Energy Bill [ Lords ] (Second sitting)

Lord Whitehead Excerpts

Committee stage
Tuesday 23rd May 2023 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I do not have anything much to say about clause 7 standing part. I will have some things to say about some of the clauses that follow, but the power to grant licences is pretty unexceptional, and we do not have anything to add or take away from the clause.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Unusually, I will speak for longer than the hon. Gentleman—I say that just as everybody was getting excited. I understand that clause 7 and subsequent clauses on granting licences and the economic models are critical to getting carbon capture up and running. Obviously, I want these provisions in place, but I ask the Minister for a bit more detail.

Clause 7 is all about the grant of licences, which is to be undertaken by the regulator. That will be Ofgem, as was said earlier in response to an intervention. The Minister assures us that it has the expertise and resource to do all the additional licensing work, but we discover in the explanatory notes for clause 7 that under clause 16, for an interim period, it is actually the Secretary of State who has responsibility for granting licences. Why is that? Why have the interim period? What expertise is available to the Secretary of State in-house when they are granting these licences? Who will oversee that? How long does the interim period last? From what I can see in schedule 1, it lasts until the Secretary of State passes regulations to end the interim period. I would like a bit more clarity on how long the interim period will last.

Is the interim period and the granting of licences by the Secretary of State a mechanism to speed up the grant of licences for track 1 projects that have already been selected by the Government? Does that not potentially give them an unfair financial advantage? The Minister touched, in his opening remarks, on competition for licensing and keeping everything competitive. How does he square these two things?

When does the Minister envisage the first licences being granted by the Secretary of State, and when does he envisage them being granted by the regulator? How will the licences that are issued in the interim period be compliant with clause 12, which is still to come and is all about standardisation? That helps to keep things competitive and transparent.

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[The Chair]

Dr Whitehead?

[Dr Whitehead]

I am attempting to get to my feet, Mr Gray.

[The Chair]

You do not have to, but you can do.

[Dr Whitehead]

My knees get worse as the afternoon goes on.

The clause is, as the Minister said, about the power to create a licence type. I appreciate that that is in the gift of the Secretary of State in the first instance; the power will be transferred subsequently, as we said when debating clause 7. This clause, however, appears to do two things, and possibly goes far wider than the Minister envisages. It allows for regulations so that

“different types of licence may be granted…in respect of different descriptions of activity falling within section 2(2).”

Clause 2(2), as we have discussed, defines activities that are prohibited if unlicensed. Those are:

“operating a site for the disposal of carbon dioxide by way of geological storage”;

and

“providing a service of transporting carbon dioxide by a licensable means of transportation”.

We mentioned the possibility of an amendment that would have covered carbon dioxide usage as well, as the Minister will be aware. The power under clause 8 would allow different licence types within that overall framework. As the Minister said, different activities may emerge. Various activities will fall well within clause 2(2), and others will be to the side of that.

As far as I can see, the power in clause 8 allows the Secretary of State to sweep up what is both central to and to the side of the activities in clause 2(2). That may be good for the Secretary of State, but it is not good for the companies developing carbon capture and storage, who are not sure whether this power will or will not sweep them up—they do not know. They are not sure whether the activity they are carrying out on the margins of the licensing arrangement is non-licensable, or will become licensable if and when the Secretary of State decides by regulation that different kinds of licences can be provided. A lot of that depends on what the regulations say. If they are broad, as this power to create licence types appears to be, companies will not have any assurances about what they are doing. When the regulations come out, they might prefer a menu of the different licence types in the Secretary of State’s mind.

I appreciate that we are in the realm of known knowns, known unknowns and unknown unknowns, but a menu of different licence types that are reasonably close to licensability in the mind of the Secretary of State would be very helpful for companies operating in this sphere. Will they be more or less likely to need to apply for a license? Would the licensing situation hold up their activities in any way, or could they go ahead with what they were doing on the margins, not within the new license type? Could the Minister comment on what is in his mind about the regulations? Will he provide that menu? If so, what might it consist of?

[Andrew Bowie]

I thank the hon. Member for his questions. I do not think the former Defence Secretary of the United States would have expected to be mentioned so much in the UK’s Energy Bill Committee—we have talked about known knowns, known unknowns and unknown unknowns. The hon. Member is correct: we are dealing with a lot of unknown unknowns when we talk about exactly how and when the industry and technology will develop. As they develop, a decision will be taken at an appropriate point about what will and will not be licensable, and what types of licence will and will not apply.

The hon. Member talks about the regulations and whether there will be a menu of options. Clarity is good for everyone, especially when developing a new technology and deciding whether to invest in carbon capture, usage and storage. We will be as clear as we can in regulations about what will and will not be licensable and what licences will apply. However, I would not like to be drawn at this stage on what will be in the regulations. That will be for Government and industry to work up together as we move toward the date when they will apply.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Procedure for licence applications

[Dr Whitehead]

I beg to move amendment 77, in clause 9, page 10, line 6, after “the Secretary of State” insert

“must ensure that licences are only granted to fit and proper persons, and”.

The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 78, in clause 18, page 19, line 33, at end insert—

“(c) may only be transferred to a person the Secretary of State considers to be a fit and proper person for this purpose.”

The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.

Amendment 79, in clause 43, page 39, line 16, at end insert

“provided that the transferee is considered by the Secretary of State to be a fit and proper person for this purpose”.

The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.

Amendment 80, in clause 50, page 45, line 35, after “any” insert “fit and proper”.

The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.

Amendment 82, in clause 61, page 54, line 16, after “given to a” insert “fit and proper”.

The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.

Amendment 83, in clause 61, page 55, line 5, at end insert

“provided that the transferee is considered by the Secretary of State to be a fit and proper person for this purpose”.

This amendment refers specifically to the need for the hydrogen counter party to be a fit and proper person. The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.

Amendment 87, in clause 82, page 71, line 42, at end insert—

“(l) for the certification by the Secretary of State that the transferee is a fit and proper person.”

If the Secretary of State needs to find a new counterparty this amendment obligates that they must ensure they are a fit and proper person.

[Dr Whitehead]

Amendment 77 concerns licences being granted to fit and proper persons; the other amendments relate to matters such as the transfer of licences. Members may think that the application of the term “fit and proper” to licensing arrangements is pretty obscure, but I will try to disabuse them of that notion. The term “fit and proper” can apply to both a real person and a person in law, which can be a company or an organisation. It appears in a number of laws and regulations where the Government or a regulator have a responsibility for appointing or licensing individuals or companies.

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[Andrew Bowie]

I thank the hon. Gentleman for his amendments. They seek to place responsibility on the Secretary of State to ensure that individuals obtaining a carbon dioxide transfer and storage licence are fit and proper. The amendments would affect the licence application, the licence transfer, the special administrative regime and transfer schemes.

It is clear that the Opposition and the Government share the same desire here, requiring the utmost standards for those wishing to engage in the transport and storage of carbon dioxide, in support of the Government’s ambitions to scale up the deployment of CCUS and its important role of achieving our net zero target. I therefore support the hon. Member for Southampton, Test’s aim; however, as addressed in the other place, the specific inclusion of “fit and proper” within the drafting of clauses across part 1 is actually unnecessary. That assurance is already inherent within the Secretary of State and the economic regulator’s role within the licensing regime. Despite sharing the desire, I ask for the amendment to be withdrawn because I believe that it is superfluous in this instance.

Amendments 82, 83 and 87, which were also tabled by the hon. Member for Southampton, Test, seek to make the Secretary of State responsible for ensuring that an individual designated as a hydrogen production counterparty is deemed “fit and proper”. The Government anticipate that the Low Carbon Contracts Company Ltd, or LCCC, which is the existing counterparty for contracts for difference and the planned counterparty for the dispatchable power agreement, will be the counterparty for the low-carbon hydrogen agreement, subject to its successful completion of administrative and legislative amendments.

In taking the decision to proceed with LCCC as the counterparty to the low-carbon hydrogen agreement, the Secretary of State considered, among other things, LCCC’s ability to deliver the required functions and its experience and track record in contract management. Those considerations would bear on any future decisions, which would also be subject to normal principles of public decision making. Again, I agree with and share the same aim and desire as the hon. Member for Southampton, Test, but the amendments are superfluous. I politely ask that he withdraw his amendment.

[Dr Whitehead]

Naturally, the fact that the Minister did not eagerly grasp and endorse the substance of the amendments and run off to the Table Office is disappointing, but I accept that he has perhaps looked in detail at how the legislation will work and is satisfied that an equivalent of the “fit and proper person” test can effectively be carried out under the provisions of the Bill. However, that has not been the judgment of other parts of Government, which have found that particular wording to be of great help in underlining what their responsibilities are. It also ensures that the judgments that they make in exercising their responsibilities are fairly bomb-proof: if the Secretary of State presses the “fit and proper person” button, there is not too much an aggrieved party can do about it. I appreciate that that is different for different licences.

The Government have effectively decided that the LCCC, which I think is a fit and proper person, will be the hydrogen counterparty, although that is still to come in legislation—so we are legislating for something that we think will happen later, but not right this minute. I leave that with the Minister. He has not agreed to amendment 77; he thinks it superfluous. I slightly disagree—I think it would be useful—but that is to some extent a matter of judgment. Perhaps in a few years’ time, when a Minister becomes seriously unstuck with a particular appointment, we will get together again and see what can be done about it. For now, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Andrew Bowie]

I beg to move amendment 1, in clause 9, page 10, line 15, leave out subsection (10) and insert—

“(10) Section 10(6) (meaning of ‘appropriate devolved authorities’) applies for the purposes of subsection (3) of this section as it applies for the purposes of section 10(3).”

This amendment corrects a drafting error in the definition of “appropriate devolved authorities”.

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[Andrew Bowie]

As the hon. Gentleman knows, we have launched a track 2 process; there will be an update on timings in the summer. Of course, we want to open up the process to as many companies and organisations seeking to get into this technology as possible, but it is really important that the appropriate steps are followed to get to that stage. That is why we are proceeding at pace with track 2 and why we will update everybody concerned with that in the summer.

Whether a competitive process is appropriate in the enduring regime will depend on how the CCUS market develops, including the anticipated number of market participants—that relates to the answer I just gave to the hon. Member for Kilmarnock and Loudoun. Any regulations that may be made under the power would first be subject to consultation with the economic regulator and the devolved Administrations, and they would be subject to the affirmative procedure.

[Dr Whitehead]

This is a bit unsatisfactory, to be honest. I appreciate that the Minister has very carefully said that this is a discretionary power for the future and the Department may, as the CCUS market develops, consider making—I presume—some licences viable on a competitive basis, and that the Government may do that by regulation; I am pleased to hear that the regulation will be subject to the affirmative procedure, should the Government do that. Nevertheless, that seems to leave huge gaps in the procedure by which competitive licences might be determined. Is the determination based on, for example, how much money a company gives for the licence, and would the competitive licence mean that the highest bidder won the licence regardless of their suitability for the purpose?

Would the judgment on the creation of the licence be subsumed in other factors such as finances, or would the competitive licence be tendered on the basis of who is geographically most able to do something in terms of the viability of the body or company complying with a licence? Would there be a financial test? Once a competition has been entered into and the terms are not carefully set, we may get to a situation of “Beware your wishes; they may come true.” What we get as an outcome of a competitive tender may not be what we wanted to happen, but if we set it in train through the competitive process and have not defined it carefully enough, there will be no going back at that point.

It will be necessary to think through this way of doing things very carefully before proceeding, even with discretion being exercised. I am concerned that there is not enough in the legislation to guide us on how that thinking process might be carried out. Perhaps the Minister will give us a little guidance on the sort of things that would be to the fore should the competitiveness process be undertaken, and indeed the things that he would not consider in such a process. I am delighted to see that he has received bit of guidance on the matter. That may well help us all.

[Andrew Bowie]

I thank the hon. Member, and completely understand his concerns and where he is coming from. Ultimately, however, the appropriateness of a competitive approach to licence allocation will be considered, taking into account the learning from both the track 1 and the ongoing track 2 licence allocation processes, as well as the wider developments in CCUS markets and technology. This is not without precedent. In gas and electricity, Ofgem runs different processes for allocating different licence types. Some are allocations that are run competitively, such as offshore transmission licences, and other licence types are not.

The power in clause 8 also enables consequential amendments to be made to the Bill should they be considered necessary to facilitate the making of different licence types, but as the hon. Member pointed out, and as I said, the power is discretionary, and it should be for the Secretary of State to choose whether to exercise such powers.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Conditions of licences: general

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

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[Andrew Bowie]

A number of conditions will be appropriate to include as standard in all licences of the relevant type. The power in clause 12 enables the Secretary of State to specify what those standards are. The Secretary of State will be required to publish the standard conditions in an appropriate manner once they have been determined, and they will then be automatically included when a licence is granted.

To allow for the possibility that the standard conditions may need to be tailored to the circumstances of a particular licensee, the clause also enables standard conditions to be either excluded or amended in an individual licence. That can be done only if both the licence holder in question and other holders of the same licence type would not be unduly disadvantaged as a result.

Notice must be given of the intent to modify or exclude standard conditions in an individual licence, setting out the proposed modifications or omissions and the reasons for them, with sufficient opportunity for representations or objections to be made. Any objections or representations must be fully considered. I commend the clause to the Committee.

[Dr Whitehead]

The Minister has set out what the standard conditions of licences are likely to be and how they are going to be determined by the Secretary of State, but the clause goes a bit further than that. It says in subsection (2) that

“the Secretary of State must”

—that is a good thing—

“publish any standard conditions determined under subsection (1)”,

which says:

“The Secretary of State may determine the conditions that are to be the standard conditions of licences”,

and subsection (2) then says the Secretary of State must publish the conditions

“in whatever manner the Secretary of State considers appropriate.”

