Renewables Obligation Order 2015

Lord Bourne of Aberystwyth Excerpts

Tuesday 24th November 2015 Grand Committee

Moved by

[Lord Bourne of Aberystwyth]

That the Grand Committee do consider the Renewables Obligation Order 2015.

Relevant document: 3rd Report from the Joint Committee on Statutory Instruments

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, the renewables obligation is a long-standing mechanism for supporting renewable electricity generation in the UK. It places an annual obligation on licensed UK electricity suppliers to source a specified proportion of the electricity that they provide to customers from eligible renewable sources. The scheme is administered by Ofgem, which issues renewables obligation certificates to electricity generators in relation to the amount of eligible renewable electricity that they generate. Generators sell their certificates to suppliers, who use them towards meeting their obligation. Since it was introduced in 2002, the renewables obligation has played a key part in increasing the level of renewable electricity from 2.9% of total UK generation in 2002 to over 25% in the second quarter of this year. It supports around 22 gigawatts of accredited capacity.

The renewables obligation scheme has been subject to a number of changes in recent years. The draft Renewables Obligation Order 2015, which I am putting before the Committee today, revokes, consolidates and re-enacts the Renewables Obligation Order 2009 and the orders that have amended it since it came into force on 1 April 2009. It also makes consequential amendments to the Renewables Obligation Closure Order—in other words, a significant part of this order is a consolidation measure. The consolidation simplifies and brings together in one document the main legislation underpinning the renewables obligation, making it more accessible to those who use it, including the Government and industry stakeholders.

The draft Renewables Obligation Order 2015 also implements outstanding policy decisions on the renewables obligation consulted on in 2013 and 2014. The changes focus on three areas: strengthening the sustainability of biomass electricity generation; providing for biomass conversion projects with an investment contract to regain eligibility for support under the renewables obligation in certain circumstances, which I will go into; and providing for the transfer of biomass co-firing and conversion projects to the capacity market mechanism.

An earlier draft of the order was published for a three-week technical consultation on 24 March 2015. Comments were received from 18 respondents, mainly representing the biomass sector. The majority of responses focused on the detail of how the biomass sustainability land criteria had been incorporated in the draft order. We have considered all of the points raised carefully and have taken them into account where appropriate.

I turn now to the detail of the new provisions in the draft order. The first set of new measures is aimed at strengthening biomass sustainability criteria. The Government are committed to achieving sustainable and cost-effective bioenergy deployment, which drives carbon savings, minimises the environmental risks and makes best use of the biomass resource available, both for energy and non-energy purposes. Currently, there are mandatory sustainability criteria in the renewables obligation for the use of bioliquids, which transpose certain requirements in the renewables energy directive. Since April 2014, generating stations of 1 megawatt and above capacity, using solid or gaseous biomass, have been required to report only on whether they meet greenhouse gas emissions and land use criteria. This draft order consolidates previous changes and makes compliance with the greenhouse gas emissions and land criteria mandatory for generating stations using solid or gaseous biomass, in order to receive support under the renewables obligation, as is the position for bioliquids.

These measures will ensure that renewable generation from home-grown or imported solid or gaseous biomass receives financial support only where that biomass delivers genuine greenhouse gas emissions savings compared with fossil fuel, and where it is sourced from land that is sustainably managed, not from land with a high biodiversity value or carbon stocks. This area of forestry and timber will be an important part of negotiations in the Paris climate change discussions on 1 December, the day after the conference opens.

On greenhouse gas criteria, biomass power generation is already required to meet a greenhouse gas savings target of at least 60% compared with the EU fossil fuel average, and this target becomes tighter in 2020 and 2025, increasing in 2025 to 75%. This draft order introduces a new methodology for calculating an annual average greenhouse gas emissions figure for all biomass used by a generating station, excluding certain types of waste. The purpose of this calculation is to ensure that generators are not penalised if an individual biomass consignment exceeds the greenhouse gas target due to circumstances beyond their control, such as bad weather increasing transport distances. This is subject to the provision that each individual consignment of biomass must not exceed an overall ceiling. This prevents mixing extremely high-emission consignments with lower-emission consignments as a means of ‘washing through’ fuel consignments with unacceptably high greenhouse gas values. I am sure that noble Lords will appreciate that the intention is to be fair in relation to acts of God, extreme weather and so forth, but without providing an opportunity to circumvent what is a sensible provision.

On land criteria, the draft order requires generators using wood fuel to comply with specific land criteria, derived from the Timber Standard for Heat & Electricity—a domestic regulation, not influenced by Europe—which draws on the principles set under the Government’s timber procurement policy. There are some exemptions introduced for certain low-risk categories of wood, such as arboricultural residues—basically hedges—and material removed from non-forest land for ecological reasons. These criteria have been developed following engagement with interest groups and were consulted on in August 2013 and in 2014. They take into account a range of social, economic and environmental issues, including protecting biodiversity, land-use rights, sustainable harvesting and regeneration rates.

The draft Renewables Obligation Order also makes minor technical adjustments to the sustainability criteria for non-woodfuel biomass which correspond to the land criteria for bioliquids, for example, to implement recent EU legislation. It amends the reporting requirements for wood fuel to enable government to monitor more effectively the use of different types of wood by the bio-energy sector, as well as making the reporting provisions more workable for industry. Ofgem will regulate compliance with the mandatory greenhouse gas and land criteria. Generating stations using biomass which have a capacity greater than or equal to 1 megawatt must prepare and submit an annual sustainability assurance report which is compiled by a third party auditor or verifier.

The second new measure relates to implementation of the final element of the renewables obligation to contracts for difference transition policy. The first competitive contract for difference auction for renewables support was completed earlier this year and has allowed us to support low-carbon electricity projects at a lower cost to the consumer. This draft order provides for a biomass conversion unit or station which has previously entered into an investment contract under the final investment decision enabling for renewables process to regain its eligibility for support under the renewables obligation, including conversion-level support, if the contract is terminated for a “permitted termination event”, such as failure to secure, or a delay in securing, state aid approval from the European Union. This specific transition measure is necessary because the investment contract process commenced in 2014, ahead of the rest of the electricity market reform, and contracts were awarded ahead of state aid clearance. It aims to provide the assurance and comfort needed to encourage ongoing investment, safeguard security of electricity supply and ensure value for money for consumers. It may well affect two ongoing projects.

The third new measure in the draft order provides for combustion units to bid into the capacity market and leave the renewables obligation if successful in that bid. As we know, the purpose of the capacity market is to ensure that there is sufficient investment in the overall level of reliable capacity—both supply and demand side—needed to ensure secure electricity supplies. It will bring forward investment at least cost to consumers by allowing the market to set a price for capacity competitively. The first capacity market auction was held at the end of last year for delivery of capacity in 2018-19.

Biomass co-firing or conversion stations or units which wish to transfer from the renewables obligation into the capacity market will be able to claim support under the renewables obligation until the last day prior to the first day of the delivery year under their capacity market agreement—so it will be seamless—as long as they have given a capacity market transfer notice to Ofgem. This will ensure that all stations which are primarily coal-firers but have at some point claimed low levels of biomass co-firing renewable obligation certificates, and remain accredited under the renewables obligation, have a chance to enter the capacity market.

In addition, a biomass co-firing unit or station can withdraw from its capacity market agreement to fully convert under the renewables obligation prior to the first day of the delivery year under its capacity agreement—so it applies in both directions—or before closure of the renewables obligation to new generating capacity from 1 April 2017, whichever is earlier. The aim of this order is therefore mainly consolidation but with some necessary amendments in relation to biomass which I have set out. With that, I beg to move.

[Lord Teverson (LD)]

My Lords, I declare an interest in that I was in front of a very warm wood-burning stove over the weekend in my house, and therefore am a great supporter of wood biomass at a domestic level. There is great pressure these days from various NGOs to take biomass out of the renewables mix. I think the approach of the last Government and this Government has been absolutely right in tightening the definition of sustainable biomass, as this SI does, rather than throwing the baby out with the bathwater and saying, “This is all wrong”. That is the right approach.

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[Lord Grantchester (Lab)]

I thank the Minister for his explanation of the order. It is not particularly controversial. The Minister underlined that the RO scheme has been particularly successful in increasing the level of renewable electricity from the 3% generated in 2002 to 25% today. It is helpful that the order will consolidate into one document the Renewables Obligation Order 2009 and the orders that have since amended it, and that it will be the main instrument underpinning the RO, thus making it more accessible. We should perhaps note that the Renewables Obligation Closure Order 2014 remains valid pertaining to the closure of the RO to onshore wind in particular, something that the Government have been keen to amend through the Energy Bill that was recently in your Lordships’ House. The Renewables Obligation Closure (Amendment) Order 2015, regarding solar renewable electricity, also remains pertinent.

This order also implements outstanding policy decisions that were subject to consultation in 2013 and 2014, predominantly concerning biomass electricity generation—not only in consolidation, as I said, but also in regulations relating to its sustainability. We welcome the fact that the order should ensure the sustainability of biomass throughout the chain of biomass procurement, transport and production. Providers will now be eligible to enter the capacity market through giving advance notice to Ofgem that they have complied with the list of requirements concerning specific land criteria and other issues. This has been admirably developed from engagement with interest groups, taking account of social, economic and environmental aspects. Co-firing is also within the order, which is welcome.

I ask the Minister for further clarification concerning compliance with mandatory greenhouse gas emissions. To be able to receive financial support, biomass must deliver emissions savings in comparison with fossil fuels. In the submission of sustainability and emissions reductions, are the criteria likely to be accumulative throughout the chain? Will there be a total score to be complied with, in addition to providing evidence of sustainability at each stage? I ask this because it could be envisaged that further development of the methodology could be incorporated through amendments to the order at a later date, or even that greenhouse gas emissions relative to fossil fuels could be tightened further, beyond the level that the Minister stated. Perhaps the Minister could outline whether Ofgem will provide guidance on this issue, especially in relation to EU directives on biofuels. Is the Minister satisfied that there is no formal sanction for not meeting sustainability criteria beyond the so-called “acts of God” that he outlined?

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords who have participated in the debate on the draft order. I seek to deal with the points raised by noble Lords in the order in which they were raised.

I turn first to the points raised by the noble Lord, Lord Teverson. I thank him for declaring his interest in his own coal-fired facility—I apologise: I meant to say “wood-fired facility”. We are indeed tightening the definitions of what is eligible. The audit process is significant. First, there are some de minimis exceptions for small suppliers; I shall write to noble Lords who participated in the debate to outline what those exceptions are. Secondly, I think that the noble Lord was making the point that enforcement overseas is more difficult. We require limited assurances in relation to what is happening overseas, and once again I will write with details of that process.

I move on to points raised by my noble friend Lady Byford in relation to the standard that we are setting. I think it fair to say that we are ahead of the game, but for a good reason: the European standard will almost certainly be the same. Work on that is going on at the same time as on our own domestic standards. It is just that we are there first, so we do not have to catch up; we are ahead of the game. My noble friend noted that she does not have a wood fire. The noble Lord, Lord Teverson, will have picked up that point and will no doubt want to ask her over to experience his. I am glad to be able to bring them together in this way.

I turn to points raised by my noble friend Lord Moynihan. I thank him for his early pioneering work in this area, which we continue to take forward. He made a fair point about the interconnections and the weather effect on the continent, which is likely to be the same as here. That is absolutely true. This is only one factor that influences the capacity issue, although it is a significant one. An interesting issue that we are researching arose recently in one of the Sunday newspapers: to switch to double British summer time. Not only would that reduce demand per se, it would put us out of line with peak demand on the continent. That is something worth looking at. It is an indication of the imaginative ways in which we can do fairly painlessly the things that we are looking at.

My noble friend Lord Moynihan also raised the issue of the range of woods required to be reported on in relation to the tightened requirements. It is true that some people suggested tightening that range while others wanted the requirements not to be so tight. All these things are a question of balance. One issue that was raised in the consultation on the tightening grip of requirements, and I will give more details on this in the letter, is that this reporting requirement is quite a burden for some businesses, so we are trying to get the balance right there.

I thank the noble Lord, Lord Grantchester, for his comments on the consolidation and in general on biofuels and the tightening of the conditions in relation to this area. I will write to him on specifically how we deal with the supply chain, because that was a fair question that demands a fuller answer. In relation to fuller answers, my officials were delighted with the question about the formula on page 75, so we will ensure that the noble Lord receives a fuller response on that if he really requires one.

Motion agreed.

Onshore Hydraulic Fracturing (Protected Areas) Regulations 2015

Lord Bourne of Aberystwyth Excerpts

Tuesday 24th November 2015 Grand Committee

Moved by

[Lord Bourne of Aberystwyth]

That the Grand Committee do consider the Onshore Hydraulic Fracturing (Protected Areas) Regulations 2015.

Relevant documents: 3rd Report from the Joint Committee on Statutory Instruments, 8th Report from the Secondary Legislation Scrutiny Committee

[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 sets out definitions for the “protected groundwater source areas” and “other protected areas” in which hydraulic fracturing will be prohibited. The powers to make this secondary legislation are found in Section 4B of the Petroleum Act 1998, as inserted by Section 50 of the Infrastructure Act 2015, which, following scrutiny in this House and in the other place, received Royal Assent in February 2015.

Before outlining what the draft regulations seek to do, I will take this opportunity to restate the Government’s commitment to a low-carbon and affordable future for energy. Gas, the cleanest fossil fuel, still meets a third of our energy demand and we will need it for many years to come. It is vital that we seize the opportunity to explore the United Kingdom’s shale gas potential while maintaining the very highest safety and environmental standards. We have established these standards as world leaders in extracting oil and gas over decades.

Shale can and will be developed safely. The UK has over 50 years’ experience of safely regulating oil and gas exploration. We have world-class, independent regulators who will not allow operations that are dangerous to local communities and the environment to go ahead. Safety is and always will be absolutely paramount. Highly respected independent bodies such as the Royal Society, the Royal Academy of Engineering and Public Health England have reported that risks associated with developing shale gas in the UK can be managed effectively if operational best practices are implemented and enforced through regulation. We have a strong regulatory regime for exploratory activities, which we will look to review continuously as the industry develops. We insist on the highest safety standards, and all this is backed up by independent checks from the regulators.

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[Lord Grantchester (Lab)]

I thank the Minister for his explanation of the regulations. He has explained the Government’s approach to providing added protections and assurances relating to the major public concerns regarding fracking in environmentally sensitive areas around water catchment zones, national parks, areas of outstanding natural beauty and world heritage sites. We regard this as largely beside the point, though, so we have severe reservations about these regulations.

The point is that from the passage of the Infrastructure Bill earlier this year in the other place the outlined areas were thought to have been excluded altogether from fracking explorations and production. As has been said, the Secretary of State is quoted as agreeing that there will be an outright ban on fracking in natural parks and these other environmentally sensitive areas. This is rightly leading to grave public concerns. It cannot be bypassed by, in these regulations, permitting fracking to proceed with only the added conditionality of being driven further underground. Quite simply, there was agreement that there would be no-go areas within which fracking would not take place, and with these regulations the Government are now backtracking.

Furthermore, the Government have not gone to consultation on the regulations. This has rightly become the subject of the eighth report from your Lordships’ Secondary Legislation Scrutiny Committee. The Minister’s department refers to consideration of the Infrastructure Act as justification for there being no public consultation about the definitions within these regulations. The Committee takes the opposite view that both public consultation and a ministerial Statement could be justified.

Are the Government trying to avoid embarrassment and controversy? Are they once again trying to put forward measures that they want through secondary legislation that cannot be amended? Instead of public consultation, the Government have merely consulted the environmental regulators on the proposed definition of “protected groundwater source areas” so that their proposal of excluding depths of above 1,200 metres was workable in light of the existing groundwater regulatory practices. I also express concern at the exclusion of SSSIs from the definition, as has already been expressed by the noble Baroness, Lady Parminter.

Can the Minister state the evidence that 1,200 metres is the correct extra precautionary level? The Environment Agency and Natural Resources Wales refer to sensitive areas for groundwater sources as source protection zones. These regulations will now provide a formal definition of how deep beneath the surface these SPZs extend, where before there was none. Can the Minister provide the Committee with any consideration or comments given to this specific depth by the regulators? Can he also clarify that these regulations would also apply to Scotland, in that the Scottish Parliament does not yet have legislative competence on this issue?

There is the further point of where the proposed wellhead of a fracking operation may be situated. These regulations do not prevent a fracking well being drilled from within the protected zone. Present guidance to planning authorities suggests that developments in these sensitive areas be refused unless demonstrably exceptional circumstances exist and they are in the public interest. Can the Minister confirm reports that the Government will consult on the question of whether wells can be drilled from the surface of natural parks and other protected areas? If these drills located outside protected areas can proceed down to 1,200 metres before changing direction and then cross underneath the surface of a national park, is this provision largely irrelevant? There will be understandably grave misgivings regarding the integrity of drilling levels should wellheads be situated within striking distance of national parks and other protected areas.

These serious issues, and others expressed around the Committee today, translate into our view that these regulations should not be proceeded with. We believe that Britain must pursue a socially just energy policy that is sensitive to the impact on the environment and climate change and how it impacts people’s lives, as well as the need for secure, affordable energy. These regulations should be deferred for further consideration by the Government. Indeed, that seems to be the Government’s position at the moment in the other place, where they have deferred further consideration on these regulations.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords who have taken part in this debate and I will endeavour to cover the points that they have made. I shall address myself first to the points made by the noble Lord, Lord Judd, who, in a meeting yesterday evening in a corridor, did indeed tell me that he was going to be raising issues today. I have looked closely at what he said last night and have listened carefully again to what he said today. We have followed a precautionary principle: 1,200 metres below the surface is well below where normal drinking supplies will be sourced from in protected areas. The noble Lord might be making a point about these regulations being ultra vires or not within scope or perhaps running contrary to the national parks Act regarding access. I think I am right in saying that the deepest pothole in the UK is 198 metres, so there should not be any issue about access to 1,200 metres below the surface. That is not what was envisaged then or indeed feasible now, so I do not think there is an access issue relating to the areas that we are talking about in national parks.

What is happening in the regulations and the statement that we are making about surface developments is that there can be no development on the surface of a national park, as it were; any drilling has to come down and then across, and it has to be at that depth. I am able to offer that reassurance and say that, like the noble Lord, I am a great fan of national parks, particularly the Peak District, where I walk frequently. I do not pothole, but I would not be able to pothole at a depth of 1,200 metres anyway because that is just not feasible.

[Lord Judd]

The concern is that we do not know what will happen to the geology once the fracking begins and what that might do to the cave system to which the Minister has referred.

[Lord Bourne of Aberystwyth]

My Lords, I was going on to say—perhaps I will come on to it now—that the scientific and environmental evidence is overwhelming that it should be safe at that depth.

In addition to the regime that we are seeking to set up here, as I have explained, there is a process of requiring a licence and planning permission, as well as the numerous EU directives that have to be complied with—the groundwater directive, the water framework directive, the industrial emissions directive, the environmental liability directive, the habitats directive and the mining waste directive—along with basic safety standards and the process that we follow. This country has a very good record for safety, and safety first, in relation to drilling. I am sure that no system can be 100% robust, but it is very clear that saying that this drilling is effectively two-thirds of a mile down very much favours the precautionary approach.

