Nuclear Industries Security (Amendment) Regulations 2016
Lord Bourne of Aberystwyth Excerpts(7 years, 10 months ago)
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Lord Bourne of Aberystwyth
That the Grand Committee do consider the Nuclear Industries Security (Amendment) Regulations 2016.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I will give some background and explain why we are seeking to make these amendments, which will be an important addition to the nuclear security framework, both while we remain a member of the EU and as our relationship with Europe changes and evolves.
The United Kingdom is highly regarded by the International Atomic Energy Agency and other key international partners in civil nuclear security, and we take our international role in this field very seriously, including with regard to regulation. The draft regulations before the Committee would update the Nuclear Industries Security Regulations 2003. Specifically, they would remove sub-paragraph (i) from the definition of transport in Regulation 2(1), and add references to air transport to Regulation 3(5)(b).
The effect of these amendments is to bring the transport of civil nuclear material by air within the same stringent regulatory framework for security that applies to the transport of such material by land or sea. This means that the independent Office for Nuclear Regulation will have the same oversight and approval function in relation to the security of civil nuclear material transported by air as it has in relation to the transport of such material by land or sea.
There are two main reasons to make this amendment to the regulations. The first is that the United Kingdom is a party to an international treaty, the Convention on the Physical Protection of Nuclear Material, which was signed in 1980, came into force in 1991 and was subsequently amended in 2005. The convention requires signatories to have in place a legislative and regulatory regime to ensure the security of civil nuclear materials stored or transported in that state. The Nuclear Industries Security Regulations 2003 are the primary means by which the United Kingdom has implemented this obligation under the convention.
When these regulations were first written, the transportation of nuclear material by air was not considered to be an option and so air transport was excluded from the scope of the regulations. As our work on decommissioning has gathered pace, we have revisited our legislative and regulatory regime for ensuring the security of civil nuclear materials and determined that the regime should apply to all potential forms of transport. Making these amendments to the regulations to extend the regulatory regime which exists in the 2003 regulations to cover the transport of nuclear materials by air will help to ensure that the United Kingdom gives full effect to the convention.
This brings me to the second reason for making these changes: our domestic considerations. Amending these regulations will allow us to consider all credible options when planning moves of nuclear material to ensure that we make the right operational decision with regard to both safety and security. Nuclear material can be safely and securely transported by air, and it is right that our regulatory framework facilitates this. Air transport of nuclear material is already an established method of transport internationally; these amendments simply mean that civil nuclear material transported by air from or within the United Kingdom will now be subject to the same regulatory regime with regard to security as transports of such material by land or sea within the United Kingdom.
These regulations will ensure that the independent Office for Nuclear Regulation will be involved with and would oversee the security arrangements for any air movements that take place. As such, they will make the transportation of civil nuclear materials more secure. In practice, this means that the Office for Nuclear Regulation will be responsible for approving transport security statements and transport security plans for all carriers of civil nuclear material by air, as they do for carriers involved in the movement of civil nuclear material by road, rail or sea, which currently take place. In drafting these regulations we have consulted the Office for Nuclear Regulation, which is content with these changes.
On a practical level, these regulations will allow us to better address the challenges we currently face. In late 2015, we began a programme of moves to remove nuclear material from the Dounreay nuclear site in northern Scotland. This programme is of great importance and will help to ensure the long-term safe and secure management and treatment of this nuclear material by storing it in the most appropriate place.
As part of this programme, the Prime Minister announced earlier this year that the United Kingdom Government had reached a landmark agreement with the United States and the European Union on a multilateral swap of nuclear material. Under the terms of this agreement, the United Kingdom will transfer almost 700 kilograms of excess highly enriched uranium from Dounreay to the United States, and in return the United States will send nuclear material to the European Atomic Energy Community, which will be used in the production of essential medical isotopes for use in Britain and European countries. This agreement is ground-breaking and will see nuclear material that we no longer need being exchanged for material that could potentially save many lives.
While we will have to work through the potential implications of Brexit in due course, the importance of nuclear security, as embodied by these amendments, will not be affected. In order to complete this operation in the safest and most secure way, we need to be able to consider all transport options seriously. Without an appropriate regulatory regime, air transport would not be a legitimate option. While we cannot disclose timings or methods of transport that will be used in any future moves of civil nuclear material, the amendments made by these regulations will allow us to consider all potential options.
I sincerely hope that these regulations will be approved, as they will help to ensure that any movement of nuclear material by air is regulated appropriately and carried out securely, and will facilitate the delivery to us of medical isotopes. I therefore commend the regulations to the Committee and beg to move.
Baroness Jones of Whitchurch (Lab)
I thank the Minister for his explanation of the order before the Committee. As he has said, the 2003 regulations are to be amended under the powers of the Energy Act 2013 in relation to the security of transporting nuclear material being subject to the oversight and approval of the Office for Nuclear Regulation. This amends the regulations to include transport by air.
Although I am content to approve the order, I have a few questions for the Minister. First, the security of civil nuclear material in transit is a UK obligation under the Convention on the Physical Protection of Nuclear Material. However, as I understand it, the amendments which now apply to nuclear material transportation came into effect on 8 May. If this is the case, it appears that we have been in breach of the regulations for the last two months. Will the Minister clarify whether this is the case?
Secondly, it appears from the Explanatory Memorandum that the transport of civil nuclear material by air is uncommon elsewhere, and the memorandum says that the department is unaware of any private sector or civilian transport providers interested in or capable of securely transporting civil nuclear material by air. It is right that the ONR have proper oversight. I was going to ask if I am right in thinking that such occurrences would continue to be rare, but from what the Minister is saying, that is far from the case. Because of the multilateral agreement which he has outlined, there is potentially going to be quite a considerable amount of air transportation of nuclear material. I understand that he cannot give all the details, but perhaps he could at least give a sense of the scale and proportionality of the potential involvement of air transport.
I ask this question because if there are any concerns, they come about from a risk management perspective. In the quadrant of probability and impact, risks from transport by air would be placed in the low probability, high impact quadrant. As noble Lords will know, any air incident is newsworthy; air disruption and atrocities are the favoured target for terrorist groups and nuclear accidents are a major concern for the public. So, addressing the level of the risk, can the Minister say whether the transport of civil nuclear material by air takes place elsewhere in the world? Can he give the Committee any details? If transport by air is being regulated elsewhere, what regulations are applied and how do they compare with the regime here?
If there was an incident, any nuclear fallout from the air would clearly cover a far wider area than would be the case with other forms of transport. Is the Minister satisfied that any contingencies which would have to be implemented have been practised by the relevant authorities and organisations in advance of these changes? While I am on the subject of risk, the noble Lord will know that the issue of normal pension age has been raised by the Civil Nuclear Police Federation, which has argued that the physical and training demands made of its staff should lead to a normal retirement age of 60. I understand that this matter is subject to discussion at the moment and I would be grateful if the Minister could give some information about progress.
Thirdly, can the Minister say whether the transportation of nuclear material by air will be limited to low-grade material only? Will the planes be specifically marked or identifiable such that attention could be drawn to them? Fourthly, what requirements will be placed on the Office for Nuclear Regulation to report to the department on the risks and mitigations that are being taken? Will these regulations be kept under review?
Finally, the Minister will know that the Secondary Legislation Scrutiny Committee, in its 2nd Report of Session 2016-17, asked the department a few questions on the regulations which the committee felt had not been adequately answered. When asked for what purpose air transport would take place, the department merely said that the regulations,
“will allow air transportation to be considered as a credible option”.
This perhaps amounts to the answer, “Because we can”. Can the Minister shed more light on why and for what purpose air transportation is now being considered?
I hope that the department will talk to the ONR about the very limited circumstances in which this form of transport should take place, given the risks involved. I hope also that the Minister shares my concern about the need for a proper risk assessment.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness for her contribution and for her support, qualified as it was by some quite legitimate questions.
Although the Civil Nuclear Constabulary pensions issue is perhaps a little off-piste in relation to these regulations, I am happy to say a bit about that situation. As the noble Baroness will know, we have sought to set the pensions arrangements for the Civil Nuclear Constabulary in the light of the Public Service Pensions Act 2013, which if I am not mistaken was based on the recommendations in the report of the noble Lord, Lord Hutton, who was formerly a distinguished Labour Cabinet Minister. I am unable to say much more than that because she is probably aware of the fact that the matter is currently sub judice while the unions are challenging the matter in the courts. As I understand it, that is the position.
On the regulations, first I can reassure the noble Baroness that the prime concern for the United Kingdom in these matters is, as always, security and safety. Our reputation for nuclear safety and security both in relation to nuclear plants and in relation to the transport of nuclear materials is, I think, unsurpassed. I can also reassure the noble Baroness—I hope that I did not give a contrary impression, but the trouble in bringing forward such regulations for a specific purpose is that the feeling develops that this must be happening an awful lot, whereas that is not the case at all—this will remain the rarest form of transfer of nuclear materials. Transportation by air will be rare and will certainly be rarer than other forms of transport. However, as she indicated, the regulations probably require us to do this. Therefore, it is anticipated that air transportation does occur. The noble Baroness asked whether other states fly nuclear material. The US certainly does and has appropriate regulations in place.
Whether we have been in breach of the convention is perhaps an open point. The convention is perhaps not totally clear on whether we have to cover air, but certainly as we are envisaging that we might want to transport material by air, obviously we would need to. That is the full consideration behind these regulations: it is to ensure that we have the same very strong security regime for the transportation of civil nuclear material by air as we currently have for transportation by land and by sea. Other states do this, as I have indicated. Are there risks? I suppose the honest answer is yes, but the security and safety regime seeks to minimise those. That is why these regulations are important. Obviously, we study very carefully what the Office for Nuclear Regulation advises us.
The noble Baroness asked for specific examples. I think that I have already given some rather specific examples. She will understand that I do not want to give too many, but I mentioned that we are exchanging nuclear material with the US, which will in return provide us with material for medical isotopes, which are, as the noble Baroness knows, quite vital for life and medical research. I am sure that she welcomed that. I would not want to give too many specific examples, but that is certainly one.
I am not sure whether the planes are readily identifiable. I can only imagine that they are not; I am being reassured that that is the case. She will understand, and indeed she indicated as much, that I cannot go into the operational details of precisely how this is all organised. However, just to reassure her, as under successive Governments, nuclear safety and security both at the plants and in the transfer of materials is very much foremost in our minds. I beg to move the regulations.
Contracts for Difference (Miscellaneous Amendments) Regulations 2016
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Lord Bourne of Aberystwyth
That the Grand Committee do consider the Contracts for Difference (Miscellaneous Amendments) Regulations 2016.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, before turning to the detail of these regulations I would like to make clear that this Government’s commitment to delivering the secure, affordable and low-carbon energy supply that this country needs, and which the Secretary of State set out in her reset speech in November of last year, remains constant. The vote to leave the European Union does not change this Government’s approach to these challenges, and we remain fully committed to delivering on our priorities, including encouraging the development of offshore wind where we see great potential—and where good progress is already being made—to get costs down and to deploy at scale. In fact, I met with representatives of the offshore wind industry this morning to discuss the opportunities that exist. The ability to provide good-quality jobs and apprenticeships and to support industrialisation of the whole supply chain, including United Kingdom companies, is just one of the elements that makes the industry attractive. We are proceeding with plans to hold a competitive allocation round for “less established” technologies later this year and hope to announce the details of this as soon as practicable.
The regulations that are the subject of this debate will amend regulations concerning the contracts for difference scheme. The contracts for difference scheme is designed to incentivise the significant investment required in our electricity infrastructure, to keep our energy supply secure, to keep costs affordable for consumers and to help meet our decarbonisation targets. Contracts for difference, or CFDs, give eligible generators increased price certainty through a long-term contract of 15 years. This allows investment to come forward at a lower cost of capital and therefore at a lower cost to consumers. Participants in the scheme bid for support via a competitive allocation, which ensures costs to consumers are minimised. We plan to run the next allocation round in late 2016—details, although not yet published, will be brought forward shortly.
