Business: Greenwashing
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Lord Howarth of Newport
To ask His Majesty’s Government what assessment they have made of the practice of ‘greenwashing’ by businesses; and what steps, if any, they intend to take to tackle it.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, green claims made by businesses should be clear and accurate and not mislead consumers, who are increasingly looking to make environmentally friendly choices. The Competition and Markets Authority and the Advertising Standards Authority have published guidance to help businesses to comply with the law when making environmental claims about their goods or services. If a business does not comply with consumer law, the CMA and other bodies, such as trading standards, can bring court proceedings.
Lord Howarth of Newport (Lab) [V]
My Lords, while many businesses are genuinely committed to the net-zero objective, should not there be zero tolerance when businesses puff their publicity and accounts with dishonest claims about their green credentials? Does the Minister accept that for those businesses self-regulation will not work, that tough regulation and penalties are needed to deal with these fraudulent practices, and that the Government must work urgently with international partners to establish standardised accounting rules, an end to bogus carbon offsets, rigour in the definition of ESG, and reliable and clear information for investors and consumers?
Lord Callanan (Con)
I understand the point that the noble Lord makes, but businesses do not self-regulate in this area. In September 2021, the Competition and Markets Authority published guidance on environmental claims on goods and services, to help businesses to understand how to communicate their green credentials while mitigating the risk of misleading consumers. The Advertising Standards Authority has also taken action against some businesses.
Lord Wigley (PC)
My Lords, I draw attention to my registered interest. Does the Minister accept that there is real pressure on productive agricultural land, particularly in Wales and Scotland, from the big businesses buying up such land and taking it out of production, so adding to food cost inflation? Does he accept that perpetual increased afforestation encroaching on productive land is not an acceptable answer, and that it needs land use that sustains food production in an environmentally acceptable manner?
Lord Callanan (Con)
That is a fascinating question, although I am not sure that what it has to do with the subject under discussion. However, it is a very real issue and certainly something that we need to keep under close examination, because we do not want productive land taken out of use.
Lord Leigh of Hurley (Con)
Will my noble friend be able to give, now or later, an estimate of the cost of ESG reporting to British companies? The reason I ask is that an SEC commissioner recently stated that the cost to the 4,600 companies it regulates of providing ESG reporting is currently at $2 billion and expected to rise to $8 billion with the new regulations.
Lord Callanan (Con)
I know that my noble friend is very interested in this important subject; we have discussed it before. The problem we have is that many businesses make environmental claims about their sustainability and that others publish information in their annual reports—often voluntarily; there is, in some respects, no legal obligation to do so—so the question is about how investors can get transferability across different companies and compare one company against another. There may be a case for some standardisation and regulations in this space, but of course we need to look at the business impacts.
Baroness Hayman (CB)
My Lords, does the Minister agree that if we are to take action on claims of greenwashing, we need clear criteria and standards against which to judge those claims? The Government have recognised that part of this is the need for a green taxonomy. Work has been done on this, yet it seems to have been paused. We were promised the results of the working party by the end of last year, so can he update us on progress on the green taxonomy? I declare my interests as in the register.
Lord Callanan (Con)
The noble Baroness is right that we need some consistency on these matters. The work on a green taxonomy is being taken forward by the Treasury and as far as I am aware it is proceeding.
Baroness Sheehan (LD)
My Lords, last year the Advertising Standards Authority ruled that HSBC’s greenwash ads were not adequately qualified and left out material information about its greenhouse gas emissions. Does the Minister agree that a ticking off from the ASA after an ad has gone out is not a deterrent? Will he request the CMA to incorporate this into its green claims code so that financial penalties can be imposed if firms breach the rules repeatedly?
Lord Callanan (Con)
The ASA has taken action against a number of companies, including one that made green artificial grass, over their environmental claims. I think this is a very real deterrent to businesses repeating unfair advertising, but I know that the CMA is looking at a number of different sectors: it has already published an investigation into the fashion sector and is moving its investigations on to other areas of the economy as well.
Lord Clark of Windermere (Lab)
My Lords, the noble Lord mentioned that the Competition and Markets Authority has issued its green claims code, under which it has the power to take errant companies to court. Have any actually been taken to court?
Lord Callanan (Con)
The noble Lord is right: the CMA published its guidance in September 2021. Enforcement of unfair claims and misleading advertising is a matter for trading standards. I am not aware of any claims that have been taken to court but, if there are any actions I can point him to, I will write to him.
Baroness Rock (Con)
My Lords, tenant farmers face acute risk of greenwashing, as landlords seek to take tenanted land back, to access public and private markets. The Rock review has already seen evidence of tenant farmers in England being served notices to quit for this purpose. What are the Government doing to ensure that we support our vital tenant farmers and do not lose tenanted land from delivering food and environmental outcomes?
Lord Callanan (Con)
My noble friend is right to point to this as an important issue. It does not fall within my purview as a BEIS Minister, but I will certainly find out the answer and write to her.
Baroness Blake of Leeds (Lab)
My Lords, green- washing is clearly a serious issue which, if not clamped down on, will seriously hinder progress towards net zero. We welcome the steps being taken to do this, such as green taxonomy, increased ESG reporting requirements and investment in product sustainability labels. All these measures should mean that communicating ESG credentials will become critical to companies, as well as compliance with legal requirements. All are steps in the right direction. Can the Minister outline the timeline for their implementation and what assessment the Government have made of the impact of the changes proposed?
Lord Callanan (Con)
There are a lot of questions in what the noble Baroness said, and there are a number of different aspects to this problem. The Advertising Standards Authority and the CMA are taking action, our net-zero strategy contained several commitments around eco-labelling, and we are working with the Financial Conduct Authority to introduce a sustainable investment label. Those are all proceeding at the moment.
Baroness Boycott (CB)
My Lords, it is well known that food, agriculture and deforestation account for a very large amount of greenhouse gases and biodiversity loss, yet it is impossible for a consumer to tell when buying a product exactly what its biodiversity impact or carbon content is. All big food companies rail against putting this on labels, on the grounds that it would take up too much space. That is fair enough; they can put it online, where nerds such as me can look it up to see whether it is okay. What are the Government doing to make labelling correct in terms of those two factors? Have they at least started a consultation and is there any news on when they might implement it?
Lord Callanan (Con)
The noble Baroness referred to looking at information online. I am sure she will be pleased to know that the CMA has launched a website to help consumers to identify and understand genuine environmental claims about the products and services that they are purchasing. It is designed to encourage them to ask themselves simple questions about whether they can believe the claims that manufacturers are making or not.
Baroness Jones of Moulsecoomb (GP)
My Lords, I was going to mention Amazon as a prime example of a company that uses greenwashing, but the Government are also very much a greenwashing organisation. They constantly laud their environmental principles, but then the Prime Minister, for example, hops into a private jet to go to Leeds instead of taking the train like the rest of us. Does the Minister agree that the Government need to correct some of their greenwashing?
Lord Callanan (Con)
There are things we could all do. The noble Baroness talks about the Prime Minister taking jets; she might want to talk to one of her Green council colleagues who, I believe, flew up to COP 26 in Glasgow. There are always improvements we can all make in our personal behaviour.
Electricity: Decarbonisation
Lord Callanan Excerpts(1 year, 4 months ago)
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Baroness Sheehan (LD)
My Lords, on behalf of my friend the noble Lord, Lord Ravensdale, and with his permission, I beg leave to ask the Question standing in his name on the Order Paper.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the Government are confident that the policies and programmes set out in the net-zero strategy and the British energy security strategy will deliver our ambition to decarbonise electricity generation in line with net zero while enhancing security of supply and keeping energy affordable.
Baroness Sheehan (LD)
My Lords, I thank the Minister for his reply and will now read the supplementary question from the noble Lord, Lord Ravensdale. The fundamental problem is that we are not building anywhere near enough low-carbon energy capacity or grid infrastructure to allow us to meet the 2035 target. One of the priority recommendations of the Climate Change Committee’s 2022 progress report is that we need a delivery plan to provide visibility and confidence for private sector investors to reduce costs and to build up supply chains. There is a key gap here, in comparison with other sectors, because, while we have the heat and building strategy and the transport decarbonisation plan, we do not have a plan for electricity decarbonisation, despite it being so important as an enabler for those other plans. Does the Minister agree that it needs urgently to be brought forward?
Lord Callanan (Con)
We will be setting out further plans on the matter in due course. I remind the noble Baroness that, during 2021, almost 55% of electricity generated in the UK came from low-carbon sources. We have an ambitious target of rolling out 50 gigawatts of offshore wind by 2030, and we have an excellent record in this area.
Viscount Hanworth (Lab)
Have the Government thought further about small modular nuclear reactors, which could come online much sooner than the EPR nuclear reactor proposed for Sizewell? Moreover, SMRs could have significant export potential if they were to materialise in good time.
Lord Callanan (Con)
The noble Viscount is absolutely right—SMR technology is something that we are supporting. We have given hundreds of millions of pounds-worth of support to Rolls-Royce, which is looking actively at how it can roll that out. It has great potential for the future, both in this country and in its export capacity.
Baroness Meacher (CB)
Germany and France use compulsion to ensure that large buildings and building complexes such as car parks, industrial estates and retail parks install solar panels on their huge roofs. I do not think that we want compulsion in this country, but can the Minister assure the House that the department has a policy to ensure that this incredibly valuable opportunity to help save the planet is actually used across the nation, perhaps with incentives such as feed-in tariffs or grants?
Lord Callanan (Con)
I remind the noble Baroness that we have the smart export guarantee scheme to encourage precisely that. The good news is that we have already 14 gigawatts of solar installed capacity in the UK and a fourth CfD allocation round for another 2 gigawatts of ground-mounted solar awarded contracts. The Chancellor recently removed VAT on solar panels, and on solar panel and storage packages. We are doing a lot in this area. Solar is a cheap and versatile source of power, which we should encourage.
Lord Moylan (Con)
My Lords, to have a strategy for decarbonising electricity, the Government have to be able to say what will make up the supply when the wind is not blowing or the sun is not shining. I have looked high and low, but I have not found a strategy that will set that out, be it through the use of batteries or hydraulic pumps. I have not found a document that sets out the Government’s strategy for meeting that intermittency. Can my noble friend help me by pointing to one?
Lord Callanan (Con)
We have a number of energy strategies, including the energy security strategy and the net zero strategy. As I said, we will set out further plans in this area. My noble friend is right that intermittency is a problem, but I remind him that we have just invested more than £600 million in a new nuclear power station at Sizewell, and abated gas power will also be available.
Baroness Whitaker (Lab)
My Lords, before asking my question, I first congratulate the Minister on the Government’s recent announcement earlier this month that the Government are proposing to offer guaranteed prices via contracts for difference for wave power, to enable this important technology to get off the ground. Perhaps that is a small answer to the question from by the noble Lord, Lord Moylan. Can the Minister say more about government support for energy generated by community enterprises, including via the Procurement Bill?
Lord Callanan (Con)
I thank the noble Baroness for her support. She is right in that we allocated CfD support of 40 megawatts of wave and tidal stream power in the last CfD round. We want to encourage community energy and we will do all that we can, working with Ofgem, to make sure that it is supported, because it is an important form of generation that we want to secure.
Lord Birt (CB)
My Lords, by 2035, we shall need a lot more electricity to power the growth in both EVs and heat pumps installed in homes and buildings. As a multiple of current demand for electricity, could the Minister tell us what is the Government’s forecast of demand in 2035?
Lord Callanan (Con)
The noble Lord is right that we will need a lot more electricity both for EVs and for the electrification of heat. I cannot give him an exact figure at this stage—it depends on a number of different factors, not least of which is the success of our demand reduction policies.
Baroness Altmann (Con)
My Lords, another barrier to the delivery of net zero was the disappointing announcement on 14 December on the green taxonomy. Unlike the answer given by our noble friend Lady Penn on 3 November in this House, it suggested that the work might be delayed or even cancelled. Does my noble friend not agree that taxonomy of sustainable business services could help the financial services industry to identify appropriate activities to support decarbonisation of the power sector and move us to net zero?
Lord Callanan (Con)
The noble Baroness is right that green taxonomy is an important component. She will also be aware that the work is being taken forward by the Treasury, with support from BEIS and Defra. I think it is fair to say that it has a mixed record in other parts of the world, but it is certainly something that we are looking at closely.
Lord Bassam of Brighton (Lab)
My Lords, just to bring us back to the core issue, in its progress report in June the Climate Change Committee highlighted several risks that remain in meeting the emissions reductions required by 2035—particularly highlighting how supply-side focused the Government’s energy security strategy was. The Minister said earlier that plans would be brought forward in due course, but can he tell us when the Government will finally deliver the energy efficiency improvements necessary to reduce demand for fossil fuels to achieve net zero and to cut the energy bills that consumers are currently struggling with?
Lord Callanan (Con)
The noble Lord is right—energy efficiency is extremely important, which is why we are spending £6.6 billion this Parliament on various energy efficiency strategies. The Chancellor in his Budget announced another £6 billion from 2025 for energy efficiency projects. We have an ambitious target; a new task force is being set up to deliver a 15% reduction by 2030.
Lord Mountevans (CB)
My Lords, the Minister has already mentioned the support that the Government have given to Rolls-Royce in developing the small modular reactor. What plans do the Government have to assist Rolls-Royce to move this exciting British technology towards domestic delivery?
Lord Callanan (Con)
As the noble Lord said, we are supporting it. It has exciting potential, but it is in the very early stages at the moment. The designs are still being approved, but we will want to ensure that appropriate support is given to roll it out domestically—and then there is its tremendous export potential as well.
Baroness Bennett of Manor Castle (GP)
My Lords, given that it is Christmas, I—
Baroness Sheehan (LD)
Could I ask the Minister what estimate his Government or department have made of the additional costs to communities of their inefficient energy policies?
Lord Callanan (Con)
I apologise to the noble Baroness, but I really did not catch most of what her question was.
Prime Minister: Trade Unions
Lord Callanan Excerpts(1 year, 4 months ago)
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Lord Balfe
To ask His Majesty’s Government what plans the Prime Minister has to meet representatives of the Trades Union Congress, as well as individual trade unions, in the light of the current economic situation.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
The Department for Business, Energy and Industrial Strategy is responsible for labour relations and works closely with trade unions. Engagement is essential to developing and delivering our policies, and during the pandemic it helped to support jobs and to keep workers safe. For example, the unions and business worked together to help deliver a package of economic support through the job retention scheme that has protected millions of jobs.
Lord Balfe (Con)
My Lords, can the Minister request his colleagues to make clear what the basis is for the Government’s current policy, which comes across as rather dismissive and uncaring in view of the rapid rise of inflation? Can I ask him to encourage the Government, in view of the sharp rise in inflation since the last pay review body reports, to ask the pay review bodies to reconvene and bring forward in January proposals for an interim settlement that takes account of the recent rapid rise in inflation and of staffing levels, such as the 600-midwife shortfall reported to me by the Royal College of Midwives this morning?
Lord Callanan (Con)
I thank my noble friend for that question but, as he knows, the Government have said that they will accept the recommendations from the independent pay review bodies in full. We certainly hope that the trade unions will call off the actions that are causing so much misery to billions of people all over the country.
Lord Woodley (Lab)
As the former leader of Unite the Union, let me tell noble Lords that no worker wants to go out on strike, as it costs them wages that they can least afford to lose. But workers, such as our marvellous nurses and others, are being driven to despair and desperation; their must-go place before Christmas is the local food bank, unfortunately. Pay the nurses and other public servants proper wages covering inflation that is not of their making, and stop hiding behind the farcical and outdated review body’s recommendations. It is corporate profiteering that is driving inflation. Does the Minister agree?
Lord Callanan (Con)
It will not surprise the noble Lord to know that I do not agree with him. The reason we have independent pay review bodies is to try to take the politics out of these settlements. The Government have said that we will accept those recommendations in full. Frankly, some of the increases that are being asked for are unaffordable.
Lord Fox (LD)
My Lords, over the weekend several senior government spokespeople have justified not increasing the offer on public sector pay because it would fuel inflation. I believe that the Minister here is more economically literate than those spokesmen, because he knows well that public sector pay does not fuel inflation, neither is it driving private sector pay—you have only to look at the discontinuity now. Will the Minister please disabuse his colleagues of this specious argument? Will he urge them to sit down with the nurses and settle this dispute?
Lord Callanan (Con)
Of course we want to see the action ended and the dispute brought to an end, but it remains the case that, if above-inflation pay rises are accepted, that will mean less money for the services that everybody wants to see expanded. There is a limited pot of money that can go only so far.
Lord Hunt of Kings Heath (Lab)
My Lords, at some point the Government are going to have to find a way out. The Minister’s noble friend has suggested a very elegant way—by asking the review body to review the evidence. Would he confirm that the report of the review body for nurses came out in July, based on evidence submitted three months before? Surely there is a unique case here to ask the review body to look again.
Lord Callanan (Con)
I understand the point that the noble Lord is making but the problem is that, once you make an exception for one group, I imagine that lots of other deserving groups will also want exceptions made for them. Pretty soon, the exception becomes the rule. We are sticking to the position that we asked the pay review bodies to look at the appropriate level of remuneration; they have done so and we have accepted their recommendation.
Lord Hamilton of Epsom (Con)
My Lords, is it not true that, in the National Health Service, there are many different grades that nurses can achieve? They can go on doing the same job but be promoted up the grades and get more pay.
Lord Callanan (Con)
I am not overly familiar with the pay grades in the National Health Service—perhaps my noble friend Lord Markham could have answered that on the previous Question better than me.
Baroness Jones of Moulsecoomb (GP)
My Lords, is the Minister aware that the Government have lost the public opinion battle? Nobody believes that the independent pay review is independent or the Government’s figures about how much it will cost per household. The Government frittered away billions on the PPE scandal, so people just do not believe them any more. Will the Minister accept that it is time to sit down and talk money with nurses, posties and railway workers?
Lord Callanan (Con)
It is very easy for Opposition Members to say that we should grant this and that pay rise, but only a limited number can be funded. The noble Baroness talks about PPE; I seem to remember that, when we had these debates in the House at the time, the Opposition Benches were united in telling us that we needed to procure more of it as quickly as possible and not let other things get in the way of delivering essential PPE for our health service professionals. That is what we did.
Lord Morris of Aberavon (Lab)
My Lords, does not the independent report predate a further surge in inflation? What do the Government consider to be appropriate to deal with that further surge?
Lord Callanan (Con)
I am not familiar with the details of the negotiations. I can tell the noble and learned Lord only that the Government have accepted in full the recommendations of the pay review body. I assume that, when it reports again next year, it will take account of the inflation that has taken place this year.
Lord Watts (Lab)
My Lords, do the Government understand that this pay review body made its award when there was low inflation? Inflation is now at 10% or higher. Is it not time that we asked it to look at this again and give a fair offer? It might not be above inflation, but it would be a lot fairer than the one being offered.
