Electricity Supplier Payments (Amendment) Regulations 2022

Lord Oates Excerpts

Monday 21st March 2022 Grand Committee

[Lord Oates (LD)]

My Lords, we on the Liberal Democrat Benches support these regulations so I will not take up too much of the Grand Committee’s time, but there are a number of questions which I hope the Minister will be able to address.

I fondly remember discussing these regulations—the previous, equivalent regulations—back on a cold afternoon last February. At that time, I asked the Minister why the review of the operation of the electricity market, which under Section 66 of the Energy Act 2013 is required after five years and so was due in 2018, had still not been completed and reported three years after it was due. The Minister said:

“We expect it to be laid in Parliament shortly.”—[Official Report, 23/2/21; col. 811.]


The Explanatory Memorandum accompanying these regulations says almost exactly the same the thing, stating that

“the findings for the review are expected to be laid in Parliament shortly.”

Can the Minister tell us what the Government’s definition of “shortly” is, and give us some reassurance that we will actually see the outcome of this review? Has it been completed? If it has, why has it not been laid yet? Had it been completed when we discussed it last year, when the Minister said it would be laid shortly? I hope that he can give us some reassurance on this matter. The reasons given were Covid and Brexit. Obviously, we understand that Covid was a big blow—although Brexit was due two years after we had voted to leave—but we really need some reassurance about when we will see the review.

I will make just a few other points. When we discussed forecasts last year, we were discussing only one year’s levy because of Covid uncertainties. The Government now say that they are confident that they can forecast electricity demand with sufficient accuracy to reinstate the multiyear format. I note that the Minister has explained how the Government expect to see demand falling, albeit modestly, over that period. I wonder whether he could say something about how the Government are factoring in all the complexities of the massive price spike, and what that might do to demand, alongside the new demands of electric vehicles and heat pumps, et cetera.

As has been noted, the operational costs are up 40% over the levy period, and that is on top of the 19% increase that we debated last year. I recognise that there has been an expansion in the CfDs that the organisation is responsible for overseeing, and we welcome it, but I hope that the relentless pressure down on costs which the Minister talked about really will be applied continuously. I wonder whether some further economies of scale can be achieved, because both these organisations, as I understand it, operate from the same address. Are there functions that could be merged to save more money?

On the subject of the expansion of CfDs, I wonder whether the Minister can tell us where we are on the CfD for hydrogen. I note that it is the number two request on the CBI’s call for measures from the Government in terms of growth—number one, incidentally, is to close the public investment gap in terms of retrofitting commercial and domestic buildings. Perhaps the Minister could tell us whether that CfD on hydrogen will be forthcoming soon.

In terms of costs on bills, the Explanatory Memorandum estimates that these will be 50p on domestic consumers’ bills and between £30 and £1,200 on business bills, depending on their electricity usage. Obviously, 50p may seem a small amount, but I am slightly confused because I believe that the Explanatory Memorandum for the last levy-setting regulations said that it would be increased by 40p. It seems odd that this is only 50p over the period. Clearly, although these are small amounts, they all add up. People are facing crippling bills at the moment, so it is important that we keep an eye on that and on how we can drive down costs.

Another point I want to ask the Minister about relates to page 5 of the Explanatory Memorandum—which was presumably prepared some time ago—which talks about inflation of 5% having been allowed and discusses omicron and so on. However, this was clearly before some of the price spikes happened, and obviously before the Russian invasion of Ukraine. The CBI and other commentators expect inflation to peak somewhere around 8% to 9%, and there is increasing feeling that that level of inflation may be sustained for a longer period than was initially anticipated. In his reply, can the Minister tell us whether these new inflationary pressures in the system have been taken into account? If they have not, as some of them are fairly new, can he tell us how things might be adjusted over the period of the levy?

Finally, if there is a surplus and the money is paid back to consumers, can the Minister tell us whether there is a way of ensuring that the electricity supply companies deliver that rebate back to consumers if they effectively have to pay the charges in the beginning?

[Lord Lennie (Lab)]

My Lords, I thank the Minister for his explanation of the regulations before the House. They are essentially non-controversial and, on this lonely side of the House, we do not take issue with them. As we have heard, the regulations update the rates for the operational costs levy and settlement costs levy, which fund the operational costs of the LCCC and the Electricity Settlements Company, respectively. As these two private companies share staff and facilities, these levies are set together.

After a single year of unpredictably and reduced electricity demand during the pandemic, first, it is welcome that this process has been able to return to a three-year system, allowing stakeholders greater visibility of the estimated operational costs, as well as reducing the administrative burdens on the two companies and on us here. Given the situation, it was sensible to reduce the periodicity, and I am glad that we have returned to normal.

Both the LCCC’s contracts for difference and the Electricity Settlements Company’s capacity market are measures that encourage low-carbon electricity generation and ensure security of supply, which is a noble intention. As my colleagues in both Houses have argued whenever these issues have arisen, since these arrangements came into place in 2013, a levy system, which will be passed on to customers by the electricity firms, is possibly the most regressive way of making these arrangements. The figures involved are certainly not large, as the noble Lord, Lord Oates, said, especially when looking only at the impact on the yearly changes, as is the case with the explanatory notice, but with energy bills increasing substantially amid a wider cost-of-living crisis, it is certainly the case that every little bit helps. Has the Minister therefore given any consideration to other methods that could facilitate the costs of these arrangements not falling on the customer?

I would also like to ask some questions about the consultation that took place ahead of the laying of this regulation, both on questions coming from it and the consultation itself. The consultation ran for four weeks and received only one response, from Scottish Power. While the perspective of this large stakeholder was welcome, I am sure the Minister would agree that having a single response to any consultation is not ideal. It is no fault of Scottish Power, but there were gaps in the responses leaving questions mostly unanswered, and inherent biases from a single respondent were unavoidable. Perhaps when this is revisited in three years’ time, the Minister could consider a longer consultation for a broader spectrum of responses to be generated.

One aspect of Scottish Power’s response that I would like to pick up upon surrounds budget lines related to providing policy support to BEIS, which Scottish Power recommended be kept under review. In their response, the Government committed to returning funds allocated here to suppliers. As this is the case with any unused funds, will unallocated funds from this aspect be ring-fenced for return, and, more importantly —as the noble Lord, Lord Oates, has said—will steps be taken to ensure that this is passed on to customers, given that any adjustment to their bills will have already been enacted?

It was also pointed out that the year-on-year budget rises are not insignificant, reaching approximately 40% over the four years from this financial year to the last of the three years this regulation covers. The Government rightly say that this is not unprecedented, given that at least in the case of the Electricity Settlement Company, the Explanatory Memorandum suggests that the body has only become more efficient, but I would be grateful if the Minister could elaborate a little on where the cost increases come from.

I look forward to the Minister’s responses to these questions.

Shale Gas Production

Lord Oates Excerpts

Tuesday 15th March 2022 Lords Chamber

[Lord Callanan (Con)]

I thank my noble friend for her remarks. I suspect that she is probably right that there was an unholy alliance between Putin and some of the more extreme end of our environmental movement. Of course, both had the same objective in mind: to rule out shale gas production. Nevertheless, it is important to recognise that there were some serious problems caused by the attempted fracking in Lancashire. I take the point which my noble friend is making. We are not ruling it out. If the scientific objectives can be overcome, and the tremors which were caused can be solved, it is potentially an option for the future.

[Lord Oates (LD)]

Is the Minister aware of the remarks made this afternoon upstairs by the former Kenyan Prime Minister and current presidential candidate, Raila Odinga, about the impact of climate change on his country, including increased droughts and flooding and deteriorating food security? Does the Minister share my concern that those advocating fracking do not seem to recognise that it would provide no solution to the current energy crisis, would lock us into dependency on fossil fuels and takes no account of the climate emergency? In this situation, is it not the number one priority to reduce the amount of energy which we are wasting?

[Lord Callanan (Con)]

I have not seen the remarks to which the noble Lord is referring. Of course, we still have our commitments to net zero, which is now a legally binding commitment, but the reality of this situation, which we have debated many times before, is that there is a need for fossil fuels during the transition—unless we are proposing to disconnect everyone’s gas boiler and stop them driving their cars tomorrow, which I do not think is anyone’s sensible position. We need fossil fuels during the transition. It is unarguable that it makes much more sense to try to get those fossil fuels from our own production, rather than relying on Putin or other unstable parts of the world. Having said that, we also need to progress our nuclear generation capacity and invest in renewables, which we are doing. We are talking about quadrupling our renewables capacity from offshore wind alone, from something like 4 gigawatts up to 10 gigawatts. We need to be doing all those things; we need a diversity of supply.

Nuclear Energy (Financing) Bill

Lord Oates Excerpts

Committee stage
Tuesday 8th March 2022 Grand Committee

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

My Lords, as well as of course supporting the amendments spoken to by my noble friend Lady Wilcox, I support the amendments spoken to by the noble Lord, Lord Vaux. In fact, he is in danger of changing my views about hereditary Peers—these debates are difficult things.

I support him on two counts. The first is in relation to beneficial ownership. Could the Minister say if this would cover ensuring that we could check whether countries we do not want to own these power stations are setting up companies in tax havens—particularly the Crown dependencies and overseas territories we have responsibility for? That has been happening far too often and we need to clamp down on that.

Secondly, I support him because I too was concerned about the scope of the Bill. I support what he said, and I am sorry that he was not allowed to table the amendment he suggested; I hope it will be picked up. I had a little problem in tabling my amendment; I had to change it and the one I have got down is not exactly what I wanted. I will come back to that later. The scope of the Bill has unfortunately been drawn far too narrowly. It deals with the purposes the Government want and are concerned about, but it does not allow us to deal with some of the wider aspects. So there we are—I support a hereditary Peer on two counts. It is a red letter day.

[Lord Oates (LD)]

My Lords, I will speak briefly on this group, particularly to Amendments 2 and 9 in the name of the noble Lord, Lord McNicol of West Kilbride, which I have also signed. I also support the amendments in the name of the noble Lord, Lord Vaux. Like the noble Baroness, Lady Bennett, I come at this from a different perspective from him, but it surely must be right that we are able to identify and verify the ultimate ownership.

As the noble Baroness, Lady Wilcox, set out, Amendments 2 and 9 seek to ensure that a nuclear power station cannot be owned or part-owned by a company controlled by a foreign state and being operated for investment purposes. However, I was a little surprised to hear her say that the amendment would cover EDF, because that was not my understanding. My understanding was that the amendments would not cover EDF, which is not operating for investment purposes, and that is why

“and operating for investment purposes”

is critical in the definition—but it would cover China General Nuclear Power Group, which does operate for investment purposes. I understood that was why the amendment was tabled and drawn in that specific way, but we can perhaps discuss that further later.

The main point here is the general concern that has been expressed on all sides of the Committee about the involvement of the Chinese state in critical national infrastructure, particularly nuclear. As we know, it currently has a 35% stake in Hinkley C and will have a proposed 20% stake in Sizewell C if that goes ahead. So I imagine that, regardless of our wider views on nuclear, we are all concerned about this issue and need some clarity from the Government on their position on this. I hope that the Minister will be able to tell us how the Government intend to proceed with regard to these matters and also answer the important questions asked by the noble Lord, Lord Howell.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

First, I thank everyone who contributed to this important and well-structured debate. I also pay tribute to the noble Baroness, Lady Wilcox, for her valuable contributions and for stepping in at the last moment to substitute for the noble Lord, Lord McNicol; having picked up a difficult and complicated subject at such late notice, she did extremely well in moving the amendment.

