Nuclear Decommissioning Authority (Pension Scheme Amendment) Regulations 2024

Lord Callanan Excerpts

Tuesday 13th February 2024 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Nuclear Decommissioning Authority (Pension Scheme Amendment) Regulations 2024.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, these regulations were laid before the House on 19 December last year.

The 2011 report by the noble Lord, Lord Hutton of Furness, started the Government on the road to the reform of public sector pensions. Although the Public Service Pensions Act 2013 made a large number of reforms, it did not cover all public bodies, including those within the Nuclear Decommissioning Authority group.

The Nuclear Decommissioning Authority, or NDA, is the statutory body responsible for the decommissioning and safe handling of the UK’s nuclear legacy. It has 17 sites across the United Kingdom, including Sellafield. The NDA was created in 2005 via the Energy Act 2004. However, many of its sites have been operating since the middle of the 20th century. This lengthy history has therefore led to a complicated set of pension arrangements. This includes two pension schemes that, although closed to new entrants since 2008, provide for final salary pensions and are in scope of the reforms. These are the combined nuclear pension plan and the site licence company section of the Magnox Electric Group of the electricity supply pension scheme.

In 2017, the then Department for Business, Energy and Industrial Strategy and the NDA engaged with the trade unions to agree a reformed pension scheme tailored to the characteristics of the affected NDA employees. This resulted in a proposed bespoke career average revalued earnings—also known as CARE—scheme, which, following statutory consultation with affected NDA employees and a ballot of union members, was formally accepted by the trade unions. The bespoke scheme is in line with the move to CARE made by the rest of the public sector.

Subsequently, a formal government consultation was launched in May 2018 and the Government published a response in December 2018 confirming the proposed changes. The reformed scheme still offers excellent benefits to its members. Notably—indeed, unusually for other reformed schemes—it still includes provision for members to retire at their current retirement age. For nearly all of them, this will be 60.

A statutory framework which applied to pension benefits across the NDA estate meant that specific legislation was needed to implement the new reformed scheme. The Energy Act 2023 provided the Secretary of State with the powers to make secondary legislation designating a person who will be required to amend the provisions of a nuclear pension scheme. This secondary legislation is being made to require the NDA and Magnox Ltd to amend relevant NDA pension schemes and implement CARE-based pension reform in accordance with the broader public sector pay policy. The instrument will also modify the statutory pension protections contained in the Energy Act 2004 and the Electricity (Protected Persons) (England and Wales) Pension Regulations 1990 in support of the reforms.

In conclusion, these measures will bring the Nuclear Decommissioning Authority group’s final salary pensions into line with wider public sector pensions. It will also deliver savings to the NDA budget, which will be recycled to support its mission of decommissioning the UK’s nuclear legacy. On that basis, I commend these regulations to the Committee.

[Lord Young of Cookham (Con)]

My Lords, I am grateful to my noble friend for that explanation, particularly as he does not seem in the best of health. I do not want to add to his distress, but I want to raise three issues.

--- Later in debate ---

[Earl Russell (LD)]

I thank the Minister for introducing these regulations. There is little information available other than the statutory instrument and the accompanying Explanatory Memorandum. I also note that this has not been picked up in any way by the Secondary Legislation Scrutiny Committee. I do not have many overriding concerns or objections, and I understand that it is likely to be the same for others speaking today. I will pick up the points that the noble Lord made, particularly in relation to the small numbers who have been excluded under paragraph 7.3.

These measures will bring NDA pensions into line with wider public sector pensions in a move from a final salary scheme to a career average scheme. The proposals have been agreed with the unions and include provisions for retirement on full pension before the state pension age. I welcome that.

As is customary, I will ask the Minister a few questions. Most of them relate to the same issue, namely that of timing—the cause of the timing and whether that delay has had any impact on the proposals being put forward today. I am just not certain, so I will ask questions around those issues.

As the noble Lord said, this was originally completed way back in 2017 and the consultation was published in May 2018. The Explanatory Memorandum blames a lack of parliamentary time for this almost seven-year delay in bringing this into law. Can it really be correct that it has taken a full six or seven years to find a few minutes of parliamentary time to carry these small changes forward? Maybe it is, but I seek clarification on that point.

Considering these proposals are now late, is there any impact as a result? The report says that the unions supported the proposals. Has their position changed since they were originally consulted? Has the Minister or his officials gone back to the unions to ask for an update on their position? Was the last time they were consulted back in 2017? I seek clarification on that, because it was not clear from the information provided.

The Explanatory Memorandum states that the proposals will save an estimated £200 million over the term of the scheme. Is that figure still correct following the delay? Is it the same amount? Has there been any loss of public funding from the delay in bringing these proposals forward? Are there any changes to the long-term savings?

Obviously, we are dealing with the Nuclear Decommissioning Authority. If any issues of people being exposed to radiation that were not known about came to light after these proposals came forward, would there be any changes in the pensions available to them as a result of the changes to the scheme?

Paragraph 10.3 of the Explanatory Memorandum mentions that most of the responses were against the proposals, but there is very little information. I understand that there were not many objections and that these were small numbers, but there was no information in the pack about the reasons for the objections. Could I ask for a sentence on that?

Paragraph 11.2 says that these proposals will impact 8,000 staff and that consultations will begin on 1 April. Is that still the same number? Has it changed over time?

I note the Government brought forward their civil nuclear road map last month, which involves a big expansion of our civil nuclear programme. Is the reason why this been delayed for seven or eight years and then rushed forward related—

[Lord Callanan (Con)]

No.

[Earl Russell (LD)]

No? Okay, that is fine. Finally, how will the Minister monitor the implementation of the changes? Will that be reported anywhere?

[Lord Lennie (Lab)]

My Lords, this instrument enacts the Nuclear Decommissioning Authority pension scheme, based on the review of public sector pension schemes by my noble friend Lord Hutton in 2011. This resulted in the Public Sector Pensions Act, which enabled the majority of public sector pensions to move from final salary to career average revalued earnings schemes. About 8,000 workers are affected as a result of this instrument. We have nothing to complain about on the scheme, but the process has raised a few questions, as the noble Lord, Lord Young, and the noble Earl, Lord Russell, have pointed out. I would like these to be addressed.

During the consultation, many respondents raised concerns that the proposed definitions and the application of the proposed powers were insufficiently clear or too broad. Many sought assurances that the powers would be restricted to implementing the reform agreed with their national trade unions. Furthermore, respondents requested either member or trade union and/or trustee engagement prior to the use of any of the powers. Could the Minister respond to those concerns?

The trustees of the CNPP and MEG-ESPS asked that they be given sufficient time to review the final rule amendments, indicating that about 12 months would have been appropriate. The response to the consultation says that, in the light of this specific request, as much notice as possible would be given to the trustees and members prior to implementation. We now know that the implementation date will be 1 April 2024. Can the Minister tell us when the Government notified the trustees of the changes? Did they deem this sufficient for their purposes of consultation and informing their members?

The noble Lord, Lord Young, raised a concern regarding the reform of the pensions for NDA employees who are covered by the Electricity (Protected Persons) (Scotland) Pension Regulations, which were not included in the public consultation. There are very few of them, as the noble Lord and the information provided say. How many are there? If a change is to be brought in for the persons in Scotland, presumably another full consultation will take place to precede any further regulations.

Finally, to repeat the question of the noble Lord, Lord Young, and the noble Earl, Lord Russell, the decision to introduce the scheme was taken on 28 December. There has been plenty of parliamentary time for this half-hour debate to take place, so could we have the actual reason why it was delayed so long?

[Lord Callanan (Con)]

My Lords, I thank all noble Lords for their valuable contributions to this debate.

I will start with the points made by my noble friend Lord Young and the noble Earl, Lord Russell. On the small numbers of people excluded, if an individual is entitled to pension protection under the Electricity (Protected Persons) (Scotland) Pension Regulations, they are not in scope for the changes in the NDA group. Whether an individual has this protection will depend on whom they were employed by and the pension scheme that they were eligible to be a member of in March 1990. The Government have reserved their position to keep this under review.

I think that every noble Lord rightly raised the delay in bringing forward these provisions. It was not that we could not find 20 minutes of parliamentary time over six years—if that were true, my noble friend would have a very valid point—but that we did not get the primary powers we required, as he will recall, until the Energy Bill was enacted late last year. It was entirely a result of needing the primary powers before we could make these changes, not a lack of parliamentary time. A great many other measures were held up due to lack of parliamentary time, but that was not the reason for the delay here. My honourable friend the Minister for Nuclear in the other place met the trade unions last year to discuss the NDA provisions in the then Energy Bill. They noted that they were also concerned about the length of time but, when the delay was explained, they were broadly understanding of the reasons.

On the £200 million of savings, despite the delay in the introduction of this legislation, we estimate that the level of savings remains broadly accurate. The exact level will depend on the change to pension arrangements and will vary depending on when members of staff retire, but we still believe that the savings will be significant, of the order of £200 million.

The number of staff affected—broadly 8,000—remains the same. Employees affected were aware of the changes due to be enacted as of April 2024, and there has been a great deal of communication during the last year, including a website set up for those affected. If changes are required to schemes not covered by these regulations, such as schemes in Scotland, that would require further consultation. The Government remain committed to ensuring that public sector pension reform proceeds in line with the 2011 review of the noble Lord, Lord Hutton. These regulations are essential to the success of the implementation of CARE-based pension reform in the NDA group in accordance with broader public sector pay policy.

Reflecting back, it is evident that the complexities of the NDA group’s pension schemes required tailored reforms. Engagement with the trade unions resulted in a bespoke career average revalued earnings scheme, aligning with the broader public sector framework and maintaining valuable benefits for its members. Furthermore, the reform preserves commitments to those excellent benefits, notably including provisions for members to retire at their current retirement age, as I said in opening, which for the majority will be 60. These measures will align NDA group final salary pensions with wider public sector standards, ensuring fairness and efficiency, yielding substantial financial savings and bolstering the NDA’s mission of responsibly decommissioning the UK’s nuclear legacy. I think I have answered all the points put to me—

[Lord Young of Cookham (Con)]

I am very grateful for my noble friend’s explanation that it was not a shortage of parliamentary time. As there are four former business managers in the Committee at the moment, will he ensure that in future his department does not blame the absence of parliamentary time when that is not the reason for the delay?

[Lord Callanan (Con)]

My noble friend makes a very good point. I will communicate that to officials. With that, I commend these reforms to the Committee.

Motion agreed.

Global Heating

Lord Callanan Excerpts

Thursday 18th January 2024 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

I thank and pay tribute to the noble Baroness, Lady Sheehan, for bringing forward this important debate. It has been short but interesting none the less, with some excellent contributions from across the Chamber. I will seek to address as many of the points made as I possibly can.

Although the title of this debate focuses on efforts to adapt to climate change, it is of course equally of paramount importance that we do our utmost to limit further warming in this critical decade. In sharp contrast to the picture painted by the noble Baronesses, Lady Jones and Lady Blake, and the noble Earl, Lord Russell, the UK is—and is proud to be—a world leader on climate change. We are totally committed to net zero, to the Paris agreement and to keeping 1.5 degrees alive. We were the first major economy to halve its emissions, and we have one of the most ambitious decarbonisation targets in the world. We have achieved that while growing our economy by more than 70% since 1990. We have a much better record than—to pluck a random example—Germany, where the socialists and the greens are in government, because it is practical action that counts rather than fancy green rhetoric.

On assessments relating to the likelihood of exceeding 1.5 degrees of warming relative to pre-industrial levels this year, the World Meteorological Organization and the Met Office recently confirmed that 2023 was the warmest single year on record globally, at around 1.45 degrees above pre-industrial levels. While reaching 1.5 degrees above pre-industrial levels in a single year does not mean that the Paris agreement long-term average temperature goal has been reached, it is clearly a concern that record temperatures are already being set. The latest IPCC synthesis report drove home just how important it is that we limit the rise in average global temperature to 1.5 degrees above pre-industrial levels. Every increment of global warming will increase the adverse impacts of climate change, multiplying hazards and compounding risks that are more difficult and more complex to manage. That is why we put keeping 1.5 degrees within reach at the heart of our own COP 26 presidency and our international climate diplomacy efforts since then.