I turn to the points raised by the noble Baroness, Lady Parminter, about the environmental impact. The economic impact is what is quantified in the assessment of economic impact; environmental issues are dealt with elsewhere. To come back to the basic point about the need to balance interests, we have an obligation, in terms of not just energy security but energy affordability and indeed our carbon footprint, to progress as a nation and to try to strike a balance between what is sensible and what is fair. We need to look at our own energy security rather than importing from overseas. My noble friend Lady Byford suggested as much by saying that we have to look to our own resources and these things take time, as indeed they do. Even with these regulations, as I have explained, there is a necessity for planning permission and licensing. In addition to the regulations, as I explained in introducing them, there is a discretion for the Environment Agency to turn down individual applications where it thinks there is good reason to do so.

I do not think that we can be accused of a dash for gas at all costs; indeed, I agree with the noble Lord, Lord Young, that we as a nation cannot be accused of a dash for gas at all. It really is time that we started taking this seriously. We have this massive potential and we have the experience of what has happened in the United States. We cannot draw direct parallels, but I think that we have a greater regard for safety in this country than is the case there. We have every right to be proud of our precautionary safety-first approach. Like the noble Lord, Lord Young, I wish that we had had a dash for gas. That is certainly not what has happened historically.

I move on to points raised by the noble Lord, Lord Young. If he is doing well with his solar panels at the moment, then the London Borough of Ealing is obviously the place to be. I am reassured that he has them and that he is contributing to the great growth of renewables. I thank him sincerely for what he says, in a most unpartisan way, about the importance of this for British jobs, for British security supply and for affordability, all of which are very necessary. However, it is really not realistic to suggest, if you study this and react to it in a fair way, that we are cutting corners.

My noble friend Lady Byford raised points about the urgency of the need for shale, which very much ties in with what the noble Lord, Lord Young, was saying. There is an urgent need for shale for our own domestic supply. Of course, we need to balance that; safety must come first, with proper planning and environmental considerations, which are already there.

To come back to protection, we have afforded particular protections to national parks, to the Broads and to world heritage sites by providing that drilling has to be at a greater depth. We have provided protection, too, by stipulating that there can be no development on the surface in those areas; we have also provided that protection in relation to SSSIs and Natura sites and so on. It is true that we have not extended SSSI protection below 1,000 metres, but 1,000 metres is well above what is considered safe in the assessment of the various scientific bodies—the Royal Society and so on—that have looked at these issues.

So far, there have been no successful planning permission applications in relation to shale, but these things take time. We have a massive potential and we have issues to address. This is the right way forward and it is a satisfactory approach. I understand what the noble Lord, Lord Grantchester, says about people’s concerns about surface activities. That is why we have said that there can be no surface activities in the areas that demand particular protection. However, we have to recognise that, if we are too restrictive, that will just drive investors away altogether.

My noble friend Lady Byford also raised the question of whether there is interest. There is some interest—there have been developers who are interested in this—but we do not want to make it so difficult or so unattractive that all interest dies away all of a sudden. We are not that sort of nation. We have energy issues to address on security of supply, which we looked at in relation to other statutory instruments earlier today.

I turn to two additional points raised by the noble Lord, Lord Grantchester. First, this does not apply to Scotland. We anticipate that Scotland will bring forward legislation of its own. This is a measure for England and Wales. Secondly, as he rightly said, we have chosen to align the 1,200 metres issue with the source protection zone 1 areas. That seems the sensible approach; the Environment Agency and Natural Resources Wales have recognised that. It seems a consistent approach. I do not think that there is any danger of pollution to groundwater. I do not accept that there is any massive safety issue. You can never be 100% certain, but we are almost there with our safety regimes, which I think we should be proud of.

[Lord Judd]

The Minister is being his usual self in being very full in his response, which I appreciate greatly, but he has not really dealt with the constitutional issue of whether you can redefine what is a national park through an order when there is legislation covering national parks and their status. I hope that the Government will look at that before this issue comes before us again. He really must not pit those who have anxieties about what is happening with the government situation on national parks against the general argument about making ourselves self-sustaining in energy. I am absolutely convinced that we must make ourselves self-sustaining in energy, but there are exceptions to the application of what is necessary.

[Lord Bourne of Aberystwyth]

My Lords, on the second point first, I was certainly not suggesting that the noble Lord, with his vast experience, or indeed anyone else, was raising anxieties that were not valid. I was seeking to reassure noble Lords that we have a safety regime of which we can be very proud and proposals in these draft regulations that strike the right balance. In relation to the first point that the noble Lord raised about the constitutional position of national parks and the argument that he is deploying that we are redefining national parks in this statutory instrument, I know that he has vast experience, but I think that that is rather a creative argument. I will of course have a look at the issue, but I do not for one minute accept that that is the case. However, I will write to him and other noble Lords who have participated on that point.

Motion agreed.

Energy Bill [HL]

Lord Bourne of Aberystwyth Excerpts

Wednesday 4th November 2015 Lords Chamber

Moved by

[Lord Bourne of Aberystwyth]

1: Clause 7, page 5, line 12, leave out “This section” and insert “Subsection (2)”

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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, before I address the government amendments, I thank the Bill team, my Whip, my noble friend Lord Younger, and the ministerial team in the department for their help and support. I also thank all those who have scrutinised the Bill. I am extremely grateful to noble Lords for their participation in our proceedings in discussions in the Chamber and indeed outside the Chamber, which have been very helpful.

Although I know that there are points on which some of us do not agree, the debate on the content of this Bill has greatly benefited from the wisdom, experience and insight that a number of noble Lords, sitting on all Benches, have brought to deliberations. I also thank specifically the noble Baroness, Lady Worthington, for her contribution to the debate and wish her well in her future endeavours as she steps down from the Opposition Front Bench. She has shown incredible commitment and great brio and has made many very valid points, and I am sure that she will continue to do so from the opposition Benches.

This is an important Bill and although, as I say, we have not agreed on key elements—particularly the early closure of the renewables obligation for onshore wind—we have agreed on many issues, including the need to tackle the threat that climate change constitutes to the environment, our security and our economic prosperity. The Government will decarbonise the economy and will do so cost-effectively.

We have had a substantial measure of agreement on carbon capture and storage. If nothing else, I think I can take great credit for bringing together my noble friends Lord Ridley and Lord Deben and Members of all sides of the House on the importance of carbon capture and storage. I am most grateful in particular to the noble Lord, Lord Oxburgh, for agreeing to head a parliamentary advisory group on carbon capture and storage. This will provide advice to my right honourable friend the Secretary of State for Energy and Climate Change, Amber Rudd, within 12 months of the Act coming into force. I would feel less guilty if I did not know that if I am taking him away from anything, it is from orienteering with his family in his spare time. I know just how busy and able he is, so I am most grateful for that.

Government Amendment 1 is a minor and technical amendment to Clause 7, which reflects an error that has occurred as a result of other government amendments made on Report. The purpose of Clause 7 is to ensure that where functions are contracted out to the Oil and Gas Authority by relying on Section 69 of the Deregulation and Contracting Out Act 1994, they may be contracted out for a period exceeding 10 years. Clause 7 also provides that Welsh Ministers may enter into a contract with the Oil and Gas Authority, authorising that body to exercise the functions of Welsh Ministers.

Clause 7(1) limits the effect of the rest of the clause to circumstances where the Deregulation and Contracting Out Act 1994 has conferred functions on the Oil and Gas Authority. However, the subsections inserted by our amendments on Report are intended to deal with a set of circumstances where that Act does not apply—that is, a power for Welsh Ministers to enter into an agreement with the Oil and Gas Authority authorising that body to exercise the functions of Welsh Ministers. With that in mind, subsection (1) should apply only to subsection (2) rather than to the whole of the clause. This amendment corrects that error.

Government Amendment 2 is a minor and technical amendment to ensure that the levy to fund the Oil and Gas Authority is not payable in respect of functions that it carries out under agreement with Welsh Ministers. This is achieved by inserting wording into the list of matters in Clause 14 that the Secretary of State must ensure are not covered when making regulations on the levy. This provides consistency with the current provision which excludes the levy from being charged in respect of functions carried out under Section 69 of the Deregulation and Contracting Out Act 1994, for example on behalf of Scottish Ministers. It is also consistent with the approach taken towards fees under Clause 13, where the Oil and Gas Authority will not be able to charge fees for the exercise of functions that it is authorised to exercise either on behalf of the Scottish Government or by virtue of an agreement with Welsh Ministers.

Government Amendment 4 updates the Bill’s Long Title to ensure that it complies with the parliamentary convention that Bills should leave this House and move to the other place in a proper state. I beg to move.

[Lord Wallace of Tankerness (LD)]

My Lords, I do not wish to detain the House other than to respond to the opening remarks of the noble Lord, Lord Bourne, and to express gratitude and appreciation for his willingness to engage during the passage of the Bill. On many occasions he was left in an unfortunate position which was not of his own doing—for example, amendments coming in late and assessments not being available—but he has engaged, certainly with my party, in a most courteous manner. Although we were not able to agree on the earlier closure of the onshore wind renewables obligation, our discussions were nevertheless very useful and have no doubt paved the way for further discussions when the Bill reaches another place and comes back to your Lordships’ House.

The amendments the Minister has just moved are technical and sensible updating measures, but very much appreciated. The first Part of the Bill implements the proposals of the review by Sir Ian Wood, which we were committed to doing when in coalition government. I welcome the fact that this is now taking shape in statutory form, and thank the Minister for his engagement with the Bill.

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[Lord Foulkes of Cumnock (Lab)]

My Lords, I think I speak on behalf of all my colleagues on the Back Benches who have sat through debates on the Bill when I say that we, too, will miss the enthusiasm and inspiration of my noble friend Lady Worthington on the Front Bench, but we know that she will still be with us in different ways, and we look forward to that.

As I am on my feet, I take this opportunity to ask the Minister to explain. Perhaps I have missed it, but I am still not exactly sure that he has explained when and how the Government will respond to the decision of the House of Lords on the former Clause 66, so that the uncertainty in the industry can be lifted. I hope that he will give us some indication of when and how the Government will respond when he replies.

[Lord Bourne of Aberystwyth]

My Lords, first, I thank the noble and learned Lord, Lord Wallace of Tankerness, for his most kind comments. It was a pleasure working with him and his colleagues, as it was with the noble Baroness, Lady Worthington. They were not difficult colleagues to deal with on the Bill, and I am sure that it is in many respects a better Bill than it was.

I also thank my noble friend Lord Howell for his comments and echo what he said about the noble Baroness, Lady Worthington. I am not sure that I can echo what he said about more energy Bills—I think I heard a thud from the Bill team behind me when he said that, as they thought of another energy Bill coming down the tracks—but we are looking at crafting a fresh approach on energy policy. This is a fresh Government, so you would expect that. At the moment we are in the middle of a spending review, but we are very conscious as a ministerial team of the importance of crafting a vision on energy policy bearing in mind the three issues that we need to address in the trilemma which is at the heart of our policy.

In response to the question of the noble Lord, Lord Foulkes, we responded immediately in a statement. The democratic House of Commons will look at it. I am not a Member of the House of Commons, and it is a matter for the House of Commons. As I made clear, we regard this as a manifesto commitment and all noble Lords will agree that the elected House will express its will and the matter will come back to us in due course.

[Lord Foulkes of Cumnock]

The Minister is not naive; I have worked with him before he became a Minister and I know that he has a lot of experience and knowledge of these matters. He knows that whatever is put to the House of Commons will be put to it by the Government, and he is a member of the Government, so he must have some idea what they propose and how it will be dealt with.

[Lord Bourne of Aberystwyth]

My Lords, I cannot make it any clearer. It is very clear what we are proposing. It was what we proposed to this House and it is what we will be proposing to the other House, as a Government. It is then for the House of Commons to give its view as the democratic Chamber on that issue. I beg to move.

Amendment 1 agreed.

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Moved by

[Lord Bourne of Aberystwyth]

2: Clause 14, page 10, line 3, at end insert “or an agreement under section 7(3) of this Act”

--- Later in debate ---

[Baroness Worthington]

I thank my noble friend and the noble Lord, Lord Oxburgh, for tabling the amendment and for pursuing this aspect of our discussions to this point. I am very grateful to hear from the Minister what I think will be a very effective way forward in the creation of an expert group that will report to the Secretary of State. That is a very welcome development. It seems to be the season of paying tributes, and I pay tribute to the noble Lord, Lord Oxburgh, who, not just through the passage of this Bill but for many years has been a fantastic champion of CCS and the group of technologies that falls within that. I know that he is stepping down as the chairperson of the CCSA fairly soon, but he has played a pivotal role in bringing this technology to the minds of policymakers and decision-makers. I thank and congratulate him for that.

It is right that we have a brief discussion about CCS in this debate today, because of the Redcar situation, as my noble friend pointed out, which illustrates how important it is that we get our energy and industrial strategy right. There is a risk to dragging our feet and there is an urgency involved in sorting out our policies on how we are going to not just maintain but actively attract industrial players back to the UK to reindustrialise our nation.

We are home to brilliant engineers and bright graduates, and we have a skilled workforce. We have and need the infrastructure that requires us to have a vibrant primary industry. There are ways in which we can rekindle that industry, but it will not be through trying to push back the tide of green policy, trying to deny that climate change is happening or blaming green taxation for our woes; it will be the reverse. It is like a judo role. We have to go into this subject in a positive way and not just accept that we are going to decarbonise but do so with conviction. If we do that, if we embrace the fact that of course there are engineering solutions that will allow us to continue to produce steel but without the emissions, we can go forward with a positive investment agenda, attract European money and external investment, and persuade Tata that this is the country where it should be developing the steel production plants of tomorrow, now.

We can do that, because we can act without fear of falling foul of state aid. With every rescue package we try to put together that denies the reality of climate change or seeks to bail out companies that are failing for global trade reasons, rather than anything to do with carbon pricing, we will fall foul of state aid. If, however, we embrace the fact that we need inward investment into zero-carbon and low-carbon production, Europe will be on our side. We can then draw down funds, apply our own funds, and recycle funds out of our carbon pricing policies into an inward investment programme.

We have a policy tool almost readily designed to do that, in the form of contracts for difference. As they were introduced in the Energy Act 2013, contracts for difference were designed for power investment and power projects. They can be adapted. We can create a contract for difference, strike off the carbon price and make it available to industrial investors. That would derisk the investment and give a guaranteed income to people, so that they could see for certain that they will be able to come to the UK and that at least one of the factors that controls whether or not they will be profitable will be taken care of. If we move with the agenda of Europe towards decarbonisation and take CCS seriously, that is the way out of this problem. To do anything else would simply be to stick our finger into a dyke that will burst: there is no escape from the inexorable move towards a low-carbon agenda. If we want to maintain our industrial activities and investment, we have got to have technologies that allow us to do that with low carbon—and that means CCS. It does not just mean CCS on its own; it can be combined with electrification, once we have a low-carbon power system. But CCS is going to play a huge role.

As we have discussed previously in this debate, by CCS we do not just mean one technology. It is very similar to renewables; a whole group of technologies falls under that category, some of which produce a usable product. Carbon capture and utilisation is also grouped within this. I am very much looking forward to the creation of this expert group. We could not have chosen a better chairperson for that endeavour, and I hope that I might be able to play a part in my new role as a Back-Bencher. We can explore these issues; we have an opportunity here and should grasp it. We are almost on our own in Europe in understanding how important CCS is and having a populace that supports us in that. Germany needs it but cannot deliver it. The only other countries that are close to us in terms of understanding are Holland and Norway. We can work with them to form a North Sea alliance to make this happen. There is huge potential: the UK is blessed in terms of its ability to embrace this technology. I hope that that endeavour, led by the noble Lord, Lord Oxburgh, will lead to concrete changes in policy, a new approach, with new vigour and energy, and ultimately to UK plc becoming once again the home of industrial innovation and engineering excellence that will lift people in those communities currently suffering job losses, give them hope for the future and bring all the social and economic benefits that come from that.

I shall not detain the House any longer, although I am tempted because this is one of the topics I like to talk about a lot. I wish the Minister well in the remaining stages of the Bill and in the associated regulations and legislation that will come his way. There is a lot more work to be done. Some of the topics we have touched on, including the recalibration of the capacity mechanism, are urgent and outstanding areas of work. We look forward to hearing more about the CFD allocations in the autumn. There are big challenges outside the UK that the Minister and his department will be grappling with. Paris is upon us, and I am looking forward to that being a historic move forward in the world starting to take this issue seriously and moving forward on a united front. Europe has a huge part to play in this.

My final word is that on energy policy the best way to engage with Europe is to engage positively with new ideas, take our vision to Europe and persuade it that our technology-neutral, all-of-the-above, focus-on-least-cost way is the right way to do this. We have some great tools and great examples of policies that work. We must work with Europe and persuade our colleagues that ours is the right path. We should not seek to disengage. We can benefit hugely from Europe, and it can benefit from us. I hope that that will be the basis on which we continue. For now, I say thank you and goodbye.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord, Lord Oxburgh. As has been indicated, the noble Lord is the right person to chair this group and I have no doubt that he will do so in the very fair way that he approaches all these proceedings. The remit of the committee has been worked through with the noble Lord, and it is for him to decide who goes on to it, but I am sure it will be done on a cross-party basis. I very much hope that the noble Baroness can be a part of it, but that is entirely a matter for the noble Lord, Lord Oxburgh.

I also thank the noble Baroness, Lady Maddock, for her kind comments. I agree with my noble friend Lord Howell that a lot of money is being put into carbon capture and storage. That is because the department regards it as a top priority. We have made sure that that is reflected in the Bill. I reassure the noble Lord, Lord Young, and I am glad he has come in with words of support for the main aim of the Bill which is to maximise economic recovery in the North Sea. That remains very much the thrust of what the Wood review sought to do, and it is an important part of moving us to a low-carbon future. We cannot get there instantly and we are going to have to depend on gas. It is far better that it is British gas with British jobs and all the safety features and so on that we ensure through the North Sea. It also provides us with an historic opportunity for CCS. We have already invested £130 million in this since 2011, and we are committed to spending a lot more during this Parliament. We already have two projects—White Rose and Peterhead—moving forward. CCS is a proven technology. There are 14 plants globally and a further eight under construction.

The noble Baroness’s contribution was a typical tour de force. It is absolutely right that we have to see how we can provide incentives for the steel industry to decarbonise, but I am sure she recognises that the trilemma is never more evident than in dealing with the steel industry. I know because I have been at meetings where a lot of MPs of all parties, including the Labour Party, have been pressing us to do something about the energy price. It is a factor, but it is certainly not the only factor. The noble Baroness is right that there are many other factors in play and we have to move towards a low-carbon solution. I am sure that she understands that we have to do what we can through Europe to see how we can provide assistance, but she is right that this is not the sum total of what needs to be done. I believe that much more can be done on the procurement front. In the department, we are looking at what we can do about public procurement with the much more relaxed rules that are now adopted in Europe. I think the UK has been the first country to have its rules cleared through this new procedure.

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Moved by

[Lord Bourne of Aberystwyth]

line 8, after “power;” insert “to make provision about the crediting to and debiting from the net UK carbon account of carbon units;”

Electricity System Resilience (S&T Committee Report)

Lord Bourne of Aberystwyth Excerpts

Tuesday 3rd November 2015 Lords Chamber

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I thank the noble Earl, Lord Selborne, for this important discussion, for the excellent way in which he has obviously chaired the committee and for the report. I also thank noble Lords for their contributions to this first-class debate—it has been a debate of extraordinarily high quality.