This group includes Amendments 2, 9, 11, 19, 22 and 24, originally tabled by the noble Lords, Lord McNicol, Lord Oates and Lord Vaux. They have been grouped together because they all address in different ways the ownership of nuclear companies that ultimately may benefit from the RAB model. Let me be clear at the outset, as I was at Second Reading, that the Government emphatically do not support investment in our critical infrastructure at the expense of national security. There is no compromising on that point and I hope to reassure all noble Lords who have spoken during this discussion shortly.

The general purpose of this Bill is to broaden our options when financing new nuclear projects and to widen the pool of potential investors; that is widely understood. It is our expectation that doing this will reduce our reliance on state-owned developers to finance the construction of new nuclear power stations. So I do not consider that Amendment 11 and, as a consequence, Amendment 22 are necessary, for the reason that designation is a robust and transparent process. I make a similar case with regard to Amendment 24. The Committee can be assured that appropriate and robust due diligence will be carried out through to the financial close of every single project, in particular following a capital raise where the financing structure of the project may change as new investment is introduced.

I assure noble Lords—particularly my old sparring partner, the noble Lord, Lord Foulkes—that the Government have strong oversight of foreign ownership in nuclear projects as a result of the National Security and Investment Act, which includes a wide-ranging ability to call in for assessment qualifying acquisitions if, in our opinion, there are any national security concerns. These are wide-ranging powers. The noble Lord will be aware that we deliberately did not define “national security” during the passage of what became that Act to give ourselves a wide range of flexibility on this subject.

I should add that the Secretary of State may also apply any conditions that he deems appropriate to the designation of a nuclear company—conditions that, if not met, may lead to the company having its designation revoked. Let me also stress—I made this point in a letter to the noble Lord, Lord McNicol—that it is the Government’s intention to take a special share in the Sizewell C project, assuming that the negotiations are successful and the project proceeds to a final investment decision.

I note the intention of the noble Lord, Lord Vaux, that we should legislate for this sort of safeguard, but I caution him that it is right that the terms of the special share should be negotiated as a commercial agreement, according to the circumstances of every particular RAB project. The projects might be different when they are negotiated, so I think that imposing constraints in primary legislation would be too severe.

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[Lord Wigley (PC)]

I am grateful to you, Lord Chairman. As I was saying, my Amendment 17 paves the way for my Amendment 20, which writes into the Bill, on page 3, line 13, a duty on the Secretary of State to impose conditions that provide: first, for pinpointing responsibility for the eventual decommissioning of a project; secondly, for specifying the extent of the nuclear company’s liability for decommissioning and rendering the site safe; and, thirdly, for providing that all residual costs for decommissioning, over and beyond those shouldered by the nuclear company, are paid by Parliament.

This amendment deals head on with one of the arguments used, sometimes very effectively, by the opponents of nuclear power concerning the cost of decommissioning nuclear power stations and the danger, of which local communities are understandably fearful, of the site of a nuclear power station being left as a radioactive hulk. They are also concerned that under- takings given at the time when planning consent was approved might just be abandoned, with the local community being left to deal with a problem way beyond its ability to handle.

We see at Trawsfynydd today, over three decades after the ending of the generation of electricity, the hulk of the station still there. It is still radioactive and still awaiting full decommissioning. In 2020, it was announced that there would be a new programme for the demolition of the reactor buildings and that the site would be fully cleared by 2083—yes, another 60 years. If the Government are serious about bringing forward another programme of nuclear power stations—as colleagues will know, I support that, because I believe that it is the way to tackle the global warming issue—they must show that they are prepared to take on the ultimate responsibility of rendering the site safe, clean and in a condition acceptable to the local community.

Part of the responsibility for securing this must, of course, be placed on the plate of the nuclear company; after all, if it is to make money from the site, it has a moral duty to clear up the station when it has ended the generation of electricity. But such companies can easily walk away from their responsibilities and the buck must surely stop with Parliament for the residual work of clearing up and rendering safe the site that the Government and Parliament have approved.

This amendment tests the Government’s resolve on this issue. If they are serious about having a new programme of nuclear power stations, they must grasp the nettle and write these, or equivalent provisions, into the Bill. I look forward to their response and, in the event of them failing to give adequate, bankable assurances, I give notice of my intention of returning to this issue on Report and pressing an amendment along these lines to be written on the face of the Bill for MPs to further consider.

[Lord Oates (LD)]

My Lords, I apologise for my delay in arriving; I misunderstood and thought that the Committee was adjourned until the end of the special session, which was slightly delayed.

I am pleased to follow the noble Lord, Lord Wigley. Amendment 3 in my name and that of my noble friend Lord Teverson would require a geological disposal facility, or GDF, to have been constructed in the United Kingdom and be operational before the Secretary of State could designate a nuclear company under this Bill. The amendment’s objective is to bring some focus to the issues of nuclear waste and decommissioning, which were largely and curiously absent from the debate at Second Reading.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

I am happy to explore this further out of Committee.

[Lord Oates (LD)]

I thank noble Lords—some more than others—for their contributions to this debate. I particularly thank the noble Lord, Lord Howell, who, while we disagree strongly on these issues, addressed nuclear waste seriously. One of my purposes in tabling Amendment 3 was not only to expose issues about and have a proper discussion around the costs of a geological disposal facility but because it concerned me, at Second Reading, that there was little focus on waste.

I perhaps should have declared an interest at the beginning as, many years ago, I acted as an adviser to the NDA. While I do not pretend to be a scientist, I have some understanding of this and say gently that there are many people, on all sides of this debate, who have an understanding and take different views. Noble Lords should not make assumptions about their greater knowledge to underpin their enthusiasm for nuclear.

On the specific point of my party’s position on this—again, rather than addressing some of the issues, we seemed to get into a rather unnecessary partisan issue—different parties have different views. As my noble friend Lord Stunell pointed out, the agreement in the coalition was no public subsidy for new nuclear and that is the position we took.

The noble Viscount, Lord Hanworth, for whom I have great respect, was uncharacteristically partisan. He told me that I could not have it both ways, but I gently suggest that he cannot have it both ways either. If the issue of nuclear waste is of such marginal concern and I should not be bothering the Committee about it or the costs of it, why are we intending to spend potentially £51 billion—I imagine much more by the time we get to it—on a geological disposal facility? The noble Viscount said, “Well, there are things happening”, but there have been things happening for a long time on the GDF. As my noble friend Lord Stunell pointed out, we have gone backwards in many ways. I have also heard some argue, “Oh, actually, we do not need a geological disposal facility. That solves it, because then we do not have to worry about the costs of that or the difficulties of securing it.” That is not the view of the majority of people I have spoken to, and I have spoken not only to those who are opposed to nuclear but to those involved in the nuclear industry. Certainly, the international view and the international experience is that such a GDF is required.

All I would ask of the Committee and the Government is, if they are intent on going down the road of nuclear—I am quite open that I am opposed to it, not for some ideological reason or from radiophobia but for some very practical reasons relating to the problems; they are not about encased waste, which you can standby or store for 100, 200 or possibly 300 years, but about long-term disposal, as talked about by my noble friend Lord Stunell, the noble Baroness, Lady Bennett, and others—

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

Is it not the case, when we are dealing with the disposal of waste, that more than 90% of it is already there, coming from the old Magnox reactors, and the new nuclear reactors produce relatively small amounts of nuclear waste?

[Lord Oates (LD)]

I have heard this from others, and the argument seems to be, “Well, we’ve created such a mess already that it doesn’t make much difference if we create any more.” They may create less waste than the old Magnox reactors, but all I am asking is that, before we create more of that waste, we have a way of disposing of it. It is important that we take that seriously, whether we are pro-nuclear or anti-nuclear. We will not convince people unless we deal with this sensibly. In terms of this Bill, we cannot know the real costs unless we understand the costs of construction and operation.

[Baroness Worthington (CB)]

My Lords—

[Lord Oates (LD)]

I say with respect to the noble Baroness, Lady Worthington, that she has intervened on many occasions and we probably need to move on. I just ask that these matters be taken seriously and that when people discuss nuclear waste they think about it in terms of the very long term over which it has to be dealt with and the fact that we do not yet have that GDF and cannot possibly know the costs of it. I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

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[Baroness Worthington (CB)]

My Lords, I will speak briefly on Amendment 4, as much of what I was going to say has already been covered. I have some sympathy with this amendment, as transparency is nearly always good and it would benefit the industry to have a thorough description of the value of investing in nuclear on this and other scales, so that we have it as an option as we combat climate change and seek to deliver affordable power to the nation.

As the noble Lord, Lord Howell, pointed out, value is subjective. Therefore, it would be hard to use it as an objective way of saying that this should not go ahead. What value does Switzerland currently place on its electricity grid, which is almost 100% hydro and nuclear? That means that, despite its location in the centre of Europe, Switzerland is feeling incredibly safe in these troubled times. What value does it place on that? It is of huge value to Switzerland.

Similarly, the social cost of carbon rapidly needs to be revised as we realise that the impacts of climate change are happening far faster and at far greater cost than we ever thought. How do we factor that into value? Transparency is important and I would welcome a much more open discussion about the value that these large-scale nuclear power projects deliver for us. You can look at the levelised cost of electricity, but I suggest it is not the most important factor. You can pay a lot less for a tricycle than for a tractor, but they do not perform the same job. You must compare like with like.

With renewable technologies you have rapid deployment but very diffuse sources of energy, large land take and intermittency, which then requires a substantial extra cost on the grid for levelling when the sun is not shining or when we have periods of no wind, which does happen in Europe—it happened recently, actually, and contributed to the high gas prices we have seen. Let us have that discussion. I feel confident that the project we are talking about here, Sizewell C, will provide a great value for the money we are about to spend, not least because 50% of its additional cost comes from its financing, as has already been stated. That is a huge overhead, because these are capital-intensive long projects. This Bill will help reduce that and increase the value for money.

We now have two reactors under construction today. We can look at the costs of those to see how they transfer to subsequent projects that are funded under this more efficient mechanism. I have been informed about and questioned EDF about its cost overruns. The costs of the two reactors being built today are in line with what you would expect if you were building a huge construction project through the period of Brexit and Covid. Nearly all the inflated costs are true of all big infrastructure projects and are not unique to the nuclear project currently under way. So I would welcome having this conversation. I think transparency would be a friend of the industry and I therefore have some sympathy with this amendment.

[Lord Oates (LD)]

My Lords, I will concentrate in particular on Amendment 6, addressing nuclear outages, and Amendment 37, which would protect recipients of universal credit from being liable to the levies under this Bill. I support the amendments in the name of my noble friend Lord Foster of Bath, and I am slightly bemused about why it is not recognised that we should understand the basis of the value for money test, given that it is in the Bill.

