Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023

Lord Callanan Excerpts

Monday 20th November 2023 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023.

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

My Lords, this order was laid before the House on 19 September. The UK Emissions Trading Scheme—the ETS—was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme to encourage cost-effective emissions reductions, contributing to the UK’s emissions reduction target and, of course, ultimately our net-zero goal.

The scheme is run by the UK ETS authority, which is a joint body comprising the UK Government and the devolved Governments. Our aim is to be predictable and responsible guardians of the scheme and its markets. In doing so, we will ensure that the scheme remains a cornerstone of our ambitious climate policy.

We have brought forward this SI to implement a number of necessary changes and improvements to the scheme. The changes relating to aviation free allocation rules and to the treatment of electricity generators follow the announcements made by the UK ETS authority in July in our response to last year’s consultation on developing the UK ETS. The final change remedies an inconsistency around free allocation and carbon capture at UK ETS installations. On aviation, this SI will cap the total amount of aviation free allocation that operators are eligible to receive at 100% of their verified emissions.

This SI makes technical changes to free allocation rules regarding the electricity generator classification for industrial installations. It will amend the electricity generator classification to consider only electricity exports in the baseline period, instead of all electricity exports since 2005, allowing operators to change their installation’s electricity generator classification if they have put a stop to the export of electricity. Electricity exports represent no more than 5% of the total produced allowances and will also be excluded from consideration in this classification.

The SI will amend the electricity generator definition to exclude installations that have produced electricity for sale if that electricity was produced by means of a high-quality combined heat and power plant, operating as part of an operator’s industrial activity. This will limit reductions in free allocation entitlements and provide further encouragement for industrial operators to achieve improved efficiency for their combined heat and power plants.

The SI also makes an operational amendment to the electricity generator classification. The SI will allow electricity generators to be eligible for free allowances after the application date if they can demonstrate that they produced measurable heat by means of high-efficiency co-generation during the allocation period.

The SI also remedies an inconsistency in the legislation to make it clear that carbon capture and other types of regulated activity may be carried out on the site of the same installation. The SI will allow provision of free allowances to industrial installations at the same site as a carbon capture plant.

As the Northern Ireland Assembly is not sitting and cannot consider affirmative legislation, this statutory instrument therefore covers only Great Britain. Officials in Northern Ireland have agreed that that none of the provisions currently affects operators in Northern Ireland.

These changes deliver on commitments made by the UK ETS authority and improve the operation of the scheme. For aviation, the SI will ensure that aviation free allocation is distributed appropriately until full auctioning for the aviation sector in 2026. This follows the decision announced in July that aviation free allocation will be phased out by 2026.

On free allocation technical changes, the SI will ensure that installations classed as electricity generators, whose eligibility for free allocation is limited, are able to change their classification if they are no longer exporting electricity. The SI will also ensure that industrial installations with high-quality combined heat and power plants which export excess electricity to the grid are not classified as electricity generators so as to not limit eligibility for free allowances.

On the electricity generator operational amendment, the SI will ensure that electricity generators can become eligible for free allowances during an allocation period if they meet the eligibility criteria. On free allocation rules around carbon capture, the SI will prevent industrial installations being disqualified from receiving free allowances if they are on the same site as a carbon capture plant—a situation that could pose a risk of disincentivising the uptake of carbon capture technology.

These changes either follow appropriate and comprehensive consultation with stakeholders or did not require consultation. In developing the UK ETS consultation in 2022, the UK ETS authority considered what technical improvements can be made to the current aviation free allocation methodology until free allocation is phased out. The responses to the consultation called for an end to the overallocation of aviation free allocation. In addition, the policy intent of aviation free allocation is to mitigate the risk of carbon leakage, and the policy did not intend for aircraft operators to receive more allowances than their verified emissions. To that end, in July the UK ETS authority announced the decision to cap aviation free allocation at 100% of verified emissions.

In the consultation on developing the UK ETS, we considered technical changes to free allocation rules regarding the electricity generator classification. The majority of respondents agreed with our suggested amendments, and the UK ETS authority announced that it would proceed with changes to the electricity generator classification. A consultation was not carried out for the CCUS free allocation amendment as this is a clarification of existing policy intention and not a change in policy.

In conclusion, these alterations to the UK Emissions Trading Scheme will support its role as a key pillar of the UK’s climate policy. They show that we will take action to improve the scheme where necessary and continue our record of delivering on our commitments. I therefore commend this order to the Committee.

[Lord Teverson (LD)]

My Lords, perhaps I may make a few comments in front of the crowd here. I welcome the SI generally , obviously, and want to try to ensure that it works properly. I have a couple of specific questions.

I am interested in understanding how the free allocations were allocated or what the baseline was for the airlines. Also, in the scheme as a whole, what proportion of units are free issue these days? I would be very interested to hear that for the current period, which I think goes up to 2026.

The Minister referred to the UK ETS as the cornerstone of ambition in terms of net zero, but of course, that cornerstone is crumbling at the moment. I would be very interested to hear, more strategically, how the Minister sees the fall in the carbon price per tonne, which has moved this year from around £100 at one point down to under £50.

To me, that seems to be, in the words of Energy UK, a major disincentive to investment in the renewables sector. As I understand it, it has threatened the Treasury to the tune of £1 billion so far this year and will mean a hit of something like £3 billion on the Treasury per annum if that price continues. As we know, there is also a threat from the European Union’s move to a carbon border adjustment mechanism—particularly in 2026, when those measures will really start to bite. There is a feeling that UK industry’s exports to the European Union could be threatened by some £500 million per year if that price remains as it is. I want to know the Minister’s understanding of why the price has fallen so much. My economics A-level tells me that, with supply and demand, when demand stays roughly the same but the price goes down, there is an all-round surplus in the supply of those units. However, there is also a volatility there, perhaps through a lack of liquidity in the scheme as a whole.

Looking again at the trade and co-operation agreement, particularly the area of energy in 2025, I would be interested to understand whether this is an opportunity to bring those trading schemes more together again, which was a target that the Government sought to achieve when that agreement was first made. Clearly, the fall in price strongly affects the renewables and clean energy industries. It seems to me that, not just from a Treasury point of view but from an industry and net zero point of view, we need to get that price back up again. I would be interested to hear the Minister’s comments on how that can be achieved—or indeed whether the Government wish to achieve it.

--- Later in debate ---

Finally, new exemptions from the ineligibility of electricity generators are made for operators with on-site combined heat and power plants, where electricity was produced by means of CHP plants that are quality assurance certified and electricity generators can demonstrate that they have produced heat by high-efficiency cogeneration. The latter is confusing, because this was already the case, but with no mechanism to demonstrate a change in reduction. One wonders how many operators were wrongly accepted on this basis. The Explanatory Memorandum says that there will be “no substantial direct impacts”, so can the Minister enlighten us as to how this could be?

[Lord Callanan (Con)]

I thank the noble Lords, Lord Teverson and Lord Lennie, for their contributions. As I said in opening, the SI will implement a number of necessary changes and improvements to the scheme. The UK ETS is a cornerstone of our climate policy and it sets a cap on emissions in the sectors covered—currently, about a quarter of the UK’s emissions. In doing so, it guarantees that these sectors will reduce their emissions in line with our overall net-zero target. The carbon price generated by the need to acquire allowances within this cap incentivises the investment in decarbonisation that is needed to make sure that we can build a thriving net-zero economy.

In July, the UK Government and the devolved Governments, who all comprise the joint UK ETS authority, set out a comprehensive package of reforms to the scheme. These reforms increase the ambition of the UK ETS, setting its cap on a path to net zero. As set out in that package of reforms in July, a wide range of changes is required to ensure that the ETS remains a key part of the UK’s approach to achieving net zero.

As part of the UK ETS authority, with the devolved Governments, we are determined to run and develop the scheme in the most effective way possible. Our aim is to be predictable and responsible guardians of the scheme and its markets. That is fundamentally why the changes in this SI are being brought forward: to deliver on our previous commitments and make essential improvements to the scheme. The alterations to the scheme that this SI brings about will support its role as a key pillar of the UK’s climate policy. They demonstrate the value of the detailed consultation that we have carried out with scheme participants. We are committed to listening to views and implementing changes where necessary to make the scheme run as efficiently as possible, so that it ultimately achieves its aims. The changes to aviation free allocation and technical changes to free allocation follow the comprehensive consultation on developing the UK ETS carried out last year. They deliver on commitments made in the response to that consultation in July.

I will now pick up on the points made in the debate, first in response to the noble Lord, Lord Teverson. We have decided to cap the total amount of aviation free allocation that operators are eligible to receive to ensure that aviation free allocation is distributed appropriately until full auctioning in 2026. In 2021, the level of aviation free allocation issued to operators surpassed the sector’s verified emissions, primarily due to the impacts of Covid-19 on aviation activity. However, even prior to the impacts of Covid-19, under the EU ETS, a number of operators received more free allocations than their verified emissions.

The current aviation free allocation methodology calculation is based on 2010 activity data, which is now of course inconsistent with current aviation activity and creates competitive distortions between participants. Not capping the amount aircraft operators are eligible to receive therefore effectively shields them from the price signal and provides an opportunity to benefit from the scheme, which, I am sure we would all agree, was not the intended aim of the policy. To answer the noble Lord’s question, in 2022, the proportion of UK ETS emissions covered by free allocations was approximately 36%.

On the noble Lord’s point on the fall of the UK ETS price, it is of course a market mechanism, and the price of carbon allowances in the emissions trading scheme is ultimately set by that market. However, in line with the net-zero cap that we announced in July, the supply of emissions allowances entering the market will fall significantly every year from 2024. Using the noble Lord’s supply and demand analogy, we can probably predict—without saying it—what will happen to the price in such circumstances.

[Lord Teverson (LD)]

Is the Minister happy that the price has fallen by half this year?

[Lord Callanan (Con)]

As it is a market mechanism, I have some sympathy with the noble Lord’s point of view, but it would probably not be wise for me to comment on the overall price. I will let the market determine what it should be. If I say what I think the ideal target price should be, that would clearly be interfering in the market, which the noble Lord can understand I should not do.

We are committed to continuing to deliver these changes, as shown by our legislating to amend the supply of allowances over the coming years and the publication of the auction calendar for 2024. The authority has also committed to exploring measures for the future of the UK ETS market, including examining the merits of the supply adjustment mechanism, which would be a means of amending the supply of carbon allowances in response to market conditions.

The noble Lord, Lord Teverson, asked about the impact of the EU CBAM. We are of course following developments closely and engaging with the Commission to discuss the technical considerations relevant to UK manufacturing because, even though EU CBAM charging does not start until 2026, companies will have to report on their emissions from 2024 to 2026, prior to charging. We will see whether the EU proceeds with charging, but it will clearly have a significant effect on many UK companies supplying into the EU market, given the additional bureaucracy they will have to go through. Noble Lords should watch this space: I am sure the Government will have more to say on this shortly.

As I said, UK ETS prices are set by the market, as it is ultimately a market mechanism. The UK market is clearly separate from the EU market. It is therefore possible that prices will fluctuate and differ, although it is worth saying that both have similar levels of ambition. We will continue to work domestically and internationally to find solutions to any risk of carbon leakage and our ambitious climate commitments rightly require our industries to decarbonise. This includes our running a consultation earlier this year on domestic measures to mitigate carbon leakage, including a potential UK CBAM and mandatory product standards. We are looking at all these issues holistically to see which is the most appropriate carbon leakage mitigation across a number of policy designs. The response to that consultation will be published—to use the phraseology—in due course, and a further consultation on free allocation policy is due later this year.

On the point of the noble Lord, Lord Lennie, on linking the UK ETS and the EU ETS, as he correctly pointed out, under the terms of the TCA, the UK and the EU agreed to consider linking our respective carbon pricing schemes and to co-operate on carbon pricing. We are open to the possibility of discussing linking the UK ETS internationally with other schemes—it is not just the EU’s; there are a number of other schemes across the world—and we will continue to work collaboratively with other jurisdictions to tackle shared challenges and learn from the experience of others as we continue to develop the UK ETS. Indeed, I attended a meeting with a number of other jurisdictions only last week to discuss that very topic.

On the point raised by the noble Lord, Lord Lennie, on carbon capture and storage, there is currently an inconsistency in how capture activities and installations are dealt with in the ETS legislation, and that does not currently reflect the department’s policy. Some areas of the legislation recognise that capture and other regulated activities might occur at the same installation, but in other areas it is assumed that capture activities will be self-contained. The amendments clarify that carbon capture may take place on the same site as other UK ETS installations or regulated activities without the loss of free allocation in respect, of course, of non-capture activities. There has been no negative impact to date, as this technology is still very new and CCUS activity is not yet taking place, but the amendment will help incentivise the uptake of CCUS technology in the future and ensure that no negative impacts occur as it continues to develop.

On the electricity generator amendments and the impact of the previous baseline period, these rules were simply carried over from the existing EU ETS for consistency and we are now amending them to tailor them to the UK system. I hope I have answered all the points I was asked about and commend the order to the House.

Motion agreed.

Biomass Strategy 2023: Cross Sectoral Sustainability Framework

Lord Callanan Excerpts

Wednesday 15th November 2023 Lords Chamber

[Baroness Boycott (CB)]

In begging leave to ask the Question standing in my name on the Order Paper, I draw attention to my registered interest as vice-chair of Peers for the Planet.

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

My Lords, the Government will consult in 2024 on the sustainability actions set out in the Biomass Strategy, including developing and implementing a cross-sectoral sustainability framework to enable greater consistency across sectors and to further strengthen our sustainability criteria.

[Baroness Boycott (CB)]

I thank the Minister for the Answer, but I draw the House’s attention to the fact that the UK’s single largest source of CO₂ emissions is a biomass power station. That fuel generates only 4% of our power and creates 13.1 million tonnes of CO₂, which is about 20% of the total that we emit as a country. But, as a nation, we subsidise it with our taxes. We call it renewable, so apparently it does not count. The recent task and finish report that the Government commissioned, looking at whether biomass could be called carbon-neutral, could not confirm that this was the case. Seeing that the evidence is pointing in the wrong direction, will the Government commit to moving away from this assumption that biomass is carbon-neutral, unless proven otherwise? Will they issue no new licences for generation and end their classification of this as a renewable power source?

[Lord Callanan (Con)]

The noble Baroness knows that I do not agree with her on this. The biomass that is used for generation in the two main plants is sustainable. There are very strict sustainability criteria attached to it, and the generators are measured against those criteria by Ofgem.

[Baroness Young of Old Scone (Lab)]

My Lords, I welcome the commitment to the cross-sectoral frame- work, provided that it is statutory rather than voluntary. Does the Minister regard this as a significant change from the Government’s previous position, when they decided to appoint a senior member of Drax management to the Climate Change Committee that advises government on biomass policy at a time when Drax had received £11 billion in public subsidy for biomass?

[Lord Callanan (Con)]

There has been no significant change in government policy. The sustainability criteria for biomass have existed for a while now, in concert with other biofuel strategies across government. Of course, if we can take the opportunity to make those criteria even better and even more sustainable, we will do so.

[Lord Bellingham (Con)]

My Lords, surely the answer to the noble Baroness’s question about Drax is to reduce the barriers to increasing domestic production of biomass in this country. Can the Minister say something about the biomass feedstocks innovation programme? Is it one that he feels strongly about, and is it actually going to be taken forward and have more money put into it?

[Lord Callanan (Con)]

Indeed, my noble friend makes a very good point. We have currently awarded £32 million of funding to projects as part of the Government’s £1 billion net zero innovation portfolio, because there is an awful lot that we can do to improve the availability of biomass feedstocks and look at deploying it more effectively.

[Lord Birt (CB)]

My Lords, the “Panorama” on Drax offered vivid and compelling evidence that fatally undermined Drax as a renewable proposition. The Minister has previously asserted that that was an accurate presentation, but as yet has offered no evidence to support his claim. Drax wrote to me almost four months ago, also claiming that the programme was a misrepresentation, and offered to present me with evidence. Despite prods from me and further promises from Drax, I have yet to receive that evidence. Is it possible that the “Panorama” was an accurate representation?

[Lord Callanan (Con)]

To slightly correct the noble Lord, I think I said it was an inaccurate portrayal, rather than an accurate one, as he said. We have debated this matter before, and the noble Lord has tabled a number of Parliamentary Questions to me on it. I cannot go any further than to repeat what I have already said: government officials have engaged extensively with forestry experts and Canadian officials following the “Panorama” programme, and we have found no evidence that wood pellet production in the region is unsustainable. We continue to believe that the narrative would have benefited from a much fuller picture of how harvesting decisions are made in practice.