That is a bit of an odd formulation. I am more used to the idea that the Secretary of State must publish any standard conditions determined under subsection (1)—full stop.

The question of publication has always been important when conditions are to be published that licence applicants will be expected to look at and know about. The onus is, or should be, on the Department to publish those conditions as widely as possible, whereas this power appears to narrow that substantially. I am not suggesting that in any way the Minister would seek to restrict the public’s free access to information, but under this formulation it is possible that, just as publications are set up specifically for the purpose of obscuring the publication of various things from the general public, the Secretary of State could decide to publish the conditions in something like The Competitors Journal. Indeed, they could be published as—I don’t know—a TikTok video, as I mentioned earlier, or in some other way that is inappropriate to the circumstances under which their publication should appear, which should give those who apply for licences the maximum amount of, and ease of access to, the information that would be necessary to inform their application.

We have not moved an amendment to strike out the second part of subsection (2), but I would like from the Minister at least an assurance that he will place an emphasis on the first part, which requires the Secretary of State to publish the conditions, and that, in pretty much all circumstances, “publish” means that the publication is widespread and easily accessible in the public domain, so that it can be digested and read by all concerned.

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[Andrew Bowie]

Yes, I agree with my right hon. Friend. It is precisely about what he was touching on earlier: we are able to provide in the legislation the flexibility to allow the technologies for which we are legislating the space to grow, develop and become commercially viable. That is why it is essential to strike the balance between regulation and ensuring freedom for companies to operate. That is exactly why we would like the clause to stand part of the Bill.

As I was saying, allowed revenues must be set at a level that covers the companies’ costs and allows them to earn a reasonable return, subject to their delivering value for consumers, behaving efficiently and achieving their targets as set by the economic regulator. The amount of allowed revenue that an operator is able earn is set out in the licence conditions, which will need to be updated to reflect the outcomes of the periodic regulatory reviews and to keep pace with the evolution of the market more broadly. The power provides for the economic regulator to make such licence modifications, subject to an appropriate consultation process.

Before making any modifications to licence conditions, the economic regulator must give notice of the proposed modifications, the rationale for them, and an appropriate timeframe within which representations may be made. Any representations that are made must be duly considered. As Exchequer support will be available to certain users of the networks, the Secretary of State must be consulted on licence modification proposals and retains the power to direct that a modification may not be made.

Should the Secretary of State object to a particular modification, the economic regulator would need to consider whether to pursue the modification in an alternative form, which would require restarting the process of notifying and consulting on the new proposals. As is the case in other regulated sectors, licensees should have the right of appeal regarding modifications that are made to licences after they have been granted. The Bill provides for that later in chapter 1.

Clause 14 requires that, where the economic regulator has made a licence modification under clause 13 to a standard licence condition, the standard conditions of all future licences of that type should similarly be modified. That ensures a consistent approach to standard conditions across licences of the same type.

Clause 15 makes provisions for the Competition and Markets Authority or, as may be the case, the Secretary of State, to modify licence conditions in specific circumstances in relation to company mergers. Where there is a merger between licensed entities, that may necessitate licence modifications to ensure compliance with competition law. The power enables the CMA or the Secretary of State to modify licence conditions accordingly. I commend the clauses to the Committee.

[Dr Whitehead]

I have a question more than anything. Will the Minister state on the record this afternoon who the economic regulator actually is? The reason why I ask is that there does not seem to be any definition in the Bill of who the economic regulator is. It appears to be the CMA, but it might not be, because clause 20, on “Appeal to the CMA”, is under the heading “Appeal from decisions of the economic regulator”, so those do not appear to be the same thing in the Bill’s construction. It is not further defined, so perhaps the Minister will clarify that for us.

[Andrew Bowie]

I am happy to clarify that the economic regulator to which I and the Bill refer is of course Ofgem. Appeal to the CMA relates to what I have just discussed: occasions when there is a merger between two licensed entities, which may necessitate modifications. That is where the CMA comes into it. To be absolutely clear, Ofgem is the economic regulator.

[Dr Whitehead]

I point out, therefore, that there are inconsistent references to Ofgem, to the CMA and to the economic regulator. They are one and the same but referred to in different ways in different parts of the Bill. That might be a drafting issue more than anything else.

[Andrew Bowie]

I have just been reminded by my hon. Friend the Member for Beaconsfield that clause 1 sets out that the economic regulator to which we refer is Ofgem.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clauses 14 and 15 ordered to stand part of the Bill.

Clause 16

Interim power of Secretary of State to grant licences

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

[Andrew Bowie]

The clause and schedule 1 provide the Secretary of State with the power to grant carbon dioxide transport and storage licences during an interim period, as has been discussed already this afternoon.

In the enduring regulatory regime, we expect the economic regulator to take decisions on who should be granted a carbon dioxide transport and storage licence. That is provided for by clause 7. However, it is the Secretary of State who will determine the first carbon dioxide transport and storage networks to be granted a licence—through the Government’s CCUS cluster sequencing programme—and the terms and conditions of those licences. That is appropriate given the Exchequer support available to the first CCUS clusters.

The CCUS cluster sequencing process is specifically designed for first-of-a-kind projects. The interim period during which the Secretary of State has the power to award licences will end on a date to be set in regulations, once the industry is sufficiently mature. After that interim period, the economic regulator will have sole power to grant licences.

Government amendment 2 corrects a cross-reference and renumbers a subsection in schedule 1 to ensure that the schedule is read correctly. Schedule 1 provides the Secretary of State with the power to grant carbon dioxide transport and storage licences during an interim period. The interim period during which the Secretary of State has the power to award licences will end on a date to be set in regulations made under schedule 1, once the industry is sufficiently mature. I think that answers some of the questions asked by the hon. Member for Kilmarnock and Loudoun earlier. After that interim period, the economic regulator, Ofgem, will have sole power to grant licences. I commend the clause and the schedule to the Committee.

[Dr Whitehead]

The clause itself is brief, but refers to schedule 1 and to the interim power of the Secretary to State to grant licences. As the Minister said, that power will come to an end on a date to be determined at a point when the industry is well established and the Secretary of State therefore no longer has to exercise the interim power. Who decides when the industry is well established? If that is the Secretary of State, is it not a rather circular way of bringing to an end the power of the Secretary of State to grant licences on an interim basis? If the Secretary of State decides that the industry is not that well established, he or she will presumably continue to grant interim licences forever.

Presumably, we want to reach a point when the Secretary of State does not grant licences in his or her own right and Ofgem or the economic regulator does, but we do not appear to have any mechanism in the Bill, other than something to be determined at a particular date, whereby the Secretary of State switches off his or her own power and switches on an Ofgem power. It would be helpful if the Minister could clarify that. There may be something in the legislation that I have not noticed, but it appears from schedule 1 and the clause that there is not a clear switch-off mechanism, other than the intention to do so when the market is mature.

[Alan Brown]

To follow on from that point, and the point that I made earlier, I know that the Minister said that he would write to us, but I am interested in how he envisages the sequencing and the interim period coming to an end. Although he said that in terms of value for money it is up to Parliament, and us as parliamentarians, to hold the Government to account, if the interim period goes on for a long while and individual licences are granted effectively on an ad hoc basis, it will be almost impossible for parliamentarians to hold the Secretary of State to account. We will continually be told that the information is commercially sensitive, so we will be unable to access it. I want a bit more clarity on how this will all come together in a more transparent manner.

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[Dr Whitehead]

The clause concerns termination events, stating:

“If the economic regulator considers that a termination event has arisen, or is likely to arise, the economic regulator must notify the persons mentioned in subsection (2) as soon as reasonably practicable.”

The Minister has given company insolvency as an example of a possible termination event, but I am sure he will agree that there are a number of others.

Subsection (5) says that a

“‘termination event’ means a state of affairs in which the economic regulator is authorised to revoke the licence.”

That explains precisely nothing; it does not give examples of termination events or explain the circumstances in which the economic regulator is authorised to revoke a licence. It does not take us very far.

Is there a roster of termination events? Is there a list of likely termination events that the Minister could put into a menu? Insolvency is one such event, but I can think of a number of other circumstances in which termination may take place either voluntarily or involuntarily. For example, a company may request that the regulator terminate its licence, stating that it cannot carry on with its licence arrangement for reasons other than insolvency.

The clause does not list any circumstances that could constitute a termination event. Is the Minister satisfied that the rather circular definition in the clause is sufficient? Or does he think that more clarity on what a termination event could constitute and how one might be dealt with is required?

[Andrew Bowie]

I understand the hon. Gentleman’s point. However, I think it is fairly well recognised and understood within the industry that the termination of a licence will come in the event that a licence holder ceases to carry on as a transport and storage business and therefore no longer requires a licence; if it becomes insolvent; or if it contravenes or fails to comply with enforcement orders made by the economic regulator or, in certain situations, the courts. I am not sure what would be added by setting that out in the Bill. I suspect that it is fairly well understood across the industry.

To answer the question of what would happen in the event of licence termination, the Bill provides certain step-in rights for the Secretary of State in a licence termination scenario to be able to transfer the ongoing operation of the transport and storage network to another operator or, where that is not possible, to ensure the safe decommissioning of the infrastructure. If a licence is terminated because of the insolvency of a transport and storage company, the Bill enables the application of a special administration regime to support the ongoing operation of the transport and storage network, prioritising its rescue as a going concern and securing the ongoing safety and security of the network. I reassure the hon. Gentleman that a great deal of consideration has gone into this specific element of the Bill, and we are happy that it is clear in its intent.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Clause 18

Transfer of licences

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

[Andrew Bowie]

We are powering our way through this afternoon. Clause 18 enables carbon dioxide transport and storage licences to be transferred from one legal entity to another, subject to the consent of the economic regulator, Ofgem. Carbon dioxide transport and storage licences will be granted to a legal entity, and they cannot be bought or sold separate from that legal entity. Circumstances may arise in which it is appropriate or necessary to transfer a licence to another legal entity, and the clause provides for that. For example, a licence may need to be transferred as a result of a company merger or acquisition, or a company restructuring, where the legal entity that is proposed to carry on the licensable activity is not the same legal entity to which the licence was awarded. A transfer may relate to the whole or any part of the licence. The regulator’s consent is required for any licence transfer.

Clause 19 sets out the process that the economic regulator must follow before giving consent to any transfer. That includes public notice of the regulator’s intent to consent to a licence transfer, the reasons for it, any conditions to be attached to the consent to transfer, and a time period within which objections or representations can be made. The economic regulator must also notify the Secretary of State of an intended transfer, and the Secretary of State has the right to direct that a transfer may not be consented to. That is appropriate, as there may have been contractual financial support agreements in place between the Secretary of State and the current licence holder pursuant to the licence.

[Dr Whitehead]

The clauses deal with transfer of licences when, as mentioned in the previous clause, a termination event takes place. Subsequent to such an event, the licence will have to be put into action again and will be transferred. I am interested to see whether I can get the words “termination event” into common language, so that I can say to people, “That is a bit of a termination event”. However, I will not do that this afternoon.

The transfer of licences under such circumstances, as we have emphasised, needs to be put under the general heading of “fit and proper people”, whether we explicitly say that or not. A termination event may have occurred because someone has proven not to be a fit and proper person—for example, if they were gambling the company’s proceeds on local casinos—and therefore the company or person has been determined not to be able to carry out the term of the licence. The licence therefore needs to be transferred at least to a better kind of person.

Will the Minister expatiate briefly on the circumstances under which transfers will be judged? We need to be sure that when a licence needs to be transferred after a termination event, no one can say, “You over there—you will do. We are in a bit of a fix as far as the licence is concerned, so you get on with it.” I am sure that that is the last thing on the Minister’s mind, but it could conceivably happen if someone wished to cut corners and keep a licensed line of activity going. If the Minister could give an assurance about how licences will be transferred, that would be helpful.

[Andrew Bowie]

I am glad that we are not going to focus too much on termination or even extermination events during our debate. Indeed, it is to be hoped that we will not need to refer to this aspect of the Bill very much, if at all. However, we have to legislate in the expectation that at some point, there may be termination events for a licensed entity. That is why we have set out the provision for a licence transfer in the Bill.

The hon. Member for Southampton, Test referred to his earlier point regarding the inclusion of the phrase “fit and proper person”. As I said, we believe that the Bill sets out exactly how the Government will determine that a company or an individual is well placed to be a licence holder and carry out their duties as they relate to the Bill. However, let us say that they are not—we hope that that will not be the case—and a transfer takes place. A new licensee will be found, and if they intend to commence the licensable activity shortly after consent is granted, the regulator—Ofgem, in this case—may ask them to demonstrate, for example, that arrangements to accede to relevant codes by the proposed transfer date are in place. I understand why the hon. Member asks these questions, and it is right to do so. It is right that we state on the record today exactly what we expect in the event that a termination event takes place in regard to a licensed entity.

Question put and agreed to.

Clause 18 accordingly ordered to stand part of the Bill.

Clause 19 ordered to stand part of the Bill.

Clause 20

Appeal to the CMA

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

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[Bim Afolami (Hitchin and Harpenden) (Con)]

I want to add a note of caution in relation to this set of clauses—a word for those on the Treasury Bench and the Minister, who is a good friend and a good parliamentarian, and who is doing a fantastic job on the Bill and in his role.