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Moved by

[Lord Oates]

5: Clause 2, page 2, line 14, at end insert “and has laid a report before Parliament setting out the reasons for that opinion, including—
(i) an estimate of the electricity price payable to the company over the period during which the nuclear energy generation project is generating electricity, and the modelling, assumptions and all relevant material underlying such an estimate;(ii) an estimate of the regulated asset base charge payable by consumers in each year until the nuclear project is generating electricity, including the modelling, assumptions and all relevant material underlying such an estimate;(iii) an estimate of the costs of decommissioning the project, how such costs will be met, and the modelling, assumptions and all relevant material underlying such an estimate.”Member’s explanatory statement
This amendment would require the Secretary of State to publish a report setting out the reasons for their opinion that designating the nuclear company is likely to result in value for money.

[Lord Oates (LD)]

My Lords, I will speak in particular to my Amendment 5, but I support all the amendments in this group aimed at greater transparency and accountability, particularly those in the name of my noble friend Lord Foster of Bath. I will speak briefly, as we have already discussed many of the issues on which Amendment 5 touches. As we heard previously, Clause 2(3)(b) of the Bill requires that the Secretary of State

“is of the opinion that designating the nuclear company in relation to the project is likely to result in value for money.”

The opinion of the Secretary of State is, no doubt, valuable, but what would be even more valuable for Parliament and the public is to understand what that opinion is based on, in order to be reassured that it is not simply an assertion of policy preference.

We spoke in Group 3 about the vast, full-life costs of nuclear generation when decommissioning is taken into account. The public would want to know that these costs are fully taken into account in the calculations of the Secretary of State when arriving at his opinion. In addition, it would be important to understand how the possibility of significant cost and time overruns would be factored in as well.

Amendment 5 seeks to address these issues by requiring the Secretary of State to publish a report setting out the reasons for their value-for-money opinion. Such a report would, hopefully, give Parliament and the public reassurance that these matters have been properly considered before a decision is taken to impose further costs on energy bills. I beg to move.

[The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)]

Before I formally call this amendment, I need to inform the Committee that there is a mistake on the Marshalled List. Amendment 11 should begin:

“Page 2, line 14, at end insert—”.


In relation to Amendment 5, the amendment proposed is:

“Page 2, line 14, at end insert”


the words on the Marshalled List—and Amendment 11 would come at the end of that.

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[Lord Callanan (Con)]

I will start with Amendments 5 and 27, laid by the noble Lords, Lord Foster, Lord Wigley, Lord Oates and Lord Teverson, and the noble Baroness, Lady Bennett. It will not surprise the Committee to know that I have reservations about how these amendments would operate in practice. On Amendment 5, for example, the requirement to publish estimates of the costs payable by consumers at the point of designation would risk undermining the independence of Ofgem, which has responsibility for determining a nuclear company’s allowed revenue in accordance with its modified generation licence.

Moreover, the obligations to report on the price of electricity, or the minimum floor price, referred to in Amendment 27, simply do not align with the reality of how we expect the RAB model to operate in practice. Under the model, there is no minimum floor price. Ofgem, in its role as the regime’s economic regulator, will need to determine the revenue the project is entitled to receive, in accordance with its modified electricity generation licence.

Finally, on decommissioning costs, we already have robust legal requirements in place in the Energy Act 2008, which require an operator to have a funded decommissioning programme in place before construction can commence on a new nuclear project. This must set out the operator’s costed plans for dealing with decommissioning and waste management. For these reasons, I am unable to accept the amendments.

Turning to the comments made earlier in the debate by the noble Lord, Lord Wigley, under the RAB model, the regular price reviews would provide an opportunity to assess the performance of the FDP, and adjustments to the operator’s allowed revenue can then be made should any potential deficiency in the fund be identified. This will deal with the noble Lord’s concern, minimise any chances of a fund shortfall and ensure the operator retains its responsibility to meet the costs of decommissioning so they do not fall on local communities. I hope that this provides the reassurance that the noble Lord was seeking.

Amendments 12, 18, 25 and 32, from the noble Lords, Lord McNicol, Lord Foster, Lord Oates and Lord Teverson, and the noble Baroness, Lady Bennett, are aimed at obliging the Secretary of State to publish various pieces of information related to the functioning and implementation of the RAB regime. I fully understand noble Lords’ desire for more information, but think this is already addressed in the Bill.

On the publication of licence modifications, Clause 6(9) already provides that modifications made under Clause 6 would not come into effect unless a revenue collection contract was entered into with the nuclear company. Publishing them as soon as reasonably practicable will provide adequate opportunity for scrutiny.

On Amendment 12, the Bill already obliges the Secretary of State to publish a statement setting out how they expect to determine whether the designation criteria have been met. This statement will provide further explanation as to how the Secretary of State expects to determine whether the development of a project is “sufficiently advanced”. While, as I said, we will publish a statement in due course, I can tell the noble Lord, Lord Foster, and the Committee that we would expect it to include consideration of a number of factors, including, for example, the progress of the prospective project through the important planning process.

On Amendment 18, where it is assessed that it would be appropriate for development funding to be included in the calculation of a nuclear RAB company’s allowed revenue, this would in turn be reflected in the company’s modified licence. Outside of the RAB structure, the Government may choose to provide development funding to projects to mature technologies and de-risk the development and construction phases. However, as this is not intended to be funded through the RAB scheme, it would be inappropriate to include information requirements about it in the Bill. They will be published in other quarters.

On Amendment 25, Clause 6(2) already states that the licence modification powers can be used only for the purpose of facilitating investment in the design, construction, commissioning and operation of nuclear energy generation projects. The Secretary of State may not exercise the powers for any other purpose. This is aligned with the consideration that the amendment discusses. I believe that the transparency processes already included in the Bill, the obligation to publish a statement on the designation criteria and the opportunity for scrutiny before the designation and licence modification powers may be exercised render these amendments unnecessary.

The final amendment on transparency is Amendment 28 from the noble Lords, Lord Foster and Lord Oates. It seeks to make the licence modifications necessary to implement the RAB model for a nuclear company contingent on approval by the House of Commons of a report about consumer bill impacts.

Bringing a project to the point where licence modifications can be made is likely to require significant investment. I submit that making a project subject to a parliamentary vote at that very late stage of licence modification would add huge uncertainty to the outcome of developers’ investment. This additional uncertainty would make it very much harder to bring forward projects —which is possibly the purpose of the amendment—and lead to either an absence of new projects or the costs of financing being raised significantly to take account of the increased risks. That would inevitably result in much worse value for consumers. The amendment could therefore defeat the policy objective of the Bill: to secure financing for new nuclear projects in a way that could deliver better value for money for consumers.

To reiterate, in rejecting the amendments put forward, the Government are not attempting to hide from challenge or scrutiny. Through this Bill, we have created a clear and transparent process for implementing the RAB model. It will allow for the voices of experts and stakeholders to be heard and appropriate consultation to be carried out. That will help ensure that the model works for the industry and, above all, for consumers. I therefore hope that noble Lords will not press their amendments.

[Lord Oates (LD)]

My Lords, I will speak briefly as time is marching on. I think the Minister told us that the reason why Amendment 5 would not work is basically that the Government cannot tell us how much this will all cost the consumer, which is one of our key worries about this means of financing.

On Amendment 12 and the definition of “sufficiently advanced”, my noble friend Lord Foster raised a number of specific issues in relation to Sizewell C and asked whether, in view of those, the project would be regarded as sufficiently advanced. The Minister notably did not answer that question but repeated his previous statement that the Government will publish the designation criteria “in due course”. Again, what he is telling us is that the Government will not tell us what those are before they expect noble Lords to vote on the Bill. As my noble friend said, whatever one’s views for or against nuclear power, that is surely not a way to do legislation.

I hope that the Minister will consider carefully all the issues that have been raised in this group. If you are pro nuclear, I would have thought that transparency was a good thing, but, certainly, I hope that he will consider these issues and come back with some clearer answers for us on Report. With that, I beg leave to withdraw my amendment.

Amendment 5 withdrawn.

--- Later in debate ---

Moved by

[Lord Oates]

33: Clause 13, page 11, line 27, at end insert—
“(A1) The primary duty of the Secretary of State is to publish all material relevant to—(a) costs that may be incurred by the taxpayer arising from any provision of this Act,(b) the determination of the regulated asset base charge that may be levied on consumers under the powers in this Act, and(c) the cost to consumers of electricity produced by the project.” Member’s explanatory statement
This amendment would place a primary duty on the Secretary of State to publish all material relevant to (a) costs that might be incurred by the taxpayer arising from any provision of the Act; (b) the determination of the regulated asset base charge that may be levied on consumers under the powers of this Act; and (c) the cost to consumers of electricity produced by the project.

[Lord Oates (LD)]

My Lords, Amendment 33 and the subsequent amendments in this group seek to ensure that the Government cannot refuse to publish information that is in the public interest without compelling grounds. As it is currently written, Clause 13(2)(a) allows the Secretary of State to withhold any relevant material which he or she believes

“would … prejudice the commercial interests of any person”.

This is an enormously wide loophole which makes no attempt to qualify the degree of prejudice to the commercial interests of that person or to balance that with the public interest in the disclosure of such information.

Amendment 33 would establish a primary duty on the Secretary of State to publish all relevant material. Amendment 34 provides that material may be excluded only in exceptional circumstances. Amendment 35 would insert the word “seriously” so that the test is whether disclosure would seriously prejudice commercial interests, not the much weaker test currently in the Bill. Amendment 36 would require that, should the Secretary of State exclude material on the grounds of serious prejudice to commercial interests, he or she must make

“a statement to Parliament that the prejudice to commercial interests”

set out in subsection (2)(a)

“is of such seriousness that it outweighs the”

overwhelming

“public interest in … the publication of material relevant to any”

costs that may be incurred by the taxpayer

“arising from any provision of this Act … the determination of the regulated asset base charge that may be levied on consumers under the powers in this Act, and … the cost to consumers of electricity produced by the project.”

It is critical for proper public scrutiny that Ministers cannot decline to provide information behind claims of prejudice to commercial interests. These are projects being funded by consumers, and they have the right to know all relevant material except in the most exceptional of circumstances. We already know how reluctant government and its agencies are to provide information on costs which are overwhelmingly in the public interest. One such example is the apparent unwillingness of the Nuclear Decommissioning Authority and GDF to provide information on the breakdown of costs for cleaning up Sellafield and how the costs of GDF are accounted for in the NDA’s figure for overall nuclear liabilities.

For example, the Nuclear Decommissioning Authority and the Radioactive Waste Management company, which is a subsidiary of the NDA, have been seemingly unwilling to provide a breakdown of how the estimated £96 billion clean-up costs at Sellafield were arrived at and what they account for. Likewise, there is no explanation of whether the nuclear liabilities costs include the additional figures of £20 billion to £51 billion for GDF that was announced in the NDA’s annual report. I noticed, when we debated the GDF issues, that the Minister did not respond to my question about how that is accounted for within the overall NDA liabilities. We already have a reluctance to share information that is overwhelmingly in the public interest.

The record of transparency in these matters is very poor. This amendment would prevent it getting even worse. It is particularly incumbent on the Government to respond and provide assurance to the public, given that they are going to have these costs imposed on their bills for new nuclear power generation, and share all relevant information unless exceptional circumstances prevent that being possible. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, I should have started by apologising for not being able to speak at Second Reading. I have a problem in that I am following two or three Bills at present and there have been some unfortunate clashes. I want to speak on this amendment because I am well known as a supporter of proper and transparent costings. To that extent, I was pleased to see the amendment of the noble Lord, Lord Oates.