Lord Callanan (Con)
No matter how many times Opposition Members ask the same question, they will get the same answer. We have accepted the recommendation from the pay review body. The next step is that another pay review body will presumably look at the issue again next year and take account of the impact of inflation and workforce patterns on availability and recruitment, et cetera, for this year. That is the appropriate time to do it.
Lord Monks (Lab)
My Lords, during the recent crisis, the mood of the nation was clearly that we were all in it together and people observed common rules—with a few exceptions in Downing Street and Barnard Castle. However, that is not the public mood in the current cost of living crisis; the mood is much more divisive, and the burden is falling almost totally on public servants. Is this not a recipe for strikes and for key workers leaving the essential services on which we all depend? Will the Government adjust their position and discuss with the TUC and relevant unions how we can recreate that mood of being in it together, come through this crisis and put an end to the damaging disruption?
Lord Callanan (Con)
We sit down with the TUC and others to discuss these matters, and we worked together during the pandemic. I remind the noble Lord that the TUC does not represent all workers; 75% of workers in this country are not in trade unions.
Lord Dobbs (Con)
Does my noble friend agree that it is very difficult to imagine, and in some cases to remember, what it is like as a family to look towards Christmas not knowing how you will meet your responsibilities? Does that not put a particular cast on the current rail strike, which is aimed not at fat cats but at the young, the weak, the sick and, in particular, old people—grandparents who want nothing more than to get home and join their families for Christmas? Does he agree that the rail strike is looking less like a normal industrial dispute and more like one man’s ego trip?
Lord Callanan (Con)
My noble friend makes an important point. It is almost as if the rail unions, in particular, are seeking to punish the public at this difficult time and exploit the monopoly position that they have to make life as difficult as possible for people wanting to join their friends and family for Christmas. It is appalling behaviour.
Lord Lennie (Lab)
My Lords, on Tuesday the UK quarter 3 growth figures will be published. They are expected to show that the economy has contracted by 0.2%, as well as real falls in household disposable income as wage increases fail to match inflation. These pressures on working people will have a severe impact, with families already cutting back on food and heat. What discussions have the Government had with the trade unions on policy options which will give families the support they will need to get through the crisis in the winter months?
Lord Callanan (Con)
We have given extensive levels of support. We are spending tens of billions of pounds on direct support to households over the winter on energy bills, cost of living payments, et cetera. This Government have an excellent record of standing by people, both in the pandemic and since then. We all know it is a difficult time; public expenditure is tight and, if what the noble Lord says is true and the economy has contracted, then there is even less money to go around because tax receipts will collapse as well. We have to keep all of these matters under consideration. We will stand by families as much as we can, and I think our record proves that.
Product Safety and Metrology (Amendment and Transitional Provisions) Regulations 2022
Lord Callanan Excerpts(1 year, 4 months ago)
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Lord Callanan
That the draft Regulations laid before the House on 14 and 21 November be approved.
Relevant document: 20th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 13 December.
Energy Bill [HL]
Lord Callanan ExcerptsMonday 19th December 2022
(1 year, 4 months ago)
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Lord Callanan
Member's explanatory statement
This amendment amends the definition of “heat network” to include any appliance connected to a heat network where the main purpose of that appliance is to provide heating or cooling for the network.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the Committee will note the large number of amendments tabled in my name on heat networks. These amendments are needed to ensure that Ofgem can operate effectively as the heat networks regulator. A large proportion of them ensure that Ofgem’s enforcement powers will replicate those that it has as gas and electricity regulator. These amendments also ensure that the Bill reflects the approach to regulation which the Government committed to in their response to the heat networks market framework public consultation. The majority of these amendments are minor and technical in nature. Some are a little more substantial, and I will address those first.
Amendments 162C and 162YYI will ensure that any price cap introduced through regulations in future can apply to non-domestic as well as domestic heat network consumers. They also widen the scope of the regulator’s power to conduct pricing investigations into instances where non-domestic heat network consumers are receiving disproportionately high prices.
The Government are committed to introducing consumer protection rules that ensure that heat network consumers receive a fair price for their heating. Regulations under the Bill will provide Ofgem with powers to investigate and intervene where consumer prices appear disproportionate, compared with heat networks with similar characteristics or compared with alternative and comparable heating systems.
Non-domestic heat network consumers, particularly micro-businesses, can be vulnerable to receiving disproportionately high prices from heat suppliers. We therefore consider it appropriate to make this amendment so that the regulator’s price investigation powers extend to non-domestic consumers, in addition to domestic consumers. The Bill also provides the Secretary of State with powers to introduce various forms of price regulation, including a price cap, should it be necessary to protect consumers while growing and decarbonising the market.
The Government have committed to using any future powers to set price caps cautiously to avoid undermining investment in this nascent sector and putting at risk the supply of heating to consumers. Should a price cap be appropriate in future, we want to ensure that it could apply to both domestic and non-domestic consumers. In particular, we found in our public consultation in 2020 that micro-businesses supplied by heat networks share similar characteristics with domestic consumers. We therefore consider that these two consumer groups should have similar protections. This amendment would enable any future price cap to also apply to non-domestic consumers such as micro-businesses.
Amendments 162YYV to 162YYY serve to ensure that the full extent of heat network regulatory activities performed by Ofgem in Great Britain, the Utility Regulator in Northern Ireland, consumer advocacy bodies and other entities are funded by heat networks and holders of gas or electricity licences. Last year, the Government ran a public consultation on a mechanism for recovering the costs of heat network regulation. The nascent state of the sector and small consumer base means that recovering these costs solely from heat networks would amount to an extra £10 or more on each heat network consumer bill per year. This would be too high and create risks to the competitiveness of the market and, of course, issues of affordability for heat network consumers.
The Government consulted on heat network, gas and electricity regulatory costs being spread evenly across heat network, gas and electricity consumers in Great Britain. The Government have estimated that this approach would amount to less than £2 added to each heat network consumer bill per year, and an additional 10p per gas and electricity consumer bill per year. Most consultation respondents agreed that this approach was the fairest and crucial to supporting the growth of the heat networks sector. The Northern Ireland Executive conducted an equivalent public consultation for cost recovery in Northern Ireland and determined this a desirable approach.
This amendment sets out for transparency purposes the full extent of the regulatory activities in scope of this approach to cost recovery. The amendment also includes Ofgem’s role as a licensing authority under the Heat Networks (Scotland) Act 2021 in the cost-recovery regime. The Scottish Government passed this Act to introduce their own heat networks regulatory framework. By ensuring a funding route for Ofgem to perform this role, the Government are helping to ensure that Scottish heat network consumers receive robust protections and that heat networks regulation is coherent across Great Britain.
The remaining amendments are minor and technical, so I will not detain your Lordships for too long with them. In summary, these amendments, first, ensure that the provisions relating to heat networks regulation are accurate; secondly, allow for regulations and authorisation conditions to be made about the connection of premises to a heat network; and, thirdly, relate to Ofgem and the Utility Regulator in their role as heat networks regulator in Great Britain and Northern Ireland respectively.
I hope, therefore, that noble Lords will agree that these amendments are necessary to enable a fair and consistent heat network market across the United Kingdom. The one non-government amendment in this group is in the name of the noble Baroness, Lady Worthington. I thank her for her thoughtful contributions—actually, I should do that at the end, after she has spoken. Oh, she is not here. I beg to move Amendment 161AA.
Lord Ravensdale (CB)
My Lords, first, I declare my interests as a project director working in the energy industry for Atkins and as a director of Peers for the Planet. I will speak to Amendment 162 in the name of the noble Baroness, Lady Worthington, who cannot be here today.
To give some context to this amendment, I welcome paragraph 14(3) of Schedule 15, in that it provides for all the conditions which may be attached to a heat network authorisation. All of this is welcome—in particular, paragraph 14(3)(f) refers to
“conditions about limiting emissions of targeted greenhouse gases in relation to relevant heat networks”.
However, it is noteworthy that the schedule does not include any conditions about the actual heat source for the emissions, and that is what Amendment 162 focuses on. It is a probing amendment, seeking to determine whether the Secretary of State or Ofgem already have the power to control the heat source using the heat networks and whether they are minded to use them.
There are some fuels which it may be in the public interest to restrict using in a heat network. For example, the UK Government are currently establishing carefully controlled trials for hydrogen for heating. Presumably, the Government would not want to be powerless to prevent a heat network provider using green hydrogen for heating if they had concerns about, for example, safety or the cost effectiveness of hydrogen as a power source. If the hydrogen trials are not taken forward, the Government may not want someone to use hydrogen in a heat network without effective oversight from Ofgem.
In another example, it may be appropriate to restrict the use of biomass, which is ostensibly low or zero-carbon. However, the Minister will have heard concerns from the noble Baroness, Lady Boycott, and other Peers last week, and there are concerns about whether the Government would have the powers to restrict biomass for local heat networks to the sustainable practices the Minister outlined in his response to that question. Can the Minister confirm in his summing up whether the Government have powers to restrict the source of heat input as applied to heat networks? If so, where? If not, would he consider taking these powers?
Lord Lennie (Lab)
My Lords, I thank the Minister and others who have spoken in this brief debate for bringing forward these amendments, as they represent necessary but foreseeable conditions for what is already a doorstep of a Bill. As the Minister said in his introductory statement, these amendments collectively show why and how heat networks and heat zones will be regulated and established.
In response to the noble Lord’s query, my understanding is that there are currently 14,000 heat networks, which represent 480,000 customers—about 2% of the total energy network. However, that percentage is predicted to rise to just under 20% by 2050. They will be a huge and significant part of the future energy market, and thus crucial in meeting net zero as they can unlock otherwise unobtainable and inaccessible large-scale renewable and recovered heat sources, such as waste heat. They are especially important for built-up areas, as they are the most effective way of accessing waste heat from industry and heat from rivers and mines.
There are currently no specific protections for customers of heat networks. A recent Competition and Markets Authority report said that while the majority of heat networks customers received a service comparable to that for other traditional customers, a significant minority did not. Higher prices and more frequent outages were just a couple of the highlighted issues. The CMA recommended regulating the sector, with Ofgem announced as the regulator and Citizens Advice and the energy ombudsman named as alternative dispute resolution bodies.
I have some questions for the Minister. First, on non-domestic customers, what steps do the Government envisage will be taken to draw the line between which of them will receive these protections and which will not? Secondly, while protecting these provisions, why have they come to us so late and to what extent were Scottish heat network customers not receiving equivalent protections under the initial drafting of the Bill? Finally, does this come into play only in a case where the powers in Clause 171 to designate GEMA as the licensing authority in Scotland are used?
Lord Callanan (Con)
I thank all noble Lords for their contributions to this brief debate. I acknowledge the point made by the noble Lord, Lord Teverson: it will be difficult for me to ask him in future to limit the number of Liberal Democrat amendments after tabling all these. I quite take his point there; all I will say is that I flagged up to noble Lords at Second Reading that these amendments would be coming forward. There will be more on other subjects, as I also flagged up at Second Reading, which are still being drafted and will be tabled as soon as possible.
I first remind noble Lords, in acknowledging the point made by my noble friend Lord Lucas, that heat networks will play a crucial role in the UK reaching its net-zero targets, as they are one of the most cost-effective ways of decarbonising heating, particularly in built-up areas, where it would be more difficult to have individual property solutions. Noble Lords will probably be aware that the Climate Change Committee estimated that around 18% of UK heat will potentially come from heat networks by 2050—up from around 2% currently—to support the cost-effective delivery of our carbon targets. However, the sector is currently unregulated.
The Bill will provide regulation for that sector and give Ministers a power to introduce, among other things, consumer protection rules and carbon emission limits on heat networks. The majority of heat networks are performing perfectly well and often run by local authorities, housing associations and others, but one or two small, private networks are abusing their customers. Of course, once you are connected to it, that is effectively a monopoly. You have no choice but to take your business elsewhere, so regulation is required in the sector.
I will now talk to Amendment 162. The Bill already allows the Government to control heating sources by providing for authorisation conditions to contain emissions limits; this is contained in paragraph 14(3)(f) of Schedule 15. By gradually lowering emissions limits, authorisation conditions will drive changes in the types of fuels and technologies used to power various heat networks.
Using emission limits allows for dynamic, ongoing regulation. I submit that mandating specific heat sources is a more limited approach that risks the Government and this House picking winners. The exact approach for implementing emission limits will of course be subject to further consultation with industry and stakeholders. Settling on a pathway ahead of that consultation would, at this stage, be unwise.
Removing whole fuel types risks ignoring other factors that will come into play, such as technological improvements, system efficiencies, varying fuel costs, the replacement cycle of generation assets, and the need for flexibility in a system to provide separately for back-up or peak demand.
The Government are of course committed to net zero by 2050, and we see heat networks playing a vital role in this. The Government wish for the Bill and its secondary legislation to ensure that the heat network sector thrives and expands and is not held back in this goal. Therefore, I hope that the noble Lord, on behalf of the noble Baroness, Lady Worthington, will feel able not to press the amendment.
Lord Lucas (Con)
My Lords, I am delighted that my noble friend is so optimistic and shares the Climate Change Committee’s optimism about the future of heat networks. Will he therefore encourage his colleagues to support deep geothermal which, if we are to need that volume of energy, must be a serious contender as it is on the continent. However, in this country, since we have not had the exploration, there is a lot of uncertainty about whether the particular strata will behave in a way that allows heat extraction. It would be a real help to that industry if the Government were to take an interest in how to reduce that first well risk, so that we can get going in the way that the Netherlands and Germany have to take advantage of the deep heat that we all believe—or the British Geological Survey at least believes—is down there and available.
Similarly, is my noble friend content that the regulations governing tidal rivers—such as the one just outside—are such that we can use those as a source of heat for heat networks?
Lord Callanan (Con)
My noble friend makes some good points. There is tremendous potential from deep geothermal, and we are funding some exploratory projects. However, the performance is mixed: some projects have drilled and not found any rocks hot enough to power the network. What is perhaps more viable, particularly in mining areas, is the use of waste mine water for powering heat networks. There are a number of exciting schemes that I have visited, particularly in the north-east of England, where they can extract the warm water from existing mine workings, put it through heat exchangers and use it for heat networks. There are a lot of promising developments in this area.
I will get a more detailed answer for my noble friend on his question about tidal waters, but I know that there are some concerns in the industry about over-regulation from the Environment Agency in some of these areas—they have been flagged up to me. I wrote to Defra about a year ago on this subject but, to be honest, I cannot remember what reply I got—if any—at the time. I will write to him on that subject.
Lord Callanan
Member's explanatory statement
This amendment (together with the amendment in the name of Lord Callanan at page 139, line 35) widens the provision made by Clause 165(3) about the treatment of heat pumps so that it applies in relation to communal heat networks (as well as district heat networks).
Baroness Blake of Leeds (Lab)
My Lords, I rise to address the amendments in this group. My noble friend Lord Whitty outlined clearly the reasons for his amendments. I will speak to Amendment 161CA in my name and that of my noble friend Lord Lennie. At this stage, it is appropriate for me to declare my interest as a vice-president of the Local Government Association because it comes up in subsequent groups.
I want to refer to my experience when I was the leader of Leeds Council. Leeds PIPES is one of the most successful district heating schemes in the country and is expanding. It aims to take more than 16,000 tonnes of carbon out per year. It is already securing reductions in fuel bills of between 10% and 25%. The other element, which we have not addressed, is that, by working locally through these schemes, we have been able to bring training and employment to the local community. Indeed, 60% of the project spend is by local businesses in the community, making it a win-win scenario.
Social housing and council housing are not the only beneficiaries of the schemes, although they are an important aspect as there are more than 2,000 such homes already on the system. The system has started to be installed and expanded into the city centre, including in council buildings, ensuring that it is a sustainable project. I look forward with interest to the Minister’s response to the specific concerns raised by my noble friend Lord Whitty about consumer protection. The third amendment in his name, on the contribution to net zero, is valuable; it highlights how these networks need to be taken seriously. We need to make sure that they are sustainable and that their future is secure on behalf of the consumers that they supply.
Amendment 161CA in my name and that of my noble friend Lord Lennie refers specifically to ensuring
“that regulation covers systems that are operational but are operating inefficiently to the detriment of customers.”
As one of the heat network providers, Switch2, explains, a 2018 study by the CMA found that,
“although heat networks provide customers with a cost effective, efficient supply of heat compared to alternatives, some customers experience poorer outcomes in terms of price and service.”
That provider has contributed to the thinking on why heat network efficiency is so important. It says:
“The efficiency of your heat network is the crux of effective operation. Before the energy crisis and regulatory requirements, heat network efficiency was often seen by operators as a ‘nice to have’, rather than a necessity, despite significant cost saving benefits to both residents and operators.”
I think we have moved forward a great deal on that consideration.
Although we are focused on the incredibly high cost of gas at the moment, I hope that we can do everything in our power to improve efficiency and take this issue forward. It is clear that the Government are aware of this issue and are acting on it to a degree. Would it not be sensible to ensure that the regulatory remit also covers inefficiencies and that consumers are protected from the issue, rather than just requiring operators to apply for grants voluntarily?
Lord Callanan (Con)
I thank the noble Lord, Lord Whitty, and the noble Baroness, Lady Blake, for their comments and amendments. As I said on the previous group, the Government are committed to introducing protections for heat network consumers that ensure that they receive a fair price and a reliable supply of heat, and are not disadvantaged compared to other consumers. Ensuring that heat network consumers receive comparable protections to gas and electricity consumers is the primary reason for agreeing to the CMA’s recommendation to regulate heat networks.
We also recognise the vital contribution that heat networks will ultimately make in decarbonising heat in buildings. I highlight to the noble Lord that the Bill already provides for the heat networks regulator to prioritise protection of consumers and the decarbonisation of the sector. The Bill provides for Ofgem to be the heat networks regulator in Great Britain, with the Utility Regulator taking on the equivalent role in Northern Ireland.
Schedule 15 to the Bill provides for regulations making provision about the objectives of the regulator. This includes its principal objective to protect the interests of existing and future heat network consumers. This is equivalent to Ofgem’s principal objectives to protect the interests of existing and future gas and electricity consumers. We intend for this principal objective to be set out in the regulations.
Schedule 15 also provides for regulations specifying the interests of existing and future heat network consumers that are to be protected. This includes consumers’ interests in the reduction of greenhouse gas emissions generated by heat networks. Schedule 15 also provides for the introduction of carbon emissions limits on heat networks in England and Northern Ireland. We intend again for this to be provided for in the regulations.
The regulations will also give Ofgem powers to investigate and intervene on networks where prices for consumers appear to be disproportionate compared to systems with similar characteristics or if prices are significantly higher than those consumers would expect to pay if they were served by an alternative, comparable heating system. Ofgem will also be able to set rules and guidance on how heat networks recover their costs through their heat tariffs.
Amendment 161CA tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, is on ensuring the efficiency of existing heat networks. I thank them for highlighting the importance of ensuring that regulation facilitates the improvement of technical standards on heat networks. This will ensure efficient heat networks that provide fair prices and reliable heat to consumers at the same time.