To answer the points made by the noble Baronesses, Lady Jones, Lady Hayman and Lady Blake, the Prime Minister has underscored our commitment to delivering on net zero. Our 2030 target means the deepest cuts of any major emitter since 1990, and we are determined to deliver on that. We were the first major economy to set a net-zero target in law, and we are committed to delivering net zero at home and, of course, to driving forward progress internationally to keep 1.5 degrees within reach in this critical decade.

However, it is of course a fact that the UK produces just 1% of global greenhouse gas emissions. We can address the remaining 99% and keep 1.5 degrees in reach only through international action and leadership, which is what we are providing. We made it the centrepiece of our COP 26 presidency and under the presidency, the proportion of global GDP covered by net-zero targets increased from 30% to over 90%. We will continue to focus on the most practical and deliverable measures that bring the largest global carbon savings.

At COP 28, we focused on driving forward efforts to protect forests, to scale finance for the transition and to accelerate net-zero transitions across a number of different sectors. On forests, we announced £576 million to support countries taking action to halt forest loss and to protect nature, and we saw the commitment to halt and reverse deforestation enshrined in the UAE consensus. We drove forward initiatives to scale finance, including the Prime Minister announcing £1.6 billion worth of new international climate finance programmes, and we endorsed the climate finance framework, which champions reform of international financial institutions to make them bigger, better and fairer.

The UK was also at the forefront of efforts to accelerate decarbonisation in many key sectors. To take an example, the International Partners Group, co-led by the UK and the EU, launched the Vietnam Just Energy Transition Partnership—JETP—a £15.5 billion resource mobilisation plan to help accelerate Vietnam’s transition from fossil fuels through to clean energy. The Powering Past Coal Alliance, which we also co-chair, announced 13 new members—including the USA, which has the world third-largest coal fleet—all committed to phasing out unabated coal power and to building no new coal capacity. We were also pleased to see two new breakthroughs launched on buildings and cement. In response to the question asked by the noble Baroness, Lady Kingsmill, these are just some of the international partnerships and initiatives that we will continue to drive forward action on.

As many noble Lords noted in the debate, important progress was made in Dubai. We are now globally unified around a commitment to transition away from fossil fuels, underpinned by a goal to triple renewables and double energy efficiency. A new fund for loss and damage has been established, and the first global stocktake under the Paris Agreement was successfully concluded.

Of course, we all know that that is not enough. Looking ahead, we have to work harder with partners to ensure that many of these key commitments are met, such as that to triple renewable power. The noble Lady Baroness, Lady Kingsmill, questioned what we, as the UK, are doing to scale up renewables. First, we have made very significant progress already. Since 2010, renewables have gone from less than 7% of our electricity supply to 48% in the first quarter of this year. Today, the UK is proud to be home to the five largest operational offshore wind farm projects in the world, and we have an extremely ambitious target to increase offshore wind to 50 gigawatts of capacity by 2050.

On the international side, we will continue to scale up renewables through UK initiatives such as Power Breakthrough and the Green Grids Initiative, which is all about scaling up the net-zero grids that we will all need for a net-zero future.

In answer to the point made by the noble Baroness, Lady Sheehan, on new oil and gas licences, this is of course a matter which we have debated across this House many times. I point out that while the Government are of course scaling up our own clean energy sources, such as offshore wind and nuclear, I agree with my noble friend Lord Lilley and the noble Lord, Lord Young of Norwood Green, that the UK still needs to utilise oil and gas for most of our energy needs. That will be a continued need over the coming decades.

New licences will slow the decline in UK production levels, rather than see them increase above current levels, as has been implied. Even with any new licences, oil and gas production in the UK is still expected to decline by 7% year on year—faster than the average global decline needed to align with the UN 1.5 degrees centigrade pathway. I have made the point many times before that it makes no sense to import LNG from other countries with higher carbon emissions when we could obtain it from our own resources, albeit that these resources are continuing to decline as the fields become depleted.

On adaptation, as noble Lords have set out, the impacts on climate change are already being felt. The UK has long recognised its importance. We are delivering on our commitment to spend £11.6 billion on international climate finance through to 2025-26, to ensure a balance between adaptation and mitigation, including at least £3 billion on protecting and restoring nature.

To support the most vulnerable in our world who are experiencing some of the worst impacts of climate change, at COP 27, the Prime Minister announced that we would triple our funding for adaptation from £500 million to £1.5 billion by 2025. Over the past 12 years, our international climate finance has helped over 100 million people cope with some of the worst effects of climate change. At the COP 28 summit, the UK negotiators were successful in helping to agree a framework to bring the global goal and adaptation into alignment. Of course, although we accept that there is further work to be done, this is a critical step towards more meaningful action. During our COP 26 presidency, we secured a commitment to double adaptation by 2025. We will continue to push for more donors to help deliver on this commitment.

To address another point made by the noble Baroness, Lady Kingsmill, we welcome the establishment at COP 28 of the new fund covering loss and damage, with funding in excess of $650 million. The UK announced a contribution of up to $40 million to this fund, with a further $20 million for funding arrangements, including for early warning systems and disaster risk finance. Given the scale of the need, it is essential for the success of the fund that it attracts new and wider sources of funding, including grants and concessional loans from public, private and some innovative sources. We will continue to progress this as much as we possibly can.

Also at COP 28, my colleague, the Minister for Development and Africa, announced a further £100 million of UK funding to help many vulnerable people adapt to climate change. The UK can be proud of its record and of everything that we are doing—both domestically and through the leadership we are providing abroad.

[Lord Young of Norwood Green (Lab)]

Before the Minister sits down, will he respond to the point I made about the Government’s support for small nuclear reactors?

[Lord Callanan (Con)]

I am happy to do so. I did not cover it directly in my speech because we made a big announcement about it last week. I answered Questions on it in this House only the other day. We are progressing big-scale nuclear reactors. We are committed to making a decision shortly on the progress of Sizewell C. We have provided £200 million to Rolls-Royce for the development of new SMRs. Great British Nuclear is rolling out our campaign of both SMRs and AMRs. Many of our existing nuclear plants will go offline towards the end of this decade. We need to make sure that we make the investments to replace them because that will be essential if we are to reach net zero. The noble Lord’s point is well made.

My time is up, so I will draw my remarks to a close. The House can rest assured that the UK will continue to deliver on net zero at home and to push and accelerate action internationally, while championing the need to address many of the worst impacts of climate change. The science demands that we drastically accelerate global action on mitigation in what will be a critical decade ahead. We will progress all these efforts both at home and internationally. Once again, I thank the noble Baroness, Lady Sheehan, for securing this debate, and all noble Lords who contributed.

[Lord Gascoigne (Con)]

My Lords, I thought I would just repeat the point made earlier in the Chamber by both the Leader of the House and the Opposition Chief Whip, the noble Lord, Lord Kennedy of Southwark, concerning the importance of brevity in this debate—indeed, in all debates. If noble Lords speak for the full time limits in this debate or exceed them, there will be insufficient time for the Minister and the noble Earl, Lord Kinnoull, to respond. So I humbly request that noble Lords stick to the allocated speaking time, which is a maximum of seven minutes. Thank you.

Civil Nuclear Road Map

Lord Callanan Excerpts

Monday 15th January 2024 Lords Chamber

[Earl Russell (LD)]

My Lords, I thank the noble Lord, Lord Lennie, for his contribution. This road map is overdue but at least it is here. The question is: will timely financial investment and industry participation follow? The Liberal Democrats recognise that nuclear energy has always been part of our energy mix and will continue to be so as we transition away from fossil fuels.

The road map creates new risks and does little to provide energy security in the medium term. It sounds very glorious to meet one-quarter of our electricity demands by 2050, but will it deliver? It is a bit of a curate’s egg. On these Benches, we think that the Government are putting too many of our energy eggs in the “grand nuclear gigawatt energy infrastructure projects will always deliver” basket. Gigawatt nuclear energy projects have a long history of being announced with much fanfare, running into a blizzard of problems, becoming delayed, being delivered late and way over budget or not being delivered at all. The reality of nuclear projects in the UK is that Hinkley Point C is well over budget, now £33 billion, and late. Little progress has been made on Sizewell C, despite years of discussion and attempts to find ways to finance it.

The current proposed financing package charges already hard-pressed consumers up-front. Why will it be any different this time? This strategy requires the extension of four AGR nuclear power plants beyond their planned end of life and is subject to regulatory approval. When does the Minister expect the regulators to take these decisions? Mini reactors should be explored, but this should be as well as, not instead of, investing in renewable energy.

If planning and regulatory processes can be streamlined for nuclear, surely that can be done for offshore and onshore wind. We welcome the £300 million invested to free the UK from energy dependence on Russian advanced nuclear fuels. This is critical to our security. When does the Minister expect that the UK will be totally free from Russia? The Government must be able to give a true account of the costs of nuclear decommissioning.

The future is renewable. By 2030, technology improvements could slash today’s prices by one-quarter for a wind and half for solar. Other technologies, such as long-term storage, are also promising. The Liberal Democrats are committed to ensuring that 80% of the UK’s electricity is generated by renewables by 2030. The UK Government are aiming to decarbonise Great Britain’s electricity system fully by 2035, yet they have not provided a coherent strategy to achieve their goal. Investment in renewables and green technologies is essential. How do the Government plan to integrate the nuclear road map with their renewables ambitions? Given the scale of renewables that the Government are planning, inflexible nuclear base load systems are an ill fit. We need the flexibility provided by technologies such as interconnectors, storage and demand flexibility. Finally, when will we see a full and comprehensive integrated energy strategy to achieve net zero with a clear road map for renewables?

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

I thank the noble Lord, Lord Lennie, and the noble Earl, Lord Russell, for their introductions. On the comments from the noble Lord, Lennie, we of course welcome the support of the official Opposition. The noble Lord is right to say that these are essentially very long-term schemes. It is good to have a degree of cross-party consensus between the two main parties about the importance of nuclear to our future energy system and energy security.

I was not sure of the Lib Dem position. The noble Lord started off quite positively, saying that the Lib Dems welcome the role of nuclear, which of course is a change from their attitude during the nuclear financing Bill. I think I spotted in what the noble Lord was saying a hint of possible support, but we will have to wait for clarity on that. I also agree with his comments about renewables. It is not an either/or choice; we need to do both. We need to contribute to nuclear to support our baseload ambitions and, of course, continue our world-leading support for renewables and the future rollout of solar, offshore wind and all the other renewable technologies.

We have published three key documents which reinforce the UK’s position as a leader in the civil nuclear renaissance: first, a civil nuclear road map; secondly, a consultation on alternative routes to market; and, thirdly, a consultation on a proposed policy for siting new nuclear power stations. In response to the question from the noble Lord, Lord Lennie, this really does set us on a path towards deploying up to 24 gigawatts of nuclear power in Britain by 2050, as part of the cleaner, cheaper and more secure energy system of the future. The road map very much establishes our vision for a vibrant British nuclear sector, which includes exploring building a major new power station and investing in advanced nuclear fuel production. It includes key enablers such as skills regulation, financing and effectively managing our nuclear legacy, and it sets out our long-term ambition for nuclear, providing high-level timelines and key decision points for a wide range of nuclear technologies over the next decade.

Finally, in recognition of our enhanced nuclear ambitions and the exciting potential offered by these new technologies, we are launching a public consultation on the proposed siting of new nuclear stations to help attract investment into the UK nuclear sector, and empowering developers to find suitable sites to enable a wide range of potential communities to benefit.