There is a hidden danger in the Secretary of State and, indeed, the Department not having the ability, outside of an interim period, to intervene at all in the process vis-à-vis licences. If I have misunderstood anything, I stand corrected, but as I understand it, once we have gone past the interim period—in peacetime, so to speak—the regulator, Ofgem, will make a decision. That decision can be, rightly and very understandably, scrutinised. Appeals can be made to the CMA, which is the right place, but there is no provision for the Secretary of State to involve themselves in that process.

If my understanding is right, and it may be wrong, there is no ability for the Secretary of State to intervene in that process. That strikes me as dangerous in the event that there is an emergency, the economic situation changes hugely or the broader political environment changes to the point that the regulator has a very different view of the issue from that of the Department. I should have referred Members at the beginning to my entry in the Register of Members’ Financial Interests: I am chair of the Regulatory Reform Group.

My point is not a dry, technical one that has no real political or economic bearing; it could be hugely significant over the coming years. I urge the Minister and his officials to consider whether we should retain some ability for the Secretary of State to intervene directly in the process if that were required, although I suspect that most of the time it would not be.

[Dr Whitehead]

I was going to make a slightly different point from that made by the hon. Member for—

[The Chair]

Hitchin and Harpenden.

[Dr Whitehead]

I remembered the Hitchin bit, but I could not remember the Harpenden bit; I am sure that the hon. Member treats both parts of his constituency with equal reverence.

[Bim Afolami]

Of course.

[Dr Whitehead]

I was tempted to refer the hon. Member to the Energy Prices Act 2022, which was recently passed—I think, to paraphrase the Minister, not on his watch. The Act allows the Secretary of State to do pretty much anything that he or she wants in the energy sphere. I do not know whether that applies to the circumstances that the hon. Member for Hitchin and Harpenden suggested, but we are particularly concerned about the powers in that Act, and whether they need to be rowed back a little in this Bill.

I draw the Committee’s attention to the process of appeal from the economic regulator to the CMA. It appears to be a linear process. The appeal is set up by the CMA, effectively, and there is no going back afterwards. There is not a circumstance in which the economic regulator can say, “Actually, we think the CMA didn’t work as well it should in terms of casting that appeal. Can we appeal the appeal—not necessarily the substance of the appeal, but the way in which it has been carried out?”

What is apparent in terms of the CMA’s powers regarding appeals is that they give the CMA a lot of ability to misstep. Clause 20(4) states:

“The CMA may refuse permission to bring an appeal only on one of the following grounds”.

The CMA, actually on fairly wide grounds, can therefore refuse to bring an appeal. It appears to have pretty widespread powers to make a determination without any comeback. For example, clause 22(4) states:

“The CMA may allow the appeal only to the extent that it is satisfied that the decision appealed against was wrong on”

various grounds, including, among others,

“that the decision was based, wholly or partly, on an error of fact”.

Various things in the clauses emphasise the linear nature of the appeal process—that is, the CMA decides, and no one is looking at what the CMA is doing in terms of its appeal processes. I would like to hear whether the Minister thinks that that is adequate or whether a little more attention ought to be paid to what the CMA is doing in those circumstances, and whether the relationship between the CMA and the economic regulator under those circumstances is as good as it could be.

[Andrew Bowie]

Turning first to the points made by my hon. Friend the Member for Hitchin and Harpenden, who does treat both parts of his constituency with equal diligence—having visited, I have seen that at first hand—he is right: the Secretary of State does not have the power to directly modify licence conditions once they are granted, but he does have a veto over Ofgem decisions. That is set out in clause 13(6).

I genuinely understand the concerns of the hon. Member for Southampton, Test, but the provisions and procedures directly mirror the appeals process in respect of electricity and gas licence modification, set out in the Gas Act 1986 and the Electricity Act 1989. We believe that it will ensure consistency of approach for the economic regulator Ofgem and, indeed, the Competition and Markets Authority, which will provide confidence for the sector, and indeed sectors, as we move forward.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21 ordered to stand part of the Bill.

Schedule 2 agreed to.

Clauses 22 to 25 ordered to stand part of the Bill.

Clause 26

Provision of information to or by the economic regulator

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

--- Later in debate ---

[Andrew Bowie]

They would be subject to the same stringent actions as have been set out, and in the interim the Secretary of State would determine what action should be taken in that respect.

Clause 27 gives the Secretary of State a power to require information directly from a carbon dioxide transport and storage licence holder, to ensure that he has access to information needed to support the effective conduct of his CCUS functions. The clause does not enable the Secretary of State to share or publish the information. To ensure protection of sensitive information, information provided to the Secretary of State will remain protected under the Data Protection Act, and an information request cannot be made to obtain information protected by legal professional privilege or, in Scotland, confidentiality of communications.

[Dr Whitehead]

The Minister’s final few words appear to show—the hon. Member for Kilmarnock and Loudoun may have a few things to say about this—that there are different conditions for disclosure or production in legal proceedings in England and Wales and in Scotland. I am not a lawyer, so I do not know exactly what the difference is likely to be, but it appears that there is greater protection for the licence holder with respect to information provision in Scotland than in England and Wales. Perhaps I am reading that wrong. Is it the case that, in effect, the two conditions are the same and the wording of the Bill just bows in the direction of the formulation in Scotland, or is there a material difference?

[Andrew Bowie]

There is no material difference at all. As the hon. Member suggests, it is just a reference to the different regulations that apply in Scotland and in England and Wales, as a result of the devolved legislature in Edinburgh legislating slightly differently from the way that we have for the rest of the United Kingdom. That is the only difference. As this is a pan-UK Bill that affects each area of the United Kingdom, we have to make clear in the Bill the different regulations that will have to be conformed to. That is why the language of clause 27 is as it is.

Question put and agreed to.

Clause 26 accordingly ordered to stand part of the Bill.

Clause 27 ordered to stand part of the Bill.

Clause 28

Monitoring, information gathering etc

--- Later in debate ---

[Andrew Bowie]

Clauses 28 to 31 relate to other functions of the economic regulator. Starting with clause 28, as I have already said, carbon capture, transport and storage are nascent industries in the UK and, indeed, globally.

The economic regulation framework for carbon dioxide transport and storage, established by part 1 of the Bill, is focused on the transport of carbon by pipeline for the purposes of geological storage. Through that framework, our aim is to both provide certainty for investors and protect user interests.

As the CCUS market becomes established, we may need to keep the framework under review—for example, on how it is applied to non-pipeline forms of carbon transportation and the most appropriate licensing structure for different types of onshore and offshore infrastructure. To help inform such considerations, clause 28 requires the economic regulator to keep the carbon dioxide transport and storage market under review.

The economic regulator may collect information for the carrying out of such monitoring functions. The regulator is also obliged to share relevant information with the Secretary of State or the CMA if requested to do so, to assist their competition and market functions. Clause 29 establishes the procedure for requesting such information and establishes a penalty if a licence holder does not comply with a request for relevant information.

Where the economic regulator is considering implementing proposals that may have a significant impact on licence holders, on others who are involved in related CCUS activities, on the general public or on the environment, clause 30 requires that the economic regulator carries out an impact assessment ahead of implementing the proposals. The economic regulator is required to carry out and publish an assessment of the likely impact of implementing the proposal or set out why it considers it unnecessary to carry out such an assessment.

An impact assessment for a proposal must be published in an appropriate manner and provide an opportunity for those who are likely to be significantly affected by the proposal’s implementation to make representations. In its annual report, the economic regulator must report on the impact assessments undertaken in the relevant financial year and the decisions taken as a result of those assessments.

Lastly, to ensure transparency of decision making, clause 31 establishes that, for certain decisions, the economic regulator and the Secretary of State must give reasons for the decisions taken. The reasons must be set out in the published notice and sent to the relevant licence holder. Before publishing a notice, the economic regulator or the Secretary of State must give regard to the need to exclude information that could seriously and prejudicially affect the interests of an individual or body.

[Dr Whitehead]

I must say that these passages are so dry that I may be hearing the Minister’s voice in my sleep this afternoon, rather than tonight. Having said that, I assure you, Mr Gray, that I am wide awake and listening to what is being said.

When considering any piece of legislation, I always think that the first thing we should look at is the impact assessments, because they have to tell the truth about what is going on. It is, therefore, always useful to have impact assessments. Indeed, it is important that an impact assessment is available as often as possible both for Bill Committees and for secondary legislation.

Clause 30, however, appears to be rather vague about whether impact assessments should actually be undertaken. On the duty to carry out impact assessment, it states that

“the economic regulator is proposing to do anything for the purposes of, or in connection with, the carrying out of any function exercisable by it under or by virtue of this Part, and…it appears to the economic regulator that the proposal is important”,

but the clause does not specify what is meant by “important”. It goes on to say:

“but this section does not apply if it appears to the economic regulator that the urgency of the matter makes it impracticable or inappropriate for the economic regulator to comply with the requirements of this section.”

In other words, if the economic regulator thinks that an issue has some significance—subjectively judged, I assume, by the economic regulator—it may carry out an impact assessment. On the other hand, if there is no time to do it or it does not appear to be terribly appropriate to the economic regulator, it does not have to do it anyway. Therefore, we might get an impact assessment, or we might not.

There are a number of grounds in the process under which the impact assessment can be voided or avoided. Although subsection (2) attempts to define what “important” means in connection with a proposal, it also states:

“A proposal is important for the purposes of this section only if its implementation would be likely to do one or more of the following”.

and thereby further downgrades the question of what is still a rather subjective view of what constitutes importance.

I assume that the Minister shares my view that impact assessments are really important not just for important subjects but for most things. Although we have not tabled an amendment, will the Minister consider tightening the wording so as to ensure that carrying out impact assessments is the norm and not something to be decided by the regulator? To use the word “important” again, it is important that we are clear about impact assessments. Indeed, that has been set out in guidance to Ministers, who should seek to undertake impact assessments at all times, where possible, and should not hide behind speed issues or other circumstances in order to avoid them. However, it appears that that is not the case for the economic regulator, and that is not satisfactory.

[Andrew Bowie]

The Government are always open to suggestions and ideas about how we can improve legislation. As I said earlier, it is important for the industry, nascent as it is, that there is as much clarity as possible about how it is governed and about the regulatory process that it must follow. We must also understand that, as the market and the technology grow, evolve and develop, we will need to keep that under review. However, I am happy to give a commitment to the hon. Member that we will consider whether it is possible to tighten up the language so that exactly what is meant is made clear to industry.

Energy Bill [ Lords ] (First sitting)

Lord Whitehead Excerpts

Committee stage
Tuesday 23rd May 2023 Public Bill Committees

[The Chair]

Copies of written evidence received by the Committee will therefore be circulated to members by email and published on the Bill website.

We now proceed to line-by-line consideration of the Bill.

Clause 1

Principal objectives and general duties of Secretary of State and economic regulator

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I beg to move amendment 75, in clause 1, page 3, line 11, at end insert—

“or who seeks to be a party to arrangements for the use of sequestered and transported carbon dioxide”.

This amendment seeks to refer specifically to the “use” of carbon dioxide, as well as arrangements for transport for the purpose of disposal.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 76, in clause 2, page 3, line 35, at end insert—

“(c) the use of sequestered and transported carbon dioxide.”

This amendment seeks to provide an additional area of activity prohibited on an unlicensed basis.

Amendment 81, in clause 57, page 51, line 19, at end insert—

“(d) a carbon capture use revenue support contract.”

This makes explicit the case of a contract for the use of carbon capture.

[Dr Whitehead]

It is a pleasure to serve once again under your chairmanship, Mr Gray. We have served in Committee together on a number of occasions, and I know that you will keep us closely to the subjects in hand as we go through the Bill, which I am sure will be a good thing for its progress.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I thank the hon. Gentleman for giving way. I want to make a personal point: may I ask him to speak up slightly? I am hard of hearing and I am already struggling to hear what he is saying. I thank him.

[Dr Whitehead]

I appreciate that point. A moment ago, I was just making a personal aside to the Chair. I will try to address the Committee in a more expansive manner.

This group of amendments would put the full definition of carbon capture, usage and storage into the Bill. As Members know, this Bill chapter is about various activities that go on with carbon capture, usage and storage, but unaccountably the detail in the Bill talks about only carbon capture and storage. We may think that is the definition of what we are talking about, but it is not just a process of sequestering the carbon that arises from, say, a power station or cement works. Various carbon capture and storage arrangements will have to be made for the sequestering of carbon dioxide in many uses, both industrial and energy-based, throughout the country.

Then, so the story goes, that carbon dioxide is transported, by either pipe or barge, and is sequestered at a suitable site. The Secretary of State for Energy Security and Net Zero waxed lyrical recently about just how much sequestering space there is around the UK waters. His view, which I think is absolutely correct, is that the sequestration of carbon dioxide as an industrial activity in the UK, with all the preparation that goes with it, is not just a necessary feature for the end of the carbon capture and storage process but something that the UK can offer to many countries around the world for their carbon sequestration, making a substantial plus-industry for the UK out of the process.

That is the end of the carbon dioxide story—how it goes from capture, either by chemical means or by extracting it from flue gases or whatever, to being put on its journey. In my long history of engagement on carbon capture and storage, I have always said that that is the case, but a number of years ago the Government added an important rider to that process in the definition that we use: CCUS, not CCS. CCUS is important because it is not just an uninterruptable process of carbon going into the transportation and sequestration arrangements, having been captured in the first place; there are points in the process whereby the carbon can be taken out of the transportation and sequestration process. Depending on the quality of the carbon dioxide that has been captured, it can be put to secondary use, before being captured again in the process, as it goes round again.