I reassure noble Lords that the Bill, more specifically paragraph 14(3)(d) of Schedule 15, already provides measures for ensuring heat network efficiency. Schedule 15 provides for the introduction of technical standards, which will protect consumers from being supplied by inefficient networks. The regulator’s compliance activity in relation to new and existing heat networks will include work on any standards mandated in authorisation conditions under this power.
I therefore submit that the intentions behind the noble Lords’ amendments are already provided for in the Bill, so I hope that they do not press them.
Lord Whitty (Lab)
My Lords, I thank the Minister for that reply. I will clearly want to look at these clauses and the Schedule once all these amendments have been agreed and adopted. I am still not absolutely convinced that all aspects of consumer protection will be covered by this and by Ofgem’s role, but I welcome the Minister’s reassurance.
The key issue is whether all interventions will treat the consumers of district or decentralised heating the same as they would consumers of other forms of energy supply. That also applies to the Government. The Minister referred to the price cap, but the price subsidies or support that we agreed the other week has not found its way to consumers of district heating. That may be a matter of time or it may be that the entity that supplies the heat is obliged to pass that on, but that is not clear at the moment. Things like that need to be tightened up before the final version of the Bill is agreed. I therefore look forward to seeing what the clauses look like following the Minister’s amendments to see whether any further amendments are needed to meet my concerns in this respect. In the meantime, I withdraw my amendment.
Lord Callanan
“(2A) The provision made in Schedule 15 is without prejudice to the generality of subsection (1).”Member’s explanatory statement
This amendment makes it clear that the breadth of the power under Clause 168 is not affected by the detailed provisions made by Schedule 15.
Lord Callanan
Member’s explanatory statement
This amendment omits a definition that is no longer needed as a consequence of the amendments in the name of Lord Callanan at page 292, line 6 and at page 303, line 35.
Lord Callanan
Member’s explanatory statement
This amendment limits any requirement on a Regulator of heat networks to keep under review the carrying on of activities connected with heat networks to those activities carried on in the part or parts of the United Kingdom for which that Regulator is responsible.
Lord Callanan
Member’s explanatory statement
This amendment ensures consistency with the reference to costs in the amendments in the name of Lord Callanan to Clause 170.
Lord Callanan
“(ba) regulations under section 168 which create an offence or provide for an increase in the penalty for an existing offence;”Member’s explanatory statement
This amendment provides that regulations made by the Department for the Economy in Northern Ireland that create an offence, or provide for an increased penalty for an existing offence, may not be made unless a draft has been laid before and approved by a resolution of the Northern Ireland Assembly.
Lord Callanan
Member’s explanatory statement
This amendment (together with the amendment in the name of Lord Callanan at page 142, line 37) clarifies the heat network-related costs that can be charged to holders of gas or electricity licences in England, Wales and Scotland.
Lord Callanan (Con)
Let me first remind the Committee of the broader ambitions of this section of the Bill, which covers heat network zoning, which is a key policy to deliver the scale of expansion of heat networks that will be required to meet net zero. This process brings together local stakeholders and industry, to identify and designate areas where heat networks are expected to be the lowest-cost solution for decarbonising heating. The clauses will enable the Government’s commitment to introduce zoning by 2025.
Amendments 162YYYA, 162YYYB, 162YYYC, 162YYYD, 162YYYE, 162YYYF, 162YYYG and 165A—who gives these numbers to amendments?—are in my name. They will permit regulations to allow the heat network zones authority, which I will refer to as the authority, to directly designate zone co-ordinators and heat network zones in cases where these functions have not been performed by the relevant responsible bodies. This will deliver a more efficient process for establishing heat network zones.
More specifically, Amendment 162YYYA permits regulations to enable the authority to designate a person as zone co-ordinator. This may be necessary in scenarios where, despite directing it to do so using the powers in Clause 176(4), a local authority does not establish a zone co-ordinator. This could prevent the heat network opportunity that has been identified from being realised. Similarly, Amendments 162YYYB to 162YYYG provide for areas to be designated as heat network zones by the authority, in addition to zone co-ordinators as already provided for in Clause 177(1)(b). They also ensure that this expanded role for the authority is reflected elsewhere in Clause 177. This mirrors existing powers for identifying areas as heat network zones and reviewing areas designated as such. The authority or zone co-ordinators may undertake each of these activities. These amendments will therefore ensure that the authority may designate zones directly, avoiding unnecessary delays to the rollout of heat networks.
Amendment 165A concerns low-carbon heat sources. A range of heat sources could potentially be used by heat networks, including heat from thermal power stations, industrial processes or cooling and refrigeration. Clause 180 gives the Secretary of State powers to require heat sources in zones to connect to a heat network. This amendment will allow regulations to ensure that heat sources that are required to connect do not abuse their monopoly position and charge disproportionate prices for the heat that they provide. Equally, it will allow the regulations to ensure that the requirement to connect does not unduly disadvantage heat sources themselves. This will help to support fair pricing, which will give investors greater security and confidence and help to accelerate the delivery of large-scale heat networks in zones.
I now turn to Amendment 162YYYZA in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds, regarding designating GEMA as the heat network zones authority. The authority will be a national body responsible for zoning functions that require national-level standardisation or are most efficiently or effectively carried out at a national level. This approach will allow for national standards and consistent rules to apply in the initial identification of a potential heat network zone.
In terms of who could fulfil the authority role, Clause 176(3) is explicit that the Secretary of State may but need not be designated as the authority. The clause as drafted therefore already provides that regulations may appoint GEMA as the authority. We will be specifying the authority’s functions and responsibilities in the regulations; this will therefore be the subject of further consultation.
The authority will fulfil a different function from the heat network regulator, which, as set out in Clause 166, we propose will be fulfilled by GEMA in relation to Great Britain. This role will cover all heat networks, both within and outside heat network zones. We do not envisage a separate regulator for heat network zones in England. We will be specifying the authority’s functions and responsibilities in the appropriate regulations; we intend for the body to undertake functions on behalf of the Secretary of State and be accountable to the Secretary of State.
Detailed considerations regarding roles and responsibilities in zones will of course be subject to further consultation as we continue to develop our policy proposals. Consultation on these issues will take place in due course. Appointing the authority in regulations will allow for amendment should this be required as and when its functions change over time as the networks become more developed in the UK. I hope that this has helped to clarify our proposed approach and the scope of the powers already provided.
I thank the noble Lord, Lord Teverson, for his thoughtful Amendments 163 and 164, which would make the provision of the zoning methodology mandatory and require the methodology to include certain details. As always, we want legislation to be flexible and future-proofed. In this context, this means that the regulations can adapt to developments in the heat network market. The Government are clear that a national methodology for identifying zones will be necessary to enable a robust and transparent approach that increases overall efficiency and drives consistency. To this end, a pilot to support the development of the methodology is under way in 28 English cities and towns. The outputs from the pilot will help to inform policy design and future consultation on the methodology and its contents. Accepting these amendments now would, in effect, tie the Government’s hands at this stage to the potential cost of industry, stakeholders and, ultimately, consumers.
Next, I turn to Amendments 165 and 166, also from the noble Lord, Lord Teverson, which concern interactions between the national methodology and the co-ordination and delivery of heat networks at a local level. Accepting Amendment 165 would mean that the methodology was no longer nationally determined and would have to vary according to each local authority’s requirements. A national methodology will minimise the duplication of effort at the local level and instead ensure that local input is applied at the most appropriate stage: the refinement and designation of the zones themselves.
Heat network zoning will support local net-zero goals by unlocking the lowest-cost pathway to heat decarbonisation in built-up areas. As we expect that zoning co-ordinators will work with the local authority, their work will be brought into local net-zero plans. Therefore, Amendment 166 risks creating unnecessary bureaucracy at a local level, reducing zoning co-ordinators’ capacity to focus on the effective delivery of zones.
The final amendment in this group, Amendment 167 tabled by the noble Lord, Lord Ravensdale, would extend the Bill’s heat network zoning provisions to individual heat pumps. As noble Lords will be aware, various factors, including building density and availability of heat sources, mean that certain localised areas are particularly suited to heat networks. This is why we are introducing a framework to identify where heat networks can provide the lowest-cost low-carbon heating solution.
The noble Lord’s amendment would apply zoning to heat pumps. Our strategic approach, set out in the heat and buildings strategy, is to work with the grain of the market and our policy levers are aligned to natural trigger points to create optionality for consumers regarding their various heating options. For clarity, such trigger points include appliance replacement and change of tenancy or property ownership, among many others of course. An approach where more technologies are zoned risks removing choice for consumers and could cause early appliance scrappage and additional disruption.
I thank noble Lords for this debate and for their amendments. I ask them not to press their amendments.
Lord Teverson (LD)
Could I ask the Minister for some clarification? I apologise if I have not got my head around this. What is a zone: a council estate, a county, a region or a combined authority? I am trying to get from the Minister a mental picture of what a zone could be and what determines that boundary.
Lord Callanan (Con)
No specific boundary is set out in the proposals. It can vary from authority to authority. It is very unlikely to be a whole region; it is much more likely to be an inner-city area, an industrial estate or something like that. It will very much depend on the local circumstances and what heating sources are available. Crucially, it will depend on local support, which is why local authorities are crucial to this process. Many local authorities around the country are already in discussions and are very keen to get on with these zoning proposals, presumably including Leeds. Although I know that the noble Baroness, Lady Blake, does not speak for Leeds any more, I know that it is one of the pioneers in this area.
Lord Ravensdale (CB)
I thank the Minister for his response. He set out the reasons why district heating is particularly well suited to a zoning approach. Could he expand a little on why, for example, heat pumps or urgent retrofits are not suitable for zoning in the same way?
Lord Callanan (Con)
They could be, but we do not want to designate a particular technology because it will vary from area to area and locality to locality. It is to be expected that heat pumps will play a part in heat network zoning. That would be the case but we do not want to be particularly specific.
Lord Lennie (Lab)
I thank the Minister and the noble Lords, Lord Teverson and Lord Ravensdale, for their contributions. I will assume that their questions have at least been addressed, if not fully answered. We might come back to them later; we shall see. On Amendment 162YYYZA, which would designate GEMA, the Minister said that there will be further consultation on who will ultimately become the designated body for network zones. Once that decision is made, will we hear about it? Will whoever has been designated that role be regulated or will it just be announced?
Lord Callanan (Con)
It will be set in the appropriate regulations. The bottom line is that we have not made a final decision at this stage.
Lord Callanan
“(b) to designate a person as a zone coordinator where a local authority (or local authorities) fail to comply with a requirement imposed by virtue of paragraph (a).”Member's explanatory statement
This amendment enables the Heat Networks Zones Authority to designate a zone coordinator where a local authority (or authorities) fail to comply with a requirement to make such a designation.
Lord Callanan
Member's explanatory statement
This amendment enables zones regulations to provide for areas to be designated as heat network zones by the Heat Network Zones Authority as well as by zone coordinators.
Lord Callanan
“(ga) make provision about the terms on which thermal energy is supplied to a district heat network in pursuance of regulations made by virtue of paragraph (f) or (g) (including in particular provision about the amount that may be charged);”Member's explanatory statement
This amendment enables regulations to make provision about the terms on which thermal energy is supplied to a district heat network where the supply is enabled by a requirement imposed on a person by a zone coordinator or where the thermal energy is generated by machinery or other equipment of specified types.
Baroness Blake of Leeds (Lab)
I shall speak to the amendments in the names of my noble friend Lord Lennie and myself. Before I get to that point, though, I want to stress that the contributions made in this debate have been so strong that I cannot see how the Government can continue not to take this aspect of the debate with the seriousness it deserves, because at the end of the day we have very serious obligations and commitments to make. We are not going to achieve what we have set out to do if we do not focus on delivery, and the importance of how we take our communities and people with us on that journey. I really do not think that has been stressed enough.
The noble Lord, Lord Ravensdale, put it very well when he stressed the importance of involving local authorities in setting up local area energy plans, particularly something that has to be repeated again and again when we talk about this: the bringing-in of powers that need to go down to local authorities and then into the communities. The important aspect of this is that the resources must be there to accompany those powers. Frankly, we are in a situation where local authorities across the country have lost over 60% of their budgets. This needs to be taken into account when we consider how local areas can contribute to the important work that needs to be done in this space. The noble Baroness, Lady Boycott, expressed it exceptionally well by highlighting the current contradictions in government policies that are holding us back in so much of what we need to do.
Going through the debate, I commend the contributions that have been made from our partners coming in. They have brought such important evidence as to what we could be doing, and about the huge potential that could be unleashed if the Government were able to put the necessary measures in place.
In this group, we have focused specifically on setting up a community electricity export guarantee programme. Our amendments relate to community energy and would bring in new clauses between Parts 7 and 8 and Parts 12 and 13. We have done this because, as we have heard, community energy covers aspects of collective action to reduce, purchase, manage and generate electricity. Projects obviously have an emphasis on local engagement and local leadership and control. I firmly believe that that action can often tackle challenging issues around energy with communities, which are well placed to understand their local areas, and bring people together with common purpose. As we have heard, it often takes only a couple of experienced and committed people at a local level to unlock some of the issues we have faced that have been holding us back, and to advise government on what needs to be changed and done to bring this forward.
I do not know whether others picked up a significant amount of interest in the different media outlets over the weekend about community energy projects and initiatives that are being brought forward. We have heard that those projects are significant and cover a whole range of different aspects and ways of coming forward. I do not want to go over all the contributions that have been made, but I hope that we are all looking for some very specific measures and some movement from the Government that we can take forward to Report to examine how we can make the difference that we need.
Running all the way through this is the cruel impact of energy bills on our communities and local people. The response communitywide is because people have to work across so many different areas. That key element of behaviour change is absolutely essential if we are to bring the necessary partners together.
Our amendments would require the Secretary of State, within six months, to
“require licensed energy suppliers with more than 150,000 customers (‘eligible licensed suppliers’) to purchase electricity exports from sites generating low carbon electricity with a capacity below 5MW, including community energy groups … Licensed energy suppliers with fewer than 150,000 customers may also offer to purchase electricity exports from exporting sites … including community owned energy groups”.
Eligible licensed suppliers must
“offer a minimum export price set annually by OFGEM”,
offer a minimum five-year contract and allow
“the exporting site to end the contract after no more than 1 year.”
These steps are important to make sure that the benefits come to community energy projects and that they have a guaranteed stable market to operate in.
A community smart export guarantee is supported by Community Energy England. It would increase investor certainty, especially for larger-scale ground-mounted projects where most of the energy is exported. I am interested to hear what consideration the Government have given to such a scheme and whether we can look forward to progress to ensure that we can deliver.
Lord Callanan (Con)
I thank all noble Lords who contributed to this important debate. Let me start with Amendment 168, moved by the noble Lord, Lord Ravensdale. It seeks to ensure that guidance is published for local authorities regarding local area energy planning. Although the amendment is well-intentioned, in my view, it is not necessary. The Government already have work under way to consider the role of local area energy planning in delivering net zero and supporting efficient network planning, including heat network zoning policy. Through the Government’s Local Net Zero Forum, we are working with local authority representative bodies to discuss the roles and responsibilities of local government, and how we will work with local government to reach our targets.
I am sure the noble Lord agrees that local authorities are already well placed to undertake local area energy planning given their established relationships with many key stakeholders. Guidance to help develop local area energy plans was already published earlier this year and the Government directly supported this activity through the £104 million “prospering from the energy revolution” programme. This included co-funding for the development of guidance for local areas developing local energy plans and the subsequent delivery of those plans. This has so far seen plans produced for Peterborough, Pembrokeshire, Stafford, Cannock Chase and Lichfield. Given that this activity is already under way, I hope the noble Lord agrees that his amendment is unnecessary and will therefore feel able to withdraw it.
I thank the noble Baronesses, Lady Young, Lady Boycott and Lady Blake, and the noble Lords, Lord Teverson and Lord Lennie, for Amendments 238 and 242G, which seek to enable community renewable generation schemes to sell electricity generated to local consumers. I also thank the noble Baroness, Lady Meacher, for her contribution. The Government believe that community groups have a role to play in our efforts to eliminate our contribution to climate change. However, it is our view that encouraging or introducing obligations on licensed electricity suppliers to mandate them to offer local tariffs would be a disproportionate intervention in the market. Local tariffs are better left as commercial decisions for suppliers.
There are already examples of suppliers offering local tariffs through the market. Octopus Energy offers customers in Market Weighton, Caerphilly and Halifax a tariff with discounted prices at times when electricity is generated locally. Any new obligation in this area is likely to be complex and burdensome, particularly if it interferes with suppliers’ existing services and processes already used to serve their customers.
It is therefore more appropriate to allow market-led solutions to continue to develop, rather than us trying to make commercial decisions on behalf of suppliers. As we set out in the British energy security strategy, the Government are developing local partnerships in England that will enable supportive communities to host new onshore wind infrastructure, for example, in return for benefits including lower energy bills. The Government are separately considering wider retail market reforms that deliver a fair deal for consumers, ensuring that the energy market is resilient and investable over the long term.
As I am sure noble Lords are aware, the Government are undertaking a comprehensive review of electricity market arrangements in Great Britain, which considers options that encourage generation and demand to consider location. It also asks how markets can better value the role of small-scale, distributed, renewable electricity. The department is currently looking at the responses to the review of electricity markets consultation, which closed in October.
Amendments 237 and 242F would enable community renewable generation schemes to receive a guaranteed minimum price for the electricity that they export to the grid. Small-scale, low-carbon electricity generation should be brought forward through competitive, market-based solutions, which will help to encourage innovation and investment. We introduced the smart export guarantee in 2020 to provide exactly that: small-scale, low-carbon electricity generators with the right to be paid for the renewable electricity that they export to the grid. It ensures that these generators, which would otherwise struggle to find a way to sell electricity, can have guaranteed access to the market and a choice of options following the closure of the feed-in tariffs scheme.
To enable the SEG to be truly market-based and encourage innovation, however, suppliers must be in a position to set both the tariff levels and structure for themselves. We should allow the small-scale export market to develop with minimum intervention and not introduce a support scheme that specifies minimum prices or contract lengths for generators.
I say without much optimism that I hope noble Lords are reassured that the Government recognise the role that community-owned and locally owned renewable energy schemes can play in supporting the UK’s national net-zero targets. I hope that noble Lords will feel able to withdraw or not press their amendments.
Baroness Bennett of Manor Castle (GP)
Before the Minister sits down, can he tell me—either now or in writing later—what is the Government’s estimate of the amount of local community energy generation that would be arrived at by 2030 under the market-led approach?
Lord Callanan (Con)
I am happy to give the noble Baroness a detailed answer in writing but we do not see any particular limit on it. It is what the market will develop. The problem with the noble Baroness’s amendment is that she is seeking, in effect, to get every other customer to subsidise a relatively uncompetitive form of energy production. If community energy schemes are low-carbon and competitive, they will be able to take their place in the generation mix. Many of these community energy schemes are already supported and will continue to be.