[Baroness Sheehan (LD)]

My Lords, I declare at the outset that I have a biomass boiler, which came with the house I live in—but, honestly, we are trying to get rid of it. It takes trees between 44 and 115 years for sequestration of carbon. The lower estimate takes us well beyond 2050, the upper beyond the lives of anyone born today. So clearly biomass is not renewable within the timeframe needed to tackle climate change. Will the Government take that into account and ensure that the UK applies the precautionary principle and ends the ridiculous classification of biomass as a renewable power source?

[Lord Callanan (Con)]

I am pleased to hear that the noble Baroness has a biomass boiler. In fact, she does not need to get rid of it, because if she sources her pellets from the appropriate sources, that is a renewable resource. These are not pellets from virgin forests but by-products from the timber production process. There are very strict sustainability criteria attached to them and, even if those pellets were not used for biomass production, they would be a waste product because the timber would still be harvested for its other uses. So the noble Baroness does not need to feel so guilty.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend look favourably on taking fast-growing willow coppice and miscanthus from local growers right across Yorkshire to give a constant stream of reliable, sustainable farm produce to Drax going forward?

[Lord Callanan (Con)]

I did not quite hear the start of my noble friend’s question, but if she is asking whether we want to source more sustainable biofuels from UK sources, the answer is yes, absolutely.

[Baroness Blake of Leeds (Lab)]

The transition to clean power will require a massive expansion of alternative energy sources right across the board, whether biomass, onshore wind, solar or others, which will also deliver energy security and hundreds of thousands of good green jobs. This cannot be achieved without reviewing the sustainability and economic competitiveness of each energy source and accelerating carbon capture and storage. How are the Government working comprehensively towards these two vital functions?

[Lord Callanan (Con)]

I absolutely agree with the first part of the noble Baroness’s question. She is right that there needs to be a variety of sources of power: renewable sources, biomass linked to carbon capture and storage, and long-term hydrogen production. Of course, in the net zero strategy we look at all these things in the round, linked to a long-term analysis of how the power needs of the UK are best met going forward.

[Earl Attlee (Con)]

My Lords, when wood decomposes, does it release CO₂ naturally?

[Lord Callanan (Con)]

I think it does, but I am not going to get into a scientific debate about it. It certainly does when it is burned, but of course it absorbs CO₂ when it is growing; that is the nature of it being sustainable.

[Lord Kamall (Con)]

My Lords, so far my noble friend the Minister has talked a lot about wood pellets and other things, but can he enlighten us on the Government’s strategy on third and fourth generation biomass and how they intend to encourage domestic producers in those two areas?

[Lord Callanan (Con)]

I am not sure I know what third and fourth generation biomass is. I will have to have a cup of coffee with noble Lords afterwards and we can have a chat about it.

[Baroness Sheehan (LD)]

Does the Minister agree that trees decompose only once they are felled?

[Lord Callanan (Con)]

I suppose, if we want to get into a debate about that, they absorb CO₂ when they are growing. If they are felled and just rot on the ground they emit CO₂, but also when they are burned.

[Baroness Bennett of Manor Castle (GP)]

Following on from that, does the Minister agree, particularly thinking about not just the products from Drax but local production, there is an alternative use of biomass, which can be put back into the soil to increase soil carbon and soil health? There is a real benefit there that needs to be considered when thinking about whether it is better to use that carbon or simply burn it.

[Lord Callanan (Con)]

I shall ruin the noble Baroness’s social media portfolio and agree with her this once: of course, we need to look at these things in the round and there are lots of alternative uses. It is the whole basis of the biomass strategy, because there are different uses that we can put it to and we need to look at what is most effective both for the environment and for UK power production.

Energy Bill [HL]

Lord Callanan Excerpts

Consideration of Commons amendments
Tuesday 24th October 2023 Lords Chamber

Moved by

[Lord Callanan]

That this House do not insist on its Amendment 274B, to which the Commons have disagreed for their Reason 274C.

274C: Because the Government has already committed to consulting on barriers to the development of community energy schemes and the Commons do not consider it appropriate to set a timeframe for bringing forward any proposals for the removal of such barriers.

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

My Lords, Amendment 274B was added to the Energy Bill during the previous consideration of Commons amendments. As the House will be aware, the amendment was debated in the other place last week and the Government Motion to disagree to the amendment was passed with a substantial majority.

I can confirm to the House that our position remains the same. The amendments would commit the Government to a consultation on the barriers preventing the development of community energy schemes. The amendment sets out with whom we would consult and commits the Government to bringing forward proposals to remove identified barriers to community energy within a brief six-month timescale.

I welcome the constructive engagement from across the House, in particular from the noble Baroness, Lady Boycott. I welcome her continued efforts throughout the passage of the Bill to ensure that the interests of the community energy sector are heard in this Chamber, but I reassure the noble Baroness that, on this issue, the Government have already made a clear commitment to the consultation.

As part of this commitment, we have outlined that we will engage in an open and collaborative way with the community energy sector, via the community energy contact group, to design the consultation. In fact, officials are already engaging on exactly that, and earlier this month held a very constructive discussion on the consultation with the group. Given our existing commitment to consult, and our ongoing engagement with the sector, we therefore believe that it is of no additional value to put the specifics in primary legislation.

In addition, there are further issues with the previous amendments that meant that we could not support their inclusion in the Bill. We clearly cannot commit to putting forward proposals to remove barriers that are preventing the development of community energy schemes before we know what barriers are raised in the consultation, or the implications of removing them. It would be remiss of us to agree to put that into primary legislation. Placing this obligation on the Government would be putting the cart before the horse.

However, I reassure the House yet again that the Government will carry out the consultation and continue to work closely with the sector to do so. I also reiterate the Government’s support in principle for community energy; we recognise the role that community groups play in our efforts to eliminate our contribution to climate change. I participated in a great visit to North Kensington Community Energy two weeks ago where I was able to see first-hand some of the important work that the sector does and to meet the contact group.

More widely, government support for the sector is demonstrated through existing support that we have already put in place, such as the £10 million community energy fund. I am pleased to tell the House that we aim to open applications to that fund as soon as we possibly can.

[Baroness Boycott (CB)]

I thank the Minister very much for his sort of co-operation through the passage of the Bill. It is hugely important. It was introduced about 16 months ago, and I do not wish to delay it any further. But I speak with great regret that the Government find themselves unable to agree to my simple and incredibly uncontroversial amendment, which just seeks to clarify the Government’s commitment to consult on the barriers that community energy schemes face. I am very pleased that the Minister went to visit one that was working, but I assure him that a lot are not.

While I welcome the steps the Government have taken to re-establish the community energy fund—for instance, reporting to Parliament and consulting—it is important to put a timescale on these plans; 18 months is fair and reasonable. Without a timescale there is a risk that this will not happen. It has been demonstrated that this issue has widespread support across both Houses. When we have something that we agree on, we ought to just get on with it and do it. I fear that this small but significant issue will get drowned out in next year’s general election. I would appreciate reassurance from the Minister that this is a needless worry and that the Government are committed.

I would just like to get some clarity on a couple of points. What will be the basis of this annual report to Parliament? Is it simply to report on the progress of projects, or will it address the challenges that we face and the best route to sort them out? My amendment also sought to ensure that, should any consultation find that there are barriers—new barriers, for instance—the Government will commit to taking steps to address these. Being candid, we know that there are barriers, and I appreciate the argument that you should not legislate for the unknown, but I am simply trying to get an assurance that they would plan to lift barriers that we know are there—including ones that we do not know.

To return to the issue of the consultation, we have rehearsed what issues need to be resolved; thanks to the Bill committee in the other place, there are many views on record. I do not believe that much is likely to change in the next year. While I agree that we should follow due process here, it must not be used as a reason for delay. I urge the Minister to open this consultation ASAP, so that we can get this ball rolling.

--- Later in debate ---

[Lord Callanan (Con)]

I thank all Members who have contributed to this extremely brief debate. To have a brief debate on the back of a Bill that now has 335 clauses, one of the longest Bills that we have passed in this House for many years, is quite ironic but probably appropriate.

On the issue in question, I thank the noble Baroness, Lady Boycott, for her remarks. She spoke about the timing of the consultation. All I can tell her is that we will launch it as soon as we can; I am afraid I cannot put a specific date on it, but I hope it will not be too long away now. Officials need to continue their discussions with the community energy sector about the content of the consultation before we can launch it. I confirm absolutely that officials are working closely with the Community Energy Contact Group—I have met it myself —and we are keen to get on with this as quickly as possible.

Similarly, on the content of the consultation, until we finish those discussions we cannot commit to exactly what the consultation will include. That really would be putting the cart before the horse—unknown unknowns, as the noble Lord, Lord Lennie, referred to. On the commitment to publish an annual report on the community energy sector, which the noble Baroness, Lady Boycott, spoke about, I confirm that, as with the consultation, we will work closely with the sector to design exactly what the report will look like.

The noble Baronesses, Lady Bennett and Lady Boycott, asked me to commit to removing barriers. Until we know what those barriers are, it is impossible for me to give a vague commitment. If removing a barrier is simple and straightforward then of course we would want to do it, but we are talking in generalities without knowing what the specific issues are. Let us have a bit of patience and wait for the outcome of the consultation. The House can be reassured that we are committed to the consultation and keen to see the community energy sector go forward, which is why we have provided the new £10 million fund to aid it to do just that. In the personal discussions I had with the sector, it was extremely keen and enthusiastic to get on with some of the great work that it does.

As this will be the final time that I will be on my feet for this gigantic piece of legislation, I thank the Members from all sides who have contributed during the passage of this, frankly, huge piece of legislation. At every industry forum that I have done for the last six months, I have been asked the obligatory question, “When will the Energy Bill get Royal Assent?”. Whether it be the CCUS sector, the hydrogen sector or the smart meter sector, as well as the community energy sector, every stakeholder group in this area is keen to get this legislation on the statute book. I know the House had some concerns but in general the legislation has support from all sides, and I think everybody accepts that it will do great and noble things for the energy sector.

As well as Members of the House, I thank all the officials who have now spent a number of years working on this. There were several hundred of them so I cannot mention them all by name, but I particularly pick out Jeremy Allen and Jessica Lee, who have led the team fantastically over the last months and years. I am sure they will be lost without their little baby, as the Energy Bill becomes the Energy Act. They have done some great work, including on the Nuclear Energy (Financing) Act and the Energy Prices Act. I hope noble Lords will join me in thanking them for all the good work they have done, in the finest traditions of the Civil Service, in helping us to navigate our way through these important pieces of legislation.

Motion A agreed.

Climate Financing

Lord Callanan Excerpts

Tuesday 17th October 2023 Lords Chamber

[Lord Oates (LD)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and in doing so I declare my interest as chair of the APPG for Africa’s inquiry into just energy transition.

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

My Lords, the UK COP 26 presidency published a delivery plan with other contributors showing that we would meet the $100 billion goal in 2023. At the Petersburg dialogue this May, developing countries confirmed that we are on track. We have worked with the Canadian and German Governments to publish an open letter at the UN General Assembly explaining upcoming milestones. The UK and other contributors are working with the OECD on a report by COP 28 on progress with regard to COP 21.

[Lord Oates (LD)]

I welcome the Minister’s Answer. Does he agree that the $100 billion target is just a fraction of what is needed? The capital requirement for just energy transition in Africa alone is estimated to be around $2 trillion to $3 trillion, yet the $100 billion target has been consistently missed in the past. Can the Minister tell the House what plans there are to make up past shortfalls, including the UK’s contribution, and what is the Government’s strategy to crowd in the additional private capital that will be so critical in meeting the challenges of energy transition and climate change?

[Lord Callanan (Con)]

The noble Lord makes some very good points. He may not have had the chance to see it yet, but we published a WMS this morning with details on our progress towards meeting the $100 billion target—so his question is very well timed. He makes a good point that, while government finance will be important, of course private finance is equally important, including in the UK and developing countries, towards meeting these goals.

[Baroness Sugg (Con)]

My Lords, women and girls are disproportionately impacted by climate change. A recent report from the UNFPA highlighted that rising temperatures have been linked to poorer maternal health and that extreme weather events are exacerbating inequalities because of the disruption to health services, including the loss of access to contraception. Does the Minister recognise this and will he also acknowledge that women are part of the solution, particularly when it comes to mitigation and adaptation? How are the Government ensuring that their climate finance properly addresses the needs of women and girls?

[Lord Callanan (Con)]

I know that my noble friend is a powerful advocate for women and girls, both in this House and in the work she did in government. She is of course absolutely right. The FCDO’s international women and girls strategy sets out our commitment to increase the proportion of our international climate finance that will be gender-marked and to integrate gender and social inclusion objectives into our climate finance programmes and strategies.

[Lord Watts (Lab)]

My Lords, all these measures will come to nothing unless we control the population of the world. What are the Government doing to help achieve that aim? Will they publish figures on their successes or failures?

[Lord Callanan (Con)]

The noble Lord asks a good question, which is slightly beyond the remit of the original Question. I point him to the answer that I just gave to my noble friend: empowering women and girls, giving them more control over their own reproductive rights, is very important in this area.

[Lord Howell of Guildford (Con)]

My Lords, I see that Janet Yellen, the American Treasury Secretary, estimates that it will take around $81 trillion—I repeat, $81 trillion—to get anywhere near the Paris targets by 2050. So, are we in the right ballpark at all in talking about £100 billion? If we are, is there not a need to concentrate on the gigantic coal burning of China, which is still around 1,000 times ours, as well as the huge coal burning of India and America? These account for 60% of the world’s emissions increases; is this not where the money should go?

[Lord Callanan (Con)]

My noble friend of course makes an important point. My reaction is that it is at least a start. Given the financial pressures on many developing countries, it is important to start the financing process. The £100 billion will be a commitment and will help many poorer parts of the world. He is also right that we need to work with China and the US to drive down their coal emissions. I am delighted that, in this country, coal will be completely gone from our power system by next year.

[Baroness Boycott (CB)]

My Lords, Britain has been very proud of its leadership position on climate change—something that has taken a bit of a dent in the last few weeks due to some of the rollbacks on climate change targets. Specifically, the CCC last week published an assessment of the Government’s recent net-zero announcements, stating that they

“were not accompanied by estimates of their effect on future emissions, nor evidence to back the Government’s assurance that the UK’s targets will still be met”.

Will the Minister commit now to publish the evidence for Members to scrutinise?

[Lord Callanan (Con)]

I must disagree with the noble Baroness. There has not been any rollback on the Government’s targets. There is a legally binding commitment, which we will maintain, and of course we have a number of legally binding carbon budgets, which we will also maintain. We are adamant that we are on track to meet all of them.

[Lord Teverson (LD)]

My Lords, I very much welcome the Minister’s confirmation of the UK’s role in international finance on climate change, but money is not the only thing. Technological transfer and transfer of expertise are equally important. Will the Minister tell us what the UK Government are doing to ensure the transfer of expertise and technology that we have in the UK, particularly in areas where we lead, such as offshore wind and other technologies? Are we working strongly to transfer that to economies in the south who can use it even more than we can?

[Lord Callanan (Con)]

The noble Lord is absolutely right. We are world leaders in many technological developments. Offshore wind is one example, floating offshore wind would be another, and a third would be the deployment of solar technology, which could be immensely valuable in many parts of the developing world. We share expertise through the good offices of the Foreign Office as much as we possibly can.

[The Lord Bishop of Sheffield]

My Lords—

[The Lord Bishop of Sheffield]

My Lords, it is reassuring to hear that the Government are confident of meeting the commitments made at COP 26 in relation to climate finance for adaptation and mitigation. Are the Government equally confident that commitments made at COP 27 in relation to the loss and damage fund will be not only met but made fully operational?

[Lord Callanan (Con)]

As far as I know, we are fully committed to meeting those targets. We are very proud of our record and all the progress that we have made, including at least £3 billion on mitigating, protecting and restoring nature. We are on track to meet all our commitments.

[Lord Lennie (Lab)]

According to the International Institute for Sustainable Development, over $1 trillion of public money has been poured into fossil-fuel subsidies since COP 26, mainly in response to the war in Ukraine. This eclipses tenfold the climate finance initiatives made at COP 26. Do the Government accept that this lack of long-term thinking about energy efficiency, onshore wind and solar has left us vulnerable to these outside forces?