I start by saying how much I agreed with the comments of my noble friend Lord Howell about the excellence of the national grid. My first ministerial visit was to National Grid at Wokingham to see the excellent work that it is doing, which is really reassuring.

There is no silver bullet. If one thing has been clear in this debate, it is that there is no single source of energy to solve the trilemma. If there were, I am sure that somebody would have come forward with it by now and we would not be debating these issues. It is a very complex matter.

Just to illustrate the point, the right reverend Prelate the Bishop of Sheffield—with whom I remember sharing an introduction day; we came in at the same time—in an extraordinarily profound and well-thought out contribution talked about the importance of the Paris COP negotiations at the end of the year. Indeed, they are important, they are vital and we are playing a leading part in them. That negotiation is centred on decarbonisation.

The right reverend Prelate spoke also, quite rightly, about the need to do something for the steel industry, which we are doing. What we are doing is what we are being pressed to do by people of all political persuasions and none, which is to provide some sort of subsidy, payment or compensation in relation to carbon emissions. Nothing could better illustrate the nature of the problems that we have to address as a Government, as a country and as a department. They are unchanging, whoever that Government are.

I will not ramp up this debate by making it a party- political knock-out issue. I share many of the views put forward by the noble Baroness, Lady Worthington, which I think she knows, and I think that there is broad agreement in this House about many issues. I regret that that is not the case in the Commons. If we are able to get to a position where it is, we will benefit from it. I think that is a view broadly shared.

The committee’s report was a wide-ranging and important contribution to this vital debate. I will try to touch on a few of the main themes discussed, picking up points made by noble Lords, and then I will go back and perhaps pick up one or two points that are broader than the committee’s report.

It has been rightly identified that we are wedded as a Government—again, there is a consensus on this—to the trilemma to ensure security of supply. I share the view put forward, for example, by the noble Lord, Lord Hennessy, and my noble friend Lord Howell and all others that this is central. We have recently published the Statutory Security of Supply Report 2015 to Parliament.

Secondly, we are determined to ensure that energy is sustainable. The Government have recently responded to the Committee on Climate Change’s annual progress report on meeting the carbon budgets. I would mention the key role that we are playing in the climate negotiations: my right honourable friend Amber Rudd has played a leading part on the finance and the Prime Minister has made a powerful statement about the Government’s commitment to helping developing states. That, too, has been widely welcomed, and I know that it has from speaking to representatives of other countries.

Thirdly—these are not in any significant order; they are the trilemma in whatever order we address them—there is the issue of affordability. Many people, including my noble friend Lord Ridley, have stressed the importance of this and quite rightly so, because this is central: we have to ensure that electricity is affordable for consumers, both for domestic consumers and for industry. Points were made about the position in Germany in relation to the steel industry. It is true that electricity prices are cheaper for industry, but domestic bills are far higher, so again there is no silver bullet in this.

Perhaps I may say something about the Government’s report to Parliament Statutory Security of Supply Report 2015. This fulfils our statutory duty and obligations, and we take this very seriously. I thank the noble Lord, Lord O’Neill, for much of what he said about nuclear and the consensus, but I disagree with him when he suggests that this report, as far as the Government are concerned, is ignorable and being ignored. Let me reassure noble Lords that that is not the case. The department takes the report very seriously, and rightly so. At the same time as our report was made to Parliament, National Grid published its winter outlook, setting out its view of the electricity and gas supply and demand situation for the winter ahead. It shows a margin of 5.1%, which is well within the Government’s reliability standard and gives us confidence that there is enough spare capacity to meet demand even in tough system conditions such as cold weather. We are confident that the capacity margin is manageable this winter and we have the right tools in place to address the immediate future.

Points were rightly made in the debate about the long-term future, and this relates to the vision behind the energy policy of the Government that many people have talked about. I think that we have made some things very clear, and no doubt other points will be made clearer this autumn. As the noble Baroness, Lady Worthington, suggested, we are in the middle of a spending review. Some things are clear, one of which is the importance of nuclear. We have made headway with Hinkley Point, we are making headway with Sizewell, and after that comes Bradwell, although that is in its early stages at the moment. It is not limited to that type of reactor because we are also bringing on Wylfa B.

Mention has been made of small modular reactors, and many noble Lords who took part in the recent debate on nuclear power will recall the issue coming up then. I responded by saying that there is going to be a progress report on it in March of next year. I will make sure that the letter I wrote to noble Lords on that occasion is also sent to those who have participated in this debate because there is a read-across, certainly on the nuclear issue and possibly on one or two other things that were touched upon in that debate as well.

I shall move on to say something about the capacity market. I may possibly disappoint the noble Baroness when I say that it would not be responsible to cancel or defer the capacity market auction this winter. Although she did not ask for the latter, there is the demand-side response option which comes in in January of next year. We have a trilemma, and if we were to do that, I think it would prejudice things. I have to say that that will not be happening. We believe that the capacity market is the right tool for incentivising long-term investment and we need to deliver security of electricity supply. There is an issue that the noble Baroness has touched upon. I rightly acknowledge that and we are looking at it. This was also touched upon by my noble friend Lord Howell. We have to refine the capacity market and see how we can deliver capacity while ensuring that it is new capacity and that it is not from diesel and so on. I accept that these are things that we will have to address, but at the moment there is no evidence to suggest that it is going to be purely or substantially diesel.

[Baroness Worthington]

I understand that it will not all be diesel, but my point is that each successive auction diminishes the pot for future auctions because we sign 15-year contracts. Once those 15-year contracts are signed, they cannot be repealed or changed; they are simply granted. Every time we build a diesel generator, we are not building something that could be cleaner, more sustainable and more efficient.

[Lord Bourne of Aberystwyth]

That is a point well made, as I have indicated, but I do not think the right answer is to cancel the auction for this winter. I hope that the noble Baroness will accept that that would not be the right approach at all.

[Baroness Worthington]

But there needs to be a response because this is a loophole that is being exploited. It started last year and it is now building up into a worse problem. As I understand it, the Secretary of State has quite significant powers under the electricity market reform to shape that auction. Now that this has come to light, what are the Government going to do about it? Are they simply going to let things go on as they are now, which will see 15-year contracts granted to large numbers of diesel generators?

[Lord Bourne of Aberystwyth]

As I have indicated to the noble Baroness, what I will not do is make policy on the hoof and I certainly will not recommend that we cancel the auctions this winter. But as I say, it is an issue that we will look at.

Let me move on to say something about the reliability standard, which was mentioned by the noble Lord, Lord O’Neill, among others. The committee recommended further research into the true costs of electricity shortfalls to set the reliability standard. We agree entirely that an understanding of the costs of shortfalls is crucial to an assessment of the measures taken to prevent them. They are difficult to assess given that, I am pleased to say, there is a lack of much historic evidence domestically in relation to this issue because we have not had shortfalls. In 2013, a comprehensive study was jointly commissioned by Ofgem and DECC that resulted in the current figure of £17,000 per megawatt hour, which we use for the purposes of our reliability standard. The research looked at the position overseas in a thoroughgoing and exhaustive exercise, and it was as evidence based as possible. We are working with National Grid and the independent panel of technical experts to investigate further the costs of dealing with electricity shortfalls, and we will take action accordingly.

Let me say something about resilience. The major contributor on this issue was the noble Lord, Lord Harris, who spoke with some passion, and spine-chilling it was, too. In preparing for this debate and looking at the issue more broadly, I asked many of these questions as well; that is, what do we do if the following happens? The noble Lord suggested that there are things that perhaps we cannot foresee happening, and I seem to recall that a similar exercise was undertaken after 2011 in which there was a review of procedures. I think he will understand when I say that detailed information cannot be given out on something like this. If it was something in the nature of a terrorist attack, obviously we would not want to publish any detailed blueprint about what we would do in particular situations. But what I will try to do is ensure that we get a response around to noble Lords to set out the position in broad outline. There are plans in place to take the necessary action in so far as we can. But as the noble Lord rightly said, there are situations which we probably have not foreseen. Again, I will ensure that noble Lords are given a response on this matter in whatever detail is possible, although I think that it will be broad in nature.

The noble Lord also mentioned the three-digit number and rightly said that it was not going to be a silver bullet. It will help in some situations but not in the most dire ones. Noble Lords will be aware that this is due to be implemented in April 2016, so for those situations that fall short of the catastrophic, obviously it is still important that there is a three-digit number that people are able to use to ensure that they know what is happening in their locality and what the advice is in a particular situation.

Perhaps I could say something in relation to demand-side response and on storage, which was rightly brought up in the debate. The report stresses the potentially important role of newer technologies such as demand-side response management and storage. Demand-side response could mean industrial customers shifting the timing of their electricity-intensive processes away from peak times, for example. We will ensure that an auction will take place for demand-side response in January 2016, with the first capacity payments for those who are successful following in 2017. An analysis of the currently available evidence indicates that demand-side response in existing generation does not generally require as significant up-front capital investment as new-build plant and therefore does not require as long-term capacity agreements as new-build plants do, and that is the reason for the shorter period in relation to that auction. On 15 October, we published an assessment of this issue which shows the diverse nature of the demand-side response, and one or two noble Lords raised questions about that report.

On storage, we very much share the view put forward in the report of the potential role that energy storage could play and the flexibility that storage offers as a balancing solution. While we are not currently planning to introduce a framework of incentives specifically for energy storage, we are encouraged that in the recent pre-qualification for the next capacity market auction, which is to take place this December, the majority of existing pump storage sites have pre-qualified this year, bringing a potential 2.7 gigawatts de-rated capacity of storage into the capacity market.

Some noble Lords also mentioned battery storage in the context of zero-carbon cars and the noble Lord, Lord Teverson, referred to Tesla. Work on this is, as yet, at a relatively early stage but we are the second largest producer of zero-carbon cars and the Government are determined that we do not lose our market edge.

Smart metering is clearly important and work is progressing on it. We have around 1.7 million meters already installed. I had a meeting about smart meters this morning and, as one would expect, it is beginning to ramp up. This will make a difference to demand, which is welcome.

The significant issue of interconnection was raised by many noble Lords, including my noble friends Lord Selborne and Lord Howell. We are committed to increasing Britain’s interconnection capacity, which can help to lower consumer bills and meet decarbonisation objectives. Great Britain currently has 4 gigawatts of interconnection, across four interconnectors, to France, the Netherlands, Ireland and Northern Ireland. Earlier this year, financial investment decisions were reached on two new interconnectors—one to Belgium and one to Norway. Denmark and Iceland are also being talked about but they are not yet at the decision stage. Interconnectors will bring additional security of supply benefits by giving access to generation beyond our national borders when it is needed. I stress that connection to neighbouring countries with different sources of generation increases the resilience of our electricity system.

Cybersecurity is one of the Government’s top national security priorities. I welcome the supportive comments made by the noble Lord, Lord O’Neill. This is taken seriously across government and certainly within DECC, which is working with government departments and agencies, as well as with industry partners, to ensure that the risks to the energy sector are understood and that appropriate mitigations are established. This includes ensuring that cybersecurity factors are considered, where possible, at the early design stages of future systems, as they have been at Hinkley C, for example. Smart meter security has been a key consideration at every stage of system development.

At the outset, my noble friend Lord Selborne rightly talked of the importance of looking at the whole-system impact. The committee’s report recommends the Government take a look at the whole-system costs of low-carbon technologies. The report on the Energy Systems Catapult is due to be published early in 2016—I think that the noble Earl raised a question about that—and DECC has also commissioned Frontier Economics to examine the whole-system impacts of electricity generation. Its report will be published in March 2016. These points were also raised by the right reverend Prelate the Bishop of Sheffield and my noble friend Lord Ridley. The Frontier Economics review aims to systematise DECC’s understanding of the impacts of electricity technologies, system balancing, overall capacity adequacy and networks.

My noble friend Lord Selborne, and other noble Lords, mentioned energy efficiency. I agree that it is vital and we are committed to insulating 1 million homes in this Parliament.

The noble Lord, Lord Dixon-Smith, talked about the importance of the planning system. I agree that it is central to this issue. He also mentioned the loss of heat from the production of electricity. DECC takes this very seriously, too.

This has been a high-quality debate, to which noble Lords have brought different perspectives. However, it has demonstrated, once again, that there is no silver bullet. There is a diversity of energy supply. Renewables and CCS—to which the noble Baroness, Lady Worthington, referred—are in the Energy Bill and are central to what the Government are doing and were mentioned in the manifesto, and there are the two projects at White Rose and at Peterhead.

[Baroness Worthington]

Can the Minister respond on the structural question of how we govern the security aspect of the trilemma, compared to the other two, given that Ofgem looks after costs and the CCC looks after climate change? Who do we rely on to get expert, apolitical advice on security of supply? Should we not be thinking of creating something that helps us to bring this kind of analysis to the table more regularly and with a similar degree of rigour?

[Lord Bourne of Aberystwyth]

I will ponder on what the noble Baroness has said. As she knows, I was very responsive to the committee in looking at the CCS policy across parties: I was very willing to take it forward and it will be covered in tomorrow’s Third Reading debate. I will look at it—at present it is the responsibility of DECC, within government, and I do not want to say that we will have another committee just for the sake of it. However, I will consider what the noble Baroness has said because she has put it forward in a very constructive way.

I thank the noble Lord, Lord Broers, for what he said about the substantive reply I gave him. I am pleased about that—we do not often get complimented on our parliamentary responses. He is right about the importance of capacity factors, nuclear and so on and about the fact that solar and wind costs are coming down. At the outset, the noble Earl said that we did not want a system on subsidies. We need them to get things moving initially and there are subsidies that remain, but, ideally, we do not want a system driven by them.

My noble friend Lord Howell mentioned fusion. That will be covered in the letter on nuclear that I will ensure goes to noble Lords. Work is being done by the Government, a lot of it at the excellent Culham centre in Oxfordshire, and it is certainly part of the mix. The noble Lord, Lord Rees, talked about support for battery storage and other methods of storage. The Government are looking at that.

I apologise for going over time, but I thank noble Lords for a very high-quality debate. We will ensure that any points that I have missed are picked up and covered in correspondence. I have undertaken to consider some points and will do so, but without commitment.

Hinkley Point: Chinese Investment

Lord Bourne of Aberystwyth Excerpts

Monday 2nd November 2015 Lords Chamber

[Baroness Jones of Moulsecoomb]

To ask Her Majesty’s Government what assessment they have made of the employment and environmental records of the Chinese companies involved in developing Hinkley Point, and whether either company has been involved in developing nuclear weapons.

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, all companies operating in the United Kingdom nuclear industry do so in accordance with the stringent requirements of the United Kingdom’s independent nuclear regulators. These include environmental protections. Likewise, all companies are required to conform to United Kingdom employment law. China is a nuclear weapons state under the Treaty on the Non-proliferation of Nuclear Weapons. China General Nuclear, which will hold a minority stake in Hinkley Point C, is not involved in the development of nuclear weapons.

[Baroness Jones of Moulsecoomb (GP)]

I thank the Minister for his Answer to my Question. I am sure he is aware that there is a lot of concern outside this place about inviting China to be such a large partner in such a complex deal. If we take into account the fact that the Chinese imprisoned 300 human rights lawyers and activists just between July and September this year, we start to see the size of the problems. In addition, Members of Parliament have only another week to voice their concerns about the Bill. I feel that the whole thing is being rushed through.

[Lord Bourne of Aberystwyth]

My Lords, the noble Baroness is right to say that concern has been expressed about China’s involvement. As I have said, the Office for Nuclear Regulation regulates the security of civil nuclear programmes, including companies from overseas, and the security services will also be involved. As she will understand, there has been a long-standing convention under successive Governments not to comment in any detail on that surveillance.

[Lord West of Spithead (Lab)]

My Lords, I am delighted that we are now moving forward and doing something in civil nuclear power generation. It is super that the Chinese are risking their money on this EPR reactor. Both of the types for Hinkley Point are being built in Finland and France, and the costs for both are twice what they were; they are taking twice as long and are still not finished. However, the Minister will be aware of my security concerns. Historically, 70% of the supply chain for nuclear work has come from United Kingdom firms, but there is evidence to suggest that when the Chinese start building the third of the reactors—the Bradwell reactor—they plan to provide all the supply chain material, at a cost to UK manufacturers. Will the Minister ensure that we get that sort of percentage to our UK firms rather than letting the Chinese monopolise it?

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord for his welcome of the project. It is true that 60% minimum is guaranteed on the supply chain in relation to Hinkley Point C, as I am sure he will be aware. It is very early stages for Bradwell yet; it has not really been discussed. I am sure that the aim will be to get at least that, but as yet pen has not been put to paper at all.

[Lord Wigley (PC)]

My Lords, as only four EPR reactors are currently being built—one in Finland, one in France and two in China—and none have shown that they work safely or efficiently, why was that technology chosen for Hinkley, ahead of the proven advanced boiling water reactor developed by Hitachi, which is currently being used successfully at three different locations?

[Lord Bourne of Aberystwyth]

My Lords, the noble Lord is right that the projects in France at Flamanville and in Finland to which he referred, and indeed in China—although the model is slightly different there—are ahead of what is happening at Hinkley Point C. This has been subject to detailed scrutiny, and we are satisfied that it is the best way forward. These are the first nuclear reactors that will have been built in this country for 25 years, and we are satisfied that this is the best way forward.

[Lord Teverson (LD)]

My Lords, given that Hinkley will almost certainly be followed by Bradwell in Essex in due course, what conversations have we had with the Chinese Government about the safe disposal of nuclear waste on nuclear sites? This is clearly important not just for world security but for our own security.

[Lord Bourne of Aberystwyth]

My Lords, the noble Lord is right about the disposal of nuclear waste. It is an issue that we have to address. We have much nuclear power at the moment and it is being addressed. It is an integral part of the discussions with the Chinese and EDF. It has to be remembered that the project at Hinkley Point C is not a China lead: one-third of the project is Chinese and two-thirds is EDF. However, it is central to the project.

[Lord Stoddart of Swindon (Ind Lab)]

My Lords, is the noble Lord aware that when I worked for the Central Electricity Generating Board, a nationalised industry, we built our own nuclear reactors and the CEGB was a leader in the provision of advanced gas-cooled reactors, which are still working. Why on earth is it necessary for this rich country to employ French and Chinese nationalised industries to build our nuclear power stations?

[Lord Bourne of Aberystwyth]

My Lords, I was not aware of the noble Lord’s background in this field but I readily acknowledge it. It is true that in the past this has been the case. Sadly, over a period of time under successive Governments, the research and development in this area was run down. We are now making agreements which are subject to stringent security and safety precautions to ensure that we move forward with what most noble Lords will acknowledge is an important part of the energy mix—namely, nuclear. We already take 20% of our energy needs from nuclear. That will continue. We are satisfied, with the conditions that we have in place, that this is the best way forward for the country.

[Lord Hunt of Kings Heath (Lab)]

My Lords, surely the point raised by the noble Lord is exactly why the integrity of the future UK supply chain is so important. My noble friend Lord West raised the issue of Bradwell and future developments. Can the Minister assure me that the UK Government will have enough leverage to ensure that, in relation to Bradwell, the size of the UK supply chain contribution can be protected and enhanced? That is a security question as much as it is a question about the industry and jobs.

