North Sea Oil and Gas Workers: Transitional Support
Michael Shanks Excerpts(1 year, 3 months ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
It is a pleasure to serve under your chairship, Sir Desmond. I join others in congratulating the hon. Member for Aberdeen North (Kirsty Blackman), not just for securing this important debate but for the tone with which she introduced it. Her seriousness and passion came through in her contribution. I genuinely thank her for that, as well as for all the conversations we have had on this important topic.
It has been a wide-ranging debate, but at the heart of all the contributions have been three key things, which I will try to sum up. First, we may all disagree on the timing, pace and detail of the transition, but there is an acknowledgment and understanding that a transition in the North sea is under way. It is important to recognise that. Secondly, if we accept that, as it seems we all do, then we need a credible and detailed plan for how to manage the transition. The hon. Member for Aberdeen North put it well by saying that the transition needs to be managed properly, and I will come back to that point. Thirdly, the workforce must be at the heart of any plan and transition. The shadow Minister made the point well: this is deeply personal for anyone with a job in the oil and gas sector, but particularly in north-east Scotland, where there is a significant concentration of workers in the industry.
Many Members have spoken about the importance of oil and gas in our energy story. A few months ago, I was pleased to be at BP’s headquarters to celebrate the 60th anniversary of the first licence being issued in the North sea, and there was a powerful video of the history of some of BP’s offshore infrastructure. The engineering skill that it has taken to extract oil and gas from extremely difficult North sea waters over the past 60 years is extraordinary and, as I have said on a number of occasions, we should be very proud of that workforce and everything it has achieved.
Oil and gas will continue to play a critical role in our energy mix and economy for decades to come. However, as we and the world embrace the clean energy transition, I want us not just to be proud of the history of the North sea but to be hugely ambitious and excited about the opportunities in the next chapter of our energy story. Our clean power mission is about not just driving forward clean power in this country but creating the jobs in manufacturing and industry that go along with it, and it is critical that those jobs materialise in the communities that have been mentioned.
It is right that we recognise that tens of thousands of jobs have been lost in the sector over the past 10 years. The truth is that we should have been planning for this transition a long time ago. My hon. Friend the Member for Alloa and Grangemouth (Brian Leishman) talked about Grangemouth. There is no greater example of the failure to plan for the transition than Grangemouth: we knew years ago that it was in a precarious position and should have been planning for the workforce at that point. My driving purpose in my role is ensure that we do not make the same mistake again in the wider North sea sector.
The hon. Member for Aberdeen North asked whether the Government are listening, so I want to say how much we have engaged with the sector and how much time I have spent in Aberdeen listening to the industry—not just the oil and gas companies themselves, but the companies involved right through the supply chains, in decommissioning and in training. I had an interesting visit to a training provider and met apprentices who are working in oil and gas in the immediate term but will transition into renewables. They are being trained both on oil and gas platforms and on the renewables jobs that come next. Exciting work is going on, and we need to capitalise on it and speed up such projects across the city and the north-east.
We have a fantastic opportunity to utilise the skills that are already in Aberdeen, which many Members have mentioned. Given the global race for skilled workers and for much of the equipment and the supply chains for the clean power missions around much of the world, we have a real opportunity to capitalise on that in Aberdeen. I suspect that the ears of Robert Gordon University will be burning after this debate, given the number of times it has been mentioned. I had a fantastic visit there a few months back to go through some of the data in great detail, and it was fascinating.
Members made the point about the number of jobs that are transferable from oil and gas into renewables. That presents us with an enormous opportunity to provide long-term, sustainable jobs for people. The pace at which we do that, and the methods we use to support the workforce to transition, are key, which is why, when we came into government, we were determined to work with the Scottish Government and with industry to move forward on skills passporting, and we have launched the first phase of that. There is clearly more work to do on expanding the passporting process, but that is a sign that we are taking practical action to support the workforce to transition.
The hon. Member for Aberdeen North asked about a plan for the transition, which was a good point to make. We have launched our consultation on the future of energy in the North sea. We were keen for that to be a genuinely open conversation with industry, communities and trade unions about what the future of energy in the North sea should look like—not a conversation focused narrowly on a series of specific questions. The consultation is still open: there is a week left for those who have not had a chance to submit their responses—I am sure that many thousands are watching this debate online—so please do submit them. It is a key opportunity. We have deliberately asked open, broad questions so that we can have a genuine conversation about the future of energy in the North sea.
The first section of the consultation deals partly with the data and the science about the decline of the North sea basin. The shadow Minister rightly made the point about language. I have always been careful about the language that I use, but it is important to recognise that the declining nature of the basin means that we have to start planning now for what comes next. As part of my engagement on the issue I have had a number of roundtables, including with trade unions a few weeks ago, to look at the specific support that is necessary for the workforce now.
Barry Gardiner
The trade unions and others have made a case for £335 million a year to be invested in skills and training to ensure that workers are not unpaid on their training days, among other things. What conversations can the Minister have with colleagues to ensure that that happens?
Michael Shanks
I thank my hon. Friend for his contribution to the debate. He is right that it is about not just the passporting and the training available but, importantly, the ability of workers to access it. I will take away that point, which also came up in the roundtable with trade unions. We have launched a number of skills pilots in four areas, of which Aberdeen and Aberdeenshire is one. The process there is slightly different from that for the other three, because skills are devolved to the Scottish Government, so the UK Government’s role is slightly different, but we want to work in partnership to ensure that we deliver. I will take away the point away and come back to it.
Andrew Bowie
I pay tribute to the Minister’s continued commitment to and engagement with the industry and the region. It seems, given the amount of times he is in and out of the north-east of Scotland these days, that he may be buying a second home in my constituency. Of course, we welcome that, because any engagement with the Government is positive. The tone with which the consultation on the future of North sea energy was launched was incredibly positive and has been warmly welcomed. However, there is also an ongoing Treasury consultation on the post-EPL fiscal framework; what engagement is the Department having with the Treasury on what that will look like? Is there any opportunity to speed up the process by which we can replace the energy profits levy?
Michael Shanks
I thank the shadow Minister for making that point. We deliberately launched the consultation on the future of energy and the Treasury consultation on the future of the EPL at the same time, because we want to bring them together to give certainty about the future of industry. My hon. Friend the Exchequer Secretary has been in Aberdeen a number of times and, indeed, we have we have had many of the same engagements, dealing with the fiscal forum and others and having the conversations. I engage with Treasury colleagues regularly on this question. The EPL, which has changed many times under both Governments, has not given industry the confidence it is calling for. We have been clear that it will end post 2030, and we want to put in place a regime that gives confidence about what the landscape looks like but still has the recognition of excess profits built into it. The consultation is open for, I think, another two or three weeks.
Barry Gardiner
The taxation regime is critical to the ability of companies to make profits in the North sea. We have the lowest base rate of tax on oil and gas production companies in the world, and it is only because we have the windfall tax that we take the rate up to the average. The Minister needs to look at the investment that would be available were we not subsidising the operations from the public purse. It is not quite the zero-sum game that he suggests.
Michael Shanks
I thank my hon. Friend for his contribution, but he tempts me into both concluding a consultation and speaking on behalf of the Treasury—two things that I absolutely will not do. But he made an important point. The purpose of the consultation—again, it is an open consultation with all those in the sector—is to get to the heart of some of these questions.
Kirsty Blackman
Will the Minister agree to consider the timescale of the consultation outcomes so that people have the earliest possible notice, in advance of next year’s budgets, if possible?
Michael Shanks
I was going to come to that point, which has been well made. In both consultations, we are looking internally at how quickly we can turn around the responses. Clearly, there is a balance to be struck, particularly in respect of the consultation on the future of the North sea. It is a hefty document and we expect a significant number of responses, which is a good thing. There is also a balance to be struck between turning around a response quickly and having a credible, detailed look at all the evidence that has been submitted, but we are trying to move as quickly as possible with both consultations.
I want to turn briefly to the point about the future, and the points that a number of Members made about investment in clean energy. It is right to say that the future of the North sea has enormous potential for offshore and floating offshore wind, and for a number of other industries, such as hydrogen and carbon capture. Since coming into government we have moved as fast as possible to drive that forward, including establishing, as the hon. Member for Aberdeenshire North and Moray East (Seamus Logan) mentioned, Great British Energy in Aberdeen—although I cannot help but notice that the SNP did not support that. It is all about driving investment, not just by creating jobs in Great British Energy’s headquarters but through the investments it makes in supply chains and developments throughout the country, particularly in the north-east of Scotland.
We oversaw a record-breaking renewables auction and, as many Members mentioned, we are currently working through the process of the clean industry bonus, which is designed to reward investment in good manufacturing jobs and clean supply chains. This gets to the heart of the point made by many Members about how we bring the benefits of the clean power mission to the UK, delivering the industrial jobs that too often have been missing in our transition. Of course, the clean power action plan will drive £40 billion a year of private investment towards our goal of clean power by 2030.
I am conscious of the time, but I want to reflect on two brief points that the hon. Member for Aberdeen North made in her closing remarks. The first is about listening to communities, which is important, and I will continue to do that, as will my colleagues. The second is about the oversight and management of the plan, which is a question we are looking at. I am always slightly resistant to simply saying that setting up a taskforce or a commission is the answer, but the point that the Just Transition Commission made, and that the hon. Lady also made, is right: we need to grasp it at the heart of Government, and we are actively looking at that.
I again thank the hon. Member for Aberdeen North for her important contribution. The future of the North sea is incredibly important for all our communities, particularly in the north-east, but also for our energy and our economy in a wider sense. We are determined to deliver a credible, just and prosperous plan for the future, for the workforce now and in generations to come.
Onshore Wind and Solar Generation
Michael Shanks Excerpts(1 year, 3 months ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
I beg to move,
That the draft Infrastructure Planning (Onshore Wind and Solar Generation) Order 2025, which was laid before this House on 10 March, be approved.
Good afternoon, Madam Deputy Speaker. This instrument is another important step in supporting the deployment of onshore wind and solar, which are critical to achieving the Government’s mission for clean power by 2030. An effective planning system is key to unlocking the new infrastructure our country needs to deliver our energy security and resilience. It is important that planning applications are determined through an appropriate planning route that reflects a project’s size, impact and complexity, where potential issues are identified and mitigated as necessary.
The nationally significant infrastructure project regime is governed by the Planning Act 2008, whereby decisions on development consent are made by the Secretary of State for Energy Security and Net Zero. The NSIP regime applies to larger projects, with a megawatt threshold determining which energy generating projects are deemed nationally significant. Following submission into the NSIP process, an extensive examination period will commence, where interested parties—including local authorities, people of office and the general public—can make written or oral representations to the examination, ensuring that the voices of communities are heard during the decision-making process.
Dr Andrew Murrison (South West Wiltshire) (Con)
Rather than traducing what remains of our countryside, what assessment has the Minister made of the UK-Morocco power project run by Xlinks, which would deliver 11.5 GW of energy and power about 8% of our grid needs? It would seem that the block to this project is not the Moroccan Government, nor the Governments of countries through whose territorial seas the cable would pass, but resides instead in Whitehall. What is the Minister doing about it?
Michael Shanks
I give credit to the right hon. Gentleman for the ingenious way he brought that up in a debate on solar and wind in the UK. He raises a good point. We are looking at the detail of a proposal that has been put forward by a private company—I am not going to say anything more on the Floor of the House.
Michael Shanks
I have given way already.
Turning back to the statutory instrument in front of us, until recently the de facto ban on onshore wind generation in England introduced by the Conservatives limited the deployment of onshore wind in England. Those changes to the planning legislation set an almost impossible bar to meet, resulting in the pipeline of projects shrinking by more than 90%, with less than 40 MW of onshore wind generation consented and becoming operational in the intervening period.
In July 2024, this Government disapplied those planning policy tests and committed to reintroducing onshore wind into the NSIP regime, reversing the damaging policies of the past 10 years and placing onshore wind on the same footing as solar, offshore wind and nuclear power stations. As such, through this instrument, onshore wind projects with a generating capacity of more than 100 MW in England will be eligible to be consented under the NSIP regime.
Leigh Ingham (Stafford) (Lab)
This legislation is crucial to achieving our net zero commitments. GE Vernova, a renewables company in Stafford, Eccleshall and the villages, struggled with really long waiting times for an expansion of its site, but it has recently been approved, which means good new jobs for people who live in my constituency. That exemplifies the importance of streamlining the planning process, which will eventually lead to lower bills for people in my constituency and around the country. Does the Minister agree that this legislation is integral to developing the jobs we need across the country, and would he like to come and visit GE Vernova with me?
Michael Shanks
I thank my hon. Friend for that warm invitation; I will of course consider it, and I look forward to visiting her constituency at some point. She makes an extremely important point. We are reforming the planning system to deal with challenges that have meant that, for too long, infrastructure that is incredibly important for our energy security has been held back by dither and delays in the process. We want to sweep that away and move forward much more quickly. The prize is energy security, but as she rightly points out, this is also about jobs and investment in communities right across the country.
Lewis Cocking
The Minister talks about our energy security. What will increase our energy security is issuing new oil and gas licences so that we can have more home-grown energy. Why will the Minister not change his policy on that?
Michael Shanks
We really are stretching this debate, but I am very happy to discuss this matter. The point has been raised on a number of occasions, and the answer is always the same: it is not delivering energy security at the moment. We have said very clearly that oil and gas plays a crucial role in our energy mix now, and it will continue to play a role for decades to come, but the North sea is already in transition. The reality of the past 10 years under the Conservatives was that more than 70,000 jobs were lost, with no plan for how to deal with it. We are determined to deliver on the transition and on energy security, which will get us off the rollercoaster of fossil fuel prices that we are all still riding.
Michael Shanks
I will make a little progress and come back to the right hon. Gentleman. Although we have 90 minutes, I am conscious of time.
This instrument is about making sure that onshore wind projects in England that offer capacity of over 100 MW will be eligible to be consented under the regime. It reflects advances in turbine technology over the last decade, with modern turbines being larger and more powerful. Reintroducing onshore wind into the NSIP regime will provide an appropriate route for nationally significant projects seeking planning consent where they are of a certain scale and complexity, so that local impacts can be carefully balanced against national benefits and the need to meet the UK’s wider decarbonisation goals. This will provide greater confidence for developers and grow the pipeline of potential projects in England once again.