However, I thought Clause 13 was quite narrow. It seemed to be concerned with matters that are commercially sensitive or need to be excluded on national security grounds. As a former businessperson, that seemed quite reasonable to me. Obviously, it would be good to know that we will have a proper understanding of costs, particularly to the consumer, which might occur as proposals are developed. I associate myself with the wish to understand the costings, although I am not convinced this amendment is appropriate or necessary.

[Lord Callanan (Con)]

I realise that time is getting on, so I will be as brief as possible. I thank the noble Lords, Lord Oates and Lord Foster, for Amendments 33, 34, 35 and 36. As most of the material is similar, I will take them together, starting with Amendments 33 and 36.

By way of background, I will explain the purpose of Clause 13. Four amendments have been tabled to it, but I reassure noble Lords and my noble friend Lady Neville-Rolfe that this clause is in no way designed to act as a “free pass” for the Government. It is a narrowly drawn provision, allowing for the exclusion of specific, sensitive, commercial and national security information only. I want to be upfront and clear about that. From looking at their detail, I do not believe these amendments will achieve what I suspect is noble Lords’ goal to increase transparency. Actually, they could cause extra confusion.

Amendment 33 makes the publication of relevant material the “primary duty” of the Secretary of State, and so would effectively place transparency above the protection of national security. I submit that this is intuitively wrong; it would be dangerous to subordinate national security concerns to publication concerns.

Amendment 36 would require the Secretary of State to make statements to Parliament about the seriousness of the potential impact of the release of information on the commercial interests of companies and how this is balanced against the public interest in disclosure. This creates ambiguity around the protection of commercial interests, which could have a serious impact on the ability of a project to raise the necessary investment. It would either make it harder to bring forward new projects or, alternatively, raise the cost of financing those projects; either way would result in worse value for consumers. I submit that it also goes against a basic tenet of commercial negotiations and operations: that an investor’s commercial interests will be treated respectfully and confidentially.

Amendments 34 and 35 similarly seek to restrict what information can be excluded from publication or disclosure under Part 1 on the grounds of national security or prejudicing commercial interests. Similar to the previous amendments, the suggestions made in these amendments would add unnecessary and unhelpful ambiguity to an otherwise straightforward provision. Again, this would introduce additional uncertainty for both the Government and potential developers.

Looking first at the addition of “in exceptional circumstances”, there is no obvious legal understanding or definition of what such circumstances would be. This would create uncertainty as to when the provision could be used and what information could be redacted. The circumstances in which Clause 13 applies are already sufficiently set out in its subsection (2). Similarly, given that “seriously” has no clear definition in this context, I submit that the addition of this term would add to the uncertainty and ambiguity about whether legitimate commercial interests would be respected for potential investors. I think that it would make them less likely to go on to be involved in projects.

I understand the desire for increased transparency behind these amendments, but I hope that, given the legal uncertainty of the wording used, I have been able to reassure noble Lords that the Government have no intention of hiding any information that we do not strictly need to in order to respect commercial confidences, so I hope that noble Lords will feel able to withdraw or not press their amendments.

[Lord Oates (LD)]

My Lords, I thank the Minister for his reply. I am afraid that I am not entirely reassured by it, because there is a lot of talk in this Bill about protecting commercial interests but there seems to be little about protecting consumers’ interests. This Bill imposes burdens on consumers, and it is only right that they have available to them information to understand how decisions are made.

I will certainly go away and think about the points that the Minister made. I make it clear that the aim of this amendment was not to compromise the Secretary of State’s ability to exclude material on grounds of national security; I fully accept that that may well be necessary. It may be that the current Minister would not use this test to withhold large amounts of material, but that certainly seems possible, and I think that there needs to be a much firmer test to protect the consumer. No doubt we will come back to these amendments, or versions of them, on Report. In the meantime, I beg leave to withdraw my amendment.

Amendment 33 withdrawn.

Russian Oil and Gas Imports

Lord Oates Excerpts

Monday 7th March 2022 Lords Chamber

[Lord Callanan (Con)]

Of course we need a diverse mix of energy, which this Question is about, and to generate as much of our own power as possible. The noble and gallant Lord makes a good point about reducing our dependence on autocracies.

[Lord Oates (LD)]

Does the Minister agree that, if we think we can solve the current fossil fuel crisis by pretending that the clear and present danger of climate change does not exist, we will simply call down a far greater catastrophe on the world? Does he agree that the answer to the fossil fuel crisis is to invest to get off them as soon as possible, not to burn more of them?

[Lord Callanan (Con)]

The answer to the high price of oil, gas and fossil fuels is to use less of them. To that extent I agree with the noble Lord. That is why we are generating as much as we possibly can from renewables. That is why we accelerated the contracts for difference round, why we have one of the largest capacities in the world, and why we need to expand it even further.

Revised Energy National Policy Statements

Lord Oates Excerpts

Tuesday 22nd February 2022 Grand Committee

[Lord Oates (LD)]

My Lords, the Liberal Democrats welcome the fact that the Government have set an ambitious net-zero target for 2050 and have recognised that that requires a 2035 decarbonisation target for the climate sector. We also welcome the target of 40 gigawatts of offshore wind for 2030. All this ambition is welcome, and we welcome the recognition in the Overarching National Policy Statement that wholesale transformation is required in our energy system. However, we remain unconvinced that the Government recognise what they have to do to achieve those targets. These national policy statements underline the gap between rhetoric and the detailed application and clarity that are required.

The net-zero target must be the overwhelming priority and challenge for the energy sector and for government as a whole. However, these documents simply do not supply the clarity and detail that the energy industry, the planners and other decision-takers will need. To have any chance of meeting the 2030, 2035 or 2050 targets, we need a much more joined-up approach across government and industry.

The national policy statements seem to be, at best, nodding acquaintances of the Energy White Paper, the 10-point plan, the offshore transmission review and the holistic network design policy—and, at times, almost complete strangers to them. The NPSs need to be clear about how the various policy documents should be taken into account by promoters and decision-takers, because the lack of integration threatens to fatally undermine the Government’s ambitions. If we are to deliver 40 gigawatts of offshore wind by 2030, we need the transmission infrastructure to deliver it to where it is needed. As the noble Lord, Lord Whitty, said, we must address the issue of an offshore grid and how we bring it onshore. The noble Baroness, Lady McIntosh, made the startling point that we lose 30% of power in transmission, so we must think about a much smarter and more locally distributed grid.

We must think much differenter—if that is a word—about the whole way we deal with the energy system. It is not a word, by the way. As a result of all this new infrastructure, there will have to be new substations, cables and so on. It is important that we think about how the impact on communities is mitigated. What is the Government’s approach to undergrounding cables, particularly in some rural areas? What is their approach to the mitigations that communities need? Industry needs clarity on this, because it has to plan, but it does not get that from these documents.

Energy storage and release will also be critical in the new energy system that we will need. The NPS needs to be much clearer about the scale of what is required. EN2 talks about pumped hydro storage and it is welcome that it does, although it gives little detail, but there is nothing about using green hydrogen as a storage vector. The Minister will correct me but I think that, in the past year, about £1 billion was paid to abate wind. This is crazy: that wind power could be creating green hydrogen, which could then be used where we need it in the energy system. We need much more about that. That is one of the points we were discussing in the debate yesterday on the Nuclear Energy (Financing) Bill. The Government must think much more creatively about how we deliver power.

The noble Lord, Lord Whitty, and a number of others stressed the importance of energy efficiency—the noble Baroness, Lady Jones, in particular. That is critical. It is crazy that so much of the energy we consume at the moment is going not to heat us, but straight out of the roof or the windows. We need a national plan for energy efficiency. Again, we discussed this yesterday. The Minister protested that much was being done and agreed with the noble Lord, Lord West, that it was also all terribly difficult. Some of it certainly is difficult, but a lot actually is not.

What makes even the relatively easy quite hard, however, is that there is a real lack of skills. For instance, if you want exterior wall insulation on your house and are in London or the south-east, good luck with that, because the few people who can deliver it are up to their eyeballs in work—and loads of them have just given up. There have been various government projects, such as the green homes grant scheme, and previously, under the coalition, the Green Deal scheme. But the industry invests, the schemes are then scrapped and now those people are fed up.

We have a massive skills shortage and there must be a plan to deal with it. If the Government care about levelling up, one of the best ways they could deliver jobs all around this country would be to reduce the energy we consume and how much we pollute our planet. We know that the Treasury is always behind these schemes going wrong, so I have a lot of sympathy with the Minister because it always thinks in the short term and these schemes can be delivered only in the long term.

Some noble Lords who spoke in this debate did so as if the climate emergency was a concept that we could choose either to believe in or not. I can only assume that the noble Baroness, Lady Foster, has not read the IPCC report on the impacts that are coming from climate change because there was certainly no mention of them whatever in her speech or, I think, of climate change at all. We heard a lot about what she regarded as absurd, but what is really absurd is that we are still building houses that leak energy. We should have had a standard in place from 2016; one was put in place by the coalition Government but scrapped by the Government who came after them. We should not be building homes that leak energy or have no national plan for the energy efficiency of our building stock. We should never have done what the Government who came in after the coalition did, which was effectively to ban onshore wind.

The noble Baroness, Lady Neville-Rolfe, raised the issue of green levies—the noble Lord, Lord Forsyth, raised it in the Chamber earlier. We really need to be clear that it is not green levies that are pushing up energy bills at the moment but the staggering cost of fossil fuels. The sooner we move off them, the better. That is what we need to be doing. In fact, total household expenditure on energy bills fell between 2010 and 2020. It did so in large part because of the energy efficiency measures that were funded through the green levies, so we should not allow this misnomer to take hold.

My noble friend Lady Sheehan raised the concerns of the energy industry about the policy statements. I hope the Minister will answer some of the very legitimate questions that the industry posed, particularly on how the various government policy documents should be taken into account by decision-takers. Also, what is expected from industry on community mitigation and why is the work of the offshore transmission review and holistic network design not properly addressed in the NPSs? How will those statements be expanded to include hydrogen and CCS, in line with government policy?

I was struck by my noble friend Lord Teverson’s question about when the geological disposal facility will come online, and whether the date in the original nuclear planning statement for operation of the GDF from 2130 was correct. I must say that it seemed like the first realistic statement I have heard about that geological disposal facility, because we have been told decade after decade that it is just around the corner. I hope the Minister can clarify that.

As I said at the outset, we welcome the Government’s ambitious targets but we need the detail about how they will be met. These national policy statements fall short in doing that.

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, I thank everyone who contributed to this debate. As always, it has been interesting and informative, if not all directly related to the subject under discussion—I am looking at the noble Baroness, Lady Jones; I will come on to that in a minute. I will address many of the points made in turn, but first I will bring the Committee back to the subject under discussion and will talk about the energy national policy statements.

Our world-leading agenda to transform the energy system requires a planning framework for nationally significant infrastructure which can process the pace and scale of planning decisions in line with this transformation. Updated energy NPSs are critical to achieving this. The review will make the policy framework for the provision of energy infrastructure clearer and more up to date.