[Lord Bourne of Aberystwyth]

My Lords, I readily acknowledge and accept that it is important on both bases. In answering the question I sought to say that we have not yet begun any detailed negotiations on Bradwell. However, new procurement rules are in place which help us in Europe and with the supply chain. We have got a good deal in relation to Hinkley Point C. I have indicated that I hope that that will be a template for what we do in Bradwell. However, it is very early days and I do not want to mislead people into thinking that we are already in that degree of discussion—we are not.

Draft Wales Bill

Lord Bourne of Aberystwyth Excerpts

Thursday 29th October 2015 Lords Chamber

[Baroness Gale]

To ask Her Majesty’s Government to what extent the draft Wales Bill secures powers for the National Assembly for Wales.

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth)]

My Lords, the draft Wales Bill will deliver a stronger Wales in a strong United Kingdom. The new reserve powers model will provide a clear devolution boundary between what is reserved and what is devolved. The draft Bill also strengthens Welsh devolution by devolving important new powers over energy, transport, local government and Assembly elections.

[Baroness Gale (Lab)]

I thank the Minister for his reply. However, I am sure he is aware of the concerns in Wales about the draft Wales Bill. Will the Minister agree to meet Welsh Government Ministers to listen to their views on the draft Bill? They suggest that the current Assembly powers will introduce an effective Westminster ministerial veto over Welsh laws. Surely he is aware of that concern. I know that the draft Bill is going through the Commons at the moment, but will he meet Ministers in Wales to discuss these difficulties?

[Lord Bourne of Aberystwyth]

My Lords, the noble Baroness is quite right: the Bill is still in draft form. It will undergo pre-legislative scrutiny and be introduced into the Commons early next year. Discussions are going on about the Bill almost as we speak—the Secretary of State is in Cardiff today, for example. As I understand it, constructive discussions are going on between officials and Ministers.

[Lord Thomas of Gresford (LD)]

The Constitutional Reform Act 2005 requires the Supreme Court selection committee to,

“ensure that between them the judges will have knowledge of, and experience of practice in, the law of each part of the United Kingdom”.

Of the 12 Supreme Court Justices, two are Scottish and one is Northern Irish. The Lord Chief Justice—the noble and learned Lord, Lord Thomas of Cwmgiedd, with whom I am occasionally confused—stands in from time to time. Will the Minister undertake to amend the draft Wales Bill to ensure that one seat will always be reserved for a Justice with experience of the practice of the law in Wales and, since the laws are passed by the Welsh Assembly in two languages, knowledge of the Welsh language? Such a judge could act as a mediator in any dispute between the Welsh Government and the UK Government as to legislative competence.

[Lord Bourne of Aberystwyth]

My Lords, that almost sounded like a job application. I know that the noble Lord is very proficient in the law and in Welsh. At the moment, it is done on an informal basis, but the noble Lord has a serious point, which no doubt will be taken forward as the draft Bill proceeds.

[Lord Elis-Thomas (PC)]

My Lords, this is not a job application, as the Minister knows. Is he aware that the National Assembly for Wales’s constitutional and legislative affairs committee will continue to adopt subsidiarity, clarity, simplicity and workability as the scrutiny tests for this Bill? Will Her Majesty’s Government listen to the committee’s reports, as the First Minister of Wales has done?

[Lord Bourne of Aberystwyth]

The noble Lord is quite right about the role of that committee of the National Assembly for Wales. It does very good work and of course it will be listened to. As I understand it, the Secretary of State will be giving evidence to the committee to discuss the Bill. I emphasise that the Bill is in draft form at the moment.

[Baroness Morgan of Ely (Lab)]

My Lords, the Welsh Government suggest that only five of the 19 Welsh Government Bills that are now Acts could have proceeded to Royal Assent had the new draft Bill’s provision been in place, either because they would now be outside the limits of the Assembly’s power, or because new UK ministerial consent obligations would have had to be satisfied first. Does the Minister accept that, as the draft Bill stands, the newly proposed reserved powers model of governance has been written in such a restrictive way that it will curtail the Assembly’s current power and lead to an even greater potential for legal conflict between Westminster and Wales?

[Lord Bourne of Aberystwyth]

My Lords, the noble Baroness will not be surprised to hear, as we had a brief discussion on this issue, that I do not accept that. I do not think that that is the case. The First Minister and the Secretary of State are looking at this very closely. It is the case that if a piece of legislation in Wales has an effect in England—for example, adoption agencies set up in England—then it will need the consent of this House. Similarly, if we wanted to do something in Wales in a devolved area, we would need the consent of Wales. That is not unreasonable. Discussions are ongoing; this is in only draft form.

[Baroness Randerson (LD)]

My Lords, the issue of Crown consent has already proved very controversial. The Schedule to the draft Bill reveals how complex the current settlement has been from the start. Does the Minister agree that there is a strong case for simplifying Welsh devolution, and in the process allowing some additional powers for the Assembly beyond those already specified in the Bill, which are very welcome?

[Lord Bourne of Aberystwyth]

My Lords, the noble Baroness has great experience and has done a tremendous amount in relation to this Bill. I recognise that and pay tribute to her. If there is one thing I have learned over the last generation, it is this: Welsh devolution is not simple.

[Lord Kinnock (Lab)]

Does the Minister agree that the paradoxes and concerns highlighted again this morning in Questions and Answers in this House demonstrate the absolutely compelling need in Wales, England, Scotland and Northern Ireland for a comprehensive constitutional convention, as requested on this side of the House and that side, and, indeed, by all thinking people, in which number I would like to include him?

[Lord Bourne of Aberystwyth]

I am grateful to the noble Lord for the compliment. It is true that there is a great danger that we do things piecemeal and do not look at the whole. That is a point well made. Obviously in relation to this Bill we are looking at the position in Scotland, Northern Ireland and, indeed, England as we proceed to try to take account of that. The noble Lord makes a powerful point: at some stage we will have to ensure that all these pieces of the jigsaw fit well together.

[Lord Morgan (Lab)]

My Lords, there are many good things in the draft Wales Bill that will be widely welcomed, but is not the problem that the St David’s Day declaration earlier in the year aroused expectations and stated that reserved powers would be transferred en bloc to the Welsh Assembly? Hitherto, the draft Wales Bill does not appear to ensure that. Should we not clear this up to avoid a serious crisis?

[Lord Bourne of Aberystwyth]

My Lords, I greatly respect the noble Lord’s work in this area. Even designing a reserved powers model is a complex issue, because something has to be on the other side of the line. It is important that we get it right, but that is why discussions are ongoing at official and ministerial level.

[Lord Richard (Lab)]

My Lords, the noble Lord will know that some years ago I had the pleasure—indeed, the honour—of chairing a commission that looked at the governmental arrangements in Wales and made certain recommendations. Having looked at the Wales Bill, which it seems to me is of fiendish complexity, I do not recognise the Bill that is now coming before Parliament as fulfilling the recommendations made by the Richard commission as long ago as 2002.

--- Later in debate ---

[Lord Bourne of Aberystwyth]

My Lords, it is fair to say, as the noble Lord reminds us, that that was a very important report. The noble Lord presented a unanimous report, apart from a dissenting letter from the noble Lord, Lord Rowlands, who is not in his place at the moment. We are taking forward some of those proposals, such as some of the procedures—I do not have the details in front of me—relating to Assembly numbers and electoral arrangements, which will now be a matter for the Assembly to decide. No doubt these can be flushed out during the draft legislative stage of the Bill.

Global Climate Change

Lord Bourne of Aberystwyth Excerpts

Thursday 29th October 2015 Lords Chamber

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, first, I thank the noble Lord, Lord Hunt of Chesterton, for raising this very important topic in the House and for all he has done in relation to meteorology and the Hadley Centre, which is much valued in government. He has made an outstanding contribution.

This has been a debate of extraordinary quality with contributions from people who really know an outstanding amount about this area—people such as the noble Lords, Lord Stern and Lord Krebs—and statesmen who have been involved in it for a considerable time in relation to Kyoto, such as the noble Lord, Lord Prescott, and who really understand it. There is an awful lot in this debate which I will try to address.

At the outset, along with others, I would like to say how valuable the intervention of the Pope has been on this issue—and not just the Pope but other faith leaders, not limited to Christianity. Our own right reverend Prelate the Bishop of Salisbury was part of the Lambeth declaration, which involved many other faiths, including the Islamic and Jewish faiths. That needs to be recognised: they, too, have an important role to play.

I also thank the noble Baroness, Lady Worthington, for what I thought was an outstanding contribution. I absolutely agree about the need to build consensus on this: there is more at stake than domestic political differences; this is an area where we really need to take united action, not just within our country but globally.

In that connection, this debate has raged over a massive number of government departments. Those people who have been in government—I know that there are many of them in the House—will recognise the silo nature of operations in Whitehall and Westminster, so I will ensure that the debate is circulated to other government departments so that they are aware of the impact that all government departments have in this area.

I will try to address all the remarks that have been made. In so far as I miss any, I will ensure that a letter goes to all Peers who participated in the debate picking up any points I miss or where I undertake to write because we do not necessarily have the answer immediately or it is a more complex issue than can be covered in a short period.

First, I shall say a few words about the domestic situation, which is important but only in so far as it feeds into the international position. I shall say something about the domestic position from the perspective of energy and climate change, then about air pollution and then about the international position. Noble Lords, not least the noble Lord, Lord Hunt, mentioned the importance of the Climate Change Act. He said that it is crucial that we are committed to carbon budgets; I entirely agree with that comment, which was made by other Peers as well. The noble Lord, Lord Prescott, mentioned the importance of that, as did many others by inference because of their involvement—the noble Lords, Lord Stern and Lord Krebs, and so on.

Turning to our domestic position and our priorities as we try to develop policy for this Government, we are not turning our back on renewables. Renewables will remain of crucial significance. We will actually be spending more on renewables this year than we did last year. I met some industrialists this week who were keen to go forward with renewables on a no-subsidy basis, because the cost of renewables is coming down. That is a very good sign. I have discussed this previously with the noble Baroness, Lady Worthington. Renewables will continue to play a key role, and so will nuclear.

I think that nuclear has not been mentioned in this debate, or barely—I beg your pardon; it was mentioned by the noble Lord, Lord Hunt, in his introduction. Nuclear power has a key part to play. We will not get to where we need to be—I know that the noble Baroness opposite agrees on this—without the impact of nuclear, and that will remain the case. We are looking at other types of nuclear, small modular reactors and thorium—we had a very good debate on that last week—and that is being taken forward.

CCS has been mentioned by the noble Lord, Lord Berkeley, and others. It is an important part of our policy. As the noble Baroness mentioned, it is being embedded into the Energy Bill. I again pay tribute to the cross-party and Cross-Bencher involvement in trying to develop consensus on that; I think we have consensus that that is of key importance.

Air quality is of course a Defra lead, and it is consulting on draft air quality regulations to make us compliant as quickly as possible with the legal position. The diesel challenge in London and elsewhere, but particularly in London, is considerable. That is an important issue, as my noble friend Lord Borwick reminded us. I pay tribute to the British Lung Foundation, which he mentioned; it does fantastic work on what is a real issue. It is not just a domestic issue, as these issues rarely are. Countries such as Singapore and Malaysia take domestic action—certainly Singapore does—but are badly affected by forest fires in Indonesia. Nothing can better illustrate the fact that we need international agreement on many of these issues. The noble Baroness, Lady Kennedy, made the point about the importance of a legal order here.

Picking up the point on rules-based systems, I do not agree with the noble Lord, Lord Giddens. We need a firmer rules-based approach. That is being developed at Paris. It is certainly key to ensuring that we have an effective scrutiny and review system to make sure that these rules are applicable and followed.

[Lord Giddens]

I just make it clear that I am fully in favour of a rules-based approach, but in international relations there is no system of enforcing those rules in the way that there is in the national legal system. Therefore, power counts for an awful lot. What the large powers do could really be crucial, alongside the Paris agreements, if we are to get traction in countering climate change.

[Lord Bourne of Aberystwyth]

I thank the noble Lord for that—it was a fair point. It is also fair—I entirely agree with the noble Baroness opposite on this—that in practice there has been overdelivery on this area by countries. That is certainly true of the United States and China. Yes, of course there need to be review and rules-based systems. That is very much the way that the United Kingdom is approaching this, and many other countries as well. It is something that is very much discussed.

Let me say something about the international position ahead of Paris. I think we all accept the need for action, and that Paris is important and a step change very different from Copenhagen in that we have 155 countries already which have declared their INDCs—their contributions in relation to emissions. That will grow and there will be more of them. It represents the vast majority of emissions but other countries will join in with that process. It is very different.

I pay tribute to the way that the French have approached this. They have organised this conference very effectively. To illustrate the key role we have played at DECC, my right honourable friend the Secretary of State, Amber Rudd, has played a leading part on finance, working with Ségolène Royal in response to requests from the French to try to put an effective financial provision into what will happen at Paris. That is a vital part of what will happen there.

Noble Lords will be aware that the question has been raised about the commitment of the Prime Minister. He personally made the commitment at New York of £5.8 billion—a significant amount, widely welcomed throughout the developing world—towards adaptation and mitigation. It is split 50:50 because we recognise that both adaptation and mitigation play a key part in this—a point quite rightly made to us by small and developing island nations. There is a particular challenge for small island nations. I met the Prime Minister of Tuvalu and representatives from the Maldives. Even if we get agreement on the 2 degrees, it will not be nearly good enough for them: they will still cease to exist as countries unless we go beyond that.

I am optimistic about Paris, but it is a staging post. It will not get us there on its own. We need to look beyond Paris. It is certainly a step on the process towards getting things right, but we need to move beyond it. Ensuring that we have a road map as well as review and rules-based systems is essential if we are to protect countries such as Tuvalu, the Maldives, Bangladesh and so on, which we must as a moral imperative—hence the need in the mean time for the adaptation to help those countries. That is a real part of the approach of the United Kingdom.

I will pick up some points made by noble Lords. As I said, any that I miss I will pick up in writing. The noble Lord, Lord Greaves, talked about a government commitment on fuel poverty. Some 1 million homes will be insulated under this Government. That is a manifesto commitment and we are obviously committed to following that.

The noble Lord, Lord Stern, rightly referred to the interconnection between the economy and the environment. The two can go forward together. He spoke of addressing poverty and the challenge of climate change. That is absolutely right. The noble Lord’s seminal report demonstrated just how right it is that those two can go forward together. They are doing so at the moment. Indeed, emissions are at the moment falling slightly and the economy is growing. That illustrates what can be done. The annual turnover of United Kingdom firms in the low-carbon sector was £122 billion in 2013. That demonstrates the opportunity that exists for—

[Lord Krebs]

Does the Minister acknowledge that, even though the Government have the manifesto commitment to insulate 1 million homes over the next five years, that will still leave more than 2 million lofts uninsulated?

[Lord Bourne of Aberystwyth]

Of course I do: there is no shortage of challenges here.

Just to bring us back to the reality, which was again outlined by the noble Baroness opposite, there are three key aims for the department. I do not think they have changed from the previous Government. Those aims are affordability, security and decarbonisation. Noble Lords will recognise the reality of government that sometimes hard decisions must be made. There is no better example of that than the steel industry. I was at the steel summit. Many Labour MPs, understandably—and, in one sense, rightly—argued that there should be relief for those businesses. We seek to go forward with all three aims together. I do not disagree with that.

All I am saying on this particular point is that there is a massive opportunity for British businesses. I will come on to that in a minute. It is not just the Government that must address these issues; it is also cities, businesses and individuals. We have touched on all that. A massive part of the UK economy is already low carbon. If we translate that, say, to the opportunities for zero-carbon cars, again we are already the second-largest producer of those. This is another massive opportunity for the United Kingdom. Work is being done on this, but again it is not simple. It is a question of ensuring that we have battery storage and so on. This work is going on.

[Baroness Worthington]

It is a challenge and there needs to be cross-departmental thinking, but I always feel that at the heart of this is the Treasury. A positive statement from the Chancellor on the kind of approach that the Treasury wants us to take—that is, least cost, focusing on those win-win situations where we can attract inward investment into the UK—would be enormously helpful to reassure people ahead of Paris that the whole Government share this agenda. Could the Minister commit to speaking to the Chancellor to get him to say something positive on this, please?

[Lord Bourne of Aberystwyth]

The noble Baroness is not wrong about the need for messaging. My right honourable friend the Chancellor has on many occasions spoken of the importance of addressing the two challenges of climate change and the economy at the same time, and noted that we can go forward on the two together. I will endeavour to get her copies of that. Of course the Treasury is central to this. It is central to it in any Government. That almost goes without saying.

I addressed the points from the noble Baroness, Lady Kennedy. I understand the points she made about the great advantage we have with the United Kingdom’s strong position on law and order, and the importance of the legal system, and so on. I absolutely agree with that.

To illustrate the fact that this is being taken forward internationally, and that not only the United Kingdom has moved on in climate change policy, since 1997 there have been globally 750 new policies enacted. Now, we all know the challenges in making sure that those translate into action, but at least there is a recognition internationally of the nature of this challenge. That is really one of the very heartening things about the position at the moment. Of course there are differences of opinion on the way forward in the sense that each country will want to puts its own particular case, quite naturally, but there is an international recognition of the nature of this challenge.

I certainly do not need convincing about the scientific case. I do not believe that the great bulk of the overwhelming scientific evidence is wrong; it is right. I do not believe that 155-plus countries are wrong; they are right. This is a massive challenge and one we need to address. Indeed, it is one we are addressing. I was talking with representatives from South America yesterday, and there is recognition across the board that this is a crucial issue that needs addressing quickly.

I shall pull my comments to an end because, although I have not got to the end of my 20 minutes, I think that the debate has run out of time. The noble Lord, Lord Haskel, also raised the issue of economic growth and climate action going forward together, and I entirely agree with that.

The noble Lord, Lord Judd, has vast experience of overseas matters. He asked, perhaps slightly mischievously, if the Prime Minister will be going. He will know that the Prime Minister’s diary would not be public at this stage—but, suffice to say, the Prime Minister, DfID, the Secretary of State for Energy and Climate Change and the Foreign Office are all very closely involved with this, and all regard it as imperative. We have had a state visit by President Xi, when these were discussed. We are about to have a visit from Prime Minister Modi of India, when these things will be discussed. These are all crucial.

The noble Baroness, Lady Young of Hornsey, asked some very interesting points, although I was slightly blindsided because I had not thought of this dimension. I shall get a detailed response to her on those points, but it is certainly true to say that she raises relevant issues on air and water pollution and the use of energy.

I thank the noble Lord, Lord McFall, for endorsing the Pope’s encyclical in this regard; that is entirely right.

On domestic adaptation, we are doing many things domestically; it is partly about mitigation and change of policy and partly about adaptation. That means things like coastal protection on the east coast, in Clacton, and flood measures in Leeds, as well as the Boston barrier. We are looking at how effective the Thames barrier is. Thank goodness that we have it, but we need to look at it again in the light of changing circumstances.

I shall write to the noble Lord, Lord Teverson, in relation to the tax regime on community energy schemes, because I do not have the answer to hand. I have a feeling that it was recognised in the consultation as a special case. However, I may be wrong on that and I shall write to him in detail.

This has been an excellent, first-class debate. I shall make sure that a detailed response goes to noble Lords on points that have been discussed and that I have not covered, and that those points will go to all government departments. Once again, many thanks to the noble Lord, Lord Hunt.