Kit Malthouse
I am extremely grateful to the Minister for giving way. He talks about national impact. I wonder what provision there is under this legislation for protected national landscapes. Many of the windiest places in the UK are among our most beautiful, whether it is the hills and mountains of our national parks or the downs of our national landscapes, like the North Wessex downs in my constituency, which was an area of outstanding national beauty but is now a national landscape. Many of my residents are concerned, because the Minister is quite right that the turbines that are now being developed are huge. It is likely to mean that for most of our lifetimes we will lose the landscape to these new developments. Will this system still encompass consideration of protected landscape and make sure that it stays as it is for future generations?
Michael Shanks
The right hon. Gentleman raises an important point. As I have always said from the Dispatch Box in this role, there is a balance to be struck here. We need to build nationally important infrastructure, and that does mean much more onshore wind in England to match the significant amount of onshore wind that has been built in Scotland over the past few years, including not far from my constituency. But the balance must be struck with protecting land as well. Even if we build the significant number of projects that are needed, there will still be protections for land in the areas he mentions. The planning system allows for those considerations to be taken into account.
The NSIP regime already includes nuclear and solar. We are saying that the ban on onshore wind introduced by the Conservatives was not a rational decision, so we are bringing it back into this process. [Interruption.] The shadow Minister says that it was absolutely rational, but his party’s former Energy Minister, the right hon. Member for Beverley and Holderness (Graham Stuart), said that it was “always mad”. I think we should remember that not everybody in the Conservative party agreed with it, including, I suspect, the shadow Minister himself.
Let me come to the second part of the statutory instrument: the question of solar. Solar has been subject to a 50 MW NSIP threshold since it was originally set out in the Planning Act 2008. However, much like onshore wind, solar panel technology has seen significant advances in efficiency, enabling a greater megawatt yield per site. Evidence suggests that the 50 MW threshold is now causing a market distortion. With modern technology, mid-sized generating stations have a generating capacity greater than 50 MW and therefore fall within the NSIP regime. That is likely to be disproportionate to their size, scale and impact. That has resulted in a large amount of ground-mounted solar projects entering the planning system artificially capping their capacity just below the 50 MW threshold, leading to a potentially inefficient use of sites and grid connections.
Perran Moon (Camborne and Redruth) (Lab)
The approach set out in the order is a continuation of the Minister’s work to build the clean energy infrastructure that the country needs. I agree that the capacity threshold and the reintroduction of onshore wind generation stations into the definition of nationally significant infrastructure projects will help deliver the triple benefits of decarbonisation, energy security and job creation. However, as the Minister knows, Cornwall is a leader in the roll-out of onshore wind and solar energy. Does he agree that the order will further opportunities for renewable energy growth across Cornwall that would have been ignored by the flat Earth climate change deniers in the Conservative party?
Michael Shanks
I thank my hon. Friend for the point, although I am disappointed, because while he normally invites me to visit Cornwall, he did not on this occasion. I will not take it personally. Since he was elected to this place, he has done a fantastic job in delivering jobs in his community on the clean power mission, most recently by looking at some of the raw materials that are so essential. He has made great progress on that, so I pay tribute to him.
My hon. Friend is of course right about the Conservative party’s scepticism of a policy that it used to support so wholeheartedly, and one that has delivered economic growth right across the country. It has now turned its face against that; I am not sure whether that is flat Earth or not. I am sure that the shadow Minister will regale us with his long list of commitments in this space, but it is clear that the drive to net zero is delivering industrial opportunities, jobs, manufacturing and investment in communities that have suffered for so long under economic decline, as well as delivering on our climate ambitions and energy security. That is the right path for us to be on.
I will return to solar for a second. Raising the NSIP threshold to 100 MW for solar will ensure that mid-sized projects have access to a more proportionate planning route via local planning authorities. It should incentivise projects that would otherwise have capped their capacity to develop to a more optimal and efficient scale.
Ben Obese-Jecty (Huntingdon) (Con)
We are talking about increasing the threshold from 50 MW to 100 MW. I wonder whether the Minister is aware of the average size of NSIP projects approved by the Government since last July. If so, why has the threshold been kept artificially low at 100 MW and not raised significantly higher? Otherwise, we will see huge numbers of smaller projects coming through and being classified as NSIPs, such as those approved by the Minister so far, rather than larger projects.
Michael Shanks
The hon. Gentleman has asked me a number of written questions on this topic to try to get to the heart of the matter, and he is now testing me on the number, which I think we did provide him with in response to one of those written questions. Since it is not on the tip of my tongue, I will write to him with the answer. On the general point, I do accept what he is saying. Part of the reason for the instrument is to try to get to a more rational point where we do not have projects limiting themselves artificially to a level based on a figure.
We settled on 100 MW because we think it strikes the right balance by allowing larger projects that can deliver the outcomes we want in the energy system through the Town and Country Planning Act 1990, while limiting the number of projects coming into the national planning process. We think that balance is right, but we will continue to look at it. The hon. Gentleman has raised important points with me in in written questions that I am happy to discuss with him in more detail.
The Government are mindful that mid and large-scale solar and onshore wind projects that may be preparing to enter the planning system might have already invested and undertaken preparatory steps with the expectation of entering a particular planning regime. Therefore, changing the NSIP criteria at short notice could result in projects entering into a different regime from that which they expected, which could increase costs for developers and cause delays. Therefore, the instrument before us also makes transitional provisions for onshore wind and solar projects that are already in the planning process when the order comes into force. The provisions will therefore ensure that projects already progressing under one regime will not be required to move into a different one.
In conclusion, through consultation, we sought views and supporting evidence on reintroducing onshore wind into the NSIP regime. We received a range of responses from different groups of people. Most agreed with our approach and the majority agreed with the 100 MW threshold. Indeed, although we initially consulted on the idea of a higher threshold of 150 MW, based on the analysis of those consultation responses, we concluded that a 100 MW threshold would be more appropriate and would reflect modern technology.
This instrument is another important step forward in delivering our clean power mission, supporting the deployment of onshore wind and solar and establishing the UK as a clean energy superpower. It supports all our work as a Government on delivering an effective planning system—one that ensures that applications are processed efficiently through an appropriate regime and that avoids distortionary effects on deployment. The measures ultimately aim to support our future energy security and resilience, alongside our 2030 goals and wider decarbonisation targets. I commend the order to the House.
Michael Shanks
With your leave, Madam Deputy Speaker, I will respond briefly to some of the points raised in the debate, but I will not detain the House long, as I know we are keen to progress through the Order Paper.
I thank hon. Members for their contributions to this wide-ranging debate. The regulations lift the nonsensical ban on onshore wind in England that the Conservatives drove through. For 10 years, that ban has held back energy, security and economic development opportunities across the country. The measures before us come to a rational position on solar in the planning system.
I will respond briefly to the points raised about nature and other issues. The hon. Member for South Cambridgeshire (Pippa Heylings) put it particularly well: the public want us to take action on the climate crisis. The Conservative party might want to pretend that that does not exist any more, but it does. The greatest threat to nature in this country is climate change. We will tackle that, but in doing so, we will deliver energy security.
On the point made by the shadow Minister, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), let me say that neither of us Scottish MPs will have a vote in the elections in four weeks’ time, but people will have the choice between the Conservative party, which has still not owned up to any of the mistakes that it made in 14 years, and the party that is trying to fix the mess. They can choose between a party that is moving forward to deliver economic growth and energy security, and a party that would rather hold us back and keep us on the rollercoaster of volatile fossil fuels. Today’s vote is a chance for us to demonstrate that we want that economic opportunity, and want to deliver energy security and climate leadership. I urge hon. Members on all sides of the House to support us today.
Question put.
Great British Energy Bill
Michael Shanks ExcerptsTuesday 25th March 2025
(1 year, 4 months ago)
Commons ChamberRead Full debate Great British Energy Act 2025 View all Great British Energy Act 2025 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Amendments as at 25 March 2025 - (25 Mar 2025)
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
I beg to move, That this House agrees with Lords amendment 1.
Madam Deputy Speaker
With this it will be convenient to discuss:
Lords amendment 2, amendments (a) and (b), and Government motion to disagree.
Lords amendments 3 to 12.
Michael Shanks
I am pleased that the Great British Energy Bill has returned to this House. I would like to thank all Members of both Houses for their scrutiny of this important legislation. I extend my thanks in particular to the Minister for Energy Security and Net Zero, Lord Hunt of Kings Heath, for his invaluable support and collaborative approach in guiding the Bill through the other place.
Twelve amendments were made there, which I will seek to address today. Before I turn to them, I remind the House that the Government were elected on a manifesto commitment to set up Great British Energy, and that is exactly what the Bill does. Since the Bill was last in this House, we have appointed five start-up, non-executive directors and announced Dan McGrail as interim CEO, based in Aberdeen, so that Great British Energy can quickly get the expertise needed to help the company develop. I was delighted to convene the first meeting of Great British Energy’s board of directors last week in Aberdeen.
We are determined to get Great British Energy delivering for the British people as soon as possible. It has already made some incredibly exciting announcements on initial projects, including a partnership with the Crown Estate, and most recently announcements on solar for schools and hospitals across England, with funding also for Scotland, Wales and Northern Ireland. We look forward to GBE making further investment decisions on projects this year, driving forward our clean power mission and creating thousands of jobs across the country in the process.
Lords amendment 2 would prevent the Secretary of State from providing financial assistance to Great British Energy if credible evidence of modern slavery was found in its supply chains. There has understandably been significant interest in this amendment from Members in the other place and on both sides of this House. We recognise that concerns have been raised widely on this issue, and I am seeking to approach it in a collaborative and open way with hon. Members.
I will also address amendment (a) to Lords amendment 2, as our approach to this amendment is similar. I first of all thank my hon. Friend the Member for Rotherham (Sarah Champion) for amendment (a). I have been grateful for her engagement with me ahead of the Bill returning to this House. I also pay tribute to her tireless work over many years on this important issue. Her amendment would amend Lords amendment 2 made in the other place by creating a cross-ministerial taskforce to which Great British Energy would need to prove that its supply chains were free of forced labour.
I want the House to be in no doubt that this Government are absolutely committed to confronting and tackling modern slavery in energy supply chains. As set out by my colleague Lord Hunt in the other place, Great British Energy has a range of tools to tackle modern slavery in its supply chains. GBE will prepare a slavery and human trafficking statement when it meets the thresholds set out under section 54 of the Modern Slavery Act 2015. That will outline the steps it is taking to ensure that slavery and human trafficking are not present in its supply chains or any part of its business.
Under the Procurement Act 2023, GBE can reject bids and terminate contracts with suppliers that are known to use forced labour themselves or that have it anywhere in their supply chain. I commit here that GBE will utilise the debarment list to ensure that suppliers with unethical supply chains cannot participate in procurement or be awarded contracts by GBE.
Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
That is not altogether correct. The Minister will know full well that the Procurement Act can only be enacted once a supplier has had a conviction under section 54 of the Modern Slavery Act. To do that, proceedings have to be able to be taken against the company that is involved in the slavery. A British company involved in agency is not involved in the slavery. It would have to get the Chinese Government to prosecute the Chinese company to make sure that they got a prosecution here. That is never going to happen.
Michael Shanks
I thank the right hon. Gentleman for his contribution and his many years of work on this issue. I will come to some of the detail in addition to this measure, but it is important to say that the debarment list, which was part of the Act passed by the Conservative Government, has been in force since February and will be populated in due course. We will use that list as the basis of challenging the decisions that Great British Energy can make not to take contracts with those on that list. I will look in more detail at the specific points that he raised, and I will come to some of that later in my speech.
Josh Babarinde (Eastbourne) (LD)
My constituent Dorit Oliver-Wolff is a Holocaust survivor. She knows what slave labour looks like, and she has written to the Prime Minister to urge that our energy transition does not repeat so many of the atrocities that she has seen. She is awaiting a reply from the Prime Minister. Will the Minister nudge No. 10 to ensure that she gets the response that she needs and deserves on her own behalf and that of victims of modern slavery across the world?
Michael Shanks
I thank the hon. Gentleman for raising that point. I saw that powerful letter, which was widely reported in the press. I am not sure that nudging No. 10 is quite within my gift, but I will certainly raise the issue for a response. The wider point raised is absolutely right. I recognise the need not just in the energy sector but across our economy to ensure that we remove any risk of forced labour in supply chains. We all share that commitment across the House. We need a number of different measures to make that happen. I am determined that Great British Energy will a leader in the sector on doing that, particularly within the energy space.
Returning to the focus that Great British Energy will have at the highest levels of its work, I can commit today that it will appoint a senior individual in the organisation to lead on ethical supply chains and modern slavery. Further, the statement of strategic priorities outlined in the Bill, which the Secretary of State will issue to GBE once it receives Royal Assent, will include an overarching expectation that GBE proactively works to deliver on these commitments and, in doing so, becomes a sector leader in this space, as we would expect from any company owned by the British public.
To further demonstrate our commitment across Government, we will write to all FTSE 100 companies outlining our expectations on responsible businesses to ensure that these issues, especially forced labour and supply chains, are being effectively identified and addressed. Given the importance of tackling modern slavery, it is crucial that businesses play their part to tackle that abhorrent crime. We cannot do this without their support, so it is an important step across Government.
Mr Richard Holden (Basildon and Billericay) (Con)
The Minister is explaining what the Government are doing, but they are not doing what Members of this House and of the other place want—not just asking people to do stuff but leading. That is what this amendment does: it would allow the UK to really show its leadership on behalf of the British public. This will be a huge public company. Why will the Minister not just commit to that further step today?
Michael Shanks
Let me come to that point, because the specific reason that we disagree with their lordships on this amendment is that it would not actually do what the hon. Gentleman says. It would force the Government to cease all GBE’s activities, rather than give it the scope to address any of the issues that we are raising today directly within the framework that we have outlined. As I said, we as a Government are wholly committed to doing this. Great British Energy will be committed to ensuring that the highest standards are maintained. The amendment would cease the funding immediately, which would not give GB Energy the scope to actually invest in the appropriate supply chains and to tackle those issues directly.