There are considerable opportunities in making the cycle go round twice, or several times, before the sequestration takes place. That is potentially an important part of getting best value out of the carbon capture and storage process. One of the first uses of the process that I came across was quite a while ago, when I paid a visit to one of the world’s first operational carbon capture and storage plants at the Boundary dam in Saskatchewan. The energy company in Saskatchewan was capturing the carbon output from a fossil fuel energy plant and diverting the carbon that was being captured in the first instance to the process of repressurising wells in oil fields to enhance the recovery of oil. Of course, the carbon was then recaptured after that point but, importantly, that cycle had been broken and something else had happened.

That is just one use, but there are many other uses that we could think about putting carbon dioxide to. It can be used in the chemical industry in the production of methanol, in metalworking to harden the casing of moulds, or in the petroleum industry to optimise the yield of oil wells. It has a substantial use in healthcare and in horticulture. As we know from junior-school biology, plants can increase their size and output by having a carbon dioxide-rich atmosphere in which to grow, and there are substantial opportunities to use carbon dioxide under those circumstances.

Those are not significant interruptions, as it were, in the carbon-capture cycle. Indeed, the use of carbon under those circumstances is beginning—or will begin—to be programmed into the carbon capture and sequestration process. Of course, programming it in is important in terms of the arrangements being set out in the Bill for the circumstances under which licences can be granted.

We will hear a lot about licences in the passage of this Bill. As we know, certainly in the energy sphere, pretty much everything that can or cannot be done is licensed in one way or another, and there is a great deal of legislation for that purpose—for example, the Petroleum Act 1998 and the electricity and gas Acts, which set out the circumstances under which licences should be granted. Indeed, as we will see in the first part of the Bill, there is a restated imperative that people cannot carry out these things on an unlicensed basis; they really must have a licence at all stages of carbon capture—a licence to capture, a licence to transport and a licence to sequester.

The hole in the Bill is in what happens when the process is interrupted. I do not use the word “interrupted” in a derogatory sense; it is very positive that we can make the most use of carbon dioxide in its passage. Having invested a lot of money in capture, it is a good idea to try to recycle the process as much as we can, but for reasons I am not quite clear on—the Minister may be able to enlighten me—the wording of the Bill does not appear to account for that particular sphere of CCUS activity.

It may be that I have missed something and that the use of carbon should not be included in the licensing and licensable arrangements. The Government may be quite satisfied that the interruption of the process is perfectly okay to leave alone. I do not think that is the case because, as I have set out, it is part of the whole process. If we are to take carbon capture and storage seriously, we will want to know that carbon dioxide use, as part of the process, goes back into the cycle of capture and storage in the long term, and that carbon is not just captured but used for a particular purpose in the way I described. After that, it disappears back into the atmosphere, presumably to be captured again at a future date.

It is important that the licensing arrangement is complete as far as the passage of carbon is concerned. Amendments 75, 76 and 81 would add the use of carbon dioxide to the various clauses that relate to the overall process. The amendments would provide a definition of carbon capture use, and additional wording for the process of licensing and of use itself. We would not want to move the amendments separately; they are rightly marshalled together in today’s proceedings. I move the amendments together, as they are grouped in the selection list, because, as I have said, they are essentially concerned with the question of use.

I am sure the Minister will provide us with a suitably inspired reply, so that we can be reassured either that this has all been thought about, and our amendments are therefore superfluous, or that there is a problem and, whether or not he accepts the amendments this morning, the process will be looked at to ensure that we have the full definition, and the full process is in hand as far as the passage of carbon capture and storage is concerned.

[The Chair]

Technically speaking, the Member has moved only amendment 75. The other two amendments will be decided on when we reach the relevant clauses. He cannot move all three together; he has moved amendment 75. I call Taiwo Owatemi.

--- Later in debate ---

[Andrew Bowie]

I thank my right hon. Friend for his intervention. I would be happy to give a thorough explanation of exactly how the carbon capture and storage will proceed; I am sure we will get to that in the course of our debate on the Bill, and in other places. However, I am not sure where that would fit within the context of this debate, other than to say that the technology being developed by companies, organisations and clusters around the UK is world leading. When it comes to being able to store in the future the carbon dioxide being produced in the UK now, the North Sea is of course the greatest asset that we have as a country. The oil and gas industry will be able to play a pivotal role in that development as we move forward.

Given the reasoning I have set out, I hope that the amendment tabled by the hon. Member for Southampton, Test will be withdrawn.

[Dr Whitehead]

I appreciate what the Minister has said this morning. Frankly, though, I am not wholly convinced that the processes have been fully accounted for. I emphasised the various uses of carbon dioxide. The Minister is right that not all those uses lead to eventual sequestration. However, most of the uses that do not lead to additional sequestration do, on occasions, sequester the carbon dioxide in the process itself.

For example, carbon dioxide used in horticulture is substantially sequestered during the process of growing the plants. There is potentially an important use of carbon dioxide in processing hydrogen and in producing sustainable aviation fuel. Those processes sort of sequester the carbon in producing a different product, which is itself then burned. We then have to sequester the whole lot again, but the product has been used in the meantime.

It is important to concentrate on aligning the processes within carbon dioxide use as closely as possible with the process of sequestration, not simply allowing the carbon dioxide to escape. One thing that concerns me is the use of carbon dioxide in the process of the enhanced recovery of oil, because unless that carbon dioxide can be sequestered at the point it is injected into a well, although it produces greater amounts of oil it leaks into the atmosphere again, so we have a net negative outcome. We have produced more oil, but arguably it should have been left where it was in many instances.

[Alec Shelbrooke]

That leads to the question that I asked the Minister. The issues that the hon. Member for Southampton, Test is raising show that there is a research and development need for sequestration in, for instance, licensing oil and gas. That will need a large investment, so does he agree that it is important that the oil and gas industry uses some of its large profits to ensure that it can do the R&D available to sequester carbon dioxide, and does that call into question the idea of scrapping the return on profits—often criticised by the Opposition—because we need R&D to achieve this?

[The Chair]

Order. That is beyond the scope of the amendment.

[Dr Whitehead]

Thank you, Mr Gray. Well, I—

[The Chair]

Don’t be tempted.

[Dr Whitehead]

All right, I won’t be.

The key point that I am trying to add to this morning’s debate is that a number of systems could be greatly enhanced in their operation by, for example, having a much greater supply of carbon dioxide available to them than is the case at the moment. The Minister may remember that we had a mini-crisis a little while ago: one of the factories that was producing industrial-use carbon dioxide closed down and we were left in the UK with one factory producing carbon dioxide. There was then a considerable run on it, which meant that, going to the heart of our civilisation, carbonating fizzy drinks was potentially under threat.

Having much greater availability through the carbon capture and storage process of carbon dioxide that could be used in industrial processes could be very good for industry, and indeed for the security of the processes that we continue to need carbon dioxide for. At the same time, that process needs some supervision to ensure that we are not undoing what we have started to do in carbon capture by making the product more widely available. Although I do not intend to push the amendment to a vote, I hope that the Minister will take onboard the idea that this is a substantial area, which we need to pay close attention to. We need to regulate it so that it points in the same direction as the carbon capture and storage process and so that the whole system is not undone by what is available.

--- Later in debate ---

[The Chair]

Order. Interventions must be brief; Members should not ramble on for half an hour. I call Alan Whitehead.

[Dr Whitehead]

The hon. Member is right that we should not seek to regulate everything out of existence. As she says, provided that the basic position is in place many industrial and commercial processes do not actually do harm, and there are all sorts of ways of making sure of that; then we can leave them alone.

My only point is not about separately regulating something that has otherwise been completely unregulated, but that this is an overall process and we need to make sure that, overall, the processes all point in the same direction. That is, one way or another, that we produce less carbon dioxide, allow less carbon dioxide to escape into the atmosphere and do what we can to use sequestered carbon dioxide in the best way. Normally, that means transporting it, for which we need regulations to make sure that there are no leakages, for example.

At the moment, we are considering a number of different options when it comes to the transportation of carbon dioxide. As the hon. Member for South Ribble will know, that does not just consist of trying to put down pipelines to deliver the carbon dioxide to the port of exit before it is put into the storage site. Obviously, sites themselves need proper regulation so that they are safe for the purposes of storage.

Earlier, the right hon. Member for Elmet and Rothwell questioned the process of storage. It is vital that the storage itself is suitable. We know, from what we have to rely on, that the storage is likely to be sound—that means, frankly, that once we have put the stuff underground it stays there and does not leak out subsequently. That is quite a science in its own right. A great deal of the time spent looking at storage sites is about being absolutely sure that the site is as we thought it was in order to avoid disaster once we have committed ourselves to storage on the site. Given the different kinds of storage site, considerable work is under way, all of which needs to be regulated properly.

We have to consider alternative forms of storage—saline aquifers, for example. It is not just a question of storing carbon dioxide in depleted oil or gas fields; a number of other geological formations appear to be suitable for the purpose. Whether those alternative formations can be used for storage onshore as well as offshore is a particular concern. People may raise the issue of carbon dioxide leaking out onshore—as well as offshore, potentially.

Throughout, there is a need to regulate how the process works. With respect to the hon. Member for South Ribble, I do not think that it is over-prescriptive to say that we need some regulation of the use of carbon dioxide—after all, in theory at least, using the carbon for the best purpose is an essential part of the process—hence the amendments that we have tabled, which I hope are constructive.

[Olivia Blake]

There are two points to this, are there not? There is a set amount of carbon at the moment, which is increasing annually. Usage allows us to reduce that—instead of new forms of carbon going into the atmosphere, we would reuse what we have. That is why the amendment is key. I hope that the Government take it away to look at again. It is also basic chemistry that if we are putting CO₂ into a chemical reaction, we will not get CO₂ coming out the other end until the product degrades, so it is a falsehood that it will all immediately leak—

--- Later in debate ---

[The Chair]

Dr Whitehead, perhaps you will be brief. We have already given this group quite a long debate.

[Dr Whitehead]

Thank you, Mr Gray. My hon. Friend makes an important point about the distinction between what we do now with carbon dioxide and what we might do with it in future. At present—I mentioned a carbon dioxide factory that closed down—we are actually purposely making carbon dioxide in other processes, where it was previously sequestered among the molecules or whatever of the raw material. In future, we will take the carbon dioxide that we have captured in a different form to replace the manufactured carbon dioxide. It is important to understand the difference and to have a positive effect on the arrangements for carbon dioxide used for industrial purposes by substituting the creation of carbon dioxide with the use of carbon dioxide already going through the system.

I agree, Mr Gray, that we have had a good debate. We do not wish to press the amendment to a Division, but I am sure that although the Minister has not exactly been taking copious notes, he will be assured of the purpose of the amendment and can consider whether anything further needs to be done to ensure that such processes are integral to the system as a whole. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[The Chair]

With this it will be convenient to discuss the following:

New clause 33—Purposes—

“(1) The principal purpose of this Act is to increase the resilience and reliability of energy systems across the UK, support the delivery of the UK’s climate change commitments and reform the UK’s energy system while minimising costs to consumers and protecting them from unfair pricing.

(2) In performing functions under this Act, the relevant persons and bodies shall have regard to—

(a) the principal purpose set out in subsection (1);

(b) the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008 (carbon targets and budgets) and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change;

(c) the desirability of reducing costs to consumers and alleviating fuel poverty; and

(d) the desirability of securing a diverse and viable long-term energy supply.

(3) In this section “the relevant persons and bodies” means—

(a) the Secretary of State;

(b) any public authority.”

This new clause and NC34, NC35 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.

New clause 34—Strategy and policy statement—

“(1) The Secretary of State may designate a statement as the strategy and policy statement for the purposes of this Act.

(2) The strategy and policy statement is a statement prepared by the Secretary of State that sets out—

(a) the strategic priorities, and other main considerations, of His Majesty’s Government in formulating its energy policy for Great Britain (“strategic priorities”);

(b) the particular outcomes to be achieved as a result of the implementation of that policy (“policy outcomes”); and

(c) the roles and responsibilities of persons (whether the Secretary of State, a relevant public authority or other persons) who are involved in implementing that policy or who have other functions that are affected by it.

(3) The strategy and policy statement must have regard to the considerations listed in subsection (2) of section [Purposes].

(4) The Secretary of State must publish the strategy and policy statement in such manner as the Secretary of State considers appropriate.

(5) For the purposes of this section, energy policy “for Great Britain” includes such policy for—

(a) the territorial sea adjacent to Great Britain, and

(b) areas designated under section 1(7) of the Continental Shelf Act 1964.

(6) A relevant public authority must have regard to the strategic priorities set out in the strategy and policy statement when carrying out regulatory functions.

(7) The Secretary of State and a relevant public authority must carry out their respective regulatory functions in the manner which the Secretary of State or the relevant public authority (as the case may be) considers is best calculated to further the delivery of the policy outcomes.

(8) A relevant public authority must give notice to the Secretary of State if at any time the relevant public authority concludes that a policy outcome contained in the strategy and policy statement is not realistically achievable.

(9) A notice under subsection (8) must include—

(a) the grounds on which the conclusion was reached; and

(b) what (if anything) the relevant public authority is doing, or proposes to do, for the purpose of furthering the delivery of the outcome so far as reasonably practicable.”

This new clause and NC33, NC35 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.

New clause 35—Strategy and policy statement review—

“(1) The Secretary of State must review the strategy and policy statement if a period of 5 years has elapsed since the relevant time.