Nuclear Technology

Lord Bourne of Aberystwyth Excerpts

Thursday 22nd October 2015 Grand Committee

[Lord Bourne of Aberystwyth (Con)]

My Lords, I thank my noble friend Lord Ridley for bringing forward this debate. It is good to see so much consensus on some of the important issues that we face, particularly after yesterday. I also welcome his idea of the nuclear bake-off; I shall be speaking later to the noble Baroness, Lady Worthington, because I see a definite commercial possibility in going forward with what she suggested on television.

I will first say a little bit about Hinkley and then try to deal with the contributions made by noble Lords. At the outset, I will say that given the time constraints, I would like either to make a Written Statement on the nuclear position or alternatively, if that is not possible, to write setting out the position of what we have touched on today, and on things we have not, given that there is an awful lot that we have not touched on. I want to be able to update noble Lords on what the department is doing, which is a considerable amount.

As has been said, the debate is timely given the signing of a strategic investment agreement this week in relation to Hinkley. Let me say a little about that because it is a significant step forward in the development of the first new nuclear power station in the United Kingdom for two decades. However, that is just the beginning. As has been suggested by some noble Lords, and in particular by my noble friend Lord Ridley, this is not an either/or situation. We can have Hinkley, and, indeed, we do need Hinkley, and we can have small modular reactors. It is my belief that they are not mutually exclusive in any way. The technologies for the next tranche of nuclear power are coming forward with Hinkley, Bradwell and Sizewell.

I thank the noble Baroness, Lady Scott, for what she said about her personal view on nuclear energy, and I also thank the noble Baroness, Lady Worthington. As I say, it is very good that at least within this forum we are able to have such unity, which is important. I say that, but I will not say any more about what is happening down at the other end. Clearly, it would be very useful to have some investment certainty on the nuclear power programme as we go forward. That is important.

The decommissioning and clean-up of the United Kingdom’s civil nuclear legacy also remains a national priority. Many noble Lords touched on this and, indeed, touched on the high hazard of Sellafield and the very high costs associated with it. I believe that we have learnt the lesson of that. It remains a massive part of the budget of the Department of Energy and Climate Change, and will do so for a considerable time into the future because of the particular hazards associated with it.

Many noble Lords also raised points about research and development, including the noble Lord, Lord Rees. That is crucially important. Research and development in this area was largely halted in the middle of the last decade. The department regards this as a high priority and views it as money well spent. I will say something about that in a minute in the context of the spending review. As noble Lords are aware, the spending review process is under way and we are at a crucial period. More will be able to be said when we are on the other side of it, but substantial work has been undertaken by officials in the Department of Energy and Climate Change, the Department for Business, Innovation and Skills, the Treasury, and the Nuclear Decommissioning Authority in relation to the nuclear decommissioning issue. We are also, of course, looking at the position of research.

Looking to the longer-term future, while technologies such as fast reactors and molten salt reactors and vehicles such as small modular reactors are still a significant time away from commercial deployment, we maintain a very close interest in their development. We are not starting from scratch. The United Kingdom, as has been indicated, has a rich research and development history which covers many of these reactor technologies and fuel types. We have previously designed and operated a diverse range of research and demonstration reactors, from the fast reactor programme at Dounreay to a number of interestingly named research reactors at Winfrith in Dorset. These include Zebra, Nestor, Zenith, Hector, Juno and, indeed, Dimple. Winfrith was also the home of the high-temperature Dragon reactor which provided some of the earliest experimentation with thorium-based fuels. I know that the noble Baroness has an interest in this.

The United Kingdom is also a leading nation in fusion research, which was touched upon by the noble Lord, Lord Hunt. I will get a specific answer to him about the position regarding the International Atomic Energy Agency. I was unaware of that, as officials were as well. If there is any particular information that the noble Lord could give us after the debate, we will certainly look at it to see what is holding up or preventing a demonstration at the annual event next year. If the noble Lord could come forward with that we would be very pleased to look at it.

There is also the Culham Centre for Fusion Energy. That part of Berkshire is becoming a sort of nuclear energy hub and it is very important to foster that. The Culham Centre is the United Kingdom’s national fusion research laboratory and forms a crucial part of the worldwide fusion research programme. It hosts the Joint European Torus, which is currently the world’s largest and most powerful fusion reactor and the focal point of the European fusion research programme.

The Government can help to create the environment and the frameworks required to support nuclear development and deployment, and the department is keen to do that. We also need to underpin the regulatory framework. I note what my noble friend Lord Ridley said about the long periods of time it takes to get these projects off the ground, but I also note the comments made by the noble Lord, Lord O’Neill, in relation to our first-class safety record. Clearly, we would not want to prejudice that, so we need to try to get the right balance between the two. Safety must come first.

However, I agree that we need to march forward, specifically on small modular reactors, which was mentioned by all noble Lords and has wide backing. The Government recognise that these could offer cost reduction and massive commercial benefits to the United Kingdom, particularly through factory production processes—the egg box point—and the reduced cost of capital needed to finance projects. There is also a big advantage with siting them. Potentially they do not need to be near the sea and the process of selecting sites could therefore go forward very quickly.

An initial feasibility study was completed in December 2014 and this made a start in building the evidence base we need to take it forward. This is being further developed, as my noble friend Lord Blencathra said, through a more detailed techno-economic assessment which is to be completed in March 2016, so that is not long to wait. I know that there is an urgency about this and I will ensure that as soon as we have the information, it is relayed on to noble Lords. This assessment will enable the United Kingdom Government to understand the opportunities for delivery, including industry views on strategic partnerships if Ministers decide to support small modular reactors. The department is sympathetic to the case. We are waiting for that evidence and then we will clearly assess it. This evidence will help to crystallise the Government’s objectives for SMRs by building our understanding of how the potential for SMRs could be unlocked.

Picking up on the point made by the noble Baroness, Lady Worthington, about the need for agreement on the harmonisation of regulation, we are engaged in discussions with our European partners about this and I will try to cover it in more detail in the letter that I send to noble Lords. It is a point well made in terms of the market. Obviously we need to march forward hand-in-hand and with the same considerations.

On the points about small modular reactors made by my noble friend Lord Blencathra in relation to marine nuclear propulsion reactors, certainly they are a part of the evidence base for looking at how they could be deployed However, there are particular problems with them. As the noble Lord said himself, they are not an automatic translation to land base. They have shorter serviceable lifetimes and the relative size of individual marine reactors is much smaller—they are at the smaller end of the scale of small modular reactors. Nevertheless we are looking at that and considering it.

As to the other points that have been made, I have picked up the point about the safety standards. I should perhaps have covered earlier a point relating to Hinkley. There will be what I understand is at least a 60% supply chain for UK business, which is important. I have covered the research programme. I have covered the point of the noble Lord, Lord Hunt, on Tokamak and the position with the IEAA. If the noble Lord could bring forward more detail on that we will certainly look at the conference in 2016 to see whether we are able to help. It sounds like a very good point.

The issue of CCS was raised and it is an important part of the mix. We spent a long time on it in the Energy Bill and there has been a degree of consensus around the Chamber and with the different parties which I am anxious to keep. However, again, it is not mutually exclusive with nuclear power. It is understood and agreed that we need a diverse mix.

The noble Viscount, Lord Hanworth, quite rightly talked about some of the challenges faced and the very good record of Rolls-Royce, with which I definitely concur. The noble Baroness, Lady Worthington, raised the record of France on nuclear, which, at the moment, as other noble Lords, including the noble Lord, Lord Hunt, have pointed out, is 80% nuclear. This is declining a little to diversify but what France does is significant and we are studying that.

Perhaps I may undertake to write with more detail on some of the points that have been covered and on some of the points that were not covered on the different technologies. In closing I should thank the Nuclear Innovation and Research Advisory Board for the advice it gives to the department. It is chaired by Dame Sue Ion and provides the Government with assistance and expert advice on the R&D needed for nuclear energy, which is significant. We need R&D in order to develop our nuclear future and to be competitive. It published its first annual report in January, which recommended an R&D programme of up to £250 million over the next five years. We are considering its advice. It is a vital part of the current spending review and I hope that the Chancellor will see a copy of the record of our proceedings today.

Committee adjourned at 6.01 pm.

Energy Bill [HL]

Lord Bourne of Aberystwyth Excerpts

Wednesday 21st October 2015 Lords Chamber

Moved by

[Lord Bourne of Aberystwyth]

78B: Clause 66, page 38, line 5, leave out subsection (1)

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, as I discuss the amendments today, I want to remind noble Lords of what has already been achieved. At the end of April 2015 there were 490 operational onshore wind farms in the United Kingdom, with an installed capacity of 8.3 gigawatts—enough to power the equivalent of more than 4.5 million homes. Considering the projects that already had planning permission and so on, there is enough onshore wind in the pipeline to contribute to what is needed to meet our ambition of 30% of electricity from renewables by 2020. This is a significant achievement, made possible only by consumer subsidies. The Government have estimated that in 2015-16, £850 million of support will go towards funding onshore wind across the United Kingdom, with around £520 million, approximately 60%, going towards funding Scottish onshore wind farms.

It is too soon to predict what the best energy mix will be as we move beyond 2020 but, as we continue on our path to a low-carbon economy, it is absolutely right that we also protect the consumer. Government support is designed to help technologies stand on their own two feet, not to encourage reliance on subsidies. This means moving from demand-led schemes to competition-led schemes. Ending support under the renewables obligation early for new onshore wind in Great Britain, with appropriate provision for grace periods, balances the interests of onshore wind developers with those of the wider public. This Government made a commitment to the electorate—no new subsidies for onshore wind, and giving local communities the final say on onshore wind farm applications—and the Government must deliver on this.

I have tabled government Amendments 78B, 78D to 78P, 78R and 82A, which seek to amend and supplement Clause 66 for debate at recommittal on 14 October. I withdrew the amendments to reflect on the points made in the debate, and committed to re-present them on Report today. I thank noble Lords for the useful discussion in last week’s debate. As promised, I have reflected on that discussion and incorporated a number of changes into the clauses that we will be debating today. It is right that we took the time to do that, and I hope that noble Lords will accept that I have listened and reacted.

The substance, however, must remain the same. We are not all going to agree on what is being proposed by these amendments, but they have been developed following extensive engagement with industry and I am confident that they strike the right balance. They provide a grace period to protect investor confidence while protecting the public interest. Early indication from industry is that it welcomes these amendments. Although there will always be projects that just miss out wherever we draw the line, it is clear that the Government have a mandate to act and that is exactly what we are doing.

Before moving on to the detail of these amendments, I shall address the future of contracts for difference, as raised by noble Lords at our last session. The Secretary of State has been clear that we will make an announcement in the autumn relating to the next allocation round for contracts for difference. That position is unchanged; it is as it was. I realise that this is an important issue for all, but I suggest that we have set out a very clear position. The clauses that I present to the House today clearly deliver on the Government’s commitment in relation to onshore wind while protecting investor confidence.

I shall address some of the points that were raised at recommittal stage by the noble and learned Lord, Lord Wallace, and echoed by others, including the noble Baroness, Lady Worthington. During that stage the noble and learned Lord raised a number of interesting points for discussion. I have responded to these in a formal letter to him, and will now respond to them in this forum for the benefit of all noble Lords.

The noble and learned Lord, Lord Wallace, asked for further detail on our reasons for including the provision for appeals in our grace period criteria. We have included these projects because, had the correct planning permission decision been taken in the first place, they would have had planning permission by 18 June. Projects where planning permission was granted on appeal in the circumstances covered by the amendments will have established a legal right to planning permission on or before 18 June and therefore we are including these cases within the approved development grace period criteria. It seems to be the right thing to do.

In the recommittal debate the noble and learned Lord, Lord Wallace, asked about projects that achieve consent after 18 June, following a delay to the decision which exceeded the statutory timeframe. Unless the projects utilised their legal right to challenge the delivery of consent within the statutory timescales, such projects would not fall within the scope of the approved development condition.

The noble and learned Lord, Lord Wallace, also raised the question of amending the grace period criteria to either allow all projects that had applied for planning permission access to the grace period or to consider extending the cut-off date to 8 October—the date on which the Government first tabled the amendments setting out the criteria for the grace period. The government amendments set out the grace period as originally proposed, which would allow those projects which as of 18 June had planning permission, a grid connection and land rights to continue to accredit under the renewables obligation until the original closure date of 31 March 2017. That is a reasonable expectation for them to have, and we have responded to it. Planning permission rather than application has been chosen because the grant of planning permission represents a very significant point in the progression to accreditation under the RO.

The government amendments strike the right balance. They deliver on our manifesto commitment while also seeking to protect investor confidence and the interests of onshore wind developers. For this reason I question the changes proposed by the noble and learned Lord, Lord Wallace. These changes would have a fundamental impact on our ability to deliver on the manifesto pledge and to manage our low-carbon spend. Based on the department’s analysis, allowing all projects with only a planning application in place could mean that anything up to 7.1 gigawatts could accredit under the renewables obligation. This figure represents all projects that had submitted an application but not yet received planning permission as at 18 June.

Furthermore, I also question moving the qualifying date from 18 June to 8 October 2015 as, similarly, this would also serve to potentially increase the number of projects eligible to accredit under the renewables obligation. This would mean that we would remain at risk of deploying beyond the 11 to 13 gigawatts of onshore wind that we project is needed to meet our 2020 targets and what we can afford under our low-carbon spending cap, as well as being inconsistent with our manifesto pledge. This could therefore potentially add more costs to consumer bills. The Government’s position is that projects must have had planning permission on or before 18 June in order to be eligible for the grace period. I hope that noble Lords can see that the line has been drawn here for a crucial reason.

Following questions raised in the recommittal debate I will also take the opportunity to discuss the position on variations. We are aware that projects that had planning permission on or before 18 June may subsequently need to vary that permission and that the Acts provide for this, for example under Sections 96A and 73 of the Town and Country Planning Act 1990 or under Section 36C of the Electricity Act 1989. Where consent is granted for development on or before 18 June and is subsequently varied as provided for by statute, the development will continue to fall within the proposed development condition set out in Section 32LJ.

On projects where a radar objection has been withdrawn, we understand that there are projects in a number of differing scenarios. For example, as the noble and learned Lord, Lord Wallace, stated, a project may have received objections to a planning application on matters such as radar. Where that project has managed to resolve the matter with the objector and subsequently has been granted planning permission on or before 18 June, it of course meets the criteria for the grace period provided that the other conditions are satisfied. If the resolution of those objections pushes the determination past 18 June, unfortunately it will not meet those criteria.

The grid and radar delay condition set out in the amendments maintains the intent of the original, existing grid and radar grace period, as set out in the Renewables Obligation Closure Order 2014. The intention is that projects which are delayed due to delays to work on radar stations or radar equipment, which are outside their control, should be eligible for the additional 12-month grace period.

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[Lord O'Neill of Clackmannan (Lab)]

My Lords, before the Minister leaves this point, could he tell us, first, what sums are involved in these investment problems at present, how many of them have been prejudiced and how much they were worth in the first place? Secondly, will he give us some idea of the global sums involved in the whole sorry procedure that we are having to go through?

[Lord Bourne of Aberystwyth]

My Lords, obviously much is dependent upon when the legislation goes through, and that is in the hands of this House and another place. Therefore, I think it is impossible to say with any certainty—or even to give an estimate—exactly how much is at stake. It relates to those projects that have already deployed, and so they are being given additional time to deploy. It is for individual projects that suffer from this investment freeze to come forward. We have done this in response to the engagement exercise. It will not deploy any more wind projects and it allows those projects that have deployed, following our proposals under the grace period, an added period within which to bring forward their projects and have the existing position.

[Lord O'Neill of Clackmannan]

I take it then that the Minister is unaware of the financial implications of what he is asking us to support this afternoon.

[Lord Bourne of Aberystwyth]

My Lords, it is not for me to determine whether the conditions are met. There is a process set out in relation to those projects that would be able to deploy and, if they have suffered a hiatus, for them to come forward with the claim in relation to how much it is. It is not going to cost any additional money, because it just gives them additional time in which to deploy. As I am coming to, it gives them approximately another nine months. It is not an additional amount of deployment; it is some projects that will deploy being allowed additional time to meet the conditions.

[Baroness Worthington (Lab)]

My Lords, perhaps I can help the Minister out, if I may. We have had estimates from the independent renewable energy group to say that the projects that have fallen just the other side of this cut-off deadline that the Government have imposed have costs in the region of £350 million.

[Lord Bourne of Aberystwyth]

With respect to the noble Baroness, this is not about those projects that fall just the other side of the line; this is about those projects that can satisfy the conditions being given additional time. This does not bring any more deployment in. That is a quite separate point, if I may say so.

[Lord Hardie (CB)]

I would like to ask the Minister about the extension of time. I fully understand and think it is fair that there has been an extension of time where planning permission is granted on appeal. However, did I understand the Minister to say that, where permission was refused on appeal, and if there were a judicial review that ultimately granted permission, that would be respected and it would be deemed to have been an appropriate permission? What concerns me is the timescale, if my understanding is correct. How many years down the line are we talking about beyond June 2015? Once we go down that line, for perhaps two years, that might have an impact on meeting the 2019 deadline.

[Lord Bourne of Aberystwyth]

My Lords, I am very happy to respond to that point, but it is a quite separate point from the investment freezing condition, relating, as it does, to the appeals process. The point of the amendments that we are putting forward is to say that if a project should have been given planning permission on or before the cut-off date of 18 June, and the appeals process demonstrates that, whether by an appeal or judicial review, it is reasonable, rational and right that they should be allowed to accredit under these proposals, and that is what would happen. That was done in response to the engagement exercise that we have been through. We have tried to do what is right, in considering very reasonable points. I do not accept that this would drag on indefinitely: I do not think that the legal process is in a Jarndyce v Jarndyce situation. There will, of course, necessarily be some sort of delay, but that is how the judicial process will operate. It is absolutely right to have that provision in relation to the appeals procedure.

To return to the investment freezing condition, the extension available in the circumstances that I have outlined will be approximately nine months—broadly equivalent to the period between the date of the Secretary of State’s announcement and Royal Assent. To be eligible for this extra time, projects must be able to provide evidence that they have been impacted by a lack of investment during the period to Royal Assent.

This “investment freezing condition” has been designed specifically to protect the projects that were intended to be able to access the grace period as proposed on 18 June. It is not an extension of deployment, but an extension of the period for those that are able to deploy within the grace period. This condition is not about increasing the pipeline of onshore wind projects that are able to accredit under the renewables obligation.

Furthermore, as a result of the helpful discussion at recommittal, a drafting change has been made to the amendment. Your Lordships will have seen that in new Section 32LK(4)(a)—some of you may have picked this up—the phrase “as at May 2016” has been replaced by the phrase,

“as at the Royal Assent date”,

following representations made by the noble and learned Lord, Lord Wallace—representations that I think were entirely valid, and which have been echoed by the noble Baroness, Lady Worthington. Similarly, in consequence, new Section 32LK(4)(b) now refers to,

“the date which is 28 days after the Royal Assent date”.

In addition, those provisions have been amended—again, following representations at recommittal—to make it clear that either uncertainty about whether the Bill will receive Royal Assent or uncertainty about the final wording of the Bill will be sufficient for the purposes of meeting the “investment freezing condition”. We have made it absolutely clear in the Bill that it is not necessary to show both. I am grateful to noble Lords for the helpful debate that we have had on these points. I believe that this revised drafting now makes our intent perfectly clear, and has improved the Bill.