Sammy Wilson (East Antrim) (DUP)
Will the Minister accept that many people listening to this will see it as evading rather than addressing the issue? We can have the Procurement Act, the taskforce and the letters to all the major companies, but the fact remains that most companies will seek financial assistance for the kinds of projects that they wish to do. If credible evidence is discovered that supply chains have been contaminated by slavery, the easy way of stopping purchases from suppliers who act in that way will be to say, “You’re not getting any support.”
Michael Shanks
I do not disagree with that at all, and that is possible. Nothing forces Great British Energy, or any other company, to take investment from any individual or company. They can choose not to do so for a whole variety of reasons, and if one of those reasons is credible evidence of modern slavery in the supply chain, I would fully expect them not to invest in those companies. That is exactly what we are talking about today. The point is that that conversation must be broader than one just about Great British Energy. It is about wider supply chains and companies right across the economy, and that is what we are hoping to tackle.
In parallel, although the energy sector is particularly important to me, I want to work across Government to outline a comprehensive plan to tackle modern slavery, which is a question right across the economy. Rather than dealing with the problem on a company-by-company basis, we must look to do so more broadly. To drive forward that work, I confirm that in the coming weeks I will convene cross-departmental ministerial meetings involving the Department for Business and Trade, the Home Office, the Foreign, Commonwealth and Development Office and my Department to discuss how we can accelerate work across Government on this really important issue.
Rachael Maskell (York Central) (Lab/Co-op)
I am grateful to the Minister for his speech and the consideration that he is giving to this issue. Will he look at a reverse burden of proof so that, instead of proving an exclusion, it is switched to show no association with modern slavery?
Michael Shanks
My hon. Friend makes a good point. I will come to that briefly in a moment.
All of this work builds on the implementation of the new procurement regime, which focuses on ensuring fair and open competition and treating suppliers equally, as well as the work that we are doing on the relaunched solar taskforce—it started under the previous Government and has continued under this Government—to develop resilient, sustainable and innovative solar supply chains that are free from forced labour.
We recognise that the landscape has shifted since the Modern Slavery Act came into effect, which is why yesterday the Home Office published updated statutory guidance on transparency in supply chains that provides comprehensive and practical advice for businesses on how to tackle forced labour in their supply chains. Great British Energy will, of course, follow any new measures on modern slavery to which it is subjected, just as any responsible public or private body should. I hope that the new steps I have outlined will reassure the House that Departments across Government will continue to work intensively on this issue.
Before I move on, I will reflect briefly on amendment (b) to Lords amendment 2, tabled by my hon. Friend the Member for Leeds Central and Headingley (Alex Sobel), which would require the Independent Anti-Slavery Commissioner to define “credible evidence” in Lords amendment 2. While I thank him for the amendment, we have to resist it as the Independent Anti-Slavery Commissioner’s role was established to encourage good practice rather than to look specifically into supply chains of individual companies. The amendment would place a significant lawmaking function on the commissioner, which the role was not designed for, and is currently not within the commissioner’s powers. The amendment would also have wider implications for how evidence of modern slavery is assessed and could create unnecessary legal uncertainty and precedent.
I turn to the remaining amendments. The Government were pleased to table Lords amendment 1 and Lords amendments 3 to 12 following positive discussions with peers in the other place. Lords amendment 1 puts community energy on the face of the Bill. The Government had a manifesto commitment to deliver a step change in community energy across the UK. We set up GBE to deliver our local power plan: it is at the heart of our plans for GBE. However, we recognise that during the Bill’s passage, it was highlighted that the role of community energy should be made explicit in the Bill. As my colleagues in the other place said, the Government have accepted that, and it is right that that is now in the Bill.
Martin Rhodes (Glasgow North) (Lab)
I very much welcome the amendment. Does the Minister agree that community energy is important not just for jobs and investment but for engaging communities with the transition to a new energy system? Does he recognise the need for the Government to support those initiatives with funding going forward?
Michael Shanks
I agree with my hon. Friend on both points. Community energy is incredibly important to give communities a stake in their energy future and to deliver the social and economic benefits that go with it. Just last week we announced a significant amount of funding through GBE for community energy projects across England, and funding for Scotland, Wales and Northern Ireland to spend on similar projects, including community energy projects in their own areas.
Michael Shanks
I will give way briefly, but then I will have to make a bit of progress.
Dave Doogan
Can the Minister advise the House on the level of recurrence to that funding? Will it be year-on-year funding? Will he also give us an indication—maybe not precisely, but broadly—what that funding stream will be year on year under GB Energy?
Michael Shanks
It will not be recurring in the same methodology. GBE does not yet exist, so we carried out the initial set of investments in a particular way. Going forward, those projects will be on the basis of the individual investment propositions put forward. Individual projects in Scotland or in other parts of the UK will therefore apply for funding, they will be considered alongside other investments and those investments will be made. However, we will not deliver funding on a population share on that basis going forward. Of course, funding is already going to the Scottish Government, with a significant increase in the budget this year to fund, for example, the community and renewable energy scheme and the community energy work, which are going on in Scotland already.
Briefly, Lords amendment 3 came in recognition of concerns raised about the length of time GBE could operate without strategic priorities. We have agreed to an amendment that would prepare a set of strategic priorities within six months, although I will say to the House, as I did in Committee, that we intend to move far faster than that. Lords amendments 4 to 10 were brought about following positive engagement with the devolved Governments and we are committed to collaboration on a UK-wide basis. The amendments, which relate to clause 5, moved from consulting with devolved Governments to consent in relation to devolved competencies. I am grateful to my ministerial colleagues in Scotland, Wales and Northern Ireland for engaging so productively and for the Parliaments’ legislative consent motions on the Bill.
Lords amendment 11 introduces an independent review of Great British Energy’s effectiveness. Finally, Lords amendment 12 ensures that Great British Energy will keep the impact of its activities on sustainable development under review. I know that was a concern raised by a number of Members in relation to how we conserve nature and biodiversity while advancing clean power. I therefore hope the House will join me in welcoming that addition.
I look forward to this debate—albeit short—and I urge the House to support the Government’s position on the amendments.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
This is a sad and quite incredible day in this House. We have debated this Government’s energy policies on many occasions in the past few months. We have frequently debated the merits, or lack thereof, of Great British Energy, an organisation about which we still know very little—what it is for and what it will do.
We were told by the Labour party that it would bring down bills by £300, but bills have gone up. We were told by the Labour party that it would create jobs, but nobody can tell us how many or by when. We were told by the Labour party that it would be based in Aberdeen, but the interim chairman is based in Manchester and it looks unlikely that we will see little more than a brass plaque in the granite city. We were told that it would employ thousands of people, but that then turned to hundreds. We were told it would generate energy, but it will not—it does not have a licence to do that. We were told that it would guarantee a positive return on every investment, but that is impossible. I therefore ask the Minister again: what will the entity actually do? Do they know? Will it be seeking an electricity generation licence? How will it bring down energy costs in this country?
Turning to today’s proceedings, far from the Secretary of State and the Minister’s insistence that Great British Energy will free us from reliance on foreign dictatorships, this headlong rush to clean power by 2030 will, in fact, make us more reliant than ever on the People’s Republic of China. He and his Ministers are quick to note the reluctance to rely on petrostate dictators. I wonder how he would characterise the People’s Republic of China, where political opposition is illegal, where citizens have more limited political rights than in the Russian Federation, where dissent is invariably punished and where the use of forced labour is proven.
In 2022 we blocked China General Nuclear from involvement in Sizewell C. In 2020 we prevented Chinese influence on our communications networks under the guise of Huawei. Yet despite serious concerns about the national security implications, the ethical implications and the high climate emissions, the Secretary of State and Ministers are opening the gates to Chinese technology in our North sea wind farms, to solar panels made with slave labour and to using coal power.
It is in the context of our increasing reliance on foreign states that I wish to speak to the Lords amendments, and particularly Lords amendment 2, tabled by Lord Alton of Liverpool. I am grateful to him, and we all recognise his long-standing dedication to this serious matter.
I said that this was a sad day, and I feel for those Labour MPs, for many of whom I have a great deal of respect, who came into this House, into politics and specifically into their party because they believed in social justice and decency, and for whom this is not just a job but a vocation. They came here in July believing that they would be part of a project to create a better world, in the spirit of Bevan, Attlee, Hardie and Wilson. I wonder what those titans of that proud labour movement would make of this today, because it was on this day in 1807 that the Abolition of the Slave Trade Act received Royal Assent, and 218 years on, Labour MPs are going to be whipped to allow the state to directly fund imports of goods built by slave labour in China. [Interruption.] They complain, but it is true.
Michael Shanks
With the leave of the House, I will sum up the debate. I thank all right hon. and hon. Members for their contributions to this debate, although it has been short, on a number of the amendments but perhaps most importantly on forced labour and modern slavery in our economy. I want to reflect on some of the contributions from Members on both sides of the House, but let me start by saying that I hear the very strong views that have been expressed on this issue. It is right that Governments of whatever party constantly challenge themselves to go further in tackling these issues, because—as the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) put it—even one person being affected by forced labour is an absolute disgrace. We should collectively tackle that issue using whatever means we can.
As such, I want to reiterate clearly that contrary to some of the contributions we have heard from Conservative Members, Lords amendment 2 is about amending the Great British Energy Bill, not about the Government’s wider commitment to tackling modern slavery. It can be repeated as often as Conservative Members like, but it is simply disingenuous to come to this place and suggest that the Labour party has suddenly decided not to care about this issue. I really do take issue with that.
Sir Gavin Williamson (Stone, Great Wyrley and Penkridge) (Con)
Will the Minister give way?
Michael Shanks
The right hon. Gentleman was not in the Chamber for a lot of the debate, but I will give way to him.
Sir Gavin Williamson
I think the Minister would accept that Lords amendment 2 is a very modest proposal that could make a significant difference to people’s lives and outcomes in China. There is talk of Labour buying off its Back Benchers by saying that further legislation is coming down the line—is that in six months’ time, a year’s time, or two years’ time? When is it going to come?
Michael Shanks
First, the right hon. Gentleman cares so much about the issue that he has only just turned up to the debate. Secondly, he was a senior member of the Government for 14 years. If this was an issue that he cared about so much, why are we here debating it now? The truth is that the previous Government could have tackled this issue in a much clearer way. I will not follow him on that point.
As I said clearly in opening the debate, which I do not think the right hon. Gentleman was here for, there should no modern slavery anywhere in our economy or our supply chains. To deliver, we must work across Government and across the economy, because it is not just about the investments that Great British Energy makes.
Several hon. Members rose—
Michael Shanks
I will give way briefly to my hon. Friend the Member for St Helens South and Whiston (Ms Rimmer), and then I need to finish.
Ms Marie Rimmer (St Helens South and Whiston) (Lab)
The Modern Slavery Act 2015 and the Procurement Act 2023 do not work in this area. To do anything, two criteria must be met, and they are only advisory. In the World Health Organisation, we had to prove that organ harvesting was not an “ethical organ transplant system”, and we cannot get to the supply chains, which are state-invented, state-imposed and disguised. I urge the Minister to give a commitment that he will listen to the argument in these two amendments.
Michael Shanks
I understand the argument that my hon. Friend is making, but the issues she rightly highlights, as other Members have, go much wider than Great British Energy, which the Bill sets up as a publicly owned energy company. Those issues are about the wider economy and investment across our supply chains.
Michael Shanks
I need to close. I am sorry.
In part, we are setting up Great British Energy because we want to deliver home-grown supply chains and an industrial strategy, in spite of the Conservative party having completely failed to deliver that for 14 years—in fact, it had a complete ignorance of how to build supply chains. Had it delivered on some of the supply chains in this country, we might not have to import so much. [Interruption.] Opposition Members can shout all they want; they know that they failed on this matter, and we are picking up the pieces.
For those Members who were in the debate, I want to respond to the points raised, in particular in the powerful speech made by my hon. Friend the Member for Rotherham (Sarah Champion). On her point about how widespread the problem of forced labour is, that underlines why a piecemeal approach, legislating on individual companies here and there, is not the right one. We need to work across Government to tackle the problem throughout the economy. She asked for clarity on some of the points made. She is right to reiterate the point that I intend to pull together Ministers from across Government, including the Foreign Office, the Home Office, the Department for Business and Trade and my Department, to look at how we can collectively tackle the issue. There will be a designated leader within Great British Energy to drive this work forward. We will utilise the debarment list.
More broadly, we fully expect Great British Energy to do everything in its power under the relevant guidance and legislation to remove any instances of forced labour from supply chains. GBE must not approve the use of products from companies that may be linked to forced labour.
This is an important debate on a Bill that was in our manifesto. It delivers the first new national publicly-owned energy generation company in 75 years. It is backed by the British public, and it will deliver jobs and investment all over the country. It will deliver the deployment of clean power. We will tackle the supply chains to ensure that jobs come to this country and that we tackle the scourge of modern slavery, not just through GBE but across the economy. That is our commitment. I urge Members to support the Government’s position. In the 15 seconds I have left, I reiterate the point I made earlier: I am willing to work with Members across the House to tackle this fundamental issue, which is of extreme importance across the Government.
Great British Energy: Rooftop Solar Power
Michael Shanks Excerpts(1 year, 4 months ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
Hundreds of schools, NHS trusts and communities across the UK will benefit from new rooftop solar power and renewable schemes to save money on their energy bills, thanks to a total £200 million investment partnership between Great British Energy and the UK Government, including the Department for Education and the Department for Health and Social Care.
In another step forward for the Government’s plan for change, the Energy Secretary has today, Friday 21 March, announced the first major project for Great British Energy—a company owned by the British people, for the British people. It will immediately begin working with schools, the NHS and the devolved Governments to install rooftop solar panels, build local clean power and bring down energy bills.
In England, around £80 million in funding will support around 200 schools. This could lead to lifetime savings of up to £140 million. Estimates suggest that, on average, a typical school could save over £25,000 per year.
Additionally, £100 million will be allocated to nearly 200 NHS sites in England. This covers a third of NHS trusts. The NHS is the single biggest public sector energy user, with an estimated annual energy bill of £1.4 billion. This has more than doubled since 2019. Great British Energy’s investment could save the NHS up to £260 million per year—up to £45,000 per hospital.
The first panels are expected to be installed by the end of summer 2025. This will save schools and hospitals money for the next academic year. There is also the potential to sell leftover energy back to the grid.