[Lord Callanan (Con)]

I do not agree with the noble Lord. We have an extremely good record on energy efficiency. To take one of his examples, we have improved the number of properties that are EPC band C or above from 14% when we came into office up to nearly 50% now. Obviously, we need to make a lot more progress. We are spending £6.5 billion in this Parliament on energy efficiency and have already committed another £6 billion from 2025. We are doing extremely well in this area.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the Minister may be aware that last week, coinciding with the IMF meeting on reform priorities for tackling debt, groups including Extinction Rebellion, Debt for Climate and Debt Justice were outside the Bank of England highlighting the $7.9 trillion in climate reparations that are due to the global south from the global north. He may also be aware that debt is preventing climate action in the global south: five times the amount of money is going on debt repayments than is going on climate action. Are the Government at the forefront of leading on action to deal with this debt crisis in the global south?

[Lord Callanan (Con)]

We are proud of our record on helping the global south to relieve its debts. We have one of the largest programmes of international aid alongside our programmes on international climate finance. Of course, there is always much to be done, but we can be very proud of the record that this country maintains.

[Lord Naseby (Con)]

My noble friend rightly mentions developing countries. He will well know that the emphasis that he gives is much appreciated. Within that, is he aware of the parlous state of the small islands and the worry that they have about their future? Is he prepared to make a commitment today that they in particular will continue to be a priority for His Majesty’s Government?

[Lord Callanan (Con)]

Of course I can give that commitment to my noble friend.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. Reform of the international financial order is going to be high on the agenda for COP 28. Do the Government support that reform and, in particular, the measures set out in the Bridgetown agenda?

[Lord Callanan (Con)]

The Government are interested in the conversations that are taking place on that. I cannot give the noble Baroness the commitment that she requires but I will come back to her in writing with the detail on that.

Net Zero (Economic Affairs Committee Report)

Lord Callanan Excerpts

Monday 16th October 2023 Lords Chamber

[Lord Teverson (LD)]

My Lords, I also declare my interest: it is in a company called Aldustria Ltd, which is into energy storage. I absolutely agree with the noble Lord, Lord Frost, that there are many issues around energy storage, particularly in the long term, on which I know the Government have done a number of consultations.

I congratulate my noble friend Lady Kramer on her introduction to this report. She is absolutely right: it has taken far too long to get it to the Floor of the House. As the noble Viscount, Lord Chandos, said, there have been three Prime Ministers since the report came out. The only thing that I would say is that it has actually managed to get to the end of its process slightly quicker than the Government’s Energy Bill, which started in the same month that this report was published but has still to be completed. I hope that that will happen before the end of this month. That shows the urgency that the Government wanted to put into their energy strategy but did not, particularly on electricity and carbon capture and storage.

I shall come back on energy costs for a minute, in response to the noble Lord, Lord Frost. The noble Viscount, Lord Chandos, is absolutely right about 2050. It is not about reaching net zero that year—you have to get it all the way through. I do not think that methane was mentioned in the report—I may be wrong—but that is one area where there may be some quicker wins.

I absolutely agree with the noble Lord, Lord Turnbull, about Rough storage, although I think that only a small amount of that facility is contracted to the Government. Centrica is hanging on to the rest of it, and there is no guarantee that it will be there long term. That is a real vulnerability.

As for new gas and oil and, particularly, coal facilities, I do not see any UK Government banning exports of those products. I do not see that ever happening, which is why I do not think that there is any effect on our energy security or, indeed, on global pricing for those new openings.

I shall come back on demand reduction in a minute in response to the noble Baroness, Lady Bennett, as it is an important area. But I just say to the noble Baroness, Lady Noakes, that I came up as a traditional economist, and it always seemed to me that it was really important to cost the idea of externalities into actual pricing systems. With carbon emissions we have huge externalities that are not priced into market competition—and that is why there have to be differences.

I also say to the noble Baroness that, of course, there is a huge kickback at the moment to the Government on contracts for difference through the Low Carbon Contracts Company, whereby at the moment actual market prices are hugely higher than strike prices. I would be interested to understand from the Minister—

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

It is not a kickback to the Government—it is a kickback to the consumer.

[Lord Teverson (LD)]

Yes, exactly. The Minister corrects me. That is even more to the point. I think it has got to several billion pounds in terms of coming back into that sector working the other way, which probably exceeds now the green costs that there were. That is quite an optimistic look at that.

It seems to me that one real problem in this area—because the world has moved on since last July—is with those recent announcements that my noble friend went through from the Prime Minister. They probably did not have as big an effect as some people said, but they did drive a horse and carriage through our international reputation, as indeed did the coal decision in Cumbria. Our being seen as a global leader in this area, which the report was keen to emphasise, has been trashed to a large degree, and has been seen as such by allies such as America and the European Union.

I want to come back to those announcements, one of which was to abolish the Energy Efficiency Taskforce. The Minister was chair of that, and I understand that four meetings took place. Whether you look at security or at cost, the most secure energy is the energy that you do not need. The energy-efficiency side is important in that area, as well as cost. I would be interested to understand from the Minister why he was made redundant by the abolition of that committee. The UK should be a real leader, and really move in this area. The report asks for an energy demand reduction strategy, and that is really called for. It is not just around buildings, as the Government’s response said that it was; it is around a much broader area, including appliances and other interests.

One thing that has been emphasised during this debate is private investment, which it is clear is absolutely essential to deliver net zero. I am not pessimistic about this. Most private investment takes place to reduce costs, not to increase them. Companies do not invest to increase prices; they invest to reduce prices, and that is what we should aim for with the net-zero strategy.

One problem with the Prime Minister’s announcement, and all the other issues that have happened, is that we have a wobble with investor confidence—absolutely we do. Those messages that go out to industry and the investment sector say that we are no longer reliable on our government policy or on the foundation of confidence going forward. That has an even bigger effect when we have the Inflation Reduction Act in the United States and the EU green deal industrial plan on the other side of the channel. I would be interested to understand from the Minister when the Government will really respond to that huge financial challenge, which really prejudices how we can deliver net zero through the private sector in future.

I will make one or two further points, as I am sure the House will want to move on. The noble Baroness mentioned the UK Emissions Trading Scheme. I have been very hopeful—not because I am pro-European but because of liquidity and various other areas—that there should be a tie-up between the UK Emissions Trading Scheme and the EU equivalent. I understood that that was a government objective, but now we have a huge divergence in prices. The UK ETS a year ago was about £100 per carbon tonne; it is now down below £40. In the EU, it was around €100 per tonne a year ago but is now down to about €80. A huge difference has opened up. I would be interested to hear the Minister’s reaction on how the carbon border adjustment mechanism will affect that, as Europe starts to develop it over the next few years. That price signal is so important in terms of taxation and disappearing incentives for investment in our economy.

I am glad to see the noble Lord, Lord West, is here, because one of the key issues in energy security at the moment is defence, which has not been mentioned in this debate. In Finland, we have seen potential interference with the explosion of one of its energy pipelines and we have seen Nord Stream 1 and 2 destroyed. We know from our intelligence that the Russian Federation is keeping a very close eye on our undersea energy and communication networks. The Minister may not have an answer to this, but it is one of our major concerns in energy security as we move forward and have more interconnectors offshore. I am sure he agrees that this is a major thing we must look at.

Finally, coming back to consumers, the energy companies and Ofgem estimate that, as we reach the end of summer and enter winter and higher bills, the outstanding energy bills from consumers will be about £2.6 billion. Are the Government happy with that? Do they think it is sustainable for low-income families? Do they intend to do anything about it? This is probably the biggest challenge of all. Although the noble Lord, Lord Frost, talked about the importance of gas, which will be important for many years, the gas price has driven inflation and the high costs to families of keeping warm. It has led to inflation, which has led to the failure of those offshore wind projects. It is important that we restart that, but the problem is not the technology and the price coming down in real terms; the problem is inflation. What will happen to families over this winter?

[Lord Lennie (Lab)]

My Lords, I thank the noble Baroness, Lady Kramer, and, through her, the noble Lord, Lord Bridges, and other members of the Economic Affairs Committee for producing this weighty report. July 2022 was also when the Government first announced their intention to legislate for the country’s future energy needs in the Energy Bill. The Energy Bill has now expanded to some 400-plus pages, has still not become an Act of Parliament and is due for further consideration by the other place later this week.

[Lord Callanan (Con)]

It would not if the Government acted as Parliament recommended.

[Lord Lennie (Lab)]

There is a process to go through. The amendments we made were to the benefit of the Bill rather than to take away from it.

There is some crossover between the Economic Affairs Committee report and the legislation but, sadly, nowhere near enough. The starting point of this report was back in February 2022, when the Economic Affairs Committee launched an inquiry into how the Government could support investment in UK energy to achieve greater security of supply, improve affordability and meet the UK’s net-zero targets.

The committee considered how the Government planned to achieve the following two separate but related objectives. First was the commitment in law to achieve net zero by 2050 alongside the target to decarbonise the system by 2035. The committee considered how this target might be achieved while ensuring the UK’s energy supply was “affordable and reliable”. It argued that encouraging private sector investment was the key to achieving net zero. However, the committee said there was

“a gap between the Government’s ambitions and the practical policy that is needed to provide confidence and clear market signals to investors”.

The second was the Government’s plans to mitigate the effect of rising energy prices exacerbated by Russia’s appalling invasion of Ukraine in 2022.

The report produced by the committee recommended that the Government should take the following measures over the next three to five years—now two to four years. First, they should publish a net-zero delivery plan which would detail how the UK could achieve net zero in an orderly way. Secondly, they should publish an energy demand reduction strategy which would include measures to increase incentives for investment in energy efficiency measures for buildings and to support the development of resilient supply chains and workforce skills—as the noble Lord, Lord Teverson, pointed out, this has not happened. Thirdly, they should increase the deployment of renewable energy sources to reduce the UK’s dependence on gas markets, including onshore wind, which it describes as

“one of the cheapest and fastest ways to increase renewable energy generation”,

despite the reservations of the noble Lord, Lord Frost. Fourthly, they should maintain existing energy generation in the immediate future while extending the life of nuclear power stations over coal power stations, as this would result in lower carbon emissions. Finally, they should seek to reach agreement with other European countries to manage energy supply emergencies. Have any of these measures been taken on board?

The committee also recommended that the Government should take action to increase investor confidence to make more private capital available to support the transition to net zero, by setting out a cost analysis of their targets to achieve 24 gigawatts of nuclear capacity. As the noble Baroness, Lady Kramer, pointed out, this figure is more than double the capacity assumed by the Climate Change Committee. Can the Minister explain the variance between the two? It also recommended they provide more detail on the capacity, timeframes and expected costs of increasing long-duration energy storage, outline the market structures and mechanisms that would be used to support increased hydrogen production and support carbon capture and storage by fulfilling their commitment to develop four low-carbon industrial clusters. They should also design “market models” to provide information to investors on the types of technology required, to give potential investors greater confidence in the long-term viability of carbon capture and storage. Is there any sign of this happening?

Since the report was published, a number of government changes have affected energy policy. The Energy Bill was introduced in 2022 under Prime Minister Boris Johnson. It included measures intended to leverage investment in clean technologies, protect customers and maintain the safety, security and resilience of the energy system. It reached Committee on 7 September 2022 and was thereafter paused by the new Prime Minister, Liz Truss. Following Liz Truss’s resignation, in December 2022 Committee started again and, under Prime Minister Rishi Sunak, the House of Commons is now scheduled to consider Lords amendments on 18 October. In February 2023, BEIS was replaced, with responsibility for energy policy transferred to the Department for Energy Security and Net Zero. Grant Shapps served as Secretary of State for Energy from February to 31 August; currently, the Secretary of State is Claire Coutinho, but for how long is anyone’s guess.

Chris Skidmore published his review Mission Zero: Independent Review of Net Zero on 13 January 2023. It concluded that the UK was not on track to meet all its targets towards achieving net zero and stated that the Government needed to do more to make the most of the economic opportunities arising from the transition to net zero. The Government have published a series of policy updates on their plans. In March 2023, Powering Up Britain was Secretary of State Grant Shapps’s launch of the new Government’s energy strategy. In the same month, Mobilising Green Investment: 2023 Green Finance Strategy updated the previous green strategy. In this, the Government committed to commissioning an

“industry-led … review into how the UK can enhance our position and become the best place in the world for raising transition capital”.

Has it happened?

On 20 September 2023, Rishi Sunak, still the PM, gave a speech in which he announced some changes to government policy on achieving net zero. While working towards meeting their overall 2050 net-zero target, he said that policies including the ending of the sale of petrol and diesel cars and vans, plus the sale of new gas boilers, would be pushed back by five years to 2035. How does this help achieve net zero? Its effect has been to deter investment by undermining the commitment and consistency required by business, as the noble Lord, Lord Teverson, and the noble Baroness, Lady Kramer, said.

This is the framework in which the Economic Affairs Committee report is being considered. Of its 38 recommendations, only a small handful have been taken forward. However, the Government’s initiatives to secure private capital by certainty and leadership are woefully inadequate. In the meantime, more changes have been confirmed. Alok Sharma, chair of COP 26, is standing down. Chris Skidmore is not going to contest his seat in the next general election. The offshore wind auction attracted no bids because the strike price was wrong.

Tony Blair once said:

“I’ve not got a reverse gear”.


It is a pity the same cannot be said of Rishi Sunak. The report rightly states that the Government cannot be expected to accurately predict what is going to happen in the future. Surely, though, we can expect more than what is currently on offer.

Labour would establish Great British Energy. It would invest in order that Britain can lead the world in carbon-free energy and technologies. Labour will ensure that we have the grid we need to rewire our country. Our public investment will stimulate private investment to bring prosperity to every part of Britain.

[Lord Callanan (Con)]

First, I add my thanks to the noble Baroness, Lady Kramer, for securing this debate, as well as thanking noble Lords for their insightful contributions.

It was a bit rich for the noble Lord, Lord Lennie, to criticise us for not getting the Energy Bill on to the statute book. The reason we have not done that is because the Opposition—despite saying that they support it—have supported largely irrelevant and superfluous amendments to the Bill. If the noble Lord is so keen to get it on to the statute book, he has the opportunity to prove it next week when it will come back to this House. I hope the Opposition will agree with the passage of the Bill, rather than just saying that they support it. We will then be able to get it on to the statute book and proceed to the secondary legislation, which will result from the primary powers, on things such as hydrogen, CCUS, et cetera.

[Lord Lennie (Lab)]

I think it is a bit rich for the Minister to say that the Opposition parties are responsible for the delay to the Energy Bill. It was paused by the Government for three or four months, when they went absolutely silent. We were knocking on the door asking what was happening with the Energy Bill, but nothing was forthcoming.

--- Later in debate ---

[Lord Callanan (Con)]

We would have had the Energy Bill on the statute book by now if it was not for the amendments the Opposition had supported. My point remains.

As the Prime Minister made clear in his recent speech, it is extremely important that we chart the fairest credible path to net zero, bringing people with us through democratic debate. As several noble Lords have mentioned, we have shifted to less drastic targets on phasing out fossil fuel cars and boilers because of the potential for sharp upfront costs to families already struggling with the cost of living.

The 2035 target for decarbonising the power sector, however, remains in place. Why is that? It is not just because this a critical bridge to net zero by 2050—which, I remind the House, we have a legal obligation to deliver —but, in response to my noble friend Lady Noakes, because wind and solar are the cheapest forms of electricity, which is also the reason why I, as a fiscal conservative, am in favour of them.

Against that, and as the noble Lord, Lord Turnbull, noted, international fossil fuel markets are volatile as they are driven by geopolitics, and our own reserves are now declining. Yes, the price of offshore wind has now risen from a historic low, but it remains well below that of gas, nuclear or gas with CCUS. In response to my noble friend Lady Noakes, we are going hard for clean electricity because it is not in tension with cheap electricity; nor is there tension in such electricity having the security of being produced domestically. It is, if you like, electricity with a UK flag plastered upon it.

The UK energy system in 2035 and beyond is going to be a mixture of tried and trusted technology and new innovation. We have connected approximately 40 giga- watts of renewable electricity—primarily wind and solar—to the grid since 2010. The point made by the noble Lord, Lord Teverson, is completely valid: with the high price of electricity, driven primarily by gas, the vast majority of those contracts for difference are now paying back into the system and subsidising consumer bills. It is not the case that the amount of renewables we have on the grid is contributing to the high price. It is driven entirely by international gas prices, and the problem is that we do not have enough of it connected to the grid. If we had more, prices would be lower.