In order to provide a consistent approach to all onshore wind projects eligible to accredit under the renewables obligation, we also ensure through these amendments that a pre-existing grid and radar delay grace period will apply here. This condition entitles projects affected by unforeseen grid and/or radar delays to an additional 12-month period in which to accredit. This amendment, too, has been redrafted to provide clarity about when a project may benefit from a grace period for grid and/or radar works delays. The provision is now clear that either grid delays or radar delays, or both, will be sufficient for these purposes. Again, I thank noble Lords for the useful discussion that led to this amendment.

I am confident in the amendments, and in the proposed grace period. I have listened to noble Lords, and I believe that I have responded positively on various issues. Again I thank them for their helpful suggestions which have been incorporated to improve the clarity of the clauses. We have listened actively to stakeholders and worked to ensure that the final policy strikes the right balance between the interests of onshore wind developers and those of the wider public. I hope that your Lordships will agree that these amendments should stand. I beg to move.

--- Later in debate ---

[Baroness Worthington]

My Lords, I am grateful to the Minister for introducing the government amendments. I will speak to those and also to Amendment 78C in my name, and in support of the amendments tabled by the noble and learned Lord, Lord Wallace.

As we enter the second day of Report, I do not feel that the Bill has been well handled, as has already been referenced. This may stem from the fact that the Bill was not ready when it was presented to us. Significant areas of policy were still being developed. It was a very fluid situation. In fact, the term “liquid legislation” will probably stay with us for many years to come. It was coined by the noble Lord, Lord Howell, in the recommital stage of Committee and describes very accurately how we have been dealing with a set of moving parts as we have gone through the Bill. Here we are on Report, but it still feels very much like a Committee stage, and that is regrettable. We should not be in this situation where we have so many controversial issues still unresolved.

Throughout the Bill’s passage, I have pressed the Minister to give me a justification and a sound argument why the Government have chosen the route that they have in this Energy Bill of introducing what is now Clause 66 regarding the early closure of a renewables support scheme that was already closing 12 months early—and, in fact, not closing it to everybody but just to one subsection of technology: onshore wind. Why do we find ourselves in a place where the Government appear to have singled out for special treatment a single technology from all the low-carbon technologies available to us, and where that special treatment is so damaging and corrosive to investor confidence? I am afraid that I have not received a suitable answer to that question throughout the passage of the Bill. Now the answer given boils down to a very few words that appeared in the Tory Party manifesto, that the Conservative Party would put an end to—

[Lord Bourne of Aberystwyth]

I am most grateful to the noble Baroness for giving way at that point, which is a very material point. The measure was in a manifesto which was taken to the country and a Conservative Government were elected in May. As the noble Baroness will know, the Salisbury convention has previously indicated that what is in a manifesto is allowed passage through the House of Lords. I value the House of Lords and its traditions and I fear that if we refer in a rather dismissive way to something that was in a party’s manifesto as somehow not being important, in the way that she did, that is a very serious pivotal moment for the House of Lords. I hope that she will consider that.

--- Later in debate ---

[Baroness Worthington]

We can debate who benefits most from our low-carbon agenda—possibly it is the Chinese at this particular juncture. However, in the context of closing the RO early, it is some of the smaller schemes—the independent developers and the independent renewable companies—that are suffering the most, and it is the larger companies that seem to be getting the grace period amendments that they need. It is the smaller guys who are losing out. This is not about rewarding the richest or the most powerful lobbyists—that is not what we are seeking to do.

As the noble Baroness, Lady Young, pointed out, this is about fairness and a common-sense test of whether, when you read those words in a manifesto in May, you then think, “Ah yes, I know what that means; it means that in about the middle of June, I will see an announcement from the Government that closes a scheme in which I have invested hundreds of millions of pounds, which is already closing with no consultation”. I hesitate to say that that passes the common-sense test, as I do not think it does. Indeed, we know it does not, because we have had a large number of investors come to us to say that this is not the way that they should be dealt with.

Normally, a consultation exercise is undertaken and then the results of that consultation are published. In this case, because we have been racing since 18 June to get everything ready in order to close the scheme early, even though it is closing anyway, we have not had a proper public consultation or publication of the results of any consultation. Therefore we are flying blind and having to work with large numbers of people contacting us to express their concern and dismay at being handled in this way by the Government.

The specific issue raised under Amendment 78C is another important one. As I have said before, I do not think this House will discuss this, but it will certainly be discussed, with far greater passion potentially, when it moves to the other place. Amendment 78C would simply repatriate the closure of the RO to Scottish Ministers. The reason for this is that during the passage of the Energy Bill in 2013, the Government had to take a power to repatriate the renewables obligation back to Westminster. We were told at the time that this would be a technical amendment and that this had to be done simply to make the closure easier, tidier and more efficient. However, we now see that this was not the case: this was a cynical move that gave the Government the power to close a scheme for Scotland without due consultation with Scottish interests. It flies against the spirit of the Smith commission agreement, which is seeking to repatriate more powers to Scotland and allow Scottish people to determine what they want to see built to provide them with clean energy in the future.

That brings me on to the question of fairness and whether the Government’s amendments, and their proposals for grace periods, are fit for purpose. It should be noted that although the announcement was made on 18 June—and a very hard guillotine introduced at that point—and some details were provided about potential grace periods, it was not until 8 October that we were given the full detail of the proposals. That is not a long period for us to consider them, and they are incredibly complex—I am very grateful to the noble and learned Lord, Lord Wallace, for his forensic and expert deconstruction of some of these issues. It is not appropriate for us to have to wait four months before we see the detail and, when we do see it, for it to be so substandard. This is a cause of great concern. It was of course quite a heated debate in Committee in the Moses Room the other week. That resulted in the withdrawal of the amendments, for which we were grateful. We hoped then that that would result in a bit of reflection and some clearer amendments coming forward.

I am grateful to the Minister for presenting the changes that were incorporated. By and large they were merely technical issues of clarification, but the biggest one, about planning and when you deem planning consent to have been given, remains unresolved. This is what is so strange about these grace periods. The anomaly here could not be more strange: because of the way the Government are interpreting this and putting it into legislation, if you are refused planning permission—if the local council signals that it is not content—and you then appeal and win that appeal, you will be able to get a subsidy. However, if you had consent from the local committee and it was clear that the community wished to see the development, but you were waiting for various formalities to be concluded which then came after the artificial 18 June deadline, you would not be eligible. That seems to fly in the face of the Government’s manifesto commitment—they are evidently keen on their manifesto commitments, as I am sure is right and proper—which is that they want local people to have the final say. There are clearly still weaknesses and great anomalies within the grace periods. The provisions already run to many pages, but we still need the department to go back to think again and come forward with something workable.

I do not want anything that I have said today to be interpreted as our desire to see endless subsidies for particular technologies continuing indefinitely. That is absolutely not the case. As I have said on previous occasions, the issue we should look at on which the Government have refused to give any clarity is what is happening with the new form of support, the contracts for difference, which replace the RO. That is the pertinent question, but whenever I have asked it, I am told that the Government will make a Statement in the autumn. It is not a good answer for an industry with 25 long years of history to be proud of to be told, “We will tell you your fate in our own good time at some point”—presumably, after the Bill has passed its crucial stages. It is not appropriate to be closing one scheme and not giving any clarity over what is to replace it.

My final concern is that the Government have left us little choice but to object to the provision. It demonstrates a Government who put ideology ahead of evidence. There is no place for ideology in energy policy. If the Government have set their mind against onshore wind, as they are demonstrating—that is evident from all that they have done—they are no better than those who take an ideological principle against fracking or nuclear. We should not be singling out technologies; we need every technology to play its part. Some technologies are better than others in certain circumstances, but there is no reason to decide that we should cease to support one over another, especially when it turns out to be cheaper than many of the alternatives, has a proven track record of delivery and is sustaining investment in our country.

I look forward to hearing from the Minister, but I doubt that he will be able to reassure me on those points, and it is for that reason that I reserve the right to press the amendment that follows.

[Lord Bourne of Aberystwyth]

My Lords, first, a rare moment of agreement: I suspect that I will not be able to satisfy the noble Baroness with the points that I am about to make. Nevertheless, I thank noble Lords who have participated in this part of the debate on the Bill.

Perhaps I may deal first with the Scottish issue, as it were—the amendment relating to Scotland, which I think only the noble Baroness spoke to. We are keen to do what is fair for Scotland—but no more, no less. That is a fair position. I reassure noble Lords that we are committed to implementing the recommendations of the Smith agreement and are doing so through the Scotland Bill. As agreed during the drafting of that Bill, the Government have and will continue to engage with the Scottish Government, as we do on a regular basis on energy issues, in line with the spirit of the Smith agreement, on all changes to the renewables obligation. That does not mean that we will agree; often we will not, sometimes we will. However, transferring legal authority to close the renewables obligation in Scotland to Scottish Ministers goes considerably further than Smith. That is nothing to do with the spirit of Smith; it is to do with the letter of Smith. As I see it, there was no suggestion that that should happen, but that debate—if there is a debate to be had—can no doubt happen on the Scotland Bill.

I turn to the issues raised other than the specific point on Scotland. As noble Lords have kindly acknowledged, I have sought to move on some of the issues. I thank the noble and learned Lord, Lord Wallace, for what he said—particularly in relation to my office. I can tell the noble Lord, Lord Foulkes, that my office often works those late hours, even when it is not dealing with the Energy Bill, as my staff will gladly tell you. I am very grateful for the massive efforts that they have made on the Bill and many other matters.

There seem to be two key differences between those on the Government and Opposition Benches. One is about subsidy. I noted what the noble Baroness, Lady Worthington, said about not believing in subsidy, but this is about subsidy. If she has not got that attachment to subsidy, that is the essence of this debate. It took considerable chutzpah to attack us for ideology on the Government’s energy policy. Her leader is against new nuclear and, I believe, against fracking.

[Baroness Worthington]

I do not wish the debate to descend into party politics, but since the Minister has raised it, it may well be the case that our leader is personally anti-nuclear and anti-fracking, but that does not mean that that is translated into a change in the position of our shadow DECC team. It would probably be sensible to discuss this with my honourable friend in the other place, Lisa Nandy, who is now the shadow Secretary of State and consult her on these matters. Jeremy’s style of leadership is not that he would impose that on departments.

It is ideological to single out a single technology on no evidence and treat it in the way that the Government are doing. I remind the Minister that being in government is not the same as being a political party and that drafting manifestos is very different from drafting the law of the land.

[Lord Bourne of Aberystwyth]

I note what the noble Baroness says, but this comes back to leadership. If its leader has materially different views, it would be good to know the Labour Party position on those issues. On ideology, I reassure her that we are not against wind. We have wind deployed offshore, and I hope we will continue to have wind deployed onshore. It will just be without subsidy. That is rather different from saying “No new nuclear” and “No fracking”. It is saying “No subsidy”, which is very different.

[Baroness Worthington]

Perhaps the Minister can clarify something that appears in the Conservative Party manifesto: that there will be new nuclear without subsidy. Does that mean that contracts for difference are not subsidy, in which case contracts for difference can presumably be applied to onshore wind?

[Lord Bourne of Aberystwyth]

I have made the position on contracts for difference very clear, as I think the noble Baroness appreciates. We will set out the position on contracts for difference this autumn, not at an unspecified date in the future as she suggested in her contribution. That is not long to wait. We are in the autumn now, so I hope that she accepts that an announcement on that will be forthcoming shortly.

I do not want to go over old ground again. We have a cut-off date. I accept that cut-off dates are arbitrary. In Committee on recommital and today, the noble and learned Lord, Lord Wallace, made telling contributions, but he suggested that we were taking a legalistic approach to this. It is likely that we will. As he will appreciate, this is legislation. We want it to be certain and for businesses and others to know where we are on this. I accept that dates will be arbitrary, but we have selected a date. Noble Lords have been indicating that they want certainty. We are delivering certainty. We have a basic difference of opinion on these issues. I do not think it is capable of resolution, as it was on the Oil and Gas Authority where we had a basic unity of view. We have a different view on onshore wind. We believe that the Salisbury convention applies here. I disagree with the suggestion that there is something ambiguous about the position in the manifesto. It was made very clear and nobody should have been taken by surprise by this, so I differ materially from what I am sure is the opinion honestly held by the noble Baroness, Lady Worthington, but I cannot see that we can resolve some of these issues because of the basic difference between us.

[The Lord Bishop of Chester]

My Lords, I realise that this is Report, but I would like to press the question I put in my intervention. When all is done and dusted—leaving aside the allegations of ideology on all sides—in relation to all the subsidies that are likely to be paid out for wind turbines in the next 25 years, what proportion of that will be saved by this activity?

[Lord Bourne of Aberystwyth]

My Lords, I do not know the proportion, but I know that the upper end of the limit is £270 million over the period. That might seem like a small amount, but it is not a small amount to me and I am not sure it would be to anyone else. We have this basic difference, and with that I oppose these amendments.

[Lord Wallace of Tankerness]

First, I did not raise the issue of the definition of the recognised lenders because the noble Lord did not deal with it when he moved his own amendment. Did he give a commitment to go away and come back with a better definition that included, for example, organisations such as the Green Investment Bank? My second point, although there are many others that I could make, is this: does he accept that with regard to radar issues, what the Government give the Government might also take away? Will he undertake to talk to the Ministry of Defence to see if it can ensure that whatever provision is made by this grace period for radar is not actually defeated by the tardiness of the MoD?

[Lord Bourne of Aberystwyth]

My Lords, on his last point first, I am very happy to speak to the MoD in the way that the noble and learned Lord suggests. On the former of the two points that he raised relating to the recognised lenders, I have indicated that we will look at this issue. I have not made any commitment about what the result of looking at it will be but I recognise, based on information given by the noble and learned Lord and others, that there is a case to look at it. I hope that is helpful.

Amendment 78B agreed.

--- Later in debate ---

Moved by

[Lord Bourne of Aberystwyth]

78D: Clause 66, page 38, line 6, at beginning insert “In Part 1 of the Electricity Act 1989 (electricity supply),”

--- Later in debate ---

[Lord Mackay of Clashfern (Con)]

My Lords, I support the point made by the noble and learned Lord, Lord Hardie, about the situation in Skye, where the implementation of the arrangements already in place has been postponed simply because of the need for the connection. There is no point in having the development until the connection is in place. This was all set up before this Bill was put forward. It requires a degree of special attention. All I want is to be assured that it will have that.

[Lord Bourne of Aberystwyth]

My Lords, this has been a very wide-ranging debate, taking in issues which are beyond the scope of the Bill. Nevertheless, they are important issues. I hope that I can do justice to the quality of the debate and respond to the points made. I shall come back to the noble Baroness, Lady Worthington, at the end because her comments perhaps symbolise the crux of the difference. In no particular order, except that it is present in my mind, first, I say to the noble Lord, Lord Steel, that I will take up the point about water and write to him on that specifically. As he indicated, it is not within the Bill but I am very happy to look at that and respond to him by letter.

I will probably stand corrected on this but I do not think that solar comes into this legislation either. If it does, I will regret that comment. It could in passing but this Bill basically is concerned about oil and gas, and the onshore wind position. I say to my noble and learned friend Lord Mackay of Clashfern and the noble and learned Lord, Lord Hardie, that I will write to them on their specific point on Skye. I do not know the particular position, so, without commitment, if I can write to them ahead of Third Reading I will certainly do so.

The debate has exhibited a very clear difference of position in relation to onshore wind. I shall come to the Salisbury convention later. I remind noble Lords that it is the responsibility of the Government and the department to do three important things. We have to ensure that we have a supply of electricity that is affordable; that we have a supply of energy that is secure; and that we decarbonise. There is a danger that today this debate has focused on just one of those elements, almost to the exclusion of the other two. They are all important and attention is required to deal with those three, as I am sure noble Lords will appreciate. I will come back to the steel issue later.

The noble Lord, Lord Foulkes, suggested that we cast aside suggestions from the noble Lord, Lord Oxburgh, who is not in his place. That has certainly been far from the case. As regards the part of the legislation in which he was taking a particular interest and giving his experience on oil and gas, we have taken up a lot of his suggestions, as noble Lords will know. I have also ensured that he will head a committee, or perhaps an advisory group, which will report to the Secretary of State on CCS policy going forward. I must correct that point as it is not true.

Clearly, there is a difference of view in this debate. Perhaps I may come to the Salisbury convention. The noble Lord, Lord O’Neill, suggested that we were casting aside planning law. We are not. The grace period makes it very clear that if you have planning permission plus grid connection plus ownership rights, you qualify for the grace period. Therefore, we are far from doing that.

I come to the political point and the points made by the noble Baroness, Lady Worthington, who comes with particular knowledge and commitment. I understand all that. She said at one stage that this is political. It is; I plead guilty to that. It is political in the sense that we believe that this is very clear in the manifesto and that it is protected by the Salisbury convention. To find a bit of wriggle room to oppose this while saying that you are upholding the Salisbury convention is not the way forward.

I also regret suggestions from the Liberal Democrats that they do not regard the Salisbury convention as important at all. They have gone a stage further. That is not a desirable place for this House to be in. As I said, I have been here a relatively short period of time, but I value the institutions of this House. I would say the same if a Conservative Opposition were opposing a different political party in government, which will happen at one stage. If we really wish to maintain the traditions of this House and the important role that we fulfil, we have to move very carefully in the territory that we are in. We have a very clear manifesto commitment. People know and understand that. It should be upheld.

[Lord Reid of Cardowan (Lab)]

On the question of the Salisbury convention, I confess that I have not included recently the Conservative manifesto in my bedtime reading, but what does the Minister say to the point of substance raised by my noble friend Lord Foulkes? The commitment in the manifesto was to avoid or to reject any new subsidies, whereas we are talking about getting rid of existing subsidies. The noble and learned Lord who spoke about the legal issues involved said that these were legal niceties. They are not; it is the English language. Will the Minister tell us how it is that “new” in English has come to include “pre-existing”? If he cannot tell us that, then it is not a breach of the Salisbury convention because the promise was to end new subsidies, not to get rid of existing subsidies that had a preordained timeline.

[Lord Bourne of Aberystwyth]

The noble Lord is right on the wording—actually, it is “new public subsidy”, but he is stressing “new”. The point is that those already in receipt of subsidy will continue to have the subsidy. This is for people who have not yet got or applied for the subsidy. It is certainly new to them in a new Parliament. It is absolutely clear that that is within the Salisbury convention. Clearly we will disagree on this. I argue that we are in dangerous territory and that the Salisbury convention should apply.

I omitted to do so earlier because I wanted to finish on the Salisbury convention, but I will say something on affordability and steel. The noble Baroness made some relevant points on that. She said that electricity was a small part of their costs; it is not for all steel companies. If it is a blast furnace it is 3% of the costs; if it is an arc furnace, as it is for Celsa in Cardiff South, a Labour-held constituency, it is 12% of the cost. That is not insignificant. That point was made forcefully at the steel summit by many Labour MPs, as well as by other people. We have to take that on board. It is a complex issue. It is not just about electricity costs, but they certainly are a valid consideration from some steel companies.

With that, there clearly is a disagreement but, as I said, this is dangerous territory for the House. In my belief and the Government’s belief, this is firmly protected by the Salisbury convention and I urge noble Lords to reject the amendment.

