Energy Bill [ Lords ] (Ninth sitting)

Alec Shelbrooke Excerpts

Committee stage
Tuesday 13th June 2023 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

On a point of order, Ms Nokes. It has come to my attention that an article published today by Politico says that the Secretary of State has

“signaled a coming U-turn on the government’s plan to put a levy on household energy bills to support the nascent hydrogen gas sector in the U.K.”

The article reports the Secretary of State as saying that

“while hydrogen was a ‘great opportunity’ for the U.K. it was ‘unlikely’ that the gas would be a major future source of domestic heating.”

Pertinent to this Committee, he said that the Government did not want to see

“a situation where a levy is penalizing people who don’t use it”

—almost the exact words that were discussed in Committee—and added that hydrogen would be

“a better bet for heavier industry”

and transport.

The Secretary of State was also reported as saying:

“We’ll look at ways to create a levy or a financing that works for everybody as best as possible”.

What I take from that is that the Government are actively looking at ways to undertake a form of levy different from the one we discussed in Committee recently. You will recall, Ms Nokes, that you had to cast the deciding vote on the relevant amendment. I am sorry that the Minister was unable to give us the information that the Secretary of State has given us in that article, in particular that the Government are actively looking at developing an alternative levy arrangement. It is more than conceivable that had that information been available to the Committee at the time, that vote may have had a different outcome. In particular, the convention of the Chairman casting the deciding vote in favour of the status quo, which you quite correctly did at that time in your position as Chair, Ms Nokes, could have meant that a vote could have been cast for a different status quo—that is, one in which the Government were actively looking

“at ways to create a levy or a financing that works for everybody as best as possible”.

The original formulation in the Bill would therefore have fallen, in effect.

Ms Nokes, do you have any guidance on how we could rectify this problem? Might we invite the Government to table a new clause, which could be discussed at the end of our deliberations on the Bill? As Chair of the Committee, would you accept a new clause later in the Bill that might allow a debate to take place in the light of the information we now have before us? It is entirely in your hands to decide, Ms Nokes.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Further to that point of order, Ms Nokes. It is great to serve under your chairmanship. I am sure the hon. Member for Southampton, Test recalls the comments that I made in the fourth sitting when I abstained on the vote. Hansard will confirm the exact language that I used, but I believe I said that the Government had said to me that they were actively looking to table an amendment on Report. The article that has been produced today ties in with the comments that I made on the record a few sittings back, and I am relieved to hear that because it shows that we are moving forward. I do not believe there is any material change in what has happened because, as I said, I was told that the Government were actively looking at making an amendment on Report.

[Dr Whitehead]

Further to that point of order, Ms Nokes. I thank the right hon. Member for Elmet and Rothwell for his point of order, which related to mine. Far be it for me to downplay his importance in proceedings but, although he is quite right, the material difference is that I was quoting what the Secretary of State said, even though the right hon. Gentleman was clearly well informed in what he said to the Committee.

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[Dr Whitehead]

It seems rather a long time since I got through the first half of my remarks on this clause, but I am happy to continue. I will recapitulate briefly what is in the clause, and then we can move on to the next business.

Members will recall that, with amendments 160 and 161 and new clause 40—I appreciate that it will be voted on later in proceedings, not today—we are drawing attention to the possible risks attached to certain load controller activities relating to appliances that are under the authorisation of load controllers. As we have discussed, appliances that are used in smart energy networks may be able to undertake autonomous information and data transmission activities—and, indeed, activities relating to their own operation—independently of the consumer or the person who installed the device.

I previously drew attention to a company that secured a 6% or 7% share of the market in SMETS2 smart meters by putting its price 30% below the market average, thereby ensuring that energy companies have an interest in commissioning third parties to purchase and install that brand of meter. I pointed out that that company, Kaifa Technology, has very close links to—indeed, is controlled by—the state-owned China Electronics Corporation, which has been sanctioned by the United States regarding high-risk activities concerning data and electronics. Kaifa smart meters are not available for installation in the United States as a result of that sanction, yet in the UK we are apparently going ahead with no concerns whatsoever.

I am not saying that Kaifa smart meters are necessarily a source of the possible transfer-link use of data. I pointed out this morning that there are remote-switching facilities within smart meters, so it is possible that a smart meter could be switched off by an outside agency, or that its data could be transferred for not necessarily very good purposes. We have a pretty strong regulatory regime, which was recently strengthened by an information security Act. I am certainly not pointing the finger at Kaifa smart meters and saying that they are definitely not to be pursued, but we do not have any method in our current legislation—nor, indeed, in this Bill—that would enable scrutiny to be brought to bear on companies such as Kaifa in relation to national security and resilience, so that our questions can be answered. We should be as certain as possible that, should these things come to be a part of our smart energy network environment they do not, as it were, just slip in under the carpet. It should be done consciously through a review of what they mean as far as our energy security is concerned and, indeed, in respect of the security of smart energy networks.

[Alec Shelbrooke]

The hon. Gentleman is making an important point about energy security and the ability for outside players—certainly, if we consider this from a Chinese perspective—to take control. On energy security, does he share my concern about the fact that 98% of the materials used in renewable energy come directly out of China? Does that not in itself represent a similar security risk to the one he is outlining?

[Dr Whitehead]

I thank the right hon. Member for his intervention, but I do not quite share his implied view that everything that comes out of China needs to have that level of security clearance. There are concerns about the proportion of our solar panels that are made and manufactured in China, for example, and a concern that one particular country has effectively captured the market in solar panels. It would be a good idea for those purposes, not for the purposes I am talking about, to rectify that situation. China is also increasingly manufacturing components for wind turbines and various other renewables, so yes, it would be a very good idea to have a much more diverse supply chain for renewables. As far as China is concerned, that is an issue of commerce; I am talking about a potential issue of national security and resilience. Yes, it involves the same country, but there are different concerns and, indeed, concerns about other countries that may be in the same position as I outlined as far as their smart energy technology offerings are concerned.