On the nuclear side, Hinkley Point C and Sizewell C are under development, and we have set up Great British Nuclear, whose first objective is to support small modular reactor development, which my noble friend Lord Howell will, no doubt, be pleased to hear.

My noble friend Lord Frost raised an issue about wind and solar. Wind and solar are clean, cheap and homegrown. Of course, my noble friend is right to say that they currently rely on unabated gas as back-up. UK gas usage has declined in the past decade as wind power has proportionately increased. Of course, it is true to say that we need a portfolio of technologies to replace unabated gas, including power CCUS; hydrogen; short- and long-duration storage; renewables, such as tidal and geothermal; interconnection; energy efficiency; and demand side flexibility. We need all these technologies. My noble friend Lord Frost and the noble Lord, Lord Teverson, will be pleased to hear that there is currently nearly 38 gigawatts of electricity storage in its various forms in the planning pipeline.

Resilience comes from having diversified sources of supply and strong relationships with trusted partners and allies. We will work closely with the EU and bilaterally on both short- and long-term energy security. As the noble Viscount, Lord Chandos, will be pleased to hear, I was delighted recently to launch a UK-German hydrogen partnership with German State Secretary Nimmermann, where we are working on a broader energy and climate partnership.

Of course, investing in energy security is about demand as well as supply. We have made great progress in upgrading what is probably the oldest housing stock in the world. Despite what the noble Baroness, Lady Bennett, would have us believe, residential emissions in this country have fallen by something like 31% since 2010; that is the second biggest improvement in the G20.

The noble Lord, Lord Teverson, was concerned about the decision to discontinue the Energy Efficiency Taskforce. The body was formed very much around Dame Alison Rose as my co-chairman and, without her, we believed it was better to streamline its function into existing work. We remain extremely grateful to the members of the task force, who produced some excellent work and recommendations; I continue to meet them regularly and we will continue to listen to their wise and trusted advice on the importance of energy efficiency.

The noble Lord, Lord Lennie, mentioned demand management. I can inform the noble Lord that the National Grid is planning to run its demand flexibility service again this winter—subject to Ofgem approval—as it proved so successful last winter.

The noble Lord, Lord Teverson, asked about the UK ETS, and that remains a cornerstone of our climate policy. It remains the fact, though, that the price is set as a market mechanism. The UK ETS is a separate market to the EU ETS so it is possible, as we have seen, that prices will fluctuate and differ, although both do have similar levels of ambition. The noble Lord will have noted that in the summer, we decreased the cap and aligned it with our net-zero ambitions. This means that the number of permits we issue in the future will continue to decline in line with our net-zero ambitions.

A number of noble Lords raised the important issue of nuclear, and our current nuclear fleet is of course ageing. While the Government have no direct involvement in the decision to expand lifespans, we are pleased that extensions are happening where the technology is performing above original expectations, and I am pleased that the noble Baroness, Lady Kramer, is in agreement on this point. On new build, we are continuing towards taking Sizewell C to final investment decision this Parliament.

The noble Baroness, Lady Kramer, did however note her personal opposition to Rosebank, as did a number of other noble Lords. Notwithstanding the shift towards renewables, it is important to remember the total UK energy use in 2022 was still 77% oil and gas. Following extensive scrutiny by regulators, including environmental impact assessments and a public consultation, we have granted new licences, including for Rosebank. As the noble Lord, Lord Turnbull, alluded to, domestically produced gas is around four times cleaner than imported liquid natural gas. Oil and gas production also provides around £17 billion to the UK economy each year and supports around 200,000 jobs.

Let me address directly the point made by the noble Baroness, Lady Bennett. New licences will merely slow the already inbuilt decline in UK production levels, rather than see them increase above current levels. Even with continued exploration and development, oil and gas production is expected to decline by 7% per year. This decline is faster than the average global decline needed to align with the UN 1.5 degrees centigrade pathway. Even with new licences, the amount of oil and gas produced in the UK sector will continue to go down as these fields come to their natural end.

I will deal with the point on the AR5 auction round. It was successful in broadening contracts to both tidal and geothermal projects, but, of course, we were disappointed by the lack of offshore wind bids. That was because developers were experiencing unprecedented economic conditions. However, as we have now moved to an annual process, in less than a year AR6 will open, and we will of course incorporate the lessons learned and ensure that AR6 reflects the most recent evidence.

As stated, we remain committed to the challenging but deliverable target of decarbonising the power sector by 2035, while at the same time, and most importantly, maintaining security of supply, which is absolutely critical. The Government are supporting investment, innovation and regulatory reform across the full range of technologies that will need to be developed and deployed in concert.

Carbon Capture and Storage Infrastructure Fund

Lord Callanan Excerpts

Monday 16th October 2023 Lords Chamber

[Baroness Jones of Moulsecoomb]

To ask His Majesty’s Government how much of the Carbon Capture and Storage Infrastructure Fund they have awarded in contracts to companies involved in the oil and gas industry.

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

My Lords, no contracts have yet been awarded through the cluster sequencing process. The amount that may be awarded to individual projects is still subject to negotiations. Project sponsors are from a range of industries including cement, industrial gases, energy from waste, et cetera. In addition, up to £40 million of the CIF is being spent under the UKRI industrial decarbonisation challenge fund, which aims to deliver significant reductions in industrial carbon dioxide emissions.

[Baroness Jones of Moulsecoomb (GP)]

That is sort of good news, because I hope that this Government are not going to give any of that funding to fossil fuel companies, or to any other industry that has not only had tax breaks in the past and made massive profits but trashed the planet knowingly. Will the Minister give me any sort of promise that fossil fuel companies will not be entrusted with this sort of technology, which is already considered very risky and ineffective?

[Lord Callanan (Con)]

No, I will not give the noble Baroness that assurance, for a number of good reasons. First, in the real world, as opposed to in the noble Baroness’s fantasy green world, CCUS is an essential technology.

[Noble Lords]

Oh!

[Lord Callanan (Con)]

The Climate Change Committee has said that CCUS is essential and not an option if we are to meet our net-zero goal, which we wish to do. Secondly, in a number of industries—cement and energy from waste, et cetera—CCUS is the only option to decarbonise those industries. Unless the noble Baroness is saying that she wants them all to close down, so that we have no building in this country and import all our cement from overseas, what is her practical solution in the real world to delivering these technologies?

[Baroness Jones of Moulsecoomb (GP)]

I will send the Minister a manifesto.

[Baroness Northover (LD)]

My Lords, the Minister has just confirmed that no commercial plants are yet operational in Britain. Is the Government’s plan to capture 20 million to 30 million tonnes of CO₂ by 2030 not therefore unachievable? Why are the Government subsidising this with £1 billion, at the expense of proven renewables?

[Lord Callanan (Con)]

It is not one or the other; we need to do both. Of course we need to push ahead with renewables, and I have set out many times in this House how well we are doing. Almost 60% of electricity in the last quarter was delivered by renewables, but CCUS is also essential. We have committed £20 billion-worth of funding to CCUS over the next few years because everybody thinks it essential to meeting our goals. It also offers a massive export opportunity for this country, as we have expertise in many of these technologies. The estimate is that capturing 20 million to 30 million tonnes of CO₂ by 2030 could deliver up to 50,000 jobs, many of them in our industrial heartlands.

[Baroness Blake of Leeds (Lab)]

My Lords, the Government have only recently entered negotiations with track 1 clusters, despite the climate investment fund being announced three years ago. They have earmarked £0.3 billion of the £1 billion fund for this financial year. This does not leave much time for negotiating. Are the Government concerned that this deadline, caused by their own delays, will impact on their negotiating position? Is the Government’s priority using this money well or simply using it?

[Lord Callanan (Con)]

My Lords, this makes me think that we cannot win on this. One part of the Opposition does not want to award these contracts at all and the Labour Party thinks we should have done it earlier. The reality is that we are proceeding with negotiations. It is our aim to have the contracts let for the first 10 projects by quarter 3 of next year. This is a really exciting technology, but we need to do the negotiations properly and get maximum value for money for the taxpayer from what is an emerging new industry.

[Lord Geddes (Con)]

Can my noble friend bring the House up to date on the Government’s support for tidal power?

[Lord Callanan (Con)]

My noble friend is dogged in his pursuit of this, and I have answered his question before. As he knows, under the last contracts for difference round, a number of tidal projects were successful in receiving funding.

Climate Change Policies

Lord Callanan Excerpts

Wednesday 20th September 2023 Lords Chamber

[Baroness Hayman (CB)]

My Lords, I beg leave to ask a Question of which I have given private notice, and in so doing declare my interest as chair of Peers for the Planet.

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

My Lords, the UK is leading the world on climate change. We are committed to net zero by 2050 and the agreements that we have made internationally. The Prime Minister will make a statement on this issue later this afternoon.

[Baroness Hayman (CB)]

My Lords, that really will not do. We have all read what the proposals are. I understand that it is very easy to see on WhatsApp the paper on this issue put to the Cabinet this morning at its emergency meeting. I also understand that the plan was not to have Parliament sitting at all and to make these major announcements on Friday. Instead, because they were leaked, we at least have some opportunity in this House to question the Minister, but I hope he will not hide behind waiting for 4.30 pm, when the Prime Minister will talk to the press and not to Parliament.

In New York today, the UN is underlining that no country has done enough to meet the challenges of climate change, so it is both ironic and depressing that the UK Government are proposing such a damaging retreat from our global leadership position. What is the Minister’s response to the horrified reception these proposals have received from business leaders, who see delaying the transition to net zero as the complete opposite of what they need—ambition, certainty and commitment?

Is it not deeply disingenuous to suggest that rolling back our climate commitments is in the interests of hard-pressed families, when slowing down ambition on home insulation, for example, will only be, as the CEO of E.ON UK put it,

“condemning people to many more years of living in cold and draughty homes that are expensive to heat, in cities clogged with dirty air from fossil fuels, missing out on the economic regeneration this ambition brings”?

Finally, can the Government explain why they are disregarding all the advice from the Treasury, the OBR and others that delays to the actions essential to achieve net zero by 2050—to which the Minister says they are still committed—will make the task more difficult, more chaotic and more expensive?

[Lord Callanan (Con)]

My Lords, there were a number of questions there. In essence, I think the noble Baroness is asking whether the Government are really committed to net zero. As I said in the original Answer, the answer is yes. More importantly, we have the track record to prove it. The UK has overachieved on all our carbon budgets to date; we have reduced emissions faster than any other major economy; we are home to the first, the second, the third and the fourth-largest offshore wind farms in the world; and renewable power reached a record share of 48% of total generation in the first quarter of 2023. All those matters have been achieved under a Conservative Government. It is our record and we are proud of it.

[Lord Deben (Con)]

My Lords, the Climate Change Committee and Chris Skidmore, who was the Government’s own adviser, say that the Government cannot at this moment reach net zero, even before they cut back. Last week, the Government failed the offshore wind industry. This week, it appears that they are making car manufacturers unable to do their jobs. How are this Government going to restore the confidence of investors, businesspeople and the general public that they will stick to their word?

[Lord Callanan (Con)]

Yet again, the noble Lord is wrong in his statements. As he well knows, we have the largest offshore wind industry in Europe and the second largest in the world. Other European countries are racing to catch up with our record. We have over- achieved in meeting our carbon budgets, and I remind the House that these are legally binding commitments. We are on track to overachieve on carbon budgets 4 and 5. We are also on track to achieve carbon budget 6, which does not start until 2033, so I am afraid the noble Lord’s statements are wrong.

[Baroness Blake of Leeds (Lab)]

My Lords, it is worth emphasising the comments from Ford UK in its response to today’s news:

“Our business needs three things from the UK government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three”.


These are not isolated comments; many businesses have made more. Why are the Government content to hurt working people by selling out British business and the long-term future of our economy in this way?

[Lord Callanan (Con)]

The noble Baroness makes a number of statements before she has even heard what the Prime Minister has to say later; perhaps she might want to read what the Prime Minister actually announces and revise her statements in light of that.

[Lord Teverson (LD)]

My Lords, the Minister has provided a list of things that all of us have been proud of in the past, but the point is that is the past. This announcement is a tragedy for this nation because that leadership that we had globally, of which we all were proud, is about to disappear. The Prime Minister is likely to say that the target of net zero still exists, which is a fabrication. We know from the Climate Change Committee, the Government’s own adviser, that we are already behind that in terms of policy. This will kill that objective.

We have the IRA in the United States and the green investment plan in the EU. We are now retreating from international investment. The question I ask the Minister is where the investment will come from to get us to net zero, but the question I really want to ask is how come any Ministers are still in the department for net zero. They should have all resigned this morning.

[Lord Callanan (Con)]

As the noble Lord knows, net zero is a legal commitment imposed on us by Parliament; it is the duty of Ministers to meet that commitment, and we will do so. As I have said, we are currently overachieving on carbon budgets 4 and 5; carbon budget six does not start until 2033. I have sat down with policy officials, and we are confident that we are on track to meet that as well. We are attracting record amounts of inward investment into this country. I talked earlier about the windfarm industry; we could talk about hydrogen or CCUS—the UK is world-leading on all those policies and many global companies are rushing to invest in the UK. Our difficulty is prioritising some of that investment.

[Lord Framlingham (Con)]

My Lords—

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

My Lords, in responding to the noble Baroness, Lady Hayman, and a number of others, the Minister has come out with a list of the Government’s claimed achievements. He has not mentioned once the issues of home insulation and energy efficiency, on which the Government’s record is disastrous. As the noble Baroness, Lady Hayman, said, this means that people are in cold, impossible-to-heat and unhealthy homes. Can the Minister reassure me that we are not going to see back-pedalling this afternoon on home insulation and energy efficiency?

[Lord Callanan (Con)]

It is always a pleasure to hear from the “noble Green lady”, even though she sounds increasingly red sometimes. I am very happy to talk about our record on home insulation. In 2010, under Labour, 14% of homes had an EPC rating of C or above. It is now almost 50%. Clearly, we need to go further, which is why we are investing £6.5 billion over this Parliament on home upgrade retrofit measures. The Treasury has already committed £6 billion from 2025 onwards—the noble Baroness shakes her head; she should listen to the facts. Last week, I was pleased to announce the Great British insulation scheme— £1 billion over three years. Even if the noble Baroness wishes to, she can apply for it online as we speak.

[The Lord Bishop of St Albans]

There is no doubt that His Majesty’s Government have done many good things, and we need all sides of the House to work on this vital area. However, this is not just something which affects some groups; it particularly affects those parts of our nation where air quality is so bad that it is materially affecting the health of many young people and causing huge additional costs to the NHS. What assurances can the Minister give us about the progress of moving to electric cars, to try to make a tangible difference to air quality in our urban areas?

[Lord Callanan (Con)]

The right reverend Prelate asks a very good question on electric vehicles; let me give him the facts on that. The UK had among the highest battery electric vehicle sales in 2022. We are registering a new EV every 60 seconds. Full-battery EV sales are up 88% year on year. Most of the UK’s emissions cuts have of course come under this Government; we are very proud of our record on electric vehicle sales. We are seeing record investments from BMW, Nissan, Tata and Jaguar Land Rover. Again, the UK has a record we can all be proud of.

[Baroness Boycott (CB)]

My Lords, I hate to disagree with the Minister, but just this morning on the Environment and Climate Change Committee we heard from car manufacturers that they absolutely did not want these targets delayed, because that is what they were doing and they needed that certainty. I have two questions. Does this announcement have anything to do with the ULEZ row that took place at the recent by-election? Secondly, everyone agrees on one thing about climate change: the more you delay, the harder the measures are going to have to be to get us to net zero by 2050, which I am glad the noble Lord still agrees on. Have the Government commissioned the OBR to do a thorough cost analysis of what these delays are going to mean, not for us today but for people in five, 10 and 15 years’ time?

[Lord Callanan (Con)]

The answer to the noble Baroness’s first question is no. With regard to the OBR, I am not quite sure why the OBR has a role in this. We obviously have our Climate Change Committee which gives the Government advice, but, to be frank, lots of other external organisations send me more advice on this subject every day, so we are not short of helpful academic advice on all the topics under consideration. As I said, we are looking towards the future. The Government are still committed to our legally binding climate change targets. That means sticking to the legally binding carbon budgets that we have overdelivered on, and we are on track to deliver on the next one.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, it was Nuclear Week in Parliament last week, which showcased a myriad of gigawatt and small, advanced and microgenerating nuclear power. Can my noble friend the Minister reassure me not only that the Government are still committed to investing in nuclear but that they understand the urgency of doing so if the UK is to benefit from both the supply chain and the employment possibilities in areas of the country that desperately need levelling up, such as north Wales?