Baroness Young of Old Scone (Lab)
I wonder whether, in writing to the noble Baroness, the Minister could also write to us on a couple of other things, including the number of schemes that have gone through the two mechanisms that were introduced subsequent to the feed-in tariff changes. This would let us see how trends are operating in the market situation that he is describing at the moment; my perception is that it is not producing growth in the uptake of community schemes. The Government must be clear: are they keen on community schemes, seeing them as a real attribute, or are they keen on only commercially competitive ones? If it is the latter, I am almost certain that we will not see many come forward.
Lord Callanan (Con)
We are keen on these schemes but, as always, the question comes down to cost. How much we are prepared to subsidise an essentially uncompetitive scheme that is leveraged on the bills of everyone else who is not benefiting from these schemes? That is the fundamental question. I am of course happy to write with the clarification that the noble Baroness asks for.
Baroness Bennett of Manor Castle (GP)
I am sorry but I really have to come back on that. Does the Minister acknowledge that there are advantages to these schemes other than on cost? They include, for example, insulation, bringing communities together and increasing acceptance and understanding of net zero, as many noble Lords have outlined.
Lord Callanan (Con)
If the noble Baroness is asking me whether I think that there is an advantage to insulation schemes, the answer is of course yes. I am not sure what her question is, but insulation is a great thing.
Baroness Meacher (CB)
Finally, if the Minister can bear it, can he tell us in writing whether he feels that these small community schemes could in fact deliver 10% or so of the UK’s electricity energy; and what estimate he has made of the feasibility of reducing all these technical regulatory constraints, which cost so much at the very beginning? He will understand that, if you are going to make a profit, you have to invest up front. Small schemes are unlikely to be able to make that initial investment but it may well be a tremendous bonus to the country in the longer term if the Government were able to help them reduce all these costs at the outset. It would be helpful to have all that set out in a letter if the Minister is able to do so.
Lord Callanan (Con)
I am of course happy to set out to noble Lords the details of our position in writing. We want to reduce bureaucracy as much as possible but we have an overriding need to ensure the stability of the energy system. Certain technical requirements need to be met by these schemes. We want to encourage them as much as we possibly can, but that comes with limits. We will certainly write with as many details as we can provide.
Lord Lucas (Con)
My Lords, my noble friend has been very helpful, but I am none the less fairly disappointed by the replies he has been able to give. To illustrate, I live in Eastbourne and, if you stand on the hills above Eastbourne—Britain’s sunniest town—and look down at hundreds of acres of industrial and retail estates and car parks, about the only solar panel you will see is on the local college’s eco training hub. That is because the ownership and commercial benefits of these areas are extremely complicated. No one is in a position to get a cost-effective, reasonable-scale scheme going on their own; it needs something that will work as a whole.
A decent feed-in tariff need not be subsidised—it can be below market rate—but there needs to be something so that there is a base on which you can build. My noble friend’s department was kind enough to send a representative to our recent solar summit. One of the main things that came out of a gathering of local businesses, energy suppliers and so on was the need for a basis on which local collaboration can be built, not to create something that requires a subsidy to produce electricity at a greater cost than would otherwise be the case, but to enable a very complicated situation to come together and be supported into commerciality, allowing local virtuous circles of electricity generation and consumption to emerge. That is not happening in our system at the moment, which is ridiculous. Something needs to happen to enable us to move from 200 hectares of white roof to 200 hectares of black roof, and to get the benefits of that.
Lord Callanan (Con)
As I said, a number of suppliers already offer competitive tariffs in the market. They will provide long-term certainty on pricing. There are many examples of industrial units that have already put solar panels on. Obviously, the most cost-effective way is for them to use that power themselves and export any surplus power to the grid using the smart export tariff guarantees. I will answer that question again: the Government are supportive of community energy schemes. We want to see more of them, but we think that is best delivered through the market framework. I will happily provide noble Lords with more detail in writing.
Lord Teverson (LD)
Can I remind the Minister that it is government policy to decarbonise the electricity system within 12 years and one week? That is no time at all. I am absolutely a defender and promoter of market forces, but in some places they just do not act quickly enough. We have a very short period of time in which we must decarbonise the electricity system. I cannot see why the Minister would not be in favour of ease of movement into this market. As the noble Lord, Lord Lucas, said, it does not necessarily require subsidy. To use a Borisonian term, it would unleash the real will of communities in this country to help in that target of decarbonisation by 2035. I cannot see why the Government do not grasp this and make the most of it.
Lord Callanan (Con)
As I said, we are supportive of proposals. We accept the target for decarbonising electricity production and we are moving ahead full-scale with our sails erected—which is no doubt a Borisonian term—towards that goal. Community energy will play probably a small role, but it will play a role. Obviously, larger-scale generators will supply the majority of the nation’s electricity.
Lord Ravensdale (CB)
My Lords, I thank all noble Lords for participating in this very informative debate. I was very encouraged by what the Minister had to say in response to my Amendment 168 and the work already ongoing in government. I come back to the fragmented nature of local area energy plans: some local authorities have the resources and others perhaps do not. I look forward to fleshing out the detail on that as we go towards Report.
The noble Lord, Lord Teverson, and the noble Baroness, Lady Blake, put it really well. The key theme running through all this is the participation of local authorities and local groups in our energy transition and about defining the part they have to play. We have these big, top-down targets—50 gigawatts of offshore wind by 2030 and 24 gigawatts of nuclear by 2050, as well as heating targets—which are all of course very necessary. But we need that bottom-up view and a better definition of the role of local authorities and local groups in supporting this huge engineering challenge, and I say that as an engineer. It is about stitching together all that local data to better inform how we respond nationally. I look forward to further discussions leading up to Report but, with that, I beg leave to withdraw my amendment.
Lord Lennie (Lab)
My Lords, I thank noble Lords who have spoken in this debate so far. We on the Labour Benches certainly welcome Amendment 192 in the names of the noble Baronesses, Lady Sheehan and Lady Hayman, and others, which would create a requirement to publish a national energy demand reduction strategy. It seems an obvious point to make.
We received some information from Energy UK. It says that, although we cannot deal with the current crisis in this Bill, it can ensure that long-term strategies are put in place to tackle the energy efficiency of the UK’s housing stock. This powerful point was made by the noble Lord, Lord Foster. If we do not have targets to measure it against, we cannot really manage it; we just have—I do not quite know what—a sort of wish list, I suppose. We support the targets suggested by the noble Lord, Lord Foster.
The Bill outlines its intention to create powers to remove the European energy performance of buildings directive, or EPBD, requirements in the UK. Those requirements are not perfect, but they have been in place in the supply chain, effectively delivering energy efficiency measures and low-carbon technologies. How will the Government safeguard against the potential for the UK to roll back on energy performance of buildings regulations when we remove the European energy performance of buildings regulations? We risk falling behind the rest of Europe, if we have not done so already, in this space.
We also need to see the detail regarding how the Government will safeguard against the potential for the UK to fall behind the rest of Europe. We need clarification on what measures the Government will take to ensure that all buildings are fit for the future, given the lack of measures in the Bill to reform planning and building regulations. The latter requirement could also be backed by the introduction of a net-zero test, as previously set out, but what measures will the Government take to ensure that all buildings are fit for the future, given the lack of measures in the Bill to reform planning and building regulations or set specific targets for delivery?
Finally, in relation to what the noble Lord, Lord Foster, said about the 19 million homes requiring energy efficiency measures to be put in place pretty quickly, I recommend to the Government Labour’s warm homes plan, which will deliver fully costed upgrades to 19 million homes, cutting bills and creating thousands of good jobs for the future.
Lord Callanan (Con)
I thank everyone who has contributed to this debate on energy efficiency, which is very much a matter dear to my heart. Noble Lords may have noticed that I was delighted to launch the Government’s £18 million “It all adds up” energy saving campaign on Saturday—it is almost as if it was designed especially for this debate—with advice that could help UK households cut hundreds of pounds off their bills. The campaign features tips on simple, low or no-cost actions that households can take to immediately cut energy use and save money while ensuring that people are able to stay safe and warm this winter.
We know that warmer homes and buildings are key to reducing bills and will create jobs along the way. That is why the Government are committed to driving improvements in energy efficiency, with a new ambition to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030. Existing plans that we already have in place are expected to deliver around half of this new ambition. To go further, we will need to work together as a country to reduce waste and improve the way we use energy. As has been referenced in this debate, a new energy efficiency task force is being established to lead this national effort.
First, Amendment 192, in the names of the noble Baronesses, Lady Hayman and Lady Sheehan, and the noble Lord, Lord Whitty, requires the Secretary of State to publish a national energy demand reduction strategy to provide for the delivery of low-carbon heat and energy efficiency targets for all UK homes and buildings. Again, while I understand the reasoning behind this amendment, we do not consider it necessary to ensure that our commitments to improve the energy performance of buildings and our net-zero targets are met.
We already have a heat and buildings strategy which sets out the actions the Government need to take to increase the energy efficiency of buildings in the near term and provides a clear long-term framework to enable industry to invest and deliver the transition to low-carbon heating. Just having another strategy document does not make the policy decisions that are required any less difficult. As I have already mentioned, the Government are launching the energy efficiency task force with the key objectives of developing a long-term strategy to drive improvements in energy efficiency and reduce national energy demand.
As I have repeated many times in the House, we are investing £6.6 billion over this Parliament on clean heat and improving energy efficiency in buildings, reducing our reliance on fossil fuel heating. As I think the noble Lord, Lord Ravensdale, referenced, the Autumn Statement also recently announced a further £6 billion of funding to become available from 2025. In the context of spending reductions and a difficult economic environment, I was delighted to see that announcement from the Chancellor. The Government also recently announced—and we are now consulting on—a further energy efficiency support scheme through ECO+. The scheme will be worth about £1 billion and shall deliver an average household saving of around £310 per year through a broad mix of affordable insulation measures, including loft insulation, cavity wall insulation, draught-proofing and heating controls.
Amendment 197, in the name of the noble Lord, Lord Foster, requires the Secretary of State to set an average energy performance certificate target for mortgage lenders of EPC C by the end of 2030. It also gives the Government the power to make regulations that relate to the disclosure of energy performance information on properties in their portfolio. I have met with many of the lenders, and I agree that they have an important role to play in improving the energy efficiency of the UK’s housing stock. However, as we highlighted in our consultation on improving home energy performance through lenders, the Government are concerned that the amendment may have unintended consequences for the mortgage and housing market. I am sure that this is not the noble Lord’s intention, but there is a danger of disincentivising mortgage lenders from lending to energy-inefficient properties. We would then end up with a load of unmortgageable homes in the UK, which I do not think anybody wants to see.
It is imperative that mortgage lenders are not disincentivised from lending to any particular group while home owners are under unprecedented financial pressure. The Government are using the feedback from the consultation to refine the policy and will publish a response once the policy matters have been resolved.
The noble Lords, Lord Ravensdale and Lord Foster, and the noble Baroness, Lady Young, all mentioned the importance of skills. If anything, that is key to this area, probably even more so than the availability of funding. We understand that scale-up requires consistent long-term deployment streams via government funding and regulation, which is what we are attempting to do, so that companies working in these markets can make the investments needed and individuals can choose to upskill.
To grow the installer supply chain, we are investing in skills and training. In 2021, the Government invested £6 million in the BEIS skills training competition, resulting in almost 7,000 training opportunities being provided across heat pump installation and wider retrofit skills. In fact, we have another training competition out for bids at the moment.
Amendment 212 in this group from the noble Lord, Lord Foster, would require the Secretary of State to collect and publish a list of those public buildings that hold display energy certificates, commonly referred to as DECs, and those that do not. I really do not believe that it would be cost effective for the Government to identify and inspect all public buildings that require a DEC, nor to record this information. The energy performance of buildings report published in 2020 cited an estimated DEC compliance of about 83%. We currently publish DEC data as part of our register. I hope noble Lords agree that this demonstrates that the existing system, which we intend to continue and keep under review, is working well in respect of DEC compliance.
Finally, Amendments 198A and 198B from the noble Lord, Lord Foster, would require the Secretary of State to ensure that all households achieve an energy performance certificate band C by 2035, with specified exemptions, and require regulations relating to energy performance in existing premises. The Government remain committed to our aspiration of improving as many homes as possible to reach EPC band C by 2035 where practical, cost effective and affordable. That is why, as I mentioned, we are investing £12 billion during this Parliament into the various Help to Heat schemes, some of which the noble Lord referenced, to make sure that homes are warmer and cheaper to heat, including £1.5 billion to upgrade around 130,000 social housing and low-income properties in England. However, we need to retain flexibility to choose the best approach, rather than being restricted to the regulatory requirement.
Regarding existing premises, the Government have consulted on raising the minimum energy-efficiency standards for the domestic and non-domestic private rented sectors. We are in the process of considering our responses to both consultations. However, it is important to stress that improving existing buildings is a complicated issue and requires striking a balance between improving standards and minimising impacts on the housing market, and, for the private rented sector specifically, ensuring that the final policy is fair to both landlords and tenants. That is a particular dilemma that we face with the PRS regulations.
Similarly, regarding the social rented sector, the Government have committed to consult within six months of the Social Housing (Regulation) Bill receiving Royal Assent. By prescribing specific targets without any opportunity for landlords to offer views, the proposed amendment would be at odds with this commitment.
I thank all noble Lords who contributed during this debate, but given what I have set out and the Government’s long-term commitment to drive improvements in energy efficiency, I hope that they will not press their amendments.
Lord Foster of Bath (LD)
Before the Minister sits down, could he clarify whether the Government believe that the 2017 Clean Growth Strategy, which talks about achieving EPC band C by 2035 for all homes where this is feasible, affordable and cost-effective, is a target or now just an aspiration? Could he be clear on the language? He used “aspiration” a minute ago. In the documentation, and in every letter he has written to me and in every answer, it has been described as a “target”. I just want to be clear.
Lord Callanan (Con)
I think we are getting into semantics here. I am not sure there is a huge difference between them. My point is that it is not helpful to embed it in primary legislation. It is a target; it is an aspiration; it is something we are working towards that we want to try to deliver, but it is a complicated area with a lot of difficult policy choices and potentially a huge amount of expenditure.
Lord Foster of Bath (LD)
In the light of that, if “aspiration” and “target” are the same and the Minister is not therefore resiling from the 2017 document, could he tell me why the noble Lord, Lord Greenhalgh, and, more recently, the Secretary of State for Environment, Food and Rural Affairs have argued that there is merit in putting environmental targets into legislation? I do not understand where the problem comes. The Minister says the Government need flexibility in the way this is delivered. I do not disagree with that. I am sure that new technology will come along that will perhaps help to do this more efficiently, effectively and quickly. I hope that is the case, but the way in which a target is achieved is totally different from having that target. The industry has been absolutely clear that it is very keen to see a statutory target to give it the confidence it needs.
Lord Callanan (Con)
I disagree with the noble Lord. I have had many discussions with businesses and companies in this area, and we are providing the policy certainty they need. It is clear what direction the country is going in. We have listened to a lot of the feedback, have set out longer delivery programmes for the various schemes that we fund directly and are giving the certainty that people need. It does not make any difference to the industry, in terms of the policy landscape, to enshrine a target in primary legislation as opposed to it being an aspiration, a target or whatever other language the noble Lord prefers.
Lord Ravensdale (CB)
My Lords, I have listened to everything the Minister said in response and, as I said earlier, it is great that the Government are moving strongly on this and all these matters, particularly skills and many other areas. However, there is still a need for a joined-up strategy and for some of these targets to be in statute. We have learned from the green homes grant, for which one of the issues was the lack of the long-term thinking that a strategy would provide.
The real issue here, as noble Lords have powerfully articulated, is that we have picked all the low-hanging fruit—the decarbonisation of our electricity system, and vehicle and transport electrification—and now we have to move much higher up the tree to more difficult matters, such as the decarbonisation of heat. The noble Lord, Lord Foster, powerfully articulated the challenges in that area. We will have many more discussions on this leading to Report but, with that, I beg leave to withdraw the amendment.
Lord Callanan
“Part 9AEnergy Savings Opportunity SchemesEnergy savings opportunity schemes(1) The Secretary of State may by regulations (“ESOS regulations”) make provision for the establishment and operation of one or more energy savings opportunity schemes.(2) An “energy savings opportunity scheme” is a scheme under which obligations are imposed on undertakings to which the scheme applies for one or more of the ESOS purposes.(3) The ESOS purposes are—(a) enabling or requiring the energy consumption for which an undertaking is responsible, or the greenhouse gas emissions resulting from that consumption, to be assessed, audited, reported and published;(b) enabling or requiring possible energy savings or emissions reductions to be identified and recommended;(c) enabling or requiring the costs and benefits of possible energy savings or emissions reductions to be assessed;(d) encouraging or requiring undertakings to produce plans or set targets for achieving energy savings or emissions reductions;(e) encouraging or requiring undertakings to take action for the purpose of achieving energy savings or emissions reductions;(f) encouraging or requiring undertakings to achieve energy savings or emissions reductions.(4) An energy saving is a reduction in the energy consumption for which an undertaking is responsible.(5) An emissions reduction is a reduction in the greenhouse gas emissions that result from the energy consumption for which an undertaking is responsible (whether or not that consumption is also reduced).(6) ESOS regulations may make provision about determining—(a) the energy consumption for which an undertaking is responsible;(b) the greenhouse gas emissions resulting from that consumption.(7) ESOS regulations may—(a) impose requirements on any person;(b) confer functions on any person;(c) provide for a person to exercise discretion in dealing with any matter.(8) The provision made by this Part is without prejudice to the generality of subsection (1).(9) For the purposes of this Part—(a) the scheme established by the Energy Savings Opportunity Scheme Regulations 2014 (S.I. 2014/1643) is to be treated as having been established by provision made under subsection (1);(b) a reference to a scheme administrator includes a reference to a compliance body within the meaning given by those Regulations.”Member's explanatory statement
This new Clause is the first Clause in a new Part 9A of the Bill (also containing the 12 other new Clauses inserted after Clause 201 by amendments in the name of Lord Callanan) making provision about Energy Savings Opportunity Schemes. The new Clause gives the Secretary of State the power to make regulations about Energy Savings Opportunity Schemes.
Lord Callanan (Con)
My Lords, for the benefit of the noble Lord, Lord Teverson, I have some more government amendments for his delectation. I will also speak to Amendments 200 to 211, 243 and 244, 246 and 247, which all stand in my name.
Amendment 199 introduces a new Part 9A to the Bill which relates to the existing energy savings opportunity scheme, commonly referred to as ESOS. I committed at Second Reading to table these new clauses regarding improvements to ESOS. For those noble Lords who do not know, ESOS is a mandatory energy audit scheme for large organisations, covering their buildings, transport and industrial processes. ESOS provides businesses with cost-effective recommendations on energy efficiency measures. The existing scheme is estimated to lead to £1.6 billion of net benefits to the UK, with the majority of these benefits applying to participating businesses as a result of reduced energy costs.