(2) The “relevant time”, in relation to the strategy and policy statement, means—

(a) the time when the statement was first designated under section [Strategy and policy statement], or

(b) if later, the time when a review of the statement under this section last took place.

(3) A review under subsection (1) must take place as soon as reasonably practicable after the end of the 5 year period.

(4) The Secretary of State may review the strategy and policy statement at any other time if—

(a) a Parliamentary general election has taken place since the relevant time;

(b) a relevant public authority has given notice to the Secretary of State under subsection (8) of section [Strategy and policy statement] since the relevant time;

(c) a significant change in the energy policy of His Majesty’s Government has occurred since the relevant time; or

(d) the Parliamentary approval requirement in relation to an amended statement was not met on the last review (see subsection (12)).

(5) The Secretary of State may determine that a significant change in His Majesty’s Government’s energy policy has occurred for the purposes of subsection (4)(c) only if—

(a) the change was not anticipated at the relevant time, and

(b) if the change had been so anticipated, it appears to the Secretary of State likely that the statement would have been different in a material way.

(6) On a review under this section the Secretary of State may—

(a) amend the statement (including by replacing the whole or part of the statement with new content),

(b) leave the statement as it is, or

(c) withdraw the statement’s designation as the strategy and policy statement.

(7) The amendment of a statement under subsection (6)(a) has effect only if the Secretary of State designates the amended statement as the strategy and policy statement under section [Strategy and policy statement].

(8) For the purposes of this section, corrections of clerical or typographical errors are not to be treated as amendments made to the statement.

(9) The designation of a statement as the strategy and policy statement ceases to have effect upon a subsequent designation of an amended statement as the strategy and policy statement in accordance with subsection (7).

(10) The Secretary of State must consult the following persons before proceeding under subsection (6)(b) or (c)—

(a) a relevant public authority,

(b) the Scottish Ministers,

(c) the Welsh Ministers, and

(d) such other persons as the Secretary of State considers appropriate.

(11) For the purposes of subsection (2)(b), a review of a statement takes place—

(a) in the case of a decision on the review to amend the statement under subsection (6)(a)—

(i) at the time when the amended statement is designated as the strategy and policy statement under the previous section, or

(ii) if the amended statement is not so designated, at the time when the amended statement was laid before Parliament for approval under subsection (7) of the next section;

(b) in the case of a decision on the review to leave the statement as it is under subsection (6)(b), at the time when that decision is taken.

(12) For the purposes of subsection (4)(d), the Parliamentary approval requirement in relation to an amended statement was not met on the last review if—

(a) on the last review of the strategy and policy statement to be held under this section, an amended statement was laid before Parliament for approval under subsection (7) of section [Strategy and policy statement: procedural requirements], but

(b) the amended statement was not designated because such approval was not given.”

This new clause and NC33, NC34 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.

New clause 36—Strategy and policy statement: procedural requirements—

“(1) This section sets out the requirements that must be satisfied in relation to a statement before the Secretary of State may designate it as the strategy and policy statement.

(2) In this section references to a statement include references to a statement as amended following a review under subsection (6)(a) of section [Strategy and policy statement review].

(3) The Secretary of State must first—

(a) prepare a draft of the statement, and

(b) issue the draft to the required consultees for the purpose of consulting them about it.

(4) The “required consultees” are—

(a) the relevant public authority,

(b) the Scottish Ministers, and

(c) the Welsh Ministers.

(5) The Secretary of State must then—

(a) make such revisions to the draft as the Secretary of State considers appropriate as a result of responses to the consultation under subsection (3)(b), and

(b) issue the revised draft for the purposes of further consultation about it to the required consultees and to such other persons as the Secretary of State considers appropriate.

(6) The Secretary of State must then—

(a) make any further revisions to the draft that the Secretary of State considers appropriate as a result of responses to the consultation under subsection (5)(b), and

(b) prepare a report summarising those responses and the changes (if any) that the Secretary of State has made to the draft as a result.

(7) The Secretary of State must lay before Parliament—

(a) the statement as revised under subsection (6)(a), and

(b) the report prepared under subsection (6)(b).

(8) The statement as laid under subsection (7)(a) must have been approved by a resolution of each House of Parliament before the Secretary of State may designate it as the strategy and policy statement.

(9) The requirement under subsection (3)(a) to prepare a draft of a statement may be satisfied by preparation carried out before, as well as preparation carried out after, the passing of this Act.”

This new clause and NC33, NC34 and NC35 are intended as a suite of purpose and strategy clauses for this Bill.

--- Later in debate ---

[Andrew Bowie]

I believe that that was made clear. As I said earlier, we are working with Ofgem to ensure that it has the capabilities to deal with all of this. In terms of a national policy statement for Ofgem moving forwards, there will be a series of announcements over the next few months and, indeed, the year that will enable Ofgem and the future service operator to get into a position where they are able to deal with what we introduce through the Bill and other statements.

Clause 1 establishes Ofgem as the economic regulator for carbon dioxide transport and storage. It also establishes the principal objectives and statutory duties for both the Secretary of State and Ofgem in carrying out their functions under part 1 of the Bill. Transport and storage networks will act as the enabling infrastructure for carbon capture and storage from a range of sources, including power plants, industrial facilities, low-carbon hydrogen production and, potentially, direct air capture.

The economic regulation model provides long-term revenue certainty for network operators while protecting network users from monopolistic behaviours, as has already been described. The Government consider that Ofgem is the most appropriate body to act as the economic regulator for carbon dioxide transport and storage, due to its experience and expertise in the economic regulation of the overall energy sector. The selection of Ofgem as the regulator has received broad support from the industry. The principal objectives set out in clause 1 reflect the balance of considerations for a nascent carbon dioxide transport and storage sector.

[Dr Whitehead]

Clause 1 concerns the appointment of Ofgem as a regulator for these activities—in particular, carbon capture and storage. The new clauses that we have tabled seek to gather together what is in the Bill and provide it with a purpose clause, and to suggest to the Secretary of State that the Bill’s contents might be encapsulated, for future direction and use, in a strategy and purpose document.

--- Later in debate ---

[The Chair]

Order. Let me interrupt the hon. Gentleman. New clauses would normally be discussed towards the end of the Committee’s debates. We took the view that, because these new clauses deal with strategy and purpose, they might by that time be out of order. We therefore thought it reasonable to allow His Majesty’s loyal Opposition to have a full debate on them now, rather than towards the end of our consideration, as would happen normally.

[Dr Whitehead]

Indeed, Mr Gray; thank you for reminding the Committee of that. I am grateful to you and to the Clerks for your careful consideration of how we should proceed with these new clauses. As you say, the normal procedure—indeed, I have taken part in a number of Bill Committees where this has happened—is that new clauses are put at the end of the selection list. I can see that a number of new clauses have been selected for debate right at the end of our consideration of the Bill. By the way, I am slightly less pleased to see that the changes to the Bill that were wrought in the other place have been placed, by and large, in a new section at the end. I assume that those will be debated—

[The Chair]

Which we will discuss when we get to them.

--- Later in debate ---

[Dr Whitehead]

Indeed. They will be debated at the same time, at the end of our consideration of the Bill.

As you rightly say, Mr Gray, new clauses 33 to 36 may have be surplus to our discussions, should we have debated them at the end of proceedings rather than at the beginning. I am pleased that we are able to debate them now, given that they are concerned with our discussions on the early part of the Bill.

As has been widely trailed, the Bill is one of the most extensive that has come before this House, certainly in the energy sphere, and is probably one of the most extensive and substantial Bills in recent history. It seeks to do an enormous number of things. Although we do not think it does enough, by and large the things that it does are all necessary for the passage of our energy economy from a high-carbon to a low-carbon basis, with all the things that go with that, which we will discuss later in the Bill, such as carbon capture and storage, hydrogen, new forms of management of grid systems—all the things that point in a green, low-carbon direction. It is essential to put them into legislation by means of what I would describe as the green plumbing of the system. A great deal of the Bill is not about high-flown rhetoric on why we should decarbonise our structures, but about getting down to the real business of doing it as quickly as possible.

I think we can agree that the Bill lists a disparate series of things that are fit for our discussion and ready to go. Indeed, in a famous recent TikTok video, the Secretary of State stood against a wall with individual pages of the Bill stuck on it and said that it is the largest Bill on energy in history. I tweeted a response to the effect that the Government have been really good at getting the largest bills in history into the laps of customers—that was a bit of levity in response to the Secretary of State’s more serious point. The Bill is extensive, for deliberate purposes, which all point in the same direction.

There is perhaps cause for a little concern. When Bills seek to do such extensive plumbing work, it is easy to lose sight of what that plumbing is actually about. We need to be clear that we do not have a series of actions that might or might not be taken in respect of the various subject headings in the Bill; they are all actions that have to be taken in pursuit of what should be the overall purpose of the Bill, which is to secure us a low-carbon future. The Conservatives and Labour agree that those actions are not in dispute; they are essential for the purposes that we think are important for the future of our low-carbon economy.

The idea of a purpose clause is not something dreamt up by the Opposition as an interesting diversion during the early stages of discussing the Bill. A number of pieces of legislation have purpose clauses; they have fallen out of fashion in more recently, but if one looks back over a reasonable period, one sees that many Acts have such sections at the beginning. They recapitulate what comes after and put it in context, so that people who have not been subjected to our detailed discussions in Committee can say, “That is what this Act is about. There are provisions in the Act that point in this direction, and I should look at and respond to the Act in the light of that overall purpose.” That is a good and important thing.

Purpose clauses are not just nice things to have at the front of a Bill. They are quite useful for those who seek to interpret an Act at a later date—lawyers and the like. They may have opinions about what a particular part of the Act does, but they will be guided by the purpose clause at the front of the Act. For the Ministers who implement the terms of an Act, it is useful to have a clear statement of what Parliament thought we were doing when we put the Act on the statute book and of the framework in which the rest of the Act should be read.

The purpose clause that we have tabled, new clause 33, states:

“The principal purpose of this Act is to increase the resilience and reliability of energy systems across the UK, support the delivery of the UK’s climate change commitments and reform the UK’s energy system while minimising costs to consumers and protecting them from unfair pricing.”

That is a good summation of the Bill’s purpose. Members may want to add or subtract bits, but it is reasonable summation of where we are and where we want to go. Subsection (2) seeks to ground the Bill in other important legislation and states:

“In performing functions under this Act, the relevant persons and bodies”—

that is, people who are interpreting the Act’s principal purpose—“shall have regard to” certain matters, including, most importantly,

“the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008…and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change.”

The new clause therefore grounds the Bill firmly in the historic Climate Change Act 2008, sections 1 and 4(1)(b) of which provide for the target in the reduction of carbon dioxide and greenhouse gas emissions that the Secretary of State is supposed to ensure that we achieve by 2050. What will happen to whoever is the Secretary of State in 2050 if they are unable to deliver that target is debateable, but I think we can agree that the Act has really stood the test of time.

--- Later in debate ---

[Andrew Bowie]

I thank the hon. Member for his careful and considered contribution, which reflected the careful and considered discussions that His Majesty’s loyal Opposition and the Government have been having on the Bill and on the wider issue of net zero and energy security over the past few months and years. He is absolutely right: this is not a partisan debate, and there is very little to distinguish the Opposition’s approach to this issue from that of the Government. We all agree that our overarching aims, though this Bill and through the other actions that we as a country are taking, are to reduce emissions, reduce bills, strengthen our energy security, and create and secure new British jobs in the process, which will be to the benefit of this country and help us to lead the way in the world.

The hon. Member spoke with great purpose. I find very little to disagree with in the substance of what he said about the purpose clause, but he also admitted that the Bill is stuffed full, to use his phrase, of clauses that explain exactly what we are striving to do. For that reason, I suggest that despite the good intentions behind this specific purpose clause, it would be superfluous to the Bill at this stage. However, it is something that we are willing to consider moving forward.

With regard to the hon. Member’s comments on the strategy and policy statement, the power of the 2013 Act was not specific to the measures contained in that Act but covered all of the Government’s strategic energy priorities. That is why we published the consultation on an SPS just 13 days ago.

[Dr Whitehead]

Nearly 10 years later.

[Andrew Bowie]

Well, we got around to it eventually. The hon. Member for Kilmarnock and Loudoun asked whether the strategy and policy statement covers Ofgem. Yes, it does, and Ofgem will have regard to the SPS consultation that we are working on right now.

As I said, we intend to designate a final strategy and policy statement by the end of this year. That will be a decision for Parliament, not the Secretary of State, whichever party the Secretary of State happens to be from at the time. The new clauses are therefore superfluous to the Bill, despite the fact that they are well intentioned and that there is very little in their contents that I can disagree with. That is why I ask the hon. Member for Southampton, Test not to press his new clauses.

--- Later in debate ---

[The Chair]

I call Alan Brown.

[Dr Whitehead]

rose—

[The Chair]

Dr Alan Whitehead, do you wish to speak?

[Dr Whitehead]

I do, but—

[The Chair]

Well, we need to decide which—I call Alan Brown.

[The Chair]

I presume that His Majesty’s loyal Opposition wish to say something. I remind the Committee that when you wish to catch my eye, it is important to stand up and make it plain that you wish to speak. If you do not do so, I will not call you. I call Dr Alan Whitehead.

[Dr Whitehead]

Thank you, Mr Gray, and I appreciate that undertaking. My knees do not necessarily work in the way that I would ideally like them to in my advanced years, but I will attempt to do that.

The clauses provide a pretty good start point on prohibition on unlicensed activities. Indeed, clause 2 states:

“It is an offence for a person to carry on an activity within subsection (2) unless the person is authorised to do so by a licence.”