Schools and hospitals have been hit with rocketing energy bills in recent years, costing taxpayers millions of pounds and eating into school budgets. This has been driven by the UK’s dependency on global fossil fuel markets. Great British Energy’s first investment could see millions invested back into frontline services, targeting deprived areas, with lifetime savings for schools and the NHS of up to £400 million over around 30 years.
A further £9.3 million will power schemes in Scotland, Wales and Northern Ireland. These projects can be a mixture of installations on public sector buildings, new community or local renewables projects, and other complementary technologies such as battery storage solutions. This funding has come from the budget allocated to GBE local delivery in the 2025-26 spending review, which has been apportioned between all four nations by population share. England has supplemented this with funding from existing budgets, including health and education. The devolved Governments may similarly choose to use this new funding alongside existing budgets to deliver ambitious new projects or expand existing schemes.
In addition, local authorities and community energy groups will also be supported by nearly £12 million to help build local clean energy projects—from community-led onshore wind to solar on rooftops and hydropower in rivers—that can help drive growth.
Great British Energy’s community energy fund will provide £5 million in grant funding to support community energy groups to develop their own clean power supply projects. These could generate profits that could then be reinvested into community projects or take money off people’s bills.
The UK Government will continue to fund the local net zero hubs in England, with a total of £6.8 million for existing hubs. These offer a free-to-use service for local authorities to access the expertise and resource to get clean energy projects up and running.
Great British Energy is also launching partnerships with strategic mayoral authorities. The metro mayors can apply for a share of £10 million to deliver clean power projects in every region of England.
We have been clear from the start that expanding support for local and community power is a core ambition for Great British Energy. This announcement demonstrates an immense commitment by Great British Energy and the UK Government to support local and community energy now and in the future. These schemes will deliver clean, secure, home-grown power for our core public services and local communities.
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Oral Answers to Questions
Michael Shanks Excerpts(1 year, 4 months ago)
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James Wild (North West Norfolk) (Con)
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
Our clean power mission will end our dependence on volatile fossil fuel markets, giving the British people the energy security they deserve and driving jobs and investment into our communities. We are already seeing the impact of the clean energy transition, with thousands of jobs being created across the country in CCUS—carbon capture, usage and storage—hydrogen and offshore wind, and more nationally significant solar power being approved in eight months than the previous Government managed in 14 years.
Mr French
The London power tunnels project has been a positive story locally in Bexley, as National Grid has worked with the community to minimise disruption with a plan to restore the site. However, the Labour Government’s planning reforms have led developers to propose two extensive industrial battery storage facilities on a nature conservation area and farmland locally in Bexley that do not meet fire safety guidance. While we need infrastructure, does the Minister agree that weakening green belt protections against residents’ wishes and damaging nature in the process to meet Labour’s unrealistic grid targets will result in bad developments in inappropriate places?
Michael Shanks
I am glad the hon. Gentleman draws attention to the London power tunnels. My right hon. Friend the Secretary of State and I have visited them recently and they are a fantastic example of engineering and of what we can achieve if we set ambitious targets in this area. I gently disagree with the hon. Gentleman on the wider point, however, as we are going to have to build infrastructure across the country to get the benefits of the renewable energy that we are generating, and battery storage is important for that. Of course communities have a voice through the planning system and it would be wrong for me to comment on individual applications, but the hon. Gentleman and his colleagues must remember that we cannot simply block every infrastructure project that needs to be built. We need to build for the economic growth of the country and for our energy security.
James Wild
Once again the Minister has failed to answer the question about the cost estimate, but we do know that the Government’s dogma-driven 2030 target will drive up costs and that we will see pylons and substations imposed in Walpole in my constituency and across the country against the wishes of local people. That will damage our countryside and it relies on Chinese supply chains, which the Energy Secretary visited only over the weekend. When will the Government realise that their approach of ruling out underground options and attempting to buy off local communities on the cheap, rather than listening to them, will only drive opposition to their plans?
Michael Shanks
Once again, we hear from Conservative Members about all these grand plans that they wish they had done in the 14 years that they were in government. They could have moved forward on undergrounding if they were so keen on it, but of course they did not. The reality is that it is for individual companies, not us, to set forward the design of individual projects, and cost estimates for undergrounding are five or 10 times more expensive.
The bottom line on all of this is that the leader of the hon. Member’s party earlier today moved away from the commitments that she had made on net zero. Just a few years ago, she said that
“Russia’s invasion of Ukraine has made it clear that relying on authoritarian regimes”
can make it
“harder…to heat our homes”.
They recognised then the importance of this net zero transition; now they are running away from how we deliver on it.
Bill Esterson (Sefton Central) (Lab)
UK electricity bills are the highest in Europe compared to gas. Evidence given to the Select Committee suggests that the Government are absolutely right to reduce our reliance on fossil fuels, and it is a shame that some Opposition Members have abandoned an evidence-informed approach to policymaking. Can the Minister confirm whether the Government are considering rebalancing the infrastructure levies on our energy bills, as a way of reducing electricity bills in the immediate future and as a down payment towards 2030 and beyond?
Michael Shanks
The Select Committee Chair makes an important point. Along with the Minister for Energy Consumers, my hon. Friend the Member for Peckham (Miatta Fahnbulleh), I am looking at all options, because it is important that we bring down bills and that we are building an energy system that protects us from the volatile fossil fuel markets in the future. There are trade-offs to be made when rebalancing that we need to be aware of, in particular whether a diminishing number of gas customers can pay bills if we were to transfer levies, but we are looking at all options and are, of course, looking at how we review with Ofgem the wider question of standing charges to make sure we bring down bills. My hon. Friend is right to say of the journey that we are on—and that the Conservative party used to be on, and on which there used to be consensus—that our transition to net zero is important for energy security and for the climate, but also for protecting bills in the long term.
Ms Polly Billington (East Thanet) (Lab)
The Minister is clearly aware of the foolhardy decision by the Opposition to abandon the political consensus on net zero, but has he made an assessment of the cost to the consumer of pursuing that disastrous path, which would lock us into our dependence on polluting fossil fuels, volatile oil and gas prices, and the whims of foreign dictators?
Michael Shanks
My hon. Friend is absolutely right. It is important to recognise that where once there was consensus in this country on how we tackle the climate crisis and, crucially, how we deliver the economic and industrial advantage, that consensus seems to have been splintered by the Conservative party. It was only two years ago that the leader of that party made an important point, which I agree with strongly, when she said
“if we get our strategy wrong, we risk being left on the backfoot as other countries seize the advantage.”
The Conservative party now wishes us to be on the backfoot, but we are determined that we will drive forward because that is the best policy for consumers, economic growth and energy security.
Nick Timothy (West Suffolk) (Con)
The Government’s rush to decarbonise the grid means more hidden costs, more curtailment payments, more balancing payments, more subsidies and a higher carbon price. Will the Minister guarantee that our carbon price will remain lower than the European price for the remainder of this Parliament?
Michael Shanks
I think the hon. Gentleman knows more than anyone about the work that the previous Prime Minister Theresa May did in this area—work that his party is now moving away from rapidly. The Conservatives were right then: the only way for us to bring down bills, deliver economic growth and tackle the economic opportunities is for us to be on this journey together. Conservative Members used to strongly believe in that. We will continue on that path because it is the right thing for the country to do.
Nick Timothy
That was a long-winded answer, but the Minister did not actually address the question, and I think he just gave away that it is Labour’s secret plan to increase the price of carbon—a massive rise in the carbon price—adding hundreds of pounds to families’ bills and decimating British industry. Given Labour’s election promise to cut bills, will he take this moment—he can look up into the camera if he likes—to promise the country that by the next election bills will be lower, as Labour promised? Yes or no?
Michael Shanks
Never mind long-winded answers—that was a very long-winded question. I have not revealed any secret plans, but the Conservatives have revealed their not so secret plan, and I can tell the county that it is just as disappointing as the one the country rejected seven months ago. We have been very clear that it is our commitment to bring down bills, and we are determined to deliver on that. Unlike the Conservative party, which left consumers across the country exposed to volatile fossil fuel markets—the hon. Gentleman is right to point out that bills went up and up and up when his party was in government—we will bring them down. His party wants to take us back to the fossil fuel casino but we will not do that.
Nick Smith (Blaenau Gwent and Rhymney) (Lab)
Sir Edward Leigh (Gainsborough) (Con)
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
Meeting our clean power mission will require a significant increase in the deployment of both ground-mounted and rooftop solar projects. As well as consenting record amounts of ground-mounted solar, we want to see a much greater deployment of rooftop solar power. We will soon publish the solar road map—work that started under the previous Government—to bring together our next steps in this area.
Sir Edward Leigh
The Government say that only 1% of agricultural land will be taken up by solar farms, but in the pipeline around Gainsborough 10,000 acres have already been put aside for solar farms, with another 4,000 announced a couple of weeks ago—up to 15% of my constituency, which is the most arable and most fertile in the country. I make one quite reasonable request of the Secretary of State: will he consider applications in the round rather than individually, and look at their cumulative effect on food production and the local environment?
Michael Shanks
Under even the most ambitious scenarios, less than 1% of agricultural land would be occupied by solar farms. On the right hon. Gentleman’s point about their being holistically planned, the strategic spatial energy planning that we have taken forward is important in having a coherent view of the entire energy system. That is work that we should have done many, many years ago. We are now moving at pace to do it, but individual planning applications are—
Michael Shanks
I think we have rehearsed the arguments about the absolute failure of the previous Government over the past 14 years. The Conservatives have just gone further back today. On GB Energy, I was delighted to be in Aberdeen yesterday to join the board of GB Energy for its first board meeting. The Bill will soon, we hope, complete its passage through Parliament. It can then get on with delivering for the British people.
Steff Aquarone (North Norfolk) (LD)
Andrew Cooper (Mid Cheshire) (Lab)
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
My hon. Friend is absolutely right that we have moved forward on delivering our plan that people hosting important infrastructure in their constituencies should benefit from it. The Conservatives consulted on it, like so many policies that they talked and talked and talked about, but failed to deliver over 14 years—we are moving on with delivering it.
Chris Kane (Stirling and Strathallan) (Lab)
Michael Shanks
I thank my hon. Friend for his question. He underlines the importance not just of delivering on energy projects but the wider economic benefits from building infrastructure—the kind of infrastructure that the Conservatives now oppose. He is right that in order to deliver these projects, we need to see investment in rural communities by the Scottish Government. We will continue to press them on those issues.
Mike Martin (Tunbridge Wells) (LD)
Brian Leishman (Alloa and Grangemouth) (Lab)
There is to be a much reduced testing process for oil at the import terminal at Grangemouth. Is the Secretary of State concerned that, if imported oil does not pass these reduced tests, it cannot be used, leading to Scotland suffering a fuel shortage?
Michael Shanks
Throughout the seven months that we have been in government, we have been doing everything we can to work with the operators of the Grangemouth refinery. Of course we were disappointed by its closure. We have carried out a number of pieces of work on fuel security. We are not concerned about that at this point, but, across the whole country, we keep constantly it under review.
Claire Young (Thornbury and Yate) (LD)
Although the Leader of the Opposition thinks that achieving net zero is impossible without “bankrupting us”, investment in low carbon energy for communities such as Severn Beach in my constituency could create valuable skilled jobs. What steps will the Government take to ensure that the area around the River Severn will get the investment that it needs to realise its potential?
Viking CCS Pipeline: Development Consent Application
Michael Shanks Excerpts(1 year, 4 months ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
This statement concerns an application for development consent made under the Planning Act 2008 by Chrysaor Production (UK) Ltd for the construction and operation of an onshore underground pipeline for the transportation of CO2 from Immingham to Theddlethorpe in Lincolnshire.
Under section 107(1) of the Planning Act 2008, the Secretary of State must make a decision on an application within three months of the receipt of the examining authority’s report, unless exercising the power under section 107(3) of the Act to set a new deadline. Where a new deadline is set, the Secretary of State must make a statement to Parliament to announce it.
The statutory deadline for the decision on the Viking CCS pipeline is 5 March 2025.
I have decided to allow an extension and to set a new deadline of 5 June 2025. This is to allow time to request further information.
The decision to set the new deadline for this application is without prejudice to the decision on whether to grant or refuse development consent.
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Management of Italian Nuclear Materials in the UK
Michael Shanks Excerpts(1 year, 5 months ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
My hon. Friend the Minister of State for Energy Security and Net Zero (Lord Hunt of Kings Heath) made the following statement today:
The Department for Energy Security and Net Zero has agreed to the Nuclear Decommissioning Authority:
Taking ownership of approximately 1.58 tonnes of separated civil plutonium which was previously owned by an Italian counterpart;
Taking ownership of approximately 700 tonnes of reprocessed uranium which was previously owned by an Italian counterpart.
These transactions, which have been agreed by the Euratom Supply Agency, will not result in any new plutonium or reprocessed uranium being brought into the UK, and will not therefore increase the overall amount of plutonium or reprocessed uranium in the UK.
The Department has agreed to these transactions on the grounds that they offer a cost-effective and beneficial arrangement, facilitating the conclusion of historical European nuclear material contracts. The revenue from the transactions is sufficient to cover the cost of the management of the plutonium and reprocessed uranium involved.
The UK has committed to publish annual figures for national holdings of civil plutonium and uranium at the end of each calendar year to improve transparency and public confidence. The most recently published data can be found at the following link: https://www.onr.org.uk/publications/regulatory-reports/safeguards/annual-civil-plutonium-figures/2023-annual-figures-for-holdings-of-civil-unirradiated-plutonium/ This data will be updated in due course to reflect the changes in ownership described above.
In January 2025, the Department also announced the decision to immobilise the UK-owned civil separated plutonium inventory at Sellafield.
[HCWS472]
Cost of Energy
Michael Shanks Excerpts(1 year, 5 months ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
Good morning; it is a pleasure to speak in this debate under your chairmanship, Mr Western. May I thank the hon. Member for Bath (Wera Hobhouse) for securing this debate and, actually, for all our engagements over the past seven months? She always helpfully challenges the Government from a place of real passion and commitment, and I appreciate her words of wisdom, even if I do not always entirely agree with them. In fact, we have had countless debates on energy policy with a number of people in this room—it is beginning to become a bit of a weekly club here in Westminster Hall—and I appreciate all the points that have been raised.