[Lord Callanan (Con)]

The noble Baroness has been resolute in her support for nuclear and does a fantastic job in advocating for it. I am very happy to give her the reassurance that she is looking for. Of course, again, the nuclear industry was left to decay under the last Labour Government. We have resumed it through building Hinkley Point, and we are about to take a final investment decision on Sizewell. I know the noble Baroness is particularly keen on the announcement of Great British Nuclear. These are all contributing towards our climate change goals. Nuclear will provide us with cost-effective, CO-free power for many years into the future.

[Baroness Young of Old Scone (Lab)]

My Lords, the Government have a track record on stuff like this. In 2015, George Osborne cancelled zero-carbon homes about six weeks before it was due to be implemented and when housebuilders had already geared up for its implementation. We lost 10 years of opportunity for net zero-compliant homes and warmer homes for people. The Tory Government have done it again with a major U-turn on their policy on home insulation, boilers and electric vehicles, against the advice of everyone, including the manufacturers and business. What will the Minister say to his colleague, Chris Skidmore, who did the net-zero review for the Government? He came to the conclusion that not enough was being done and is incandescent with rage at the likely announcements this afternoon. What is plan B when we are going to lose another 10 years on the path to net zero?

[Lord Callanan (Con)]

We will not lose another 10 years on the path to net zero. I outlined our policies earlier. For the sake of repeating them again, we are still committed to net zero and to meeting the carbon budgets; we have an excellent record. We are committed to meeting the 2050 target. We will continue to advance on that path, but we will do so in a fair and proportionate manner that takes people with us rather than by imposing things on them.

[Baroness Parminter (LD)]

My Lords—

--- Later in debate ---

[Baroness Parminter (LD)]

My Lords, a third of all emission reductions to get us to our net-zero target will need to be made by people adopting new technologies, choosing new products and services or going for less carbon-intensive consumption. As the noble Baroness, Lady Boycott, said, all the evidence to our committee’s EV, boiler upgrade and behaviour change inquiries showed that what people and industry want is policy certainty, consistency and clear leadership from the Government. In the clear absence of those this afternoon —as I am sure we will see—how on the earth will the Government achieve their net-zero goals?

[Lord Callanan (Con)]

The key phrase in the noble Baroness’s question was people choosing green alternatives. We want to help them to do that, and we want them to do it voluntarily. We want to make the choices attractive, which is why we provide incentives for insulation schemes. I refer once again to the Great British insulation scheme that I announced last week, which offers £1 billion over three years to help people in council tax bands A to D to upgrade their homes. If the noble Baroness has a little patience, in the next 20 minutes she will be able to listen to the Prime Minister and I think that she will find at least some announcements that she will like pertinent to some of her recent inquiries.

Energy Bill [HL]

Lord Callanan Excerpts

Consideration of Commons amendments
Tuesday 12th September 2023 Lords Chamber

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 1.

1: Clause 1, page 3, line 2, at end insert—
“(aa) the interim targets, as defined in section 2 of that Act;”

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

My Lords, with the leave of the House, as well as moving that this House do agree with the Commons in their amendment, I will also speak to the other Commons amendments. I am pleased to bring the Energy Bill back to this House, following on from the many hours of debate that we had during its parliamentary stages in this place. The Bill is essential to the transformation of our energy system and will leverage private investment in clean technologies. It will reform our energy system so that it is fit for the future, and it contains essential provisions for ensuring the safety, security and resilience of the UK’s energy system.

The Government have listened carefully to the points raised, both in this House and in the other place, and we tabled various amendments in the other place to address many of these issues. The amendments have been gathered into three groups. First, there are the amendments making changes to the Bill in response to concerns raised across the House and where we have overturned lost votes. Secondly, there are amendments where we have introduced new government policy. Thirdly, there are amendments addressing minor and technical amendments made to the Bill. I wrote to noble Lords about this in advance of the debate, and I am grateful for the positive engagement that I have received from across the House.

I will speak first to the amendments in the first group, tabled following constructive engagement with both Houses. First, on the amendment on Ofgem’s duties, no doubt the noble Baroness, Lady Hayman, will be pleased about this—and I am grateful to her for her amendments on Report that sought to include the Government’s net-zero targets within Ofgem’s duties. The Government have now tabled a revised version of the noble Baroness’s amendment to ensure that it would not impact the hierarchy and intended effect of Ofgem’s duties, but very much in the spirit of the original amendment. The revised provision amends Ofgem’s existing duty to consider a reduction in greenhouse gases by making specific reference to the net-zero targets and carbon budgets in the Climate Change Act 2008. This reaffirms the Government’s commitment and mandate in achieving our net-zero targets and ensures that Ofgem’s role in net zero is clear.

I turn to the amendments to the hydrogen levy provisions. The Government have included these provisions following consideration of the concerns raised by colleagues in both Houses, particularly the Labour Front Bench. Following careful analysis of the implications, these amendments are similar in intent to an amendment made on Report in this House, but they help to ensure that the provisions work in a way that is practical. Specifically, they remove provisions that enable the levy to be imposed on energy suppliers in Great Britain, ensuring that within Great Britain the levy could be placed only on gas shippers. In the case of Northern Ireland, the amendments are intended to ensure that only gas supply licence holders who engage in gas shipping activities can be subject to the levy. This reflects the different approach to the licensing of gas shipping across Great Britain and Northern Ireland. The revised legislation provides a fairer approach to funding hydrogen, placing the charge higher up the supply chain, with the potential for costs to be spread to sectors expected to benefit most from early hydrogen deployment.

Finally, I remind the House that the Bill will not impose a levy on gas shippers. Instead, it will enable government to introduce such a levy through secondary legislation. Any decision to do so would take into account all relevant considerations, including the affordability of energy bills. The Government will hold a public consultation as usual, before laying regulations introducing the levy.

I turn to amendments on renewable liquid heating fuel. As the recent biomass strategy made clear, such fuels will have a critical role to play in decarbonising our economy. We recognise that these fuels have the potential to play an important role in decarbonising heat in those off-grid properties that are not suited to electric heating. I thank the noble Lord, Lord Berkeley, for his amendment and comments on Report on this issue. I am pleased to confirm that we will explore the potential of these fuels for heat by issuing a consultation within 12 months, and we are taking powers in the Bill to support the use of these fuels in heat in future. This amendment would provide government with the powers to introduce, again by regulation, measures that would impose obligations on heating fuel suppliers to supply specified amounts of renewable liquid heating fuel within specified periods. The Government also commit to consult specifically with the Scottish Government when consulting on the role of renewable liquid fuels in heating buildings off the gas grid and the implementation of a renewable liquid heating fuel obligation. The Government will look to legislate when parliamentary time allows to give statutory force to this consultation requirement.

Amendments 165 and 165A on sustainable aviation fuel commit the Government to publishing a consultation on the options for designing and implementing a revenue certainty scheme for sustainable aviation fuel within six months of the Bill being passed. The Government are also introducing a sustainable aviation fuel mandate from 2025 that will do the heavy lifting to close the cost gap between jet kerosene and sustainable aviation fuel by providing price support in the form of tradable certificates. These policies, along with the £165 million advanced fuels fund, will help to deliver our ambition of having at least five commercial-scale sustainable aviation fuel plants under construction in the UK by 2025.

I turn to community energy. The Government recognise that such projects can have real benefits for the communities in which they are based, and we are keen to ensure that they deliver value for money for consumers. That is why earlier this summer we launched a new £10 million community energy fund, which expands on the success of the previous rural community energy fund to enable both rural and urban communities across England to access grant funding to develop local renewable energy projects for investment. Alongside the proposed fund, we are committing to publishing an annual report and to consulting on the barriers the sector faces when developing projects.

--- Later in debate ---

[Lord Lennie (Lab)]

My Lords, I will make a few comments. First, I thank the noble Baroness, Lady Boycott, the noble Lord, Lord Teverson, and my noble friend Lady Blake for their amendments and will make our position on them clear. Secondly, I thank the noble Lord, Lord Callanan, for the welcome changes that he made to the Bill in the other place on the housing levy and on renewable liquid fuels.

We generally welcome the passage of the Bill. It has been a long time in gestation—15 months or more—with hundreds of changes and more today. We welcome all those too, although they probably could have been made earlier.

I turn to the three amendments. First, on coal, the new new Labour Party is no longer in favour of coal. We absolutely support what the noble Lord, Lord Teverson, said about the coal industry, and it is time to put this in legislation. It is not enough to say that we are no longer committed to coal; we need to legislate for it and so we will be supporting this amendment.

On my noble friend Lady Blake’s amendment on energy efficiency, I will restate the facts. First, the UK has the least energy-efficient homes in Europe. Domestic energy-efficiency measures have fallen 95% since 2012 and are 20 times lower than they were when Labour was last in power. The Resolution Foundation estimates that 9 million households are paying an extra £170 a year as a result of these failings.

The Minister said that the amendment is unnecessary, because it is partly in the net zero strategy and the Powering Up Britain publication, but this is legislation, and it should state what the Government propose to achieve and by what timescale. Therefore, we support the amendment.

On community energy, the noble Baroness, Lady Boycott, set out very clearly her proposal to commit the Government to finding out what the barriers inhibiting the development of community energy are, and to bring forward a plan to overcome them. That is a very modest amendment from where we were the last time around, and I can see no reason whatever for the Government not to support it. We will support those three amendments should the Members wish to test the opinion of the House.

[Lord Callanan (Con)]

My Lords, I thank all noble Lords who have contributed to the debate. I will start on the last issue raised by the noble Baronesses, Lady Boycott and Lady Meacher, and others: that of community energy.

The Government launched the £10 million fund this summer, and it is larger than its predecessors. From what I have seen so far, it has been welcomed across the community energy sector. It will fund projects such as Congleton Hydro, which received £73,500 in funding from the former rural community energy fund—this fund will do a similar job. Thanks to that funding, it is producing affordable, clean and secure electricity from a local weir, enough to power the equivalent of 60 homes. Not only is the project reducing emissions in the area but its success has led to the creation of an annual £5,000 fund for local community projects.

Amendments 274A and 274B aim to commit us to a consultation on the barriers preventing the development of community energy schemes. The amendments set out with whom we should consult, and commit government to bringing forward proposals to remove identified barriers to community energy. But as I referred to earlier, the Government have already committed to consult on the barriers that the sector faces when developing projects. As part of this process, we will of course involve the community energy sector in designing the consultation, through the Community Energy Contact Group. We continue to believe that it is more appropriate to allow the small-scale export market to develop with minimum intervention than to introduce a support scheme that specifies minimum prices or contract lengths for generators.

I know that the House is keen on supporting community energy, and we are the same, but it has to be done in a cost-effective manner, because the cost is borne by every other bill payer. It might be advantageous to certain islands or rural community villages, but if there is a cost in excess of the system, it is borne by every other bill payer in the country. The amendments would place an additional obligation on government to bring forward proposals to remove these barriers within a specified timeframe.

In Committee in the other place, Energy UK submitted evidence recognising the role of community energy but cautioning:

“The additional context of developing roles for future energy system operation, reform of competition in delivery of network infrastructure, and wider reforms of electricity markets including energy retail”


mean that the consideration of community energy needs to take into account this much wider context, rather than considering community energy “in isolation”, and that we need

“to give the Government, the regulator, and the industry time to fully consider”

all those issues. We must be careful not to disadvantage the majority of the population to benefit a very small minority.

We obviously cannot be sure what the consultation will conclude until we have carried it out, so in our view it is not appropriate to make a commitment to do something the outcome of which, and what barriers or proposals will come forward, we do not know at this stage. But I reassure the House that the Government will continue to work closely with the sector and the wider industry on the best way forward.

I now move on to the somewhat contentious issue of coal. Amendment 272A, on prohibiting coal extraction, was raised by a number of noble Lords, including the noble Lords, Lord Teverson and Lord Lennie, and of course the noble Baroness, Lady Bennett. I was particularly interested to hear the comments of the noble Lord, Lord Lennie, because of course we both come from the north-east of England, and there are still sitting Labour MPs in the north-east, whom the noble Lord, Lord Lennie, knows well, campaigning in favour of opening new coal mines. It is interesting that the Labour position seems to be developing from that.

A full prohibition on coal extraction is likely to prevent extensions in existing operational mining—even where that extension could enable site restoration or deliver public safety benefits. It would cut across heritage mining rights in, for instance, the Forest of Dean, which is important to its tourism offer, and perhaps also in Beamish, another area that we know well. Importantly, it would prevent domestic coal extraction projects from progressing that seek to supply industries that are still reliant on coal, such as steel manufacturing. Again, the Labour Party loses no opportunity to lecture us on the importance of the steel industry. That industry is going through a transformation, but many parts of it still require access to coal, so I hope the Labour Party has cleared its position with the steel unions, which I suspect would not support an amendment such as this—I will leave that little domestic argument to different Labour members.

The phasing out of future coal-powered generation, which we do agree with, is a more proportionate response to moving away from coal use than a complete prohibition on coal extraction. Such a ban would deny the prospect of access to domestic coal reserves for future generations, regardless of the circumstances, regardless of the use it could be put to and regardless of the fact that it could perhaps play a role with CCUS in the future.

The Secretary of State for DLUHC’s decision on the mine followed a comprehensive planning inquiry that heard from over 40 different witnesses and considered matters including the demand for coking coal and its suitability. It went into all the issues that the noble Lord, Lord Teverson, recommended, the climate change impact and, crucially, the impact on that particular local economy. While the full reasons for the Secretary of State’s decision are set out in his published letter—which should perhaps be read in its entirety—he concluded that

“there is currently a UK and European market for the coal … it is highly likely that a global demand would remain”.

While coking coal may be required for steel production for quite some time—I assume the Labour Party is not proposing that we should close the steel industry down overnight; if so, that would be a fairly radical policy change from all that it has said before—to support the decarbonisation of that industry through its transition period, as well as other industries that still rely on coking coal, we have already put in place the £315 million industrial energy transformation fund. We think that is a better way to help industry move away from coal in the future, rather than just banning their fuel source, because you would be banning British coal—you would not be banning coal; you would just import those same supplies produced by miners in other parts of the world. This helps business, in our view, with their high energy use, to cut their energy bills and reduce their carbon emissions through investing in energy efficiency and low-carbon technologies—that is a more constructive way to proceed.

On sustainable aviation fuel, again the noble Baroness, Lady Bennett, got excited and condemned us for something that we are not doing. Sustainable aviation fuel is the most developed technology pathway for aviation decarbonisation and will play a key role along with the other technologies as outlined in the jet zero strategy. Many experts view sustainable aviation fuel as the only alternative to kerosene for long-haul flights up until 2050. If the noble Baroness does not want that, she should have the courage of her convictions and say to people that what the Greens really want to do is to ban flying completely, to prevent people going on business or on their holidays. If that is her agenda, she should say so, rather than try to put amendments forward to prevent us developing those sustainable fuels that we could use in the future to decarbonise the sector.

We recognise that there is uncertainty around feedstock availability and we will continue to work closely with colleagues across government to ensure that the most up-to-date evidence and modelling are reflected throughout the policy design of the SAF mandate and the revenue certainty mechanism. We have already confirmed that the sustainable aviation fuel mandate will not support crop-based biofuels and that SAF must meet strict sustainability criteria. These measures will prevent negative environmental consequences, such as the loss of biodiversity, deforestation and the clearance of land with high-carbon stock that could be associated with the cultivation of raw materials that may be used in certain SAF production.

On energy efficiency and energy statements, of course I understand noble Lords’ desire to go further. I am passionately committed to the cause of energy efficiency, but I do not recognise some of the characterisation put forward in this House. We are making good progress in this country. In 2010, some 14% of UK homes were at EPC band C or above. Now it almost 50%. We have a particularly difficult problem because we have the oldest housing stock in Europe, but we are making progress on this matter. We could go further and faster, and we are endeavouring to do so, but we do have a good record in this country. I want to put that on the record before I talk about the specific issues.

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 2.

2: Clause 2, page 4, line 14, after “repeals” insert “or revocations”

[Lord Callanan (Con)]

My Lords, with the leave of the House, I will speak also to the other amendments in this group. The Government introduced amendments on Report in the Commons to commence further provisions of the Bill on Royal Assent. These amendments will ensure that key secondary legislation can progress at the pace required for the department’s policy objectives to be met.