The noble Earl, Lord Russell, asked about freeing us from Russian nuclear fuel. I can confirm that it is the ambition of the Government to make sure that we are completely free of any components of Russian nuclear fuel by 2030.

[Lord Howell of Guildford (Con)]

My Lords, this road map is extremely welcome. However, in view of the fact that Hinkley Point C is now €15 billion over budget and many years late, and has almost bankrupted Électricité de France, with the Chinese partners reportedly stopping all further payments, does my noble friend think it wise to make a replica of the Hinkley Point project at Sizewell C and make it the spearhead of our nuclear programme, when smaller modular reactors and new technologies could be ready many years sooner and with much less burden on the taxpayer and the consumer?

[Lord Callanan (Con)]

My noble friend makes a good point, but the attraction of using a similar design is that many of the teething problems that have been undergone at Hinkley will hopefully be solved by the time we get to a decision on Sizewell. As I said, my noble friend makes a valid point and, again, it is not a question of either/or. We will continue the development of SMRs and AMRs in conjunction with large-scale nuclear.

[Lord Birt (CB)]

My Lords, I welcome the Government’s Statement on their long-term nuclear policy. It is and it should be a critical component of our strategy for achieving net zero. However, I want constructively to raise some points. I worked at No. 10 in 2004 when the decision was made in principle to give the go-ahead to a new nuclear plant, which of course became Hinkley Point C. It has become a 25-year project. This is a genuine question: what lessons does the Minister think the UK can learn about how we manage these ambitious long-term infrastructure projects? Did we set out to fund it in the right way?

--- Later in debate ---

[Lord Callanan (Con)]

The noble Lord makes a number of good points. Clearly, there are some lessons to be learned from the process of Hinkley. We absolutely funded it in the right way, to go back to the point made by my noble friend Lord Howell, because the cost is being borne by EDF—and it is very kind of the French taxpayer to help us out in our nuclear programme. That is one of the reasons why we needed to look at alternative funding mechanisms for the Sizewell project. Of course, there are always lessons that can be learned in the regulatory process, the planning process and so on to try to bring these projects onstream a little sooner.

[Lord Jones (Lab)]

My Lords, the Minister will know of the great contribution made to the generation of nuclear power by the plants of Trawsfynydd, in the magnificent landscape of old Meirionnydd, and Wylfa on Ynys Môn, Môn Mam Cymru, or Anglesey. Can he give any encouragement today to people who wish to see further generation at the Trawsfynydd plant and the renewal of energy production at Wylfa? Does he know that those plants are far-flung in the north-west of Wales, where well-paid and skilled work is very rare? Can he give any encouragement at this stage?

[Lord Callanan (Con)]

I welcome the noble Lord’s comments. We recognise the substantial contributions that many communities in Wales have made over the years towards our nuclear policy in the UK and all the energy that we have received. Part of the consultation is a check on the siting of new nuclear plants, and community support, the existence of existing grid connections and so on will play important roles in future siting policies. The plants that he mentions score very well in that regard.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, I draw attention to my nuclear interests as outlined in the register. I wholeheartedly welcome this report—and its earlier cousin, Towards Fusion Energy—particularly its emphasis on the cross-Whitehall endeavour to build the skilled workforce that the industry needs, which we all know will be a challenge. But back to Wales. Following on from what the noble Lord, Lord Jones said, can my noble friend the Minister reassure me that, in deciding sites for a further large-scale and small modular reactor, sufficient weight will be given to the levelling-up needs of north-west Wales, where the creation of a nuclear cluster, including gigawatt generation at Wylfa and both SMR and medical radioisotope production at Trawsfynydd, would indeed be transformative?

[Lord Callanan (Con)]

My Lords, I know from many conversations that I have had with my noble friend her absolute commitment to pursuing the cause of Wales and the contribution that it can make to our nuclear renaissance. I give her the absolute reassurance, building on the reply that I gave to the noble Lord, Lord Jones, that the communities she has mentioned are very well placed to benefit from the new nuclear policies that we have announced. On her other point, my noble friend is correct to say that we need to build a skilled nuclear workforce to ensure that we have the people we need to power this future nuclear renaissance.

[Viscount Hanworth (Lab)]

My Lords, the road map makes frequent reference to high-temperature gas-cooled reactors. An indigenous project to build such a reactor, called U-Battery, was shelved due to a lack of government support. From whom do the Government propose to import such technology—which, by the way, was pioneered in Great Britain? When will the Government give sufficient support to our native industry, which was once pre-eminent in the world?

[Lord Callanan (Con)]

The noble Viscount makes an important point. We had one of the most pre-eminent nuclear industries, but that industry was left to die during a number of Governments, particularly starting with the Labour Government in 1997. Now we are on a different page. There are a whole host of different new technologies and processes coming forward in this space, and it is very much the job of Great British Nuclear to guide us in the process of selecting the best technologies to take forward.

[Baroness Stuart of Edgbaston (CB)]

My Lords, could I have reassurance from the Minister that, in his discussions about civil nuclear energy and the skills space, which has been mentioned several times before, he works very closely with the Ministry of Defence? At the very time when it has an increased demand for those types of skills, it is experiencing a shortage. I do not want to see us robbing Peter to pay Paul and still not having enough people who can do these jobs.

[Lord Callanan (Con)]

The noble Baroness makes a very valid point. We are looking forward to the upcoming findings of the nuclear skills taskforce, very ably chaired by Sir Simon Bollom. I am sure he will have some interesting comments and observations for us in taking forward the diverse needs of the workforce.

[Lord Naseby (Con)]

Is my noble friend in a position to tell us when there will be a move forward on the advanced small modular reactors? My understanding of the background is that Rolls-Royce has been ready for the best part of two years, and I understand the same is true for the competitors, which are supposed to be bidding in due course.

[Lord Callanan (Con)]

I am happy to reassure my noble friend. We have given Rolls-Royce £210 million to help in the development of the next phase of small modular reactors. There are a number of competing technologies. Great British Nuclear will be making progress on selecting the most appropriate technology in the months and years to come.

[Viscount Stansgate (Lab)]

My Lords, on page 28 of the road map document, reference is made to the fact that additional sites will be needed beyond those already designated. In the light of what the Minister has just said about the process of consultation, when does he expect the Government to be in a position to make announcements as to which sites have been chosen?

[Lord Callanan (Con)]

There is quite a process to go through before then. We announced today the consultation on the national policy statement on siting, and we look forward to seeking the views of various interested parties and communities. There will be a further consultation once we have produced the national policy statement. There are a few steps to go through yet, but we want the process to be as transparent as possible, involving communities, residents and companies looking to take this work forward.

[Lord Walney (CB)]

My Lords, further to the question from my noble friend Lady Stuart, do the Government understand the scale of the step-up needed to run a massive civil nuclear expansion alongside military expansion? There is the renewal of the deterrent and the additional responsibilities that the hugely welcome AUKUS agreement places on the UK, getting not simply the workforces ready but the interdependencies across the supply chain in the UK.

[Lord Callanan (Con)]

We very much understand that. I know the noble Lord, in his previous constituency interests, had a close connection with these matters. It is important that we take the two projects forward together. There are a lot of synergies in the experience and training required among very skilled workers, and we are determined to make sure that we have the appropriate skills here in the UK.

[Lord Jackson of Peterborough (Con)]

My Lords, I welcome the road map and particularly the important focus on energy security. However, is not the wider context that many of the delays over the years have been as a result of the planning system and, therefore, that the Government need to look holistically at reform of strategic infrastructure planning, the compensation code and compulsory purchase? We have not had new legislation on compulsory purchase for over 40 years. Are those wider issues not just as important as access to private and public money?

[Lord Callanan (Con)]

My noble friend makes a good point. Separate processes for potential reforms to the planning system are going forward in government across a range of areas. Of course, it is important not just for the nuclear industry but in terms of grid connections, solar farms and all the other technologies coming forward. We need to find ways to do these things more quickly in this country and to make sure that people have appropriate opportunities to feed in their views, their objections, et cetera, but there is no reason why it should take literally decades to do some of these schemes.

[Lord Liddle (Lab)]

My Lords, speaking as a native of Cumberland and a former Cumbria county councillor, does the Minister recognise that the most enthusiastic supporters of new nuclear power are to be found in west Cumberland and among the people who work at Sellafield and in its associated activities? Will he end the record of dither and delay—this is not a party-political point—about what is to happen in the nuclear industry? Does he recognise that at Sellafield and at Moorside there is a potential site for SMRs and the major new gigawatt nuclear power station, which was planned but then scrapped, although it is now apparently back under consideration?

[Lord Callanan (Con)]

I agree with a lot of what the noble Lord said. I absolutely accept the strong support of the communities in west Cumbria. I am not sure I agree that they are the most enthusiastic—I am sure our colleagues from Wales would disagree about that—but we can probably agree that they are as enthusiastic as many other communities. His party-political point about dither and delay was slightly unfair; much of it was started under a Government whom he was close supporter of. But perhaps we should put those matters aside and welcome the fact that both Front Benches now agree that we should take forward the new nuclear renaissance we have announced.

[Lord Lansley (Con)]

My Lords, I draw attention to my registered interest as co-chair of the UK-Japan 21st Century Group, and to the fact that I have family members living on Anglesey. I say to my noble friend that they, too, share the view that the further development of nuclear power generation at Wylfa would be very welcome on Anglesey. Since Hitachi withdrew from the project at Wylfa, we have legislated for the regulated asset base model. With the example of Sizewell C, is there scope, and indeed action, to bring Hitachi back for a project at Wylfa again?

[Lord Callanan (Con)]

Wylfa is one of a number of excellently co-ordinated and positioned sites. I am not sure I want to give it any prominence beyond what it already has; there are a number of other potential sites. I am sure we will be very interested in having further discussions with Hitachi if it wants to progress those proposals.

[Lord Hope of Craighead (CB)]

My Lords, the sole remaining nuclear power station in Scotland, at Torness, is nearing the end of its useful life. Are discussions taking place with the Scottish Government about the contribution that Scotland can make to the road map once the Torness power station has to be closed down?

[Lord Callanan (Con)]

The noble and learned Lord is absolutely right: Scotland has an excellent long tradition of support for nuclear power. Sadly, that is not shared by the existing Scottish Government. We would like to have discussions with them on this, but they seem to have set their face against nuclear power. Of course, some of the planning powers are devolved, so they are entitled to take that decision. However, speaking on behalf of their friends in England and Wales, I am sure we will be very happy to help them out with power in the future, with the many cross-border connections.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I begin by welcoming the Government’s launch of the consultation on amending the contract for difference bidding, which will potentially allow repowering of onshore wind to be included within it. Of course, that could potentially see us finally getting new onshore wind, which we have not seen for so long—the cheap, affordable facilities that can be spread around the country. That can be done very quickly, if the Government sort that process out. But as the noble Lord, Lord Lennie, said, we are talking about the suggestion of small modular reactors and the final investment decision in 2029. The Minister in the other place said that we would not be looking at them until well into the 2030s. Are the Government not simply being distracted from the solution to our energy issues and energy security, which is renewables?

Given that the last estimate I have seen for the nuclear clean-up of our old nuclear is a cost of £260 billion—an estimate made by Professor Stephen Thomas at the University of Greenwich—and that the Nuclear Decommissioning Authority has just been warning that ageing equipment at Sellafield means that there is a serious risk of a fire there, should we not clean up the old mess before we risk creating new ones? Will the Government make sure that there is no public cost in any future clean-up, if indeed we see any new nuclear?

[Lord Callanan (Con)]

Yet again on this subject, the noble Baroness sets up a false choice between either nuclear or renewables. We are in favour of doing both; they both have a contribution to make to our diverse energy system. I bow to no one in my support of renewables. I think that wind and solar are great, and they are relatively cheap compared with fossil fuel sources; they will make a massive contribution to our energy supply in future. But they are intermittent, so it is important to have baseload capacity as well. You cannot run your whole energy system on wind and solar, however much the Greens would like to tell us you can. We need other sources as well—we need diversity, we need storage, and we need nuclear. We can do both.