May I say to the hon. Member for Strangford (Jim Shannon) that I just cannot get enough of his contributions? Having not spent enough time in the Commons yesterday, we are back again today, but I am appreciative none the less. I will come to his points about Northern Ireland later.
I will start where the hon. Member for Bath started: on the public’s view about the cost of energy. She made an important point about how central energy costs are not just to the cost of living crisis that our constituents are still living through, but to their belief in the Government’s ability to change things, so it is important that we tackle these issues. As the hon. Member for Beaconsfield (Joy Morrissey) rightly said, this Government were elected on a manifesto that contained pledges on energy. I am privileged to have the job of Energy Minister, because for the first time in a very long time we have a Government with a key mission to fix the energy system in this country. The truth is that it needs to be fixed because of what we inherited from the previous Government.
The energy crisis in 2022 was just the peak that highlighted how vulnerable we are to the rollercoaster of the fossil fuel markets. The cost of energy continues to have a devastating impact on our constituents and communities right across the country. Although consumers are protected to a certain degree by the energy price cap, our energy costs are determined by volatile markets outwith our control. As long as we remain exposed to that, the risk to our constituents is that we will face yet another price spike in the future.
My hon. Friend the Member for Northampton South (Mike Reader) made the point well that after 14 years of Conservative Government, we have to not just turn around one bit of the energy system, but deal with the whole series of occasions on which the previous Government failed to make decisions that would grapple with the scale of the problem. That is why I announced yesterday in the main Chamber our transitional support for Drax and biomass. The truth is that we got a good deal for consumers and for sustainability, but we had to make that decision. We had no other options because the previous Government left us with no long-term plan for energy security.
That is why we believe so firmly in our clean power by 2030 mission, which, by creating home-grown renewable energy, will help us to reduce our dependence on volatile fuel markets and will protect bill payers for good. Great British Energy will play a vital role in that mission by accelerating our deployment of clean energy so that Britain can become a clean energy superpower. Crucially, it will also invest in the supply chains that bring manufacturing jobs for renewable energy to our country.
Sir John Hayes
I understand the Minister’s desire to create more economic resilience by ensuring energy independence. By the way, I should refer Members to my entry in the Register of Members’ Financial Interests in respect of this contribution and the previous one. The key thing is transmission and distribution costs, which make up 15% of every energy bill. No Government have looked at that seriously. If we distribute energy production to small solar plants spread right across the kingdom, we will maximise the costs and damage the resilience that the Minister seeks. Will he focus on the concentration of energy production and bring it as close to consumption as possible?
Michael Shanks
I will come to the right hon. Gentleman’s point about transmission costs later, because it is important, particularly when it comes to how we grapple with constraint costs. The truth is that we will have to build more network infrastructure. I hope he will support the construction of that, although I suspect he will not. We also want to review energy market reforms to look at how we deal with some of these issues. I will come back to the important point, which a number of hon. Members raised, of how we build an energy system for the future. The question of balance is key. We do not want a renewables-only system, although renewables will be incredibly important. We announced last week our commitment to rolling out much more nuclear to provide the baseload and the security of supply. We have the ability to place small modular reactors across the country near centres of demand, such as the data centres that we will see in the future.
Edward Morello
The hon. Member for Beaconsfield (Joy Morrissey), representing the former Government, tried to mischaracterise the need to upgrade the grid as a cost of renewables, but does the Minister agree that we need to upgrade the grid regardless of what technology we use? We lose 10% of the energy we generate through transmission. It is an old grid and, regardless of the technology we use, we need to upgrade it.
Michael Shanks
The hon. Gentleman makes a very good point. Upgrading the grid is important for transmitting the clean power that we want to generate in the future, but it is already 50 or 60 years old, and it is creaking under the pressures it has operated under for a very long time.
There is real need to upgrade the grid right across the country. The truth is that the previous Government recognised that that was important. They launched the idea of the great grid upgrade before we did, but they are now running away from a lot of that. That is hugely disappointing, but it will not get in the way of our moving forward to make sure that we build the grid of the future. Yes, we need to meet the demand for now, but we know that by 2050 electricity demand is likely to double in this country. If we do not build the infrastructure now, it will be the weakest part of our economic strategy in the future. It is essential we build it now, but we want to bring communities with us.
Wera Hobhouse
Is it not also true that although we need to upgrade an old grid, the challenge of the future is a decentralised energy system, and that that is so often misunderstood? We had big power stations; now we have decentralised and smaller energy providers. That is a big challenge that we all have to recognise rather than criticising a particular Government—as tempting as it is to just criticise the Government of the day.
Michael Shanks
Never will it be said that I enjoy criticising the former Government.
I would flip what the hon. Member for Bath says on its head: that change also presents a real opportunity to look at the electricity system in a different way—I will come back to that point, particularly on community energy. It is right to say that the days of big cities with power stations right next to them are long gone, so we need to think of a different way to build our transmission system into the future.
On Clean Power 2030, advice from the National Energy System Operator said that the clean power system can be cheaper than today’s system for consumers. Contrary to what some Members have said, we know that renewables are by far the cheapest to run. There is a cost to building them, but there is also a huge cost to building new gas or nuclear power stations that is often not factored into the debate. Renewables come at a cost but are then incredibly cheap to operate on our system.
The hon. Member for Epsom and Ewell (Helen Maguire) spoke very passionately about climate change. That is really important. The mission we are on is about building an energy system for the future that gives us energy security, but it is also about tackling the climate crisis, which we can no longer think of as a future threat. As we look around the world, we can see from just this year alone that it is a present reality. It is increasingly difficult to read the statistics and not think that we should be taking more decisive action.
I gently say to the hon. Lady, as she prods this Government for not going fast enough, that in seven months we have launched the Clean Power 2030 mission, lifted the onshore wind ban in England—which was an absurd policy—and approved more solar than the previous Government did. We have had the biggest renewables auction in history, with 131 projects, we have created the pathway to clean power by 2030 and have already delivered record investment in the supply chains that will deliver some of the infrastructure upgrades we need, including £1 billion by ScottishPower. We launched the solar taskforce and the onshore wind industry taskforce. We are also looking at the Offshore Wind Industry Council and how it can deliver more. I am not sure we could move much faster, but if the hon. Lady has some suggestions, I am happy to take them on board.
Finally, on the point about the rooftop solar revolution, we agree that it needs to be not an either/or, but both. We will need ground-mounted solar, which plays a really important part, but we have rooftops right across the country—in car parks, warehouses and industrial units—that we should be covering in solar panels wherever we possibly can. We will do much more on that. We reconvened the solar taskforce, which the previous Government ran, to try and increase the ambition, and it will report in due course.
Jamie Stone
To return to my earlier intervention about the switch-off of the radio signal, on infrastructure, does the Minister agree that the data communication company must be exhorted and encouraged in every possible way to get on with the roll-out? Otherwise, people who are very vulnerable will pay more for their electricity.
Michael Shanks
I had a segue planned in my speech that was going to get me to the hon. Gentleman’s point, but he pre-empted me, and he is quite right to do so. He is right. This is a real challenge. The switch-off is the right thing for us to do in the long term—I think that everyone agrees that as a system that is outdated—but we do need to be absolutely certain that no one is left behind.
The Minister responsible for energy consumers, my hon. Friend the Member for Peckham (Miatta Fahnbulleh), has already had a number of meetings with Ofgem and with industry to make sure we speed up the roll-out. The service ends in June, as the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) said, and the taskforce that has been put in place to roll it out is now moving at pace. I think it is fair to say that it should have been moving faster up to this point, but they are very aware of the issues and we will keep that under review; it is of course essential that people are not left behind when the signal is switched off.
Moving on to short-term support, we recognise that by 2030 the clean power system will be crucial to bringing down bills in the long term, and to protecting consumers from the price spikes that we have faced in recent years. However, short-term support is important for households that are struggling with their bills while we are in that transition. That is why the Government continue to deliver the warm home discount, which gives a £150 rebate off energy bills for all eligible low-income households, and it is expected to support 3 million households across the country this winter.
The Minster for energy consumers has worked with energy suppliers to agree a £500 million industry support commitment to help specific customers who are struggling this winter. We also extended the household support fund until March 2026 with an extra £742 million, with additional funding for the devolved Governments as fuel poverty is devolved through the Barnett formula.
A number of hon. Members raised the question of a social tariff. My hon. Friend the Member for Northampton South made a passionate case for it, and we are looking at what bill support could look like in the future, including the possibility of a social tariff. I acknowledge that there is a broad consensus on the idea of a social tariff. The challenge is that it means different things to different people. One of the challenges that we are grappling with is how we define a social tariff, and how we can reach, in a very targeted way, the people who need it the most.
Part of that is the issue of data sharing, which a number of hon. Members have raised—that is, how we bring together the information that the Government have about the individual people who could most benefit from such a scheme. The Minster for energy consumers is leading that work, alongside industry bodies such as Energy UK and stakeholders. They are looking at how we can improve affordability and accessibility, and they are working with the Department for Work and Pensions on how we might be able to share some of the data that it has.
The question about levies has been raised by a number of hon. Members, and I think the Conservative party is now pledging to abolish levies entirely. It is an incredibly complex subject, but it is something that we want to grapple with, and we need to be very mindful.
I return to the point made by the hon. Member for Bath at the beginning of the debate. While the wholesale price will come down as we put more renewables on to the system, and as we squeeze off gas as the marginal price, if bills do not come down because levies remain high, people will not see the benefit. It is really important to bring communities with us. The truth is, it is a complex issue. I am not going to stand here and say that we can just abolish levies, or that we can just transfer them entirely on to taxation. Neither option is possible in completion, but we are considering how we look at the future of levies, and we are open to suggestions from all parties on how we do that.
On the point about rebalancing—how we move electricity costs, in particular, on to gas—that is also a challenge. We want the number of people who use gas to decline in the coming years, as we decarbonise. The challenge will be making sure that we do not put charges on to a dwindling number of customers. Potentially and inadvertently, some of the poorest people in the country might be those who are the last to convert from gas to alternatives. I do not, for a second, dismiss the points that have been raised; they are incredibly important. However, I want to be very clear that we are working relentlessly in this Parliament on how we reduce the wholesale costs, and we want to make sure that it follows through on to consumers’ bills.
Related to that, of course, is the point about standing charges on bills, which, as many hon. Members hear from constituents, seem to be such an unfairness because they are not based on consumption or on particular customers’ circumstances. We are committed to looking at the future of standing charges. In December, Ofgem provided an update on reform. It included quite a radical proposal for introducing a new zero standing charge option under the energy price cap, which would give consumers greater choice in how they pay for their energy bills. It is for Ofgem now to consult on that proposal, which it will do this year. The driving force behind that will be making sure that any reforms are fair to all customers.
To underline that this is not straightforward and we cannot just simply abolish levies, I note that there would be unintended consequences if we were to transfer some of the costs on to other people. We could inadvertently find ourselves raising bills for some people without that being the policy intent. We are committed to reforming standing charges, but we want to do it in a way that is fair.
Mr MacDonald
Would the Minister spare a minute to talk about community benefits?
Michael Shanks
I was not expecting the hon. Gentleman to stop at that point. I saw him in his place earlier and knew that I would talk about community benefits. I will turn now to the points about community energy and community benefits; both are important.
On community benefits, in all of this, we want to bring communities with us on this journey. That is important. We have made a very clear case that this Government intend to build the energy infrastructure we need, the transmission infrastructure we need, the homes that people need and the industry that people need to grow our economy, which is important. For far too long, this country has not built the infrastructure it needs. In doing so, we want to streamline the planning process so that applications are dealt with far more efficiently and far faster, but we want to bring communities with us. That is absolutely vital.
We will be saying much more very soon about community benefits on several fronts. The first will be how we expand some of the community benefits for particular technologies. That process is already well established in Scotland, for example with onshore wind. The absurd policy of the onshore wind ban in England means that it has not developed as much, but we can look to Wales and to Scotland for advice on that. We also want to expand that to other technologies, particularly solar, which does not have the same community benefits at the moment, and to network infrastructure. I have always said that, if we build network infrastructure and a community is hosting that infrastructure that is essential for the country, it is doing a favour for the rest of the country and should feel some benefit from it. We will announce a package of community benefits shortly.
On the wider point about community infrastructure, we do not only want communities to benefit—we want them to actually own the infrastructure that gives social and economic benefits as well.
Michael Shanks
I will not, because I am going to come to the point made by the hon. Member. He has made the point about a highland pricing formula in the past—he is very reasonable about the issue—and it is something we will look at. The reform to the energy market will be part of that work as well. I am afraid I do not have time to come to much detail on mitigations on radar, apart from saying that we recognise the problem and we are working on it.
As always, this has been an incredibly useful debate. The passion from hon. Members is important, because this is one of the most important challenges facing our communities. We are committed to ensuring that energy is affordable for households across the country. Our clean power mission will help us deliver on that, but we have much more to do and we recognise that fact. We will work with Members from all parties, with industry and consumer groups, with charities and with individual constituents who raise these issues to make sure that we support everyone with this transition, to bring down bills in the long term and to support families with their energy costs.
Drax Power Station: Biomass
Michael Shanks Excerpts(1 year, 5 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
In January 2024, the previous Government launched a consultation on supporting large-scale biomass generators when existing support ends in 2027. Since this Government came to office, we have carefully considered responses to the consultation and assessed the case for a new support mechanism.
Biomass currently plays an important role in our energy system, but we are conscious of concerns about sustainability and the level of subsidy biomass plants have received in the past.
The Department will very shortly publish our response to the consultation. Alongside it, I want to report on our conclusions about the role of Drax power station in Yorkshire in the years 2027 to 2031.
In coming to this view, we have taken advice from the National Energy System Operator on security of supply, analysed the effect on consumers of support for biomass versus alternatives, looked at issues around subsidy and sustainability in existing arrangements, and considered longer-term issues around decarbonisation.
First, on security of supply, we inherited a situation from the previous Government where there was no long-term planning for our energy system and its resilience. In the system we have inherited, large-scale biomass provides around 5% of our annual electricity generation, serving a specific role as a source of firm power.