In the context of the wider reform programme for nationally significant infrastructure, up-to-date energy NPSs will support project sponsors, the Planning Inspectorate and ultimately the Secretary of State in timely consideration and decisions over when and how to provide significant to critical infrastructure.

We believe that the documents we have consulted on and which are being examined by the committee of the other House at the moment strike the right balance between the need for new energy infrastructure and the impact that such infrastructure will have, and they will enable planning decisions to be taken at the required pace.

I thank the noble Lord, Lord Whitty, and many other noble Lords who have used this debate to make some interesting and wide-ranging comments on energy policy. However, I repeat that our purpose today is to consider whether the NPSs are fit for purpose in performing their critical purpose, which is to provide a legal framework for planning decisions on nationally significant energy infrastructure.

I thank my noble friend Lady Neville-Rolfe for her comments on timing and security of supply. Within that, the NPS establishes the need for the infrastructure required to deliver the energy objectives. This includes ensuring that we have a supply that is secure and reliable as well as consistent with our net-zero ambitions.

A number of noble Lords, including my noble friends Lady Neville-Rolfe and Lady McIntosh, the noble Baroness, Lady Sheehan, and the noble Lord, Lord Lennie, asked me about the timetable for future reviews. Of course, there will be change over time, and we will review the documents when appropriate—so I do not want to give an absolute commitment to a specific time; we will do it as required. The exact timing of a review will depend on the specific circumstances that apply in the case of each national policy statement, but it is expected that a public announcement on whether a review is required should be made at least every five years. This reflects the position that was set out in the Government’s published guidance.

I thank the noble Lord, Lord Teverson, for his comments on biodiversity. He will be aware that Schedule 15 to the Environment Act 2021 introduced specific requirements for biodiversity net gain in relation to NSIP development. This schedule is not yet in force, and Defra is currently consulting on exactly how it will be implemented. Of course, the NPS will be amended to bring it in line with the Environment Act before it is designated.

I welcome the comments from my noble friend Lord Moynihan and my noble friend Lady Foster’s support for the energy NPS. I can assure both of them that the NPS recognises the need for continued investment in oil and gas infrastructure during the transition to clean energy. It was recognised also by the climate change committee that we will continue to need oil and gas infrastructure during the transition. I think some of the simplistic exponents sometimes miss the point that this is a long-term transition. Unless we want to unplug people’s boilers or stop them putting petrol in their car tomorrow, there is an ongoing requirement for investment, and it makes more sense to obtain oil and gas from our own reserves than to import it from Russia, Qatar, Saudi Arabia or American shale gas reserves through the medium of LPG.

I say in response to the noble Baroness, Lady Sheehan, that we believe that the draft NPS strikes the right balance between clarity on the need for the types of infrastructure required to deliver on our climate commitments and retaining security of supply and identifying the potentially negative impacts of such infrastructure at local level. This enables planning decisions to be taken which weigh this national need against these potential impacts, based on expert evidence and, of course, on full stakeholder involvement. Of course, there will always be different views on whether we have got this balance right, and we are currently analysing the responses to the public consultation. We will take account of these and any resolutions or recommendations from the parliamentary scrutiny process before issuing our final response.

The draft NPS reflects the work of the offshore transmission network review and the policy is written to support that work. Future changes will depend on the outcome of the OTNR. The urgency and scale of offshore wind farm development—I remind the Committee that there is to be a fourfold increase by 2030—mean that radial routes to shore are in many cases not viable given the environmental and community impacts.

I say to my noble friend Lady McIntosh that we recognise the desire for a settled siting policy for new nuclear and we are seeking to deliver a robust and comprehensive framework. Three years is the rough working estimate to develop, consult and deliver on an NPS. I can assure my noble friend that a new nuclear NPS will be subject to the same requirements of public consultation and parliamentary scrutiny as these energy NPSs. I can also assure her that the NPSs cover climate change adaptation and mitigation—mitigation is covered by part 2 and new section 5.2 of EN-1.

The noble Baroness, Lady Jones—where to start? In her wide-ranging contribution, I lost count of the number of questions that she asked me. I think I got up to about 25 before I lost count. The noble Baroness will, of course, appreciate that in the context of this short debate it is not possible to answer all her points. I am sure that we will have lots of debates and questions on these subjects in future. Of course, I do not think that any of her questions had anything to do with the subject of this debate, which is on the NPS. I am afraid that the noble Baroness knows that we disagree over this. A lot of her solutions sound great, but they are overly simplistic nonsense in most cases.

In many respects, I agree with the noble Baroness. Of course, we want to see more renewables. We have the largest offshore renewable capacity in the world—and we going to increase it fourfold. It has been a British success story; the price of new offshore wind is now at record low levels. It is a good thing, but it is inherently intermittent. During the recent stormy weather, we saw that wind generation for the UK was up to almost 50% of our capacity, which is great, but a few months ago, when we had a weather depression, we saw wind capacity at about 2% to 3% of our national energy needs. We need a diverse mix of supply—so we need nuclear and existing oil and gas infrastructure and supply and, yes, we need renewables as well.

I do not disagree with the noble Baroness. Of course, we want to see energy efficiency schemes, as energy efficiency is by far the best form of generation; the energy that you do not use is required. We are spending £9.2 billion over this Parliament on energy efficiency and insulation schemes. I am proud of our record. Of course, we can have an argument over whether we should be spending even more, but as regards our levels of investment compared to any previous Government, we are spending record sums on environmental schemes. On ECO alone, the contribution that we are making to that is going up to £1 billion a year, starting in March this year, in addition to the £9.2 billion that we are investing through direct government support. The vast majority of that is going to help fuel-poor households and those on lower incomes to benefit from increased investment and increased energy efficiency in their homes, to make their bills smaller and their homes warmer. That is a key point.

I assure the noble Baroness that we will have time to debate all her many questions and points in future, but I hope that she will forgive me if I do not address all those issues now, because it is not a matter for today’s debate.

In response to my noble friend Lord Naseby, of course we need to preserve our most productive farmland as best we can, which is why the draft NPS continues to advise that the effective use of land is prioritised by focusing large-scale solar farms on previously developed and non-agricultural land, provided that it is not of high environmental value. It also suggests that, when a proposal involves greenfield land, poorer-quality land should be used in preference to higher-quality land.

In response to the noble Lord, Lord Oates, the draft energy NPS set out the Government’s policy for delivering nationally significant energy infrastructure and providing a legal framework for planning decisions at the national level. This includes balancing the need for new infrastructure against the impacts of such infrastructure. It will provide guidance on some of the issues that the noble Lord raised, such as the presumption in favour of underground cables in areas of natural beauty, but many of the important issues raised by the noble Lord, such as energy efficiency and housing, are outside the scope of these documents.

[Lord Oates (LD)]

I am grateful for the Minister’s response, but could he address one specific question that I asked about guidance on community mitigation? This is something that the industry is really clear on—that it needs to have guidance, because it is going to have to bring onshore lots of cable and lots of new energy infrastructure. It really needs clarity from government about what it should be doing there. I would be grateful if the Minister could address that point.

[Lord Callanan (Con)]

During the planning process itself, community mitigations will be taken into account, providing the national framework to enable local planning decisions to be taken. Community mitigations of course play an important part in the planning process.

As I said earlier in response to the noble Baroness, Lady Jones, improving the energy efficiency of homes is the most effective way to permanently reduce energy bills by reducing the amount of energy required to heat the home, and it can tackle fuel poverty in the long term. I covered all the schemes that we have, including ECO, home upgrade grants, the local authority delivery scheme, the public sector decarbonisation scheme and the social housing decarbonisation scheme—myriad different schemes, all contributing quietly and in the background to upping the energy performance of the homes that we all live in.

The noble Lord also mentioned the need for clarity in the approach to CCUS and hydrogen. The NPS establishes the need for CCUS and hydrogen infrastructure, but we do not want prematurely to introduce detailed guidance before we know more about the impact of such projects. We will consider whether to develop a technology-specific NPS for CCUS and hydrogen infrastructure as the technology and the project landscape evolves.

The noble Lord, Lord Lennie, asked how many consent decisions have been made under the current regime. The answer is that 65 decisions on energy projects have been made under the existing suite of energy NPSs. We are, of course, expecting a significant increase in the number of applications as the transition to net zero continues. He also asked about onshore wind. It was removed from the NSIP regime in 2016 through amendments to the Planning Act 2008. This means that all planning applications for onshore wind turbines in England are made to the local planning authority, or to the Welsh Government in Wales. As national policy statements are statutory guidance, and as onshore wind is now not included in the 2008 Act, it was no longer appropriate for the national policy statements to provide specific policies in relation to onshore wind.

Finally, to reply to my noble friend Lady Foster’s point about fracking, it is important to realise that Lancashire is not Texas. The UK is a relatively densely populated island compared to most parts of the US. Although we are not in principle against the idea of fracking, it must be done with the consent of local communities and we need to be aware of its environmental impact. Also, as we discussed during Questions in the House a few weeks ago, it is not the short-term answer that many people think it is. Even if we managed to overcome all the environmental objections, and even if we managed to progress the scheme, it would be many years, if not a decade, before we got meaningful quantities of shale gas out of the ground. Even then, the quantities that we would be able to produce in this country would have no meaningful impact on the overall gas price level. We continue to keep these matters under review, but it does not represent the easy solution that we might like to think it would in this circumstance.

Nuclear Energy (Financing) Bill

Lord Oates Excerpts

2nd reading
Monday 21st February 2022 Lords Chamber

[Lord Oates (LD)]

My Lords, I declare my interest as the chair of the advisory committee of Weber Shandwick UK. I am very pleased to follow the noble Lord, Lord West, and to take part in what has been a very interesting and informative debate. It follows on from a debate we had just before Christmas where I found myself the only person on one side of the argument. I see a little bit more support here today.

The Liberal Democrats are opposed to the provisions of this Bill on two principal grounds. The first is that we believe that new nuclear power generation is neither feasible nor a desirable means of reaching our net-zero targets. Secondly, we believe that, even if new nuclear projects were a feasible mechanism for reaching our decarbonisation requirements, this Bill, and the regulated asset base funding model for new nuclear that it establishes, are fundamentally flawed. The Bill imposes a double whammy on consumers, hitting them both with the upfront cost of construction and then with the huge, uncompetitive cost of nuclear generation. It takes no account of the ability of consumers to pay. Costs will fall equally on the richest and the poorest; those already struggling with the massive spike in the energy price cap will feel the charges most acutely.

The Bill is completely opaque in relation to the assumptions and models used to arrive at the estimated RAB charges. In the discussions that we had ahead of the Bill, the Minister’s own department described some of this as “a little bit arbitrary.” It gives the Secretary of State unacceptable powers to prevent publication of relevant material simply on the grounds that it might prejudice a commercial interest, regardless of the public interest in such disclosure. We hope that the Minister will recognise the need for far greater transparency in these matters than is currently proposed.