Again, that is the whole licensing arrangement that pervades the energy sector. The clause then specifies the activities, including

“operating a site for the disposal of carbon dioxide by way of geological storage”,

and

“providing a service of transporting carbon dioxide by a licensable means of transportation.”

We tabled an amendment on the use of carbon dioxide, but we were assured by the Minister at that time that that would be effectively covered by the scope of this clause.

That is a great start, but then we move on to not just the consultations but, in clause 5, the exemption from prohibition. Interestingly, clause 5 states:

“The Secretary of State may by regulations grant exemption from the prohibition under section 2(1).”

It does not actually specify what those exemptions might be; it just states that the Secretary of State may by regulations grant exemption. I therefore presume that, within that secondary legislation, the Secretary of State will unpack and set out the exemptions, and indeed how far those exemptions might run. It is interesting that the Bill states:

“An exemption may be granted…unconditionally, or subject to such conditions as may be specified.”

I presume that those conditions will be specified in the regulations that the Secretary of State will be required to introduce in secondary legislation. It also states:

“An exemption may be granted…indefinitely, or…for a period specified in, or determined by or under, the exemption.”

That will also presumably be in the regulations.

--- Later in debate ---

[Kerry McCarthy (Bristol East) (Lab)]

I know that this is a lengthy Bill, and there is a lot to get through, but I slightly had trouble keeping up with the breakneck speed at which the Minister introduced the clauses, so I am glad to have an opportunity to question him. He said that although there will be instances where licences are not needed, the situation might change and a licence may be needed. It would be helpful to have some examples of those scenarios to illustrate when the Secretary of State might invoke these powers. Does my hon. Friend agree?

[Dr Whitehead]

Yes, indeed. My hon. Friend has read my mind, as she often does.

This clause is procedural, as I have illustrated, and essentially says: “There may be exemptions. We don’t know what they are or what they might consist of, but don’t worry about it. The Secretary of State will think about that in due course and produce regulation that we hope—but we don’t know—might set that out in greater detail.” It is important that the Minister sets out today what might be in his mind when he makes those regulations, as far as exemptions are concerned. Is he a wide exemption Minister or a narrow exemption Minister? If he is a wide exemption Minister, what is the scope of the exemptions that he will be thinking about? If he is a narrow scope Minister, how does he interpret subsection (7), which states that an exemption may be granted indefinitely, given what he just said about how things may change in the future?

I know that there are things that we thought were indefinite in legislation that have turned out not to be—most importantly because Parliament cannot decide what the previous Parliament thought. However, it seems to be a hostage to fortune to put the word “indefinitely” in this legislation in the way that we see in clause 5(7).

I would be grateful if the Minister could provide us with some thoughts on what exemptions might look like and what his intentions are as far as regulation is concerned. I have not looked yet at the end of the Bill to see how any regulations might be considered by Parliament, but when the Secretary of State makes regulations on exemptions, I would expect those to be put forward under the affirmative rather than the negative procedure so that we have an opportunity to examine what they consist of.

[Kerry McCarthy]

Clause 5(6) refers to “Notice of an exemption” being given. It would be helpful to have clarity on the reference to

“Other persons who may be affected by it.”

I am not sure how that would be decided. It is really important that we have transparency and accountability in these processes. Does my hon. Friend agree?

[Dr Whitehead]

Yes, I do agree. Again, I appreciate that the wording of this Bill might be regarded as necessarily fairly vague, because of the fact that—in the words of Donald Rumsfeld—there are known knowns, known unknowns, unknown knowns and unknown unknowns about the future. However, it is important at least to have on the record something that guides us in a more positive way on who might be the “other” people affected and on indefinite exemptions and so on. It would be a good idea if that could at least be included in the discussion of the Bill.

By the way, our proceedings in Committee are of course recorded, and they are used on occasion in law to determine what the purpose of particular clauses was and what was thought to be in the mind of legislators when they introduced them. So it would be helpful, not just for our discussions today but perhaps for the future record, if the Minister was able to clarify these matters in a suitable way.

[Alec Shelbrooke]

It is a pleasure to serve under your chairmanship, Mr Gray, for what will be a long and detailed consideration of the Bill.

I want to focus on these clauses, because they provide an overall setting for the entire agenda. As the hon. Member for Southampton, Test outlined, the Bill is perhaps one of the most important pieces of legislation to come before the House in the 21st century, as we look at how we deal with these issues for the rest of the 21st century—it really is that significant.

To draw on the hon. Gentleman’s comments about unknown knowns and so on, we have to be careful at this early stage that we do not regulate to the point that we choke off innovation and research. A complaint is often made at several levels about how difficult it can sometimes be in this country for innovators and entrepreneurs to move forward without getting tied up in huge amounts of red tape. Given the global competition that exists in the field of climate change, environment and green energy, we want to have a competitive advantage.

I am sure we will discuss later areas such as tax credits and how research and development can be expanded in this industry. The Bill is so wide-reaching, across so many Departments—indeed, you might rule us out of order as we consider it, Mr Gray—that I expect to be told once or twice that some provision is not the responsibility of the Minister. The Bill ties up so many areas of Government, including the Department for Business and Trade, the Treasury and the responsibilities of the Minister.

Therefore it is important that we do not try to license every possible outcome that we may consider at this stage. That would delay the process. Often, it is important to allow a Minister to make a reasonably quick decision as something comes to the fore, whether through secondary legislation or a delegated decision. If we look at America’s Inflation Reduction Act or the EU’s response to it, we know that we are in a highly competitive, subsidised market. I do not believe in the heavy subsidisation of companies; I believe in being able to exploit their intellectual capability to be innovative, to be world leading and to get things to market as quickly as possible. Having said that, later clauses of the Bill concern things, such as battery storage, about which I have great concerns and on which we probably need a bit more legislation. That is one of those areas that may well fall under a different Department, but it will be important to raise those issues in the context of the Bill.

I understand the desire to say, “We must try to use the Bill to offset any health and safety concerns that may come along, because we are in such a new technological area.” But when we look at the granting of licences in this part of the Bill, we would not want to choke off the innovators for which this country is well regarded in so many countries around the world. We are an innovative nation. We have the lead on innovation. China steals IT and reduces the cost of producing materials through poor wages and a disregard for health and safety, but it is not an innovator, which is what our universities and sectors work so well towards being.

The hon. Member for Sheffield, Hallam mentioned that she had spoken to the institutions in her great city. In a previous life, when I worked for the University of Leeds, I was involved in the early days of nanotech. We joined up all our seven major universities, including the universities in the hon. Lady’s city, and that accelerated Yorkshire’s ability to lead in nanotechnology. We could do that because we could draw those things together, bring the expertise together and accelerate it. Innovation hubs formed out of those universities in the early 2000s and gave us a leading edge, which we have used.

As legislators, we must try to ensure that we provide a framework for companies, innovators and researchers to work within. But that should not be prescribed in such a way that, when a product is ready to take to market, needs extra investment or needs to be able to work elsewhere, we have put a very tight pair of handcuffs on the ability to do those things. The premise of the Bill gives direction, but my hon. Friend the Minister should not make it so tight that we choke off the very things that we are trying to do.

We all talk about the huge potential investment in the green economy, about the green investment bank and about the massive changes that have taken place in the Treasury in recent years. Of course, we talk about having a smooth transition when there is a potential change of Government. That is why the Bill is so important and why I pushed to be on this Committee. The Bill is a major change that will stand this country—and indeed the world, if we can export some of the technology—in good stead in terms of achieving the better society we are trying to achieve on climate change. It is important that we go down this road, but let us not make the provisions so restrictive that we choke off the innovation at which this country excels.

Oral Answers to Questions

Lord Whitehead Excerpts

Tuesday 23rd May 2023 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Will the Minister explain how, on his watch, things have got to such a wretched state with grid development? The grid apparently cannot now connect renewable energy plants to the system until after 2035, the date by which the Government say in the energy security strategy

“we will have decarbonised our electricity system”.

Presumably they envisage that system will be connected to the grid by that point. Has he been unaware that there is a serious problem, or was he aware, but did nothing about it?

[Andrew Bowie]

My watch began only in February. However, I believe the United Kingdom is a victim of its own success, as this is what happens when new renewable electricity production is developed at such scale and pace. We understand the challenges facing the country and the grid. That is why we are meeting with Ofgem and have commissioned the Winser review, which we will publish in the summer. We are determined that we will meet that 2035 target.

[Dr Whitehead]

The Minister says that some things are beginning to happen, but does he recognise in this context the figure of £30 billion, which is the investment the energy system operator considers is necessary to make the system fit for offshore wind and other renewables coming on to the system, not by 2035 but by 2030? Is he prepared to commit now to find that amount of investment, one way or another? If he cannot do that, how can we take his assurances on action at all seriously?

[Andrew Bowie]

This Government are determined to face up to the challenges that we have. We have moved forward at such pace, having inherited a disgraceful situation in terms of how much renewable electricity was being produced under the last Labour Government. That is why the grid is facing such challenges today and why we have commissioned Nick Winser to produce a review in the summer to see how we can move much faster to achieve our goals. I would welcome the hon. Gentleman and the Labour party being more supportive, talking up this country and our success in developing renewable electricity, and working with us to tackle the challenges that he so rightly brings to the Floor of the House today.

Energy Bills Discount Scheme Regulations 2023 Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 Energy Bills Discount Scheme Pass-Through Requirement Regulations 2023 Energy Bills Discount Scheme Pass-Through Requirement (Heat Suppliers] Regulations 2023

Lord Whitehead Excerpts

Monday 22nd May 2023 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

We have been around these houses quite a few times, between us. I cannot remember exactly how many SIs we have had on the energy bill support scheme pass-through requirements—the non-domestic element of the original scheme—but I think it is well into double figures. During that period we have debated a whole range of things relating to those SIs, both positive and negative. The overwhelmingly positive aspect of the SIs has been that they provide the support people need for their bills in these times of great uncertainty and difficulty.

Today we are debating five SIs, which, secure the energy bill discount scheme for non-domestic businesses in Great Britain and Northern Ireland for a further year. The Minister will not be surprised when I repeat my concerns about the likelihood of some people getting the money they are entitled to, in view of the requirements of the SIs. She will recall our discussions about whether there should be a strict legal liability on the intermediaries responsible for the pass-through arrangements. There has been a further development in the arrangements for the energy ombudsman to become involved in matters of dispute, but he or she has no legal recourse to enforce payments. We still lack a strict legal liability for those whom the legislation makes responsible for passing through payments to the right people. I do not think we will profit greatly by having a long debate about that— I do not think we will resolve it further—but I note that I am still not entirely satisfied.

I am puzzled about how the new scheme fits in with paragraph 5 of schedule 6 to the Energy Prices Act 2022, which provides for reduced energy charges for non-domestic customers in Great Britain. It is right that the secondary legislation should concern itself with a one-year scheme, particularly for non-domestic customers, bearing in mind that the contracts they enter into do not fall strictly within any particular six-month period. One problem we had in our previous discussions about non-domestic customers was that someone might take out a contract for a non-domestic service that started before the support period and finished halfway through it, or that they might take out a contract halfway through the support period that finished outside it. There could be problems at either end. Those issues seem to have generally been resolved, but a period of a year is a more approachable proposition.

The Energy Prices Act sets out a two-year window within which support is to be provided, and states that that support

“may only provide for the reduction of charges for electricity supply that takes place during a period of six months or less;”.

As the explanatory notes to the Energy Bill Discount Scheme regulations state,

“The EBDS takes us up to the end of the third of the four successive periods.”

That means that the Act envisages a maximum of two years in four different tranches of six months. It then states:

“Support under EBDS will be provided for a year (divided into two six month periods), reflecting the limits in the Act.”

Dividing the support into six-month periods reflects the limits in the Act, but it does not make it clear—it is certainly not clear in the secondary legislation that we are debating—whether the superior legislation so limits the provision of support for a period of six months or less that putting forward a proposal that support should be provided for one year does not necessarily count, for legislative purposes.

It may be perfectly in order for the Government to set an aspiration that support should be for one year, but that may not necessarily accord with what the Act says. In order to make that right for a year, we may have to be here, yet again, in six months’ time re-legislating for the second of those two six-month periods.

I would like to know whether today’s proceedings really will be the last word on that support, or whether the proposal for a year’s support is an aspiration that will require us to go around the houses with legislation in six months’ time. If the Minister can clarify that, I will be very happy to support these regulations. In fact, I am happy to support them for the reasons I have outlined; I will not make my support conditional on the Minister’s doing that, because I am sure it will take some clarification. It is important, however, that we make it clear that we have finished legislating to give that certainty, and that as a result of today’s proceedings, we have put to bed for another year the question of price support for non-domestic customers.

--- Later in debate ---

[Amanda Solloway]

I thank hon. Members for their contributions to this debate. First, I address the question of whether these instruments are the end of the legislation in this area. I sincerely hope so. However, if there is anything to add when we meet tomorrow, I will of course let the hon. Member for Southampton, Test know, but it is very much my clear understanding that they are the end.

I turn to the point made by the hon. Member for Cardiff West about the music industry. I understand his great passion. He indicated very clearly why the industry is so important to the whole United Kingdom. He mentioned that he is very proud of our music industry—I am as well. I will attempt to explain the reason why we have these schemes. If I am unable to give a full enough explanation, as always I will be happy to offer a further meeting. Within the discount scheme, there is the universal level, which I believe is the level originally mentioned by the Department for Digital, Culture, Media and Sport Minister, my hon. Friend the Member for Hornchurch and Upminster. On that level, support will be given across all of the non-domestic industry. That is my understanding of the support that the music industry will be receiving.