[Baroness Lawlor (Con)]

My Lords, I welcome the Statement on the development of civil nuclear. I thank my noble friend for his answers so far but, given that it is a long-term project, two things must be kept under constant review and need constant effort. Have the Government made any further plans or given any thought as to how they will allocate finances between the large-scale nuclear projects, the SMRs and the AMRs? Bearing in mind that the research and technology will continue to change, we should not be tied too much to those that may not be so easy to achieve. What is the thinking about changing the weight given to the different sorts of nuclear? That is my first question.

In relation to long-term development, I pick up on the remarks of the noble Lord on the Cross Benches who talked about the large-scale structures involved and the kind of education and training we need for nuclear physicists, who are very highly trained. Physics is not a growing subject at university—many universities have closed their physics departments. That goes right down to the skilled technicians and technologies that we need to run any civil nuclear plant. I pick up on the comments of the noble Lord who mentioned the skills near Sellafield. We need to keep whatever skills we have, but there is a lot of work to be done at every level of education and training so that we have the workforce. Can the Minister comment on that?

[Lord Callanan (Con)]

I thank my noble friend for her suggestions. Of course, we need to pay close attention to the skills needs of the future, which is why we have set up the nuclear skills task force and are eagerly awaiting its report for us to take forward. My noble friend is also right that we need to keep a close eye on the costs of the different technologies. She is right to say that they are essentially long-term projects, but many of our energy infrastructure projects are long term—even offshore wind developments take a number of years to bring to fruition. Many of the projects that are coming on stream now were started a decade ago. Obviously, we want to try to bring down the timescale for those deployments, but nevertheless all those infrastructure projects contributing towards our long-term energy security of supply are essentially long term, and nuclear will be an important part of the mix.

[Lord Lucas (Con)]

My Lords, is the European pressurised reactor working reliably and safely anywhere in the world and, if so, where?

[Lord Callanan (Con)]

My noble friend makes a good point—but, of course, these are matters for the regulators, which will keep a close eye on the safety, security and efficacy of the technology.

Hydrogen Production Revenue Support (Directions, Eligibility and Counterparty) Regulations 2023

Lord Callanan Excerpts

Monday 18th December 2023 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Hydrogen Production Revenue Support (Directions, Eligibility and Counterparty) Regulations 2023.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, these regulations were laid before the House on 8 November this year. On 26 October, the Energy Act 2023 received Royal Assent. The Act provides a legislative framework for hydrogen, including provisions relating to the hydrogen production business model—a funding model to support the production and use of low-carbon hydrogen in the United Kingdom. Delivering this policy will be essential to kick-start the hydrogen economy and move towards the Government’s ambition to have up to 10 gigawatts of low-carbon hydrogen production capacity by 2030, as set out in the British Energy Security Strategy.

Under the business model, projects will be paid a subsidy for the hydrogen produced through a revenue support contract, similar to the highly successful contracts for difference for low-carbon electricity production. The business model, contracts for hydrogen, will be managed by a hydrogen production counterparty. Initial projects are to be selected through allocation rounds run by the Department for Energy Security and Net Zero. To receive business model support, a project must be an

“eligible low carbon hydrogen producer”.

Where such a project is allocated support, the Secretary of State will issue a direction to the hydrogen production counterparty to offer to contract with that project.

I hope noble Lords noticed that, last week, we announced 11 major new electrolytic hydrogen projects across the UK that will be offered support under the hydrogen production business model. This represents the largest number of commercial-scale green-hydrogen production projects announced at once anywhere in Europe. These new projects, stretching all over the country from the south-west of England and south Wales to the Highlands of Scotland, will invest over £400 million up front over the next three years, in a major boost to the UK’s green economy. In addition, CCUS-enabled hydrogen projects have also been shortlisted through the track 1 phase 2 cluster sequencing process.

I turn now to the detail of the regulations and their important role in all this. Fundamentally, the regulations satisfy the duty in Section 66(4) of the Energy Act 2023 by determining the meaning of “eligible” in relation to a low-carbon hydrogen producer. They tell the world who can be eligible for support.

The regulations set out that only new hydrogen production facilities, or existing hydrogen production facilities adding new production capacity, that can demonstrate that their proposal for the production of hydrogen is capable of complying with the UK low-carbon hydrogen standard, will be considered eligible. This will ensure that eligibility keeps pace with how the Government define low-carbon hydrogen. I recall that a number of amendments tabled during the passage of the Energy Act 2023 sought to ensure that regulations on eligibility made reference to the low-carbon hydrogen standard, so I hope that the Committee will welcome these provisions.

The regulations also set out the process by which the Secretary of State may direct a counterparty to offer to contract with an eligible low-carbon hydrogen producer. This follows a similar approach to contracts for difference, with which industry is very familiar. Similarly, the regulations include requirements for a counterparty to publish the full contracts entered into and establish a public register of key information. As noble Lords would expect, such publication is of course subject to redaction of confidential information and personal data. The regulations also set out various requirements in respect of Secretary of State directions to a counterparty. They include the circumstances in which directions cease to have effect and enable the Secretary of State to revoke a direction before it has been accepted.

Furthermore, the regulations require a counterparty to promptly notify the Secretary of State if it is, or considers it likely to be, unable to carry out its functions. Your Lordships may think such a provision sounds familiar, and indeed it is; it is very similar to the approach taken by the Nuclear Regulated Asset Base Model (Revenue Collection) Regulations 2023, which I am sure the Committee is following very closely.

The department has considered the content of these regulations extremely carefully. We carried out a full public consultation earlier this year, seeking views on the principles enshrined in the regulations and satisfying the statutory requirement to consult, as set out in the Energy Act 2023. We received 28 responses from various organisations and members of the public. We carefully considered all of them, although I am pleased that the majority supported our proposals. Accordingly, in our government response, which we published on 30 October, we set out plans to proceed largely as proposed, albeit with some amendments made in response to the feedback that we received.

This secondary legislation represents an essential step for implementing the hydrogen production business model to ensure that we can support the deployment of low-carbon hydrogen projects to achieve those 2030 ambitions, to improve our energy security and to help achieve net zero. I therefore commend these draft regulations to the Committee.

[Lord Naseby (Con)]

My Lords, I very much welcome this statutory instrument and congratulate His Majesty’s Government on bringing it forward so speedily. I just wonder whether my noble friend has any idea of how many potential clients there are in the United Kingdom. That would be interesting in itself.

Regulation 2(4), on page 2, defining an

“eligible low carbon hydrogen producer”,

is very sensible and has thankfully been included. Of course, because of the publicity for the domestic trial in the north-east of England, hydrogen is getting a bit of an unfortunate image. I am not sure whether any incentive can be produced to help the local communities—which I would say are getting difficult, but let us say they are being very careful—to do those trials. If there is not, there is not, but this is a negative reaction and not one I welcome.

Finally, it is usual for most statutory instruments, certainly the ones on which I comment, to have a sunset clause for review. I do not see one, unless I have missed it, but that would have helped.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

Can I just put on record my appreciation for the incredible contribution that the noble Lord, Lord Teverson, has made in this area? I certainly benefited enormously from our working closely on the Energy Bill, and going forward from that.

I also echo the Minister’s comments on the progress that has been made; during the passage of the Bill, there were times when we wondered how we were going to get through it. I assure the Minister that the announcement of the first funding round, with its 11 successful green hydrogen projects, has been noted and is welcome. I certainly look forward to hearing about their progress.

I want to make a few comments on the regulations before us. As we have heard, this statutory instrument is one of the first to follow from the 2023 Act and we know that there are more to come. The regulations cover, in particular, the process whereby the hydrogen low-carbon business plan will be implemented during the initial allocation period of contracts for hydrogen producers; all of this goes towards the target of 10 gigawatts of hydrogen production.

As I understand it, schemes will be identified and quality-assured by the Minister, who will then direct the hydrogen counterparty—it is identical in structure to the low-carbon contracts company—to provide contracts for companies that have been deemed eligible. All of that is absolutely fine and the right thing to do, especially when we consider the initial allocation process.

The Explanatory Memorandum states that the initial allocation will give way to a competitive tender process later on. Some more detail on that would be useful as we go forward; perhaps it will be forthcoming. However, at this moment in time, we are considering the initial allocation process, which is to be informed by the centrepiece of the SI: the low-carbon hydrogen standard, which has been outlined for us today. This refers to a detailed document setting out the greenhouse gas emissions and sustainability criteria that programmes applying for an allocation contract should follow.

I note the stringent qualifying criteria for a project’s eligibility. Of course, they require a project not to exceed a certain level of carbon emissions and to measure fugitive hydrogen—that is, the process whereby hydrogen is produced and all the implications around hydrogen—for its duration. It is a system-wide standard for the low-carbon nature of that hydrogen. For a project to get a direction from the Minister, it must comply with the standard when it receives agreement to proceed.

I just want to pick out that point. As we understand it, the standard will evolve. Indeed, the standard to which the SI refers is version 2 of the UK low-carbon hydrogen standard; that evolved from the initial standard, which was produced immediately after the Act was passed. Version 2 has emerged from consultation with the correction of various elements of the initial standard that could have caused difficulties. It has tightened up several matters that were uncertain, difficult or in need of clarification. It is absolutely clear in the documentation and the Explanatory Memorandum that it is intended that the standard will evolve; this means that the department envisages that it will produce further iterations of the standard in future. The low-carbon hydrogen standard as it currently stands is therefore likely to change. Does the Minister think that this will present some difficulties for those companies that have had their contracts approved? Clearly, although they will be signing up under version 2, they may not necessarily comply if we move on to versions 3 or 4—or more. It would be good to get some assurances around what the implications will be for companies in the earlier rounds.

There needs to be a bit of thought about whether those companies could be disadvantaged as we go forward. Will the Minister have some discretion in considering this? Of course, it could go either way, although it is very unlikely that there would be a relaxation of the carbon emission standards, but there is something to pick up there. Is it possible that, with these changes, companies might be put in a place where there are more costs, expense and planning? It would be useful to have more understanding of the methodology that will be used to determine whether companies are continuing to adhere to the standard once it is set in the contract. From the initial comments, I understand that the Minister is satisfied that this will work well. Could he expand on some of the changes that might come along?

During the consultation, some respondents suggested that further information could be published in a contract register, including outturn volumes, CO² capture rates and CO² capture quantity. It is obvious that a balance needs to be struck between transparency and what useful information is kept confidential but, as making this information public seems like it would have a positive impact, is it that the impact is not deemed significant enough to lower confidentiality? Alternatively, is it that there are further drawbacks to publishing this information that have led the Government to proceed with the initial approach? A bit more clarification around that decision-making would be welcome. On the other hand, 10 of the 23 respondents disagreed with information that the Government are proceeding with publishing, primarily due to the financial aspects. Could the Minister please elaborate on the decision-making process there?

I welcome the progress that has been made and look forward with interest to see how we can move forward in the area of hydrogen, which seems to be fairly fraught—I note the comments of the noble Lord, Lord Naseby. I am also interested in the response on the review. It is very noticeable that that is missing, because of the process. But, in such a new departure, a review would be useful and welcome.

[Lord Callanan (Con)]

I thank all noble Lords for their contributions to the debate. Low-carbon hydrogen will be an essential part of our future energy mix, and the hydrogen production business model seeks to address one of the key barriers to its deployment: the higher cost of low-carbon hydrogen, compared to higher-carbon counterfactual fuels. The Government remain committed to delivering on our hydrogen ambitions—first, those to help support energy security, but also our decarbonisation goals.