The Bill takes no account of willingness to pay. Some consumers have contracted explicitly with electricity suppliers that they do not receive nuclear-generated power, but they will be just as compelled to pay as anyone else. It proposes a funding model that has been used for new nuclear only in the United States, where, as we have heard from the noble Baroness, Lady Bennett, it was an unmitigated disaster. It cost consumers billions of dollars, with not a single new plant coming online as a result. The Minister tells us that the circumstances for the RAB are different because of different company structures and a different regulatory approach, but at the heart of both is the fact that risk is being transferred from an unwilling private sector to the consumers, who will not be given a choice. These are just some of the flaws in the Bill that we will attempt to correct in Committee.

Liberal Democrats, for a number of reasons, have a more in-principle objection to new nuclear projects. The noble Lord, Lord Wigley, quite rightly pointed out that we need to rapidly decarbonise our energy sector, but the new projects envisaged in the Bill cannot feasibly come online in time to meet the target to decarbonise our electricity supply by 2035, which the Government themselves say is necessary if we are to hit our 2050 net-zero target. The noble Lord, Lord Howell, underlined the huge difficulties that face these large-scale reactor projects. Even the notoriously optimistic EDF does not believe that Sizewell C could start generating before 2034 at the earliest. Given that it was wrong by a factor of 12 years for Finland’s Olkiluoto EPR, and that in January of this year EDF announced yet another delay to its Flamanville 3 EPR, which is already running a decade late and at quadruple the cost of its first estimate, I hope the Minister can agree with me—on this, if on nothing else—that EDF’s predictions are not ones on which to bank our net-zero plans.

Nuclear is not a feasible global strategy for meeting net-zero targets. We cannot possibly envisage nuclear power being the solution across the world. It is just not going to happen, so we need to find other ways. Nuclear is also, as we heard from my noble friend Lord Teverson, a particularly bad technology for complementing renewables. It is designed for baseload generation and, despite the ability of PWRs to load-follow, it is limited. As my noble friend said, the astronomical costs of construction mean that it does not make economic sense to run these plants at less than full capacity.

However, we also have to take into account the fact that delayed completion and outages can leave huge holes in supply. When Hinkley Point C finally comes online, should it suffer further delay or an outage once operational, we would lose 7% of all UK power, so we have to have an ability to backfill that. We should be aware that at this present moment, 10 of the French reactors are currently offline—nearly 20% of their fleet.

Thirdly, new nuclear is a costly distraction from the urgent need to radically rethink our energy system. As the noble Baroness, Lady Bennett, said, with the Bill we will be crowding out capital that is vitally needed for rethinking and reshaping that energy system through demand reduction, demand repositioning, and energy storage and release. The Bill is stuck in outmoded thinking.

As we heard from my noble friend Lord Teverson, the most cost-effective way to reduce CO₂ emissions—I think I saw the Minister nodding his head in agreement—is to reduce energy use. For the amount that Hinkley Point C will cost we could retrofit enough homes to save all the energy it will produce.

[Lord West of Spithead (Lab)]

I mentioned that with regard to this sort of work that is very easily said, but the complexity of doing it is immense when you are talking about people packed into tower blocks and all the different houses. It is not easy and straightforward. It is very important, but it will not resolve that problem, in exactly the same way that over the last weekend renewables did not provide us with that much energy. Luckily—I suppose—power lines went down so people were not demanding it that way, but my goodness me, renewables were not providing it.

[Lord Oates (LD)]

A huge amount of work could be done. Huge numbers of homes that are in very poor housing stock and in very poor condition could easily be brought up to speed. That is the urgent thing that needs to be done now instead of becoming obsessed with huge power plants which are immensely expensive, highly complex and cannot possibly come online in time to meet the targets that the Government have set themselves.

[Baroness Bennett of Manor Castle (GP)]

Does the noble Lord agree with me that the noble Lord who just intervened on him—

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

I am sorry; I was trying to get the terms right. The noble Lord, Lord West, might like to go to Portsmouth to see where there was a wonderful passive house refurbishment of an entire council house block.

[Lord Oates (LD)]

I am grateful to the noble Baroness. I am sure that the noble Lord, Lord West, is very familiar with Portsmouth and that he will take the opportunity to visit such projects.

As we know, electrical use is highly cyclical, both in terms of daily peaks and troughs and annual swings. Therefore, we have to show much greater urgency about how we use smart pricing to reposition demand rather than simply piling on more production to meet peak load. We also have to invest in energy storage and integrate it into grid planning through batteries, green hydrogen production, pumped hydro, compressed gas storage and other solutions.

Finally, nuclear power generation produces high-level nuclear waste which is deadly for longer than any human civilisation has ever survived. It is notable how few noble Lords who contributed as nuclear proponents to this debate addressed that fundamental issue.

The Minister was keen to tell us, as other noble Lords were, how the UK was the first country in the world to begin a civil nuclear programme, yet decades after that and after promising that a solution to this problem is just around the corner, the Government and industry have still failed to supply one. It is our contention that, quite apart from the other powerful arguments against nuclear, it is morally unjustifiable to build new nuclear stations until we first have a geological disposal facility in operation for the long term to deal with the existing high-level waste we have produced. That is key.

In our view, the case for new nuclear generation projects falls down at every hurdle. They cannot contribute to our 2035 electricity decarbonisation target, they cannot effectively complement renewables, and they cannot even clean up the mess they have already created. So laden are these projects with risk, so staggeringly unable are they to keep to time or budget, and so eye-wateringly expensive is the electricity they generate that the only way to finance them is by passing the risks and costs to consumers and taxpayers who are given no choice over whether to accept them.

It is hard to improve such a fundamentally flawed project, but in Committee we will do our best to bring forward amendments to deal with the specific flaws in the Bill that I identified earlier. We look forward to working with noble Lords across all parties in the House to at least make the best of a bad job.

[Viscount Hanworth (Lab)]

Before the noble Lord sits down, may I ask him to clarify how he proposes that we should accommodate the variability of wind and solar power, which I believe are the sources of power that he prefers or proposes?

[Lord Oates (LD)]

If the noble Viscount had listened to my speech, I set out a range of areas in which we need to completely rethink our energy system, including significant investment in energy storage that we can bring online, demand repositioning and demand reduction. Those are the solutions, but I am happy to discuss them further with the noble Viscount outside the Chamber.

Cost of Living

Lord Oates Excerpts

Thursday 3rd February 2022 Grand Committee

[Lord Oates (LD)]

My Lords, I follow other noble Lords in congratulating the noble Lord, Lord Whitty, on the timely nature of this debate, coming on this day when we have seen a staggering increase in the energy price cap, the Bank predicting inflation at 7.25% by April and the Bank rate rising by a further 0.25%, impacting on millions of borrowers and current mortgage-holders on variable mortgages, plus all the people who will enter the mortgage market in the coming years. It has been estimated that the average rate is likely to rise from 1.6% to 2.5% by the end of this year. So there is a whole series of pressures—not just home costs and energy costs but the knock-on effects on the wider economy. The one thing about energy inflation, of course, is that it feeds through our whole economy and will continue to do so for some time.

Back in 2015, I had a conversation with Stewart Wood—now the noble Lord, Lord Wood of Anfield—who was at the time working for the then leader of the Opposition. He was talking to me about the Labour Party’s proposal for a price cap and what the Liberal Democrats’ view of it was. I gave him my personal view: I lived for some time in Zimbabwe, where the Government thought that they could cap prices. The impact was that there is no decent electricity supply in Zimbabwe anymore. Stewart perhaps thought that I was trying to compare the leader of the Opposition at the time to Robert Mugabe, which was not the point. The point was that, at the end of the day, no Government can insist that a business, or even a public utility, should supply goods in the long term at a lower cost than they cost them. It is just not sustainable.

Of course, this is not the moment to lose price caps, but we have to understand that, in addition to this 54% hike that people are going to see—indeed, for some people it will be up to 100%, because they may be coming off fixed rates—we also have the costs that will be piled on to energy bills to pay for the collapsed energy companies. Some have estimated that it will cost as much as £94 per household to cover the cost of those that went bust. I would be interested if the Minister could shed some light on that.

On top of this, the Government are now proposing that part of the way out of the current situation is a solution that will put further costs—a further £40—on bills later. As the Resolution Foundation said today, it is about slightly smaller bills today for even bigger ones tomorrow. That is no solution in the long term. On top of that even, the Government are proposing, in a Bill that will come into the House on 21 February, something called the regulated asset base model for the funding of nuclear, which will pile yet more money up front on the bills of millions of consumers.

At the same time, as many noble Lords, including the noble Lord, Lord Sikka, have mentioned, we see Royal Dutch Shell and all the oil and gas majors showing record profits. I do not intend to get into a debate about who proposed what first with the Green Party, the Labour Party or anybody else, but as my noble friend Lord Shipley said, the Liberal Democrats proposed a windfall tax—a Robin Hood tax, as he called it—on those oil and gas majors, which would help to provide a doubling of the warm home discount, a doubling of the winter fuel allowance and a £500 million fund to assist energy-intensive industries, which the noble Lord, Lord Jones, mentioned.

However, the truth is that we are where we are because of an abject failure of energy policy on the part of the Government. It starts with their failure on home insulation. My noble friend Lady Scott of Needham Market set out clearly the nature of that failure. We should, however, put that in the context of what the noble Baroness, Lady Bennett, said, which is that the best energy saving is the energy that one does not use. Contrary to much that we have heard from the climate chaos fanatics who, sadly, are not represented here, and who say that it is all about us pumping not enough gas or putting too many green levies on bills, the truth is that the price rises are to do with fossil fuel, not green levies.

Total household expenditure on energy between 2010 and 2019 fell from £27.7 billion to £23.4 billion. One of the main reasons for that was that domestic gas and electricity consumption also fell in that time, from 43,717,000 tonnes of oil equivalent in 2010 to 34,282,000 in 2019—a 21% drop. A huge reason for that was some of the efforts made by the coalition Government, in particular by my right honourable friend Edward Davey as Energy Secretary, to push home energy efficiency. In March 2015, just before the end of the coalition, there were 53,894 monthly installations. In March 2019, that had figure fallen to 13,929. I have used the 2019 figures in all those statistics so that people cannot say, “Oh well, that’s just to do with Covid”. That has been costing households, as my noble friend Lady Scott said, an absolute fortune. In addition, as she also mentioned, the zero-carbon homes standard of the coalition was scrapped by George Osbourne—another one of his mistakes.

I say to the noble Lord, Lord Young, who thinks that somehow if there were more fracking or we were pumping more gas from the North Sea it would solve our problems, that I am afraid the truth is that it would not. The astonishing fact is that between September and November 2021, the latest period for which figures are available, the UK exported 31,975 gigawatt-hours of gas. Between September and November 2020, the figure was 15,830 gigawatt-hours—less than half. In case people say that that was just because of Covid, the figure for the same period in 2019 was 19,633 gigawatt-hours. The truth is that we are operating in a market, and all that would happen if we pumped more gas is that we would export more of it. The idea that whatever we could pump would materially bring down prices, unless we somehow seized those assets and nationalised them, is for the birds.

The inflationary impact of energy is massive, but it comes amidst so many other inflationary pressures. The impact on the lowest paid, as we have heard from my noble friend Lord Shipley, the noble Baroness, Lady Crawley, and many others, will be particularly acute, and I join him in calling for a realistic price index that really reflects the impacts on the lowest paid.