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These are two particular instances—in the private rented sector and two-way energy production at properties—but as we have seen the Government have effectively set out targets, ideas and aspirations in a number of other areas, and while they have not necessarily done nothing, they have not done things commensurate with the ambition. This is one case where that certainly happened in the not-too-distant past. I hope that the Committee will accept the new clauses. I appreciate that they will not be voted on until the end of our proceedings, but I hope that when we do so Members, and possibly even the Government, will decide that this is something that they would like to put in the Bill after all, and vote accordingly.

[Alec Shelbrooke]

Further to my point of order this morning about declarations of interest, I have spoken to the Commons Registrar who has informed that because I personally make no financial gain from property that my wife owns it does not have to be in the register; however, I have to declare an interest at this moment that my family has a substantial property portfolio. The comments that I am about to make, however, are based on the concerns of landlords, estate agents and letting agents in my constituency.

One of the problems is if we start to over-legislate at this time. The hon. Member for Southampton, Test pointed out that, importantly, the Government are still consulting on the report. We are in danger of focusing purely on the one area of energy efficiency in the private rented sector, and in effect making landlords do things that the owner of a private property does not have to do, with the cost being passed on to tenants. Subsection (3)(a) of new clause 41 would

“enable Local Authorities to give notice to landlords that they wish to inspect a property, requesting permissions from landlords and any tenants in situ at the time to carry out an inspection at an agreed time”.

In other words, that would enable constant inspections and attempts to move forward with insulation.

We have said throughout that we have to take the public with us on this agenda. In some areas, we move too quickly to legislate on something that the Government are consulting on and that has not been properly thought through. Several times, my hon. Friends have intervened to ask where the money is coming from to do such works. At the moment, as I look at the Bill and the £10,000 cap, it is coming from the tenant. At a time when there is a political argument on both sides of the House about how people can get on the housing ladder, increasing their rents even further because the landlord has to do something that people in the private sector do not have to do will not help that cause.

There is no doubt that energy efficiency will reduce the amount of fuel that has to be used to heat a home. That is a scientific fact. We hear that it could save £1,000 a year, but that assumes that everything stays level and that we do not have to put another levy on electricity bills. I remind colleagues that when nuclear power came along, it was said that it would be so cheap to produce that we would not be able to meter it. That turned out to be far from the truth.

[Alan Brown]

Hear, hear.

[Alec Shelbrooke]

There you go, praise from the other side.

One of the points made by the hon. Member for Southampton, Test was about getting in and retrofitting now, and not having to do it again in 2050. New clause 42(1) states:

“Within 12 months of the date on which this Act is passed, the Secretary of State must conduct a review of the “Improving Energy Performance Certificates: action plan” that sets out how new technologies can improve the energy usage and efficiency of premises.”

I have no doubt of the intent with which that was written, but it can be interpreted very differently. It could mean that as time goes forward, the regulations will change and those with band C EPCs might now be told to come to a level that was not required at this stage of retrofitting.

Energy Bill [ Lords ] (Fourth sitting)

Alec Shelbrooke Excerpts

Committee stage
Tuesday 6th June 2023 Public Bill Committees

[Dr Whitehead]

He said:

“We have to take the public with us on this—we cannot keep adding to people’s bills to try to make things work.”—[Official Report, 9 May 2023; Vol. 732, c. 276.]

That was well said, and I hope that that view will be reflected in the decisions taken by this Committee this morning.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I thank the hon. Member for Southampton, Test for what was almost a warm-up act to introduce me to the stage. I agreed with every word: we do have to take the public with us, and a movement is building in the country against net zero and an increase in bills. There are many issues, as he has outlined.

I have good news and bad news for you, Mr Gray: I have quite a lot to say, but the hon. Member has covered a few of those things by setting out the financial implications, using some well-researched material that is available to the Committee, so I shall leave some of that aside.

One problem is that it is a little bit of lazy economics to come along with a new area of energy generation—renewable generation—and just say, “Well, we’ll add another tax to do it.” I hope to set out some alternative ways of doing it. There are some considerable potential uses of hydrogen, which I will come on to describe. If we take them in turn, they could suggest areas where the focus could be changed.

My hon. Friend the Minister is a dear friend of mine, and I will try to be gentle with him. He commented that the Bill will enable funding streams that are not yet decided. However, I say to him in all good heart that conversations in the background have opened with the comment, “Well, if we don’t do this, how are we going to pay for it?” That would suggest that decisions have already been made about the levy coming into place. I find that exceptionally disappointing, within the brief that the Minister has been given, because I do not want to see him hung out to dry.

Where I think the Minister has a very valid argument is in what he said about discussions taking place in the background. I have been led to believe that the Government are trying to work on alternatives for Report; I hope very much that that is true. The hon. Member for Southampton, Test quoted my comments on Second Reading; he will have noticed that my comments were not unique, as many colleagues on the Government Benches had similar concerns. I think that it is the view of the House, overall, that there are concerns about Government amendment 12. There is therefore an imperative on the Government to come along and find a way to make hydrogen work without a direct taxation on people’s bills.

Here is the reality. I have some figures and comments from the Library. Costs to consumers due to Government policy are known as policy costs. They consist of the renewables obligation paid on electricity bills to support large-scale renewables; the feed-in tariff paid on electricity bills to support small-scale renewables; contracts for difference paid on electricity to support low-carbon generation; the energy company obligation paid on both electricity and gas to support household energy efficiency; the warm home discount paid on both to provide a discount to vulnerable households; assistance for areas with high electricity distribution costs paid on electricity; and the green gas levy, which funds the green gas support scheme, paid on gas bills.

Based on the Q2 2023 price cap, the breakdown of annual costs annually is as follows: the renewables obligation is £80.26; the feed-in tariff is £18.70; the energy company obligation is £43.87; the warm home discount is £20.60; assistance for areas with high electricity distribution costs is £1.45; and the green gas levy is 45p. That shows that a significant number of green levies are already applied to people’s bills.