The remaining government amendments are technical and minor in nature. They relate to existing policies already in the Bill. I wrote to noble Lords about these amendments, setting out what they do and our intentions behind them. Therefore, the House will forgive me if I do not speak to every amendment in detail; I will instead recap the key amendments we sought to make in the other place.

In general, the amendments have been made to improve the clarity, precision and consistency of the Bill. In Part 1, we have amended the definition of a carbon capture entity to include direct air capture projects, with the intention of supporting such projects that bolster our greenhouse gas removals efforts, as set out in the net zero strategy.

In Part 2, we have tabled amendments to the definitions of hydrogen production revenue support contract and carbon capture revenue support contract so that, while contracts can be offered only to eligible low-carbon hydrogen producers and eligible carbon capture entities, after the point of contract signature it is for the contracts to set the parameters of the ongoing support that they provide. This will help ensure that projects and their investors are clear on the terms of their support. That should inspire confidence in this new regime.

We have amended Part 5, on the independent system operator and planner, to limit the breadth of its efficiency and economy objective and clarify the definitions of ISOP functions in the Bill. These changes leave the ISOP with a mission that is more clearly defined but also flexible enough to accommodate wider developments in energy regulation. They should also help to reduce the risk of the ISOP being distracted from its core purposes and potentially incurring unnecessary costs to customers.

Part 12 on the offshore wind environmental improvement package has been amended to make clear that the clauses apply to all infrastructure in the UK marine area used or intended for use in connection with an offshore wind farm and in connection with the conveyance of electricity generated by such wind farms. Further amendments have been made on the energy performance of premises, petroleum production licensing, the disposal of radioactive waste and compensation for nuclear damage, as well as other minor drafting and clarificatory amendments. I hope noble Lords will agree that they are necessary amendments that improve the Bill. I beg to move.

Motion on Amendment 2 agreed.

Motion on Amendments 3 to 16

[Lord Callanan]

Moved by

That the House do agree with the Commons in their Amendments 3 to 16.

3: Clause 2, page 4, line 19, at end insert—
“(7A) But regulations made by virtue of subsection (7)(a) may not make provision amending (or repealing or revoking) any provision of—
(a) an Act of the Scottish Parliament, or an instrument made under such an Act, unless the Scottish Ministers have consented to the making of that provision;
(b) a Measure or Act of Senedd Cymru, or an instrument made under such a Measure or Act, unless the Welsh Ministers have consented to the making of that provision;
(c) Northern Ireland legislation, or an instrument made under Northern Ireland legislation, unless the Department for the Economy in Northern Ireland has consented to the making of that provision.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 17.

17: Clause 56, page 50, line 15, at end insert—““carbon dioxide transport and storage counterparty” has the meaning given by section 59(3);
“carbon dioxide transport and storage revenue support contract” has the meaning given by section 59(2);”

[Lord Callanan (Con)]

My Lords, with the leave of the House I will speak also to the other amendments in this group, which concern new policy that was introduced in the other place. I turn first to the amendments on hydrogen transport and storage infrastructure. These amendments will enable business models to be brought forward to provide investors with the long-term revenue certainty that they will need to establish and scale up the deployment of hydrogen transport and storage infrastructure. I am sure this will be of interest to the noble Lord, Lord Whitty, and the noble Baroness, Lady Bennett, who spoke about this earlier in the Bill’s passage.

The development of this infrastructure represents the critical next step in the growth of the hydrogen economy to support the Government’s ambition to have up to 10 gigawatts of low-carbon hydrogen production capacity by 2030. The business models are intended to help overcome the key barriers to investment in this infrastructure, such as high capital costs, lengthy development lead times and uncertain financial investment returns in what is a very nascent market.

Next, on carbon capture storage information and samples, the amendments support the role of the North Sea Transition Authority—NSTA—as the regulator of carbon dioxide storage in the UK continental shelf. They achieve this by ensuring that it has the relevant powers to access and share information and samples collected through relevant carbon-storage activities. This reflects similar powers already held by the NSTA for the petroleum industry and will enhance knowledge sharing across the carbon capture, usage and storage industry. It will support innovation for the effective utilisation of the UK’s geological storage potential and help encourage private investment in the UK’s growing green economy.

The Government have also tabled amendments relating to Great British Nuclear. These amendments will enable GBN to support government in rebuilding our civil nuclear industry and facilitating the delivery of nuclear projects to achieve our net-zero ambitions. GBN will play a critical role in strengthening the UK’s energy security. By legislating for GBN, we are working to undo decades of underinvestment and inspire trust in the UK civil nuclear industry, restoring the global leadership that the UK used to have in civil nuclear power.

I move on to discuss the amendments to provide relief on network charging for energy-intensive industries. High industrial electricity prices are one of the key barriers that inhibit the most carbon-intensive sectors from adopting greener technology. The measures deliver on a fundamental element of the British industry supercharger set out in February. These amendments will give the Government the powers to deliver a scheme that will provide relief on electricity network charges for Britain’s strategic energy-intensive industries. It will bring electricity prices for these UK businesses in line with some of their global competitors, thereby helping to preserve thousands of jobs and investment and enabling greater electrification of industrial processes, removing one of the major barriers to decarbonisation. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise to speak to Amendments 259A to 271A inclusive; your Lordships will be pleased to know that I do not intend to speak to each one individually. For technical reasons these had to be split up but, essentially, this is a chance for your Lordships’ House to reconsider again the whole Great British Nuclear introduction that the Minister just outlined.

This debate follows on in many ways from that secured for last Thursday by the noble Lord, Lord Howell of Guildford, about nuclear power. I will not revisit all the many issues raised there, although I note that the noble Lord, Lord Howell, expressed rightful and strong scepticism about the progress of both Hinkley Point C and Sizewell C, on cost and other factors. There is also the continuing cost of the clean-up of dinosaur technology from the last century of £260 billion, and issues of waste that we have still not tackled.

I said that I will not go through these amendments one by one, but I do want to speak to Amendment 262A, which disagrees with the financial assistance. In our discussion yesterday on the failure of the offshore wind contract for difference bidding process, the Minister said my suggestion that we should look at a higher strike price for offshore wind was not thinking about the bill payer. I do not know how many Members of your Lordships’ House have looked closely at the detail of government Amendment 262, but it is utterly an open slather:

“The Secretary of State may provide financial assistance … to facilitate the design, construction, commissioning and operation of nuclear energy generation”.


Proposed new subsection (2) says that this assistance

“may be provided … by way of grant, loan, guarantee or indemnity … the acquisition of shares … the acquisition of … assets … a contract, or … by incurring expenditure for the benefit of the person assisted”.

Proposed new subsection (3) says that the assistance may be considered “without interest”—it goes on and on. I will not go through the whole lot, but basically this allows the Secretary of State the open slather to do whatever they like to fund nuclear—and one thing we know about nuclear energy generation is that it costs, and the cost just keeps going up.

I am afraid there is currently a great deal of speculation. Many people accept that, essentially, Hinkley Point C and Sizewell C are ongoing disasters. We have this wonderful new idea of small-scale nuclear plants scattered all over the countryside, as a noble Lord suggested in last Thursday’s debate. Really, my Lords, how realistic is this? We are talking about something that simply does not scale down.

I am aware of the desire of your Lordships’ House to move on to votes, but I want to quote one person who perhaps has a different perspective from mine. Markus Krebber, the chief executive of RWE, suggests that investors should not and will not back nuclear plants. This comes back to the issue of finance. If there will not be private money coming in, we are talking about massive sums of government money. He told the Australian Financial Review:

“I would have a big question mark whether building new ones is really a good strategy, because if you look at the cost overruns and the delays, I think purely a renewables-based energy system including the necessary storage is probably in most of the regions already today cheaper than new nuclear”.


I think that is unarguable.

I will briefly address the issue of Sizewell C. We are talking as Japanese fishermen around the Fukushima nuclear plant suffer massive economic loss as a result of the dumping of wastewater into the sea there. In Suffolk we will see the local economy facing massive loss if Sizewell C goes ahead. Studies by the Suffolk Coast destination management organisation show that visitors would stay away, losing the tourism industry up to £40 million a year and an estimated 400 jobs.

If we look at the environmental impacts of the proposed Sizewell C, we can see that it is opposed by both the RSPB and the Suffolk Wildlife Trust. The site is surrounded by protected wildlife habitats. When it comes to water, the Planning Inspectorate was unable to recommend that Sizewell C be granted planning consent due to the lack of an identified long-term supply of potable water. There is a huge problem with access to the site. It will require a 60-metre cut-off wall so that it can be dewatered and existing soil can be swapped out for more suitable material and huge, as yet undesigned, sea defences. Looking at the state of our climate now, we are seeing significant runaway with very serious potential risks in the impact on our sea levels. I note that Cefas said that

“it is generally only possible to predict detailed changes to the coastline over the next 10 years”.

I have focused a little on Sizewell C and the deep uncertainties and concern because of the point about money. Under the government amendment, we are letting a Government go ahead and do whatever they like and spend whatever they like on a project that is so deeply problematic.

--- Later in debate ---

[Lord Lennie (Lab)]

All I would like to say is that, in response to the comments by the noble Baroness, Lady Bennett, we are interested in keeping the lights on and we are interested in nuclear being part of the mix of fuels that will keep the electricity going, particularly now that coal will no longer be part of the electricity production in this country.

[Lord Callanan (Con)]

I thank all noble Lords for their contributions. I will first deal directly with the points by the noble Lord, Lord Kerr. What should I say about this? He is, of course, prescient in his observations, but this has been a long-standing policy—effectively of the Treasury, which is unwilling to fund many of these policies from general taxation. Therefore, a lot of previous subsidies, such as the warm home discount, are levied on energy bills. That has been a long-standing policy through a number of Governments and different Treasuries. I wish the noble Lord luck in his campaign to change the mind of His Majesty’s Treasury on these matters.

Moving on to the other issues, let me deal first with the points made by the noble Baroness, Lady Bennett. The problem for the Greens on this is that any sensible energy system in the UK—this is recognised also by the Opposition and we are grateful for their support—needs nuclear power, because it is a source of carbon-free electricity. Of course, many Greens, the more progressive Greens who have looked at our energy system properly, also support the use of nuclear power. I would point the noble Baroness to a very interesting website that I was looking at, called Greens for Nuclear Energy. This is a statement from a series of members of the Green Party who take a sensible and progressive view about this. Looking at the needs of the energy supply system and the need for decarbonisation, they have come to the same conclusion as many other sensible experts: that there is a need for nuclear power in this country.

The website says:

“Greens For Nuclear Energy seek to influence the Green movement’s key organisations and institutions”


in favour of nuclear energy because

“We need every available low carbon power source to combat catastrophic climate change”.


They therefore believe that

“the increasingly urgent need to deal decisively with our emerging climate crisis makes continued opposition to nuclear energy irrational for environmentalists and reduces our chances of averting a climate catastrophe.”

Perhaps the noble Baroness would want to go away and look at some of the more sensible members of her own party.

The invasion of Ukraine and the subsequent rise in global energy prices have demonstrated the paramount importance of accelerating our homegrown power and strengthening our national energy security. This is in addition to the significant contribution, as I have just said, that nuclear would make to achieving our net-zero objectives because it is very low carbon. Nuclear technology generates zero direct carbon or other greenhouse gas emissions and has one of the lowest life cycle emission rates among generating technologies. The Committee on Climate Change, the International Energy Agency and the UN Economic Commission for Europe—alongside some sensible Green members—have all highlighted the role that new nuclear electricity generating capacity, in partnership with renewables, can play as part of our diverse energy mix while helping us to achieve net zero.

Great British Nuclear will de-risk new nuclear developments by, among other things, co-funding selected technologies through their development. This will provide greater certainty for investors to develop projects over the long term required to deliver new nuclear generation capacity on to the electricity grid. We intend to fund Great British Nuclear’s initial operating costs via grant in aid. It will be subject to standard NDPB reporting and accountability requirements, which will be set out in Great British Nuclear’s framework document.

The terms of investment in development projects will be bespoke and negotiated on an individual basis. The key goal will be to deliver on the Government’s commitment to increase nuclear energy capacity in Britain, while of course ensuring, as always, value for money for the taxpayer and the bill payer. We are legislating to ensure that Great British Nuclear has the long-term operational mandate needed to carry out the role that government intend for it. The amendments set out the framework within which Great British Nuclear shall operate in facilitating the deployment of nuclear reactors in Britain.

I spoke earlier about the comments of the noble Lord, Lord Kerr. The EII support levy, like the other measures in the British Industry Supercharger, would simply constitute a rebalancing of existing electricity costs away from EIIs and on to other energy users, who have traditionally received more protection from higher energy prices than some in industry.

At the end of these debates, I am grateful to all noble Lords who have contributed. In particular, I thank my colleague in the other place, Andrew Bowie, for guiding the Bill through the House of Commons. I also thank the department’s Bill team and all the other policy and legal officials across various government departments who have been involved in this huge and landmark piece of legislation. They who have worked tirelessly to deliver it. I particularly thank the House authorities, parliamentary staff, clerks and doorkeepers, and all noble Lords who have contributed to the evolution of this landmark Bill.

Amendment 17 agreed.

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendments 188 to 258.

188: Clause 205, page 172, line 30, leave out “Secretary of State” and insert “appropriate authority”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 259.

259: After Clause 269, insert the following Clause—
“Great British Nuclear
(1) The Secretary of State may by notice designate a company as Great British Nuclear.
(2) A company may be designated under this section only if—
(a) it is limited by shares, and
(b) it is wholly-owned by the Crown.
(3) A notice under subsection (1)—
(a) must specify the time from which the designation has effect, and
(b) must be published by the Secretary of State as soon as reasonably practicable after the notice is given.
(4) The designation of a company terminates—
(a) if it ceases to be wholly-owned by the Crown, or
(b) if the Secretary of State revokes its designation by notice.
(5) A notice under subsection (4)(b)—
(a) must specify the time from which the revocation has effect, and
(b) must be published by the Secretary of State as soon as reasonably practicable after the notice is given.
(6) For the purposes of this section a company is wholly-owned by the Crown if each share in the company is held by—
(a) a Minister of the Crown,
(b) the Nuclear Decommissioning Authority established by section 1 of the Energy Act 2004,
(c) the United Kingdom Atomic Energy Authority established by section 1 of the Atomic Energy Authority Act 1954,
(d) a company which is wholly-owned by the Crown, or
(e) a nominee of a person falling within any of paragraphs (a) to (d).
(7) A company designated as Great British Nuclear under this section is exempt from the requirement in section 59 of the Companies Act 2006 (requirement as to use of “limited” in company name).
(8) In this section—
“company” means a company registered under the Companies Act 2006;
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act).”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 260.

260: Insert the following Clause—
“Crown status
(1) Great British Nuclear is not to be regarded as a servant or agent of the Crown or as enjoying any status, immunity or privilege of the Crown.
(2) Great British Nuclear’s property is not to be regarded as property of, or property held on behalf of, the Crown.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 261.

261: Insert the following Clause—
“Great British Nuclear’s objects
Great British Nuclear’s objects are to facilitate the design, construction, commissioning and operation of nuclear energy generation projects for the purpose of furthering any policies published by His Majesty's government.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 262.

262: Insert the following Clause—
“Financial assistance
(1) The Secretary of State may provide financial assistance—
(a) to Great British Nuclear, or
(b) to any other person to facilitate the design, construction, commissioning and operation of nuclear energy generation projects.
(2) Financial assistance under this section may be provided in any form and in particular may be provided—
(a) by way of grant, loan, guarantee or indemnity,
(b) by the acquisition of shares or any other interest in, or securities of, a body corporate,
(c) by the acquisition of any undertaking or of any assets,
(d) pursuant to a contract, or
(e) by incurring expenditure for the benefit of the person assisted.
(3) Financial assistance under this section may be provided subject to such conditions as the Secretary of State considers appropriate, which may include—
(a) conditions about repayment with or without interest or other return, or
(b) conditions with which Great British Nuclear or any recipient of financial assistance under subsection (1)(b) must comply if the financial assistance is used for—
(i) acquiring shares or any other interest in, or securities of, a body corporate, or
(ii) participating in a partnership or joint venture.
(4) The power to provide financial assistance under this section is in addition to (and does not limit or replace) any other power of a Minister of the Crown to provide financial assistance.
(5) In this section—
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act);
“partnership” means—
(a) a partnership within the meaning of the Partnership Act 1890, or
(b) a limited partnership within the meaning of the Limited Partnerships Act 1907.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 263.