The power in the amendment would replace the repealed power in the European Communities Act 1972 under which the UK established ESOS in 2014. Without this, ESOS is a frozen scheme and cannot be updated. The changes are aimed at encouraging businesses to take action on recommendations to increase their energy and carbon savings.
Lord Teverson (LD)
Can the Minister clarify: did he say that this Bill revokes that EU legislation? Is that what he just said?
Lord Callanan (Con)
The power in the amendment would replace the repealed power in the European Communities Act 1972, which I presume was repealed after Brexit, or rather the end of the implementation period.
The changes are aimed at encouraging businesses to take action on recommendations to increase their energy and carbon savings. The benefits to existing participating businesses are estimated to be savings of £1.12 billion from 2023 to 2037 through reduced energy bills. The savings would of course help to support businesses to keep the costs of their products and services affordable for consumers.
Amendments 200 to 202 outline some of the details of the ESOS regime and associated powers to make regulations. They include provisions regarding which undertakings ESOS should apply to; provisions regarding when, how and by whom an ESOS assessment should be carried out; and ESOS assessor functions and requirements.
Amendment 203 enables regulations to introduce a requirement for ESOS participants to publish an ESOS action plan covering intended actions to reduce energy use or greenhouse gas emissions. This requirement aims to increase participants’ engagement with ESOS and stimulate greater uptake of energy efficiency measures. Amendment 204 enables regulations to impose requirements for ESOS participants to take actions that directly or indirectly support the reduction of energy use or greenhouse gas emissions.
Amendments 205 to 207, 209 and 210 concern the administration and enforcement of the scheme. They enable regulations to make provisions about the appointment of scheme administrators and their functions, including compliance monitoring and enforcement, provisions on penalties and offences, and rights of appeal. These amendments also enable the Secretary of State to provide financial assistance and to give directions to a scheme administrator, with which it must comply.
Amendment 208 concerns procedures for making regulations. It requires the Secretary of State to consult appropriate persons considered likely to be affected by the regulations and, where provisions relate to devolved matters, the respective devolved Administrations. It describes where affirmative procedure would be required, for example if extending ESOS to smaller businesses, mandating action by ESOS participants or creating offences.
Amendments 211 and 243 define certain terms used in the ESOS provisions, explain where provisions fall within devolved competence and set out the extent of the ESOS provisions to be England and Wales, Scotland and Northern Ireland. Amendments 244 and 246 clarify when the amendments will come into force. Amendment 247 inserts into the Title of the Bill a reference to the new clauses on ESOS, introduced by Amendments 199 to 211. With that, I beg to move Amendment 199 in my name.
Baroness Bennett of Manor Castle (GP)
My Lords, given the hour I will ask one very simple and direct question on government Amendment 210, which is about financial assistance. The second part of it says:
“‘Financial assistance’ means grants, loans, guarantees or indemnities, or any other kind of financial assistance”.
Can the Minister give us any indication of what the Government’s intentions are here? That is a very broad range and we know, for example, how wrong loans have gone in the past and how schemes based on loans have really not worked out. Given what interest rates are now, that is obviously a challenge. To tackle the kind of issues I raised earlier about the most disadvantaged areas having particular problems with the quality of housing, do the Government intend to look towards grant-type schemes?
Lord Callanan (Con)
The clause enables the Secretary of State to provide financial assistance to scheme administrators and ESOS participants. It does not, of course, compel us to do so but we are taking a power to have that option. If we decide to provide financial assistance, I will inform the House accordingly.
Lord Teverson (LD)
My Lords, there was a reason for my question. I absolutely agree that the Minister warned us that we would have these amendments coming down the track, and on ESOS I welcome that fact because it has been a very good scheme. Although companies occasionally bitch about it, as he says, it has caused actual change.
As the Minister will know, being a former MEP and so on, the ESOS scheme at the moment is based on the energy efficiency directive of 2012, which was updated in 2018. It came into force in the UK in 2014 and, as the Government’s website says:
“Government established ESOS to implement Article 8 (4 to 6) of the EU Energy Efficiency Directive (2012/27/EU).”
The reason I asked him for a clarification on his opening statement is that nowhere in his amendments could I see anything that repealed the existing directive or regulations that related to the energy efficiency directive.
Is this a sort of parallel scheme to the one that still exists, or is it still based on the original EU directive? If it is still based or relies upon the original EU directive, what happens if ever the retained EU law revocation Bill becomes a statute? Does all this fall away because it still relies on that EU legislation? If it is a parallel scheme, when does the existing one stop under the EU directive and this one actually start? That is what I am trying to understand. The Minister may well have explained this—forgive me if he has—but I do not get a flavour for what the big difference is between this one and the existing one. What would he see as the big positive change?
My last question is a more general one. I have not counted the non-government amendments that have come forward, yet—despite having on this side, and even part of that side, combined brains the size of a planet, excluding mine—the Government have not seen one amendment worthy of thinking, “Yes, that could be useful and might be something that could improve the Bill.” I just ask the Minister before the end of the year—and I wish him and the Bill team a very enjoyable Christmas and break—why has none of the brainpower on this side has been worth taking notice of in terms of the Bill going forward?
Baroness Blake of Leeds (Lab)
I shall be very brief. There are many aspects of this that are to be welcomed, but I am just intrigued. The Minister mentioned the section on finances. I am concerned about the capacity of the lead assessors and professional bodies to do this work, with particular reference to the intention to expand the scheme to, I think he said, small and medium-sized enterprises. I understood that it was medium-sized: I do not know quite where the definition lies, which would also be interesting. That is a major expansion, and I wonder whether an assessment has been made of how many additional businesses we could be talking about, and how the work is going to be done in those circumstances.
Lord Callanan (Con)
Let me respond first to the final point of the noble Lord, Lord Teverson. He and I know each other well; I have taken a number of Bills through this House, and I think that if he talks to the Official Opposition as well, he will find that I have a reasonable record of listening carefully throughout Committee on Bills and, where I can, within the confines of government policy—he will know how the process works within government—I try to take on board, where possible, the concerns of the Committee. On some Bills, that does mean accepting opposition or Back-Bench amendments directly, and I have done so on a number of occasions.
I am not giving any commitments on some of the amendments we have been debating in this Committee but, as always, I will take careful note of comments, discuss them with the Bill officials and other departments where it is required to do so and, if there are matters on which we can move, then of course we will do so. We will seek to discuss these matters before Report and, as always, I am listening to comments that noble Lords are making and trying to assess the will of the Committee.
ESOS is an important scheme that was originally implemented on the back of the energy efficiency directive, but there were specific parts of it that were UK legislation. We did not directly copy the energy efficiency directive and we will seek to do the same with the new scheme as well. The BEIS Select Committee made recommendations on energy efficiency, including that ESOS should require reports to be made public and should mandate participants to take action to reduce energy review. There was also a post-implementation review of ESOS in 2020, which found that it was largely achieving its original aims and that businesses were unlikely to carry out energy audits unless mandated to do so, but that the scheme could be helpful in producing that. I think that covers most of the points that were discussed and I thank noble Lords for their attention.
Baroness Blake of Leeds (Lab)
The Minister did not respond to my question about the capacity and extent of extending the scheme.
Lord Callanan (Con)
It is not our intention to extend it to small businesses at the moment. We are obviously always concerned about the impact on small businesses in particular but, if these amendments are accepted, we would have the regulation-making powers to extend it to businesses of different sizes. I think it is very unlikely that we would ever extend it to small businesses but that would be the subject of secondary legislation, which would, of course, be debated in the House.
Baroness Blake of Leeds (Lab)
I raised that because I may have misheard what the Minister said in referencing small businesses. I understood that this extended to medium-sized businesses but, even so, that is a significant increase. Have the Government taken on board the additional workload and whether the capacity will be there, assuming that the work is taken on?
Lord Callanan (Con)
We are not proposing to extend it to medium-sized businesses at this stage. We would want to work with stakeholders on the detail of any potential future implementation, which would be subject to a further consultation and, ultimately, a cost-benefit analysis. This is a complicated area and there are a number of different views. We have had a couple of consultations on this. With these amendments, we are taking the powers to implement the scheme. Of course, the regulations would be subject to further debate in the House.
Lord Teverson (LD)
I just want to check something with the Minister. Are we saying that, if the retained EU law Bill became an Act, with its sunset clause of 2023, this scheme would still remain in force and there would be no legal ambiguity about it? Also, I believe that the next deadline for reporting is December 2023. Can I check that this still holds?
Lord Callanan (Con)
The noble Lord is asking for commitments on a different piece of legislation. When that Bill arrives in the House, we will no doubt have a full discussion on it. My understanding is that it is at Report stage in the House of Commons now. The sunset date is still set at 2023 although there are powers in that Bill to exempt particular pieces of legislation and Ministers have the option of extending the sunset date for pieces of retained law that it is not possible to update or review in the short time available. I am sure that we will have a long, involved discussion on the retained EU law Bill when it arrives in the House and that I will get déjà vu from the Brexit withdrawal Act, with many of the same people no doubt making many of the same points they made during that time.
Lord Callanan
“Application of energy savings opportunity schemes(1) ESOS regulations may provide for—(a) an energy savings opportunity scheme to apply to specified descriptions of undertakings;(b) specified descriptions of undertakings to be excluded from the application of the scheme.(2) ESOS regulations may make provision about circumstances in which—(a) two or more participants are to be treated for the purposes of the regulations as if they were a single participant;(b) an obligation imposed under the regulations on one participant is to be treated as if it had been imposed on a different participant.(3) The provisions of this Part relating to energy consumption apply to energy consumed by assets located, or activities carried on—(a) wholly or partly in the United Kingdom;(b) wholly or partly in an offshore area;(c) where subsection (4) applies, elsewhere.(4) ESOS regulations may make provision about circumstances in which the energy consumption for which a participant is, for the purposes of the regulations, responsible may include energy consumed by—(a) assets located elsewhere than in the United Kingdom or an offshore area, or(b) activities carried on elsewhere than in the United Kingdom or an offshore area.(5) The provisions of this Part relating to greenhouse gas emissions apply to the emissions resulting from energy consumption to which this Part applies whether such emissions occur in the United Kingdom, in an offshore area or elsewhere.(6) ESOS regulations may make provision about the attribution of energy consumption to participants, including in particular provision about the treatment for the purposes of the regulations of—(a) a participant’s consumption of energy generated by that participant;(b) energy consumption by a person over whom a participant has control or influence;(c) energy consumption shared between a participant and one or more other participants or other persons;(d) energy consumed by assets held on trust by or for a participant.(7) In this section, “offshore area” means—(a) waters landward of the seaward limit of the territorial sea adjacent to the United Kingdom,(b) any designated area within the meaning of section 1(7) of the Continental Shelf Act 1964, and(c) any area for the time being designated under section 41(3) of the Marine and Coastal Access Act 2009,and includes the places above those areas and the bed and subsoil of the sea within those areas.”Member's explanatory statement
This new Clause makes provision about the application of regulations made under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201.
Product Safety and Metrology (Amendment and Transitional Provisions) Regulations 2022
Lord Callanan Excerpts(1 year, 5 months ago)
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Lord Callanan
That the Grand Committee do consider the Product Safety and Metrology (Amendment and Transitional Provisions) Regulations 2022.
Relevant document: 20th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, since 1 January 2021, the post-exit UK conformity assessment—UKCA—marking has been in use alongside recognition of the EU’s CE and reversed epsilon markings. For most product sectors, recognition of the CE marking in Great Britain is due to end at 11 pm on 31 December this year. The main objective of this instrument is to reduce immediate cost increases and burdens for businesses, given the current cost of living crisis and global supply issues, by providing businesses with additional time to transition to UKCA requirements. This means that businesses will continue to have flexibility in how they can legally place products on the market in Great Britain while maintaining high levels of product safety for British consumers. Without the measures implemented by this instrument, industry will have to meet UKCA requirements from 1 January 2023 at a time of economic hardship for many businesses.
By way of background, the UKCA marking was introduced in Great Britain to replace the EU’s CE marking. As a result of Brexit, we have the autonomy to set our own product regulations and ensure that they work for businesses and consumers in this country. To place products on the market in Great Britain, manufacturers must ensure that products meet the essential safety requirements of relevant product legislation. Compliance is achieved by following a conformity assessment procedure. For lower-risk products, manufacturers can self-declare compliance; for higher-risk products, manufacturers may need to go to a conformity assessment body—a CAB—for product testing.
We have of course engaged with businesses on the challenges that they face in transitioning to UKCA. The feedback that we received from industry informed the decision to announce a range of measures in June to make it easier for businesses to use the UKCA marking. However, given the current cost of living crisis and economic challenges that businesses are facing, we need to go further in our support. The SI will not only implement the measures announced in June but provide flexibility to allow businesses to use CE marking or UKCA marking for their goods for a further two years.
Over the past 12 months, officials have delivered an extensive programme of domestic and international engagement to support businesses transitioning to the UKCA regime. Officials have also engaged with UK conformity assessment bodies and worked closely with the UK Accreditation Service to ensure that organisations that wish to become UK CABs can do so.
Despite the work we have done to support industry to transition, industry engagement has indicated that the additional costs and burdens of fulfilling UKCA requirements may be impacting UKCA business uptake. Although we recognise that a further extension to the recognition of CE marking may raise questions about the future transition timescales to the mandatory UKCA regime, we believe that the benefits of reducing immediate burdens and costs for industry in the current economic climate outweigh the potential risk of business hesitancy to prepare.
The UKCA marking remains valid when placing goods on the market in Great Britain. We will continue to engage with industry closely to provide businesses with support and to understand how to take a pragmatic approach to improving regulation to the benefit of businesses and consumers.
I turn to the key elements of the instrument. First, this instrument extends the time for existing transitional provisions allowing certain products meeting EU requirements and markings to be placed on the market, or put into service, in Great Britain. This will give businesses the option to choose to use the CE marking for a further two years until 31 December 2024.
Secondly, this instrument provides that where a manufacturer has undertaken any steps under EU conformity assessment procedures in the period up to 31 December 2024 but those goods have not been placed on the Great Britian market, those steps will be taken to have been done under the equivalent UK conformity assessment procedures. This applies for only as long as any certificate issued is valid or until 31 December 2027, whichever is sooner.
Thirdly, this instrument extends time for existing labelling easements. This will allow businesses to affix the UKCA marking and to include importer information for products imported from EEA countries, and in some cases from Switzerland, on a label affixed to the product or an accompanying document, rather than on the product itself.
The SI does not cover all product areas that require UKCA marking, and there are different rules in place for medical devices, construction products, cableways, transportable pressure equipment, unmanned aircraft systems, rail products, and marine equipment.
Without the measures implemented by this instrument, most businesses will have to meet UKCA requirements from 1 January next year for product sectors covered by this instrument, at a time of cost of living increases and global supply chain challenges. From 1 January 2023, if businesses are unable to meet UKCA requirements, most businesses will not legally be able to place their products on the Great British market. This could cause short-term market and supply chain disruption across different sectors. In turn, reduced product availability could translate into higher costs for commercial supply chains and consumers.
In conclusion, I hope noble Lords will recognise that, at a time of cost of living increases and global supply chain challenges facing UK businesses, it is vital that the UK Government continue to support businesses. Without this legislation in place, recognition of the CE marking in Great Britain would end at 11 pm on 31 December 2022 for most product sectors. The main objective of the instrument is to provide businesses with additional time to transition to the post-exit independent UK conformity assessment marking by providing flexibility to use either CE marking or the UKCA marking, while maintaining high levels of product safety for UK consumers. Therefore, I commend the regulations to the Committee.
Baroness McIntosh of Pickering (Con)
While my noble friend pauses for breath, I thank him for introducing the regulations. What will their status be in the context of the EU retained law Bill? Will this be one that the department seeks to keep or to dispense with?
Lord Callanan (Con)
I thank my noble friend Lady McIntosh and the noble Lord, Lord Lennie, for their forbearance and for being the only ones to turn up and talk about my regulations. They deserve special Christmas medals for that and for the valuable contributions they made to the debate.
The regulations under consideration today are essential to support businesses within the context of the rising cost of living and the many global supply chain challenges they face. As I said in my introduction, for most product sectors, recognition of the CE and reversed epsilon marking in Great Britain is due to end at 11 pm on 31 December. This legislation will therefore provide industry with additional time to transition to the UKCA regime, for most product sectors. It will give businesses continued flexibility in how they can legally place products on the market in Great Britain, by allowing them to use either the CE marking or the UKCA marking, until 31 December 2024.
If this legislation is not implemented, and businesses are therefore unable to comply with UKCA requirements by the end of this year, most businesses will not legally be able to place their products on the Great British market. Industry will also not be able to benefit from the transitional labelling and retesting measures provided by this instrument.
My noble friend Lady McIntosh asked how this instrument relates to the passage of the retained EU law Bill. I would remind my noble friend that the Bill is a separate piece of legislation, with its own aims. Sunsetting retained EU law will help to review and simplify our statute book, ensuring that we understand and utilise what is left and do away with any unnecessary legislation. The deadline is not about a cliff edge but about having a focused date to create the impetus for change, enabling the UK to make the most of its new-found freedom from the EU and build a domestic regime that works for the British people. We will use the additional time under this instrument to address challenges that businesses have raised regarding transition to UKCA, and consider whether we can reduce regulatory burdens in the longer term. The short answer to my noble friend’s question is that these regulations are unaffected by the REUL Bill.
The noble Lord, Lord Lennie, asked whether there would be a further extension and what needs to change to present a further extension. This instrument shows that the Government are committed to taking a pragmatic approach to implementing post-Brexit rules. We have engaged and listened to industries’ concerns, and have responded accordingly on our approach to implementing the UKCA markings. Over the next two years, we will continue to engage with businesses to understand whether there are any further actions that we need to take to minimise burdens on them.
The noble Lord also asked whether the measure on testing would come with any safety implications and whether this could not be done for the longer term. We are confident that extending recognition of the CE marking will not impact product safety or consumer protection. We have made this decision because we want to support industry as much as possible, while maintaining high levels of consumer protection. However, it is important that we introduce our own regulatory approach. An autonomous domestic product regulation regime allows us to set our own product regulations and make them better for UK businesses and consumers, while ensuring high levels of protection from unsafe goods.
The noble Lord also asked why these changes must be made when they are effectively de minimis. We know that lots of businesses are already ready; however, it is right that we provide additional support in the current economic context. In October, 89% of UK manufacturers subject to the UKCA market were either using or planning to use UKCA. However, the risks that we outlined remain, which is why we have acted.
Lastly, the noble Lord noted the Secondary Legislation Scrutiny Committee’s report, which highlighted concerns that businesses have already spent money to prepare for the UKCA regime and may have concerns about future changes. Ultimately, the UKCA marking remains valid when placing goods on the market in Great Britain and can still be used by businesses. We will continue to engage with industry closely, and to understand and manage any implications that are flagged up to us.