To meet our needs between 2027 and 2031, we could seek to replace Drax with new gas-fired power stations, but in the timescale we have, there would be significant risks to relying on this approach. In that context, NESO has advised us that Drax plays an important role in delivering security of supply between 2027 and 2031.
Secondly, on price, we have undertaken comprehensive analysis of the costs of biomass against alternatives. Our central projections show that, on the right terms and in a much more limited role than today, biomass generation at Drax is the lowest-cost option, including when compared to gas-fired power stations, for bill payers during this period.
Thirdly, we have looked at previous arrangements for subsidy and sustainability. We believe that they simply did not deliver a good enough deal for bill payers and enabled Drax to make unacceptably large profits. At the same time, they demanded levels of sustainability that are not now in line with the latest scientific evidence or global best practice, including supply chain emissions well above the European standards. We have concluded that if Drax is to continue to play a role in our power system, these arrangements must urgently be improved going forward.
Fourthly, we have looked at issues around decarbonisation. Our finding is that there is a potential role for bioenergy with carbon capture and storage, or power BECCS, but realistically this will take time to implement and therefore cannot form the primary basis of this decision.
Following this assessment, and given the circumstances we have inherited, the clear evidence is that Drax is important to delivering a secure, value-for-money power system in the period 2027 to 2031. But we have also concluded that we cannot allow Drax to operate in the way it has done before, or with the level of subsidy it received in the past. On this basis, we have secured heads of terms that will form the basis of a very different agreement with Drax for support during the period 2027 to 2031. A summary of this agreement is included at the end of this statement. First, it will ensure that Drax plays a much more limited role in the system, providing low-carbon dispatchable power only when it is really needed.
Drax currently operates as a baseload plant, running around two thirds of the time. This means that it provides power even when other renewable sources are abundant. This must not continue in the same way. Under the new arrangement, Drax will be supported to operate at a maximum load factor of just 27%—operating less than half as often as it currently does. This will be guaranteed by the design of the dispatchable contract for difference that we have agreed. When renewable power is abundant, Drax will not generate, and consumers will benefit from cheaper wind and solar instead.
Secondly, the contract will deliver much better value for consumers. It will significantly reduce the amount paid in subsidies compared to the existing support mechanism. This new deal halves the subsidies for Drax —equivalent to a saving of nearly £6 per household per year. Furthermore, our analysis shows this will save consumers £170 million in subsidy in each year of the agreement, compared with the alternative of procuring gas in the capacity market.
The deal limits the expected rate of return for Drax to a level below that of monopolies regulated by Ofgem. But while this is our central estimate, we are not prepared to take the risk of prices soaring in response to volatile fossil fuel markets. As a result, the agreement includes a built-in windfall mechanism with rates of 30% and 60% that would claw back excess profits made by Drax. This will guarantee a much fairer deal for consumers than in the past.
Thirdly, we will introduce tough new measures on sustainability. We will increase the proportion of woody biomass that must come from sustainable sources from 70% to 100%. We will also significantly cut the allowable supply chain emissions to a level in line with the much stricter regulations currently operating in the rest of Europe, and we will exclude material sourced from primary forests and old-growth forests from receiving support payments. There will be substantial penalties on Drax if these criteria are not met.
We will go further to ensure greater confidence that these standards will be met. The Government will appoint an independent sustainability adviser to work with my Department, the Low Carbon Contracts Company and Ofgem to ensure our monitoring and enforcement measures are robust and keep pace with the science.
These measures represent a profound shift from the past on sustainability and on value for money. In this context, this is the right deal for security of supply and price in the period 2027 to 2031, given the circumstances we have inherited from the previous Government.
But nevertheless, we recognise the strength of concerns about the use of unabated biomass. It is not a long-term solution. We are determined that the next time these decisions are made, Government are not left in the circumstances we have been left in. We will do the work that was not done by the previous Administration on strong and credible low-carbon alternatives, so that we have proper options in 4 years’ time.
To help that process, we are setting up an independent review to consider how respective greenhouse gas removal, including large-scale power BECCS and direct air carbon capture and storage, can assist the UK in meeting our net zero targets and ensuring security of supply, out to 2050. Further details of the review will be shared in due course.
These steps are about fulfilling our duty to ensure security of supply and the best deal for bill payers. We have faced up to the circumstances left by the previous Government and delivered a step change in value for money and sustainability. This Government will do whatever it takes to deliver energy security and protect billpayers now and into the future.
Overview of heads of terms for a low-carbon dispatchable contract for difference with Drax Power Ltd—related to electricity generation at its Selby plant.
Overview
Government have agreed heads of terms with Drax Power Ltd for a low-carbon dispatchable contract for difference at its 2.6 GW Selby power station. The heads of terms define the commercial terms that will underpin a new contract to be finalised over the coming months.
Following advice from the National Energy System Operator as to the utility of this plant for security of supply purposes, the heads of terms for a four-year CFD was agreed that ensures Drax will provide low-carbon dispatchable electricity when the system, and in turn consumers, most require it.
Heads of terms summary
The key terms are as follows:
Duration—1 April 2027 to 31 March 2031. This arrangement will commence on 1 April, the day after existing support arrangements conclude, and be limited to four years in duration.
Strike price—£113 per MWh (2012 prices).
Generation collar that caps the annual load factor eligible for subsidy at 27%. Together the strike price and the capped load factor are projected to halve the subsidy that Drax will receive during this contract period, compared against Drax’s current arrangements (under the renewables obligation and CFD). This is equivalent to savings of nearly £6 per household per year. Furthermore, Drax is obliged to generate to a minimum annual contract floor of 22%, ensuring the system, and consumers, can rely on its presence.
Excess returns mechanism on profit. This contract has been calibrated to provide Drax with a limited return over the contract period. However, should Drax make higher than anticipated profits in an extreme price scenario, a profit clawback mechanism is in place to protect the consumer.
Enhanced sustainability criteria. The CFD substantially tightens sustainability criteria. It increases the proportion of biomass that must be sustainably sourced from 70% to 100%, reduces the supply chain emission threshold from 55.6 grams of CO2 equivalent per megajoule to 36.6 grams of CO2 equivalent per megajoule (aligned with international best practice—for example, the EU’s RED III), and, will include provisions to exclude material sourced from primary and old-growth forests from receiving support payments.
Robust contract compliance arrangements. Should Drax not comply with the sustainability criteria, then subsidy payments for electricity generated from whole consignments of biomass generation can be revoked, and there is a termination right for repeated breaches of those requirements.
[HCWS424]
Biomass Generation
Michael Shanks Excerpts(1 year, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)
With permission, Madam Deputy Speaker, I would like to make a statement about support for biomass electricity generation. My apologies to the House for it having to put up with even more of me.
In January 2024 the previous Government launched a consultation on supporting large-scale biomass generators when existing support ends in 2027. That consultation outlined their proposals to continue to support biomass as a
“valuable...form of dispatchable power”.
Since this Government came to office, we have carefully considered responses to that consultation and assessed the case for a new support mechanism. Biomass currently plays an important role in our energy system, but we are conscious of concerns about sustainability and the level of subsidy that biomass plants have received in the past. With that in mind, I want to report to the House on our conclusions about the role of Drax power station in Yorkshire in the years 2027 to 2031.
In coming to the view I will express today, we have taken advice from the National Energy System Operator on questions of security of supply, analysed the effect on consumers of support for biomass versus the alternatives, looked at issues around subsidy and sustainability in the existing arrangements, and considered longer term issues around decarbonisation.
First, on security of supply, we inherited a situation from the previous Government where there was no long-term planning for our energy system and its resilience. In the system we have inherited, large-scale biomass provides around 5% of our annual electricity generation, serving a specific role as a source of firm power. To meet our needs between 2027 and 2031, we could seek to replace Drax with new gas-fired power stations, but in the timescale we have there would be significant risks to relying on that approach. In that context, NESO has advised us that Drax plays an important role in delivering security of supply between 2027 and 2031.
Secondly, on price, we have undertaken comprehensive analysis of the costs of biomass against alternatives. Our central projections show that, on the right terms and in a much more limited role than today, biomass generation at Drax is the lowest cost option, including when compared with gas-fired power stations, for bill payers during this period.
Thirdly, we have looked at previous arrangements for subsidy and sustainability. This Government’s view is that they simply did not deliver a good enough deal for bill payers and enabled Drax to make unacceptably large profits. At the same time, they demanded levels of sustainability that are not now in line with the latest scientific evidence or global best practice, including supply chain emissions well above the European standard. We have concluded that if Drax is to continue to play a role in our power system, these arrangements must urgently be improved going forward.
Fourthly, we have looked at issues with decarbonisation. Our finding is that there is a potential role for bioenergy with carbon capture and storage—or power BECCS—but realistically this will take time to implement and therefore cannot form the primary basis of this decision. On the basis of that assessment, and given the circumstances that we inherited, the clear evidence is that Drax is important for delivering a secure, value-for-money power system in the period 2027-31. But we have also concluded that we cannot allow Drax to operate in the way in which it has before, or with the level of subsidy that it received in the past. On that basis, we have secured heads of terms that will form the basis of a very different agreement with Drax for support during the period 2027 to 2031.
Let me set out the terms of the agreement. First, it will ensure that Drax plays a much more limited role in the system, providing low-carbon dispatchable power only when it is really needed. Drax currently operates as a baseload plant, running around two thirds of the time. That means that it provides power even when other renewable sources are abundant. That must not continue. Under the new arrangement, Drax will be supported to operate only at a maximum load factor of just 27%. In other words, it will operate less than half as often as it does currently. That will be guaranteed by the design of the dispatchable contract for difference that we have agreed. When renewable power is abundant, Drax will not generate, and consumers will benefit from cheaper wind and solar instead.
Secondly, reflecting that change, the contract will deliver much better value for consumers. It will significantly reduce the amount paid in subsidies compared with the previous support mechanism. The new deal halves the subsidies for Drax—equivalent to a saving of nearly £6 per household per year. Furthermore, our analysis shows that the deal will save consumers £170 million in subsidy in each year of the agreement compared with the alternative of procuring gas in the capacity market. I can also inform the House that the deal limits the expected rate of return for Drax to a level below that of monopolies regulated by Ofgem, but while that is our central estimate, unlike the last Government we are not prepared to take the risk of prices soaring in response to volatile fossil fuel markets, so the agreement includes a built-in windfall mechanism, with rates of 30% and 60% that would claw back excess profits made by Drax, guaranteeing a much fairer deal for consumers than in the past.
Thirdly, we will introduce tough new measures on sustainability. We will increase the proportion of woody biomass that must come from sustainable sources from 70% to 100%. We will significantly cut the allowable supply chain emissions to a level in line with the much stricter regulations currently operating in the rest of Europe, and we will exclude material sourced from primary forests and old-growth forests from receiving support payments. There will be substantial penalties on Drax if those criteria are not met, and we will go further to ensure greater confidence that the standards will be met. I can inform the House that we will also appoint an independent sustainability adviser to work with my Department, the Low Carbon Contracts Company and Ofgem to ensure that our monitoring and enforcement measures are robust and keep pace with the science.
To be clear to the House, taken together the measures represent a profound shift from the past on both sustainability and value for money. In that context, this is the right deal for security of supply and price in the period 2027 to 2031, given the circumstances that we inherited from the previous Government. Nevertheless, we recognise the strength of concerns in this House and across the country about the use of unabated biomass. It is not a long-term solution. We are determined that the next time such decisions are made, the Government are not left in the circumstances we have been.
We will do the work that was not done by the previous Administration on strong and credible low-carbon alternatives, so that in four years’ time we will have proper options. To help that process, we are setting up an independent review to consider how options for greenhouse gas removal, including large-scale power BECCS and direct air carbon capture and storage, can assist the UK in meeting our net zero targets and ensure security of supply out to 2050. The review will take representations widely on the issues and report back in due course.
The steps that I have set out are about fulfilling our duty to ensure security of supply and the best deal for bill payers. We have come into office, faced up to the circumstances left by the previous Government, and delivered a step change in value for money and sustainability. The Government will do whatever it takes to deliver energy security, to protect bill payers now and into the future. I commend this statement to the House.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
I also apologise, as I am sure that the House is a little fed up hearing the Minister and me this afternoon.
I thank the Minister for advance sight of this statement. In the past few weeks it has been difficult not to feel at least a little sorry for Ministers in the Department for Energy Security and Net Zero. First, their Secretary of State was forced out of hiding to defend a third runway at Heathrow—something that he once said that we could not do because it would make us look “completely ridiculous”. Cornwall Insight has stated that Ministers will miss their clean power target by a country mile, and I think it was clear during the urgent question that they are getting ready to be overruled by the Prime Minister on approval of the Rosebank and Jackdaw oil and gas fields—something that we on the Opposition Benches would welcome.
Now the Secretary of State has sent the hon. Gentleman to the House this afternoon to defend the farce of chopping down trees in forests in Canada, converting them into pellets, shipping them across the Atlantic on diesel-chugging ships and burning them in a power station in North Yorkshire, all in the name of net zero. The Conservative party is under new management, and that means confronting hard truths, so let us get one thing straight from the outset: Drax’s biomass plant is neither clean, nor cheap.
As my right hon. Friend the Member for East Surrey (Claire Coutinho) has said, burning wood from the other side of the Atlantic—releasing more carbon dioxide in the process—and labelling it renewable is a product of a carbon budget system that forces politicians to make perverse decisions. Those decisions result in an extortionate level of subsidy, deliver a bad deal for British taxpayers and bill payers, and make the climate worse. We have started a reset on net zero, and we will not shy away from arguing for a more pragmatic approach that prioritises cheap, stable and reliable energy.
Turning to the details of the statement, naturally we welcome a more limited role for Drax biomass in our power system, but more biomass subsidies are needed only in the short term, because this Government are embarking on a reckless experiment to have a grid based entirely on intermittent renewables at the expense of flexible and reliable baseload power. Drax’s role could be filled with more gas power plants, which are cheaper and cleaner than burning trees shipped in from Canada. Ministers know that burning wood at Drax produces four times the emissions of our last coal power plant, which in turn produces around twice the carbon emissions of gas. We could get that gas from the non-subsidised fields in the North sea, if this Government were not in such an ideological rush to shut down our domestic energy industry.