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[Katherine Fletcher (South Ribble) (Con)]

My right hon. Friend is making a powerful case around what many of us hear on the doorstep. Does he agree that being able to define exactly what any levy would be for is a really important part of explaining something when people are fearful of their energy bills? Some have concerns about the hydrogen levy: “What hydrogen is it? Is it green hydrogen produced by wind? Is it blue hydrogen produced from carbon fossil-fuel sources with associated carbon capture and storage?” Blue hydrogen still contains some contaminants. Does he believe that “hydrogen” has been defined enough to allow us to explain things to the general public?

[Alec Shelbrooke]

My hon. Friend touches on an important point, drawing on comments made by the shadow Minister, the hon. Member for Southampton, Test. We are being asked to add a levy before we know how it will be used or what type of hydrogen it will generate. I do not think that people like signing open cheques without the way forward being defined.

I want to develop the argument for why hydrogen is an important step and to look at its applications in the automotive industry. The reason I say that is purely—

[The Chair]

Order. I am reluctant to interrupt the right hon. Gentleman, whose speeches I always greatly enjoy, but he is now launching us into a Second Reading-type debate on the benefits of hydrogen. We are discussing a very specific series of amendments, so perhaps he will return to the group under discussion.

[Alec Shelbrooke]

I am grateful, Mr Gray. What I am seeking to do is set out alternatives that can be used instead of putting the hydrogen levy in place.

[The Chair]

Order. We are discussing a Bill. It is possible to discuss the Bill itself or the amendments proposed to it; it is not possible to discuss things that are not in the Bill, even if the right hon. Gentleman thinks that they might be a good idea. Will he therefore please discuss either the Bill or the Government or other amendments in this group? He may not discuss things that are not in the Bill.

[Alec Shelbrooke]

I take your advice, Mr Gray. One tries to push one’s luck, but I take your comments on board.

To summarise the comments I was going to make, which can wait until subsequent stages, there are several alternatives within the energy market that can be used to achieve some of the things we are hoping to achieve with the blunt tool of yet another tax on energy. Hydrogen will play an important part in the energy progress that we make going forward. These things will need capital funding to help set them up, similar to many things that were done when the North sea was first exploited. Government subsidies and underwriting helped to get that under way.

These are important areas. We must not be blind to the fact that the public are losing faith in the climate agenda overall. There are many reasons why that may be happening. It may well be just algorithms on social media that draw certain people together, but we cannot be blind to the fact that there is a growing movement against net zero. There is a growing movement in this House to talk about having a referendum on whether we want to achieve net zero. Some colleagues are now pushing that forward.

We have to act carefully and diplomatically, and show people that there are huge advantages to be had from this technology and this energy going forward. The Government raise a lot of revenue off energy production, as the hon. Member for Southampton, Test and I have outlined. I therefore feel that Government amendment 12 would be a mistake. However, the Minister has indicated that work is taking place in the background, and I have had indications that amendments may be brought in on Report. If the amendment is pushed to a Division today, I shall not vote against it, but I shall abstain.

[Olivia Blake (Sheffield, Hallam) (Lab)]

It is a pleasure to follow the right hon. Member for Elmet and Rothwell. I know that this is not really a declaration of interest, but my mother, Baroness Blake, was actually the person who moved the amendment in the other place. It is interesting that mother and daughter are both working on this Bill in different ways.

Energy Bill [ Lords ] (First sitting)

Alec Shelbrooke Excerpts

Committee stage
Tuesday 23rd May 2023 Public Bill Committees

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I thank the hon. Gentleman for giving way. I want to make a personal point: may I ask him to speak up slightly? I am hard of hearing and I am already struggling to hear what he is saying. I thank him.

[Dr Whitehead]

I appreciate that point. A moment ago, I was just making a personal aside to the Chair. I will try to address the Committee in a more expansive manner.

This group of amendments would put the full definition of carbon capture, usage and storage into the Bill. As Members know, this Bill chapter is about various activities that go on with carbon capture, usage and storage, but unaccountably the detail in the Bill talks about only carbon capture and storage. We may think that is the definition of what we are talking about, but it is not just a process of sequestering the carbon that arises from, say, a power station or cement works. Various carbon capture and storage arrangements will have to be made for the sequestering of carbon dioxide in many uses, both industrial and energy-based, throughout the country.

Then, so the story goes, that carbon dioxide is transported, by either pipe or barge, and is sequestered at a suitable site. The Secretary of State for Energy Security and Net Zero waxed lyrical recently about just how much sequestering space there is around the UK waters. His view, which I think is absolutely correct, is that the sequestration of carbon dioxide as an industrial activity in the UK, with all the preparation that goes with it, is not just a necessary feature for the end of the carbon capture and storage process but something that the UK can offer to many countries around the world for their carbon sequestration, making a substantial plus-industry for the UK out of the process.

That is the end of the carbon dioxide story—how it goes from capture, either by chemical means or by extracting it from flue gases or whatever, to being put on its journey. In my long history of engagement on carbon capture and storage, I have always said that that is the case, but a number of years ago the Government added an important rider to that process in the definition that we use: CCUS, not CCS. CCUS is important because it is not just an uninterruptable process of carbon going into the transportation and sequestration arrangements, having been captured in the first place; there are points in the process whereby the carbon can be taken out of the transportation and sequestration process. Depending on the quality of the carbon dioxide that has been captured, it can be put to secondary use, before being captured again in the process, as it goes round again.

There are considerable opportunities in making the cycle go round twice, or several times, before the sequestration takes place. That is potentially an important part of getting best value out of the carbon capture and storage process. One of the first uses of the process that I came across was quite a while ago, when I paid a visit to one of the world’s first operational carbon capture and storage plants at the Boundary dam in Saskatchewan. The energy company in Saskatchewan was capturing the carbon output from a fossil fuel energy plant and diverting the carbon that was being captured in the first instance to the process of repressurising wells in oil fields to enhance the recovery of oil. Of course, the carbon was then recaptured after that point but, importantly, that cycle had been broken and something else had happened.