263: Insert the following Clause—
“Secretary of State directions and guidance
(1) The Secretary of State may from time to time give Great British Nuclear directions or guidance.
(2) Before giving a direction or issuing guidance the Secretary of State must consult Great British Nuclear and such other persons as the Secretary of State considers appropriate.
(3) Directions may be general or particular in character.
(4) Great British Nuclear must—
(a) comply with any directions given to it under this section, and
(b) have regard to any guidance given to it under this section.
(5) The Secretary of State must—
(a) publish and lay before Parliament any directions given to Great British Nuclear under this section, and
(b) publish any guidance given to Great British Nuclear under this section.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 264.

264: Insert the following Clause—
“Annual report
(1) Great British Nuclear must, after the end of each reporting year, send a report to the Secretary of State about the activities it has undertaken during that year.
(2) The Secretary of State must lay a copy of the report before Parliament together with any comments that the Secretary of State considers appropriate.
(3) In this section “reporting year”, in relation to Great British Nuclear, means a period of 12 months ending with 31 March (but does not include any period before its designation as Great British Nuclear).”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 265.

265: Insert the following Clause—
“Annual accounts
(1) Great British Nuclear must send a copy of its accounts and reports for each financial year to the Secretary of State before the end of the period for filing those accounts and reports.
(2) The Secretary of State must lay a copy of any accounts and reports received under subsection (1) before Parliament.
(3) In this section—
“accounts and reports” means, in relation to Great British Nuclear, the annual accounts and reports that Great British Nuclear’s directors must deliver to the registrar under section 441 of the Companies Act 2006;
“financial year”, in relation to Great British Nuclear, means Great British Nuclear’s financial year determined in accordance with section 390 of the Companies Act 2006;
“period for filing”, in relation to accounts and reports for a financial year, has the same meaning as in the Companies Acts (see section 442 of the Companies Act 2006);
“the registrar” has the meaning given by section 1060(3) of the Companies Act 2006.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 266.

266: Insert the following Clause—
“Transfer schemes
(1) The Secretary of State may make one or more schemes for the transfer of property, rights and liabilities—
(a) to a GBN body or a proposed GBN body from—
(i) a former GBN body;
(ii) a GBN body;
(iii) a proposed GBN body;
(iv) a Minister of the Crown or Crown body;
(v) a designated BNFL body;
(vi) an NDA body;
(vii) a UKAEA body;
(viii) a nominee of a person falling within any of sub- paragraphs (i) to (vii);
(b) to a former GBN body, a Minister of the Crown or Crown body, a designated BNFL body or a public body from—
(i) a former GBN body;
(ii) a GBN body.
(2) The things that may be transferred under a transfer scheme include—
(a) rights and liabilities relating to a contract of employment;
(b) property, rights and liabilities that could not otherwise be transferred;
(c) property acquired, and rights and liabilities arising, after the making of the scheme;
(d) criminal liabilities.
(3) A transfer scheme may—
(a) create rights, or impose liabilities, in relation to property, rights or liabilities transferred;
(b) make provision about the continuing effect of things done by a transferor in respect of anything transferred;
(c) make provision about the continuation of things (including legal proceedings) in the process of being done by, on behalf of or in relation to a transferor in respect of anything transferred;
(d) make provision for references to a transferor in an instrument or other document in respect of anything transferred to be treated as references to the transferee;
(e) make provision for shared ownership or use of the property;
(f) make provision for apportioning property, rights or liabilities;
(g) require a transferor, an associate of a transferor, or a transferee, to enter into any agreement of any kind, or for a purpose, specified in or determined in accordance with the scheme;
(h) make provision for transferring property, rights and liabilities irrespective of any requirement for consent that would otherwise apply;
(i) make provision for preventing a right of pre-emption, right of reverter, right of forfeiture, right to compensation or other similar right from arising or becoming exercisable as a result of the transfer of property, rights or liabilities;
(j) make provision for dispensing with any formality in relation to the transfer of property, rights or liabilities by the scheme;
(k) make provision for reimbursing any person in respect of expenditure reasonably incurred by the person in connection with the making of a transfer scheme;
(l) make provision that has the same or similar effect to the TUPE regulations;
(m) make other consequential, supplementary, incidental or transitional provision.
(4) A transfer scheme may provide—
(a) for modifications by agreement;
(b) for modifications to have effect from the date when the original scheme came into effect.
(5) A transfer scheme may make provision requiring a transferor to provide such co-operation to a transferee as the transferee may reasonably require in connection with the implementation of the scheme.
(6) The co-operation that may be required by virtue of subsection (5) includes, in particular, co-operation in relation to—
(a) the provision of information;
(b) consultation with representatives of employees transferred by the scheme.
(7) Any requirement imposed on a person by a transfer scheme is enforceable by the Secretary of State in civil proceedings—
(a) for an injunction,
(b) for specific performance of a statutory duty under section 45 of the Court of Session Act 1988, or
(c) for any other appropriate remedy or relief.
(8) Before making a transfer scheme, the Secretary of State must consult—
(a) the transferor (or, if there is more than one transferor, the transferors), and
(b) such other persons as the Secretary of State considers appropriate.
(9) Subsection (8) may be satisfied by consultation before the passing of this Act (as well as by consultation after that time).
(10) The making of a transfer scheme is not a trigger event for the purposes of the National Security and Investment Act 2021.
(11) In this section—
“associate” has the meaning given by section 1152 of the Companies Act 2006; “company” means a company registered under the Companies Act 2006; “Crown body” means any body corporate in which a Minister of the Crown holds, directly or indirectly, any shares or other interest;
“designated BNFL body” means a company designated for the purposes of Schedule 7 to the Energy Act 2004 or any body corporate in which a company designated for those purposes holds, directly or indirectly, any shares or other interest;
“former GBN body” means—
(a) a company formerly designated as Great British Nuclear, or
(b) any body corporate in which a company formerly designated as Great British Nuclear—
(i) holds, directly or indirectly, any shares or other interest, and
(ii) held, directly or indirectly, any shares or other interest, at a time at which it was designated as Great British Nuclear;
“GBN body” means Great British Nuclear or any body corporate in which Great British Nuclear holds, directly or indirectly, any shares or other interest;
“information” includes documents;
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act);
“NDA company” means the Nuclear Decommissioning Authority (established by section 1 of the Energy Act 2004) or any body corporate in which the Nuclear Decommissioning Authority holds, directly or indirectly, any shares or other interest;
“proposed GBN body” means a company that the Secretary of State proposes to designate as Great British Nuclear or any body corporate in which a company proposed to be designated for those purposes holds, directly or indirectly, any shares or other interest;
“public body” means a body established by an enactment (within the meaning of Part 1 of this Act) or any body corporate in which a body established by an enactment holds, directly or indirectly, any shares or other interest;
“the TUPE regulations” means the Transfer of Undertakings (Protection of Employment) Regulations 2006 (S.I. 2006/246);
“UKAEA body” means the United Kingdom Atomic Energy Authority (established by section 1 of the Atomic Energy Authority Act 1954) or any body corporate in which the United Kingdom Atomic Energy Authority holds, directly or indirectly, any shares or other interest.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 267.

267: Insert the following Clause—
“Transfer schemes: compensation
(1) A scheme under section (Transfer schemes) may provide for a transferor or any person who has suffered loss or damage in consequence of the scheme to be entitled to compensation from the Secretary of State or a transferee under the scheme, in accordance with provision made by or under the scheme.
(2) Where a person is entitled to compensation, the amount of compensation is to be the amount—
(a) agreed by the Secretary of State and the person, or
(b) in the absence of such agreement, determined by an independent valuer.
(3) An independent valuer appointed for the purposes of subsection (2) must be appointed—
(a) by the Secretary of State and the person, or
(b) in the absence of such agreement, by the Secretary of State on behalf of both the Secretary of State and the person.
(4) The Secretary of State may by regulations make provision about compensation under this section that corresponds or is similar to any provision about compensation that may be made by the Secretary of State by regulations under paragraph 8(5) of Schedule 7.
(5) Regulations under this section are subject to the negative procedure.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 268.

268: Insert the following Clause—
“Transfer schemes: taxation
(1) The Treasury may by regulations make provision varying the way in which a relevant tax has effect in relation to—
(a) anything transferred under a scheme under section (Transfer schemes), or
(b) anything done for the purposes of, or in relation to, a transfer under such a scheme.
(2) The provision that may be made under subsection (1)(a) includes, in particular, provision for—
(a) a tax provision not to apply, or to apply with modifications, in relation to anything transferred;
(b) anything transferred to be treated in a specified way for the purposes of a tax provision;
(c) the Secretary of State to be required or permitted to determine, or to specify the method for determining, anything that needs to be determined for the purposes of any tax provision so far as relating to anything transferred.
(3) The provision that may be made under subsection (1)(b) includes, in particular, provision for—
(a) a tax provision not to apply, or to apply with modifications, in relation to anything done for the purposes of, or in relation to, the transfer;
(b) anything done for the purposes of, or in relation to, the transfer to have or not have a specified consequence or be treated in a specified way;
(c) the Secretary of State to be required or permitted to determine, or to specify the method for determining, anything that needs to be determined for the purposes of any tax provision so far as relating to anything done for the purposes of, or in relation to, the transfer.
(4) In this section—
(a) “relevant tax” means income tax, corporation tax, capital gains tax, stamp duty, stamp duty reserve tax, stamp duty land tax or value added tax;
(b) “tax provision” means any provision—
(i) about a relevant tax, and
(ii) made by an enactment (within the meaning of Part 1 of this Act);
(c) references to the transfer of a property include the grant of the lease.
(5) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 269.

269: Insert the following Clause—
“Transfer schemes: provision of information or assistance
(1) The Secretary of State may direct a person within subsection (2) to provide the Secretary of State with such specified information or assistance as the Secretary of State may reasonably require in connection with the making of a scheme under section (Transfer schemes).
(2) A person is within this subsection if—
(a) property, rights or liabilities are likely to be transferred from or to the person by such a scheme, or
(b) the person is a body corporate that is likely to be transferred under such a scheme.
(3) Paragraph 12(4), (6), (7) and (8) of Schedule 7 apply to a direction under this section as they apply to a direction under sub-paragraph (1) of that paragraph.
(4) In this section—
“assistance” includes assistance provided in a country or territory other than the United Kingdom;
“information” includes documents;
“specified” means specified in the direction.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 270.

270: Insert the following Clause—
“Reimbursement and compensation in connection with designation
The Secretary of State may reimburse a person in respect of expenditure reasonably incurred by the person in preparation for or in connection with the designation of a company under section (Great British Nuclear) (other than any expenditure incurred in connection with the making of a scheme under section (Transfer schemes)).”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 271.

271: Insert the following Clause—
“Pension arrangements in connection with Great British Nuclear
(1) The Secretary of State may by regulations make provision about pension arrangements in relation to Great British Nuclear that corresponds or is similar to any provision about pension arrangements in relation to the ISOP that may be made by the Secretary of State by regulations under paragraph 2 or 3 of Schedule 8 (see paragraph 4 of that Schedule for restrictions on how the power to make regulations under paragraph 2 or 3 of that Schedule may be exercised).
(2) Before making regulations under subsection (1) that make provision corresponding or similar to the provision that may be made by regulations under paragraph 2(1) of Schedule 8, the Secretary of State must carry out a consultation corresponding to the consultation required by paragraph 2(5) of that Schedule.
(3) Before making regulations under subsection (1) that make provision corresponding or similar to the provision that may be made by regulations under paragraph 3(1) of Schedule 8, the Secretary of State must carry out a consultation corresponding to the consultation required by paragraph 3(4) of that Schedule.
(4) Subsections (2) and (3) may be satisfied by consultation before the passing of this Act (as well as by consultation after that time).
(5) The Secretary of State may direct a person within subsection (6) to provide the Secretary of State with specified pensions information or such specified assistance as the Secretary of State may reasonably require in preparation for or in connection with the exercise of the power conferred on the Secretary of State by subsection (1).
(6) The following persons are within this subsection—
(a) the trustee of a qualifying pension scheme;
(b) any person who exercises functions on behalf of a person within paragraph (a);
(c) any person who is or has been an employer of a qualifying member of a qualifying pension scheme.
(7) Sub-paragraphs (5) to (7) of paragraph 5 of Schedule 8 apply to a direction given under subsection (5) as they apply to a direction given under sub-paragraph (1) of that paragraph.
(8) The exercise of the power conferred on the Secretary of State by subsection (1) is not a trigger event for the purposes of the National Security and Investment Act 2021.
(9) In this section—
“pensions information” means information that—
(a) relates to pensions or other benefits under a qualifying pension scheme, or
(b) relates to the administration of a qualifying pension scheme in respect of pensions or other benefits under the scheme;
“qualifying member”, in relation to a qualifying pension scheme, means a person who is or has been a member (as defined by section 124(1) of the Pensions Act 1995) of the scheme;
“qualifying pension scheme” means a pension scheme that provides for the payment of pensions or other benefits to or in respect of employees or former employees of—
(a) a transferor in relation to a transfer scheme under section (Transfer schemes), or
(b) an associate (as defined by section 1152 of the Companies Act 2006) of such a transferor;
“specified” means specified in the direction.
(10) Regulations under this section are subject to the negative procedure.”

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 272.

272: Page 238, line 5, leave out Clause 270

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 273.

273: Page 238, line 10, leave out Clause 271

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendment 274.

274: Page 238, line 23, leave out Clause 272

--- Later in debate ---

Moved by

[Lord Callanan]

That the House do agree with the Commons in their Amendments 275 to 338.

275: Page 240, line 6, leave out Clause 273

Offshore Wind

Lord Callanan Excerpts

Monday 11th September 2023 Lords Chamber

[Baroness Bennett of Manor Castle]

To ask His Majesty’s Government what steps they plan to take to ensure the continued development of the offshore wind industry following the failure to attract bids in the latest Contracts for Difference round.

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

My Lords, the Government are disappointed that no offshore or floating offshore wind projects secured contracts for difference in the most recent allocation round. The results provide valuable learning for subsequent auctions. Work has already started on allocation round 6, incorporating the results of the recent round, and we look forward to a strong pipeline of technologies participating. The Government remain fully committed to our target of decarbonising the power system by 2035 and to our ambitions for 50 gigawatts of offshore wind, including up to 5 gigawatts of floating wind.

[Baroness Bennett of Manor Castle (GP)]

I thank the Minister for his Answer, but can we really wait? Look at what has happened in other countries: for example, Germany had a similar experience in December then, in the subsequent two quarters, lifted its price cap and increased its number of bids by several times. In the US, Massachusetts had a failure and New York is now considering petitions to offer a higher price. This is the low-cost, low-carbon alternative: the industry is now suggesting that there is a 24-gigawatt gap for the 2030 target. Surely the Government should be taking immediate action in the shorter term to fix this problem of their own creation, given that this was widely predicted to happen before the contracts closed.

[Lord Callanan (Con)]

I am happy to hear the noble Baroness be so cavalier with bill payers’ funds; she is, in effect, talking about increasing the strike price. It is always difficult for the Government to strike the right balance: we want to get the best value possible for bill payers, as opposed to providing sufficient revenue for the companies to build. I obviously know which side the noble Baroness is on but I want to be on the side of the bill payer. We have already secured the largest offshore wind sector in Europe by far; she quotes the example of Germany, which should be very jealous of the amount of offshore wind capacity that we have. We secured almost 7 gigawatts in the last allocation round and, in this round, secured 91 projects with other technologies. There is a viable long-term pipeline of about 77 gigawatts of wind available to this Government and we will take advantage of it, but we will make sure that we do it at the right price for consumers.

[Lord Deben (Con)]

My Lords, I am on the side of bill payers. The problem is that they will have to pay more, because we will not have the renewable energy that we would have had and will have to use more expensive gas instead. This was the Government’s fault; everybody warned that the reserve price was too low. But let us forget the past. Why can emergency legislation not pass through the House, which I am sure would be supported by all sides, so that we can replay this very quickly for the bill payer?

[Lord Callanan (Con)]

The bill payer will be very grateful that 7.5 gigawatts of construction is already under way, as we speak. We all want to see more, but at the right price. I understand why industry is urging us to pay more for this. That is understandable and in its commercial interests, but I would have expected most Members of this House to be on the side of bill payers as well. We can do both: we can get a good deal for the bill payer and take advantage of the many gigawatts of potential construction in there, which has either been consented or is under consent. Following a contract being let, it takes three to four years, on average, for the capacity to come on stream. Obviously, the capacity let in previous rounds is coming on stream gradually, as we speak. As I said, we consented to about 7.5 gigawatts in the last round. There will be another auction in about six months and it would take almost that long to pass new legislation.