In conclusion, we must have a radical overhaul of our energy system and economy, so that we can get to a stage where the Government are not boasting about the funding they are giving to food programmes and holiday activities, but are ensuring that we have an economy in which people can earn a decent wage and have a decent life.

--- Later in debate ---

[Lord Callanan (Con)]

My Lords, I thank the noble Lord, Lord Whitty, and admire him for his prescience in selecting such an appropriate subject for debate today. He must have had more advance notice than even I had of when the Government’s announcements were coming, so congratulations to him on a very timely and informative intervention. Of course, I am grateful to everyone who has contributed today on this topical but also extremely vital subject. I will try to address as many of the points as possible that noble Lords raised, but this has been a wide-ranging debate and, if I do not manage to cover everything, I am sure that we can catch up in writing.

The Government of course recognise and understand the pressures that people are facing with the cost of living and we will continue to listen to people’s concerns, as we have done throughout the pandemic. I agree with the noble Lord, Lord Monks, and many other speakers in recognising that this is a timely debate, with the energy regulator’s announcement just a few hours ago and the Chancellor’s announcement on the back of that. The regulator’s announcement was for the period April to September 2022.

In a recent debate secured by my noble friend Lady McIntosh, I set out that wholesale energy prices have been rising, as we all know, due to increases in the price of wholesale gas, to which multiple international factors have contributed. I start by reiterating that energy security remains an absolute priority for the Government and we are confident that our energy security will be maintained. We continue to work closely with key industry organisations, including Ofgem and National Grid gas, to monitor both supply and demand. In response to the point made by the noble Lord, Lord Sikka, we meet around half of our annual gas supply through domestic production and the vast majority of our imports come from reliable suppliers such as Norway.

As I have said before in the House, the energy price cap has, for the last six months, protected millions of households during the winter period from the volatility seen in wholesale gas prices. The Government have committed to retaining powers to implement a price cap beyond the current long-stop date of 2023, should that prove necessary. However, as noble Lords will know, sadly, the rising wholesale costs of energy have now fed into the price cap’s methodology, leading the independent—I emphasise that—regulator, Ofgem, to increase the level at which the price cap is set. Recognising the impact that this will have on households, I am pleased to update the House, as the Chancellor did this morning in the other place, that the Government are taking action on the back of this.

Today the Chancellor announced a £5.6 billion energy bills rebate, which will help households to deal with the unprecedented increase in energy bills that we have seen this year by helping to smooth the costs over subsequent years. The rebate, which will shortly be consulted on by my department, will provide households with a payment of £200, which will be credited to their energy bills by their current energy supplier. This rebate will likely start issuing payments to energy suppliers to pass on to their household customers from autumn this year, which of course is when households will need it most as we head into the winter period next year.

In response to the point from the noble Baroness, Lady Bennett, let me make it clear that while the mechanism will be subject to consultation, this scheme is not a loan. No interest will be charged on the upfront funding provided by the Exchequer. The Government will seek to recoup the funding at a later stage, smoothing out the cost increases we have witnessed in the wholesale energy markets. The department will work closely with industry and consumer groups on how we can best deliver this policy, with a consultation planned for the spring.

This is an important and timely measure, which will help households at a time when they need it most. In addition, the Government have announced further support for delivery outside of the energy system to help with the wider cost of living. We have also today announced a £150 payment for the 80% of English households in council tax bands A through D. This measure will be worth the equivalent of more than 2.5% of net income in 2022-23 to the poorest 10th of households, compared with less than 0.5% to the richest 10th. In addition, there is £144 million of discretionary funding for local authorities to support households who need support but for some reason are not eligible for that council tax rebate. The combined package could see some households receive £350 over the coming financial year to help them with the cost of living. This is worth some £9.1 billion.

This new support package is on top of the existing set of measures in place to support families, worth around £12 billion a year. These include energy-specific measures targeting the fuel poor. The noble Lords, Lord Whitty and Lord Oates, and my noble friend Lady McIntosh mentioned the warm home discount scheme which provides support with energy bills through rebates, helping households stay warm in the winter months. The scheme currently provides over 2 million low-income and vulnerable households with a £140 rebate off their winter energy bills. I am pleased to confirm to noble Lords that BEIS has already consulted on proposals which would expand the scheme from around £350 million to £475 million per year, at 2020 prices, which will help the scheme reach 3 million households from winter next year onwards.

On the very important subject of energy efficiency, I am afraid I have to tell the noble Baroness, Lady Scott, that she is simply wrong. The energy company obligation has already installed 3.3 million measures in 2.3 million homes. We are increasing, not cutting, the amount energy suppliers invest in energy efficiency measures for low-income households. From April this year, the start of the next financial year, this will be extended until 2026 and we are boosting its value from £640 million to £1 billion a year, helping the poorest households to install the energy efficiency measures that many noble Lords referred to.

In addition, for the benefit of noble Lords who raised the issue, such as the noble Lords, Lord Oates and Lord Shipley, and the noble Baronesses, Lady Scott and Lady Bennett—amazingly I agree with one point the noble Baroness, Lady Bennett, made—the best form of green energy is indeed not using it in the first place, through energy efficiency measures. This is precisely why we are investing over £2 billion a year in energy efficiency schemes, through projects such as the home upgrade grant, the local authority delivery scheme, the sustainable warmth competition and the social housing decarbonisation fund. All of these are helping to provide long-term solutions by improving the energy efficiency of the homes of the poorest people in society—exactly those who should be deserving of our support.

In addition to all that, the Department for Work and Pensions has a set of measures to support households with their energy bills. The £500 million support fund was announced last autumn to help those most in need this winter. This includes provision for utility costs, including energy. The DWP also continues to provide support for vulnerable users and pensioners through its winter fuel payment and cold weather payment.

Picking up on some of the points made by noble Lords, the debate was well introduced by the noble Lord, Lord Whitty, who asked a number of questions, as indeed did the noble Lord, Lord Oates, about the retail market and supplier failures. As a result of high gas prices, some 26 suppliers have exited the market since the beginning of August 2021. The current situation has been precipitated by unprecedented conditions. In the vast majority of those cases, the Government and Ofgem have utilised the supplier of last resort process, which has been set up to protect customers when their supplier fails to ensure that they do not suffer any disruption or lose any of their credit balances. Ofgem and the Government will continue to look at ways to reduce the costs that arise from a supplier of last resort process, but it is clear that it is a vital safety net that has protected millions of consumers. Last October, Ofgem published a letter to industry setting out the actions that it will take to reform the retail market. This includes reviewing licence conditions to strengthen the financial resilience of suppliers and help restore stability to the sector.

I was also asked about retail market reform. The Government want a retail energy market that continues to protect consumers now and as we transition to net zero, while engaging them with positive choices about their energy supply. We want a competitive market whereby companies invest in innovation and offer products and services that help us in our drive to decarbonisation.

The noble Lord, Lord Whitty, talked about retail market regulation to support progress to net zero. In considering these reforms, the Government will take account of the lessons of the current market. In fact, we published a call for evidence on the future of the retail energy market. A strategy will be published as soon as possible once the current market situation has stabilised.

The noble Lord, Lord Oates, raised the issue of funding our future policy costs to deliver net-zero policy. He will be aware that, as set out in the heat and buildings strategy, we will publish a fairness and affordability call for evidence to set out the options for energy levies and obligations to help rebalance electricity and gas prices and to support green choices, with a view to taking final decisions in 2022. Consumers will be at the heart of those decisions.

[Lord Oates (LD)]

The one question that the Minister has not answered is what the Government’s estimate is of the added cost to bills as a result of the 26 energy company failures that he mentioned. Citizens Advice estimates that it has put £93 on bills. Do the Government have a figure?

[Lord Callanan (Con)]

I do not have a precise figure in front of me. It is a complicated issue because it depends on exactly where the costs fall but if the figures are available, I will write to the noble Lord with as much information as I am able to provide.

In response to the point made by the noble Lord, Lord Whitty, on national insurance rises, the lowest earners will, of course, be protected from the levy. The highest-earning 15% will pay over half the revenue and 6.1 million people earning less than the primary threshold or lower profits limit will not pay the levy at all. Regarding the rebate adding costs to bills further down the line, the aim of the policy is to reduce energy bills for households in Great Britain in 2022-23; it is to be paid back automatically and interest-free over the next five years. This is a fiscally responsible approach that helps customers to manage the unprecedented increase in energy bills by spreading the increased costs of global prices over time.

My noble friend Lord Howell of Guildford, as he normally does, made some good points about our overall energy strategy. He will be aware that the energy White Paper set out a vision for transforming our energy system, backed up by practical action. We will address the decarbonisation of the power sector on a whole-system basis so that we deliver low emissions and maintain high levels of reliability and resistance, while ensuring that the cost of the transition is fair and affordable. The Government are taking a range of important steps to decarbonise the power sector, while establishing business models to support hydrogen-fired generation, new nuclear and CCUS-enabled generation, and to support the development of flexible storage.

I agreed with many of the sensible comments made by the noble Lord, Lord Young of Norwood Green, from whose expertise in this area we have benefited. He reminded us—it is worth making this point—that these are difficult, complicated issues, which need long-term holistic solutions. Of course, we are all searching for a simple, easy answer, but many of these issues take decades to come about. One issue that I could highlight is that of new nuclear. The noble Baroness, Lady Blake, criticised us for not developing new nuclear, but these projects take decades to bring about. The main reason for the decline in the nuclear industry in the UK was that Labour abandoned our nuclear programme when it came to power in 1997. For the whole of its period in government, no progress whatsoever was made on new nuclear. We are now reversing that and proceeding with new nuclear developments, but it takes many decades to bring them online. I believe that, in considering our energy system, that decision will prove to be one of the biggest mistakes in energy policy over recent decades.

The noble Lords, Lord Shipley, Lord Monks, Lord Sikka and Lord Oates, the noble Baroness, Lady Crawley, and other noble Lords raised the issue of a windfall tax. It is worth pointing out that the UK Government already place additional taxes on the extraction of oil and gas, with companies engaged in the production of oil and gas on the UK continental shelf subject to headline tax rates on their profits that are currently more than double those paid by other businesses. To date, the sector has paid more than £375 billion in production taxes. We are always considering a full range of options to support consumers and businesses through the current high price challenges, but it is important to remember that any action that we take must not have broader negative consequences for the economy.

All Peers have referred to the importance of attracting investment and achieving our energy goals, which will require vast investment from the private sector in our energy system. If the Government woke up one morning and imposed windfall taxes, however attractive that might sound, that would massively impact the amount of inward investment that we attract into the country. While the dividends of those companies have been criticised, we should never forget that many of those dividends go into paying the pension funds that help to pay the pensions of the many pensioners that noble Lords highlighted who might be suffering from fuel poverty this winter. There are never any easy, simple or straightforward solutions to these problems, however much we might want to think that there are.

My noble friend Lady McIntosh raised the important issue, as she often does, of off-gas-grid consumers. The Government believe that it is essential that consumers of LPG and heating oil get a fair deal. In our view, the LPG and heating oil markets do not share the monopoly characteristics of network utilities and are therefore not subject to price regulation under Ofgem. However, I can tell my noble friend that the energy rebate announced today is being passed through to suppliers to pass on to domestic energy users, including off-gas-grid consumers, who are, of course, electricity customers.