I underline once more that these regulations are essential to support industry in a time of economic hardship. They will provide businesses with the flexibility to use either the CE marking or the UKCA marking to avoid potential economic impacts, supply chain disruption and the likelihood of limited product availability. We will continue to engage closely with industry to provide support to businesses, and to understand how to take a pragmatic approach to improving regulations for the benefit of businesses and consumers, while maintaining our commitment to high levels of protection for UK consumers. I therefore commend these draft regulations to the Committee.
Conformity Assessment (Mutual Recognition Agreements) (Amendment) Regulations 2022
Lord Callanan Excerpts(1 year, 5 months ago)
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Lord Callanan
That the Grand Committee do consider the Conformity Assessment (Mutual Recognition Agreements) (Amendment) Regulations 2022.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, I beg to move that the draft Conformity Assessment (Mutual Recognition Agreements) (Amendment) Regulations 2022, which were laid before the House on 21 November 2022, be approved.
Switzerland is the UK’s 10th-largest trading partner, with bilateral trade between our two countries worth £38 billion in 2021. The UK and Switzerland have strong economic and historical ties, and both our countries have been clear about a shared commitment to maintain a strong trade and investment relationship.
In 2019, the UK and the Swiss Confederation agreed a trade agreement bringing together a number of different areas covered by the EU’s various agreements with Switzerland. Included as part of this were provisions to replicate the mutual recognition agreement between the EU and Switzerland for three sectors of UK-Swiss trade: motor vehicles, good laboratory practice and good manufacturing practice for medicinal products. It was possible to reach agreement in these sectors because many of the applicable rules were already aligned internationally. Between them, these three sectors covered 70% of the UK/Swiss trade covered by the old EU/Swiss mutual recognition agreement.
Although this covered a significant amount of trade, the UK and Switzerland committed through a memorandum of understanding to continue to work towards an agreement in the remaining chapters; the UK and the EU also agreed temporary measures to aid continuity of trade in 13 sectors until such an agreement could be reached. On 17 November this year, the UK and Switzerland successfully concluded a mutual recognition agreement in five of these remaining sectors. From hereon in, I will refer to this as the MRA.
The MRA supports trade in goods between the UK and Switzerland by reducing technical barriers to trade but, importantly, it does so in a way that protects the UK’s robust product safety system. The UK’s product safety legislation requires certain products to be assessed to ensure that they meet requirements in legislation. Sometimes this assessment must be done by third parties that are independent of the manufacturer. MRAs can reduce barriers and costs by allowing this assessment to be undertaken by a conformity assessment body—a CAB—based in the UK for export to the relevant country, in this case Switzerland. We make the same arrangements for Swiss businesses so that the agreement procedures carried out by recognised Swiss CABs are accepted for the purposes of our domestic regulations.
The SI that we are debating today implements this MRA to ensure continuity for UK businesses trading conformity-assessed goods with Switzerland. It does this by amending the earlier 2021 regulations made by my department, which implement MRAs with other countries so that they also include the Swiss MRA. I will return to this briefly when discussing the territorial scope and specifics of the regulations.
Let me now address the measures that we are taking to recognise Swiss bodies and appoint UK bodies under this MRA. This SI provides for the Secretary of State to designate CABs as competent to assess that certain goods comply with the regulatory requirements of Switzerland under the MRA as set out in the schedule to the SI. For example, this means that, where a UK- based CAB would like to be recognised by the Swiss authorities as capable to assess goods against the Swiss measuring instruments requirements, it can apply to UKAS—the United Kingdom Accreditation Service —to be accredited as fit to test against those Swiss requirements. The Secretary of State may then designate the body under the Swiss MRA to assess, for example, measuring instruments for export to Switzerland.
As a result, a UK manufacturer that uses the services of that UK CAB can now use the same body to do its accreditation for the Swiss market. It does not need to identify and start contracting with another CAB operating in Switzerland. This should reduce its costs and make it able to place products on the Swiss market more cost effectively, potentially passing savings on to consumers.
Lord Callanan (Con)
I thank the noble Lord, Lord Lennie, for his comments. It is clear that this SI will maintain our robust product safety framework, at the same time as reducing barriers to trade with Switzerland. It will do this by providing for recognition in Great Britain of conformity assessment by Swiss CABs for certain products under the MRA, while Swiss bodies will be recognised in Northern Ireland under their country’s MRA with the EU; and by providing for the Secretary of State to designate UK CABs to assess against the requirements of Switzerland for certain products under an MRA.
In response to the noble Lord’s questions, I will have to get back to him in detail on the points that he raised, and in writing. In the meantime, I hope he will give us forbearance and allow me to do that, while agreeing that technical agreements such as this play an important function in the landscape of new trade agreements that the Government are negotiating with partners around the world. With these agreements, we demonstrate our commitment to free trade through a variety of means to promote growth in the UK.
With my apologies for not having a detailed answer for the noble Lord, I will get back to him. I again commend these regulations to the Committee.
Renewable Energy: Generation Licences
Lord Callanan Excerpts(1 year, 5 months ago)
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Baroness Jones of Moulsecoomb
To ask His Majesty’s Government what plans they have to increase the number of renewable energy generation licences.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the acceleration in renewable deployment will be supported by the UK’s main renewable energy scheme, contracts for difference. The latest round delivered almost 11 gigawatts of new renewable projects, almost double that achieved in the previous round. The next CfD round will be brought forward to March 2023, and future rounds will run annually to further drive deployment of renewable power. The majority of CfD applicants are exempt from the requirement to hold a generation licence.
Baroness Jones of Moulsecoomb (GP)
So far, it has been much more difficult to get renewable licences. One thing that might help, as well as the Government’s investment, is if the Minister could go back to his government colleagues and ask them to stop taking party donations from fossil fuel companies. That might give renewables a fair chance.
Lord Callanan (Con)
I thank the noble Baroness for that, which is totally unrelated to the Question she tabled. There have been almost 1,000 generation licences issued. It is a demand-driven process. All generators below 50 megawatts are exempt from having a licence in the first place.
Lord Forsyth of Drumlean (Con)
My Lords, could my noble friend the Minister indicate what has happened in recent days, as temperatures have fallen so low and there being no wind, to the cost of electricity as a result?
Lord Callanan (Con)
My noble friend makes an important point. I suspect that he knows the answer to his own question: because it has been relatively still, there have been relatively small amounts of wind in the power sector, so the other sources of power—nuclear, imports, gas, et cetera—have moved in to fill the gap. That is how a diverse system should work.
Baroness Humphreys (LD)
My Lords, getting a grid connection, never mind a generation licence, for any kind of generation is increasingly difficult, and indeed is even beginning to restrict housing developments. Will the Government instruct Ofgem to increase the pace of grid investment to avoid a literal energy gridlock?
Lord Callanan (Con)
The noble Baroness raises a good point. We are seeing a total reconfiguration of the grid away from large nodes, such as coal-fired power stations, to a much more diversified system of generators. That requires massive configuration of the grid, which is extremely expensive and, I might add, politically controversial. Many people do not want new pylons, et cetera, going through their neighbourhoods. Nevertheless, work is ongoing to reconfigure it. Considerable sums are being invested, but clearly we need to do more in that area.
Lord Geddes (Con)
My Lords, I have asked my noble friend this question before, and to an extent it follows up the question from my noble friend Lord Forsyth. Where are we with tidal power?
Lord Callanan (Con)
Tidal power is an interesting technology. A number of schemes are being rolled out. For the first time ever, in the last CfD round a number of schemes were awarded licences. We need to continue supporting and developing it, but we must not run away with the idea that this will be a long-term, sustainable solution for large amounts of power. At the moment, it is on a relatively small scale. We need to continue supporting it, and we will.
Lord Hain (Lab)
My Lords, the biggest tidal power project is, of course, the Severn barrage. Will the Minister receive a delegation to brief him on the potential for that? It is equivalent to two nuclear power stations, and it is lunar, and therefore generates predictable baseload energy. Frankly, it is a no-brainer.
Lord Callanan (Con)
I understand the point the noble Lord makes. A Severn barrage scheme has been talked about since I was an electrical engineering student, way back in the 1980s; it is not a new scheme. It all comes down to the cost and the environmental damage that would result from implementing it. We continue to keep all these things under review. I assure the noble Lord that both I and the department know all about the details of the scheme.
Lord Hayward (Con)
My Lords, I add my comments to those made in relation to both tidal and wave power. We have the second-largest tidal range in the world. Some 40 years ago, I lobbied the Government on the Severn barrage, but there are many alternatives. They are not small power generators but potentially very substantial generating powers, particularly wave power.
Lord Callanan (Con)
The barrage schemes are potentially large-scale schemes. I meant that some of the bottom tidal schemes are on a relatively small scale. It all comes down to cost. The costs of these schemes fall on bill payers. The Government’s general approach is to support forms of renewable power that offer the best value for money for taxpayers—principally solar and wind, but we are starting to support some of the other tidal schemes as well. The barrage schemes are extremely expensive and very long term, and there are a lot of environmental implications.
Baroness Blake of Leeds (Lab)
My Lords, we note the increase in the frequency of contracts for difference allocation rounds every year. Can the Minister expand what impact this will have on deploying more energy regeneration? Why is the process so prescriptive? It has “lack of ambition” written all over it. Surely more flexibility is the key to encouraging more investment in zero-carbon technologies. Are any plans coming forward to make Britain the clean energy superpower it deserves to be?
Lord Callanan (Con)
I disagree with the premise of the noble Baroness’s question. We are already a renewable energy superpower. She talks about lack of ambition. In the last auction, round 4, we delivered more than 11 gigawatts and 93 renewable power projects—enough to power 12 million homes. We have the largest offshore wind capacity in the whole of Europe and the second largest in the world. We want to scale-up that ambition and deliver more, but I think the noble Baroness should give us some credit for what we have already achieved.
Lord Vaux of Harrowden (CB)
My Lords, I remind the House of my interests in the register. Now that the feed-in tariff has ended, there is not much incentive for people to install more capacity on their homes than they use themselves. The smart export guarantee pays typically between only 1p and 5p per kilowatt-hour, which is not enough to encourage people to install excess generating capacity. Does the Minister agree that a peer-to-peer trading facility that allows people to sell their excess power to their neighbours might increase returns to generators and improve the incentive, and also reduce the cost of power to neighbours?
Lord Callanan (Con)
It is an interesting concept. As the noble Lord knows, the smart export guarantee is a market-driven mechanism, and it is for suppliers to determine the value of the exported electricity to them, taking account of their administrative costs. There are a number of schemes, such as the one mentioned by the noble Lord, and I am certainly very happy to look at it. However, we always have to bear in mind that any subsidy offered to certain generators is paid for by every other customer on the network.
Lord West of Spithead (Lab)
My Lords, all this talk of tidal power makes one think of ships. Noble Lords will be glad to hear that I am not going to ask a question about ships. There is going to be a huge growth in demand for electrical power. The only certain way of providing electrical power, no matter what the weather and completely green, is nuclear. What is the actual percentage that we are looking for in the provision of nuclear power, looking to the future of electrical supply within this country?
Lord Callanan (Con)
The noble Lord is right: we need to expand our nuclear production. We have just agreed the contract for Sizewell, only a couple of weeks ago, and other developments are planned. We have not set a specific target for nuclear production, but we will need to replace a lot of the aging plants that will come offline in the next 10 or 15 years or so.
Baroness Jones of Whitchurch (Lab)
My Lords, the Minister, in reply to several questions, has said that it comes down to cost. Could he assure us that the full cost of continuing to invest in fossil fuels is factored in when that equation is calculated? Fossil fuels come at a cost to the environment and certainly to our climate change ambitions. Can he assure us that this is fully taken into account when those balanced decisions are taken?
Lord Callanan (Con)
There are of course no subsidies given to fossil fuel generation. In fact, it is the opposite: they are paying into the system record levels of taxation. This is a gradual transition. To all those who want to get rid of fossil fuels, I say great, but 80% of our heating is gas heating at the moment; are we going to turn off people’s gas boilers overnight? I suspect that the answer to the noble Baroness’s question is no. Of course we want to roll out renewable generation, which is what we are doing, but it is intermittent, as the question from my noble friend Lord Forsyth intimated earlier. We need back-up generation for that; that could take a number of different forms, and nuclear is one of the possible options. In the short term, as we move to a more renewable system, we will need fossil fuel generation.
Lord Kamall (Con)
My Lords, I want to ask my noble friend the Minister about the long-term thinking in the department. Looking at the developments in technology, particularly in storage capacity and micro- generation, might there be a day when there really is no incentive for people to feed into a grid, and they can generate all their energy locally? What sort of long- term thinking has there been on the impact on the grid of more local generation and storage?
Lord Callanan (Con)
My noble friend makes an important point. There will be, and has been, an increasing amount of microgeneration. I am told by the suppliers that there are record demands at the moment for things such as solar panels and PV generation, as people respond to high electricity costs. Many people will want to install systems that will save them money in the long term. Of course, the higher electricity prices are, then the pay-back period for microgeneration schemes becomes less and less. It comes down to the question that was asked earlier about the reconfiguration of the grid. There would be much more small-scale generation rather than the big node operators that we are used to. A considerable investment is going into the grid to bring that about. We also have schemes such as smart metres; 50% of the country is now connected to a smart meter, and they enable better charging regimes, demand-management schemes, et cetera, all of which will contribute to what the noble Lord suggests.
Energy Bill [HL]
Lord Callanan ExcerptsMonday 12th December 2022
(1 year, 5 months ago)
Grand CommitteeRead Full debate Energy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 39-IV Fourth marshalled list for Grand Committee - (12 Dec 2022)
Lord Callanan
Member’s explanatory statement
This amendment and the amendment in the name of Lord Callanan at page 75, line 31 are consequential on the amendment in the name of Lord Callanan at page 71, line 34.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, it is a great pleasure to be back in Committee once again, debating the Energy Bill. I thank noble Lords for their patience during the interregnum. Noble Lords will recall that the Bill was necessarily paused following the death of Her Majesty the Queen. However, we have always been clear that the Bill represents a landmark piece of legislation to provide for a cleaner, more affordable and more secure energy system that is fit for the future, so I am very happy to be debating it again.
Clause 84 makes changes to Section 30 of the Energy Act 2008, which in turn enables modifications to Part IV of the Petroleum Act 1998. Amendments 90 and 91 make consequential changes to definitions in Clause 84 in response to government Amendment 70.
The next set of amendments relate to Clause 85. Amendments 92, 93, 101 and 102 update the heading, labels and definitions in Section 30A of the Energy Act 2008, as amended by this Bill, to avoid inconsistencies with existing definitions in the 2008 Act. Amendment 103 makes a consequential change due to the changes in definitions.
Moving to Amendments 94 and 95, the existing Section 30A of the Energy Act 2008 includes a carve-out in subsections (2) and (3). This prevents the Secretary of State designating an installation as eligible for change of use relief if it is to be used as part of a CCUS project that is in Scotland or is licensed by Scottish Ministers. However, the Scottish Parliament is also unable to legislate to confer such a designation power on Scottish Ministers because oil and gas is a reserved matter. It is important that change of use relief is available to oil and gas assets in Scottish territorial waters to create a consistent application of this policy. Amendment 94 removes this carve-out from Section 30A of the Energy Act 2008. Amendment 95 then updates a cross reference as a result of the proposed Amendment 94.
The process for issuing change of use relief first requires that an asset is designated as eligible. Only after this can the asset then qualify for that relief. Amendment 97 makes clear what conditions must be satisfied for an installation already designated as eligible for change of use relief by the Secretary of State actually to qualify for that relief. The first condition is that the Secretary of State has issued a carbon capture and storage-related abandonment notice under Section 29 of the Petroleum Act 1998 on a person for that installation. The second is that the trigger event has been satisfied.
Amendment 98 describes the trigger event that must occur for the relief to take effect. The trigger event requires that, first, a decommissioning fund must have been established for the relevant asset. Secondly, an appropriate amount must have been paid into this fund to reflect the decommissioning liability that the previous owner is being relieved of. This amendment would also give the Secretary of State power to make regulations on the required amount that must be paid into the decommissioning fund, and who may make such a payment, to qualify for change of use relief.
The Secretary of State must also approve that the amount paid into the fund is sufficient. Amendment 96 imposes a requirement on the Secretary of State to consult the Oil and Gas Authority before certifying that the amount is sufficient. Amendment 104 makes consequential changes to defined terms in Clause 85 as a result of Amendment 97.
I now turn to the other amendments tabled by noble Lords in this group. Amendments 99 and 100, tabled by the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, seek to enable the Secretary of State to accept financial security from the previous owner, rather than requiring the amount to be paid in cash into the decommissioning fund. The Government acknowledge the point made by noble Lords regarding the value-for-money considerations when requesting funds to be set aside for decommissioning. The costs of decommissioning a repurposed asset are likely to be incurred at the end of the carbon storage asset’s life, which may be many years after the establishment of the decommissioning fund. However, the purpose of this trigger event for the issuance of change of use relief is to help protect the taxpayer from the decommissioning liability by having funds available to decommission repurposed assets. The requirement for a cash deposit looks to ensure that funds are available should the carbon storage asset close early and decommissioning of the existing infrastructure is required. This reduces the risk that the burden of decommissioning is left completely to the taxpayer. It is also intended that decommissioning funds will be invested to allow the fund to retain its value over time until decommissioning is required. This is another reason why it is important for the previous oil and gas owner to contribute money into the decommissioning fund.
More generally, the policy intent of change of use relief is to provide previous oil and gas owners with greater certainty over their liabilities, to incentivise the repurposing of assets. In return, however, the taxpayer should equally expect assurance that the oil and gas owners’ liability will be met, in accordance with the obligations that the owners agreed to undertake on commencement of their oil and gas activities. The Government judge that this can be provided only through a cash deposit, and not through a promise of funding, potentially decades into the future. This is the principle on which the policy was proposed in the Government’s consultation in August 2021 and with which, at the time, respondents broadly agreed. Therefore, I beg to move the amendment in my name and ask the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, not to move their amendments.
Lord Teverson (LD)
My Lords, I welcome the Bill’s return to Committee; I am very pleased that that is the case. I have no comments to make on the amendments, but I note that during that interregnum, as the Minister described it, the Government gave planning permission for a coal mine. Although we are not going to debate it here today, that is a hugely retrograde decision which flies in the face of the Bill and the general way in which it looks forward. However, I have no comments on the amendments that the Minister has tabled.
Lord Lennie (Lab)
My Lords, I am also delighted to be debating the Energy Bill again. I am delighted that the noble Lord is still the Minister so that we at least have continuity on the Bill; it remains much the same as it was before we left it some three months ago.
As the Minister said, the amendments refer to Clauses 84 and 85 of Chapter 2 of Part 2 on “Decommissioning of carbon storage installations”. This gives the Secretary of State a power to make regulations regarding the financing and provision of security for decommissioning and legacy costs associated with carbon capture utilisation and storage. The decommissioning of offshore installations and pipelines used for carbon dioxide storage purposes is modified by Section 30 of the Energy Act 2008, which modified Part 4 of the Petroleum Act. Clause 84 enables further modifications to the modified Part 4 in relation to the definition of carbon storage installation, and the establishment of decommissioning funds and legacy costs as set out in Clause 82, “Financing of costs of decommissioning etc”.