On cost, the new agreement that the Minister has signed us up to comes with a genuinely eyewatering strike price of £160 per MWh in today’s money. That is higher than Drax’s existing agreement of £138 per MWh. In fact, Baringa’s analysis that Drax put out this morning shows that bill payers will still be paying over £450 million a year in subsidies to burn trees. If the analysis behind the Minister’s promise to cut bills by £300 is anything to go by, we should not rely on him too much. Has his Department carried out its own independent analysis, separate from that published by Drax this morning, to determine what the increased strike price will cost the British people and how that compares to supporting extra gas power in the capacity market?
We welcome the strengthened sustainability criteria, as investigations by Ofgem and the BBC’s “Panorama” have revealed serious questions to be answered by Drax about the import of wood from untouched primary forests in British Columbia. But as the BBC journalist Joe Crowley, who reported on these issues for “Panorama”, stated this morning, more clarity is needed on whether wood from primary forests will be classed as unsustainable under this new regime. Will the Minister confirm that Drax will not be allowed to burn wood from primary forests during any of its generation—not just that which is subsidised? What work is being done to ensure that the new sustainability criteria are actually enforceable?
On sustainability reporting, will the Minister confirm that the Department has received the KPMG report that the Prime Minister said he would look at? Will a copy be placed in the Library? The Minister’s statement has left the door wide open for the introduction of power BECCS after the transition arrangements end in 2031. That proposal to fit first-of-a-kind technology solely for the purpose of meeting our carbon budgets would cost the bill payer up to £40 billion—£1.7 billion a year. That is unacceptable. Will the Minister confirm whether his Department has produced any analysis of what a system without BECCS would cost? Will he rule out keeping this racket going indefinitely, with people’s energy bills rising to pay for BECCS?
Will the Government set a date for the burning of the last tree in a British biomass power station? This Government have been promising us clean, cheap, home-grown energy, but burning trees at Drax is not clean or cheap, and the trees are certainly not home-grown. If the widespread burning of forests is part of the solution to climate change, we have to ask ourselves if that is the problem we are trying to solve.
Michael Shanks
“Under new management,” indeed! The tough thing about being the acting shadow Secretary of State is that it is not, of course, his script that the hon. Gentleman is reading out.
This Government are fixing the mistakes left by the previous Government. I gently point out that eight previous Conservative Energy Ministers stood at this Dispatch Box and—deal after deal after deal—announced a worse deal than this for bill payers, energy security and sustainability. The hon. Gentleman seems to have forgotten that today. In fact, only a year ago—such is my love of his contributions in this House that I have read up on Hansard—he was saying that he had “absolute confidence” in the deal the previous Government made with Drax.
Let me outline why this deal is so different from those his party made in the past. The hon. Gentleman first asked about subsidy and mentioned a figure, which is what it will cost to deliver the necessary dispatchable power. He missed the fact that it is, of course, half of what was paid under the previous Government—nearly £1 billion a year—to Drax. We have halved that amount to lower bills for consumers.
Secondly, the hon. Gentleman spoke about sustainability. We agree on the importance of tightening up the sustainability, which is why we have moved from 70% to 100%. I would gently say, again, that he was quite happy to support public money going into unsustainable biomass year after year when he was in the Energy Department. We have said that we will not pay a penny of subsidy to Drax if there is unsustainable biomass in the mix.
Thirdly, what the previous Government did not do, of course, was any sort of deal to control the runaway excess profits—record profits—that Drax was able to obtain as part of its deal. We have put in place a mechanism to claw back that excess profit so that the people of this country do not pay over the odds for their energy.
Fourthly, I will address the important point about energy security. Year after year, the Conservatives exposed us to the lack of a plan for what the energy system would look like in the late 2020s and into the 2030s. This Government have had to take tough decisions quickly to secure that supply for the future, and that is what we have done. We have decided that running Drax when it was not necessary—when there were clean, cheaper alternatives in the system—will no longer happen. To the hon. Gentleman’s specific point on Drax running less, I say that limited generation times mean that it will run only when we need it for capacity to meet demand in the system. The alternative—he asked for the figure, which I set out in the statement—would be £170 million more every single year.
Finally, on the future of BECCS, we are open-minded at this point on the role it will play. However, I agree that it is important that we come to a decision on that soon. The review we have outlined is about bringing together all the various bits of science that we know are there in different reports and trying to work out a credible pathway for whether power BECCS will play a role in the system. We will make that decision as soon as possible.
I will finish by saying that this is an extremely different deal. It will deliver benefit for the hard-working people of this country, ensure that sustainability is at its heart and protect our energy security in the years ahead.
Madam Deputy Speaker (Judith Cummins)
I call the Chair of the Energy Security and Net Zero Committee.
Bill Esterson (Sefton Central) (Lab)
I congratulate my hon. Friend the Minister on his marathon stint and on the pragmatic and well-crafted analysis of how the Government’s energy policies will address the security of supply and provide the best deal for bill payers. This is in stark contrast to what the Conservatives did, and in particular to what my hon. Friend described as the terrible deal with Drax that they presided over while in office.
Today’s statement is a timely reminder of the challenges with Drax, not least given the news over the weekend of further misreporting of the burning of primary forest. NESO, in its future energy pathway, predicted a reduction in the use of biomass as part of the UK becoming more energy independent. Does the Minister, with his announcement, foresee that the cuts in subsidies and in the reliance on Drax will contribute to the Government’s clean power plan, to energy security and to reducing bills for all our constituents?
Michael Shanks
The Chair of the Select Committee is absolutely right about where Drax, and biomass generally, fits in our wider energy system. What we want to build at pace is a clean power system that takes us off the volatile fossil fuel markets. That is important, but there are short-term issues around ensuring we have the dispatchable power we need when we need it.
The Government have taken long-term decisions, for example in the first funding scheme for long-duration energy storage in 40 years. We hope to see modern new technologies of long-duration energy storage but also some classics from the history books, with pumped storage hydro playing a critical role in the system and delivering the dispatchable clean power we need. But there is a short-term question we need to answer that the previous Government did not have an answer for: how we get to 2031. We can build new gas units. Our analysis and the advice from NESO was that that was more likely to deliver energy security and in the end be cheaper for bill payers, who ultimately pay the bill. Our long-term ambition is to build towards that clean power system. This is an important step to get us the energy security that we need in the system.
Madam Deputy Speaker (Judith Cummins)
I call the Liberal Democrat spokesperson.
Michael Shanks
I thank the hon. Lady for her questions. Her tone means that I will resist the urge to say that, although I made fun of the shadow Minister for the eight announcements, it was of course the current Liberal Democrat leader who agreed the first support deal for Drax. But we will move past that on to her important questions about security of supply.
The place we want to get to by the end of this period is one where we are not forced into making a decision like this again. It is really important to say that. We have a strong deal that protects bill payers, improves sustainability and delivers energy security, but we want to have options. The truth, as the hon. Lady rightly points out, is that we came into government without those options because of the decisions made by the Conservative party. That is a really important point.
As for the point about excess profits, there was previously no mechanism to claw them back. We made that a key part of the negotiation and we managed to get it into the deal. Even if our estimates are wrong—and the estimates, of course, mean that the profit will be below the level expected of the regulated companies by Ofgem—we can claw back the additional profit from Drax. That is important to the system.
Both the hon. Lady and the shadow Minister raised the question of KPMG’s reports. I know that my Department has seen them and engaged with them, and I know that Ofgem is still engaged in the audit process. I will take those questions away and see what can be done about sharing those reports.
Mr Toby Perkins (Chesterfield) (Lab)
We have a new line from the official Opposition. We are told that they are a firm under new management, but this sounds to me like the same circus, just with different clowns.
The Minister is right to say that the new deal that the Government are putting in place is a far better deal for taxpayers, because the previous deal was an absolute disgrace for taxpayers, but can he tell us a little more about the projections that he has seen? Do they confirm that this deal is the best for taxpayers, even in comparison with gas? How can he be certain of that? We heard a different suggestion from the shadow Minister.
Michael Shanks
My hon. Friend makes an important point. I think we should consider two aspects of the analysis of the importance of Drax to the system. First, in comparison with the counterfactual of building new gas-fired power stations, our analysis is that the deal we have agreed, which involves the use of gas on the system for 27% of the time, costs £170 million less. Secondly, on energy security, the assessment is that even if we wanted to go down that route, there would be risks about whether we could build that capacity in the time that we have.
This is all about the decisions taken by the last Government, who did not look far enough ahead and did not have that capacity on the system. Even if we did want to proceed with new gas stations, there would be questions about whether we could build them in time. This deal is about protecting bill payers, halving the subsidy from £1 billion and ensuring that there is dispatchable power when we need it as we build the clean power system.
As we move towards the 2030s, what comes next is long-term planning for a clean power mix, but also about the long-duration and short-duration storage mixes that will help us to make decisions that are different from the one we were forced to make this time.
Sir Roger Gale (Herne Bay and Sandwich) (Con)
I suppose we shall be told that half a loaf is better than none, but this strikes me as a half-baked half-loaf, to say the least.
The Minister has spent an hour this afternoon lecturing the House about why it was better to import oil and gas from overseas than to extend the production of at least some home-grown material. The bottom line is that, clearly, the Minister has not read the KPMG report, the Prime Minister has not read the KPMG report, and we are still going to pay billions of pounds in subsidy to import pellets created in Canada and then shipped across the Atlantic at God knows what carbon cost. Where, please, is the sense in that?
Michael Shanks
First, let me say that I have spent the last hour answering questions from Members on both sides of the House. I have not lectured anyone. I have, however, stated the facts—for instance, that if oil and gas are extracted from the North sea, they are sold on the open market for whatever price the international markets have at any given moment. That delivers neither energy security nor confidence to bill payers. While Opposition Members may want us to go back to the fossil fuel casino and hope we can play a better hand this time round, I think we should be building a secure power system that delivers both energy security and confidence that we will not be exposed to the price spikes we have been exposed to in the past. If the right hon. Gentleman wants to take that as a lecture, he can take it as such.
On the role that Drax will play, of course we looked at all the assessments around Drax to date. Frankly, we have put in such a robust process on sustainability, and independent assessments of some of that, because of the questions that the right hon. Gentleman raises: we know that there have been questions in the past, and we want to make sure that there are tough penalties if Drax does not comply. Raising sustainability from the level under the previous Government—70%—to 100% means that we will not pay a penny of subsidy if Drax fails the sustainability tests that we have set out for it. That protects consumers right across this country and delivers the dispatchable power that we need.
Alex Sobel (Leeds Central and Headingley) (Lab/Co-op)
I thank the Minister for his statement. I have met women from the southern United States and British Columbia who live next door to primary forests that have been cut down by Drax so that wood pellets can be burned in Yorkshire. As we know from the BBC’s “Panorama” and Ofgem, Drax has utilised primary and old-growth forests. Drax cannot be trusted to ensure that the sustainability requirements that the Minister has put forward will be met. What powers and audit trail will the new independent sustainability adviser utilise to ensure that Drax is burning 100% sustainable wood and not ruining the lives of people in North America by using primary forests?
Michael Shanks
My hon. Friend makes an incredibly important point. The sustainability criteria are important, but he is right that making sure they are met is important too. This is a contract for difference agreement and we will work with Ofgem to work out exactly what its role is as the regulator, but to go above what has been in place before, we have announced that an independent adviser will work with my Department, the Low Carbon Contracts Company and Ofgem to make sure that the latest science and the latest awareness on different elements of biomass are key in our decision making, and that there is a real audit trail in place. The other really important thing is that there is now no room whatsoever for Drax not to comply with the sustainability criteria. Its compliance must be 100%, and there will not be a penny of subsidy for anything that is not sustainable. That is important, and the audit trail will be part of that work.
Bradley Thomas (Bromsgrove) (Con)
Will the Minister agree to publish the full, comprehensive analysis of the cost of providing support to Drax versus the alternatives?
Michael Shanks
Transparency is important, so I am very happy to publish what we can. Elements of that analysis, such as details of how Drax runs its power station, will be commercially sensitive, so I will have to look at exactly what can be published. I know that NESO has today published a summary of its advice, to give clarity on its view on the security of supply questions. I am happy to take the hon. Gentleman’s point away and write to him.
Barry Gardiner (Brent West) (Lab)
Drax has exploited UK taxpayers for far too long. It has lied about meeting sustainability rules, burned 1 million tonnes of wood from primary forests, gagged whistleblowers with non-disclosure agreements, and pretended that it could sequester carbon from replanted forests in time to meet our 2050 targets. Today, the Government have brought that a stop. They have debunked Drax’s lies, cut its subsidy, and set a clear and sensible exit strategy that will maintain security of supply. After 15 years of campaigning, I welcome this breakthrough for honesty and common sense.
Will the Minister now look at the role of Ofgem in all of this? Just this weekend, when it was informed of the other break in proper reporting of sustainability, it replied, “That is the same issue as we’ve dealt with before.” What would he say if a policeman said that about a serial murderer?
Michael Shanks
On the start of my hon. Friend’s question, I agree. This Government were deeply concerned about sustainability practices at Drax and, frankly, about the level of subsidy that was part of the deal negotiated by the previous Government. We inherited a dire situation in terms of long-term planning for our energy security. What we have sought to do with this deal is answer all those questions—on sustainability, on security of supply, on excess profits and on the role of Drax in the system for dispatchable power, which is important.
On the role of Ofgem, I know that the audit of some of Drax’s practices is still under way. I am rightly not privy to the details of that, because it is Ofgem’s review, but we have a wider review of the role and remit of Ofgem under way at the moment, and I think that would be an opportunity for my hon. Friend to feed in his thoughts on the future of Ofgem.
Chris Law (Dundee Central) (SNP)
Biomass burning has always been a sticking plaster, and it has allowed successive Governments to claim green progress while continuing to emit immense amounts of CO2. The public were promised £20 billion a year of green investment, but instead we are getting less than 6% of what is needed. When will the UK Government commit to significant direct investment in long-term energy storage such as pumped hydro storage and green hydrogen production, so that the UK can move past burning forests for its energy?
Michael Shanks
I agree with the hon. Gentleman’s point, and I reiterate that we wish we were not in the position we were in when we came into government, whereby this was the only option that would deliver security of supply out to the early 2030s. We have sought to get the best possible deal for sustainability and for bill payers, but I agree that we need to be building what comes next.