The noble Lord, Lord Jones, asked for estimates of the number of homes struggling. We regularly publish updated fuel poverty statistics, including projections for 2022, taking into account the price cap increase and the measures announced today. We will publish those on 24 February. In addition, Ofgem regularly publishes its statistics on vulnerable consumers and indebtedness through its consumer protection and vulnerability reports.

Lastly, the noble Baroness, Lady Blake, spoke about the important subject of hydrogen. We are committed to the development of hydrogen as a strategic decarbonised energy carrier for the UK. We are currently taking a twin-track approach, covering both electrolytic hydrogen from renewables and methane reformation with carbon capture, usage and storage. Both methods of production are covered by innovation schemes and policy development.

As I have set out, the Government have listened, recognised and acted on the concerns of families struggling with the cost of living. As I said at the start, the energy bills rebate will provide over £5.6 billion of support to households later this year, ahead of the next winter period, while the additional support for English homes in council tax bands A to D will further help households with the cost of living—a total package worth £9.1 billion. Of course, the Government will continue to engage with industry, consumer groups and other stakeholders as we progress these measures and I am sure that we will have further debates as these policies develop in the coming months.

CPTPP (International Agreements Committee Report)

Lord Oates Excerpts

Tuesday 1st February 2022 Grand Committee

[Lord Oates (LD)]

My Lords, I am pleased to follow the noble Lord, Lord Lansley. I very much welcome the introduction of the noble Baroness, Lady Hayter; I am particularly pleased about the emphasis on how our committee can work and properly help to inform the House. It is really important that the Government give us some clarity on that and do not simply reserve it such that they decide what and when they will tell us whenever they feel like it.

I very much agree with the noble Lord, Lord Lansley, that the negotiating objectives are one of the most crucial points in our work in the committee, and for the House as well. By the time an agreement is signed, it is too late. This is the moment where we get to put our views. I hope the Minister will not only listen and respond but take on board some, if not all, of the points—if not mine, perhaps at least those of the noble Lord, Lord Lansley.

I will focus on the climate aspects, but the issue about medicines is critical; it goes back to the role of Parliament in the process. I would much prefer that Parliament, particularly the House of Commons, had to agree the negotiating objectives, because it would be very clear to our negotiating partners what they were. In the absence of that, on an issue as critical as this it is essential that the Government speak clearly and categorically, so that there is no doubt in the minds of our negotiating partners.

As I said, I want to speak principally on the climate-related aspects of the negotiating objectives set out in The UK’s Strategic Approach. I am afraid that the document seems to lack any positive ambition to combat climate change and to protect nature. There are just nine references to climate change in the whole document. Two of those simply state that, as a significant collection of nations, CPTPP has a potentially important role in tackling climate; I am sure that is true. In another reference the Government say that

“the UK will work with partners to support our mutual objectives to tackle climate change”—

I hope that was not in doubt. Another reference says that

“the UK will advocate for clean growth and cooperation in the global fight against climate change”.

Again, there are no details of how and there is no specific reference to the CPTPP. The fifth and sixth references, on page 60, simply state the generalised overall commitment of the Government to their climate change commitments and the statement that

“Climate change is a threat that requires an urgent global response”.


The urgent response is definitely not found in these negotiating objectives. The final references simply refer to the impacts of climate in this regard.

Nowhere—not once in the whole of this 67-page document, as far as I can find out—is there a single concrete negotiating objective. As our report points out at paragraph 140:

“The Negotiating Objectives … do not include any commitments or red lines to ensure that the UK’s right to regulate is maintained in support of climate commitments and environmental standards.”


Nowhere in the document will you find an indication of the overall approach that the UK will take to ensuring that membership of the CPTPP leads not only to regression in our climate ambitions, but actually to some ambition for a net-positive outcome in tackling climate change and driving down carbon emissions. Indeed, far from tackling emissions, the document concedes that UK greenhouse gas emissions will rise as a result of the agreement, according to the impact statement. Even then, the real impact of UK accession on greenhouse gas emissions is of course likely to be in partner countries, not in the UK. Regrettably, The UK’s Strategic Approach cannot give us any useful information about that at all. It says that it is all too complicated, and it may well be. Nevertheless, as the carbon intensity of production in almost all those countries is greater than in the UK, it is likely that any significant increase in trade will result in a significant increase in emissions. We noted, in particular at paragraph 141 of our report, that there is a danger that the CPTPP will incentivise

“greenhouse gas intensive agricultural practices in CPTPP member countries with lower environmental production standards.”

That has the potential to undermine the UK agricultural sector’s commitment to net-zero greenhouse gas emissions by 2040.

The Department for International Trade needs to step up to the plate here and recognise that UK trade policy has to factor in our climate ambitions, otherwise it will simply end up exporting jobs to countries with higher carbon-intensive production, causing economic damage at home and climate damage abroad. Regrettably, however, the Government seem to lack coherence on climate and trade. BEIS, Defra, the Treasury and the Department for International Trade all seem to be pulling in different directions, and it seems that there is confusion even within the department, between the department and the Board of Trade and within the Board of Trade about what this is all about.

The Board of Trade’s report last July stated:

“Climate change and nature loss are among the most complex issues of our time—they will touch every aspect of life and require all the tools at our disposal to resolve them, including trade tools.”


Yet this document on the strategic approach to one of the most important partnerships that we are likely to form in the coming years, if we go ahead, has nothing at all to say about our ambitions. I really think that the Department for Trade needs to start internalising; if we are serious about the Paris targets and serious about those commitments, they have to be taken into account in our trade negotiations.

Personally, I think we need a few rules about this. First, we could start prioritising trade agreements with countries that are willing to take ambitious steps with us on carbon emissions and wider issues of biodiversity and nature loss. We could insist that all trade agreements that we are prepared to sign up to will have to include zero tariffs and the removal of non-tariff barriers for certified green products and services. We could say that we do not intend to sign any trade agreements unless the overall impact from them can demonstrate a net reduction in greenhouse gas emissions and a net increase in biodiversity.

The challenges we face in reaching the Paris climate targets are already herculean; we cannot go on adding to them, however modest the Government may argue this is. Whatever the scale of the greenhouse gas emission increases arising from accession to the CPTPP, the Australia FTA or any other trade agreement that there turns out to be, they are too much. Trade policy is one of the tools that we have to drive down greenhouse gas emissions and drive up biodiversity. The strategic approach suggests that the Government are unwilling to use that tool. I really hope that the Minister can go back to his department and reinforce how important this aspect of trade policy is.

Net-zero Test for New Policies

Lord Oates Excerpts

Tuesday 11th January 2022 Lords Chamber

[Lord Callanan (Con)]

I thank the noble Baroness, but the reason my Answer was very similar to a few months ago was that the Question was very similar to the one she asked me a few months ago. We have taken new approaches to embed net zero in spending decisions, including requiring departments to include the greenhouse gas emissions of their spending review bids and their impact on meeting carbon budgets and net zero. There is a huge amount of co-ordination taking place across government and between this Government and the devolved Administrations in helping us to meet our goals.

[Lord Oates (LD)]

Does the Minister agree with the same letter where it says that we must

“ensure the competitiveness of UK businesses is not disadvantaged by imports that do not have the same carbon costs”?

If so, why is it that the only thing the Treasury’s Net Zero Review has to say in the way of action on carbon leakage is that

“a case for conducting a formal call for evidence may emerge.”

Is that not a woefully complacent approach which puts at risk British industry and British jobs?

[Lord Callanan (Con)]

I agree with the noble Lord that the competitiveness of UK industry is extremely important. The question he is asking is effectively about the carbon border adjustment mechanism which the EU and others are considering. I am sure that the noble Lord would be the first to accept that this is a complicated and difficult policy area. It cuts across various WTO and international trade commitments. I can see in principle the case for what he is saying, but it is a complicated area.

Energy Costs

Lord Oates Excerpts

Thursday 6th January 2022 Lords Chamber

[Lord Oates (LD)]

My Lords, I congratulate the noble Baroness, Lady McIntosh, on securing this timely and important debate. Although I do not often agree with the noble Baroness, Lady Fox, I absolutely share her view that this is an emergency. After that, however, I think we part company. The Minister knows that I always want to be helpful to him, so I will share some of the practical suggestions that, as my noble friend Lord McNally told the House, the Liberal Democrats have recently set out to tackle the immediate energy price crisis.

Noble Lords will be aware of the excess profits currently being generated by oil and gas companies as consumers suffer. Consequently, we propose a windfall tax on these profits to support vulnerable individuals and families. This Robin Hood tax would raise an estimated £5 billion to £7 billion, which would be spent on the following: doubling the warm home discount, taking £300 off the bills of 7.5 million vulnerable households, and extending the discount to all those on universal and pension credit; providing up to £600 a year to 11.3 million elderly pensioners to help with heating bills through a one-off doubling of the winter fuel allowance; implementing a 10-year home insulation scheme to reduce energy bills in the long term, including £500 million to be spent on emergency insulation in the next year through fully granted funds for those in fuel poverty and on low incomes; and, finally, establishing a £500 million fund to support energy-intensive businesses, protect jobs in the sector and help companies to reduce their long-term energy requirements.

These are practical short-term measures that the Government could take now, if they had the will. In the longer term, they have to construct an effective energy policy, which should be centred on three principles: first, reducing energy waste; secondly, massively increasing our energy storage capacity; and thirdly, accelerating renewable deployment. Although we face an undeniable crunch on household energy bills today, over the decade from 2010 to 2020—the last full year for which government figures are available—total household expenditure on energy and overall household energy bills based on average consumption both fell significantly in real terms. This was due significantly to reduction in consumption as a result of new heating and energy-efficiency measures introduced during the coalition Government by the then Secretary of State, one Ed Davey. Total energy expenditure on gas in real prices fell from £28 billion to £23 billion. During that time, average annual household consumption of gas fell from 17,651 kilowatt hours in 2010 to just 12,225 kilowatt hours in 2020.

As the Climate Change Committee has reported, measures to reduce emissions from the UK’s 29 million homes have since stalled. Energy usage in homes has increased and adaptations of the housing stock to meet the impact of the changing climate are lagging far behind what is needed. The Government urgently need to address this issue. As the NAO report on the green homes grant fiasco recommends, the Government must

“engage with the installer market on the proposed design of any future scheme and base its planning on a realistic assessment of how long it will take … the market to mobilise the skills and capacity to meet demand across … the country.”

Can the Minister tell us what discussions the Government are having on this? Can he also tell us why the Government have failed to take up the Minimum Energy Performance of Buildings Bill tabled by my noble friend Lord Foster of Bath, which places a duty on the Secretary of State to achieve the Government’s energy-efficiency targets for homes, by placing them in legislation and requiring annual reports on progress provided to Parliament? A very similar Bill was proposed in another place by the late David Amess. It would be a fitting tribute to his memory if the Government would now implement this in law.

I will avoid being provoked into an intemperate response to the curious comments of the noble Lord, Lord Lilley. I simply conclude by saying that the influence of climate defeatists on past Conservative policy is one of the key reasons for the difficulties in which we now find ourselves.