That is just one use, but there are many other uses that we could think about putting carbon dioxide to. It can be used in the chemical industry in the production of methanol, in metalworking to harden the casing of moulds, or in the petroleum industry to optimise the yield of oil wells. It has a substantial use in healthcare and in horticulture. As we know from junior-school biology, plants can increase their size and output by having a carbon dioxide-rich atmosphere in which to grow, and there are substantial opportunities to use carbon dioxide under those circumstances.

Those are not significant interruptions, as it were, in the carbon-capture cycle. Indeed, the use of carbon under those circumstances is beginning—or will begin—to be programmed into the carbon capture and sequestration process. Of course, programming it in is important in terms of the arrangements being set out in the Bill for the circumstances under which licences can be granted.

We will hear a lot about licences in the passage of this Bill. As we know, certainly in the energy sphere, pretty much everything that can or cannot be done is licensed in one way or another, and there is a great deal of legislation for that purpose—for example, the Petroleum Act 1998 and the electricity and gas Acts, which set out the circumstances under which licences should be granted. Indeed, as we will see in the first part of the Bill, there is a restated imperative that people cannot carry out these things on an unlicensed basis; they really must have a licence at all stages of carbon capture—a licence to capture, a licence to transport and a licence to sequester.

The hole in the Bill is in what happens when the process is interrupted. I do not use the word “interrupted” in a derogatory sense; it is very positive that we can make the most use of carbon dioxide in its passage. Having invested a lot of money in capture, it is a good idea to try to recycle the process as much as we can, but for reasons I am not quite clear on—the Minister may be able to enlighten me—the wording of the Bill does not appear to account for that particular sphere of CCUS activity.

It may be that I have missed something and that the use of carbon should not be included in the licensing and licensable arrangements. The Government may be quite satisfied that the interruption of the process is perfectly okay to leave alone. I do not think that is the case because, as I have set out, it is part of the whole process. If we are to take carbon capture and storage seriously, we will want to know that carbon dioxide use, as part of the process, goes back into the cycle of capture and storage in the long term, and that carbon is not just captured but used for a particular purpose in the way I described. After that, it disappears back into the atmosphere, presumably to be captured again at a future date.

It is important that the licensing arrangement is complete as far as the passage of carbon is concerned. Amendments 75, 76 and 81 would add the use of carbon dioxide to the various clauses that relate to the overall process. The amendments would provide a definition of carbon capture use, and additional wording for the process of licensing and of use itself. We would not want to move the amendments separately; they are rightly marshalled together in today’s proceedings. I move the amendments together, as they are grouped in the selection list, because, as I have said, they are essentially concerned with the question of use.

I am sure the Minister will provide us with a suitably inspired reply, so that we can be reassured either that this has all been thought about, and our amendments are therefore superfluous, or that there is a problem and, whether or not he accepts the amendments this morning, the process will be looked at to ensure that we have the full definition, and the full process is in hand as far as the passage of carbon capture and storage is concerned.

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[Andrew Bowie]

Of course, none of this is without its challenges, and Ofgem recognises that. However, I have regular conversations with Ofgem and the Department is happy that it is indeed scaling up its capability, to enable it to deal with not only the new carbon capture utilisation and storage procedures that we are discussing but the whole range of areas in which Ofgem will have a role as we move towards a net zero future. Given the aims and purpose of the economic licensing framework that clause 2 establishes, I hope that the hon. Member for Southampton, Test will agree to withdraw his amendment.

Amendment 81 seeks explicitly to include within the scope of the term “revenue support contract” a contract for the use of carbon capture. We understand that to mean a contract to support carbon capture and usage. The carbon capture revenue support contracts are intended to support the deployment of carbon capture technologies. The Bill allows for carbon capture revenue support contracts to be entered into with eligible carbon capture entities. Broadly, a carbon capture entity is a person who, with a view to the storage of carbon dioxide, carries on activities of capturing carbon dioxide that has been produced by commercial or industrial activities, is in the atmosphere or has dissolved in seawater.

Storage of carbon dioxide is storage with a view to the permanent containment of carbon dioxide. It is important to emphasise that provisions in the Bill may therefore allow for a broad range of carbon capture applications, including those carbon capture entities that utilise the carbon dioxide, resulting in the storage of carbon dioxide with a view to its permanent containment. Decisions on which carbon capture entities will receive Government support are to be made on a case-by-case basis. Prioritising support for carbon storage is considered essential to help deliver our decarbonisation targets.

[Alec Shelbrooke]

Will my hon. Friend describe the actual mechanisms of the carbon dioxide storage, geologically? How will that be done—for instance, will that be out into the North sea, using old oil platforms?

[The Chair]

Within the context of this amendment?

[Alec Shelbrooke]

In the context of carbon dioxide storage.

[Andrew Bowie]

I thank my right hon. Friend for his intervention. I would be happy to give a thorough explanation of exactly how the carbon capture and storage will proceed; I am sure we will get to that in the course of our debate on the Bill, and in other places. However, I am not sure where that would fit within the context of this debate, other than to say that the technology being developed by companies, organisations and clusters around the UK is world leading. When it comes to being able to store in the future the carbon dioxide being produced in the UK now, the North Sea is of course the greatest asset that we have as a country. The oil and gas industry will be able to play a pivotal role in that development as we move forward.

Given the reasoning I have set out, I hope that the amendment tabled by the hon. Member for Southampton, Test will be withdrawn.

[Dr Whitehead]

I appreciate what the Minister has said this morning. Frankly, though, I am not wholly convinced that the processes have been fully accounted for. I emphasised the various uses of carbon dioxide. The Minister is right that not all those uses lead to eventual sequestration. However, most of the uses that do not lead to additional sequestration do, on occasions, sequester the carbon dioxide in the process itself.