Last year we announced that, for the first time in 40 years, the Government would be funding long-duration energy storage, and I have held a number of meetings with developers on pumped hydro and also on new, modern forms of long-duration energy storage. There are some really interesting, innovative ideas out there. Ofgem is currently putting in place the technical specifications for the cap and floor scheme, and we want to get that rolling as soon as possible. From all my meetings with developers in Scotland, I know that there is huge potential around pumped hydro in particular. They are waiting for certainty from the Government in order to move forward, and we are determined to give them that.
Olivia Blake (Sheffield Hallam) (Lab)
Reports show that Drax has behaved appallingly, and under the last Government it seemingly had pretty free rein. I welcome the fact that this settlement includes a drastic reduction in subsidy, an upping of sustainability in supply chains to 100%, and a windfall tax principle that will deliver value for the British bill payer. I also welcome the further consultations the Minister has outlined, but this raises the question: why were the last Government unable to get anywhere near to this deal?
Michael Shanks
I am tempted to say that we will have to ask the Conservatives that question, but they are under new management, so they do not know why the previous Government that they were all Ministers in made the decisions that they did. The truth is that for far too long—under, I think, eight different Conservative Energy Ministers—they signed off deal after deal with Drax with uncapped profits and nowhere near the sustainability criteria that they should have had, letting Drax do whatever it wanted with that power station. We have put a stop to that. Let us be really clear: we have halved the subsidy, taking £6 off every single bill in this country every single year, we have increased sustainability to 100%, and we are delivering the energy security this country needs, but we should not have been in the position on coming into office where there were nowhere near enough long-term plans for the future of our energy system.
Martin Vickers (Brigg and Immingham) (Con)
I think I detected one item of agreement between the Minister and his shadow, which was that there needs to be a long-term solution and this is not a short-term fix. Surprisingly, there seems to be little support from the Government Benches for Drax, which plays a major part in the regional economy. In my own constituency, Associated British Ports invested £150 million in the facility to import the biomass, and a significant number of my constituents will be involved in the supply chain. Can the Minister give an assurance that he will bear in mind the impact on the local economy as we move forward to a longer-term solution?
Michael Shanks
The hon. Gentleman makes an important point, although I would gently point out that the shadow Minister and I agree on a lot more than he likes to pretend—or I like to pretend, perhaps. The hon. Gentleman is right to say that we are aware of the importance of the jobs at this particular power station and in the supply chain, and we will be working with Drax on what that looks like. We are of course changing the role that Drax will use the power station in Selby for, and I will ensure that I have those conversations about the supply chain. I would be happy to speak to him more about that in due course.
Luke Murphy (Basingstoke) (Lab)
The Minister should be commended for ending the terrible deal negotiated by the previous Conservative Government, which led to higher bills, excess profits and poor sustainability standards, but it is worth saying again that there seems to be no end to the Conservatives’ rank hypocrisy on energy policy. In government, the then Secretary of State for Energy Security and Net Zero, the right hon. Member for East Surrey (Claire Coutinho), signed off planning consent for the Drax carbon capture project, saying that
“the public benefits…outweigh the harm.”
The shadow Minister, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), has now come to the Dispatch Box to decry the costs, while the right hon. Member for East Surrey also opposes Drax. Has the Minister considered capturing the burning hypocrisy of Conservative Members, because it seems to be a truly inexhaustible resource?
Michael Shanks
My hon. Friend makes the point for me. He forgets, of course, that the Conservatives are under new management, so it is all fine—we just forget everything that happened in the last 14 years and move on. Of course, we have had to pick up the pieces from the last 14 years, and while the Conservatives will not take responsibility for those decisions, we have grasped the challenges and are moving forward as quickly as possible.
The truth is that not only did we inherit an energy system without the long-term planning it should have, but Drax did not have a deal that was good for the climate, good for energy security or good for the hard-working people of this country, who paid year after year for the subsidies that the previous Government negotiated. We have halved the subsidy every year, putting money back into people’s pockets and, of course, making sure that any excess profits come back to the Exchequer.
Lee Anderson (Ashfield) (Reform)
The net zero madness coming from this place is truly staggering. Bearing in mind that this power station used to burn coal from a coalmine less than 20 miles away, we are now transporting wood from 3,000 miles away. We are paying over £10 billion in subsidies for this power station, and it is producing four times more CO2 than a coal-fired power station. Can the Minister explain how this is contributing to net zero?
Michael Shanks
I was not aware that it is the Reform party’s policy to reopen the coalmines—
Michael Shanks
That is good to know.
I am proud that, as a country, we have moved past coal-fired power generation, which is incredibly destructive for our environment. We closed the last coal power station, at Ratcliffe-on-Soar, last year. Its workforce proudly recognised the role they played in powering the country for many years, while also recognising that the drive to net zero is important. While we are building a clean power system that delivers energy security for the future, the Reform party would take us back to the stone age.
Johanna Baxter (Paisley and Renfrewshire South) (Lab)
I thank the Minister for his statement and the strict new sustainability rules imposed on Drax, which will mean that we do not pay a penny for unsustainably sourced biomass. Can he give the House a bit more detail on the role of the independent adviser? Their work to hold Drax to account will be critical to ensuring that this deal progresses.
Michael Shanks
The point of having an independent adviser is that, while the role of the Low Carbon Contracts Company as the counterparty to the contract for difference we have agreed and the role of Ofgem as a regulator are incredibly important, we think there is also a role for someone independent to make sure they are analysing the particular questions about biomass and sustainability, while also having an eye on the science as it moves forward.
Part of the challenge is that, over the years, the sustainability information we have, and the types of forestry and where the biomass comes from, have changed. The adviser will play an important role in advising my Department, Ofgem and the Low Carbon Contracts Company on this deal in the years ahead. It is important to say that we want to make sure we also have an independent review of what the future looks like, so that in five years’ time we are not looking at the same decision as we are now.
Sir Julian Lewis (New Forest East) (Con)
I welcome the Minister’s emphasis on energy security. Can he give us some idea of the timetable for when the first small modular nuclear reactors—preferably ones built by Rolls-Royce, which has expertise in this area thanks to its excellent work for the Royal Navy—will be commissioned?
Michael Shanks
The right hon. Gentleman will not draw me into the ongoing competition on small modular reactors, but he has made the case for his preferred company.
Last week, the Prime Minister announced that we have a new commitment to reviewing the 2011 planning statement so that we can have much more new nuclear across the UK. That is particularly important because previously there were only eight designated sites. Small modular reactors, of course, open up possibilities right across the country, and we want to see much more of that. We are moving as fast as possible to make sure these reactors are under way, and I hope that we can move at such a speed that the Scottish Government will change their objection to having small modular reactors in Scotland.
Joe Morris (Hexham) (Lab)
The news of a windfall tax on Drax was welcomed by people across my constituency. Will the Minister assure me that this will be the end of grotesque profits going to Drax at the expense of the taxpayer?
Michael Shanks
I can give my hon. Friend that assurance. We have significantly reduced the ability of Drax to make profits, but we have also ensured that if there are excess profits, they are clawed back on behalf of the British people. The additional rates of 30% and 60% in the mechanism that we have designed will ensure that any unexpected profits are clawed back. That was not the case under the eight previous Energy Ministers in the previous Government who signed off deals on Drax year after year. This is a new way of operating that protects our energy security, as well as protecting the hard-working people of this country.
Carla Denyer (Bristol Central) (Green)
Drax is a clean energy scam that has been handed £6 billion by successive Conservative Ministers since 2012, when that money should have been spent on getting energy bills down. The Minister rightly cites past excess profits and I believe he said specifically that the new contract will allow Government to claw them back. Will the contract allow clawback of previous excess profits and remedy the past misspending of public money? Or will the clawback apply only as we go forward into the future, in which case that is still throwing good money after bad, just slightly less of it?
Michael Shanks
We do not have a mechanism to claw back past profits from any company—that is not something that Governments are able to do. What we can do is move forward with a fair system that reduces the subsidy considerably, and has excess profit mechanisms and a windfall tax in place to ensure that if the company generates additional profits, we can claw that back for the British public, which is important. The level that we have agreed in the deal brings the subsidy down to a considerably lower level—half what it was under the previous Government.
Tom Collins (Worcester) (Lab)
I welcome the revision of Drax’s role in our energy system, reducing biomass and ensuring that where it is used it displaces gas, not excess wind and solar. However, we also need to find new low-carbon forms of dispatchable power, backed up by long-term energy storage at scale. Hydrogen is a strong candidate for that. By moving fast, the UK can reduce costs and regain our early-mover advantage. Will the Minister work with industry at pace to ensure the opportunities around hydrogen are known, explored and exploited?
Michael Shanks
My hon. Friend is right that one of the really important outcomes of the new deal is that instead of cheaper wind and solar power being displaced by Drax when it operated with baseload capacity, Drax will only operate when we need it on the system. That means that the cheaper, cleaner power sources that we are building in abundance, of which we want to see much more in the years ahead, can generate and deliver cheaper power for the people of this country. On my hon. Friend’s wider point, it is important that we explore the role that hydrogen can play in the system. We are looking at a number of different technologies at the moment. Just last week, I met some investors looking at the future of the gas system to take forward some of those questions, and I am happy to discuss that further with my hon. Friend in the future.
Dr Andrew Murrison (South West Wiltshire) (Con)
The Minister said that he is looking for
“strong and credible low carbon alternatives”
to burning biomass in order to generate electricity. Will he ensure that those alternatives do not include so-called energy from waste plants, since burning waste is as dirty as coal? And will he follow Scotland and Wales in placing a moratorium on the construction of new waste incinerators?
Michael Shanks
The right hon. Gentleman is right that we want “credible low carbon alternatives”. I will look at the specific points he mentions, but we do not see such generators as key to the review we want to undertake. We want to look at carbon capture and other technologies and, crucially, how we store some of the renewable energy that we are generating in abundance that we cannot use at times of peak demand, including long-duration energy storage and, increasingly, short-duration energy storage batteries that are powering more than they have done in the past. I will look at the specific points the right hon. Gentleman raises.
Alistair Strathern (Hitchin) (Lab)
The last Government’s deal with Drax was not just shocking value for taxpayers, leaving us all on the hook for subsidising sky-high profits during a cost of living crisis, but bad news for the environment, with real concerns about the sustainability of Drax’s supply chain. As the Government rightly take a measured approach to ensuring that we protect not just bill payers but workers as we seize the benefits of the green transition, what assurances can the Minister give my constituents that this will be a far better deal for our country?
Michael Shanks
My hon. Friend is right that this is a good deal, in the short term, to ensure security of supply into the early-2030s, which was key to NESO’s advice on the basis of security of supply. In the process, however, we have sought to halve the subsidy that Drax was given by the previous Government and deliver on the sustainability criteria, taking that from 70% to 100%. This is a good deal for the people of this country.
My hon. Friend also touched on the important work we need to do in the broader energy space to deliver energy security. That is why clean power 2030—our sprint to deliver decarbonised power—is so important, delivering good jobs in supply chains across the country.
Sammy Wilson (East Antrim) (DUP)
This statement should be a warning to all those across the House who are cheerleaders for renewable energy. Let us not forget that, in 2010, Drax power station was the poster boy for green energy policy. Of course, it turned out that instead of green energy, it has produced more CO2. We have chopped down natural habitat 3,000 miles away to bring it and burn it in a power station in England, and consumers pay the grand total of £1,000 million a year for the pleasure of doing so.
The Government have not learnt from that lesson. Only this year, we have had a similar mistake made with wind energy, where the Government have given a subsidy six times what the price of gas would be. Will we find a Minister in 15 years’ time standing again at the Dispatch Box to apologise for a waste of public money, high electricity prices and environmental disaster?
Michael Shanks
After an urgent question and a statement, I hope that I will not still be standing here in 15 years’ time, and I suspect the House will support that. Let me be really clear. I do not remember Drax being the poster child for the clean energy transition. I have outlined clearly why this decision is important in terms of energy security, but we wish that we as a Government had had more options. Unfortunately, those options were not there, so we have made the best of a difficult situation to get an incredibly good deal that delivers value for money, improves sustainability and delivers on energy security. In the 2030s, I want to see our clean power system delivering cheaper bills and industrial manufacturing jobs across the country. I hope that, in 15 years, the right hon. Member and I will have a conversation about how that is delivering for our constituents.
Tom Hayes (Bournemouth East) (Lab)
The shadow Secretary of State talked about being under new management, and I suspect that he will be saying the same thing in a few months after the inevitable bloody coup. I commend the statement, which will do some really important things, including: capping Drax’s output; a windfall tax on Drax; millions saved by halving subsidies paid for by my constituents; and the forcing up of sustainability. It is a pragmatic solution to a disastrous inheritance. Does the Minister agree that this will be a better deal for taxpayers and consumers for our energy security and our environment?
Michael Shanks
My hon. Friend summarises the importance of the deal clearly. We have limited the expected rate of return for Drax to a level below that of monopolies regulated by Ofgem. We have halved the subsidies provided to Drax that were in every single deal from the Conservative party, year after year, saving £170 million each year of the agreement. We have introduced a windfall tax with 30% and 60% rates to be clawed back should Drax have excess profits. We are delivering on energy security and on tougher sustainability requirements, but at the heart of the deal is better value for money for the hard-working people of this country.
Paul Waugh (Rochdale) (Lab/Co-op)
Drax has been a greenwashing con that has ripped off the British public for far too long, so I welcome the statement. The Minister and the Energy Secretary have done more than eight previous Tory Energy Ministers, and indeed one Lib Dem Secretary of State. I welcome the move to slash the subsidy for Drax and to enforce 100% sustainability targets on its supply chains. But when the Minister talks about a windfall mechanism, may I gently urge him to call a spade a spade? This is a windfall tax on Drax and we should be proud of saying so.
Michael Shanks
At the risk of getting into trouble with those responsible for tax matters, I simply say that this is a windfall mechanism that does exactly the same thing, and it does exactly what the Conservatives failed to do in 14 years, which is to ensure that there is a good deal and good value for money for the British public, delivering on energy security and, crucially, getting us to a point where our clean power plan for 2030 delivers energy security, climate leadership and jobs right across the country. It is the ambition of doing something different in this country and doing it fast, and we are committed to delivering it.