Clause 85 relates to Sections 30A and 30B of the Energy Act 2008, which make provision for a person to qualify for change of use relief on installations and submarine pipelines converted for CCS demonstration projects—as defined by Energy Act 2010. This relief removes the ability for the Secretary of State, in some circumstances, to take steps under the modified Part 4. This clause makes amendments to Section 30A of the Energy Act 2008 by broadening the scope of change of use relief so that it applies to eligible carbon storage installations more generally, amending the trigger point to qualify for such relief.
Amendments 99 and 100, which the Minister referred to, were tabled by my noble friend Lady Liddell, who unfortunately cannot be here and therefore will not be able to move them. They reflect value-for-money considerations in the decision-making process, meaning that the Secretary of State could accept provision of security in respect of amounts to be contributed on account of decommissioning costs—costs likely to be incurred, as the Minister said, many years after the establishment of the fund—rather than requiring such amounts to be paid simply in cash.
Lord Callanan (Con)
I thank the noble Lord, Lord Teverson, and the noble Lord, Lord Lennie, for their comments, but I do not think there were any points for me to address, so I will leave it there.
Lord Callanan
Member's explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 75, line 30.
Lord Callanan
Member's explanatory statement
See the amendment in the name of Lord Callanan at page 76, line 1.
Lord Callanan
“(5) The trigger event occurs in relation to an eligible CCS installation when—(a) a decommissioning fund (as defined in section 82(6)) has been established for providing security for the discharge of liabilities in respect of decommissioning costs in relation to the installation, and(b) the Secretary of State certifies by notice in writing (an “approval notice”) that one or more relevant persons have paid into the fund an amount or amounts the total of which is not less than the required amount.(5A) In subsection (5)—(a) “relevant person” means a person of a description specified in regulations made by the Secretary of State;(b) “the required amount” means an amount determined by the Secretary of State in accordance with regulations made by the Secretary of State.”Member's explanatory statement
This amendment amends the conditions for qualifying for change of use relief under section 30A of the Energy Act 2008.
Lord Callanan
Member's explanatory statement
See amendment in the name of Lord Callanan at page 76, line 1.
Lord Teverson (LD)
My Lords, I was getting ahead of myself on the last group, and I apologise to the Grand Committee for that. I would have thought that the Government would like to accept this amendment, as they are likely to be in opposition in five years’ time. I wait to hear from the Minister.
Lord Callanan (Con)
I thank the noble Lords, Lord Lennie and Lord Teverson, for their concern about whoever might be the Official Opposition at the time. I suppose we will see. I am surprised that the noble Lord, Lord Teverson, did not want to ask for the fourth-placed political party in Parliament to be a statutory consultee as well.
These amendments seek to clarify those who must be consulted as part of the process of designating a CCUS strategy and policy statement. Amendment 113 was tabled by the noble Lord, Lord Lennie, the noble Baroness, Lady Blake, and the noble Baroness, Lady Bennett—who, sadly for us all, is unable to be with us. This amendment seeks to require the Official Opposition to be consulted as part of the strategy process. I reassure noble Lords that parliamentarians will have the opportunity to consider any draft CCUS strategy and policy statement, which must be approved by a resolution of each House of Parliament before it can be designated, as is provided for by Clause 91(10). So, of course, whoever is the Official Opposition at the time, and whoever is the fourth-placed political party at the time, will have a full opportunity to contribute to the debate on this matter.
As the Bill sets out, any CCUS strategy and policy statement that has been designated will be required to be reviewed every five years, although, in the specified circumstances set out in the Bill, a review could take place sooner than five years. When the outcome of a review is that the Secretary of State considers that the statement should be amended, the Bill provides for a statutory consultation process, including consultation with the economic regulator and relevant Ministers in the devolved Administrations. An amended statement would also be required to be approved by a resolution of each House, and would therefore be subject to parliamentary scrutiny and approval before it could be designated.
The process for designating the CCUS strategy and policy statement mirrors the process set out in the Energy Act 2013 for an energy strategy and policy statement. When the outcome of a review is that the Secretary of State considers that the statement does not require amendment, or should be withdrawn, this also requires consultation with the economic regulator and Ministers in the devolved Administrations. This is to ensure that any impact that this decision would have on the conduct of the regulator’s functions, or in relation to the important matter of devolved policy, is taken into account in the decision-making process. It is also the case, of course, that the Secretary of State can update Parliament on the plans for, and outcome of, any review, as part of the normal process of parliamentary business.
On Amendment 114, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, Clause 91 provides for the Secretary of State to consult whomever he or she considers appropriate, in addition to certain specified persons, in the process of developing a strategy and policy statement. This formulation enables the Secretary of State to consult ahead of laying a statement before Parliament. As I have set out, it is for Parliament to consider and approve any new or amended statement.
Although I thank noble Lords for their concern about whoever ends up being the Official Opposition at the time, and for their interest in this topic, I hope that the reassurances I have been able to provide on these points mean that they will not press their amendments.
Lord Callanan (Con)
I do not think that is the case. As a Minister, I have issued many consultations. In my experience there is never a problem with anybody contributing who wishes to, even if they are not statutorily listed in the legislation. They are normally public consultations in any case, with a large number of stakeholders. The advice from officials and others is always to extend the scope of consultation to be as wide as possible because you then minimise any potential legal challenges as a result. I understand the noble Lord’s concern but I do not think it is warranted on this issue.
Lord Lennie (Lab)
My Lords, the amendment that seeks to include the Opposition as part of the formal consultation would avoid what we get in Parliament, which is the “ayes and noes” and the “take it or leave it” approaches to policy development. This is an area where we have pretty much a common interest. It seems a sensible approach to throw open the consultation at least to the Opposition—who knows, maybe even to the fourth party—but to make it as wide as possible to avoid that prospect of Parliament rejecting or accepting in total whatever is put before it. It is about buy-in. As the Minister said, there are plenty of examples where buy-in has been part of the Government’s approach to consultation. It seems strange that this is not one of them. With that, I beg leave to withdraw the amendment.
Baroness Sheehan (LD)
I rise in support of Amendments 117, 118 and 122. If we are to move towards cleaning up heat, we really need to get on with it and put sensible deadlines in place rather than leaving it open-ended, as it currently stands in the Bill.
Amendment 118 tightens up what needs to happen by when and makes some very sensible suggestions on timeframes for
“the banning of the installation of unabated gas boilers in new properties from March 2025 … the banning of the sale and installation of unabated gas boilers in all properties after March 2035.”
We need to get on with this. I support the amendment wholeheartedly.
Likewise, Amendment 122 would introduce a deadline
“to include the number of heat pumps in the latest figures on recommendations from the CCC.”
On Amendment 121, like the noble Baroness, Lady Worthington, I add my note of caution about reliance on hydrogen. It is an unproven technology. There are ample studies and research that point to there being substantial barriers before it can be delivered at a low enough cost. Not least, there are technical difficulties: we know that the existing pipelines will not be suitable. So it will not be a straightforward case of replacing a natural gas boiler with a hydrogen or blend boiler. There are far greater changes that need to be made to the whole infrastructure before deployment.
Lord Callanan (Con)
My Lords, I will start with my Amendments 123 and 124. Amendment 123 seeks to provide additional clarity to Clause 100. Clause 100(1) provides examples of how targets for a low-carbon heat scheme may be set. The amendment’s addition of proposed new subsection (2A) clarifies that an average appliance efficiency or emissions intensity target could apply to all of a given manufacturer’s heating appliances sold in the UK, whether or not they were sold or installed by the manufacturer itself. This had been explicit in one of the examples in the list in subsection (1) but not in others. The Government believe that it is prudent to make this explicit and it provides additional clarity.
The Government have tabled Amendment 124 purely to correct a minor drafting error in Clause 100(4), replacing “activity” with “appliance” so that the subsection has its intended meaning.
Moving on to the amendments tabled by other noble Lords, I will start with Amendment 117 from the noble Baroness, Lady Worthington. The Government have always been clear that they intend to introduce the low-carbon heat scheme provided for by this chapter in very short order; namely, from 2024. However, it is the Government’s view that it would not be appropriate to incorporate a timeline into the Bill. If the noble Baroness will take my word for it, we intend to get on with this fairly quickly. It is important that the legislation retains the opportunity, if necessary, to respond to any unforeseen changes in market conditions, et cetera, and to ensure that the necessary administrative and enforcement systems are established. We are indeed looking at the appropriate enforcement mechanism at the moment.
I turn to Amendment 118, the first of four in this group in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. I also thank the noble Baroness, Lady Sheehan, for her contribution. This amendment would require there to be a link between the introduction of a low-carbon heat scheme and a ban on the installation of gas boilers in new-build and existing properties respectively.
Noble Lords will be aware that the Government will introduce a future homes standard in 2025, which will effectively require that new properties are equipped with low-carbon heating and high energy efficiency, avoiding the need for future retrofitting. New properties would be taken care of in that respect. It would be premature to decide exactly what policy approaches will be best suited to implement the phase-out of natural gas boilers in existing properties.
I do not believe that it is helpful to create a dependency between the ability to launch a scheme on the one hand and a particular, separate measure such as an appliance ban, as the amendment proposes, on the other. That would risk delaying the introduction of such a scheme altogether.
On Amendment 119, the Government have been clear that a range of low-carbon technologies are likely to play a role in decarbonising heating. District heat networks have an important role to play in all future heating scenarios, as do electric heat pumps. Work is ongoing with industry, regulators and others to assess the feasibility, costs and benefits of converting gas networks to supply 100% hydrogen for heating. As the noble Baroness, Lady Sheehan, said, it is indeed a considerable challenge, but we need to do the studies to work out whether it is feasible. Of course, other technologies may also play a supporting role.
To establish whether or not it is a feasible technology, the Government have an extensive programme of work already under way to develop the strategic and policy options for all these technologies and for different building segments. Another plan, seeking restrictively to prescribe the right solution for all properties now and out to 2050, is not particularly necessary or helpful.
I thank my noble friend Lord Naseby for his contribution on Amendment 121. This amendment would expand the potential set of low-carbon heating appliances that could be supported by a scheme established under the power in this chapter. However, I emphasise that the set of potential relevant low-carbon heating appliances established in this clause is solely for the purposes of a scheme under this power. It does not in any way serve as a comprehensive statement of all potential low-carbon heating appliances, and it has no wider bearing on what could be considered low-carbon heating appliances in any other policies, schemes or legislation.
The Government recognise that low-carbon hydrogen could be one of a few key options for decarbonising heat in buildings. To that end, the Government are working to enable strategic decisions in 2026 on the role of hydrogen in heat decarbonisation; I note the scepticism of a number of noble Members about this. The Government will bring forward the necessary policies and schemes to support the deployment of hydrogen heating, depending on the outcome of these decisions. We will also shortly consult on the option of requiring that all domestic gas boilers are hydrogen-ready from 2026. Since the scheme provided for by this measure would not be suitable or necessary to support the rollout of hydrogen-using or hydrogen-ready heating appliances, it would not be helpful to expand the scope of the power in this way.
Finally, Amendment 122 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, would require that three specific targets be incorporated into regulations for a low-carbon heat scheme. Again, the Government believe that targets are best set and adjusted in the scheme regulations, based on an assessment of the market conditions at the time, rather than in the enabling legislation in advance.
I turn to the specific targets that the noble Lord proposed. I have said a number of times that the Government’s ambition is to develop the market towards 600,000 heat pump installations per year in 2028. That is what we assess to be a scale necessary for and compatible with all strategic scenarios for decarbonising heating by 2050. Although the Government have clear plans to support industry to build a thriving manufacturing sector for heat pumps in the UK, we do not believe that a production quota is an appropriate way to achieve this.
In the light of what I have been able to say, particularly on the consultation, I hope that the noble Baroness, Lady Worthington, will agree to withdraw her amendment.
Lord Teverson (LD)
My Lords, I wanted to give the Minister the opportunity to introduce his amendments, but I will say a couple of things about this because low-carbon heating is a key issue. As he will know, 40% of UK emissions, more or less, are from heating. One of the big gaps in the Bill is part of the solution to that: home efficiency, which does not really appear in the Bill at all but should have.
I would like to ask the Minister specifically about energy from waste. Clause 98(4) has a list of fossil fuels, but energy from waste is not there. It is sort of a hybrid of being one and not. Over the last decade or so, one of the issues has been that when we have had energy-from-waste plants there has been a big emphasis on them being compatible with using the excess heat for commercial or domestic heating purposes, but hardly any of them do that. They get the planning permission but hardly anything happens. There are one or two in south London where it works, but generally it is not the case. Where do energy from waste and the high carbon emissions from disposing waste fit into this? Do the Government have any appetite—I do not really see it in this section of the Bill—to repair that past omission and make sure that excess heat from those facilities is used far more effectively, and perhaps compulsorily, in future?
Lord Callanan (Con)
The noble Lord makes a good point. Before he corrected himself, I was about to contradict him and say that a number of energy-from-waste plants are already supplying district heating networks—as he said, there is a particularly big one in south London, which I have visited. It is doing so, because the Government supported it. It received grant money to enable it to do that. There are a number of others around the country, so we already have existing powers and support funds to support heat networks.
We are very supportive of energy-from-waste plants using the waste heat to connect into district heating networks. However, it is a difficult area, because it depends on a number of factors. You have to have the energy-from-waste plant in the first place, and office blocks, apartments, et cetera have to be available to take the waste heat. The noble Lord will know that later in the Bill we will discuss the zoning power for heat networks that local authorities will have, which hopefully will enable them to utilise those powers and take heat networks forward; there are a number that are very keen to do so. I would certainly envisage that a number of energy-from-waste plants—those in inner cities, in particular—will be able to take part in those initiatives.
Baroness Worthington (CB)
I thank the Minister for his response. I am somewhat reassured by the timetable that these regulations will be pursued against. I would like to mention that it is not unusual for government to announce things and for there to then be quite a long delay. Energy-efficiency standards reaching EPC C by 2035 was first announced in 2017, but we still have not seen that make it through. If we had, we would be in a far better position now as we face this winter, where we have shortages of gas, and we should have more efficient homes. There is a reason why we are pressing on this timescale.
I support the Government’s amendments as introduced and the Minister’s statement that it is not helpful to expand this particular scheme at the moment any further than it is already defined. It is important to have clarity. The nearest corollary to this legislation is the ZEV mandate, which we will probably discuss in relation to the amendment tabled by the noble Baroness, Lady Randerson. It is better to have clarity of purpose that gives manufacturers and industry time to adapt and build an industry. It is clear in my mind that electrification of heat is probably 90% of the answer, if not the full answer. Therefore, getting it right, keeping it tight and giving confidence for investment would be the fastest way for us to get off volatile, expensive and unhealthy fossil fuels. However, I beg leave to withdraw the amendment.
Lord Callanan
“(2A) In the case of a low-carbon heat target that is imposed by virtue of subsection (1)(c) or (d) on a scheme participant who manufactures heating appliances, the target may be set by reference to heating appliances that are supplied or installed (whether or not by the scheme participant).”Member's explanatory statement
This amendment makes it clear that a low-carbon heat target set by virtue of Clause 100(1)(c) or (d) may be set, in the case of a manufacturer, by reference to heating appliances of the manufacturer that are supplied or installed, whether by the manufacturer or someone else.
Baroness Randerson (LD)
My Lords, I thank all those who have taken part in this short debate. I knew that I would provoke a debate by specifically mentioning hydrogen—and that was my intention. I wanted to tease out the Government’s views. I thank the Minister for her response, but it was light on detail as, I fear, the whole of the Government’s policy is.
I agree with the noble Baroness, Lady Jones, on her view of the Government. I fear that the Government have been so self-obsessed for the past two or three years that there is a policy vacuum in all sorts of places, and transport is one of them. I also agree with her that we need to rely very much more on public transport but, of course, the vast majority of public transport is provided by buses, which are heavy vehicles. Electricity is fine in towns and cities but it is not yet the answer for long distances in rural areas or for long-distance buses. Of course, not enough of our electricity is green and comes from renewable resources. Despite the ingenious plans for the national grid, we have a crisis of capacity, which will face us very soon if we all rely on electric vehicles.
The noble Lord, Lord Whitty, referred to aviation. I remind noble Lords about the Government’s jet zero strategy, which is a triumph of optimism over reality.
My noble friend Lady Sheehan made a very important point about batteries. It is important to emphasise that we are well behind in the international race for developing gigafactory capacity. Very soon, rules of origin will be a problem for those wishing to export.
Lord Callanan (Con)
I do not know what the noble Baroness is doing; she is supposed to be deciding whether she will withdraw her amendment, not responding to a debate. This is not a debate on general activity relating to hydrogen. She should say whether she wants to withdraw her amendment—that is the question.
Baroness Randerson (LD)
My Lords, in Grand Committee it is normal to allow people the courtesy to respond to well-made points from noble Lords. I want to make it absolutely clear that the intention of my amendment was to provoke debate. I am disappointed that the Government’s response has been so limited. The amounts of money announced by the Minister are attractive and worth while, but they need to be multiplied by at least 10 to have any impact at all.
I will withdraw the amendment, of course, but I remind noble Lords of the words of the United Nations Secretary-General:
“We are in the fight of our lives, and we are losing”—
we need a sense of urgency. I withdraw my amendment.
Lord Callanan (Con)
I will start with Amendments 125 to 127; I thank the noble Lords, Lord Teverson and Lord Lennie, and the noble Baroness, Lady Blake, for their contributions and for promoting them. The amendments relate to Clause 109, which, alongside Clause 108, will ensure the safe and effective delivery of a village-scale hydrogen heating trial. This trial will gather evidence to enable the Government to make strategic decisions on the role of hydrogen in heat decarbonisation. I know that there are very strongly held opinions on whether hydrogen is the correct solution, but we will never know unless we do the appropriate research and trials.
Lord Callanan (Con)
Let me finish, then the noble Baroness, Lady Worthington, will be able to come back.
I will start with Amendments 125 and 126. With Amendment 125, the noble Lord, Lord Teverson, calls for an adequate level of information to be provided to consumers in the trial area concerning safety, long-run bill impacts and opting out of the trial. I agree that these are important issues. Support from local people will be crucial to the success of the trial, and gas transporters are already working closely with communities in the potential trial locations. In fact, the relevant Members of Parliament have already been in touch with me, and I already have meetings in my diary to talk with them and residents from the local areas about this.
Steps have already been taken to ensure that people have all the information required to make an informed choice about whether they wish to participate. Both gas transporters have opened demonstration centres in the two shortlisted local communities to raise awareness of what the trial would involve.
Clause 109 provides the Secretary of State with the power to require the gas transporter running the trial to take specific steps to make sure that consumers are properly informed about the trial. In meeting their responsibilities to inform consumers, we fully expect gas transporters to provide clear information about each of the important topics listed in the noble Lord’s amendment.