[The Lord Bishop of Chester]

Before the Minister sits down—I asked a specific question and I would like to encourage an answer. The noble and learned Lord, Lord Wallace, spoke of those who incurred expenditure under the March 2017 deadline who had, I think he said, a legitimate expectation that their investment could be carried through. Is the Minister saying that they do not have a legitimate expectation any more and that that can be changed by the legislation, or is it simply that the Government are legislating in the face of what might be regarded as a legitimate expectation?

[Lord Bourne of Aberystwyth]

It is neither of those, if I may say so. We have had an engagement exercise with industry, the devolved Administrations and others to look at those who would be prejudiced by the proposal as set out on 18 June. In consequence of that, the grace period that we have put forward—which I think we have agreed to as it stands—is that if you have a planning permission, a grid connection and land rights as at 18 June, you have additional time. We have also moved in relation to the investment freeze condition and appeals to try to achieve that. So, following the engagement exercise launched after the decision which was taken on 18 June, we have catered for those with a legitimate expectation of being able to deploy in this regard.

[Baroness Worthington]

My Lords, I am grateful to the Minister for his response and, indeed, to all noble Lords who have participated in this debate. We always knew that it would be a very interesting debate and it certainly has been wide-ranging. I must start by apologising for not referring to Lady Thatcher by her proper title. I think that may be due to the fact that I was not here during her great tenure.

I do not propose to detain the House for very much longer. It is absolutely clear that we have a difference of opinion. Manifestos are brief, do not contain detail and therefore are open to interpretation, and opinion therefore plays an important role. We are not doing anything that we believe contravenes the Salisbury convention. I have read the Conservative manifesto and I am afraid that it is not that clear. There are some inconsistencies. It says that the Government support wind, which may come as terrible news to the noble Lord, Lord Cormack, and the noble Viscount, Lord Ridley. However, the manifesto says in black and white that the Conservatives think that it plays a valuable role. It also says that the Conservatives will deliver nuclear without subsidy. That is a very interesting phrase. I do not understand how that will work. The manifesto also says that the Conservatives are committed to least-cost decarbonisation and that they will stop new subsidies.

Noble Lords have said very eloquently that the nub of the issue is: does it pass the common-sense test that, if you read the manifesto commitment before the election you would read those words and think, “Ah, yes, that will mean the RO is closing a year early”? You would not think that. That is not a common-sense response to reading those words. Had the Government been clear-minded and knew what they were about to do, why did they not simply say in the manifesto, “We propose to close the renewables obligation for onshore wind a year early”? That would have been very easily understood and everyone would have known where they were. However, that was not what was said. One could put a wide range of interpretations on what was said. Again, I come back to what is happening with the contracts for difference. We have heard nothing from the Government on this. In light of that, how weak this legislation is, and the concerns that have been raised on all sides of the House, I propose to press this amendment and wish to test the opinion of the House.

--- Later in debate ---

Tabled by

[Lord Bourne of Aberystwyth]

78R: After Clause 66, insert the following new Clause—
“Onshore wind power: circumstances in which certificates may be issued after 31 March 2016
(1) Part 1 of the Electricity Act 1989 (electricity supply) is amended as follows.
(2) After section 32LC (inserted by section 66) insert—
“32LD Onshore wind generating stations accredited, or additional capacity added, on or before 31 March 2016
The circumstances set out in this section are where the electricity is—(a) generated by an onshore wind generating station which was accredited on or before 31 March 2016, and(b) generated using—(i) the original capacity of the station, or(ii) additional capacity which in the Authority’s view first formed part of the station on or before 31 March 2016.32LE Onshore wind generating stations accredited, or additional capacity added, between 1 April 2016 and 31 March 2017: grid or radar delay condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited during the period beginning with 1 April 2016 and ending with 31 March 2017, and(ii) in respect of which the grid or radar delay condition is met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016, (ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 April 2016 and ending with 31 March 2017, and(iii) the grid or radar delay condition is met in respect of the additional capacity.32LF Onshore wind generating stations accredited, or additional capacity added, on or before 31 March 2017: approved development condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited on or before 31 March 2017, and(ii) in respect of which the approved development condition is met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016,(ii) in the Authority’s view, the additional capacity first formed part of the station on or before 31 March 2017, and(iii) the approved development condition is met in respect of the additional capacity.32LG Onshore wind generating stations accredited, or additional capacity added, between 1 April 2017 and 31 March 2018: grid or radar delay condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited during the period beginning with 1 April 2017 and ending with 31 March 2018,(ii) in respect of which the approved development condition is met, and(iii) in respect of which the grid or radar delay condition is met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016,(ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 April 2017 and ending with 31 March 2018,(iii) the approved development condition is met in respect of the additional capacity, and(iv) the grid or radar delay condition is met in respect of the additional capacity.32LH Onshore wind generating stations accredited, or additional capacity added, between 1 April 2017 and 31 December 2017: investment freezing condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited during the period beginning with 1 April 2017 and ending with 31 December 2017, and(ii) in respect of which both the approved development condition and the investment freezing condition are met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016, (ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 April 2017 and ending with 31 December 2017, and(iii) both the approved development condition and the investment freezing condition are met in respect of the additional capacity.32LI Onshore wind generating stations accredited, or additional capacity added, between 1 January 2018 and 31 December 2018: grid or radar delay condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited during the period beginning with 1 January 2018 and ending with 31 December 2018,(ii) in respect of which both the approved development condition and the investment freezing condition are met, and(iii) in respect of which the grid or radar delay condition is met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016,(ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 January 2018 and ending with 31 December 2018,(iii) both the approved development condition and the investment freezing condition are met in respect of the additional capacity, and(iv) the grid or radar delay condition is met in respect of the additional capacity.32LJ The approved development condition
(1) This section applies for the purposes of sections 32LF to 32LI.
(2) The approved development condition is met in respect of an onshore wind generating station if the documents specified in subsections (4), (5) and (6) were provided to the Authority with the application for accreditation of the station.
(3) The approved development condition is met in respect of additional capacity if the documents specified in subsections (4), (5) and (6) were provided to the Authority on or before the date on which the Authority made its decision that the additional capacity could form part of an onshore wind generating station.
(4) The documents specified in this subsection are—
(a) evidence that—(i) planning permission for the station or additional capacity was granted on or before 18 June 2015, and(ii) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached,(b) evidence that—(i) planning permission for the station or additional capacity was refused on or before 18 June 2015, but granted after that date following an appeal or judicial review, and(ii) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached,(c) 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 additional capacity, (ii) the period allowed under section 78(2) of the 1990 Act or (as the case may be) section 47(2) of the 1997 Act ended on or before 18 June 2015 without any of the things mentioned in section 78(2)(a) to (b) of the 1990 Act or section 47(2)(a) to (c) of the 1997 Act being done in respect of the application,(iii) the application was not referred to the Secretary of State, Welsh Ministers or Scottish Ministers in accordance with directions given under section 77 of the 1990 Act or section 46 of the 1997 Act,(iv) 1990 Act permission or 1997 Act permission was granted after 18 June 2015 following an appeal, and(v) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached, or(d) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, planning permission is not required for the station or additional capacity.(5) The documents specified in this subsection are—
(a) a copy of an offer from a licensed network operator made on or before 18 June 2015 to carry out grid works in relation to the station or additional capacity, and evidence that the offer was accepted on or before that date (whether or not the acceptance was subject to any conditions or other terms), or(b) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, no grid works were required to be carried out by a licensed network operator in order to enable the station to be commissioned or the additional capacity to form part of the station.(6) The documents specified in this subsection are a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, as at 18 June 2015 a relevant developer of the station or additional capacity (or a person connected, within the meaning of section 1122 of the Corporation Tax Act 2010, with a relevant developer of the station or additional capacity)—
(a) was an owner or lessee of the land on which the station or additional capacity is situated,(b) had entered into an agreement to lease the land on which the station or additional capacity is situated,(c) had an option to purchase or to lease the land on which the station or additional capacity is situated, or(d) was a party to an exclusivity agreement in relation to the land on which the station or additional capacity is situated.(7) In this section—
“the 1990 Act” means the Town and Country Planning Act 1990;“1990 Act permission” means planning permission under the 1990 Act (except outline planning permission, within the meaning of section 92 of that Act);“the 1997 Act” means the Town and Country Planning (Scotland) Act 1997;“1997 Act permission” means planning permission under the 1997 Act (except planning permission in principle, within the meaning of section 59 of that Act);“exclusivity agreement”, in relation to land, means an agreement by the owner or a lessee of the land not to permit any person (other than the persons identified in the agreement) to construct an onshore wind generating station on the land;“planning permission” means—(a) consent under section 36 of this Act,(b) 1990 Act permission,(c) 1997 Act permission, or(d) development consent under the Planning Act 2008. 32LK The investment freezing condition
(1) This section applies for the purposes of sections 32LH and 32LI.
(2) The investment freezing condition is met in respect of an onshore wind generating station if the documents specified in subsection (4) were provided to the Authority with the application for accreditation of the station.
(3) The investment freezing condition is met in respect of additional capacity if the documents specified in subsection (4) were provided to the Authority on or before the date on which the Authority made its decision that the additional capacity could form part of an onshore wind generating station.
(4) The documents specified in this subsection are—
(a) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, as at the Royal Assent date—(i) the relevant developer required funding from a recognised lender before the station could be commissioned or additional capacity could form part of the station,(ii) a recognised lender was not prepared to provide that funding until enactment of the Energy Act 2016, because of uncertainty over whether the Act would be enacted or its wording if enacted, and(iii) the station would have been commissioned, or the additional capacity would have formed part of the station, on or before 31 March 2017 if the funding had been provided before the Royal Assent date, and(b) a letter or other document, dated on or before the date which is 28 days after the Royal Assent date, from a recognised lender confirming (whether or not the confirmation is subject to any conditions or other terms) that the lender was not prepared to provide funding in respect of the station or additional capacity until enactment of the Energy Act 2016, because of uncertainty over whether the Act would be enacted or its wording if enacted.(5) In this section—
“recognised lender” means a provider of debt finance which has been issued with an investment grade credit rating by a registered credit rating agency;“the Royal Assent date” means the date on which the Energy Act 2016 is passed.(6) For the purposes of the definition of “recognised lender” in subsection (5)—
“investment grade credit rating” means a credit rating commonly understood by registered credit rating agencies to be investment grade;“registered credit rating agency” means a credit rating agency registered in accordance with Regulation (EC) No 1060/2009 of the European Parliament and the Council of 16 September 2009 on credit rating agencies.32LL The grid or radar delay condition
(1) This section applies for the purposes of sections 32LE, 32LG and 32LI.
(2) The grid or radar delay condition is met in respect of an onshore wind generating station if, on or before the date on which the Authority made its decision to accredit the station, the documents specified in subsection (4), (5) or (6) were—
(a) submitted by the operator of the station, and(b) received by the Authority.(3) The grid or radar delay condition is met in respect of additional capacity if, on or before the date on which the Authority made its decision that the additional capacity could form part of an onshore wind generating station, the documents specified in subsection (4), (5) or (6) were—
(a) submitted by the operator of the station, and(b) received by the Authority. (4) The documents specified in this subsection are—
(a) evidence of an agreement with a network operator (“the relevant network operator”) to carry out grid works in relation to the station or additional capacity (“the relevant grid works”);(b) a copy of a document written by, or on behalf of, the relevant network operator which estimated or set a date for completion of the relevant grid works (“the planned grid works completion date”) which was no later than the primary date;(c) a letter from the relevant network operator confirming (whether or not such confirmation is subject to any conditions or other terms) that—(i) the relevant grid works were completed after the planned grid works completion date, and(ii) in the relevant network operator’s opinion, the failure to complete the relevant grid works on or before the planned grid works completion date was not due to any breach by a generating station developer of any agreement with the relevant network operator; and(d) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, the station would have been commissioned, or the additional capacity would have formed part of the station, on or before the primary date if the relevant grid works had been completed on or before the planned grid works completion date.(5) The documents specified in this subsection are—
(a) evidence of an agreement between a generating station developer and a person who is not a generating station developer (“the radar works agreement”) for the carrying out of radar works (“the relevant radar works”);(b) a copy of a document written by, or on behalf of, a party to the radar works agreement (other than a generating station developer) which estimated or set a date for completion of the relevant radar works (“the planned radar works completion date”) which was no later than the primary date;(c) a letter from a party to the radar works agreement (other than a generating station developer) confirming, whether or not such confirmation is subject to any conditions or other terms, that—(i) the relevant radar works were completed after the planned radar works completion date, and(ii) in that party’s opinion, the failure to complete the relevant radar works on or before the planned radar works completion date was not due to any breach of the radar works agreement by a generating station developer; and(d) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, the station would have been commissioned, or the additional capacity would have formed part of the station, on or before the primary date if the relevant radar works had been completed on or before the planned radar works completion date.(6) The documents specified in this subsection are—
(a) the documents specified in subsection (4)(a), (b) and (c);(b) the documents specified in subsection (5)(a), (b) and (c); and(c) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, the station would have been commissioned, or the additional capacity would have formed part of the station, on or before the primary date if—(i) the relevant grid works had been completed on or before the planned grid works completion date, and(ii) the relevant radar works had been completed on or before the planned radar works completion date. (7) In this section “the primary date” means—
(a) in a case within section 32LE(a)(i) or (b)(i) and (ii), 31 March 2016;(b) in a case within section 32LG(a)(i) and (ii) or (b)(i) to (iii), 31 March 2017;(c) in a case within section 32LI(a)(i) and (ii) or (b)(i) to (iii), 31 December 2017.”(3) In section 32M (interpretation of sections 32 to 32M)—
(a) in subsection (1), for “32LB” substitute “32LL”;(b) at the appropriate places insert the following definitions—““accredited”, in relation to an onshore wind generating station, means accredited by the Authority as a generating station which is capable of generating electricity from renewable sources; and “accredit” and “accreditation” are to be construed accordingly;”;
““additional capacity”, in relation to an onshore wind generating station, means any generating capacity which does not form part of the original capacity of the station;”;
““commissioned”, in relation to an onshore wind generating station, means having completed such procedures and tests in relation to the station as constitute, at the time they are undertaken, the usual industry standards and practices for commissioning that type of generating station in order to demonstrate that it is capable of commercial operation;”;
““generating station developer”, in relation to an onshore wind generating station or additional capacity, means—
(a) the operator of the station, or(b) a person who arranged for the construction of the station or additional capacity;”;““grid works”, in relation to an onshore wind generating station, means—
(a) the construction of a connection between the station and a transmission or distribution system for the purpose of enabling electricity to be conveyed from the station to the system, or(b) the carrying out of modifications to a connection between the station and a transmission or distribution system for the purpose of enabling an increase in the amount of electricity that can be conveyed over that connection from the station to the system;”;““licensed network operator” means a distribution licence holder or a transmission licence holder;”;
““network operator” means a distribution exemption holder, a distribution licence holder or a transmission licence holder;”;
““onshore wind generating station” has the meaning given by section 32LC(2);”;
““original capacity”, in relation to an onshore wind generating station, means the generating capacity of the station as accredited;”;
““radar works” means—
(a) the construction of a radar station,(b) the installation of radar equipment,(c) the carrying out of modifications to a radar station or radar equipment, or(d) the testing of a radar station or radar equipment;”;““relevant developer”, in relation to an onshore wind generating station or additional capacity, means a person who—
(a) applied for planning permission for the station or additional capacity,(b) arranged for grid works to be carried out in relation to the station or additional capacity,(c) arranged for the construction of any part of the station or additional capacity,(d) constructed any part of the station or additional capacity, or(e) operates, or proposes to operate, the station;”.”

--- Later in debate ---

[Lord Wallace of Tankerness]

My Lords, we have already debated this. I think that Amendment 78RA would improve Amendment 78R, so I would wish to test the opinion of the House, but perhaps the Minister would clarify. Is he still insisting on his Amendment 78R, or is our amendment otiose?

[Lord Bourne of Aberystwyth]

Perhaps the noble and learned Lord can tell me what it is about.

[Lord Wallace of Tankerness]

My understanding is that Amendment 78R contains the new clause to embrace the grace periods. As Clause 66 has fallen, I am not sure whether he wants to insist on it. If he does, I will want to press our Amendment 78RA, but I want clarification, because there is no point dividing the House if he does not insist on his new clause, which incorporates the grace periods.

[Lord Bourne of Aberystwyth]

I am certainly not pushing this amendment.

Amendments 78RA to 78RG, as amendments to Amendment 78R, not moved.

--- Later in debate ---

That is why I am delighted that the amendment has been brought forward. It concerns a matter that I have felt strongly about since 2008, when the Climate Change Bill became an Act and, at the time, was a world leader. This gives us an opportunity to cement that leadership in this area, even if, unfortunately, we are rather backtracking in others.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords who have participated in the debate on this part of the Bill. I shall take the amendments in the order that they are marshalled.

With regard to Amendment 78S, we are committed to ensuring that the UK continues to do its part to tackle climate change, in line with the Climate Change Act, but we want to do so as cost-effectively as possible to make sure that our energy is secure and affordable, as well as lower carbon. We believe that locking ourselves into an expensive and inflexible target for the power sector is not the way to do that. There are just too many things that we cannot predict about how the energy system will develop up to 2030, and the costs of getting it wrong would be picked up by consumers for many years to come.

The amendment would, in effect, require the Government to introduce an additional power sector target in the form of an obligation on electricity suppliers in the United Kingdom. As has been referred to, the Conservative manifesto, upon which this Government were elected, stated that we will not support additional distorting and expensive power sector targets, but it is our belief that this is what the amendment would lead to.

Noble Lords will know that setting a decarbonisation target for the power sector, which would be the effect of the amendment, was debated in this House during the passage of the then Energy Bill 2013, which has been referred to, and the then Infrastructure Bill 2015. The topic of power sector decarbonisation targets was also discussed during the Committee stage of this Bill. In that discussion, I set out the Government’s intention not to set a power sector decarbonisation target, following that manifesto pledge. As has been confirmed, I also wrote to noble Lords after that further reiteration of the position, explaining that, instead, the Government have already committed to set out totals for the levy control framework beyond 2020, providing a basis for electricity investment into the next decade. I shall not restate the position on contracts for difference, as I think it is already clear that we are committed to making a statement on that this autumn. Therefore, I know that noble Lords will be familiar with the arguments against setting a target such as this.

We have an extensive range of targets at the domestic, EU and international levels. These require action across the economy to meet targets in 2020, 2030 and 2050 on carbon, renewables and energy efficiency. Domestically, we have a legally binding target to reduce greenhouse gas emissions by 80% by 2050. We have carbon budgets setting out targets to 2027 and will be setting a further budget next year, covering the period to 2032. We are also subject to EU targets on carbon, which cover 2020 and 2030. On renewables, these run to 2020 and include interim milestones along the way. Internationally, we are subject to the requirements of the Kyoto Protocol and the compliance periods that these set up.

These targets are comprehensive, far-reaching, and mutually reinforcing. What makes the United Kingdom unusual by comparison with our European partners is the fact that we have a carbon budget system with comprehensive reporting and independent scrutiny. Investors want to know that we have clear, credible and affordable plans. The CBI has said that clarity on future financial support for low-carbon electricity will be more important than targets in driving investment. That is why we have said that we will set out totals for the levy control framework beyond 2020, providing a basis for electricity investment into the next decade, as well as setting out plans in the autumn in respect of future contract for difference allocation rounds.