Clearly, the energy-intensive industries needed more support based on the energy that they use, and the fact that a lot of the work is international was also taken into account. The list that the hon. Member for Cardiff West referred to was the standard industrial classification list, known as the SIC list. That is the standard that we used to define the energy-intensive industries that were to have the additional discount. If I have not explained that fully, I am happy to have a meeting with the hon. Member at a later date.

[Dr Whitehead]

The Minister mentions the so-called SIC list. That is an interesting list in so much as it provides, as my hon. Friend the Member for Cardiff West said, a number of categories of energy-intensive industries. Some of those categories are very narrowly drawn, and some are very widely drawn. His point, at least in part, was that some of the categories within the energy-intensive classification for the higher level of funding are very tightly drawn, and therefore they come into that level, whereas others are very widely drawn.

I mentioned the discrepancy between ornamental or leisure gardens and horticulture, which is often very intensive, and between horticulture and agriculture. Clearly, agriculture is outside the energy-intensive industry classification, but because horticulture is classified within agriculture it does not get in, even though it has similarities with things in the energy-intensive list. I wonder whether the Minister will find time, at some stage, to look at the SIC list to see whether it does the job that we think it does when it comes to ensuring that people get the assistance. Energy-intensive industries should be well enough drawn to ensure that we do not have the sort of anomalies that my hon. Friend the Member for Cardiff West thinks we have.

[Amanda Solloway]

The hon. Gentleman makes an interesting point about the SIC list. That is obviously the list we are using at the moment. We have taken a consistent approach to identifying the most energy and trade-intensive sectors with all the sectors that meet the agreed threshold to be eligible for this support. The Government are committed to continuing to provide essential energy bill support to eligible UK businesses, charities and public sector organisations until April 2024, to help avoid unnecessary financial pressures and job losses resulting from the ongoing situation in the wholesale market.

In addition to the baseline discount for all non-domestic consumers, the new scheme also provides, as we have discussed at length, much-needed targeted support for energy and trade-intensive industries and consumers on heat networks. That additional support will ensure that those most exposed to volatile energy prices and international trade are supported while limiting the fiscal burden on the taxpayer. The methodology ensures that the scheme captures those industries that have been identified as being less able to pass through their increased energy costs to customers because of international competition, as demonstrated by the level of trade intensity, and require an additional level of support. The pass-through requirement sets out how the benefit is passed on to end users in a reasonable and just way. The delivery of this calculation has been designed to ensure that it is not prescriptive but supports all scenarios.

By replicating existing civil enforcement mechanisms, we hope to avoid any complications for end users and provide clarity on how disputes can be raised. My Department has published clear guidance on gov.uk, both for intermediaries and for end users, that provides detailed information to help those affected. We are keen to ensure that all end users, including those who are vulnerable, receive the benefits of the schemes to which they are entitled. We will continue to review our pass-through requirement communication strategy, including reviewing guidance on gov.uk and offering engagement sessions to ensure that intermediaries understand their obligations and that customers receive the benefits to which they are entitled. I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the Energy Bills Discount Scheme Regulations 2023 (S.I. 2023, No. 453).

ENERGY BILLS DISCOUNT SCHEME (NORTHERN IRELAND) REGULATIONS 2023

Resolved,

That the Committee has considered the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 (S.I., 2023, No. 454).—(Amanda Solloway.)

ENERGY BILLS DISCOUNT SCHEME (NON-STANDARD CASES) REGULATIONS 2023

Resolved,

That the Committee has considered the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 (S.I., 2023, No. 464).—(Amanda Solloway.)

ENERGY BILLS DISCOUNT SCHEME PASS-THROUGH REQUIREMENT REGULATIONS 2023

Resolved,

That the Committee has considered the Energy Bills Discount Scheme Pass-through Requirement Regulations 2023 (S.I., 2023, No. 463).—(Amanda Solloway.)

ENERGY BILLS DISCOUNT SCHEME PASS-THROUGH REQUIREMENT (HEAT SUPPLIERS) REGULATIONS 2023

Resolved,

That the Committee has considered the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 (S.I., 2023, No. 455).—(Amanda Solloway.)

Non-Domestic Alternative Fuel Payment Application Scheme Pass-through Requirement Regulations 2023

Lord Whitehead Excerpts

Monday 15th May 2023 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

What the Minister says about the regulations is all good stuff in terms of the need to ensure that high users of kerosene in off-grid industrial and commercial settings get the benefit of £150 and, indeed, of a top-up, as the Minister mentioned, in recognition of the high fuel costs that they are experiencing.

This is, I hope, the last in a dizzying catalogue of secondary legislation, all of which the Minister’s predecessor, the right hon. Member for Beverley and Holderness (Graham Stuart), and I sat here scrutinising over a long period to try to get right the regulations related to all the different areas under consideration for payments. In this instance, we are considering pass-through requirements. The principle that we should require pass-through in circumstances where an intermediary receives a payment and the end user of the kerosene, in this instance, may not get it because they are not the primary person or organisation to whom the payment goes, is very important as far as the overall legislation is concerned. When we last met to discuss regulations of this sort, I asked the right hon. Gentleman whether they were the last ones. Apparently that was not the case, but I hope these regulations are the last ones. After all, the scheme is pretty much over and done with, but we are still trying to legislate to ensure that we get it right.

As I say, the regulations are well and good—except, as the Minister pointed out, and indeed as the Joint Committee on Statutory Instruments pointed out in relation to another SI, they rather fall down because no one actually has to do anything about them. We have a substantial piece of legislation to try to make sure that people get their money. As my right hon. Friend the Member for Leeds Central acutely pointed out, the intermediary has to write to the end user of the kerosene, in this instance, to tell them that £150 may be coming their way and, if they are not going to get the full amount—there may be reasons for that, due to administration and other costs incurred by the intermediary—what proportion of it might come their way, and that has to be just and reasonable. However, as the Joint Committee pointed out, in law, the intermediary does not actually have to do any of that. It can simply sit on its hands and not tell the end user that they are entitled to £150 and that a portion of it, or otherwise, will come their way. The intermediary can just say nothing and the law will not come after it, because there is no strict liability in the regulations to make anyone do anything.

Yes, there is a theoretical remedy: as with pretty much anything else, if the end user does not get their £150, they can try to recover it as a civil debt through the courts. But, frankly, if someone does not even know they have £150 coming their way because they have not been told in the first place, it is rather difficult for them to take legal action to get hold of it. The intermediary has no legal liability to tell the end user that £150 should be coming their way. Indeed, there is no Government register of those intermediaries that should be passing on the money, so there is no real way of bottoming this out as far as intermediaries are concerned.

The Government have said in response to the Joint Committee on Statutory Instruments that—as the Minister outlined, if I may paraphrase—all this strict liability, for the size of the problem before us, would be an awful faff, and the scheme is coming to an end more or less anyway, so it might be disproportionate. The other odd thing they say, as the explanatory memorandum sets out, is:

“Furthermore, it is considered important to ensure consistency across the pass-through regulations relating to the energy support schemes.”

That means: “We have not done it in other pass-through regulations, so we are not going to do it now. None of them has strict legal liability involved, and they all have that very inadequate, virtually non-existent way of getting any sort of remedy for the £150, so at least we are consistent.” That is not a very good way of going about such things.

The Opposition will not oppose the regulations, because it is important for people get their pass-through money if possible. However, the judgment made by the Government is, in effect, to say that it is useful to have incomplete requirements to do various things such as notification, because most people will probably do it, and it is important that they are there as guidance for how to do it. That may well be true, but a number of people might desperately need the money, as the Minister said, but miss out for various reasons. It is not always the case that the people who are intermediaries—perhaps not in this case, but in a number of others, such as park home owners—are necessarily the most completely upright, careful and judicious operators in their organisations. I can see the temptation for some people to say, “Right, we’re not going to have anything to do with this. Nothing much will happen to us, so it’s probably worth our while not to do anything, because we will probably save more money than we might conceivably expend in one or two small legal cases.”

Overall, I do not think that this has been a glorious way to respond to the points made by the Joint Committee on Statutory Instruments. I am not sure that the decision simply to ignore what the Joint Committee said is ultimately supportable, but I hope that the regulations work well and that the people involved get their £150 and their top-up for kerosene. The regulations are well intentioned, given that they are about ensuring that that happens, and we are absolutely with the Government in that desire, but I wonder whether the Minister intends simply to leave the issue or might she possibly have a look, once things are under way, to see if there is a potential problem in the lack of strict legal liability that we think there is at the moment? She may come back to the House at some stage to say either, “Well, it turns out there wasn’t a problem,” or, alternatively, “Hmm, there was a bit of a problem, so how can we get it better next time?”

Energy Bill [Lords]

Lord Whitehead Excerpts

2nd reading
Tuesday 9th May 2023 Commons Chamber

[Dr Alan Whitehead (Southampton, Test) (Lab)]

We have had a good, calm and well-informed Second Reading debate. Indeed, we have heard contributions from across the House emphasising the point that the Bill is necessary but not necessarily sufficient.

My right hon. Friend the Member for Leeds Central (Hilary Benn) asked who will pay the changed levies as far as heating is concerned, and spoke about the need to undertake that properly for customers.

My hon. Friend the Member for Llanelli (Dame Nia Griffith) pointed us towards the rise of state-controlled companies’ investment in new energy arrangements, and was adamant about the Bill lifting of the ban on onshore wind.

My hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) made a strong contribution on the role of hydrogen in heating and, in particular, on the hydrogen trials that he has experienced. Perhaps we can assure him that we will certainly pursue an amendment to the Bill along the lines that he suggested.

My hon. Friend the Member for Stockton North (Alex Cunningham) spoke strongly about carbon capture and storage, about the importance of CCS in the Teesside industrial cluster, and about the importance of ensuring that the industrial clusters can play their role in CCS as they develop further,

In the spirit of general cross-party support for the Bill, I think it also worth mentioning selected contributions from hon. Members who are not on the Labour side. Unfortunately, if everyone stuck to the contributions from their own side, those of the hon. Member for Brighton, Pavilion (Caroline Lucas) would not be mentioned by anybody, but she made a strong contribution about the future of coal, about the need to support the amendment on coal tabled in the other place, and about the ludicrousness of continuing to maximise the economic production of oil, echoing many of the sentiments of my right hon. Friend the Member for Doncaster North (Edward Miliband).

The right hon. Member for Ludlow (Philip Dunne), who chairs the Environmental Audit Committee, spoke strongly about the need for security of investment in this market, and the length of arrangement that would secure those investments and confidence in markets for the future.

Finally, the right hon. Member for Kingswood (Chris Skidmore), author of the net zero report, spoke enormous sense about delays being the biggest threat to net zero in future. He supported the retention of Lords amendments to the Bill, as did many other hon. Members, on community energy changes and other things that are part of the Bill that we are debating in the Commons.

[Wera Hobhouse]

Does the hon. Gentleman think that it is important that we do something about methane flaring and venting, which I raised in my contribution?

[Dr Whitehead]

Yes, I am happy to acknowledge that that is an important issue in the transition to net zero for the oil and gas industry, and that it is ripe for further legislation to outlaw it in the not-too-distant future.

It is fair to say that hon. Members across the House went along with the theme that we have tried to establish on the Bill: it contains a great deal to support, and it is a Bill that is necessary to introduce things that are essential to the development of a low-carbon economy, to the achievement of the many targets on low-carbon energy and renewable deployment, and to the new forms of energy management that the Government have already put in place and on which they are seeking to succeed.

The Bill establishes mechanisms and business arrangements for carbon capture and storage, and for the manufacture and deployment of hydrogen as a low-carbon fuel for the future. It starts to delineate how energy systems are going to be governed and managed for the future, with the establishment of the independent system operator. For the first time, it introduces a proper system of heat network regulation, and it takes the planning and development of heat networks further. It heralds some of the essential elements of energy market reform. In short, it undertakes a great deal of what I would call necessary “green plumbing”, which has to be done now if our low-carbon energy system of the future is to work effectively.

The Opposition have some serious differences with the Government about how to go about those changes, but we acknowledge and support the generality of those “green plumbing” measures, not least because their establishment will undoubtedly help the new Labour Government greatly as we embark on our far more ambitious programme of energy decarbonisation and energy efficiency from 2024 onwards. Indeed, one of our substantial criticisms of the Bill is how long it has taken for us to get to the point of establishing the legislation that will guide the next stages of our energy decarbonisation.

As we have heard, the Bill has been with us for 10 months in its almost finalised form. Yes, the Government have sought to add amendments to the Bill in another place, and there will be further amendments in the Commons, but the measure could have been on the statute book many months ago—and time is of the essence in getting going with the next stages of decarbonisation. Instead, last autumn we were treated to the spectacle of the then Secretary of State for Business, Energy and Industrial Strategy pulling the Energy Bill from its established progress after just two sessions of debate, and sitting on it for over three months for no apparent reason while the legislative process stalled completely. That led to the remarkable situation of the Opposition writing to the new Minister during that period of stasis demanding that the Bill be recommenced as soon as possible. I know about that because I was the person who wrote the letter. [Interruption.] Indeed, I did a very good job there.

Yes, this Bill is necessary, but many Members have asked whether it is sufficient, and we think it is certainly not. There are many missed opportunities to legislate for many aspects of the green transition that are or will become necessary shortly. There are many instances where the green plumbing in the Bill looks, frankly, fairly faulty and could do with beefing up. For example, the Bill fails completely to lift onshore wind back into place as a key element of our low-carbon energy armoury. The Bill fails to redefine Ofgem’s remit to start from a low-carbon imperative. The Bill fails to address another key part of that armoury—community energy—in any sort of meaningful and enabling way.