The message from the 2023 progress report from the Climate Change Committee was the need to deliver policies to enable deployment at scale of new industries such as hydrogen. I think that sentiment is widely recognised across this House and by industry. Last week’s announcement represents a major step forward in helping producers to deliver a fuel of the future today, backing some of our fantastic businesses here in the UK to go greener. These regulations are vital to enable those contracts to be awarded, so that projects can take the investment decisions that will kick-start the deployment of low-carbon production in all parts of the United Kingdom. But we are not stopping there. A new second round of funding is already available for producers to apply for, so that they can develop the next round of projects and then subsequent ones that help to build on that success. I will deal with some of this in more detail as I go through the questions raised by noble Lords.

--- Later in debate ---

[Noble Lords]

Oh!

[Lord Callanan (Con)]

Damned by faint praise. We have always had an excellent relationship and I am sure we can look forward to many exchanges from the Back Benches when he has left the Front Bench of Liberal Democrat politics and joined the real world of politics that the rest of us take part in. I am joking—it has been a pleasure to work with him. On so many issues we generally agree and see eye to eye. It has been fun working with him, and I am sure we will have lots of contact in the future. I thank him for all the work that he has done contributing to these discussions and many of the legislative discussions we have had in the Chamber. With that, I commend these regulations to the Committee.

Motion agreed.

Limiting Global Temperature Increase

Lord Callanan Excerpts

Wednesday 13th December 2023 Lords Chamber

[Lord Whitty]

To ask His Majesty’s Government whether (1) the position of the OPEC states, and (2) the lobbying of fossil fuel companies, at the Dubai COP 28 have made it more difficult to achieve the goal of limiting global temperature increase by 2050 to 1.5 degrees Celsius above pre-industrial levels.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, the UK Government do not comment on the positions of different groups and countries. The UK worked tirelessly with all parties to push for an ambitious outcome at COP 28 that keeps 1.5 degrees within reach, and we welcome the deal reached this morning, which is the first time that there has been a global agreement to transition away from fossil fuels. It maintains the Paris Agreement to limit global warming to 1.5 degrees centigrade.

[Lord Whitty (Lab)]

My Lords, I join with the Minister in accepting that the current draft is a darn sight better than the dreadful draft presented two days ago, but it is still, sadly, deficient. In the run-up to the COP, we not only saw the petrostates and fossil-fuel companies trying to derail any reference to fossil fuels in the agreement; we also saw the IPCC and the scientists warning us that we were well off the Paris trajectory towards 1.5 degrees, to which we are all supposed to be signed up. Perhaps we also ought to acknowledge that any improvement due to the UK Government’s intervention was down to our own Minister, the noble Lord, Lord Benyon, with the actual leader of the British delegation being called back from saving the world to saving the Prime Minister. Is not this Government’s moral authority to persuade smaller, more vulnerable and poorer nations to adopt a net-zero policy sadly undermined by our continued licensing of oil and gas extraction in the North Sea and other retreats from our green policies? Can the Minister give us a date for abandoning those polices?

[Lord Callanan (Con)]

There was a whole series of questions in the noble Lord’s statement. This was an international agreement, involving almost 200 countries. Is it perfect? Is it everything we would have wanted? No, but it is certainly a great achievement by our extremely hard-working negotiating team. I do not agree with the noble Lord on the second part of his question about licensing and increased production in the North Sea. Even if they come on stream, the output in the North Sea will still continue to decline and we are still committed to phasing out oil and gas production.

[Lord Naseby (Con)]

Will my noble friend reflect that it is not just carte blanche? There will be situations where an oil company finds a new field, perhaps like the one 200 miles north of the Falklands, where the quality of the oil is far better than the oil that we produce in the North Sea, and it would make economic sense to substitute one for the other in the future. Then at some stage, that field will be reduced. It is not absolutely static, is it? We now want a situation where the industry decreases but at the same time improves the product.

[Lord Callanan (Con)]

My noble friend is right, in that different circumstances will apply to many countries, but we are very clear about the trajectory that we are on. We need to bear in mind that this is a transition. It cannot happen overnight, but we are clear on the direction in which we are travelling.

[Earl Russell (LD)]

My Lords, do the Government now regret their decision to recall our Climate Change Minister 6,831 miles to London, putting party before planet? As a nation, we were not adequately represented at the crucial point in these negotiations. Is it not the truth of the matter that the Conservatives have prioritised their own local difficulties over crucial negotiations to tackle the climate emergency?

[Lord Callanan (Con)]

I am sorry, my Lords, but that really is a nonsensical question. Graham Stuart is a Member of Parliament and has duties to perform in Parliament. The negotiating team were in constant contact with him, all the time. He flew back out to COP last night. Our own Minister, my noble friend Lord Benyon, was there as well, occupying the UK chair, alongside the fantastic team of negotiators, who held the pen for many of the negotiations and secured some far-reaching commitments in line with UK’s policy objectives.

[Baroness Boycott (CB)]

Now that we have reached an agreement in Dubai, is the Minister sill completely confident that the UK will reach our target of a 68% reduction on NDC by the end of 2030? As has been mentioned often in this House, we have rolled back on some of our commitments, such as those on electric vehicles and various other things, and I cannot believe they will not have an impact on that target. Can I have the Minister’s reassurance that he will publish the Government’s evidence base that the things which have recently taken place, in terms of rollback, will not affect the crucial outcome?

[Lord Callanan (Con)]

I can happily tell the noble Baroness that we remain committed to all our targets.

[The Lord Bishop of Oxford]

My Lords, I assume the Minister will be aware of the large amount of lobbying taking place, not only at the COP but around the COP through social media. One oil company is estimated to have spent $1.8 million on TikTok videos alone, seen by millions of people across the world, and helping to spread climate disinformation. Does the Minister think the Government should be doing more through the Counter-Disinformation Unit to challenge climate disinformation, given the scale of what is happening and the risk to the world of the failure to curb emissions?

[Lord Callanan (Con)]

I understand the point that the right reverend Prelate is making, but one person’s disinformation is another person’s free choice and free speech. There is always robust debate about all of these issues. There will be continue to be robust political debate about it, and I think that is right in a democratic society. We are very clear on the policy that we should be following and that we are committed to. We are committed to net zero; it is a legal obligation. The Government are committed to that trajectory.

[Baroness Sheehan (LD)]

My Lords, the agreed wording of COP 28 in the small hours of this morning does not go far enough, given that scientific consensus is strongly in favour of a phase-out of fossil fuels. Nevertheless, this is what we have signed up to. Can the Minister say whether the Government will publish a plan to say how they will meet our commitment to

“Transitioning away from fossil fuels in energy systems, in a just … and equitable manner, accelerating”

—and that is a key word—

“action in this critical decade”.

[Lord Callanan (Con)]

We are into semantics and wording, but a transition away with clear deadlines is, in our view, a phase-out in all but name. It is not the language that we would have preferred, but in a multilateral negotiation there has to be compromise. We are very clear on the trajectory we are following. We have published numerous plans about our transition. We are accelerating the rollout of renewables and reducing our use of oil and gas, and that will continue.

[Baroness Blake of Leeds (Lab)]

My Lords, I too recognise today’s COP agreement as an important moment for the world. It is the first time there has been a global commitment to a transition away from fossil fuels. There will always be those vested interests pushing back, as there was at COP. The reality is that limiting global warming to 1.5 degrees still requires much to change. Despite the Minister’s attempts to reassure us, it was disappointing that, when their leadership was most needed at COP, our Government put their party infighting first. To keep 1.5 degrees alive, they will need to do better and lead by example. Therefore, as a result of the statement released this morning, what plans do the Government have to show strong international leadership and to make sure that we bring in the changes of direction needed? Are there any plans for changes at this moment in time or not?

[Lord Callanan (Con)]

I repeat the answer I gave earlier: these statements demean the noble Baroness. The UK provided fantastic leadership. We have an official, Alison Campbell, who co-chaired a number of the panels. She was the penholder on a number of these negotiations. We succeeded in all of our aims. There was robust political leadership; Graham Stuart was there. For a lot of the time, our own Minister, my noble friend Lord Benyon, was there. There were many other Ministers who were also there. There was no gap in UK representation or in the agreements that we achieved.

[Baroness Fox of Buckley (Non-Afl)]

My Lords—

--- Later in debate ---

[Baroness Fox of Buckley (Non-Afl)]

My Lords, whatever about the lobbyists from the fossil fuel companies, do the Government have any assessment of the cost in terms of CO₂ used to travel to Dubai, or in terms of public money paid to facilitate the tens of thousands of pro-net zero lobbyists, NGOs and consultants who attended COP 28? Can the Minister reflect on the impact for developing countries of not using fossil fuels when they are so essential for enabling their citizens to achieve the prosperity of western economies?

[Lord Callanan (Con)]

On this issue of lobbying, tens of thousands of people were at COP, representing a whole series of different shades of opinion. Of course, there were lobbyists from all sides, but that does not mean you have to agree with the position that they take. A wide range of views were represented; I said to the noble Lord, Lord Foulkes, when he asked me something similar last week, that you listen to the views, and there are lots of people having meetings around it, lobbying groupings and so on, but the negotiation is done by committed teams of officials who probably do not watch any of the TikTok videos that the right reverend Prelate referred to. However, as I said earlier, the needs of countries are also different in different environments. We are fortunate, being a relatively wealthy country, that we can transition away from fossil fuels. It is much more difficult for some third-world countries, which is why we are offering them considerable amounts of finance—we have £11.6 billion of international climate finance with which to help them with the transition. We are leading on initiatives such as the Powering Past Coal Alliance, which helps developing countries to move away from coal-fired power stations as well. So we are taking a range of different initiatives in collaboration and co-operation with a number of different other countries.

Hydrogen Heating

Lord Callanan Excerpts

Monday 11th December 2023 Lords Chamber

[Baroness Sheehan]

To ask His Majesty’s Government what assessment they have made of the finding of the National Infrastructure Commission that there is no public policy case for hydrogen heating, set out in the Second National Infrastructure Assessment published in October.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, heat pumps and heat networks will be the primary means of decarbonising heat for the foreseeable future, and will play an important role in all 2050 scenarios. Of course, we welcome the NIC’s input, are carefully considering the analysis and will respond to the report in due course.

[Baroness Sheehan (LD)]

I thank the Minister for his reply. My first question is about the residents of Redcar. Their council leader has written to the Secretary of State to say that they do not want a hydrogen heating trial. Am I correct in saying that they will be allowed to follow the residents of Whitby and veto the proposal? After all, the Minister himself has said as much from the Dispatch Box. Secondly, what assessment have the Government made of recent scientific developments that show that hydrogen leaked into the atmosphere has an indirect global warming impact around 12 times greater than that of carbon dioxide?

[Lord Callanan (Con)]

With respect to the noble Baroness’s first question, I think she needs to read the letter from the leader of Redcar Council more carefully. I do not think it supports the analysis she gave. Nevertheless, I have said on numerous occasions that no hydrogen village trial will take place without strong support from local residents. On the noble Baroness’s second question, yes, hydrogen does have a high global warming potential, which illustrates the importance of not allowing it to leak at all.

[Lord Howell of Guildford (Con)]

My Lords, is the National Infrastructure Commission’s report really welcome? What it says in that report is that hydrogen molecules are just too difficult for 23 million domestic supplies at home. It wants to dig up or close down entirely the existing retail gas distribution system as well, because it thinks it does not fit in with our global aims—and it is absolutely right. And it wants to turn us into an all-electric economy. But have we got the slightest clue where all this extra electricity will come from, how it will be transmitted and delivered, and how that can be done at reasonable cost to the consumer? Until we have a clearer view on those things, it is very hard to just say that we welcome the NIC report.