In relation to Amendment 78T, I acknowledge that it is important that developers and investors have some foresight as to the frequency of CFD allocation rounds. However, this must be balanced with LCF budget availability, which, as noble Lords know, is funded by a levy on consumer bills. The function of the levy control framework is to limit the amount paid by consumers. It is therefore crucial that the Government are able to take decisions in the light of the latest evidence around deployment projections and costs.

The United Kingdom is continuing to make progress towards the 2020 renewables target of 15% of final energy consumption from renewable sources, with provisional 2014 figures showing that we are on target to meet the 2020 target. No carbon intensity targets for electricity generation have been set in order that we retain flexibility around how we achieve our 2050 target. Committing to annual CFD allocations, even only in certain circumstances, would inhibit the Government’s ability to respond to evidence around levels of deployment in renewable electricity generation, costs to consumers and opportunities in other sectors, such as heat and transport.

The noble Baroness’s amendment would unnecessarily commit the Government to a course of action that would neither benefit the consumer nor provide any certainty to renewable energy generators or investors. We are committed to our energy targets and continue to make progress towards meeting them. For this reason, I do not accept the amendment.

Amendment 78UA seeks to make a fundamental change to the Climate Change Act which—as, in fairness, I think the noble Baroness acknowledged—runs contrary to how the carbon budget regime was designed and implemented by the last Labour Government. The noble Baroness played a significant part in that, I know. I think that this is much more than a small, technical amendment and it has huge implications for the Climate Change Act. It changes the focus of the United Kingdom’s approach to decarbonisation and, I believe, sends a wrong message about our faith in the EU emissions trading system. I may have misquoted the noble Baroness in terms of it being a radical change. If I did, I apologise. I think that it is a radical change. She is shaking her head, so I have misinterpreted her position and I apologise for that.

We believe that the amendment would make a fundamental change to the basis of carbon budgets and, if it were accepted, it is likely that we would need to revisit the levels of all current budgets. It would be an unnecessarily and overly burdensome process, as carbon budgets reflect the EU ETS.

Instead, we want to focus on driving the action to deliver decarbonisation at least cost. We are committed to ensuring that the United Kingdom continues to do its part to tackle climate change in line with the Climate Change Act and international obligations. However, we want to do this as cost-effectively as possible to make sure that our energy is secure and affordable, as well as lower carbon.

The EU emissions trading system is a central component of the United Kingdom Government’s policy for delivering emissions reductions in the UK and further afield in a cost-effective and technologically neutral way. The EU emissions trading system is designed to deliver least-cost decarbonisation of particular sectors across the EU, and we are supportive of this approach. We are also supportive of international efforts to price carbon, such as the EU emissions trading system, which is the first, and largest, cap-and-trade system of allowances for emitting greenhouse gases in the world.

We recognise that the EU emissions trading system requires reform, and the United Kingdom has been one of the leading advocates of measures to strengthen the scheme, such as negotiating the market stability reserve. However, on what is, I think, at the very least a significant change, we need to beware of throwing out the baby with the bath-water. We do not want to imply a loss of faith in the EU emissions trading system as a means of achieving least-cost decarbonisation by decoupling our carbon budget regime from it. Instead, we are focused on continuing to work with other member states to strengthen the EU emissions trading system.

Finally, it must be noted that our approach is in line with the Committee on Climate Change’s advice on the use of emissions trading system allowances. It renewed its advice in 2013 that we should include emissions trading system allowances in the net carbon account and proposed an approach for doing so, which the then Government broadly accepted.

My noble friend Lord Howell made significant points during the debate about ensuring that we keep energy affordable. I think that this would jeopardise that, at the very least.

In the light of those comments, I hope that the noble Baroness and the noble Lord have found my explanation reassuring and will not press their amendments.

[Baroness Worthington]

My Lords, I am grateful to the Minister for his response and to the noble Lord, Lord Teverson, for his support for this amendment and for lending his name to it.

I am afraid that I am not reassured. I have listened to and understood the argument. However, it is not a radical change but an important change—there is a distinction there.

In answer to the specific question from the noble Lord, Lord Howell, about whether it will be cheaper to do it this way, I honestly believe that, for UK plc, it will be. At present, the way the budgets work is that, essentially, we pay other people to decarbonise and then we import the certificates. That can be done for a while, and it makes economic sense to do so. In fact, for the first three carbon budgets, while the system has been bedding down, it probably made sense to use a traded system—the rules and the allocations from Europe were clearer and we were all finding our way to see whether the EU ETS would deliver. The closer that we get to our 2050 target, the more that that approach starts to be a false economy. We find then that, potentially, we are repeatedly paying other countries to decarbonise and not investing in our own country.

[Lord Bourne of Aberystwyth]

I can follow the argument that the noble Baroness is making very clearly. However, does she not agree that the great danger with the proposal is that it takes away the flexibility of being able to use the trading system? At the moment, it does not have to be used but it can be used if it is appropriate. If we were to go down this path, we would be throwing away that tool.

[Baroness Worthington]

I am grateful to the Minister for that question. However, that is not the case. There are two versions of flexibility in the Climate Change Act: there is an overarching flexibility created by the budget system, and there is a flexibility that the Government maintain to settle their accounts using credits that they can then take from the EU budget that they are given, by simply not auctioning them, or purchase from offsets that are relatively cheap. There is always a limited amount of offsetting that the Government are able to do if they find themselves out of an account. This would not change that; it simply changes how we count emissions and what counts towards the budget. In this sense, we are saying that actual emissions—what happens in our territorial waters —is what we count. Then, we do the settling up, using credits, to a certain extent, as the budget management system. That is an important point and I hope that people can follow it.

As to whether this would take us out of step with other countries, as I have said, other countries use actual accounts for their targets. Germany is the most obvious example, where there are domestic climate change targets that go beyond European targets. There is a reason for that: Germany is investing in business, infrastructure, companies and enterprise that will be future proofed and provide an export market long into the future. Germany has been very smart about that. We, on the other hand, have a slightly more liberalised market view. In this case, because the ETS is not working as it was meant to, that is potentially damaging our ability to stay within our targets, to do so cost-effectively and to drive investment here. We want to see jobs here and money flowing here, not necessarily pass money overseas for the abatement that someone else has invested in.

For those reasons, I believe that this is an important but not radical move that squares the circle. In response to Amendment 78S, the Minister said that we do not want to set any more distorting new targets in the power sector. I am happy to concede that point. However, this is a very good way of doing what we all agree that we need to do, which is to create investor certainty that this is an enterprise that we remain committed to. As we get closer and closer to that 2050 target, we need to start looking not just at what is happening Europe-wide but at what is happening in the UK economy, so that we are benefitting from the supply chains, the investment and the projects happening here.

I hope that I have made it quite clear why I think this is important, why it is timely and why it has arisen in the course of this Bill. I am encouraged by the support that I have seen from the House. I feel confident that I can answer the question from the noble Lord, Lord Howell: this will be cheaper in the long run; it will be cheaper for UK plc to do this in a way that enables us to drive investment here. For those reasons, I am minded to test the opinion of the House on Amendment 78UA.

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[The Lord Bishop of Chester]

My Lords, once again very briefly, could the Minister also make some comment in his response about what the cost to the consumer will be of electricity which is generated by plant under contracts under the capacity mechanism?

[Lord Bourne of Aberystwyth]

My Lords, I thank all noble Lords who have participated in the debate on Amendment 78V and the noble Baroness, Lady Worthington, for introducing it. We missed each other late last night to discuss this amendment, but I am grateful that she rang before breakfast this morning so that we could discuss it then. That is how seriously we both take our jobs. Again, I am grateful to the noble Baroness because otherwise it would have taken us on the blind side that the amendment was coming up today. I am also grateful to the noble Baroness for what she has said in relation to this issue and for confirming that she will not push it to a vote. The comments made by the noble Lord, Lord Teverson, are right, but as framed there would be difficulties with the amendment anyway.

Perhaps I may say something about the purpose of the capacity market for the benefit of the House and then say something about the particular issue that has been raised. The purpose of the capacity market is to ensure security of electricity supply by providing all forms of capacity with the right incentives to be on the system and to deliver energy when it is needed. The first capacity market auction was successfully concluded in December 2014, contracting 49.3 gigawatts of capacity at a clearing price of £19.40 per kilowatt—and with that I have addressed the particular and very valid point raised by the right reverend Prelate. The outcome was great news for consumers, as fierce competition between participants drives down costs. The results will ensure that enough of our existing capacity will remain open at the end of the decade, as well as unlocking new investment.

I accept that there is an issue about emissions. Other government policies that were referred to by the noble Baroness, Lady Worthington, including the emissions performance standard and the carbon price floor, limit potential emissions from thermal plant for larger producers in keeping with our aims of decarbonising the power sector. For example, the emissions performance standard for larger generators limits carbon emissions to around half of that produced by unabated coal. The carbon price floor obviously provides an incentive for investment in low-carbon electricity generation. I accept that, as things stand, small generators are not covered by that. The department is aware of the issue, but we believe that the EPS represents the best way of looking at the smallest generators, perhaps within the review cycle for the EPS rather than in the context of the capacity market alone because that clearly seeks to ensure that the capacity we need is delivered. I am happy to discuss this further outside the Chamber. It is worth recognising that, at least at present, most of the small generators in the capacity market run for only a limited number of hours per year, but I appreciate that there is no guarantee on that. However, I recognise that this is an issue.

I turn now to what might have been the point that, given his background, the noble Lord, Lord Teverson, was referring to. There is not a state aid issue here. The capacity market state aid clearance is based on the current design of the mechanism, including the concept of technology neutrality, so accepting the amendment in its present form would have required state aid renotification, which as we know typically takes nine months or longer. That would have introduced uncertainty into the market and would have caused problems. But I am happy to continue a discussion on how to tackle what is a very real issue, and I thank the noble Baroness for her comments.

[Baroness Worthington]

I thank the Minister for his response, and our conversation was welcome just so that this did not come completely out of the blue. I am reassured by his comments and I think that this is something we can work on together to try to find a solution. I am certain that the wording I came up with was not perfect.

I would just say that state aid absolutely does require technology neutrality, and it is something that we need to think about in general for the whole of the EMR Bill. State aid clearance was on the basis of technology neutrality and that relates to the CFDs that we let as much as the capacity mechanism. I am grateful to the noble Lord for indicating that we can continue to work on this, and I am happy to withdraw the amendment.

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Moved by

[Lord Bourne of Aberystwyth]

79: Clause 67, page 39, line 24, leave out paragraph (b)

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Tabled by

[Lord Bourne of Aberystwyth]

82A: Clause 68, page 39, line 34, leave out “This Part comes” and insert “Sections 66, (Onshore wind power: circumstances in which certificates may be issued after 31 March 2016) and this Part come”

[Lord Bourne of Aberystwyth]

My Lords, in view of the earlier defeat of Clause 66, I shall not move this amendment.

Amendment 82A not moved.

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Moved by

[Lord Bourne of Aberystwyth]

83: Clause 69, page 40, line 3, after “amendment” insert “(other than an amendment of Part 1A of the Petroleum Act 1998)”

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Moved by

[Lord Bourne of Aberystwyth]

84: After the Schedule, insert the following new Schedule—
“ScheduleAbandonment of offshore installationsPetroleum Act 19981 Part 4 of the Petroleum Act 1998 (abandonment of offshore installations) is amended as follows.
2 Before section 29 insert—
“28A Restriction on abandonment
(1) A person to whom a notice may be given under section 29(1) in relation to an offshore installation or submarine pipeline may not abandon, or begin or continue the decommissioning of, the installation or pipeline unless an abandonment programme approved by the Secretary of State has effect in relation to the installation or pipeline.
(2) A person who without reasonable excuse contravenes subsection (1) is guilty of an offence.”
3 (1) Section 29 (preparation of programmes) is amended as follows.
(2) After subsection (1) insert—
“(1A) The power to give a notice under subsection (1) is exercisable—
(a) on the Secretary of State’s own motion, or(b) at the request of any person to whom the notice may be given (whether or not the notice is given to that person).”(3) After subsection (2) insert—
“(2A) A person to whom a notice under subsection (1) is given—
(a) must consult the OGA before submitting the abandonment programme to the Secretary of State, and(b) must frame the programme so as to ensure (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) that the cost of carrying it out is kept to the minimum that is reasonably practicable in the circumstances.(2B) When consulted under paragraph (a) of subsection (2A) the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) how to comply with paragraph (b) of that subsection.”(4) In subsection (3), after “such” insert “other”.
4 (1) Section 32 (approval of programmes) is amended as follows.
(2) After subsection (2) insert—
“(2A) The modifications or conditions may (in particular) include modifications or conditions—
(a) which are intended (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) to reduce the total cost of carrying out the programme, provided that they do not increase the total costs to be met by any person who is to be subject to obligations under the programme or under any other abandonment programme;(b) requiring the persons who submitted the programme to carry out and publish or make available to the Secretary of State and the OGA a review of the programme and its implementation including, where relevant, recommendations as to the contents and implementation of future abandonment programmes.”(3) At the end insert—
“(6) Before reaching a decision under this section the Secretary of State must—
(a) consult the OGA, and(b) take into account the cost of carrying out the programme that has been submitted and whether it is possible to reduce that cost by modifying the programme or making it subject to conditions.(7) When consulted under subsection (6)(a), the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) whether section 29(2A)(b) has been complied with and, if it has not been, modifications or conditions that would enable it to be complied with.”5 In section 33 (failure to submit programme), after subsection (3) insert—
“(3A) When preparing an abandonment programme under this section the Secretary of State must—
(a) consult the OGA, and(b) frame the programme so as to ensure (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) that the cost of carrying it out is kept to the minimum that is reasonably practicable in the circumstances.(3B) When consulted under paragraph (a) of subsection (3A), the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) how to comply with the requirement in paragraph (b) of that subsection.”6 (1) Section 34 (revision of programmes) is amended as follows.
(2) After subsection (4) insert—
“(4A) A person who makes a proposal under subsection (1) that is likely to have an effect on the cost of carrying out the programme must frame it so as to ensure (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) that the cost of carrying out the programme as proposed to be altered is kept to the minimum that is reasonably practicable in the circumstances.
(4B) Where the Secretary of State makes a proposal under subsection (1)(a) the purpose of which is to reduce the total cost of carrying out a programme, the proposal may not increase the total costs to be met by any person who is to be subject to obligations under the programme or under any other abandonment programme.”
(3) After subsection (7) insert—
“(7A) If it appears to the Secretary of State that what is proposed under subsection (1) is likely to have an effect on the cost of carrying out the programme, the Secretary of State must, before making a determination under subsection (7)—
(a) consult the OGA, and(b) take that effect into account.(7B) When consulted under subsection (7A)(a) the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) whether subsection (4A) applies and, if so, whether it has been complied with.”7 After section 34 insert—
“34A Amendment of programmes
(1) This section applies where an abandonment programme approved by the Secretary of State includes provision by virtue of which the programme may be amended.
(2) A person who proposes to make an amendment under such a provision that is likely to have an effect on the cost of carrying out the programme must frame the amendment so as to ensure (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) that the cost of carrying out the programme as proposed to be amended is kept to the minimum that is reasonably practicable in the circumstances.
(3) If it appears to the person who proposes to make the amendment that subsection (2) applies, the person must consult the OGA before making the amendment.
(4) When consulted under subsection (3) the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) whether subsection (2) applies and, if so, whether it has been complied with.(5) Any person who has the function of approving amendments made under a provision mentioned in subsection (1) must, when exercising the function, take into account the effect of the proposed amendment on the cost of carrying out the programme.”
8 After section 36 insert—
“36A Reduction of costs of carrying out programmes
(1) This section applies where an abandonment programme approved by the Secretary of State has effect in relation to an installation or pipeline.
(2) The Secretary of State may, for the purpose of reducing the total cost of carrying out the programme, by written notice require any person who submitted the programme to take, or refrain from taking, action of a description specified in the notice.
(3) The notice may, in particular, require—
(a) changes to the times at which the measures proposed in the programme are to be carried out;(b) the persons who are under a duty to secure that the programme is carried out to collaborate with other persons.(4) The programme, and any condition to which it is subject, has effect subject to any notice given under this section.
(5) A notice given under this section may not increase the total costs to be met by any person who is to be subject to obligations under the programme or under any other abandonment programme.
(6) The Secretary of State may not give a notice to a person under this section without first giving the person an opportunity to make written representation as to whether the notice should be given.
(7) A person to whom a notice is given under this section who without reasonable excuse fails to comply with the notice is guilty of an offence.
(8) If a notice under this section is not complied with, the Secretary of State may—
(a) do anything necessary to give effect to the notice, and(b) recover from the person to whom the notice was given any expenditure incurred under paragraph (a).(9) A person liable to pay any sum to the Secretary of State by virtue of subsection (8) must also pay interest on that sum for the period beginning with the day on which the Secretary of State notified the person of the sum payable and ending with the date of payment.
(10) The rate of interest payable in accordance with subsection (9) is a rate determined by the Secretary of State as comparable with commercial rates.”
9 In section 37 (default in carrying out programmes), after subsection (1) insert—
“(1A) If it appears to the Secretary of State that the proposed remedial action is likely to have an effect on the cost of carrying out the programme, the Secretary of State must—
(a) consult the OGA before giving a notice under subsection (1), and(b) take that effect into account when deciding whether to give the notice.(1B) When consulted under subsection (1A)(a), the OGA must consider and advise on the likely effect of the proposed remedial action on the cost of carrying out the programme.”
10 In section 40 (offences: penalties)—
(a) after “section” insert “28A,”, and(b) after “33,” insert “36A,”.11 (1) Section 41 (offences: general) is amended as follows.
(2) In subsection (1)—
(a) after “section” insert “28A,”, and(b) after “33,” insert “36A,”.(3) In subsection (2)—
(a) after “section” insert “28A,”, and(b) after “33,” insert “36A,”.(4) In subsection (3)—
(a) after “section” insert “28A,”, and(b) after “33,” insert “36A,”.(5) In subsection (5), after “section” insert “28A, 36A or”.
12 (1) Section 42 (validity of Secretary of State’s acts) is amended as follows.
(2) In subsection (2), after paragraph (e) insert—
“(ea) the giving of a notice under section 36A(2);”.(3) In subsection (5), after paragraph (e) insert—
“(ea) in relation to the giving of a notice under section 36A(2), means the requirements of section 36A(6);”.Energy Act 200813 (1) Section 30 of the Energy Act 2008 (abandonment of carbon storage installations) is amended as follows.
(2) In subsection (1), after “subsections” insert “(1A),”.
(3) After that subsection insert—
“(1A) For the purposes of subsection (1), the amendments made to Part 4 of the 1998 Act by Schedule (Abandonment of offshore installations) to the Energy Act 2016 are to be disregarded.”
(4) For subsection (4A) substitute—
“(4A) The power in subsection (4)—
(a) may (in particular) be exercised to make modifications corresponding to the amendments made by Schedule (Abandonment of offshore installations) to the Energy Act 2016, and(b) is subject to section 30A.””

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Moved by

[Lord Bourne of Aberystwyth]

85 line 2, after “infrastructure;” insert “to make provision about the abandonment of offshore installations, submarine pipelines and upstream petroleum infrastructure;”

Energy Bill [HL]

Lord Bourne of Aberystwyth Excerpts

Monday 19th October 2015 Lords Chamber

Moved by

[Lord Bourne of Aberystwyth]

That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 and 2, Schedule, Clauses 3 to 69, Title.

Motion agreed.