As noble Lords will be aware, the first CFD allocation round was held in October 2014, leading to contracts being signed with 25 large-scale renewable generation projects, at significantly lower cost than those projects would have cost under the renewables obligation scheme. While this scheme is operating successfully, the Government are looking to make a number of minor amendments: first, to ensure that an application for a CFD cannot be made where there is a pending application for a capacity agreement in respect of the same unit, which would potentially distort the allocation for both processes; and, secondly, to improve the efficacy of the allocation process, including by making available non-price bid information to enable evaluation of the allocation rounds—information that would be held by National Grid and would be made available to the Secretary of State.
In order to implement our proposed amendments, four sets of regulations will need to be amended by this instrument: the Contracts for Difference (Definition of Eligible Generator) Regulations 2014; the Contracts for Difference (Allocation) Regulations 2014; the Contracts for Difference (Standard Terms) Regulations 2014; and the Electricity Market Reform (General) Regulations 2014. The instrument under consideration—that is, the Contracts for Difference (Miscellaneous Amendments) Regulations 2016—makes a number of minor and technical amendments to the current regulations. I will aim to run through these technical amendments briefly.
The amendments are designed to improve the effectiveness of the CFD scheme. The most significant of these amendments are: first, to ensure that an application for a CFD cannot be made where there is a pending application for a capacity agreement in respect of the same unit. This will ensure that an applicant cannot apply to participate in the CFD and capacity market auction at the same time and then make a choice of scheme, potentially distorting the allocation for both processes.
Secondly, the regulations set out the connection requirements applicable to generators who connect to the national transmission or distribution system, or to a private network, to align with the allocation framework. These are key qualification requirements for applicants who connect to the grid in this way, and having the detail in regulations will provide greater certainty to generators in advance of a future allocation round.
Thirdly, the regulations refine the procedures that apply when there is a need to delay or rerun the auction or allocation round, leading to greater clarity for investors.
Fourthly, they make a distinction between confidential price information and non-price information in a sealed-bid submission, which will ensure that the Secretary of State is able to obtain information relating to non-price sealed-bid data to evaluate the efficacy of the allocation round—non-price information could, for example, include the ratio of successful to unsuccessful projects or the number of bids in each delivery year.
Fifthly, they enable unincorporated joint ventures to participate in the CFD regime.
Sixthly, they ensure that only those bank holidays observed in England and Wales are considered within the definition of a “working day”. The proposal to focus on a single jurisdiction to define a “working day” allows for consistency of time periods and deadlines throughout the CFD regime.
Finally—seventhly—they allow for the Secretary of State to issue a direction to the CFD counterparty to amend signed CFD contracts where the sustainability criteria have been altered in subsequently published versions of the CFD.
All of the proposals being implemented by this instrument were publicly consulted on and received a largely favourable response. Some concern was expressed about the proposal to split non-price data from confidential price information in a sealed-bid submission. We are confident that the non-price data can be effectively disaggregated from confidential price information and anonymised in such a way that individual projects cannot be identified. This will enable us to evaluate the efficacy of the allocation round.
As a final point, I would like to take the opportunity to assure noble Lords that the Government will continue to evaluate and monitor the reforms following implementation, making sure that the measures put in place remain effective and continue to represent value for money to the consumer. I beg to move.
Baroness Jones of Whitchurch (Lab)
My Lords, I am grateful to the Minister for his explanation this afternoon. We accept that most of these changes appear to tidy up minor issues which have cropped up after the initial allocation rounds. Arguably, some of those problems might have been anticipated, but I will not make an issue of that this afternoon.
The most important amendment is to Regulation 14, seeking to extend the exclusion from possible conflict between CFDs and capacity agreements to cases where an application has been made for a capacity agreement but has not been determined. Therefore, as the noble Lord said, the new rules would stop duplicate applications to both allocations at the same time. I understand that this type of gaming is not desirable, although I also understand that the Minister in the other place admitted this had not ever happened in practice. In the meantime, can I clarify whether, under the new regulations, this prohibition works equally for both schemes, so that you cannot apply for either one while the other application is being processed?
Also, while we understand that the Government would not want to reward one company applying under both schemes, is there not some scope for companies to make some sort of initial application, on the basis that the applications take time to go through the several stages and be considered, before that company works out for itself which is the most right and appropriate application to pursue? I just wonder whether we are being rather too stringent on this and whether there ought to be some more flexibility for an initial application to be made before the final application is followed through. I think companies may find that that process makes it easier for them to decide what is in their best interests in the longer term.
Perhaps the noble Lord could give some clarification on these points, but I would make it clear that, in principle, we support the amended regulations.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Jones, for her contribution and her general support for this instrument. As she rightly said, and as was stated in another place, there have not been any overlapping applications for CFDs and capacity market agreements so far. This is therefore a pre-emptory move to ensure that such overlaps do not happen. She is right to suggest that the prohibition would work equally for both schemes and in both directions.
On the noble Baroness’s point about flexibility being desirable, so that a company might choose, it is our view that the details of the schemes are available and, obviously if they do not overlap, it is possible to apply for one and subsequently for another if the first application was unsuccessful. However, it appears to us—although we will keep it under review—that it is absolutely right that people make that choice. After all, the CFD and the capacity market are for different purposes. We believe that this is the right approach, but I assure the noble Baroness that we will keep her point under review and thank her for raising it.
With that, I commend the regulations to the Committee.
Electricity Capacity (Amendment) Regulations 2016
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The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth)
My Lords, this draft instrument seeks to amend the main secondary legislation package for the capacity market scheme, which was part of the electricity market reform programme in 2013. The powers to make this implementing secondary legislation are found in the Energy Act 2013 which, following scrutiny in this House and the other place, received Royal Assent in December 2013 with cross-party support.
I remind noble Lords that the capacity market will address our electricity needs and ensure that there is a sufficient electricity supply towards the end of the decade and beyond. In brief, the capacity market will achieve this by making a regular “capacity payment” to providers who are successful in capacity auctions. In return for this payment, providers must meet their obligations to provide supply, or reduce demand, when the system is tight, ensuring that enough capacity is in place to maintain security of supply.
Ensuring that hard-working families and businesses across the country have secure, affordable energy supplies they can rely on is our top priority as a Government. That is why we already have firm mechanisms in place, working closely with National Grid and Ofgem, to maintain comfortable margins on the system in the coming winter.
Beyond that, it is essential that generators have confidence that they will receive the revenues they need to maintain, upgrade and refurbish their existing plant, and can finance and build new plant to come on stream as and when existing assets retire. Equally, we want to make sure that those who are able to shift demand for electricity away from periods of greatest scarcity—without detriment to themselves and the wider economy—are incentivised to do so.
That is why we have the capacity market. The first two capacity market auctions took place in 2014 and 2015 and the first of two separate auctions, focusing on demand-side response, took place at the beginning of 2016. These resulted in a good outcome for consumers, as fierce competition between providers meant that we obtained the capacity we will need at prices below the levels many had expected. That translates to lower costs on consumer bills.
To ensure that the capacity market remains fit for purpose, my department has reviewed the capacity market mechanism in light of experience gained in these auctions. The clear message from industry and investors is that the mechanism retains their confidence and is the best available approach for ensuring our long-term security of supply. They also stressed that regulatory stability is crucial.
Baroness Jones of Whitchurch (Lab)
My Lords, I am grateful to the Minister for setting out the intentions behind the amended regulations today. I have to say at the outset that the strategy for maintaining energy supply consistency does not seem to be working out quite as well as the Minister would have had us believe in his comments earlier and just now. We seem to be moving to a place where what was once a vibrant independent energy market is increasingly making investment decisions based on the government subsidy that is available. The more that the Government intervene, the more their interventions skew the overall energy capacity available.
Of course these latest proposals have to be seen against the backdrop of government policy shifts that have created huge uncertainty and risks for investors, deterred investment and put up costs. The Minister will have debated with my colleagues on numerous occasions the negative investment impact that has arisen from pulling the plug on schemes such as feed-in tariffs and the renewables obligation. I do not expect him to agree with me but we would contend that some of the problems with which he is now trying to grapple are essentially of the Government’s own making.
The original intention of the capacity market scheme was to attract new investment, encouraging gas-fired power stations in particular, but it seems to have completely failed in that objective. Instead, the subsidies seem increasingly to be used to reward existing profitable suppliers, including nuclear power stations. For example, nuclear power plants have so far received payments amounting to £153 million for 2018 and £136 million for 2019, despite the fact that they were almost certain to remain open during those years without receiving those subsidies.
Incidentally, I could use this opportunity to raise again with the Minister the question marks over Hinkley Point, given the outcome of the referendum, which has fuelled further concerns about the commitment of the French Government to that investment, but I realise that he will feel obliged to repeat the mantra that all is well in that investment until eventually there is overwhelming evidence that that is not the case and the deal finally falls through. So I understand that he is limited in what he can say on that.
There is also a question mark over whether the capacity market interventions will run counter to the Government’s other binding commitments to reduce pollution, given that some of the beneficiaries are coal and diesel generators. Indeed, my colleague in the other place, Lisa Nandy, made a telling point that there is a danger that consumers will be paying twice for policies pulling in opposite directions: they will pay once to drive coal out of the system via the carbon price floor, and once to keep it in the system via the capacity market. We are now reaping the effects of ill- thought-through market interventions, with consumers bearing the ultimate cost.
The Minister may be aware of the recent report from the IPPR think tank into the workings of the capacity market. It underlines the argument that these measures work against decarbonisation. They have provided a lifeline for several old coal-fired power stations, which received a total of £373 million from the first auctions. They have also heavily incentivised the proliferation of new diesel generators, which are even more polluting than coal. The report also makes the point that the capacity market is designed around the requirements of large power stations rather than smart energy technologies, such as demand response and electricity storage.
Has any consideration been given to introducing an emissions performance standard, which could be applied to all those in receipt of the capacity payments? Is the department giving any thought to how the capacity payments could be used to incentivise gas power plants using carbon capture and storage if they are to stay open in the longer term? Is the department prepared to consider variable subsidies so that the new technologies, which could provide a longer-term solution, do not have to compete with traditional power station generators for support?
Having said all that, the specific proposals in the amended regulations to increase the penalty for non-performance clearly make sense. It cannot be right for suppliers to accept subsidies and then walk away from the contract anyway. It is also right that there should be a robust system of checks on new-build and existing plant to ensure that agreements are honoured.
Finally, does the Minister feel that the financial assessment of the cost benefits of the new auctions, in what is clearly a volatile market, can be relied on, and is there a mechanism for revising such calculations in the light of changing market responses? Does he feel that enough stress-testing has been done to interrogate the market effects of introducing one-year auctions when we are trying to encourage longer-term planning and investment? I look forward to his response.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Jones of Whitchurch, for her qualified support—I think she gave some support to the basic thrust of what we are seeking to do—and I will endeavour to respond to the points she has raised.
It is ironic that the Official Opposition have put forward a more market-based approach than the Government on this occasion. I feel that intervention is necessary, and the regulations have been brought forward on that basis. As I have said, the No. 1 priority for this Government, as I would think for any Government—I have yet to hear otherwise—is to ensure that we have security of supply and that the lights are kept on. In the broader sense, we need to ensure that our hospitals can carry out operations in a timely way; at the most basic level, we can see why that is so important.
Such interventions are necessary. As I have said, the changes that have occurred in the market since 2014, with the massive drop in commodity prices, have made many of the regulations necessary. Some power stations have closed. The noble Baroness will know that the Government are totally committed to the closure of coal-fired stations. That is something that only this Government have brought forward. We have said that unabated coal-fired power stations will end by 2025—that will be put out for consultation—subject to ensuring we have security of supply. We are the first developed country in the world to indicate that we will do so, ahead of all our European colleagues, the US and so on. As a country, we can be proud of that, and I hope that the Official Opposition support it.
The noble Baroness talked about the importance of underpinning renewables. That is certainly true, but we cannot rely totally on renewables. We need baseload to support renewables, which is what the regulations are about. She said she would refrain from mentioning Hinkley Point C, and then she did so. Having heard her dismal litany, I am obliged to say that the mantra she expected in response is indeed what we believe to be the case. Last week, I discussed this with a Chinese Minister, who is fully committed to the project, and we understand that the French Government are as well. It remains central to our energy policy, and I hope we can avoid talking down this area of activity, because the supply of nuclear is essential for us.
