusing to build new gas wells in the North Sea. So, what are we doing? We are buying it from the North Sea from Norway. It was announced today that Norway’s sovereign wealth fund, its $2 trillion oil fund, has embarked on a major sell-off of its holdings in London-listed small-cap and mid-cap companies, even as Rachel Reeves hails a new golden age for the City, blah blah.

The noble Baroness, Lady Young, said, “In the bad old days nobody played the game; it is great that now they are playing the game”. Can the Minister confirm that the private equity houses, which are the major financiers of these contracts, agreed this very high price, which will further ruin our economy, only if they got 20 years? Is that why the noble Baroness is able to rejoice that somebody is playing the game now, because they got 20 years in which our economy will be ruined?

[Lord Whitehead (Lab)]

I do not recognise the scenario that the noble Lord paints. Not only is this AR7 settlement good for energy prices—indeed renewables and low-carbon energy have reduced overall prices by 25% because of the effect of the merit order and the driving of gas to the margins in terms of prices—but the industrial work that will be undertaken will be enormously good for a large number of jobs with the fabrication and erection of piles, jackets and all sorts of things which go with this. By the way, the Government are producing a clean energy bonus to make sure that that work is in Britain, so it is a major industrial step forward for this country in its own right.

The noble Lord mentioned that I had not said anything about intermittency. I thought that I had dealt with that issue by saying that one thing we have to do as far as our energy is concerned is run the whole system smartly. Wind, both onshore and offshore, has tremendously increased its efficiency—ie, the proportion of time it produces wind—and the issue at the moment is not whether wind collectively produces a large output on a reliable basis. After all, we had over 80 days last year when renewables and low carbon completely fuelled our energy economy. The fact is that intermittency is a problem only if you do not have a smart system to use that energy where you have it in the smartest possible way. That is why, among other things, there has been such a development imperative on batteries and other low-carbon forms of storage that distribute the energy in a much more coherent way from the sources that we have.

It really is not a scenario that I recognise. I do not think the British economy is going to be ruined by this; on the contrary, this is going to be a great leap forward for the British economy. After all, as has been said on a number of occasions, the green economy in Britain is growing three times as fast as the general economy. This is where the growth is going to come from over the next period, and is very much a leading part of that growth and the new industrial future.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the Minister referred to onshore wind. Under previous Governments, we saw onshore wind come to a grinding halt for reasons of apparent short-term political advantage. Onshore wind has the potential to be part of community energy schemes. Offshore wind inevitably tends to involve large multinational companies, but onshore wind gives communities the chance to decide for themselves how to generate their own energy and use local resources. Can the Minister outline where the Government are going with that?

[Lord Whitehead (Lab)]

I am sure the noble Baroness will be aware that one of the first things that the new Labour Government did when we took office was, literally at the stroke of a pen, to remove the ban on onshore wind. We have subsequently made sure that onshore wind enters the allocation rounds. At a local level, Great British Energy will undoubtedly be supporting quite a lot of onshore wind and a number of other community and local renewable resources. The future for onshore is set very fair. After all, it is even cheaper than offshore and just as reliable and long term—indeed, it is marginally better in its overall performance. Onshore is something that we very much want to see as part of the overall package. The noble Baroness will have to wait for about a week before she sees what we have come up with as far as the allocation of further pots is concerned.