For example, carbon dioxide used in horticulture is substantially sequestered during the process of growing the plants. There is potentially an important use of carbon dioxide in processing hydrogen and in producing sustainable aviation fuel. Those processes sort of sequester the carbon in producing a different product, which is itself then burned. We then have to sequester the whole lot again, but the product has been used in the meantime.

It is important to concentrate on aligning the processes within carbon dioxide use as closely as possible with the process of sequestration, not simply allowing the carbon dioxide to escape. One thing that concerns me is the use of carbon dioxide in the process of the enhanced recovery of oil, because unless that carbon dioxide can be sequestered at the point it is injected into a well, although it produces greater amounts of oil it leaks into the atmosphere again, so we have a net negative outcome. We have produced more oil, but arguably it should have been left where it was in many instances.

[Alec Shelbrooke]

That leads to the question that I asked the Minister. The issues that the hon. Member for Southampton, Test is raising show that there is a research and development need for sequestration in, for instance, licensing oil and gas. That will need a large investment, so does he agree that it is important that the oil and gas industry uses some of its large profits to ensure that it can do the R&D available to sequester carbon dioxide, and does that call into question the idea of scrapping the return on profits—often criticised by the Opposition—because we need R&D to achieve this?

[The Chair]

Order. That is beyond the scope of the amendment.

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[Dr Whitehead]

Yes, I do agree. Again, I appreciate that the wording of this Bill might be regarded as necessarily fairly vague, because of the fact that—in the words of Donald Rumsfeld—there are known knowns, known unknowns, unknown knowns and unknown unknowns about the future. However, it is important at least to have on the record something that guides us in a more positive way on who might be the “other” people affected and on indefinite exemptions and so on. It would be a good idea if that could at least be included in the discussion of the Bill.

By the way, our proceedings in Committee are of course recorded, and they are used on occasion in law to determine what the purpose of particular clauses was and what was thought to be in the mind of legislators when they introduced them. So it would be helpful, not just for our discussions today but perhaps for the future record, if the Minister was able to clarify these matters in a suitable way.

[Alec Shelbrooke]

It is a pleasure to serve under your chairmanship, Mr Gray, for what will be a long and detailed consideration of the Bill.

I want to focus on these clauses, because they provide an overall setting for the entire agenda. As the hon. Member for Southampton, Test outlined, the Bill is perhaps one of the most important pieces of legislation to come before the House in the 21st century, as we look at how we deal with these issues for the rest of the 21st century—it really is that significant.

To draw on the hon. Gentleman’s comments about unknown knowns and so on, we have to be careful at this early stage that we do not regulate to the point that we choke off innovation and research. A complaint is often made at several levels about how difficult it can sometimes be in this country for innovators and entrepreneurs to move forward without getting tied up in huge amounts of red tape. Given the global competition that exists in the field of climate change, environment and green energy, we want to have a competitive advantage.

I am sure we will discuss later areas such as tax credits and how research and development can be expanded in this industry. The Bill is so wide-reaching, across so many Departments—indeed, you might rule us out of order as we consider it, Mr Gray—that I expect to be told once or twice that some provision is not the responsibility of the Minister. The Bill ties up so many areas of Government, including the Department for Business and Trade, the Treasury and the responsibilities of the Minister.

Therefore it is important that we do not try to license every possible outcome that we may consider at this stage. That would delay the process. Often, it is important to allow a Minister to make a reasonably quick decision as something comes to the fore, whether through secondary legislation or a delegated decision. If we look at America’s Inflation Reduction Act or the EU’s response to it, we know that we are in a highly competitive, subsidised market. I do not believe in the heavy subsidisation of companies; I believe in being able to exploit their intellectual capability to be innovative, to be world leading and to get things to market as quickly as possible. Having said that, later clauses of the Bill concern things, such as battery storage, about which I have great concerns and on which we probably need a bit more legislation. That is one of those areas that may well fall under a different Department, but it will be important to raise those issues in the context of the Bill.

I understand the desire to say, “We must try to use the Bill to offset any health and safety concerns that may come along, because we are in such a new technological area.” But when we look at the granting of licences in this part of the Bill, we would not want to choke off the innovators for which this country is well regarded in so many countries around the world. We are an innovative nation. We have the lead on innovation. China steals IT and reduces the cost of producing materials through poor wages and a disregard for health and safety, but it is not an innovator, which is what our universities and sectors work so well towards being.

The hon. Member for Sheffield, Hallam mentioned that she had spoken to the institutions in her great city. In a previous life, when I worked for the University of Leeds, I was involved in the early days of nanotech. We joined up all our seven major universities, including the universities in the hon. Lady’s city, and that accelerated Yorkshire’s ability to lead in nanotechnology. We could do that because we could draw those things together, bring the expertise together and accelerate it. Innovation hubs formed out of those universities in the early 2000s and gave us a leading edge, which we have used.

As legislators, we must try to ensure that we provide a framework for companies, innovators and researchers to work within. But that should not be prescribed in such a way that, when a product is ready to take to market, needs extra investment or needs to be able to work elsewhere, we have put a very tight pair of handcuffs on the ability to do those things. The premise of the Bill gives direction, but my hon. Friend the Minister should not make it so tight that we choke off the very things that we are trying to do.

We all talk about the huge potential investment in the green economy, about the green investment bank and about the massive changes that have taken place in the Treasury in recent years. Of course, we talk about having a smooth transition when there is a potential change of Government. That is why the Bill is so important and why I pushed to be on this Committee. The Bill is a major change that will stand this country—and indeed the world, if we can export some of the technology—in good stead in terms of achieving the better society we are trying to achieve on climate change. It is important that we go down this road, but let us not make the provisions so restrictive that we choke off the innovation at which this country excels.