The noble Baroness mentioned diesel generators. I share some of her concerns, so I can understand where she is coming from on this point. As she will appreciate, this area cuts across government departments. Some of it rests with Defra, which we expect will announce consultation proposals in the autumn, ahead of both the next round of auctions and, indeed, the supplementary capacity auction that we are dealing with. We therefore expect bidders to be aware of likely future restrictions on their generation, and their bidding behaviour will adjust accordingly. We cannot anticipate precisely how that will go, but the consultation is being held with a view to ensuring that we can restrict diesel. I share the concerns she has expressed on that point, so I hope that that offers her some comfort.
In general, the noble Baroness will know that the auctions operate in relation not just to providing additional capacity but to the demand-side response of reducing capacity. That is central: we are looking not just to build in more generation but to restrict existing generation and to shift it. I hope that that will again provide some comfort to her. I should also say with regard to diesel that Ofgem will consult on proposals to tackle embedded benefits in due course, so action is going on elsewhere in government to deal with the diesel generation issue, which I recognise; I previously indicated in the House that we would look at it, as indeed we are.
Once again, I thank the noble Baroness for the qualified enthusiasm for the regulations she was clearly demonstrating, although she managed largely to restrain herself, and I commend the statutory instrument to the Committee.
Baroness Jones of Whitchurch
Lest the Official Opposition, as he describes me, are totally misrepresented, I would say on intervention and regulation that our position is that when you do it, it should be smart intervention. There is always a danger in any regulation that you encourage perverse outcomes if you do not think through its consequences. I was just warning against some of those perverse outcomes which can occur, particularly when you deal with large sums of money, as we are here. However, I do not want to go back over the Minister’s clarification of other points but simply wished to say that on that basis we are happy to support the regulations.
Lord Bourne of Aberystwyth
My Lords, that is a perfectly fair point, and I thank the noble Baroness.
EU: Energy Governance (EUC Report)
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The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I am most grateful for contributions to what has been an extremely wide-ranging debate, far beyond the issue of energy governance, as many noble Lords would acknowledge. It covered just about every aspect of energy policy, possibly apart from smart meters, so I will try to give those a mention as well as I go through. I will try to pick up all points brought up by noble Lords. I will ensure that officials and myself read a report of the debate, pick up every aspect of the debate and write to all noble Lords who have participated in what was, as I have said, a very wide-ranging debate.
First, I join with the thanks to the noble Baroness, Lady Scott, who has done an outstanding job over three years as chairman of this committee, and to committee staff and officials. The noble Baroness, Lady Scott, as she said, now rotates off and I welcome to the rotisserie the noble Lord, Lord Teverson, who follows her; she is obviously a very difficult act to follow. There must be something in the water in Needham Market, I think. I thank her very much for the work she has done and for this report.
I say at the outset, pursuant to what was said by the noble Viscount, Lord Hanworth, the noble Lord, Lord Grantchester, and my noble friend Lord Suri, that the position of the Government on the European Union is very clear: we believe that it is in the best interests of the United Kingdom that we remain members. That is certainly my view too and it colours some of what I will be saying as I go through the various points that have been made. On an international level, international points were made as well, highlighting the importance of the European Union, the relatively recent success in Paris and the role that the United Kingdom and the European Union made in that—we were part of the European Union negotiation team. My right honourable friend the Secretary of State, Amber Rudd, played a leading role in that. The leading official for the European Union was Pete Betts from our own DECC and we were very proud of the role that he played too. That is a clear example of the importance of the European Union in relation to climate change.
Energy and climate policy is an area where there is significant added value for the United Kingdom in working with our European partners, whether to shape the single market or to drive ambitious action on climate change in Europe and more widely. The Government support the energy union because it should help ensure that the Commission and all EU member states take a more holistic, long-term and strategic approach to energy and climate policy. I should say something at this stage about the Energy Council in Luxembourg a week ago today, to which the noble Baroness, Lady Scott, referred. The only reason we did not sign the agreement, the North Seas countries declaration, was simply purdah, as I made clear at the time and have since. I am absolutely clear that we will sign it, but we were not in a position to do so last week or this week. As soon as we are able to do so, we will.
The holistic approach I have referred to should cover all five pillars of the energy union. These are energy security, the internal market, energy efficiency, decarbonisation, and research and innovation. They are all central parts of UK government policy as well as energy union policy. At the heart of it, the energy union should support the delivery of a competitive, interconnected and fully functioning single energy market. The single energy market is the cornerstone of our ability to provide secure, affordable and sustainable energy supplies. That is the approach of the Government and I am very pleased to hear the support that the noble Lord, Lord Grantchester, offers to that approach.
The United Kingdom has long been a strong advocate of making the single energy market a reality, because it helps keep bills down and improves the energy security of all. Inside the EU it is cheaper and easier to buy and sell energy across borders. By 2030, a fully integrated EU energy market could save EU consumers £50 billion a year in energy costs. Therefore, we fully support the further development of the single energy market and are working with the Commission on its electricity market design proposals, a point raised by my noble friend Lord Suri. We understand your Lordships’ interest in common EU standards for capacity markets. However, until there is a fully functioning internal market, we do not think that such common standards are practically possible or, indeed, politically desirable. The development of capacity markets is a political decision which needs to take into account the circumstances of individual member states. It is not appropriate or desirable to be harmonised at European level, in our view.
It is, however, important that the effect of capacity markets on the working of the single energy market is kept to a minimum. That is why the United Kingdom, the first member state to receive clearance for our capacity market, supports agreed general principles for capacity markets and encourages member states to share best practice and to develop our common understanding of how capacity markets in different countries interact. Of course, we are happy and indeed keen to share our practice and our own experience in relation to that. Capacity markets are a very important part of dealing with the capacity that we have and the importance of security of supply, a point raised by my noble friend Lord Howell. I was at the National Grid this morning, discussing this. We actually have a slightly better margin than we have had for the past winter, but it is obviously something where capacity markets, demand-side reduction and interconnectors are all helping us to address the challenges: there are challenges, of course.
I move on to regional co-operation, a point raised by the noble Baroness, Lady Scott, and my noble friends Lord Selkirk and Lord Howell. The sharing of information, plans and best practice can also improve energy security for the United Kingdom and our partners across Europe. My noble friend Lord Selkirk of Douglas raised recommendations 19 and 20, which we unequivocally support, about balancing the need for EU frameworks with member states’ right to choose the best and most cost-effective way to meet their emissions reductions targets. We strongly support that and would strongly oppose any attempt to use the governance framework to impose de facto binding national or regional renewable targets.
As I think I have made clear, we also support increased interconnection. The United Kingdom plans to more than double the amount of electricity we can import over the next five years, saving consumers nearly £12 billion in energy costs over the next two decades, involving interconnectors with France, Belgium and Norway and so on. Combined with recent measures to facilitate cross-border energy flows, interconnection should improve energy security and give the United Kingdom access to continental electricity when it is cheaper.
We strongly believe in an energy union and that it is important to strike the balance between national interests and the way the energy union will operate in the interests of the whole community. That is what we seek to do. Indeed, based on the experience of last Monday, I think that is what other member states seek to do. I forget which noble Lord made the point about differing national interests and differing national energy mixes—I think it was my noble friend Lord Selkirk although it may have been my noble friend Lord Howell or somebody else—with Germany ruling out nuclear, France being strongly nuclear and the United Kingdom being somewhere in between. The nuclear issue arose at the recent Energy Council and was dealt with. It seems that most states in the energy union take a different view from that of Luxembourg, Austria and Germany, which are fairly strongly anti-nuclear. Member states have different national interests and should have the right to determine the way in which they reach decarbonisation targets.
If the single market works well, the overall effect will be to reduce prices. The energy union should also give investors the greater policy certainty—many noble Lords mentioned this—that they need to make the long-term investments in energy infrastructure projects required to continue to deliver secure, affordable and clean energy in the future. Investor certainty is certainly important. A very clear signal was given in Paris. We should keep at the very forefront of our minds the importance of that clear message. I say “should” in relation to the energy union giving investors that greater policy certainty because we are at a very early stage in the development of thinking about the energy union, what it means and how it can best be implemented. This was discussed last Monday and clearly things will move on. This is why the report and indeed this debate are so timely.
Discussions are beginning in capitals and in Brussels to determine what an energy union governance framework should look like and how to develop an approach that works for countries not used to taking a holistic approach to energy and climate policy, and for countries such as the United Kingdom which have done so for many years. Given what is at stake, it will be vital to develop the right framework for the governance of the energy union, one that seizes the opportunity to enable all member states to have a clear and credible road map for decarbonisation of their economies over the long term. That point was made by many noble Lords, including my noble friends Lord Howell and Lord Ullswater and the noble Lord, Lord Teverson. The framework should support those member states that will be producing national energy and climate plans for the first time. We shall proceed on the basis of the carbon plans that we are already producing, so this will form the basis of our own national energy and climate plans. However, it must respect those member states such as the United Kingdom which have produced such plans for many years. We believe that the United Kingdom can play a strong leadership role here, continuing to share with other member states the experience we have gained from the complex cross-government work required to both produce and implement our carbon plans.
We have set out our position on ending energy from coal. We are unique in the European Union and in developed countries in that regard. That highlights the differences that often exist in this field. My noble friend Lord Howell referred to the importance of the marine possibilities that we have such as hydro, which is important at the moment. Tidal lagoons are being looked at and we need to move that forward. We believe that with our experience we can help others develop long-term, robust, credible national plans and so ensure a level playing field across the EU.
However, the arrangements for energy union governance need to be flexible. Member states must be responsible for developing and delivering their own national plans. Crucially, member states’ right to determine their own energy mix must be respected. With this in mind, we do not believe that national renewables targets in particular should be part of the 2030 framework. This should not surprise noble Lords as this has been a very clear stance of the Government for a considerable period.
The United Kingdom is a world leader in offshore wind deployment and we recognise the role played by the 2020 framework to kick-start renewables deployment and drive down costs in the United Kingdom, across Europe and globally. But for the period after 2020, it is right that member states have the flexibility to decarbonise in the most cost-effective way. Energy union governance should not create unnecessary burdens or constraints, nor restrict member states’ policy choices on those issues best addressed at national level. I briefly mention nuclear, which has come up. I do not want to get bogged down in a discussion about Hinkley. That is perhaps for another time. I am happy to pick that up in correspondence but will say that the increased cost of Hinkley is an increased cost for EDF and the Chinese Government. That is not reflected in the strike price. In decarbonising, the contribution of nuclear is important not just from Hinkley and developments at Wylfa, Moorside and so on but also from small modular reactors.
In policy terms this means balancing the need for EU frameworks on issues such as market integration and emissions reduction with preserving national flexibility to choose the best and most cost-effective way to meet national greenhouse gas targets. It also means balancing the need for certainty and predictability with the need to adapt as the market changes and technologies develop. It has also been mentioned in the debate that there will be developments that we may not even anticipate at the moment—known unknowns. With an eye to the better regulation agenda, the energy union should not create additional burdens for countries such as the United Kingdom which are ahead of the pack. We will be arguing strongly for a flexible template for member states to use in completing those national plans.
As regards DECC’s goals, clearly there is the trilemma. Our first priority is energy security—as I think noble Lords know—affordability and, of course, the importance of clean energy and decarbonisation. We are strongly committed to those goals. Nobody can doubt that, having seen what we did in Paris with the commitment to decarbonisation.
I apologise for picking up other points made by noble Lords in a somewhat random way but they were not perhaps central to the report. The challenge of security of gas supplies in Europe is certainly a central one and—to be fair—comes up in relation to the energy union. That obviously is linked with not just the energy union but also the energy community in south-east Europe and, indeed, the energy charter which governs the former Soviet Union, the European Union and a few others in terms of ensuring that we have security there. That clearly is important. I have mentioned some of the other issues relating to nuclear. I think I have covered the importance of interconnectors. Energy efficiency is certainly important. We hope that that can contribute to demand-side reduction. It is already bringing down demand, as has been acknowledged today in relation to the national grid. Demand is an important point in ensuring that we have that security of supply. We are now getting the demand-side reduction on the industrial business side. We can expect to see that delivered through smart meters and smart grids on the domestic side as they roll out to 2020 and, indeed, beyond.