I turn to Amendment 126. The Government have been very clear that no consumer in the trial location should be financially disadvantaged due to taking part in the trial. Last year, the Government published a framework of consumer protections that will underpin the trial. Consumers in the trial location will not be expected to pay more for their heating than they would if they had remained on natural gas or to pay for the installation and maintenance of hydrogen-capable appliances.
The village trial will be paid for through a combination of government and Ofgem funding and contributions from the private sector. All gas consumers pay a very small amount towards Ofgem’s net-zero funding for network companies, which supports projects to decarbonise the energy sector; that includes this trial. All gas consumers will benefit from well-informed strategic decisions on how to decarbonise the way we heat our homes.
I hope that I have been able to reassure the noble Lord that the important issues he has raised, about which I agree with him, are already effectively addressed by the Bill, and therefore that he feels able not to press his amendments.
I move on to Amendment 127 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. As I have said, local support will be crucial to the success of the trial. Gas transporters are already working closely with communities in the potential trial locations to develop an attractive offer for people who want to convert to hydrogen. However, we understand that not everyone will want or be able to connect to hydrogen, and the Government are clear that nobody will be forced to do so. The gas transporter running the trial will have to provide alternative heating solutions and appliances for people who do not take part in the trial. In May 2022, this requirement was clearly set out in a joint letter from BEIS and Ofgem to the gas transporters, alongside the other requirements that must be met before any funding is provided for the next stages of the trial. The gas transporters will need to demonstrate that they have a viable plan for providing alternatives to hydrogen. There is already an effective way to ensure that they provide alternatives to hydrogen, through the Government’s funding requirements.
We therefore do not believe that this amendment is necessary. I fully appreciate the noble Lord’s intention—which I share—to ensure that the trial is conducted properly, with alternative heating systems offered to people who do not take part. With that information, I hope he feels reassured that there are already steps in place to ensure this and will therefore feel able not to move the amendment.
I will say a few words about the stand part notices on Clauses 108 and 109. I know that the noble Baronesses, Lady Jones and Lady Worthington, and my noble friend Lord Moylan, who is not here now, have registered their intention to vote against these clauses. I have already established that the overall intent of these clauses is to support a safe and effective trial for hydrogen heating.
Clause 108 allows the Secretary of State to designate a hydrogen grid conversion trial, ensuring that both this clause and Clause 109 are narrow in scope and would apply only for the purposes of such a trial. Importantly, the clause expands the duty to participants of the gas transporter running the trial to undertake the required work without charge. It also makes certain modifications to the Gas Act 1986 to build on existing provisions concerning powers of entry. This will ensure that the gas transporter running the trial has clear grounds to enter private properties to: carry out any essential works, including replacing appliances and installing and testing safety valves; undertake inspections and tests for the trial, such as safety checks; and safely disconnect the gas supply in a property.
It is important to emphasise that gas transporters already have powers of entry into properties through the Gas Act. We are merely extending these powers in a very limited way to conduct the necessary work to set up and deliver the trial. Gas transporters will only ever use these extended powers as a very last resort once all other attempts to contact property owners and reach an agreement are exhausted. The existing rules on powers of entry requiring a gas transporter to obtain a warrant from a magistrates’ court will continue to apply, of course. I reiterate once again that nobody will be forced to use hydrogen. I have already covered the plans for alternative arrangements in my comments on the amendment earlier.
Finally, I draw noble Lords’ attention to the fact that the majority of responses to the public consultation the department ran last year on facilitating a hydrogen village trial were broadly supportive of our proposals to change legislation in this way. I therefore urge that Clause 108 stands part of the Bill.
Clause 109 provides the Government with the powers to establish consumer protections for people taking part in this world-leading hydrogen village trial. It will do this by giving the Secretary of State two delegated powers to make regulations which require the gas transporter running the trial to follow specific processes to engage and inform consumers about the trial, and ensure that consumers are protected before, during and after the trial.
The department is of course working closely with the gas transporters as they develop their plans for consumer engagement and protection. It is worth saying that there is quite a bit of support in these communities for the trial. The council leaders in the areas concerned have expressed their support and one MP in particular is actively campaigning for their area to take part in the trial. Opinion is obviously mixed in both communities, but we want to make sure that it has the maximum level of support required. I have already highlighted the importance of consumer engagement and support in my earlier comments. Regulations made under this clause will ensure that people will have all the information required to make an informed choice about whether they wish to participate.
The second power in this clause, to introduce regulations for consumer protections, will work alongside existing protections such as the Consumer Rights Act 2015 and the Gas (Standards of Performance) Regulations 2005. This recognises that it is a first-of-its-kind trial and will allow the Government to introduce additional protections for consumers in the trial area. These might include regulations to ensure that consumers are not financially disadvantaged by taking part in the trial.
I am sure that all noble Lords will agree that these provisions, which—as I said, again—were well received by stakeholders when we consulted on them last year, are crucial to ensure the fair treatment and protection of people in the selected trial area.
Lord Lennie (Lab)
The Minister said that no one would be forced to take part in the trial. I appreciate that but, first, it seems like the place for that statement to be made is within the Energy Bill. Secondly, will they be given an alternative low-carbon solution?
Lord Callanan (Con)
The answer to both of those questions is yes. No one will be forced to take part in the trial. If they do not take part in the trial, they will of course be given an alternative low-carbon solution.
Lord Teverson (LD)
Can the Minister clarify what areas are being looked at? I have seen Redcar, Whitby and Fife being looked at as potential areas. Are those agreed? Is the number roughly three and when are those locations likely to be confirmed?
Lord Callanan (Con)
There is already a small-scale trial in Fife in Scotland. There are two shortlisted villages, Redcar and Whitby—on the west coast, not Whitby on the east coast. They have been shortlisted for the trial and we will make a decision on the basis of submissions from both communities in the new year.
Baroness Worthington (CB)
My Lords, I respond on behalf of the noble Baroness, Lady Jones, on the stand part notice that we have both signed. I thank the Minister for his response. To be honest, because I am so clear that this should not form part of the Bill, I have not gone through all the detailed provisions in these two clauses. The Minister seems to be saying that there is an absolute right of refusal, but my reading of both clauses is that the emphasis is that required information must be provided. There might be protections from financial penalties—that is implied when it talks about protecting consumers—but I cannot see it written down anywhere that the regulations will enshrine the consumers’ right of refusal.
I would be grateful if the Minister would undertake to write to us on this because this seems like a scheme where the fox is being put in charge of the henhouse. The gas transporters are the interlocuters between the poor people living in these villages who are going to be told that this is the great answer to their climate change concerns. Will they provide adequate information about safety? You are at least four times more likely to have an accident with hydrogen; it has been verified.
I take issue with the Minister’s characterisation of this as being a matter of opinion where “some people think this” and “some people think that”. It is not true. This is clear physics and chemistry. It is more likely. You may get slightly more frequent accidents at a lower explosion rate, but that does not reassure me in the slightest. Peer-reviewed scientific studies have taken place and we do not live isolated from the rest of the world. Other countries have tried this. There have been countless trials and there have even been studies in this country. This is not a safe way of proceeding. It needs to be made categorically clear that independent advice should be given to these villages, not advice given by the gas transporters which, of course, have a huge, vested interest in this going ahead.
I am afraid that I am in no way assured by the responses I have received. I certainly would not want to be living in one of these villages. I would not want hydrogen anywhere near my home. I will continue to advocate on that basis. I will not press my objection to this clause at this stage, but I am sure that we will return to this on Report. This is going to get—and needs—a lot more scrutiny. A lot more independence needs putting into the process, and it needs a rethink.
Lord Callanan (Con)
Let me just respond to the noble Baroness’s point and reiterate once again that nobody will be forced to take part in these trials. There is extensive information available. As I said, there are campaigns in some communities which want to take part in the trials. At least one MP in one of the areas is campaigning for it, and both council leaders have been contacted by officials and are supportive of it. Obviously, people want reassurance and more information; that will happen.
The noble Baroness’s other point about health and safety is crucial. I actually agree with her that, potentially, hydrogen is dangerous. Natural gas is also potentially dangerous, but we have mitigated the safety concerns of that. We will want to make sure that the HSE is involved in studies as well, and we will not do anything to put anybody at risk or do anything that will prejudice their safety. That goes without saying, and there are extensive studies taking place.
I also have some scepticism about the potential use of hydrogen for home heating, but I believe that we should do the trials to assure ourselves one way or the other where the truth lies, and whether the existing network can be repurposed easily, simply and cheaply for hydrogen. We do not actually know the answers to those questions until we do the studies, and that involves doing a trial to find that out.
With those reassurances, once again, let me reassure noble Lords that nobody will be forced to take part in these trials. Everybody will be provided with the appropriate information, and nobody will suffer any financial loss because of it, but I believe that it is worth pushing ahead with these trials.
Baroness Worthington (CB)
Would the Minister point to where in the Bill it states that there is a right to refusal and consumers can object? It should be stated up front in the legislation so that the regulations are clear.
Lord Callanan (Con)
I am giving the noble Baroness that assurance now, and it will be in the regulations. I am happy to put it in writing, if she wishes. It is not in the Bill, because that is not the place for secondary regulations. The Bill provides the principles and the powers for the Secretary of State. Of course, when we make the regulations, there will be further potential for that to be discussed both in this House and in the House of Commons, and I am sure that it will be.
Baroness Jones of Moulsecoomb (GP)
The Minister mentioned having meetings. Has he actually met scientists, who know more about this than do people involved in financing the scheme?
Lord Callanan (Con)
I know that the noble Baroness, Lady Jones, has her very passionate views, but there are lots of alternative views out there as well. We are saying that it needs to be properly looked at and studied on the basis of evidence—I know that the Greens are sometimes not big on evidence, but we believe that policy should be properly evidenced and studied. That is why we think that it is important that we should do these trials.
Baroness Worthington (CB)
With a Bill of this magnitude, if we are saying that it is a principle that there is a right to refuse, that principle should be in the primary legislation. That is where you put principles—and then the details can be worked out. Nothing in the Bill says that consumers have the right to refuse. I am sure that we are going to revisit this, as it is fundamentally important that principles are enshrined in primary legislation.
Baroness Sheehan (LD)
I completely agree with the noble Lord, Lord Lennie, and the noble Baroness, Lady Worthington, on this—but could I ask the Minister a separate point about how the trials will be carried out? The Minister said they were going to provide evidence. I want to ask how long the trials will last. One of the issues with hydrogen, if I understand it, is its impact on the pipes that carry the gas to the boilers, et cetera. Those pipes perish in time, because the hydrogen makes them brittle in a way that natural gas does not. Of course, that will lead to cracks and leakages. Will the trial take place over a long enough period to see whether that is indeed the case and what the jeopardy from those pipes might be?
Lord Callanan (Con)
Let me reiterate once again. Noble Lords are getting involved in the detail of what these trials will comprise—timescales, consumer protections, et cetera. This Bill is about giving the Secretary of State the powers to make the regulations, which will then come back this House, when I am sure that we will have a massively long and involved discussion about all these precise and important details—but this Bill is not the place.
Lord Teverson (LD)
In defence of my noble friend, I think it is reasonable to ask the Minister to come back and give us an indication of the length of the trials. He must know that, and that would be a very useful bit of information.
Lord Callanan (Con)
The initial intention is for them to last two years, but we will want to come back and look at all these details on the basis of proper scientific evidence.
COP 27: Outcome
Lord Callanan Excerpts(1 year, 5 months ago)
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Lord McNicol of West Kilbride (Lab)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I make the House aware of my register of interests.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, COP 27 established a new fund for responding to loss and damage as part of other funding arrangements relevant for loss and damage. This is significant in supporting the most vulnerable. New pledges were also made to the Adaptation Fund totalling more than $230 million. However, we had to fight at COP 27 to keep 1.5 degrees alive. While we were disappointed not to make progress on fossil fuels, the deal does preserve the Glasgow climate pact.
Lord McNicol of West Kilbride (Lab)
My Lords, I thank the Minister for his Answer. I had the privilege of attending COP 27 with rewired.earth, a not-for-profit organisation. Like many, we were very concerned at the low level of agreement and ambition for the future. With the war in Ukraine, the energy crisis and the cost of living crisis, it is understandable but very worrying that there was not more emphasis on the net-zero approach. Global emissions remain at a record level and the world is on track for warming well in excess of 2 degrees. I believe Britain can be at the forefront of solving the problem. What mechanisms have the Government put in place to ensure joined-up, consistent policy-making between departments so that policies are aligned with and do not put in jeopardy our pull towards delivering on climate?
Lord Callanan (Con)
I agree with the noble Lord’s initial comments about COP. I think it is worth being a little optimistic, in that over 90% of world GDP is now covered by net-zero commitments and 169 countries have put forward new or updated 2030 NDCs. However, I entirely agree with him that there is a lot more progress still to be made. This Government are very proud of our record. We have the world-leading net-zero commitment in law and all government departments are working together to deliver that.
Lord St John of Bletso (CB)
My Lords, one of the most significant challenges outlined at COP 27 was the rapidly increasing use of single-use plastics globally. The United Kingdom is one of the worst offenders, with almost 99 kilograms per person. What are the Government doing to address this and transition to more sustainable alternatives?
Lord Callanan (Con)
The Government have taken a number of measures—I point the noble Lord to the tax on single-use plastic bags—but clearly there is a lot more that we need to do. I know that colleagues in Defra are working on this.
Baroness Altmann (Con)
My Lords, I praise the Government on all their work so far on the climate issue. Could my noble friend tell the House whether they have plans to embed into the United Kingdom standards in the upcoming Financial Services and Markets Bill the recommendations of the UN high-level expert group on the net-zero pledges of non-state entities, such as pension funds, to ensure that our massive, long-term institutional investor money will support net zero and green growth?
Lord Callanan (Con)
I am sorry to tell my noble friend that I am not responsible for the financial services Bill. I would be very happy to get Treasury colleagues to write to her.
Baroness Walmsley (LD)
My Lords, could I ask the Minister about our overseas investments? It is important that we put our money where our mouth is. Since Boris Johnson announced that we would stop supporting fossil fuels overseas nearly two years ago, what, if any, investments have been made into fossil fuels through British International Investment, UK Export Finance or one of their subsidiaries? If he does not know the answer, would he write to me?
Lord Callanan (Con)
As far as I am aware, the Prime Minister’s pledge has been kept. If that is not the case, I will certainly write to the noble Baroness.
Lord Sikka (Lab)
My Lords, can the Minister confirm that the UK’s share of the cost of reparations relating to damage from greenhouse emissions will be borne solely by the ultra-rich? Research shows that billionaires are responsible for a million times more greenhouse emissions than the average person.
Lord Callanan (Con)
If the noble Lord is referring to the UK’s taxation system, it is clear that those at the top end of the scale pay the largest amounts of taxation by far. If that translates through to our international climate commitments, where we are proud to be contributing something like £11 billion, then I suppose in a strange way the noble Lord gets his wish.
Lord Howell of Guildford (Con)
My Lords, the main problem at COP 27, and the main disappointment, was that it failed to address the central and crucial issue of rapidly rising global carbon emissions. In light of that, is it not time to reassess our own contribution to meeting this crisis, recognising that a 1% reduction in emissions, which our net zero might achieve, is all right, but it is only an example and an example is not going to be enough. We have to think in terms of mobilising old and new technologies on a massive scale with other countries to begin to bring the temperature down from the 2 to 2.5 degrees centigrade it is heading to, and curb the otherwise inevitable climate violence which will hurt a lot of people.
Lord Callanan (Con)
My noble friend makes a very good point of course. Our 1% is not going to make a massive difference, but there are also opportunities attached to it. Our rollout of renewables is going extremely well. We have one of the largest selections of offshore renewables in the world, which has enabled the cost to come down. It is an example we have set through our contracts for difference scheme, and now renewables—particularly offshore wind renewables—are coming in at a fraction of the cost of fossil-fuel generation, so the market is also helping to drive these matters, and of course provides excellent export potential for our industries.
Baroness Blake of Leeds (Lab)
My Lords, as well as the net-zero priorities highlighted at COP 27, the Russian invasion of Ukraine has of course underlined the need to move away from oil and gas and on to homegrown, cheap, clean energy sources that guarantee our energy security. Why have the Government been doubling down on this in regard to fossil fuels, including the loophole to save generators’ profits, while continuing to block the cheapest, cleanest, quickest forms of power —onshore wind and solar?
Lord Callanan (Con)
As I said in response to the previous question, we have one of the fastest rollouts of renewables in the developed world. We have the second largest share of offshore wind after China, but there is undoubtedly still a need for gas as a transition fuel. It makes sense therefore to use that transition fuel from our own North Sea resources, rather than importing it, in a very carbon-heavy manner, in LNG.
Baroness Boycott (CB)
My Lords, when we were in Egypt, the UK Government signed up to the global methane pledge, which commits to a cut in global methane emissions by 30% by 2030, though we have not yet set any domestic targets. Bearing in mind that 80% of methane stems from agriculture and waste, will the Government consider bringing forward the UK’s ban on landfilling biodegradable waste, better biogas capture from landfill and better slurry management?
Lord Callanan (Con)
The noble Baroness raises an important point. I am happy to tell her that, through our green gas levy and support scheme, we are continuing to support the rollout of biomethane—an understated industry in the UK but one doing extremely well—and we need to align our food waste policies to produce even more biomethane.
Baroness Manzoor (Con)
My Lords, my noble friend is well aware of the devastating effects of climate change on countries such as Somalia and India and Pakistan. In Somalia, there were first floods and then drought. I am therefore very pleased to hear that the Government have worked closely at COP 27 to secure compensation. Will my noble friend agree that that framework needs to ensure that the money goes to the people who really need it—those families and children who are currently dying?
Lord Callanan (Con)
I agree with the point made by my noble friend. We will need to make sure that, when the fund is up and running and established, it goes to the people who really need it, which is sadly not the case with some other UN funds.
Baroness Jones of Whitchurch (Lab)
My Lords, in addition to the steps we need to take to curtail our use of excavation of fossil fuels, we need to do something about the consumption of those fossil fuels. What are the Government doing, in terms of our use in industry, home heating and transport systems, to cut down on the demand for fossil fuels and to make sure that all those sectors start to move very quickly towards using renewable energy?
Lord Callanan (Con)
The noble Baroness makes an important point. Energy efficiency should be our first port of call, and indeed it is. Over this Parliament, we are spending £6.6 billion on home energy efficiency measures. In the mini-Statement a couple of weeks ago, the Chancellor announced additional funding of another £6 billion from 2025. We are currently consulting on the £1 billion ECO+ energy conservation scheme. We are looking at additional measures in terms of regulation that we would also need to introduce, and that is just on the domestic side. On the industrial side, we have a suite of measures—the industrial decarbonisation fund, et cetera—to help industry to cut back on its emissions and to save energy as well. Energy efficiency should always be our first port of call, and I agree with the noble Baroness.