Energy Bill [ Lords ] (Second sitting)

Alec Shelbrooke Excerpts

Committee stage
Tuesday 23rd May 2023 Public Bill Committees

[Andrew Bowie]

Clauses 13 to 15 relate to the modification of licences for carbon dioxide transport and storage.

Clause 13 enables the economic regulator to modify the conditions of a licence after it has been granted. That is to ensure that licence conditions can keep pace with the evolution of the market. It also enables the economic regulator to undertake periodic reviews of the amount of allowed revenue an operator can receive, which will then be set out in the licence. In economically regulated sectors, price controls are a method of setting the amount of allowed revenue that can be earned by network companies over the length of a given period. Regulated companies then recover their allowed revenues through the charges they set.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Does my hon. Friend agree that clause 13 is about precisely what I was touching on earlier? It is important to have the flexibility in the legislation to adapt as technology and innovation adapt too.

[Andrew Bowie]

Yes, I agree with my right hon. Friend. It is precisely about what he was touching on earlier: we are able to provide in the legislation the flexibility to allow the technologies for which we are legislating the space to grow, develop and become commercially viable. That is why it is essential to strike the balance between regulation and ensuring freedom for companies to operate. That is exactly why we would like the clause to stand part of the Bill.

As I was saying, allowed revenues must be set at a level that covers the companies’ costs and allows them to earn a reasonable return, subject to their delivering value for consumers, behaving efficiently and achieving their targets as set by the economic regulator. The amount of allowed revenue that an operator is able earn is set out in the licence conditions, which will need to be updated to reflect the outcomes of the periodic regulatory reviews and to keep pace with the evolution of the market more broadly. The power provides for the economic regulator to make such licence modifications, subject to an appropriate consultation process.

Before making any modifications to licence conditions, the economic regulator must give notice of the proposed modifications, the rationale for them, and an appropriate timeframe within which representations may be made. Any representations that are made must be duly considered. As Exchequer support will be available to certain users of the networks, the Secretary of State must be consulted on licence modification proposals and retains the power to direct that a modification may not be made.

Should the Secretary of State object to a particular modification, the economic regulator would need to consider whether to pursue the modification in an alternative form, which would require restarting the process of notifying and consulting on the new proposals. As is the case in other regulated sectors, licensees should have the right of appeal regarding modifications that are made to licences after they have been granted. The Bill provides for that later in chapter 1.

Clause 14 requires that, where the economic regulator has made a licence modification under clause 13 to a standard licence condition, the standard conditions of all future licences of that type should similarly be modified. That ensures a consistent approach to standard conditions across licences of the same type.

Clause 15 makes provisions for the Competition and Markets Authority or, as may be the case, the Secretary of State, to modify licence conditions in specific circumstances in relation to company mergers. Where there is a merger between licensed entities, that may necessitate licence modifications to ensure compliance with competition law. The power enables the CMA or the Secretary of State to modify licence conditions accordingly. I commend the clauses to the Committee.

Energy Bill [Lords]

Alec Shelbrooke Excerpts

2nd reading
Tuesday 9th May 2023 Commons Chamber

[Grant Shapps]

Again, I will make a little progress before I take the next set of interventions.

Offshore wind provides a secure and resilient source of energy, and we are already global leaders in offshore wind, with the world’s largest wind farm in the North sea. We also have the world’s second largest wind farm and the third largest. The fourth largest is being constructed now at Dogger Bank, and that will become the largest in the world. In other words, we have become global experts in delivering offshore wind, and that is why this country is now selling that technology and expertise elsewhere in the world. It is also why we have a leadership role in offshore floating platforms; we have both the first and the largest such platform in the world. We are also introducing reforms to assist with security at civil nuclear sites, and we are ensuring that offshore oil and gas regulatory regimes protect habitats as new technologies are developed.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I want to bring my right hon. Friend back to his comments about energy security. The Bill outlines lots of ways in which that will be achieved, but he will be aware that the vast majority of materials needed for renewable energy are processed in China. Are we not therefore in danger of creating the same situation with renewables as we had with fossil fuels and Russia, and what assessment has he made of energy security in those particular areas?

[Grant Shapps]

I very much share my right hon. Friend’s concerns. I was recently at the G7 in Japan, where we signed an agreement with other nuclear powers from the G7 on exactly this issue of energy security. Of course, we have Urenco—a third owned by the British Government—which is in many ways very advanced on the production, fabrication and other elements of uranium. It is part of the mix and we must ensure we are able to do that, so I thank him for his question.

--- Later in debate ---

[George Eustice (Camborne and Redruth) (Con)]

This is a large and technical Bill that sets in place important frameworks, particularly when it comes to carbon capture and storage and the wider deployment of hydrogen and heat networks. I will address my comments, in the time that I have today, to part 3 of the Bill, particularly the support for low-carbon heating schemes and the opportunity that this provides for doing something creative for the off-gas grid homes in this country. It links to the earlier intervention of the hon. Member for Strangford (Jim Shannon) and to a private Member’s Bill that I introduced at the beginning of this year.

At the moment, we have 1.7 million homes in this country that are currently off the gas grid, most of which use kerosene at the moment. Under the current Government plan, which is born out of a strategy that dates all the way back to 2017—several Governments ago—the intention is that all those 1.7 million homes would be banned from having a replacement boiler after 2026 and told that, instead, they must have, effectively, either an air source heat pump or a ground source heat pump. As the right hon. Member for Leeds Central (Hilary Benn) said, there is a role for those heat pumps, but they are not for every home. In particular, in rural and especially coastal areas, air source heat pumps can be prone to rusting and decay. It is also the case that they need a lot of insulation to make them work, and, in some older homes, high levels of insulation mean less ventilation, which can lead to problems with damp, mould and all of the health problems that go with that.

Perhaps, more important than anything, the capital cost of these air source or ground source heat pumps for a single property is around four times that of a conventional boiler.