CCS is vital. We discussed that very recently in New York when signing the international treaty and when discussing bilateral arrangements with other states on the importance of coming together to see whether we can pool resources in terms of research and data on CCS. That work will be ongoing. Therefore, an awful lot is happening. I restate my thanks and those of the Government for the report, which is timely and well thought through. We largely accept it and welcome it, as noble Lords are aware. I am very grateful for it. I thank the noble Baroness once more for all that she and the committee have done and wish them all the best in the future.
Nuclear Reactors
Lord Bourne of Aberystwyth Excerpts(7 years, 12 months ago)
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Viscount Hanworth
To ask Her Majesty’s Government what progress has been made in the assessment of the alternative design proposals for small modular nuclear reactors, and when those alternatives are likely to undergo their generic design assessments.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, in March the Government launched phase 1 of a competition to identify the best-value small modular reactor design for the United Kingdom. DECC has received 38 expressions of interest, which it is now assessing for eligibility. No assessment has yet been made of the designs.
Viscount Hanworth (Lab)
I thank the Minister for that enlightening Answer. I should like to draw attention to a passage in the December 2014 feasibility study of the National Nuclear Laboratory on small modular reactors. The report declares that there is,
“a narrow window of opportunity in which the UK can join the respective programmes … there are other interested parties and also a cut-off point by which time there will no longer be an opportunity for the UK to contribute to design in a way that will provide substantial Intellectual Property Rights”.
Therefore, do the Government intend to involve Britain’s nuclear industry in an SMR programme in a manner that would assist its revival? Can the Minister assure us that the Government will not regard this project simply as a commercial affair? That is how he described the Government’s involvement in the project to build a reactor at Hinkley Point.
Lord Bourne of Aberystwyth
As I indicated, there has been strong interest, with 38 expressions of interest. It is indeed the Government’s intention to take this forward, which we are doing.
Baroness Featherstone (LD)
My Lords, the creation of a series of small nuclear reactors across Britain would give rise to a multiplicity of potential new terrorist targets. What plans do the Government have to limit this threat, including scaling up the civil nuclear police force?
Lord Bourne of Aberystwyth
My Lords, nuclear security is central to the Government’s concerns. Obviously, that informs all the policy that we are putting forward in relation to small modular reactors, their siting and taking forward the dialogues that we will have with those eligible out of the 38 expressions of interest.
Lord Howell of Guildford (Con)
Will my noble friend tell us a little more about reported plans for an experimental park for the development of small modular reactors in Trawsfynydd in Snowdonia? Are those to be very small plants? Are they to be based on the marine models of Rolls-Royce or will they be larger? How will this experimental system take off the ground?
Lord Bourne of Aberystwyth
My Lords, I suspect my noble friend of an alliance with Plaid Cymru on this issue; I had thought that that question would be asked by the noble Lord opposite. It is an interest that has been raised with us by the former economy Minister in the National Assembly for Wales and we are looking at it very closely. Obviously, siting would have to be considered because it is not among those eight sites that have been identified for the orthodox siting of nuclear. However, it is certainly something that the Government take very seriously.
Lord Wigley (PC)
Will the Minister confirm that, with regard to Trawsfynydd, there is considerable interest in that possibility and that some discussions have taken place? Can he indicate what the likely timescale would be if that was to be pursued and at what stage there would be a public consultation?
Lord Bourne of Aberystwyth
My Lords, I have mentioned that the matter has been raised with me by the former economy Minister in the National Assembly for Wales and can confirm that there is interest there. I cannot comment on the expressions of interest we have had so far, but we are taking it forward on the basis of involving all those expressions of interest and trying to find something that is viable across the country. As the noble Lord has noted, there has been interest.
Viscount Trenchard (Con)
My Lords, will the Minister confirm that the Government intend to select one single technology to proceed to the GDA process and that they will ensure there is UK intellectual property in the industrial legacy resulting from the SMR programme?
Lord Bourne of Aberystwyth
My Lords, it is premature to go into the detail of the precise technologies. All technologies are eligible in the competition, for which we have opened part 1 and which is now being scrutinised. The national interest in this competition is something that the Government take very seriously.
Lord Hunt of Chesterton (Lab)
My Lords, are Her Majesty’s Government planning to support research into modular fusion reactors, where the UK has a considerable lead, which are currently provided by private investors in the UK and the USA? This approach is now expected to achieve clean power before 2030.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord for the question. I reiterate that I think it would be premature to talk about specific technologies because that is part of the process under scrutiny now. Those projects that are eligible will enter into a dialogue with officials in the department. There are many technologies that qualify but, as I said, we are keen to do what we can in the national interest. I remind noble Lords that there is £250 million in the innovation budget for the nuclear programme at large, of which small modular reactors are an important part.
Lord Haskel (Lab)
My Lords, EDF has already started training its engineers, with a nuclear engineering academy and some 300 apprentices at Babcock and other engineering firms. If Hinkley Point C does not happen, will the Government continue with this training?
Lord Bourne of Aberystwyth
My Lords, Hinkley C will happen. We have heard in the past week an expression of intention once again from the President of France that the project will go ahead. I think that we will reach a final investment decision later in the year, but there is every confidence that the project will go ahead.
Lord Lea of Crondall (Lab)
Will the Minister confirm that in the Government’s judgment and that of many in the industry the jury is still very much out on large reactors versus small reactors? If comparisons are made between small reactors and Hinkley C, is there not probably scope in the long term for both types? Small is beautiful—maybe fashionable—at the moment, but it is not necessarily the basket in which to put all our eggs for the long term.
Lord Bourne of Aberystwyth
My Lords, I find myself in total agreement with the noble Lord opposite; I think that it is both, and that is the Government’s intention.
Lord Hunt of Kings Heath (Lab)
My Lords, what impact will the development of this technology and its use have on the disposal of nuclear waste? Can the Minister say where we are with the selection of a site for deep geological storage?
Lord Bourne of Aberystwyth
My Lords, once again, the supposition behind the question is that it will be plutonium-based; it may well not be or it may be part of the mix, but I say again to the noble Lord that we are running ahead of ourselves. We will scrutinise all these issues, but, of course, decommissioning will be discussed at length in the dialogue that follows those expressions of interest.
Lord West of Spithead (Lab)
My Lords, will the Minister confirm that any reactor sites will be protected by the Civil Nuclear Constabulary, who are fully firearm-trained officers? This is the case at the moment, so we do not need fear that. On the lower-grade storage of nuclear material, I had real concerns at one stage that some sites were not protected. We really need to think about that when one sees the risk of dirty bombs from terrorists. Can the Minister reassure the House that such sites are now properly protected?
Lord Bourne of Aberystwyth
My Lords, the noble Lord is absolutely right that nuclear security is paramount—that has been the position on this of successive Governments. We have a very good record on nuclear security, and it is the present Government’s policy to pursue that and to make sure that it remains central.
Lord Foulkes of Cumnock (Lab)
My Lords, I commend the Minister on the way in which he has had positive discussions with representatives of the Welsh Government. Can he confirm that he is having similar discussions with the Scottish Government?
Lord Bourne of Aberystwyth
My Lords, I suspect a slight note of mischief in the question from the noble Lord opposite—he is shaking his head—but I can confirm that I have had no such discussions. However, I am very open, as is the department, to any such discussions if anybody from the Scottish Government wishes to pursue them.
Lord Turnberg (Lab)
My Lords, perhaps I may follow up on my noble friend Lord Hunt’s question about nuclear fusion. Is the Minister aware that nuclear fusion does not generate any fissile material, whereas nuclear fission does?
Lord Bourne of Aberystwyth
My Lords, my knowledge on this subject is not extensive, but I certainly did understand that. Once again, this will be taken forward in looking at the various technologies within the expressions of interest in the dialogues with the department.
Hinkley Point
Lord Bourne of Aberystwyth Excerpts(8 years ago)
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Lord Holmes of Richmond
To ask Her Majesty’s Government what the current economic and technological case is for continuing with Hinkley Point.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth)
My Lords, Hinkley Point C is a good deal for consumers. The plant will provide reliable energy at an affordable cost, powering nearly 6 million homes for around 60 years and creating more than 25,000 jobs during construction.
Lord Holmes of Richmond (Con)
My Lords, there is no economic case for Hinkley Point and there is no technological case for it. The numbers do not work; neither does the EP reactor. We need nuclear plants but we do not need this nuclear plant. In the light of this, for the sake of the UK taxpayer and the UK energy consumer, is it not time that we pulled the plug on this power project?
Lord Bourne of Aberystwyth
My Lords, I hesitate to disagree with my noble friend but I do on just about all counts. We need Hinkley C and there is a very strong economic case, as I have indicated, in terms of jobs and the power that is necessary. I agree that we also need other nuclear plants. We are of course developing those as well to help us transition away from reliance on coal.
Lord Cunningham of Felling (Lab)
My Lords, does the Minister recognise that, with all due respect, we do not need his noble friend to put the boot into Hinkley C? The French Cabinet and the board of EDF are quite capable of doing that for themselves. The Minister mentioned other projects. What is the latest situation with respect to the NuGen proposals to build three AP1000 reactors at Moorside in west Cumbria or the Horizon project to build reactors at Wylfa on Anglesey and in South Gloucestershire?
Lord Bourne of Aberystwyth
My Lords, President Hollande and Emmanuel Macron, the French Finance and Economy Minister, are both very much committed to the EDF project. The noble Lord is right to highlight the importance of NuGen in Moorside and Horizon at Wylfa Newydd on Anglesey. They are both proceeding quite independently of Hinkley Point C.
Lord Howell of Guildford (Con)
My Lords, aside from the option of postponement, which of course is the choice of the French trade unions, is my noble friend aware that the Chinese also have a plan B, which is to bypass EDF altogether and to build two smaller reactors on the Hinkley C site, and to do it rather quicker than the present Hinkley C plans?
Lord Bourne of Aberystwyth
My Lords, my noble friend will be aware that the workers are being consulted; indeed, he indicated as such. It is of course a consultation that will last 60 days, so in the view of the French Government and the UK Government it is no more than a hiccup. Yes, I am aware of the Chinese situation.
Lord Teverson (LD)
My Lords, we have had the Hinkley station on the planning board since 2008 and we are now in 2016, without an investment agreement. As the noble Lord, Lord Cunningham, said, it seems that this is very unlikely to finally happen. We have taken solar and onshore wind off the field of play. How do the Government intend to meet their carbon targets for the budget and for the 2030 target?
Lord Bourne of Aberystwyth
My Lords, we will be publishing the fifth carbon budget shortly. The noble Lord will know, as well as I do, that we need nuclear to transition away from coal. We need a reliable and constant source and, in that regard, we cannot rely on renewables. He will also know that we spent more on renewables last year than in the previous year, and the second most in the whole of the EU.
Lord Stoddart of Swindon (Ind Lab)
My Lords, are there not fears about the safety of the present reactor plans? Is it not a very expensive project and could nuclear provision not be better arrived at by building smaller nuclear power stations near highly populated places? Does the Minister understand that many people believe that we used to build our own power stations under the CEGB?
Lord Bourne of Aberystwyth
My Lords, standards of nuclear safety are second to none in the United Kingdom. The noble Lord is of course right about small modular reactors, and we are progressing with that, as my right honourable friend the Chancellor announced in the Budget. We have had 38 expressions of interest, which will be written to by the end of May. That is certainly an important part of the energy jigsaw.
Lord Grantchester
My Lords, further to the noble Lord’s question regarding safety, France’s independent nuclear safety authority has found irregularities in an audit from Areva after it detected a very serious anomaly in a nuclear reactor vessel in the country’s Flamanville European pressurised reactor. Britain is using the same model at Hinkley Point. Has the Minister’s department asked for a report on this from the Office for Nuclear Regulation and whether these irregularities are also present at Hinkley Point? Will any report be published to allay public concerns regarding nuclear safety at Hinkley Point, or indeed any other nuclear reactor in the UK?