--- Later in debate ---

[Lord Callanan (Con)]

Well, I did not say that we necessarily welcomed the NIC’s report; I said that we were studying it, and of course it will provide a useful backdrop to and illustration of the decisions that we will make. To go back to the point of the noble Baroness, Lady Sheehan, we will announce a decision on the trial in Redcar very shortly. I think the noble Lord makes a good point; where does all the extra electricity come from? Of course, there is detailed scenario mapping done on that; we have very exciting and ambitious plans for lots more offshore wind, lots of solar development and lots of nuclear development—so there will be ample supplies of electricity available.

[Lord Watts (Lab)]

Does the Minister agree that it is pointless improving heating systems if many houses are badly insulated? What will the Government do to step up the programme to make sure that people can live in decent homes?

[Lord Callanan (Con)]

I agree with the noble Lord that energy efficiency and insulation are extremely important. That is why we are spending £6.5 billion over this Parliament on insulation, energy efficiency and clean heat measures; but, of course, there is always a lot more to do and we will have more to say on that shortly.

[Lord Naseby (Con)]

Is it not extraordinary that Germany appears to have decided that all its heating for domestic should be in a hydrogen/gas mix, and there are apparently at least four or five other European countries far ahead of us? How is it that the national infrastructure plan can ignore the work that appears to be being done on hydrogen on the ground in this country, with factories being built at the moment for the use of transport and all the extensive work being carried out in trials?

[Lord Callanan (Con)]

I do not think my noble friend is correct about attitudes in Germany. The latest information I have is that 10 homes in Germany—no more than that—are subject to the trial. The issue of blending hydrogen into the gas network is of course a separate issue, and that too is something on which we will have more to say shortly.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. Is the noble Lord, Lord Howell of Guildford, not completely right in one respect: that there is confusion about the transition—how it will be funded, how it will come about, how North Sea oil and gas will fit into that, when it will diminish, when it will completely finish being important in our energy mix? Is it not time we got below some of the very high-level aspirations of the Government and into the detail of what a transition plan will actually mean for the country?

[Lord Callanan (Con)]

The noble Baroness is absolutely correct. We have set out in great detail what the transition plan looks like. As I said in my Answer, electrification—heat networks in particular—will play a very important role in the decarbonisation of heat.

[Baroness Blackwood of North Oxford (Con)]

My Lords, among the more controversial recommendations of the report was a very sensible recommendation to set clear resilience standards and better maintenance practices for all infrastructure sectors. As the Minister’s department considers the report, will he pay particular attention to those recommendations?

[Lord Callanan (Con)]

My noble friend makes a very good point. We will of course fully consider those recommendations alongside the views on hydrogen heating.

[Lord Lennie (Lab)]

My Lords, newspaper reports at the weekend suggested that the Government were looking for an entire town to use as a hydrogen heating pilot. Given the difficulties in Whitby and Redcar, referred to by the noble Baroness, Lady Sheehan, which are not yet resolved but will be very soon, and recent scientific developments, which she also referred to, about indirect warming from hydrogen emissions being higher than previously thought, does the Minister think that now is the right time to be pushing ahead with this?

[Lord Callanan (Con)]

The noble Lord will find out whether now is the right time to be pushing ahead with it when we announce the decision. He should not necessarily believe everything that he reads in the newspapers.

[Earl Russell (LD)]

My Lords, the Second National Infrastructure Assessment argues:

“Gas boilers, which currently heat around 88 per cent of English buildings, need to be phased out and replaced by heat pumps. Around eight million additional buildings will need to switch to low carbon heating by 2035, and all buildings by 2050”.


Can the Minister tell us how the Government plan to implement these recommendations and make carbon-neutral home heating available in time to meet our net-zero commitments?

[Lord Callanan (Con)]

There is a long and detailed answer to that, but there are a number of different elements to it. We will be consulting very shortly on the future homes standards, which will take advantage of new technology in terms of setting standards for all new developments. Clearly, there is a big challenge with existing, particularly residential, properties. I have said that heat pumps and heat networks will play the majority role in decarbonisation efforts. There could also be a role for renewable heating fuels, where there are some exciting developments.

[Lord Whitty (Lab)]

My Lords, given the growing case against using hydrogen as the main source of domestic and office heating, are the Minister or Ofgem about to stop supplier companies offering so-called “hydrogen-ready” boilers to those who need a boiler replacement? Is the Minister any further ahead on the kind of technology that is going to be used for district heating schemes?

[Lord Callanan (Con)]

I think the CMA is looking into some of the claims. Chancellor, it is a complicated area, because you can blend hydrogen into the existing gas network and that will work perfectly satisfactorily with all existing gas appliances. In that respect, all appliances are hydrogen-ready. But I am sure Ofgem will want to look at the full implications of that as well.

[Lord Geddes (Con)]

When my noble friend helpfully lists forms of alternative renewable energy, could he be kind enough to include tidal?

[Lord Callanan (Con)]

I know my noble friend feels very passionately about this. As I have said, we allocated some contracts for difference in the last round for tidal. I am sure we will want to do so in the next round again, provided the bids are competitive—but it does contribute a relatively small part of our energy mix.

[Lord Newby (LD)]

My Lords, does the Minister agree that part of the answer to the question from the noble Lord, Lord Howell, about hydrogen as an appropriate source of heating is that producing hydrogen in itself uses a tremendous amount of energy? It is one of the least energy-efficient ways of producing an alternative source.

[Lord Callanan (Con)]

The noble Lord is right. Of course, there are two separate issues. Hydrogen will play an important role in the transition; there are lots of industrial processes, such as heavy transportation, for which there is no realistic alternative to hydrogen, and we will be announcing the results of the first hydrogen allocation round shortly—a lot of things are happening in the near future. Hydrogen will play an important role in decarbonisation and long-term energy storage because we principally “waste”—in inverted commas—quite a lot of electricity in curtailment payments because we cannot use it. So, in terms of large-scale storage of energy, it can play an important role, as well as in industrial processes. There will be some important uses for hydrogen. There is a separate question about whether it should play an important role in home heating, about which we will decide shortly.

Climate Change: Phasing Out Fossil Fuels

Lord Callanan Excerpts

Wednesday 6th December 2023 Lords Chamber

[Baroness Boycott (CB)]

In begging leave to ask the Question standing in my name on the Order Paper, I declare my relevant interests.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, the Intergovernmental Panel on Climate Change, which represents the best available science, is clear that minimal use of unabated fossil fuels is a critical part of limiting warming to 1.5 degrees centigrade.

[Baroness Boycott (CB)]

My Lords, is it still the Government’s view that we need to phase out fossil fuels? A lot of the debate is between “phase down” and “phase out”, so I would welcome the Minister’s clarity on that point. UNEP, the United Nations Environment Programme, estimates that the world is planning to produce more than double the amount of fossil fuels in 2030 than is consistent with a pathway that has any hope of staying on 1.5 degrees. It also concludes that the UK is showing no evidence of actively winding down our oil and gas production. Given that it will do nothing to help consumers domestically and that we should lead by example, as we always say we are doing, will the Government reconsider their decision to continue licensing new fields, particularly the approval of Rosebank?

[Lord Callanan (Con)]

It is our policy to phase out the unabated use of fossil fuels. On the second question, even with the granting of any new licences, UK oil and gas production will continue to decline at a faster rate than most other productive fields in the world.

[Lord Teverson (LD)]

My Lords, I very much welcome that the Government have sent a number of Ministers to COP 28. I am sorry that the noble Lord the Minister is not there to put the UK’s views forward. Does he realise that the good will we are building up there was undermined by the many announcements on climate change made a couple of months ago? They take away from our international leadership. When will Downing Street understand that its announcements on climate change made domestically for political purposes are heard internationally and undermine that reputation, not least with the industrial investors we need for the future?

--- Later in debate ---

[Lord Callanan (Con)]

I thank the noble Lord for his good wishes, but I am very happy to be in the House answering noble Lords’ questions rather than being in Dubai. Two members of my department have been there. I do not recognise the picture the noble Lord presents. I regularly meet international investors; we have one of the largest investment flows of green finance into the UK of any industrialised country and one of the largest in Europe. Our sectors—solar, offshore wind, hydrogen and CCUS—are all benefiting from enormous flows of inward investment, which we welcome. The Global Investment Summit a couple of weeks ago saw a further £30 billion of commitments, so I am afraid the noble Lord is just wrong.

[Baroness Blackstone (Lab)]

My Lords, last week at COP the Prime Minister said the UK is

“delivering on the historic Glasgow deal to end deforestation”.

When will the relevant regulations under the Environment Act be laid? It is now two years since it received Royal Assent, since when the EU has agreed more ambitious rules on deforestation. I hope the Minister will say that the regulations are imminent.

[Lord Callanan (Con)]

The responsibility belongs in a different department so I am not sure of the exact date of the regulations the noble Baroness refers to, but I will certainly write to her on that.

[Lord Bellingham (Con)]

My Lords, will the Minister find time today to remind the House of the extent of the UK’s progress on the route to net zero? I think we are 58% of the way there, compared with France at 40% and Germany at about 48%. Can he confirm those figures, which put the UK in a really strong position and put the Prime Minister’s recent remarks in context? Can he also say something about his views on carbon capture and storage, and whether he feels it has an important role in the reduction of greenhouse gases?

[Lord Callanan (Con)]

I do not need to find the time to do it, because my noble friend has just done it. Our record is an excellent one. We decarbonised faster than any other G7 nation between 1990 and 2021, cutting our emissions by around 48%. We were the first major economy to set a net-zero target in law. I am grateful to my noble friend for reminding us of those key facts. He is also right to talk about carbon capture, usage and storage, another area in which the UK has fantastic potential. We have already committed £20 billion of expenditure on CCUS. We have announced the first two industrial clusters and we are powering ahead with negotiations with those clusters. We hope to make some final investment decisions on that by quarter 3 next year.

[Baroness Uddin (Non-Afl)]

My Lords, I congratulate the noble Baroness, Lady Boycott, on her Question. Will the Minister take this opportunity to congratulate Harry Acheampong, the interim Prime Minister of the Children’s Parliament, who addressed the hangout in Dubai and talked about climate change and water security, including for Ghana, supported by the Darwin200 conservation project, as well as raising funds for the Kenya water project at Obama school?

--- Later in debate ---

[Lord Callanan (Con)]

I am sorry to disappoint the noble Baroness, but I have not seen those particular remarks. I am sure they were excellent, and I will certainly take the trouble to have a look at them.

[Baroness Blake of Leeds (Lab)]

My Lords, earlier this month it was revealed that the UK has fallen behind when it comes to attracting investment in renewables, slipping to seventh behind the US, Germany and others. This was a direct result of what EY described as the “diminishing of green policies”. Can the Minister tell us whether the Government have made any assessment of the impact of this on jobs and investment in the UK? How do the Government expect to encourage investment in green industries when they are pursuing climate delaying tactics at home?

[Lord Callanan (Con)]

We are not pursuing climate delaying tactics. Our legally binding net-zero commitment and carbon budget remain exactly the same. I do not know whether the noble Baroness was listening to the answer I gave to the noble Lord, Lord Teverson, but we are attracting record amounts of inward investment. At the Global Investment Summit, a whole range of inward investors promised considerable new funding in the order of £30 billion to all these exciting new industries, in which the UK is a world and European leader.

[Baroness Sheehan (LD)]

My Lords, in his COP 28 speech, the Prime Minister referenced the 48% reduction in UK territorial emissions, but he did not refer to the consumption emissions related to goods made outside the UK. One tool for addressing emissions leakage is via effective carbon pricing, so can the Minister tell the House when the Government will publish their response to their consultation on measures to mitigate carbon leakage, including via a carbon border adjustment mechanism?

[Lord Callanan (Con)]

The noble Baroness highlights an important matter. We consulted on this in the summer. We are currently doing the work to consider all the implications of carbon leakage measures, including CBAM, which we are looking at closely. We will have more to say on that very shortly.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. There was reference earlier to imminent decisions. Can I press the Minister on the question of the Energy Charter Treaty, which he answered last week? When will we know the Government’s decision on this? Will it be, as I hope, to withdraw from the treaty?