[Alec Shelbrooke]

My right hon. Friend touches on a point that I was going to raise later. My concern about the banning of gas boilers from 2024 is the impact that that will have on industry and on farming in particular, especially in relation to those costs. Farming is under a lot of pressure at the moment. Does he agree that this is similar to the argument that he is making about households in 2026?

[George Eustice]

My right hon. Friend makes an important point. As the right hon. Member for Leeds Central said, we need a diversity of different technologies because it is essential that we have all the tools in the box to achieve our objectives.

There is also a wider problem with the current Government strategy. Just before we get to 2026, we can envisage plumbers and boiler engineers across the land going out to people and saying, “If I were you, I would get a new boiler now because the drawbridge is about to come up.” That will probably mean that we will have a surge of investment in boilers at just the wrong time. On top of that, there is likely to be a “mend and make do” approach that will stretch for many years. All of this means that the objective of making carbon reductions, and getting not just to net zero but to our objectives under carbon budget 5, gets potentially further away, rather than closer.

The good news is that there is a better way. In recent years, the technology and supply of renewable liquid fuels have developed. If we were to use renewable liquid fuels such as hydrotreated vegetable oil, there is a great opportunity for us to get an 88% reduction in our carbon emissions, but far faster than the current Government strategy. It could get us an 88% reduction by carbon budget 5 simply by having an adaptation of those existing boilers.

A pilot in my own constituency has been testing hydrotreated vegetable oil. Residents who have used it report that it burns more efficiently. Some say that the use of the fuel is around 30% lower than with kerosene. The people at the church hall like it because they need intermittent heat, and they can switch it on without having a heat pump running continuously, wasting all that energy. The staff at the school like it because it works for their Victorian building. There is a huge amount to be said for opening the door to the deployment of these renewable liquid fuels. The Government already recognise this, because the renewable transport fuel obligation, introduced in 2007, creates an incentive scheme to require both importers and refiners of fuel to source some of that from renewable sources, such as hydrotreated vegetable oil. The Bill is an opportunity to extend the architecture of the RTFO, a long-standing scheme, to domestic boilers as well so that we can have that incentive.

I know that some officials in the Department argue that we cannot be certain that hydrotreated vegetable oil comes from renewable sources. I do not accept that. There is a British standard—an accreditation scheme for HVO that comes from renewable sources. It would be very easy for the Government, through regulation, to insist that only British standard-certified HVO would be allowed for this purpose. The officials have also raised questions about the supply of renewable HVO, but we are seeing an exponential rise in supply both from the United States and from the European Union and the potential to develop it in this country as well.

I very much hope that the Government will look favourably on amending the Bill—clause 104 of part 3 of the Bill would be key—preferably with their own amendment to give respite to 1.7 million homes in rural locations. If not, I shall seek, if I have the support of the House, to amend the Bill. My private Member’s Bill attracted huge support not just from Conservative Members, but from Members across the House, and the Government should consider it.

--- Later in debate ---

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

In the short time I have, I will focus my comments on vehicle propulsion, but first I draw on the comments from my right hon. Friend the Member for Camborne and Redruth (George Eustice) and the right hon. Member for Leeds Central (Hilary Benn) that the cost we pass on to the public must be minimised. I hope the Minister will take note of the points about the hydrogen levy before Committee stage. It is misguided and it is in the wrong place. We have to take the public with us on this—we cannot keep adding to people’s bills to try to make things work. I hope the Minister will take that point away.

Much has been said about energy security and trying to get away from the situations we face with Russian gas, fossil fuels and so on, but I am concerned that we are moving into another area of energy dependence on another autocracy or dictatorship, China. I raised this point with the Secretary of State earlier, and he focused on uranium, but that was not what I was getting at. China has sucked up the processing of many of the materials in the world that are needed to make renewable energy. According to statistics put forward by Morgan Stanley, China refines 59% of the world’s lithium, 80% of the cobalt, 69% of nickel sulphate, 95% of magnesium, 100% of spherical graphite, 69% of synthetic graphite, as well as producing 70% of battery cells, 78% of cathodes and 91% of anodes.

To build on that, the Mercator Institute for China Studies, a German think-tank, says about nickel processing in Indonesia:

“In 2014, Indonesia banned the export of unprocessed nickel, prompting a wave of Chinese investments seeking to secure battery materials. With China’s help, Indonesia plans to boost its share of global nickel production from 28 to 60 percent… Already several multi-billion USD nickel-focused industrial parks are sponsored by Chinese companies.”

On cobalt in the Democratic Republic of Congo, MERICS states:

“The DRC is home to over half of the world’s cobalt reserves and was responsible for two-thirds of mined output production in 2020. Chinese companies control up to 70 percent of the Congolese mining portfolio, but mining contracts…are under review by the DRC.”

MERICS also comments on the Lithium Triangle,

“a region around the borders of Argentina, Bolivia and Chile. It is thought to hold around half of the world’s lithium reserves. Between September and November 2021 alone, four separate Chinese companies announced acquisitions cumulatively worth USD 1.2 billion.”

That is the reality we live in today. A parallel can easily be drawn to what a hostage to fortune it could be if an autocracy or dictatorship took a direction we were not happy with. We have seen that happen in terms of fossil fuels with Russia.

So what do we do about it? The Bill makes some progress here, but I think we must come up with another technology that can work alongside electric vehicles. I want to draw attention to the fact that we do not put enough energy into hydrogen combustion. There is a lot of research going on. I am a big motorsport fan and I have been taking the magazine “Autosport” for over 30 years, so I will quote from its engineering supplement on 16 March 2023:

“‘People think hydrogen infrastructure is complicated and it doesn’t have to be if you look at it in stages,’ reckons Cosworth CEO Hal Reisinger, his company one of many including ORECA to have invested in hydrogen test cells. ‘Internal combustion engines can be very easily converted to hydrogen; put different injectors in, remap the ECU and there’s this entire infrastructure of engines that are available. It’s much easier to establish a hydrogen infrastructure than an electric infrastructure.’”