Lord Bourne of Aberystwyth
My Lords, I repeat the point I made about the high standards of nuclear safety. We are aware of the alleged defects at the Le Creusot works. We are working on that, and it will not affect the generic design assessment process that is going on at Hinkley Point C.
Viscount Ridley
My Lords, can my noble friend tell us, at the current price of electricity, what his department’s estimate is of the subsidy that will be paid by energy bill payers in this country over the 35 years of the Hinkley Point contract to Chinese and French investors? Is it true that the figure will be a staggering £50 billion?
Lord Bourne of Aberystwyth
My Lords, my noble friend will be aware that the strike price is £92.50 on the assumption that we do not go ahead with Sizewell. If we do, which we may well, it will come down. This is unaffected by all these issues with the works council—the strike price is set, and increased costs and any minor difficulties do not affect the strike price at all.
Baroness Jones of Moulsecoomb (GP)
My Lords, I am sure the Minister is well aware that the global solar industry is doubling every two years. In spite of this Government’s withdrawal of subsidies, there will be sufficient global capacity in 12 years to cover all demand on the planet. Does that not make Hinkley Point obsolete? We will probably not even have it built in 12 years’ time.
Lord Bourne of Aberystwyth
My Lords, the noble Baroness is right on the growth of renewables and absolutely right to highlight the importance of that, as I have been doing repeatedly, without subsidy. But she is wrong to say that we do not need a back-up, because renewables are not constant. That is where nuclear is so important and why we need Hinkley Point C.
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years ago)
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Lord Bourne of Aberystwyth
That this House do not insist on its Amendment 7TB to Commons Amendment 7, to which the Commons have disagreed for their Reason 7TC.
Lords Amendment in lieu
(e) evidence that—
(i) an application for 1990 Act permission or 1997 Act permission was made on or before 18 June 2015 for the station or for additional capacity,
(ii) a grant of planning permission was resolved by the relevant planning authority on or before 18 June 2015,
(iii) planning permission was granted no later than three months after 18 June 2015, and
(iv) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached.”
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, the elected Members in the other place have again sent a very clear message to this House. I do not wish to prolong the debate on this issue. We have discussed many times now the importance of ensuring that the Bill comes to a swift conclusion. As I noted during our last debate, industry bodies such as Energy UK, RenewableUK and Scottish Power have highlighted the need for swift passage of the Bill. In addition, the GMB Scotland secretary, Gary Smith, said today:
“'The Energy Bill contains important measures to help alleviate the severe pressures on jobs… across our oil and gas sector”.
He went on:
“It makes no sense whatsoever to compromise the Bill and the future of Scotland's oil and gas sector over a taxpayer subsidy that will only end up in the pockets of the hedge funds and wealthy landowners”.
He added that,
“some 200,000 jobs in Scotland depend on our oil and gas industry”.
He then urged MPs and noble Lords to get the Bill passed —I agree.
I do not wish to repeat the arguments that have been much debated both here and in the other place. We are all aware that this is a manifesto commitment which was signalled well in advance of the 18 June announcement last year. Indeed, the noble Baroness, Lady Parminter, acknowledged as much in the previous debate.
Lord Foulkes of Cumnock (Lab)
The noble Lord quoted Gary Smith, whom I know well. He is the Scottish secretary of my own union—the GMB. We all want the Bill passed in relation to oil and gas, but there are different ways of getting it passed. It could be passed very simply if the noble Lord, Lord Bourne, agreed to accept our amendment. There would be no problems; it would be passed straightaway. Am I not right?
Lord Bourne of Aberystwyth
My Lords, the noble Lord appears to disagree with the general secretary of the GMB, who said quite clearly that we did not need taxpayer subsidies. That is where the Government stand and that is where he stands, and 200,000 jobs are at stake, of which we should be conscious.
Onshore wind is a well-established technology, the costs of which continue to fall, so it is right that Government should scale back subsidy. The Government have a mandate to deliver on their manifesto commitment to end new subsidies for onshore wind. Yesterday, Members in the other place removed Amendment 7TB, inserted at our last debate on the Bill. Amendment 7TB sought to widen the scope of the grace period to allow certain projects to accredit under the renewables obligation beyond the early closure date. As I have said before, these are projects that did not have planning permission when the early closure was announced on 18 June last year, and therefore do not meet the grace period criteria proposed by the Government. The date of 18 June 2015 was set out as a clear, definitive line for industry, and the Government have continued to maintain the importance of this as a clear cut-off date. As I have said previously, the prolonged debate on this issue is stopping the Bill proceeding to Royal Assent—Royal Assent which is so urgently needed so that we can implement the much-needed measures relating to the Oil and Gas Authority.
As my honourable friend the Minister of State for Energy and Climate Change, Andrea Leadsom, noted in the other place:
“It is vital that the Oil and Gas Authority gets the functions and duties it needs to maximise the economic recovery of the UK’s remaining oil and gas reserves, while building its capacity and capability to attract investment and jobs, and helping to retain valuable skills in the UK. I received an email just this morning from the head of Oil & Gas UK urging me to ensure the safe passage of the Bill at what is a very challenging time for the industry. The need for an independent, robust and effective regulator for the North Sea is greater than ever. We cannot afford the loss of confidence that delaying the establishment of the Oil and Gas Authority would generate among existing operators and the regulatory uncertainty it would generate among investors”.—[Official Report, Commons, 9/5/16; col. 447.]
The policy as set out by the Government strikes a fair balance between the public interest, including protecting consumer bills and ensuring an appropriate energy mix, and the interests of onshore wind developers.
Once again, I urge noble Lords to take careful note of what Members in the other place have said and not seek again to undo the Government’s clear position by insisting on amending the Bill repeatedly. I beg to move.
Motion A1 (as an amendment to Motion A)
Lord Foulkes of Cumnock
My Lords, I also speak in favour of my noble friend’s Motion. Unfortunately, the noble and learned Lord, Lord Wallace, has stolen just about every point that I wanted to make, so I shall be mercifully brief. I remind the Minister of what I said earlier. As the noble and learned Lord said, we are all in favour of the Oil and Gas Authority. The Government could have had this Bill weeks ago if they had accepted the arguments that we have been putting forward. It is the Government’s recalcitrance which has delayed the Bill.
I will make just two points. In the House of Commons yesterday, Andrea Leadsom said:
“The other place has seen fit yet again to try to overturn that manifesto commitment”.—[Official Report, Commons, 9/5/16; col. 446.]
That is not the case. We are not trying to do that. I do not know how many times we need to repeat that and argue the case before noble Lords and honourable Members understand it.
Whether we like it or not, the subsidy date has been brought forward. All that we are talking about now are the grace periods. Three of these have been accepted: we are down to the last one. I cannot say it any better than my honourable friend Alan Whitehead, who said in the other place yesterday:
“The amendment from their Lordships’ House does not seek to alter the premise of grace periods. It does not seek to overturn the early closing date for onshore renewables, sad though that is. It does not seek to alter in any way the vast bulk of this well-crafted Bill, with all its important provisions concerning the North Sea oil industry. It simply seeks to put right one of the great anomalies in the grace period sections of the Bill, and, in that way, strengthen the proper application of those periods. As the Minister may have noted, it now does so in a way that it did not do in a previous amended incarnation. It places a specific time limit after the cut-off date of three months, reflecting the view that grace periods should be just that. This is now a very brief grace period window in which to put right the most difficult cases frozen out for doing the right thing”.—[Official Report, Commons, 9/5/16; col. 449.]
As I said on a previous occasion, one example of doing the right thing is in Sorbie. This family farm has, unfortunately, not been running so profitably in past years. Under advice, guidance and suggestion from the Government, they diversified into onshore wind and are now suddenly being told that they cannot get the subsidies that they were promised. As a result, they are in danger of going into liquidation. These are the kinds of small employers who are going to suffer if the Government press ahead with their policy.
I will make one last plea. I know that the Minister in this place has some sympathies. We have had the tea and we have had some sympathy: we have not had the result. We have not had anything because people down at the other end are so blind that they cannot see. I hope that Members of this House will understand it and that we will send it back and ask them, once more, to think again.
Lord Bourne of Aberystwyth
My Lords, I am grateful to noble Lords who have participated in this debate. They are three of the most fluent and persuasive Peers on the other side and I quite understand their intent and the passion that drives them. I will come to the points in the order in which they were raised. First, the noble Lord, Lord Grantchester, very generously acknowledged that it was in the manifesto and that we have moved on grace periods to address radar/grid delays. In his words, he “applauded” the concessions we have made. We have also made some on the investment freeze. But he seemed to suggest that we were engaged in some kind of ideological and belligerent—I think those were his words—warfare against renewables in general and wind in particular.
The United Kingdom has a proven track record of growth in renewable electricity, which goes on. We will be spending more this year than we did last year, and in every year of this Parliament we will be spending more on renewables. Nearly £52 billion has been invested in renewables since 2010. More than half the total investment in the EU in 2015 occurred in the United Kingdom, and that was just another record year based on several earlier record years. So I hope the noble Lord will accept that that is not the case. We recognise the vast importance of renewables.
One reason for the action and for it being in the manifesto was that we were deploying at a far speedier rate than had been anticipated. It was not anticipated by the coalition Government that we would be well above the top range of what could be expected. We are not taking action for any ideological reason. We have massive deployment and that deployment goes on. But we are reaching the end of subsidies for solar and for onshore wind because they can be deployed without the subsidy. It is widely recognised, including by the general secretary of GMB Scotland, whom I quoted, that we do not need these subsidies any longer and that often we are subsidising people who do not need the subsidy. That is another reason for the action.
The noble and learned Lord, Lord Wallace, put the case very eloquently, as he always does. I think he accepted that we had moved on grace periods. He suggested, as did the noble Lord, Lord Grantchester, that the date we set was arbitrary. Well, it was—only in the sense that any date is arbitrary. The noble and learned Lord will know very well that dates are set and they are very often arbitrary and somebody will fall the other side of them; even if you move the date, somebody else will fall the other side of it. I do not accept that it was arbitrary in the sense that he seemed to be suggesting—that it was somehow capricious. That was not the case and it was not a question of it fitting in with the grid. It was the date that the Government chose to announce the policy that had been signalled in the manifesto. I hope he will accept that the case is borne out: we accepted many amendments on the Oil and Gas Authority as the legislation went through; and we have amended the position on onshore wind to take account of grace periods, appeals and radar grid delays. All these things we have done.
The noble Lord, Lord Foulkes, was very generous and spoke with great passion and very eloquently, as he always does. Yes, I accept that the intentions are benign but the will of the other place has been expressed now three times. Surely now is the time to recognise that this House should not keep overriding the will of the other place on an issue where it has expressed its position very clearly.
Lord Wallace of Tankerness
Can the Minister indicate any amendment to the grace period provisions, which have been there since they were first tabled when the Bill was recommitted to the Grand Committee?
Lord Bourne of Aberystwyth
As the noble and learned Lord knows, those provisions were not there when the Bill was introduced. They were introduced subsequently, after consultation with industry. I accept that they were not subsequently altered but there was consultation, as he will recall, about what was fair on the grace periods. I think many people recognise that these amendments from the original position were fairer and more just. That is the position. They were not amended subsequently—he is quite right on that.
We have been round the circuit on this so many times that I will not delay the House any further. The view of the other place is clear. We do not want to hold up this legislation with its vital Oil and Gas Authority provisions. I beg to move the original Motion.
Lord Grantchester
I am very grateful to noble Lords who have responded on my behalf to the Government’s stance regarding the position we are now in, and to the Minister for the way he has replied. I may well have been injudicious in the words I used regarding the Minister’s motives. However, I am disappointed that I still find his remarks less than convincing. I am not entirely satisfied with his response and I am not happy with the lack of movement towards a compromise.
This issue will not go away. It goes beyond the few cases in the amendment. It concerns the lack of inclusion and the ability of the wind industry to take part in the future bidding rounds for contracts for difference. There is a concern that the Government are not being technology-neutral. It also concerns jobs and investment in Scotland. We remain as determined as ever that we will return to this, but we accept where we are now with the Government—they are not listening and they will not concede. Indeed, it could well be the end of the parliamentary road. Reluctantly, I beg leave to withdraw the Motion.
Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2016
Lord Bourne of Aberystwyth Excerpts(8 years ago)
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Lord Bourne of Aberystwyth
That the draft Regulations laid before the House on 13 April be approved.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, these regulations will make a minor amendment to the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, postponing the date by which the Secretary of State must establish the private rented sector minimum standards exemptions register. I will first give some background on the private rented sector and the 2015 energy efficiency regulations, before discussing the specific effect of this amendment.
There are around 1.2 million non-domestic rental properties in England and Wales, making up approximately two-thirds of the non-domestic property market. Around one in five of these non-domestic properties falls within the lowest two energy efficiency bands—namely, the F and G energy performance certificate ratings. In the domestic sector, there are around 4.6 million privately rented properties in England and Wales, making it the second-largest tenure after owner-occupation, at around one-fifth of the total domestic housing stock. Up to 10% of properties in the domestic privately rented sector have an F or G energy performance certificate rating.
The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, when they bite, will drive improvements in the least energy-efficient privately rented properties across the domestic and the non-domestic sectors. They will do this by requiring landlords of F and G rated properties to improve those properties to a minimum energy efficiency rating of E if they wish to relet them after 1 April 2018. By targeting these worst-performing properties, the minimum standards regulations will improve the living and working conditions of tenants, many of whom—principally those in the domestic sector—are among the most vulnerable. By reducing the winter peak demand, the regulations, particularly the non-domestic provisions, will also help improve the UK’s energy security.
However, the minimum standards regulations recognise that there will be instances where it will not be cost effective, or indeed practical, to improve particular properties. Therefore, a number of temporary exemptions are provided to protect landlords. For example, landlords will not be required to improve a property to an E rating where planning consent is required and cannot be obtained. Landlords will also be exempt where there is independent evidence that installation of a recommended measure would damage the fabric of their property or reduce its value by more than 5%.
In the non-domestic sector, landlords will be required to install only those measures that cost the same as, or less than, their expected energy savings over a seven-year period and will be eligible for an exemption if the improvements do not meet that payback test. Similar cost-effectiveness tests exist for the domestic sector, which I will discuss further in a moment.
In all cases where a valid exemption applies, the regulations will require the landlord to register that exemption on a centrally held register, the exemptions register, which my department is required to establish for this specific purpose. The minimum standards regulations give 1 October 2016 as the date on which the register must open. This is a full 18 months before the minimum standards come into force—in other words, 18 months after 1 October 2016, on 1 April 2018. That date will remain the same after these regulations amend the primary regulations in the 2015 set.
We are now seeking to amend that date for two reasons. First, the establishment of the register, while not a significant technology undertaking, will require time to design, build, and user test with landlord groups and local authorities and local weights and measures authorities, which will enforce the minimum standards. Given that a majority of landlords are unlikely to seek to register an exemption until much closer to the date at which the minimum standards come into force, because the five years will run from the registration rather than the date of the regulations coming into force, we believe that postponing the launch of the register by six months until 1 April 2017, will provide us with reasonable extra time to fully user test the database, without negatively affecting landlords’ plans to register a valid exemption.
Separate to this, we wish to postpone domestic landlords’ access to the register for a further six months, until October 2017. I noted a moment ago that the minimum standards regulations contain a cost-effectiveness test for domestic landlords. This provides a five-year exemption for landlords where they are unable to undertake improvements without up-front cost, specifically when measures cannot be wholly financed, at no cost to the landlord, with funding from central government, a local authority or any other source.
Noble Lords will be aware that, since mid-2015, the Green Deal Finance Company has not been funding any new Green Deal plans. While obligated energy company funding will continue to be available after 2018, and while local authority grants may continue to be available in specific areas, the current absence of Green Deal finance leaves a gap in the operation of the regulations as currently structured. We are clear that this should not be allowed to affect the delivery of the minimum standards adversely, and are working with the sector to determine what amendments we need to make to the scheme rules to allow the domestic standards to work. Invariably this work will take time, both to agree policy and to consult effectively on any proposed amendments. In the mean time, it would not be sensible to allow landlords to register five-year exemptions on the basis of a lack of Green Deal finance, which would risk significantly reducing the impact of the regulations over that period. By postponing domestic landlord access to the register until October 2017, we are ensuring that we will be able to consult fully and make any amendments which may be necessary before landlords can begin to register valid exemptions.
In conclusion, these amendments seek to postpone the launch of the private rented sector exemptions register by six months to April 2017, with an additional postponement for domestic landlords until October 2017. The amendments are being made for both technical and policy reasons and, while minor in themselves, will help to ensure that the minimum standard operates effectively, in line with its original intention—that is, to deliver significant improvements to the energy efficiency of the least energy-efficient properties in the private rented sector. I beg to move.
Lord Redesdale (LD)
My Lords, we on these Benches also support the regulation. I declare an interest as CEO of the Energy Managers Association and as a landlord. I find it incredible that the landlords are arguing that they cannot afford to upgrade their properties. I know from personal experience that that can be very expensive but they are expecting their tenants, who often are in fuel poverty, to pick up the tab, and they are the least able to pay. Moving forward to a new rating—as quickly as possible—is a very important step. I take on board that this is going to be a complicated register, and it has to work to ensure compliance with it.
However, there is one issue on which I wish to question the Minister, which was brought to my attention by the Country Land and Business Association. If you own a listed property, it is difficult to change it to meet some of the registrations under the EPC rating, especially given the criteria from English Heritage—as was—on double glazing, which should be revised. Not having double glazing in listed properties is ridiculous, given that the standard has improved so significantly. At present, if you want an exemption you have to go through the planning consent process and roll that over for five years, which seems a very clunky way of dealing with this problem.
During the consultation, could a more satisfactory system be looked at, especially for listed properties, to ensure that landlords do not face major costs arising from bureaucracy? I believe that solutions can be found. If owners of listed properties wish to rent them out, they should make them as energy efficient as possible. That said, I have a 16th-century bastle house that is difficult to get even close to an E, even though I have carried out almost every measure I can think of.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords who have participated in this debate. I will endeavour to answer the points that were raised by the noble Baroness, Lady Jones, and the noble Lord, Lord Redesdale.
I reassure the noble Baroness that, as I said, the ultimate deadlines remain the same. There is no question of a lack of ambition; the ambition has not changed. We are determined to tackle the scourge of fuel poverty and to aim for energy efficiency, and this will also contribute towards energy security. The problem, as I exemplified when I set out the case, is that first we need extra time to properly design the register. This is within the ultimate deadline set by the Act. It is important that we get this right. The noble Baroness indicated general approval, in fairness, so I am sure she would approve of that. There is no lack of ambition; we just want to ensure that we get it right.
The second point is specifically about the ending of the Green Deal, which she referred to. The Green Deal came in during the last Government, but early on we said that it was not doing its work, so we are moving away from it. However, we are still determined to ensure that we tackle the minimum standards in the private rented sector, so that we can deliver on improvements up to energy performance certificate E. As I said, the deadlines remain the same.
The noble Baroness asked about HMOs. They are covered by this regulation, and I hope she will welcome that news. In response to what was, if I may say so, a rather dismal litany—our proposals are very sensible—I repeat that there is no delay in implementation. There is a delay in the register coming online but no delay in the deadlines for producing measures that landlords have to conform to. It is right that we take some time to consult to make sure that we have got the provision right and it is workable. We will do that, and that will happen in due order this year. The noble Baroness has my assurance on that, and no doubt she and others will want to contribute to that process.
I thank the noble Lord, Lord Redesdale, for his general welcome and note what he said about the Country Land and Business Association. There are exemptions, which I referred to, with regard to listed buildings and the difficulty of getting planning permission. They are already in the regulations and there is no proposal to change those. If the noble Lord wants to write to the department about specific situations, of course we will look at them.
Baroness Jones of Whitchurch
I am grateful for what the Minister has said, but he did not answer the critical question of why the Government did not foresee this. They created regulations that were predicated on the Green Deal, in the knowledge that they were already questioning the future of the Green Deal. It would have made sense to anticipate that when the original regulations were drawn up in 2015. We would not be in this situation now, had the Government had a little more foresight. Will the Minister respond to that?
Lord Bourne of Aberystwyth
Indeed, my Lords; I apologise for the lack of foresight. With 20:20 hindsight vision, it is possible to say that this should have been foreseen. However, the best thing to do when you can see that a scheme is not working, which Green Deal finance was not, is to end it. We are now seeking a replacement, without any delay in implementing the legislation the noble Baroness referred to. She mentioned lack of ambition but the ambition remains absolutely constant. These changes are necessary for us to deliver on the aim of dealing with the scourge of fuel poverty, to ensure that we are energy efficient and to deal with security of supply.
Nuclear Installations (Liability for Damage) Order 2016
Lord Bourne of Aberystwyth Excerpts(8 years ago)
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Lord Bourne of Aberystwyth
That the Grand Committee do consider the Nuclear Installations (Liability for Damage) Order 2016
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, we are today considering an instrument which amends the Nuclear Installations Act 1965 in order to implement changes to the Paris convention on nuclear third-party liability and the Brussels supplementary convention. The powers to make this order are contained in Section 76 of the Energy Act 2004.
Before briefly outlining what the draft order seeks to do, I take the opportunity to restate the Government’s commitment to make sure that we have a secure, affordable and clean energy system to keep the lights on in the decades ahead.
As noble Lords may be aware, the United Kingdom is a signatory to the Paris convention on nuclear third-party liability and the Brussels supplementary convention. These conventions establish a largely western European framework for compensating victims of a nuclear incident. The regime has been in place since the 1960s and is one of the cornerstones of international nuclear liability law. This special international regime is necessary since ordinary common law is not well suited to deal with the particular problems in this field. The regime provides compensation to the public for damage resulting from a nuclear accident and makes sure that the growth of the nuclear industry is not hindered by bearing an intolerable burden of liability. The reciprocal nature of the regime scheme also provides for consistency internationally. Amendments to the conventions were agreed by the Paris and Brussels signatory countries in 2004, including by the United Kingdom. They will come into force once the amendments have been ratified by the signatories to the conventions. The United Kingdom is committed to ratifying the amending protocols and to do so we need to implement the changes in United Kingdom legislation.
This order will upgrade the existing nuclear third-party liability regime and ensure that, in the event of a nuclear incident, an increased amount of compensation will be available to a larger number of claimants in respect of a broader range of damage than is currently the case. The proposed changes will apply to existing operators of nuclear licensed sites and to operators of any new licensed sites in the future. The liability regime will be extended to facilities used for the disposal of low-level nuclear radioactive waste.
Operators must put in place insurance or other financial security to cover their potential liability. It will be for operators to bear the costs of this on their balance sheets. At societal level the policy is estimated to have zero net impact as the current resource cost of government holding the contingent liability is considered equivalent to the future insurance costs for the industry.
The provisions of the order will come into force at different times. Some provisions will come into force shortly after the order is made so as to allow secondary legislation to be made to complete implementation of the regime changes. However, the main provisions will not come into force until the revised regime comes into force in respect of the United Kingdom. Joint ratification of the Paris protocol is required with the other EU signatories to the conventions, and this has a current target date of 1 January 2017.
On the specifics of the order, it provides for the inclusion of new categories of damage, in addition to the existing categories of personal injury and property damage: costs of measures of reinstatement of the impaired environment, loss of income deriving from a direct economic interest in any use or enjoyment of the impaired environment and costs of preventive measures where there is a grave and imminent threat of nuclear damage and consequential compensation.
The amendments to the conventions increase significantly the amount of funds available for compensation in the event of a nuclear incident. Under the current regime approximately €300 million in total is available for compensation, and this will rise to €1,500 million. Operators will be required to bear much greater financial responsibility for a nuclear incident. Operators of power stations and similar sites will have an immediate increase in liability from the current €140 million to €700 million and this will then rise by a further €100 million annually up to €1,200 million. We are continuing to use the flexibility in the conventions to set lower liabilities for lower-risk situations where, in the event of an incident, there is unlikely to be significant damage. The lower liability levels for low-risk and intermediate sites and low-risk transport will be brought into effect by additional regulations to be made in advance of the commencement of the order. All liability levels will be topped up from public funds to a total of €1,500 million per incident, if needed, to meet compensation claims as required by the amended Brussels convention. Contributions from all Brussels convention countries will be used to top up the funds from €1,200 million to €1,500 million.