The Bill fails to address the very real changes in regulatory machinery that will need to accompany the transition from oil and gas to a predominantly low-carbon energy environment. The Bill continues to propose soaking customers for the support of future infrastructure when we require entirely new forms of support that recognise both the breadth of the work that has to be done and the institutions that we will need to support investment and development.

There are many areas where we can say, “Yes, but” to this Bill and put forward the measures that will enable it to rise to the challenge of decarbonisation in a comprehensive way. That is why we will embark on that task as the Bill goes into Committee by tabling the amendments that will make the Bill so much more robust for the challenge of the future, and we hope the Government will be receptive to those proposals. That process has been started, with a number of very well-thought-out additions made to the Bill in the other place on Ofgem, hydrogen, coal, community energy and home retrofitting. We will seek to defend those changes in this place, and we hope the Government will see the wisdom of them and not seek to overthrow them.

This is a necessary but not sufficient Bill that we want to get on the statute book, preferably with the added heft of our proposed changes to it in Committee, so that it becomes more on the sufficient end and less just necessary. We will not seek to divide the House on Second Reading but instead will give conditional support and assistance as far as we can with an early emplacement on the statute book.

Labour has an ambitious low-carbon energy programme for government, with a fully decarbonised power system by 2030, including a doubling of present onshore wind deployment; a grid that is fit for enabling and delivering a low-carbon economy; Great British Energy, an investment company that can do so much to speed the energy transition along; a massive programme to retrofit 19 million homes over 10 years to reach our energy efficiency targets; and serious planning of the energy transition, so that it is a just transition both in the North Sea and elsewhere. All these plans will benefit from many of the measures that are in the Bill, but they could be so much more supportive, and that is why we want to see an extended and more robust version of the Bill on the statute book as soon as possible.

Oral Answers to Questions

Lord Whitehead Excerpts

Tuesday 18th April 2023 Commons Chamber

[Andrew Bowie]

The east of England does do a lot of heavy lifting for renewables—almost as much as the north-east of Scotland—but this is not a competition. I am delighted to inform my right hon. Friend that I am visiting East Anglia next week to meet communities in the area. Indeed, I met producers and manufacturers yesterday to see what they can do to mitigate the impact on her local community and other communities in the region.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

If we are prevented from building renewable power in the first place, connection times become rather a moot point. Will the Minister explain why he has failed to lift the ban on onshore wind, despite the Government saying that it would be lifted by the end of April?

[Andrew Bowie]

This Government are committed to onshore wind as a huge part of our renewable energy mix—14 GW, in fact. We are also committed to new renewables offshore and to new nuclear, which the Labour party opposed for such a long time. It will be a whole collection of those new technologies and infrastructure projects that will help us drive our way towards our net zero ambitions and the cleanest and cheapest electricity in Europe.

[Dr Whitehead]

That wasn’t very good, was it? The Government’s own offshore wind champion Tim Pick said last week that we will miss our 2030 offshore wind ambitions by more than 10 GW because of poor grid connections. Even with the lifting of the onshore ban—if we believe the Minister—developers will not invest given the prospect of a 13-year delay in grid connection. When will the Minister commit to a speedy programme of grid capacity building, to give onshore and offshore wind a good chance of success?

[Andrew Bowie]

As I said, this country is leading the way in investment in new renewable technology. We acknowledge that there are difficulties connecting to the grid, and we are investing in improving that. Nick Winser’s report is coming in June, which will give recommendations to Government on how to reduce the timescale for connecting those new projects to the grid. That is the focus of this Government, not playing politics. We are taking real decisions to benefit this country, to cut our carbon emissions and to reduce energy bills across the piece.

Energy Support for Farms

Lord Whitehead Excerpts

Tuesday 21st March 2023 Westminster Hall

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I congratulate the hon. Member for Upper Bann (Carla Lockhart) on securing the debate. It is on an important and usually forgotten part of our current energy debates. We talk generally about domestic customers and industry and commerce and what they get in the various energy bill support schemes and discount schemes and so on, but we very rarely talk about farming or agriculture.

We tend to think that there is not much energy going into these rural buildings. We completely overlook just how much energy is used by farms, particularly in intensive industries such as poultry farming and horticulture where an enormous amount of energy is used in many parts of the process. It is rather hidden behind the seemingly low-cost, low-energy appearance of the rural environment.

It is important to concentrate on the farming sector’s problems with energy costs and what they mean for the ability of such businesses to sustain themselves. We must also think about what that means for the on-costs for everybody else, such as effects on the cost of food production. Many farms are pushed between the prices they are going to get for their end products from further up the chain and their own costs coming in. We must consider how they are going to make a living between those two points.

The hon. Member for Upper Bann gave examples of just how much energy costs have gone up for relatively small farms in her area. Those costs are, of course, replicated across the United Kingdom. She made a strong case for the question of energy support for farms to be looked at with a far wider lens that encompasses not just the small contributions that have been made to farms through the energy bill support scheme and others—though I know Northern Ireland has a slightly different scheme from the rest of the UK, where the payments are lumped together. There has been a considerable debate in Northern Ireland about the extent to which farms that are both domestic properties and farms get the full amount of payment through the scheme. Indeed, I have discussed with Ministers in Delegated Legislation Committee proceedings the rather complicated nature of that process.

The hon. Member for Upper Bann put forward the case that, notwithstanding Northern Ireland’s scheme, farms ought to be treated as part of an energy-intensive industry. I am sure hon. Members will be interested to know what actually is classed as an energy-intensive industry. The starting point for being treated as an energy- intensive sector is to fall in the 80th percentile for energy intensity—meaning it must fall in the top 20% for energy intensity across the UK—and the 60th percentile for trade intensity. So there is a formula as to what gets on the list of energy-intensive industries and can then receive additional support from the EBRS and be substantially exempted from environmental levies on the whole industry. The exemption has been 85% for quite a while, and there are discussions about whether it should be increased to 100% in the not-too-distant future. Categorisation as an energy-intensive industry is important, in a number of ways, to getting support with energy.

It is curious that poultry processing, for example, is on the list of energy-intensive sectors, but poultry production is not, and that things relating to ornamental plants are on the list, but horticulture is not. I suspect that may be because of the NACE—nomenclature of economic activities—classes, which define sectors. It may be that what look to us like sectors—poultry and horticulture, for example—are lost in the wider definition of a class such as agriculture and farming.

The Government should review fairly urgently how sectors are defined for energy intensity purposes. Seventy-one sectors come under the definition of energy-intensive industries. Is farming simply losing out because, as the sector is defined, its relatively lower-carbon elements dilute the elements with greater energy intensity? Such a review is well overdue. If the sectors were drawn a bit more closely, I think farming—or at least substantial elements of it, in the way that the hon. Member for Upper Bann described—would come under the definition.

Curiously, coalmining is defined as an energy-intensive industry and therefore 85% exempt from environmental levies, when we might think that that activity has something to do with the raising of those levies in the first place. There may be a wider case for redefining what counts as an energy-intensive industry.

This is a very important issue, and the Government could do something about it, not simply by providing a larger cash amount to farms, but by defining much more clearly what it is to run a farm and how energy use affects such definitions. The Government can look again at those definitions, and I hope that the Minister will commit to doing just that.

Oral Answers to Questions

Lord Whitehead Excerpts

Tuesday 28th February 2023 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The Secretary of State says that he has brought the scandal of prepayment meters to an end, but it certainly is not at an end. Indeed, the Government were repeatedly warned about this scandal but were effectively paralysed while thousands of vulnerable householders were disconnected by the back door. Customers now face more uncertainty as the moratorium on forced installations ends in just four weeks’ time, with nothing in its place. Can the Secretary of State confirm that there will be no lifting of the ban until this rotten system has been reformed and that there will be a proper compensation scheme managed by the Government for every customer affected?

[Grant Shapps]

As I mentioned previously, there is a role for prepayment meters. For example, my son lives in a shared flat, and they find a prepayment meter a very good way to pay the energy bill. I do not think that an outright ban is the right way to go, but the hon. Gentleman and others have rightly pointed out the level of concern across the House, which I absolutely share, about prepayment meters being forced on customers. We will ensure that we do not go back to those bad old days that I was pleased to play an important part in stopping.

Draft Electricity Supplier Obligations (Green Excluded Electricity) (Amendment) Regulations 2023

Lord Whitehead Excerpts

Monday 27th February 2023 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

This statutory instrument is, in principle, pretty straightforward. It removes something that, as the Minister said, was a consequence of state aid discussions, which took place when the CfD first became a major instrument of renewable development in the UK. It deals with the CfD that was in place in the UK, and a potential loophole in state aid regulations. Suppliers importing electricity from Europe should not have that supplier obligation applied to them and the electricity they are bringing in from European sources.

So far, so good. I agree that since we do not now have responsibilities as far as state aid is concerned, it is really no longer relevant to continue with an arrangement that was dependent on a state aid loophole. However, that has a consequence, which the Minister alluded to: pretty much all the energy that comes in from Europe has to come in through an interconnector. In the past, suppliers on this side of an interconnector, having contracted for something to come through that interconnector to the UK, had to produce evidence of the extent to which whatever came through the interconnector would otherwise have been eligible for a payment into the Low Carbon Contracts Company. There was a supplier obligation to pay out the generators, which were getting money from the low carbon contract in respect of the strike price that they had set up for the CfD. They had to provide evidence of the power coming in to claim that there was no money to pay, as it were, for that supply coming in.

Now the opposite is the case. It appears that suppliers will have to provide evidence of what is coming in, as a renewable source, via the interconnector from Europe, to ensure that they do pay. I presume that they will be paying into the Low Carbon Contracts Company in the same way as other people who are eligible in the UK, as far as CfDs are concerned.

My first question is this: why would any company that now has to do the reverse of what it did previously—produce evidence of a green import through an interconnector in order not to pay—willingly give evidence to pay? Would the company not simply say, “We don’t know where our power comes from. It comes through the interconnector, so it might be renewable or it might not”? If the company did have to pay, rather than being exempted, the likelihood of it ensuring that it did not put any evidence in that anything had come in from a renewable source would be quite high. Nothing in these regulations suggests that the Government would require that evidence to make people pay, and there is nothing about any penalties or enforcement against bodies that did not supply that information for the purposes of paying in future. Do the Government have any view on that development possibly taking place?

The second issue, as I am sure the Minister will be aware, is that we do not have an inversion in place as far as the relationship between CfD strike prices and reference prices is concerned. That means that, instead of the normal procedure as far as CfD holdings in this country are concerned, the supplier does not get a payment out of Government in respect of the strike price. As the reference price is consistently above the strike price, or it is at the moment, the supplier has to pay back into the Low Carbon Contracts Company. The company then has a reasonable obligation to pay that money back to suppliers.

Are suppliers newly obligated to pay money into the LCC for CfDs, which were previously exempted, but also to get money from the LCCC when the general strike price is inverted against the reference price? Is that an indication that those companies might have to report what they are bringing into the country, and register that renewables have come in and that, therefore, they might be eligible to get money back, as far as their contribution to CfDs are concerned? If the Minister can enlighten us on those two points, I would be grateful, but we have no intention of opposing the instrument.

--- Later in debate ---

[Andrew Bowie]

I thank hon. Members for their contributions. The hon. Member for Southampton, Test, made some good and sensible points on the SI and the policy. It is only right and proper that companies provide evidence that they are importing electricity. This SI was brought forward following extensive consultation with industry, and we expect companies to do the right thing. In terms of sustaining extra costs, those suppliers who have used the exemption will pay the scheme a cost in closer proportion to their market share. There are more suppliers who will benefit from this change than not. The change is considered to be very minor. The extra cost that the companies will pay will be minor, and we do not suspect that it will be in any way a disincentive for them to declare that they are importing energy.

I welcome the fact that the hon. Member for Kilmarnock and Loudoun put on record that he considers CfD to be a success. I agree: it certainly has been a success. Indeed, we have only to look at my constituency and the number of wind turbines springing up off the coast of Aberdeenshire. On grid connections and the cost for electricity generation in Scotland, he knows that there is a trade-off, and that consumers in Scotland pay less as a result of the higher charges being placed on electricity generation. That is not to say that there are not issues that need to be addressed. I agree that there are, and we should look at them. I hear loud and clear his comments on tidal stream energy. In fact, I have been to see the exciting developments in Orkney, and I look forward to doing more on this.

[Dr Whitehead]

Will the Minister give way?

[Andrew Bowie]

I will, given that we have taken up so little time so far.

[Dr Whitehead]

I am grateful to the Minister for giving way. He passed over my point about whether the suppliers will get a payout from the LCCC when the difference between the strike price and reference price is inverted from its normal position. If they will, how much will that come to?

[Andrew Bowie]

I am terribly sorry: I will have to write to the hon. Member on that point, but I will get an answer to him in the next couple of days, because it is important that it is answered.

I hope that I have given hon. Members the necessary assurances to approve the statutory instrument. As I said, the changes in these regulations will mean that a supplier in GB will pay a proportion of the CfD scheme cost that is closer to its market share; will remove the condition imposed on the British scheme by the European Commission; and will remove the incentive for GB suppliers to import EU-generated renewable electricity. They must be made now, ahead of the end of the scheme’s reporting period on 31 March, so that electricity suppliers and the scheme administrators can plan accordingly.

Question put and agreed to.