There are indeed great demands coming if we want to achieve the target number of electric vehicles. By the Government’s own estimate, the global demand for electric vehicle battery materials is projected to increase by between six and 13 times by 2040 under stated policy. World copper production has to double to be able to meet production policy, yet there was a report only last week that not enough new mines are being exploited to reach the current copper production level.

Hydrogen combustion does have issues. The compression of the hydrogen has to be 700 bar. There are questions about how we manufacture and store it. If we get the technology wrong. it produces dangerous levels of nitrogen oxide. That will have to be addressed, and so will the weight.

However, my argument is that there is an alternative that technically can work. I know that other companies, including JCB, have done a lot of research into it. I urge the Minister, when we are looking at development budgets, to start to put some hydrogen combustion development in there. We could refocus the automotive transformation fund, which perhaps has been too focused on electric vehicles and needs to look at other areas. There is a geopolitical and geostrategic effect that is occurring after some of these policies have been written, and we must be able to adapt and move along.

Every hon. Member in this Chamber wants to move towards a net zero society, but if we do not do so sustainably, taking the public with us, we will find that harder and harder to do, as my right hon. Friend the Member for Camborne and Redruth outlined with regard to the buying of gas boilers making the situation worse. Recognising that the supply of the rare earth elements that are needed may provide hostages to fortune with countries such as China, I urge my hon. Friend the Minister to look into how the Government can help companies to research and develop hydrogen combustion.

--- Later in debate ---

[Dame Maria Miller (Basingstoke) (Con)]

It is a pleasure to see you in the Chair, Madam Deputy Speaker. I rise to support the Bill. I was hoping to hear from the hon. Member for Brighton, Pavilion (Caroline Lucas) a few more of the positive things that this Government have achieved, which are important to acknowledge, so that people can see that progress has been made, not least the fact that half of all our electricity is now generated from renewable energy sources—something we could be forgiven for missing in her speech.

I do not want to repeat what has been said in the debate, much of which I agree with, but I want to bring up two particular issues that I hope the Minister will take note of: fusion power and lithium-ion storage facilities. He will not be surprised by that. They both illustrate the ingenuity of our scientists and the fact that, as our understanding of new energy sources develops, the Government’s response to those energy sources needs to develop and those technologies need different regulation.

Let us take fusion technology first. Last year I visited General Fusion in Vancouver, British Columbia, an incredible Canadian firm working with the Culham Science Centre in Oxfordshire, which will be the home to the firm’s fusion testbed. We should be very proud of that. The Bill fundamentally changes the way in which fusion technology is regulated in the UK, because we understand it much more now. The current regulatory regime characterises fusion in the same way as nuclear, which is just plain wrong. To better recognise the fusion process, the Government are rightly introducing measures in clause 110 to remove fusion from nuclear site licensing requirements. That is very welcome. It is more accurate. It provides confidence to investors, the industry and the public alike, and it is an example of how the Government are recognising the need for regulatory changes.

That is in contrast with the issues around lithium-ion battery storage facilities, which are covered in clause 168—the Minister knows where I am going next. For the first time, the Bill recognises that electricity storage is separate from electricity generation. It is a new sector. In the past, power stations were designed to match consumer demand. With around half of our electricity now generated by wind, it is essential to store electricity to help out when the wind is not blowing, to put it plainly. Over 90% of our UK electricity storage capacity is in lithium-ion batteries, and while recognising energy storage, the Bill is silent on issues that are fundamental to the future of this sector, including fire safety.

[Alec Shelbrooke]

Does my right hon. Friend agree that a lot more research needs to be done on where these storage facilities are based? Thermal runaway can cause fires that take several days to put out, and some of the chemicals used to extinguish those fires are toxic. There are planning applications coming forward for facilities that are far too close to people’s homes.

[Dame Maria Miller]

My right hon. Friend is right that there are hundreds of applications coming forward in around 350 constituencies, and I urge Members to check whether any such applications have been made in their patch.

I would like to draw on a slightly different issue, which is that if we do not have the right regulation for lithium-ion battery storage, we will not attract investment into this area in the future, because we will not be encouraging those lithium-ion battery storage facilities to be designed in a way that mitigates the risks we know exist. At the moment, the planning application process takes no account of the proven fire risks that my right hon. Friend just referred to with lithium-ion battery storage plants. Thermal runaway is a chemical reaction caused by overcharging or a design fault, and these fires cannot just be put out; they can only be stopped by cooling with large amounts of water over several days, which creates toxic fumes and polluted water runoff. Even though the use of batteries for this purpose is relatively new and there are currently only 35 such facilities in action, we have already had one major fire in Merseyside in 2019 that took 59 hours to put out.

This new technology is being rolled out at lightning speed, with 473 new sites under way, yet there is still no planning guidance for local authorities, no requirement to obtain an environmental permit from the Environment Agency and no requirement for the fire service to be consulted over designs or locations. The Bill must directly address that gap in regulation. Since I raised the problem with Ministers in July last year, and following a roundtable with five Departments in March, there now appears to be agreement that regulatory change needs to be considered. This Bill is exactly where it needs to be addressed, and I am happy to table amendments to that effect if the Government are not able to do so themselves.

In an open letter to all Hampshire council leaders, Neil Odin, who is the fire chief of the Hampshire and Isle of Wight Fire and Rescue Service, stated that these batteries

“can malfunction and lead to an intense fire, and when they do, pose a significant harm to the environment”.

That is coming from the head of one of the largest fire authorities in the country. I believe they also pose a significant risk to people, including firefighters, and I hope that in advance of Report the Minister will work with me to amend the Bill, so that lithium-ion battery storage can continue to play a hugely important role in realising the Government’s ambitions but with the right regulatory governance in place, not only to ensure the safety of our residents but to encourage insurance companies and those who want to run these facilities to do so in the future.