Contracting parties are permitted to impose a higher liability limit or unlimited liability. The UK has adopted an approach similar to most other contracting parties in capping liability to make sure that operators are able to put in place insurance or other financial security specifically to cover their third-party liabilities.
The geographical scope of the conventions is extended so that it is wider than countries that are party to the conventions, including non-nuclear countries and countries that have equivalent and reciprocal liability arrangements.
The order increases the period in which claims for personal injury can be brought against operators to 30 years from the date of an incident. The limitation period for other claims remains 10 years.
The provisions on allocation of jurisdiction between Paris convention countries now take into account the establishment of exclusive economic zones under international law and other types of maritime zone. The provisions also specify that only one court in the convention country where the incident has occurred should deal with claims arising from it. This avoids conflicting judgments as to liability, as well as ensuring that the responsible operator’s liability limit is not exceeded. This provides clear benefit to the United Kingdom if it is affected by a nuclear incident in another country.
The instrument brings into the liability regime operators of disposal sites for nuclear radioactive waste. We are working with Paris convention countries to agree an exclusion for operators of disposal installations that take only low-level and very low-level nuclear radioactive waste since the risks such waste present are not what the Paris convention was designed to address. If excluded from the regime, general tort law will continue to apply to these sites.
The revised Paris convention now requires every Paris convention country to ensure that its law allows another country to bring representative actions on behalf of its people. This does not create any new right to compensation; rather, it provides an alternative avenue for claiming compensation and allows for co-ordination of large volumes of claims. The order creates rights for other countries to bring representative actions in the UK. The UK Government will have the equivalent power to bring representative actions in other Paris convention countries.
One of the key features of the Paris regime is the requirement for operators to maintain insurance or other financial security to cover their liabilities under the convention. Operators currently meet this requirement by purchasing insurance from the market. Under the new regime, the market is willing to provide cover to the full extent of the operators’ new liabilities, apart from the extension of the limitation period from 10 to 30 years for personal injury claims. If operators are unable to obtain cover for a liability, Governments are required to provide it, so we will, on a commercial basis and for a charge, consider arrangements to fill this gap in cover until the market is prepared to cover it. If such arrangements are made, I will ensure that a report is made to Parliament on them every two years.
The United Kingdom will review the operation of the revised regime in line with the timings set by the contracting parties to consider any revisions to the Paris convention. The form and timing of the review is a matter for the contracting parties—including, of course, the United Kingdom—to agree.
I finish by emphasising the importance of this update to a long-standing regime. Nuclear power in the UK has a strong safety record and the likelihood of a nuclear incident occurring is extremely small. The production and use of nuclear power, however, involves the use of hazardous radioactive materials and an incident could have far-reaching adverse consequences for human health and, indeed, the environment.
Guarding against those risks is therefore of the highest priority for the Government. The United Kingdom has in place robust safety, security and environmental protection regimes that comply with frameworks laid down at EU and international level. The liability regime is aimed at ensuring adequate and fair compensation for victims, while ensuring that the operators, who are in the best position to ensure the safety of their installations, take responsibility for any failure in safety. Further, recognising that the effects of a nuclear incident do not stop at national boundaries, the conventions aim to provide a high degree of uniformity in certain basic rules across their signatory countries.
The Earl of Kinnoull (CB)
My Lords, I had not intended to speak on the order, but given that I have spent 25 years in the international insurance markets at senior level in Hiscox—I therefore declare my interest—and given that I was involved in and responsible for this area of insurance for some time, I have some knowledge. I shall make two points and ask one question of the Minister.
My first point is that greater use of commercial insurance in these risks will undoubtedly drive better risk management simply because we are very much less rich as insurers than the Government, so we are very careful with our risk management to try to ensure that things go well. Therefore, I thoroughly welcome the arrival of the order and the greater reliance on third-party insurance.
Lord Grantchester (Lab)
My Lords, before I begin my remarks on the order before the Committee today, I should like to start by congratulating the Minister on his visit to New York last week to sign the Paris agreement on climate change on behalf of the United Kingdom. I trust that it was a wonderful experience as well as an honour to sign on our behalf, and I am sure that he will not mind me reminding him of this from time to time during our debates in future. Regarding the signing, perhaps I may ask him whether there are further legal requirements to make the Paris agreement operational. Is there a need for formal parliamentary ratification or, indeed, for possible amendments to the Climate Change Act down the line?
However, returning to more normal events, I thank the Minister for his introductory explanation today. The order is a lengthy document, and he has given the Committee an excellent summary. The instrument amends the Nuclear Installations Act 1965 in order to update and extend changes following the Paris agreement, as he has mentioned, and the Brussels supplementary convention, to both of which the UK is a signatory. The order covers the aspects of insurance liabilities for nuclear operating companies and how they are changing. As the Minister said, the powers to make the order come from the Energy Act 2004.
In the other place, questions focused on the decision to phase in higher levels of cover, from €700 million to €1,200 million, over five years, and whether that should be speeded up. The questions also covered the higher and lower aspects of the transport risks of materials and the pricing costs around the Hinkley Point deal. These were very helpful, and I understand the responses made by the Minister there, especially on the problems with pricing mechanisms where there is little or no track record of claims dealing with low-probability outcomes. The fact that any outcome could have high impact adds to the complexity.
At this point, I should declare my interests as a dairy farmer in Cheshire as I reflect that my reading of the order was made poignant by remembering the effects on farmers in north Wales at the time of the Chernobyl accident in the Soviet Union, when rain from the east deposited radioactive sediment on grass consumed by livestock in that area. At the time, there were thoughts that the land might be contaminated for several decades. Therefore, in noting the new category of,
“Loss of income deriving from a direct economic interest in any use or enjoyment of the environment”,
for which the example of “fishermen and cockle-pickers” is cited, I assume that this would also apply to farmers who have grazing on common land. Are there any definitions around “insignificant” in paragraph 7.14 of the Explanatory Memorandum, which states that,
“the impairment must not be ‘insignificant’”?
Any comments that the Minister could make on that would be helpful.
Following on from that, I also note the new category “Costs of preventive measures”, in paragraphs 7.15 and 7.16 of the Explanatory Memorandum, to mitigate the damage that might result from an incident. Here I could envisage a situation where the contamination of a large area could lead to food retailers refusing to take supplies of agricultural produce as a precaution, even though certain products could be said to be uncontaminated. Can the Minister say whether this situation would be compensatable?
The Explanatory Memorandum also explains the concept of an “occurrence” and cites the Magnohard case. Paragraph 7.31 explains that the order makes specific provision to address the point and that,
“the court took an expansive view of the meaning of ‘occurrence’ … The Order … does not adopt as broad an approach”.
Is the Minister able to explain why and what is the effect of this? The memorandum is silent on this point.
Lastly, I have a simpler question. The order requires that nuclear operators assume full responsibility for any breach, that insurance cover is to rise to new levels and that liability is extended to 30 years for claims for personal injury. The Explanatory Memorandum states:
“The Government will, subject to any EU or UK legal requirements such as state aid … fill any gap in cover”.
It is understood that such a gap may exist regarding extension to 30 years for claims for personal injury. Given that personal conditions and physical reactions can take several years to develop and can be severe and costly, will the Minister confirm that the Government will be providing the shortfall of cover in these circumstances? This will be a matter of prime public interest.
The UK has one of the strongest nuclear regulatory regimes in the world. Even as new reactor designs are developed, we can be confident that regulatory regimes will continue to maintain and improve all aspects of safety at nuclear installations. I am happy to approve the order before the Committee today.
Lord Bourne of Aberystwyth
My Lords, I am very grateful to noble Lords who have contributed to this debate and thank them for their general support. I reiterate that the United Kingdom has a very strong record both on nuclear safety and on protection in the event of a nuclear accident. I shall try to deal with the various points that have been raised by noble Lords.
First, I thank the noble Earl, Lord Kinnoull, for his comments and general support. I am most grateful for that. I reiterate that we have very strong performance in the London insurance markets—and, indeed, internationally, as this is not limited to just the United Kingdom—and he is right that the competitive element, not just in the UK but internationally, will help to ensure that standards are even better than before. On the noble Earl’s precise question on Article 37, I confess that I am not nearly as expert as him in these areas of the London closing exchange rate. I shall endeavour to find out and provide him with a more precise answer than the one I am now giving, but I would anticipate that either it is custom and practice that there is a particular exchange rate closure on a particular day or that there is a definition elsewhere that is cross-referred in the order. We are definitely checking that and the team will provide me with an answer. I shall write to the noble Earl and copy in the noble Lord, Lord Grantchester.
I thank the noble Lord, Lord Grantchester, very much for his typically kind and generous comments about signing the Paris agreement. It was indeed a great privilege to be there signing the agreement for the United Kingdom. I am conscious of the amount of hard work that has been done by many people, not just within the United Kingdom, but clearly within the United Kingdom cross-party—and, indeed, beyond party—that made all that possible, building on the success at Paris. The most challenging part of the whole ceremony was avoiding Zimbabwe—sitting straight behind us in the shape of Robert Mugabe. That apart, it was a very enjoyable and significant occasion.
The noble Lord asked whether the signing had a particular impact and when the agreement will come into place. It will come into place when 55 states have ratified, out of the 185 that concluded the agreement in Paris. I should say that 175 countries signed on day one, but they have to go through their internal ratification procedures, so it is 55 states representing 55% of emissions worldwide. As he and other noble Lords will know, the European Union made a joint statement on the position with regard to meeting the targets. Therefore, because the United Kingdom is part of the European Union, our position on ratification is that we will not ratify—and therefore the European Union will not ratify, because it depends on unanimity—until we have agreement on the effort share among the 28 member states. Work on that has begun.
The noble Lord referred to the coverage of the order. As he rightly said, it also covers Hinkley and is designed to cover potential new sites, as I think I said initially. He mentioned Chernobyl. Of course, there have been two major international nuclear incidents, of which Chernobyl was one; Fukushima was the other. The impact of Chernobyl, as he rightly said, was felt in north Wales—as I know—Cumbria and parts of Scotland. The increased protection that we have here will not help in that regard because Ukraine is not a party to this convention. We would be thrown back on to international law because Ukraine is not a party to the other major treaty either, the Vienna treaty, which has a less generous compensation regime.
The noble Lord asked why we are saying that it has to be something “significant” and therefore ruling out incidents that are “insignificant”. This is a fairly common legal practice—a de minimis situation to stop something that is so minor—to prevent vexatious litigation. I think that is the thinking behind it. He also asked whether this would allow claims by the likes of grocery shops, butchers and so on if there were a nuclear incident like Chernobyl in a member state of the convention. I think there would be an issue—I am treading very carefully because the noble Lord, Lord Faulks, is sitting close by—about the remoteness of damage and how far down the chain you can go in such a situation, but I will write to the noble Lord.
Lord Grantchester
I may be able to help the noble Lord, in so far as I think that third-party traders may not be affected. I meant the produce from that area may be affected, even though it could not be said to be contaminated, because of a general ban on products from that area getting into the food supply chain.
Lord Bourne of Aberystwyth
I thank the noble Lord for that clarification. I think there are two issues in relation to that. One is indeed the remoteness: it would be a question of how far down the chain you could go in terms of liability. I did refer the noble Lord and other noble Lords to the fact that this new protection allows for the costs of preventive measures where there is a grave and imminent threat of nuclear damage and consequential compensation. I think that might cover it. The noble Lord raised a specific issue about Magnohard. I will write to him on that to give him a definitive answer.
I am grateful for noble Lords’ help and their broad acceptance and approval of the order. This is a more generous system. It is widely welcomed. It provides added protection and characterises our approach to nuclear energy.