[Lord Callanan (Con)]

I have certainly heard what the noble Baroness has to say on this. I cannot go any further than what I said last week. As soon as I have some further news, I will be sure to update her.

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

My Lords, as the Minister knows from last week, I was inclined to agree with the noble Lord, Lord Teverson, that it is good for Ministers to go out to Dubai. But then I heard that there are 90,000 delegates there—nearly twice as many as there were in Glasgow, all flying in. It will be the same next year, the year after that and the year after that. Why can this COP not be held virtually?

[Lord Callanan (Con)]

I think there is considerable sympathy for the noble Lord’s point of view. I went to the COP in Glasgow. Unlike the Greens, I went by rail.

[Noble Lords]

Oh!

[Lord Callanan (Con)]

Where are the Greens when you want them? It occurred to me that a few hundred people were doing all the important negotiations, while the other 30,000 were talking about them. I will let the noble Lord draw his own conclusions on that.

[Lord Kamall (Con)]

I am sure my noble friend the Minister will agree that we cannot just stop fossil fuels at the moment if we want to have a modern, digital economy with high-speed electric rail. How long do the Government envisage the continuous use of fossil fuels as we transition to a fully net-zero economy?

[Lord Callanan (Con)]

My noble friend makes an extremely good point. We are in a transition, so our use of fossil fuels will clearly decline. Even the Climate Change Committee has recognised that, in a net-zero scenario, we may still use about 20% of the quantities of gas that we use now—albeit abated with carbon capture, usage and storage. Fossil fuels will still have a use, but we need to treat them responsibly and to slowly phase out their use as we transition to net zero. My noble friend makes an important point that we should bear in mind.

Climate Change: Aims for COP 28

Lord Callanan Excerpts

Tuesday 28th November 2023 Lords Chamber

[Lord Harries of Pentregarth]

To ask His Majesty’s Government what they aim to achieve at COP 28 this week.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, we want progress in five areas: ambitious new commitments and action, including a pathway to keep 1.5 degrees centigrade within reach of the global stock-take; scaling up clean energy through commitment to triple renewables, double energy efficiency and moving beyond fossil fuels; progress on finance reform, delivering on $100 billion for developing economies; building resilience to climate impacts, including doubling adaptation finance and establishing a loss and damage fund; and, finally, progress towards restoring nature.

[Lord Harries of Pentregarth (CB)]

I thank the Minister for his reply. As he will know, one particular focus at COP 28 is the agricultural sector, and in particular how it will be possible to reconcile feeding a growing world population and reducing the very extensive emissions from the agricultural sphere. Can he say a little bit more about what kind of agreement we are likely to see at the end of COP in relation to the agricultural area?

[Lord Callanan (Con)]

The noble and right reverend Lord makes an important point. Agriculture is one of the most difficult areas to decarbonise. It is of course linked into a lot of the action that has been taken on nature. It is one of our priority areas and we will be doing what we can to progress agreement.

[Earl Russell (LD)]

My Lords, information uncovered this week by the Centre for Climate Reporting purports to show that the UAE is planning to use its role as the host of COP 28 as an opportunity to strike a new generation of oil and gas deals in Africa and Asia. Does the Minister agree that the oil sustainability programme is completely contrary to the letter and the spirit of the global climate talks? What action will the UK Government be taking in considering this new information?

[Lord Callanan (Con)]

Obviously, the reports that we saw in the last few days were concerning, but of course we are not aware of what was discussed in private meetings. The UAE presidency was not appointed by us, but we support it in what it has said publicly in terms of advocating for an ambitious deal.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. The Government announced in September that they were renewing our membership of the Energy Charter Treaty. Does the Minister agree that the treaty, and our membership of it, does nothing to support the objectives of COP 28 that he has just outlined to the House? Will a decision be made before COP 28 meets to withdraw, as other countries have done, from this outdated and damaging treaty?

[Lord Callanan (Con)]

The noble Baroness makes an important point. As she mentioned, we are reviewing our membership. I do not know when a decision will be taken. I hesitate to use the word “imminently” after the last question, but I am sure that we will want to act as quickly as possible.

[Lord Lennie (Lab)]

My Lords, staggeringly, we lose more than 15 million trees globally each year due to deforestation. The Center for Global Development predicts that we will lose at least 1 million square miles of forested land by 2050. Can the Government give an update on their pledge to the COP 26 to reverse deforestation by 2030? Can the Minister tell the House whether the Government will use COP 28 as an opportunity to reconsider this key commitment?

[Lord Callanan (Con)]

The noble Lord makes an important point. We helped to secure an agreement on the Kunming-Montreal global biodiversity framework to halt and reverse biodiversity loss by 2030, and the agreement on marine biodiversity in areas beyond national jurisdiction. We were pleased to support that during our COP presidency and want to continue doing so.

[Baroness Bennett of Manor Castle (GP)]

My Lords, a big part of the UK’s COP 26 presidency during the Glasgow conference was the global methane pledge: the focus on methane and the fact that in the next 10 years, slashing our methane emissions will be crucial if we are to stay below the 1.5 degrees above pre-industrial levels. What progress do the Government expect to see on methane in COP 28? Will the Government be taking further progress in the UK, particularly on methane flaring from oil and gas installations, to the COP discussions?

[Lord Callanan (Con)]

The noble Baroness is right that action on methane is important. It is one of the focuses for discussion that we will take forward. I have answered questions on flaring before in this House. She will remember that we are taking action to eliminate flaring completely by the end of the decade. It has reduced considerably in recent years, but clearly we need to go further.

[Lord Sikka (Lab)]

My Lords, the richest 1% are responsible for more carbon emissions than the poorest 66% combined. We all know that a well-established principle is that the polluter must pay. The Government now have a choice. They can levy wealth taxes on the ultra-rich, to reduce their capacity to pollute, or let the climate crisis deepen. Which of these options will the Government exercise, given that they are keen to set the intellectual agenda for COP 28?

[Lord Callanan (Con)]

The noble Lord never disappoints in terms of his advocacy for more taxes on—well, everyone, effectively. He might want to talk to his own Front Bench about some of these policies. The UK is very proud of our record on decarbonisation and we are very proud of our record on helping the poorest communities. We have committed £11.6 billion of expenditure on international climate finance by 2025-26, including £3 billion to protect, restore and sustainably manage nature, and tripling the UK fund for adaptation to £1.5 billion by 2025—so we can be proud of our record.

[Lord Purvis of Tweed (LD)]

With regard to adaptation, nature and resilience, the Minister outlined the overall level of commitment, but in the latest rounds of ODA allocation this has been cut by £24 million for the most vulnerable countries around the world. This is a reduction of 49% to developing nations. Does the Minister agree that COP gives a superb opportunity for any UK representatives to give a statement that those cuts will be restored for the most vulnerable nations on earth?

[Lord Callanan (Con)]

Well, I just said in my previous answer that we have not reduced our commitment to international climate finance and all the various areas that it covers. The Prime Minister and senior Ministers are attending COP 28 and the noble Lord might want to watch for any announcements that are made at that point.

[Lord McNicol of West Kilbride (Lab)]

Perhaps I might ask the Minister: what does success at COP 28 for the UK look like?

[Lord Callanan (Con)]

I do not want to repeat the five points that I have made. Obviously, we want to make progress on all of them. That is probably unrealistic; it is a negotiation and there are many countries with different agendas going into it, but we will negotiate in good faith and the overall pledge to take action on 1.5 degrees is probably going to be the most important point, but there are a number of other important negotiating points as well.

[Baroness Sheehan (LD)]

My Lords, we get quite a lot of our gas from the UAE. What assessment have our Government made of the pollution caused by the flaring and venting of methane by that state?

[Lord Callanan (Con)]

Flaring and venting is something to be avoided by all member states. The noble Baroness is right that we do import a lot of liquid natural gas. Of course, if she and others were not so keen to halt the UK’s extraction of oil and gas, we would not need to import so much from the UAE. So perhaps she might want to indulge in a little bit of introspection.

[Baroness Bennett of Manor Castle (GP)]

My Lords, since there is space, an issue that is fast rising up the climate agenda is private jet flights, which of course have enormous levels of carbon emissions per passenger. Are the Government looking to examine the impact of those private jet flights, and indeed to take any action about flights into the UK?

[Lord Callanan (Con)]

The noble Baroness asks the question on the day that the first international flight with sustainable aviation fuel was launched by, I think, Virgin Atlantic, across to the US. Obviously, that is only one and there is a lot of progress to be made, but sustainable aviation fuel does offer one of a range of potential solutions. I know that the noble Baroness would just ban everything, but that is not practical in the real world. We want to show people that of course we can make progress on progressing the agenda against climate change, but not necessarily by banning everything they want to do.

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

My Lords, perhaps I might say how pleased I am, personally, to see that the Minister has escaped the recent cull. Does he agree with me that, on balance, it is probably justifiable to use all this energy travelling to the United Arab Emirates for the Prime Minister and senior Ministers to come to an agreement—maybe even for the First Minister of Scotland to go there, using up all this energy as well? But what is the justification for the leader of Glasgow City Council, and entourage, doing it?

[Lord Callanan (Con)]

When the noble Lord started off with praise, I was waiting for the “but” to come into the question. The noble Lord will be pleased to know that I am not going to COP. My Secretary of State is there, with a number of other Ministers from the Government. I do not know what council leaders are going for, or what their role is going to be; that is something that they will need to answer for to their own electorates.

Electricity Network Connection Action Plan

Lord Callanan Excerpts

Wednesday 22nd November 2023 Lords Chamber

[Baroness Whitaker]

To ask His Majesty’s Government when they intend to publish the electricity network connection action plan promised for the summer in Powering Up Britain: Energy Security Plan.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, the Connections Action Plan is published today. The plan will significantly reduce connection delays from the current average of five years to no more than six months beyond the date requested by the customer. It will release 100 gigawatts of spare capacity, equivalent to around a quarter of electricity needs in 2050. The plan also establishes an Ofgem-chaired monthly connections delivery board to ensure timely and effective implementation; that board will first meet on 6 December.

[Baroness Whitaker (Lab)]

My Lords, in declaring that I am in receipt of an IPT fellowship in wave energy, I thank the Minister very much for that reassuring news, but one consequence of the essential greater grid capacity could be many more unpopular and unsightly pylons. What thought have the Government given to supporting burying them, or to Andrea Leadsom MP’s proposed amendment to the then Energy Bill in the other place? The amendment said:

“Within six months of the passage of this Act, the Secretary of State must by regulations provide for a fast-track planning process for electricity pylons along motorways and rail lines”,


which would considerably lessen the visual impact.

[Lord Callanan (Con)]

I congratulate the noble Baroness on tabling her Question for today, which is a fantastic coincidence and shows her great foresight on this. She is right that the construction of new electricity infra- structure, particularly pylons, is a controversial matter, particularly in the communities that are affected. She will know that the Winser review made a number of recommendations as to how we can involve communities further and take them with us on these plans. We are taking forward all those recommendations.

[Lord Swire (Con)]

My Lords, the noble Baroness is precisely right in her Question. While I welcome the new generation of T-pylons, of which we are less visually aware, the visual impact provision scheme has £465 million from Ofgem to bury power lines. The truth of the matter is that National Grid is very against the burial of power lines. It is possible; if it was not, we would not bury them in areas of outstanding beauty and national parks. When will the Government recognise the fact that this huge explosion of interconnectors and power lines that we are about to witness needs to be taken seriously when it comes to destroying our beautiful, unrivalled landscapes?