[Baroness Walmsley (LD)]

My Lords, what assessment have the Government made of the increase in potential of both productivity and profitability for wind power companies to fit turbines to the base of their installations, where conditions allow, to take advantage of tidal energy, which provides a baseload. What support are the Government giving companies prepared to do that?

[Lord Callanan (Con)]

The noble Baroness asks a very good question. Eleven tidal stream projects were consented in this allocation round, totalling about 41 megawatts. The price for that is currently higher but we need to develop this technology. I hope, as has been the case with offshore wind, that if we continue to let more CfDs the price will continue to come down over time. That was one area of the round that was successful.

[Lord Lennie (Lab)]

My Lords, given the Government’s monumental failure—and they were warned about it, as has been said around this House—to attract any interest whatever from the energy sector in their recent CfD bidding process for offshore wind projects, can we assume there will not be any similar complacency when it comes to developing onshore wind projects, which, in light of the current failure, must now be the Government’s priority towards achieving net zero?

[Lord Callanan (Con)]

Again, there is no complacency. I understand that there are many projects wanting the go-ahead, but we must be careful in making sure that the consumer gets a fair deal. Lots were consented to last year; I am sure that lots will be consented to in the future. The noble Lord talks about onshore wind. I am pleased to tell him that 24 onshore wind projects were consented to and were successful in this round, totalling 888 megawatts.

[Lord Naseby (Con)]

Is my noble friend aware that a number of us have taken an interest in this market, recognising the enormous steps that His Majesty’s Government have taken on the development of offshore wind? At a time when it is stated that we are facing a possible bill of £65 billion to replace the internal grid to all our homes in the United Kingdom, is it not more appropriate that the resources we do have should be used for research such as that into the mix of hydrogen with LPG to see whether it can be used in the existing pipelines available to every house in the country?

[Lord Callanan (Con)]

The noble Lord asks a lot of different questions within what he said. I think his figure of £65 billion refers to the cost of upgrading property to EPC level C, which is a long-term aim. His separate question on hydrogen for heating is indeed a controversial subject. We will make a decision on whether to go ahead with a hydrogen village trial by the end of the year. Similarly, another issue facing us is whether to allow blending of hydrogen into the gas network; you can blend up to about 25% with the current network. Again, that is an issue where, frankly, there are a lot of pros and cons on both sides of the argument. We will make a decision on that by the end of the year as well.

[Lord Harries of Pentregarth (CB)]

The next round comes in six months’ time. Are the Government confident that the price will be set at the right level to attract a good number of significant bids?

[Lord Callanan (Con)]

Of course, that will be our aim. As I said, we want to see more projects consented to and we will try to get the balance right. We will certainly learn the lessons from this round. It is obviously disappointing that we did not attract bids this time, but the offshore wind industry has been a tremendous success for the UK. We have by far the largest capacity in Europe. We have the largest offshore wind farm in the world, the second largest, the third largest and the fourth largest. One reason that developers were unable to proceed this time was pressure in the supply chain. There is pressure in the supply chain because every other country in Europe wants to copy our example, because they can see the success we have made of the offshore wind allocation rounds through the contracts for difference price system. Most other European countries are trying to adopt the same model; they are a long way behind us but trying to adopt the same model now. Of course, that brings pressure in the supply chain, which, adding in the Covid pressures as well, contributes to the increase in costs that industry is experiencing.

[Lord Trefgarne (Con)]

My Lords, is it not the case that wind-generating facilities in the North Sea tend to cause mayhem with the wild bird population? Can anything be done about that?

[Lord Callanan (Con)]

My noble friend certainly highlights a concern, but lots of protections are built in and lots of environmental regulations need to be adhered to when these projects are consented to and all the matters are gone into fully, in both environmental and regulatory permitting. Every energy source has its drawbacks. Those who are against nuclear would point to its drawbacks; with coal-fired power stations, there are obviously drawbacks; gas-fired power stations have their drawbacks. There has been an increase in new solar farms being developed in the UK. I can assure noble Lords that, from my postbag, lots of people write in to complain about those as well. We have to get generation capacity and electricity supplies from somewhere. No system is absolutely perfect but offshore wind is certainly one of the best.

[Baroness Sheehan (LD)]

My Lords, it is unacceptable that last week’s offshore wind auction was a failure because of the Government’s insistence on an unrealistic strike price, yet we remain none the wiser about the cost of another source of electricity—nuclear energy. The cost of Sizewell C’s electricity remains shrouded in secrecy. The only thing we can be sure of is that it will be exceedingly expensive. The Commons Science, Innovation and Technology Committee has called for greater transparency on Sizewell’s cost. Will the Minister take this opportunity to give an updated cost estimate for Sizewell C? We need to be sure that we are on a level playing field.

[Lord Callanan (Con)]

I will be happy to supply those figures to the noble Baroness in writing if I can. Again, it is worth saying that, in a diversified energy system, it is important to have different sources of supply. I am very enthusiastic about solar and offshore wind; they are intermittent but they are cheap when they are generating. We also need baseload supply, so there will a role for nuclear and for gas-fired power stations, ideally with CCUS fitted as well. It is important that we have diversity of supply, including such things as tidal on a relatively small scale. Geothermal is another technology that was successful in getting contracts under this allocation round. Again, these are nascent technologies that are starting to build up. We need diversity of supply for our future generating mix.

[Lord Cormack (Con)]

My Lords, I agree with my noble friend that Britain is a world leader in offshore wind; he is right to boast gently about that. But he also said that lessons would be learned from what has just happened. Is my noble friend Lord Deben not right that we got it wrong—and that we must make absolutely sure that in six months’ time we get it right?

[Lord Callanan (Con)]

I have said that lessons will be learned. As I said, there is a healthy stream of projects wanting to come forward. Understandably, the developers want to be paid as much as possible. The unique thing about offshore wind is that it involves very high initial capital investment costs. Once the things are built, they are relatively cheap to operate, unlike some other sources of generation. It is all about providing long-term guarantees of revenue for those developers. There is always a process of negotiation; the CfD auction rounds have been successful in the past and I am sure that they will be in the future.

[Baroness Hayman (CB)]

My Lords, I declare my interest as chair of Peers for the Planet. The Minister recognises that the offshore wind industry raised these issues some time before this round of contracts for difference. The Government did not listen and we have the results with offshore wind, as we have seen. At this time, the onshore wind industry is saying to the Government that the, frankly, puny changes in the planning regime that they announced will not bring forward the large-scale increase in onshore wind production in this country. Will the Government listen in time this time and put the planning regime for onshore wind on a level playing field with other renewable infrastructure?

[Lord Callanan (Con)]

I know that the noble Baroness is passionate about onshore wind. I hope the changes that we announced will produce more capacity. As I said, we have just let 24 projects under the latest CfD round. She is right that the industry said in advance of this round that it wanted to be paid more. Across all the different areas of government for which I have been responsible, I have never met a private developer who want to be paid less for what they do. Let us be realistic: this is a negotiation process. Of course, industry will say, “We need to be paid more; we need to be given larger contracts”. That is entirely understandable. We have to bear in mind our responsibility to the bill payer who ends up paying these costs. We of course want to see more renewable capacity laid out—it is intermittent but it is cheap. We need to produce a strike price that is fair to the developers, so that they get a return, but also to the bill payers.

[Lord West of Spithead (Lab)]

My Lords, the Minister is right that we should praise ourselves for the offshore wind farms, which I must say are most impressive. However, the interconnectors and so on lie along the seabed. Like so many other aspects of our energy supply and other things, the seabed has certain vulnerabilities. We have seen Russian ships from the main directorate of undersea research regularly in the North Sea, going along areas where these lie. Is the Minister happy that we have put enough effort into monitoring and tracking where they are all the time and then using ships, aircraft and whatever else to go and make sure that those lines are still safe?

[Lord Callanan (Con)]

The noble Lord makes a good point. There are a number of such areas of critical national infrastructure, including gas-interlinking pipelines and electricity interconnector cables with other countries, as well as our interconnector cables with the offshore wind farms. These are all critical vulnerabilities and the noble Lord can be assured that we monitor these things closely. We are well aware of the possible threat presented to them.

2030 Emissions Reduction Target: Heating

Lord Callanan Excerpts

Tuesday 5th September 2023 Lords Chamber

[Lord Teverson]

To ask His Majesty’s Government how they intend to decarbonise heating in order to meet the 2030 target of a 68 per cent reduction in emissions.

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

My Lords, the Government are investing £6.6 billion over this Parliament in improving energy efficiency and installing low-carbon heating. A further £6 billion has already been committed for 2025 to 2028. Heat pumps are the key technology for decarbonising heating in the near term and are essential in all 2050 scenarios. Therefore, the Government’s aim is for 600,000 heat pump installations annually by 2028. However, a range of technologies will be needed to decarbonise heating, including expanding heat networks in the longer term.

[Lord Teverson (LD)]

My Lords, the Government’s emission targets are both ambitious and critical, so why are we still allowing gas boilers to be installed in new housing developments right now?

[Lord Callanan (Con)]

As the noble Lord knows, that is a matter for building regulations. The future homes standard will come in from 2025; it will not specify the type of heating but it will put in place standards that will, in effect, end gas boiler installations in new homes.

[Lord Birt (CB)]

My Lords, the Minister will know that heat pumps are a very efficient means of turning electricity into heat, but does he think that, while electricity costs roughly three times as much as gas, there is any prospect whatever of them taking off in the UK?

[Lord Callanan (Con)]

The noble Lord is right about the efficiency of heat pumps and about the cost of electricity. Later this year we will issue a consultation on so-called price rebalancing, which will attempt to bring the electricity price down relative to gas.

[Baroness Whitaker (Lab)]

My Lords, will the Government turn their mind to trying to encourage heat pump installers to install them in flats, where a large proportion of UK residents live? In other countries, they can do this; obviously, it is not feasible in all cases, but in many cases it is.

[Lord Callanan (Con)]

The noble Baroness makes a valid point. Heat networks are probably more appropriate for most flats—for instance, you could have one heat pump in the basement that would heat all the flats—but for some cases she is right.

[Lord Forsyth of Drumlean (Con)]

My Lords, what is the Government’s estimate of the cost of meeting this target and who will pay for it?

[Lord Callanan (Con)]

That depends on what target the noble Lord is referring to. There are a number of different targets but a substantial amount of government funding is going into this—some £450 million for the boiler upgrade scheme and £6.6 billion to decarbonise heating generally.

[Baroness Sheehan (LD)]

My Lords, this July, residents of Whitby in Ellesmere Port vetoed plans to be one of two proposed sites for hydrogen village trials out of safety concerns—concerns which were extremely well-founded, I might add, given that hydrogen is the lightest element in the periodic table and notoriously difficult to control. I have two questions. Can the Minister confirm that the residents of Redcar in Teesside will have a similar right of veto? Which other locations are now being considered for these ill-advised hydrogen boiler trials?

[Lord Callanan (Con)]

Public acceptability is a key component; that is why we ruled out Whitby for the trial. Redcar is the only other location being considered.

[Baroness McIntosh of Pickering (Con)]

My Lords, does my noble friend agree that decarbonisation would be faster if we had better insulated rental properties, rather than seeing most of the heat go through single-glazed windows, particularly in the north of England?

[Lord Callanan (Con)]

I would not characterise just rental properties in that way; whatever form of heating is used, better insulation and better performance of buildings is a good thing.

[Baroness Hayman (CB)]

My Lords, I declare my interest as chair of Peers for the Planet. As the noble Lord, Lord Birt, made clear, the decarbonisation of home heating will require an even greater supply of clean electricity. I therefore welcome the Government’s announcement today that they will finally end the destructive and irrational effective ban on onshore wind development that we have lived with since 2015 by updating the National Planning Policy Framework. What scale of difference does the Minister think this will make to the amount of electricity generated by onshore wind? I am sure he will be aware that, last year, we managed two new onshore wind developments while Ukraine managed 19.

--- Later in debate ---

[Lord Callanan (Con)]

The noble Baroness has been dogged in her pursuit of this. It is very difficult to give an estimate, as she asks me to do. It would depend on the number of applications and its acceptability for local communities.

[Baroness Blake of Leeds (Lab)]

My Lords, including industrial processes, heating accounts for about 37% of total UK carbon emissions. Of the 17% of carbon emissions from heating and cooling in buildings, the vast majority can be attributed to domestic homes. Analysis shows that a third of the money pledged for retrofitting and alternative systems has not yet been allocated. That is approximately £2.1 billion unspent. When and how will this be resolved, or do the Government believe that they are on track to reduce emissions as planned without it?

[Lord Callanan (Con)]

I will have to look very closely at the noble Baroness’s figures. I do not recognise £2.1 billion as being unspent; in many of the schemes we are oversubscribed in applications, but we will press on with the progress in many of these schemes. In fact, I went to visit a number of them in the noble Baroness’s home area of Leeds only a few weeks ago, and they are proving extremely successful.

[Lord Hope of Craighead (CB)]

My Lords, what are the Government’s proposals for increasing the number of transmission lines? Electricity once generated must reach the people who are going to use it and at the moment we do not have enough transmission lines.

[Lord Callanan (Con)]

The noble and learned Lord is right. His home area of Scotland will see the installation of a number of transmission lines to help to get power to other parts of the country. This is very important. Ofgem has allowed billions of pounds in the settlement to the DNOs, which will help electricity upgrades, but as he will be aware it is not without its controversial elements.

[Baroness Walmsley (LD)]

My Lords, is the Minister aware that, last year, France installed nearly six times as many heat pumps as the UK? Does he think that a coherent government decarbonisation heat policy, a more effective new-build efficiency regulation, support for a professionalised end-to-end supply chain and independent advice for consumers have anything to do with France’s success? Are the Government planning to adopt any of those strategies?

[Lord Callanan (Con)]

Indeed we are. The situation in France and for ourselves is very different, because France has not had the availability of domestic gas that we have had over the years. Nevertheless, I agree with the noble Baroness’s point: we need to expand the number of heat pumps being installed. In fact, we are already doing many of the measures that she outlined.

[Lord Geddes (Con)]

My Lords, would my noble friend please put greater emphasis on the development of tidal energy, which would greatly reduce carbon emissions? I think he will tell us that the infrastructure is extremely expensive; that is true, but thereafter it is utterly free and totally predictable.

--- Later in debate ---

[Lord Callanan (Con)]

That is the case for many renewables. Tidal power is an emerging technology and it is eligible for contracts for difference schemes. We made a number of allocations of tidal power support in the last round. I agree with the noble Lord, but we must look at the costs of that against the costs of other renewable technologies and get the best value for the bill payer and the taxpayer.

[Lord Grantchester (Lab)]

My Lords, it is an unfortunate feature of Conservative Governments that they constantly churn grant schemes—

[The Lord Bishop of St Edmundsbury and Ipswich]

I will be very brief. A crucial component of the decarbonisation of heat in homes agenda is to have enough skilled technicians and engineers to install the various heating solutions. Can the Minister update the House on the progress of creating the necessary training opportunities?

[Lord Callanan (Con)]

I can indeed update the right reverend Prelate. There are a number of schemes and training competitions, and we have recently allocated tens of millions of pounds, training thousands of new installers. I am pleased to say that many of the boiler and heat pump manufacturing companies are running their own training courses, and there are now, I think, about 2,000 registered firms with the Microgeneration Certification Scheme.

[Lord Grantchester (Lab)]

I apologise; I had not noticed the right reverend Prelate rise to ask his question.

It is an unfortunate feature of Conservative Governments that they constantly churn grant schemes and support. The Government is way off on their targets for the boiler upgrade scheme and have now, in consequence, in their usual pattern, extended the support for heat pumps until 2028. Do the Government recognise that this constant lack of commitment undermines the confidence of businesses and householders to plan ahead?

[Lord Callanan (Con)]

The noble Lord is asking a self-contradictory question. He starts off by saying that the Government have no long-term schemes and then admits that we have extended the boiler upgrade scheme through until 2028—precisely to address the point that he is talking about. We need more long-term schemes and we need a greater commitment over the longer term. That is precisely what the Treasury has allowed us to do, by already announcing £6 billion of extra funding from 2025 to 2028 to provide exactly that certainty. We need to build up the skills base and the supply chains in the longer term.