Lord Grantchester
Has the Minister had confirmation from the officials behind him that the Government will be picking up any gaps regarding personal injury claims being extended to 30 years?
Lord Bourne of Aberystwyth
I thank the noble Lord. I had written that down in my notes but I missed it. Yes, we will. I covered that in my introduction, I think. I said that we will fill that gap until the commercial market is able to take over. We will be making a commercial charge to cover that, but we will certainly fill that gap.
I commend the order to the Committee.
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Bourne of Aberystwyth
That this House do not insist on its Amendment 7T to Commons Amendment 7, to which the Commons have disagreed for their Reason 7TA.
Commons Reason
The Commons agree with the Lords in their Amendments 7A to 7S and 7U to 7W, and disagree to Lords Amendment 7T for the following reason—
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, the elected Members in the other place have sent a very clear message regarding the amendment made in this House on 12 April. The continued toing and froing on this issue is preventing the Bill proceeding to Royal Assent in a timely manner. Until that happens, we are unable to implement the much-needed measures relating to the Oil and Gas Authority. In the other place, there was much discussion of the importance of ensuring that the Bill now comes to a swift conclusion. The honourable Member for Aberdeen South, Callum McCaig, said, in relation to the Oil and Gas Authority functions:
“I urge the Government to put their eyes back on the ball and allow the Energy Bill to proceed. If we go back and forth with ping-pong we risk delaying that further”.—[Official Report, Commons, 20/4/16; col. 945.]
Indeed, previous representations from industry bodies such as Energy UK, RenewableUK and Scottish Power have also recognised the need for the,
“swift passage of the Energy Bill, with clear, fair and consistent RO grace period provisions”,
as those bodies have jointly said. We must move forward with the Bill to provide certainty in this sector and to allow projects to benefit from the investment freezing condition, which has been broadly welcomed by the industry.
Once again I find myself reminding your Lordships why the onshore wind measures were introduced in the Bill. The Government have a mandate to deliver on their manifesto commitment to end new subsidies for onshore wind. The Government remain intent on delivering this commitment and bringing forward the closure of the renewables obligation to new onshore wind in Great Britain. Noble Lords will recognise that the manifesto proposals were put before the country at the general election last year, which resulted in the present Government taking power. The Government have a mandate to act on this manifesto commitment, which was based on plans signalled well before the election. I know that the noble Lord, Lord Grantchester, was surprised by the result of the election but noble Lords should not be surprised that this action is being taken. It was very clearly stated in the manifesto and well signalled. Nobody should have been taken by surprise.
Back in March 2015, the right honourable Member for West Suffolk, Matthew Hancock, then Minister for Energy and Climate Change, stated in the other place:
“We have made it absolutely clear that we will remove onshore wind subsidies in the future”.—[Official Report, Commons, 6/3/15; cols. 1227-28.]
Prior to that, in December 2014, the Prime Minister said of wind farms in a House of Commons Liaison Committee:
“We don’t need to have more of these subsidised onshore, so let’s get rid of the subsidy”.
The Government, the Prime Minister and Members of the elected Chamber have continued to make their position clear.
Members in the other place have removed Amendment 7T, inserted after our previous debate on the Bill. Amendment 7T would have allowed certain projects, which did not have planning permission as of 18 June last year, into the renewables obligation beyond the early closure date. I say again: these projects did not have planning permission as of 18 June last year and therefore do not meet the grace period criteria proposed by the Government. Amendments such as the one removed in the other place would lead to an increase in deployment under the renewables obligation, which would come at a cost to consumers. As my honourable friend the Minister of State for Energy and Climate Change, Andrea Leadsom, noted in the other place:
“Opposition Members suggest that just because there is local agreement, it is fine to add to the bills of all consumers across Great Britain, but that is simply not the case. It is our duty as consumer champions—at least on the Government Benches—to keep down the cost to consumers, and this is what we will do”.—[Official Report, Commons, 20/4/16; col. 952.]
The policy set out by the Government strikes a fair balance between protecting consumers and addressing the concerns of industry. Noble Lords should take careful note of what Members in the other place have said and should not seek to undo the position by amending the Bill again. I beg to move.
Lord Foulkes of Cumnock (Lab)
My Lords—
Motion A1 (as an amendment to Motion A)
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords for participating in this debate and making their points as fluently and forcefully as they have in the past. I shall deal with the points in the order they were made during the debate, and will therefore refer first to the noble and learned Lord, Lord Wallace, who spoke about the grace periods and the timeliness of what we are doing, saying that this is the Government’s fault. The point I was seeking to make was not so much about the delay as the constant ping-pong, given that the other place has given a very clear view. This measure was passed there by a substantial majority—far larger than the Government’s overall majority; it was not just Conservative Members who voted for it.
So these points are relevant, and I hope that the noble and learned Lord will accept that the Liberal Democrats have no monopoly in determining what justice is. We have sought to be just in setting grace periods and allowing for an investment freeze, so although we differ on where we think justice lies, I will take no lessons from the Liberal Democrats—that this is the definition of justice that has been handed down from on high.
The difference between us is this. We feel—
Lord Wallace of Tankerness
I was not seeking to give the Minister a Liberal Democrat definition of fairness and justice: I quoted his honourable friend Andrea Leadsom on what fairness was, and himself when he defended the Government’s ending the renewables obligation for photovoltaics. It was a Conservative Minister’s definition of fairness, which the Government are not rising to in this case.
Lord Bourne of Aberystwyth
We Conservatives have put forward our own definition of justice, rather than seeking to put a gloss on it in a way that is helpful to the noble and learned Lord’s argument.
The essential difference is one of deployment. Every proposal put forward by the noble and learned Lord would increase deployment. We feel that we are doing the right thing in balancing the interests of investors with the wider interest, what was in the manifesto and votes in the other place.
The noble and learned Lord raised the issue of steel, suggesting that this measure would make a massive difference and therefore we have to adopt it. As is widely recognised, the Government are committed to doing everything they can on steel, and indeed are delivering—on procurement, on relief on energy costs, on action against dumping. I hope that we will have his support in those matters.
I turn to the noble Lord, Lord Foulkes, who, with his customary passion and fervour, put forward arguments in relation to an area that he knows well. I respect where he is coming from—of course, I understand that—but I do not think that there is any ambiguity in relation to Sorbie. I have checked this and do not want to give a running commentary on planning issues—I should not seek to do that and it would be unwise to do so—but it seems to us that it is very clear that Sorbie falls the other side of the line. I do not think that there is any ambiguity there but, as I said, I cannot really give a running commentary on it.
Lord Foulkes of Cumnock
I do not seek a running commentary; I just seek a specific answer to a specific question. Sorbie was approved well in advance. It was delayed because of the aviation objection, which was subsequently withdrawn. Therefore, it is reasonable to assume that it was approved prior to the relevant date, and that is an interpretation that could be put on it by the department or by Ofgem. I am seeking an indication that at the very least the Minister will have this examined to see whether that is a possible interpretation of the current position.
Lord Bourne of Aberystwyth
The noble Lord is being very creative. I do not think that there was any legal doubt about it. He has referred to it previously as a technicality in a broader sense. I will write to him if I am wrong on that. We will double check but I do not think that there is any uncertainty in relation to that matter.
I move on to what was said by the noble Baroness, Lady Worthington, in relation to CFDs. That of course goes wider than the current debate, which is focused on wind deployment, but I take on board what she said. We have made statements about new technologies within CFDs. The CFD system is designed with this in mind. As I think the noble Baroness knows, CFD auctions for less-established technologies will be taking place later this year in relation to pot 2, and further details will be issued in relation to that.
Baroness Worthington
Would the Minister care to comment on the fact that, because we have not yet met our deployment targets under our legally binding European targets, any onshore wind project that goes through that is cheaper than projects less close to CFD auctions that we are about to grant saves the bill payer money rather than costing the bill payer more?
Lord Bourne of Aberystwyth
To me, unnecessary subsidies—and I think we are entering into that area—are undesirable. Solar, for example, is being deployed without subsidy, as we know, and that will no doubt happen with onshore wind. All the evidence I see is that those technologies where we do not need a subsidy, we should not be subsidising, and that is the international message that is coming across. Al Gore and others who are not necessarily supportive of the Conservative view say that we should not be subsidising unnecessarily, and we are very much of that view.
I turn to the noble Baroness, Lady Liddell, who sought to characterise the House of Commons as a big boy with a stick or a bully. That may happen on occasion but it is perhaps an incomplete picture of what, after all, is the elected Chamber, and this measure was passed by a significant majority in the House of Commons.
Baroness Liddell of Coatdyke
Given that I spent 11 years in the Chamber of the House of Commons, I think that I have a passing knowledge of what it is like. “A big boy did it and ran away” means somebody dreaming up an excuse for something that they did but do not want to admit to.
Lord Bourne of Aberystwyth
The noble Baroness did indeed give exemplary service there. Of course, she has experience of the other place and she will therefore know that it is the elected Chamber and that we should not ignore what is said there. However, I come back to the principle of this issue. We have to draw a line somewhere. It is said that that line is arbitrary, but it is arbitrary only in the sense that that was the date—
Baroness Quin (Lab)
I am grateful to the Minister for giving way. As he knows, I have a lot of sympathy with government policy because I have seen very heavily subsidised schemes inflicted on communities in Northumberland where over 90% of the people have opposed them. At the same time, it seems to me that the Government should look at all possible ways of having flexibility in the cases quoted by my noble friends Lord Foulkes and Lady Liddell. If there is some flexibility in schemes that undoubtedly have the support of local people and, at the same time, through no fault of their own they seem to have fallen foul of the grace periods, I think that the Government ought to be prepared to look at that.
Lord Bourne of Aberystwyth
My Lords, I understand the point that the noble Baroness is making, and I thank her for her general support for what the Government are doing. Clearly, we need legal certainty. We feel that we have delivered on a grace period to take account of some of the difficulties that there are and the investment freeze position. We have made movement on grid delays and radar delays as well. I say to the noble Baroness that the line has to be drawn somewhere; as soon as you start to unpick it and make exceptions for one or two categories then one or two others come into play. I understand that there is great difficulty in drawing the line anywhere, but unless you draw that line, every case could be an exception. That is the point I am making.
I thank my noble friend the Duke of Wellington for some interesting insight on the situation. As for the noble Lord, Lord Foulkes, who said that my noble friend would not get his vote, I do not think any of us got his vote, so that was probably fair to all of us.
I turn to the points made by the noble Lord, Lord Grantchester. He talked rather uncharacteristically—I am not sure whether he really meant it—about vindictive and aggressive attitudes and the adoption of a UKIP stance. I hope he has evidence that that is what we have been doing because it does not cut the mustard with us. As the noble Lord well knows, we do not listen to UKIP on anything, thank goodness. There can be no suggestion that this is vindictive or aggressive. It was in the manifesto, which people voted for; it has been debated in the other place numerous times; and we were responding to views heard up and down the country. He might not like the policy but I do not think that he can characterise it as vindictive or aggressive.
We have the date of 18 June and I repeat to the noble Lord that that is not arbitrary: it is the date that the announcement was made. We believe that this is an unnecessary subsidy and that we have got justice by balancing issues such as the investment freeze and the grace period with the cut-off point. There is a very clear policy, which has been endorsed several times by the other place. I urge noble Lords to oppose any amendments and vote for the main Motion.
Lord Wallace of Tankerness
My Lords, the Minister has given us a fairly predictable but disappointing reply. He will be aware that when we first dealt with grace periods, back in October, there was a considerable number of possible areas in which justice could be done—and I am talking about justice as defined by his ministerial colleagues and himself. We have whittled those down. Indeed, I am prepared to indicate that the “insist” Motion, which is whittled down even further by the Motion in the name of the noble Lord, Lord Grantchester, is one that we would be prepared to support. However, we are getting absolutely no response.
Scottish colleagues present will understand the phrase, “It is like arguing with Ailsa Craig”. I am afraid that that is the position we are in. I do not think that this is good governance. What we are doing is freezing potential developers in other areas, not just in onshore wind, who no longer can have the certainty that the developments they make and investments they put in will not one day be swept aside at the whim of government. However, I beg leave to withdraw Motion A1.