[Lord Callanan (Con)]

I have a certain amount of sympathy with what my noble friend says, but the reality is that we need this new infrastructure and, unfortunately, it is not possible to say that no community will be affected. It is possible to bury power lines, of course, but it is up to 10 times more expensive and that cost will fall on the bill payer. As in many things, it is about getting the balance right.

[Lord Ravensdale (CB)]

My Lords, I declare my interests in the register. The future systems operator will be key to planning and rolling out network infra- structure. Now that we have the enabling legislation in place, can the Minister please update the House on the timescales and process for set-up of the future systems operator in the coming months, and the associated consultations?

[Lord Callanan (Con)]

The noble Lord is absolutely right: the FSO role is absolutely key, and we are progressing work on that as quickly as possible. It is really important to get it up and running, and relieve the responsibility from the national grid, which I think has had a number of conflicts of interest in this space.

[Lord Wigley (PC)]

My Lords, does the Minister accept that there is a pressing need for new interconnector links down the west coast of Wales to facilitate potential hydroelectric schemes? Is he aware of the uncertainty concerning the help to minimise the physical impact on houses nearby and on substations? Who will fund these payments, and who will determine the planning issues? Are the Government working in close co-operation with the Welsh Government to make sure that there is clarity on this issue and that they can move forward quickly?

[Lord Callanan (Con)]

Indeed, we are working with both the Scottish and Welsh Governments. There is tremendous public support for offshore wind; it has been our biggest expansion mechanism. But of course it requires a lot of onshore infrastructure as well, which is unpopular in the communities affected. There is a well-established planning process, looking at all these impacts, and we will continue to work with the devolved Administrations.

[Lord Teverson (LD)]

My Lords, since the Government have just dabbled with changing the planning conditions for onshore wind in England, there has been no action whatever from the industry, in that it still sees the planning restrictions as a major barrier. When does the Minister expect the next connection into the grid by onshore wind in England so that households can benefit from the cheapest form of energy we can produce in this country?

--- Later in debate ---

[Lord Callanan (Con)]

Of course, there are still some onshore wind connections being built in both Scotland and Wales, and a few in England as well. We are committed to looking at the barriers that exist and overcoming them.

[Baroness Blake of Leeds (Lab)]

Ofgem’s new mandate to prioritise the UK’s net-zero target comes into force on Boxing Day—welcome progress secured by an amendment to the recent Energy Bill. Given that the review on reform of the electricity connections system began before this change, what discussion have the Government already had with Ofgem to make sure that decisions are made in line with the new mandate, thereby ensuring that every opportunity it presents is taken to ensure progress?

[Lord Callanan (Con)]

I think the noble Baroness will find that Ofgem’s view is that it was already fulfilling that mandate—and, of course, the vast majority of the new connections are because of new renewable electricity, which is to fulfil our net-zero obligations. Ofgem is fully in line with that.

[Baroness McIntosh of Pickering (Con)]

My Lords, does my noble friend not agree that it would make more sense to keep locally the electricity that is generated in the North Sea and coming onshore in Scotland, the north of England and Humberside, which have some of the coldest and poorest-insulated households in the UK?

[Lord Callanan (Con)]

I am not sure I understand the point my noble friend is making. The reason we have a national grid is to distribute electricity around the country so that all communities get the chance to benefit. If you had a much more localised system of grids, it would be much more inefficient. The whole idea or principle of the national grid is that the whole country can benefit from all our renewables infrastructure.

[Baroness Hayman (CB)]

My Lords, I declare my interests in this area and very much welcome the Minister’s original reply. Does he agree with me that, as well as the expansion of the grid and connections, we need to look at the demand side and at reducing demand and increasing energy efficiency? The Government promised several consultations on this issue in different sectors and on building standards. Is the Minister confident that the timescales promised for those consultations will be kept?

[Lord Callanan (Con)]

I agree with the noble Baroness that energy efficiency is really important. It is much cheaper than building new energy infrastructure. She will be aware that we are spending £6.5 billion on energy efficiency and clean power over this Parliament, and we have already managed to secure £6 billion from the Treasury for 2025-28. We need to take forward all these measures. There are a number of key consultations coming up that will make a big difference, not least that on the future homes standard.

[Lord Blunkett (Lab)]

My Lords, today’s announcement is very welcome, but does the Minister agree with me —I am sure he does—that we are in a farcical situation where a charging point off the M1 in West Yorkshire has to rely on diesel-driven generators to supply the electricity to electric vehicles?

[Lord Callanan (Con)]

If that were the case then, yes, I would agree with the noble Lord that it is a farcical situation.

[Lord Howell of Guildford (Con)]

My Lords, the excellent document Powering Up Britain talks about a 100% increase in national grid capacity to deliver an all-electric economy by 2050. National Grid itself talks about a much larger figure: a 200% or 300% addition in the national grid. Can the Minister guide us on which he thinks is the most reliable of those estimates? Can he also tell us how it is all to be financed and, indeed, how the planning system will be sped up so that we can achieve anywhere near that by 2050?

[Lord Callanan (Con)]

My noble friend asks good questions. The figures are that peak demand for electricity is expected to increase from 47 gigawatts in 2022 to between 90 and 120 gigawatts in 2035, as transport, heating and industry electrify. We think that this will require between 260 and 310 gigawatts of generation capacity connected to the network by 2035. To do all these things, we of course need to reform the planning system, which we are doing through national policy statements and through the action plan announced today.

[Lord Grantchester (Lab)]

My Lords, there are considerable problems with capacity issues within local circuits in the distribution network from the transmission lines, especially in rural areas. There are reported delays even to the 132-kilovolt networks, as renewable schemes are being held in the queue to be connected until 2037. How can that help to decarbonise the power sector by 2035? I declare an interest as being involved in such a scheme. Will the plan published today help to resolve this queue and reappraise the first-come-first-served basis for supply connections?

[Lord Callanan (Con)]

The noble Lord points to the main problem that we have, which is that there is a large queue of projects running into many hundreds of gigawatts. The whole purpose of the action plan is to look at which of those projects are likely to go ahead and to prioritise those that are likely to proceed—a lot are in the queue and probably not likely to proceed—and have the investment and backing, and will decarbonise and deliver the upgrades as quickly as possible. I am not familiar with the particular project that the noble Lord referred to, but if he wants to send me the details, I will certainly look at it for him.

Green Gas Support Scheme (Amendment) Regulations 2023

Lord Callanan Excerpts

Monday 20th November 2023 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Green Gas Support Scheme (Amendment) Regulations 2023.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, the regulations were laid before the House on Monday 16 October 2023. They make a set of changes to improve the administration of the green gas levy, which is charged to licensed gas suppliers in Great Britain, and to ensure that it works in line with the original policy intent. The legislation will ensure that the levy operates as intended and seeks to minimise the burdens arising from it for the scheme’s administrator, Ofgem, and for the gas suppliers that have to pay it.

The green gas levy, as noble Lords are aware, funds the green gas support scheme, which is a Great Britain-wide tariff-based scheme supporting new biomethane plants injecting biomethane into the gas grid. It facilitates ongoing investment in the biomethane industry and enables the development of new production plants. The green gas support scheme is expected to contribute 3.7 million tonnes of CO₂ equivalent of carbon savings over carbon budgets 4 and 5, and 8.2 million tonnes of CO₂ equivalent of carbon savings over its lifetime. During the peak years of production, biomethane plants incentivised by the GGSS will produce enough green gas to heat around 200,000 homes.

All funds raised by the green gas levy are used to fund the green gas support scheme. The GGL funds both tariff payments to plants on the GGSS and the scheme’s administration by Ofgem. The levy is charged to suppliers based on the number of meters they supply. Currently, the cost is relatively low, at 45p per meter in 2023-24. It will increase in the coming years as deployment of the green gas support scheme increases, with costs expected to peak at around £7.50 per meter in the late 2030s.

--- Later in debate ---

[Lord Lennie (Lab)]

The noble Lord has high expectations. As with the scheme we just discussed, we were very supportive of this scheme when it came out and we still are. Supporting the injection of biomethane into the gas grid, replacing other gases, produces substantial carbon savings and is very welcome indeed. As such, I will not speak for long on this instrument, which simply makes changes to improve the administration of what is already a very positive scheme.

The extent of these changes is to improve the administration of the green gas levy, as the Minister said, to reduce the administrative burden for Ofgem and the gas suppliers that pay it, and to ensure a maintained link between the regulations and policy intent. We welcome the lower administrative burden for Ofgem. It is due, not least, to successful efforts during the passage of the Energy Bill, and it now has a specific mandate to support the Government to meet their net-zero obligation.

I have a few questions, which may help the noble Lord, Lord Teverson, in his curiosity about this. Where the instrument changed the green gas levy formerly, it implied that gas suppliers were paying too much due to how interest on funds is allocated. Specifically, interest that had accrued in Ofgem’s account was added to the levy collection target rather than deducted from it, which makes little sense. How did that apparent mistake happen? While it feels peculiar arguing against more money for a scheme that we support—for once, I am not suggesting that gas suppliers’ profits should be better used—it is important that such a scheme is administered fairly. What happened to the previous levies that were collected at too high a rate?

[Lord Callanan (Con)]

They were not taken.

[Lord Lennie (Lab)]

The instrument also allows the Secretary of State to review and update the maximum levy amount to ensure that the levy remains able to sufficiently finance the GGSS after 2008-09, as the Minister said. This of course makes sense, as it is a good scheme and should be financed, but I am cautious on both sides of the argument. If the Secretary of State is to have this new power, why was the scheme not initially created with it written in? Also, if the predicted funding requirement increase is in part predicated on a welcome increase in biomethane production, do the Government foresee a situation where the other reason for the increase—inflation, which I should note was previously caused by the Government—could make a decision to increase the MLA difficult? If so, what happens to the scheme and, if not, could the MLA not increase automatically?

I am curious about the de minimis payments the Minister mentioned. Is this expected to make a net loss or profit for the levy, and has any review been done of the administrative functions that make small payments disproportionately burdensome?

As the Minister said, the other changes are minor, so I will conclude, other than to restate that it is welcome that this positive scheme is being further improved.

[Lord Callanan (Con)]

I thank the noble Lord, Lord Teverson, for his very brief contribution and his support. I will come on to the questions from the noble Lord, Lord Lennie, in a moment.

As I said, the green gas levy is charged to licensed gas suppliers in Great Britain to fund the green gas support scheme. These policies make an important contribution to achieving our emissions reduction target by incentivising the production of biomethane and its injection into the gas grid. This reduces the emissions intensity of the UK’s gas supply and ensures the capture and use of emissions from waste, which is used as feedstock for green gas production.

The SI will ensure that the green gas levy can run optimally and will reduce administrative burdens for Ofgem and gas suppliers, thus reducing costs. It will also ensure that the levy is set as intended by altering the collection formula and by adding flexibility to the setting of the maximum levy amount. Overall, this will help the delivery of a cost-effective levy, benefiting policy administration and gas suppliers and, therefore, bill payers.

I will pick up the first question from the noble Lord, Lord Lennie. As I said in my introduction, the interest is charged two years in arrears. There has therefore been no net effect from what was an administrative error when the regulations were tabled. We want this modification to the SI approved now so that, when those interest payments subsequently become due, they will be used to subtract and not add to the overall amount—as was originally stated in error.

The further changes will improve the administration of the levy by Ofgem and for all gas suppliers, and the instrument gives us the opportunity to make these changes. The levy was launched on 30 November 2021, and the intervening years to this point have given us the opportunity to identify one or two minor technical changes to the levy to help reduce the administrative burden. In answer to the noble Lord’s second question, again, we do not expect the de minimis level to make any difference to the overall rate—it is purely that for those very few gas suppliers that have a tiny number of meter points, the administration cost of the levy exceeds the sum raised, so actually it will probably save money in the longer term. However, of course it has no effect on all the big suppliers.

I have dealt with both questions from the noble Lord, Lord Lennie, and I commend this regulation to the House.

Motion agreed.