Oil and Gas Producers: Windfall Tax

Wera Hobhouse Excerpts

Tuesday 1st February 2022 Commons Chamber

[Wera Hobhouse (Bath) (LD)]

I support the motion for a windfall tax on the profits of oil and gas companies. Household utility bills will rise by an estimated £50 a month in April, and we have heard many moving stories today about how struggling households will have to make very difficult and awful choices. Millions of people will be turning down their heating, or turning it off altogether, so that they can keep eating, and millions more will feel the pinch, including many of my families in Bath.

I will focus on how we got here, how our dependence on volatile gas supplies from abroad could be avoided in future and why more has not be done. Two things have shocked me. First, I am shocked by how dependent we still are on gas when we must dramatically change our fossil fuel consumption if we want to stand a fighting chance of reaching net zero in 10 years’ time. Secondly, I am shocked that consumers who have switched to renewable electricity companies will foot the extra bill for gas, although they do not use any gas at all—I made that point in another debate, as the Minister knows.

Ideally, all power should come from renewables: onshore and offshore wind, solar and marine. There are few countries as well situated as the UK for wind and marine. Not only should we be generating all our power renewably but we should be exporting it across Europe. This is a perfect opportunity to be a global leader.

The cost of wind power is coming down year on year, and it will soon be a mature market with steady costs. Once a wind farm is built, apart from small overhead and maintenance costs, the electricity cost is almost nothing. That is the beauty of all renewables, and it was the idea behind the contracts for difference introduced by the Liberal Democrats in government when my right hon. Friend the Member for Kingston and Surbiton (Ed Davey) was Secretary of State for Energy and Climate Change. Contracts for difference are best described as fixed-term contracts for the electricity produced over a 20-year period. Once they are out of contract, electricity from these installations should be extremely cheap, which is perfect for consumers.

A lot more should have been done over the last seven years, when the Tories have been in government on their own. The Government quadrupled the number of contracts for difference offered in the last auction round, but that is not enough. Why limit the number at all, as it slows the roll-out of renewables?

So far, the Tory Government have allowed renewables to grow, but only slowly to maintain the fossil fuel and renewable industries alongside each other. As businesses and residential customers shift from gas to electricity, limiting the growth of renewables by restricting the number of contracts for difference keeps the fossil fuel industry in the game.

That brings me back to the millions of consumers who are committed to climate action and have switched to a renewable electricity supplier. In April they will find they are paying more for their electricity, even though they are not buying any electricity generated from gas. This is a clear example of the market being regulated for the benefit of the gas companies. Renewable electricity prices are approximately the same now as they will be in six months’ time, so why should such customers have to pay higher bills?

The Government need to fix this unfairness as a matter of urgency. Although it would not fix the energy crisis for everybody, it would at least reward customers who are doing the right thing on climate action. It would incentivise more people to switch and, in turn, drive climate action, but a windfall tax on the profits of the oil and gas companies is needed immediately.

--- Later in debate ---

[Greg Hands]

I have been clear that matters of taxation are for the Chancellor, but of course the Government continue to monitor the situation very closely. I was answering a specific point about what support is already available for consumers.

I did not hear a word from any of the Opposition parties in support of our incredible North sea transition deal, concluded just last March, between the UK Government and the oil and gas sector. It will support workers, businesses and the supply chain through this transition by harnessing the industry’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as hydrogen production, carbon capture, usage and storage, offshore wind, and decommissioning.

[Wera Hobhouse]

rose—

[Greg Hands]

I will make a bit more progress.

We will see commitments from industry that will achieve a 60 megatonne reduction in UK greenhouse gas emissions, including 15 megatonnes through the progressive decarbonisation of UK production over the period to 2030, which puts the sector on a path to deliver a net zero basin by 2050.

I turn to the contributions in the debate itself. My right hon. Friend the Member for Wokingham (John Redwood) made an excellent speech. He said: please can we burn our own gas, rather than importing it? That is a really strong point, not just in terms of jobs in this country but for our energy security as well. It makes no sense for us to be importing, beyond what we have to, expensive volatilely priced foreign hydrocarbons—hydrocarbons that come with a significantly increased emissions content. LNG has up to two and half times the emissions content compared with natural gas produced in the UK. He also made strong points about tax revenues.

My hon. Friend the Member for Banff and Buchan (David Duguid) knows oil and gas better than anybody in the House. The sector is hugely important for his constituency, as I saw when I visited in December. He talked about the punitive intervention that Labour is proposing. He also rightly pointed out that renewables have increased by four times under Conservative Governments since the right hon. Member for Doncaster North was Secretary of State.

My hon. Friend the Member for Waveney (Peter Aldous) talked about the unintended consequences. He is right that in the transition we need the oil and gas sector to co-operate with the offshore wind and hydrogen sectors. He is the living embodiment of transition, representing both the older and newer energy industries.

My hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) made an excellent speech. He praised British business and discussed how Labour is giving up on Aberdeen. Mr Deputy Speaker, you, the right hon. Member for Doncaster North, the Labour Chief Whip, the right hon. Member for Tynemouth (Sir Alan Campbell), and I were here in the days when Labour had two Members of Parliament for Aberdeen. It has now totally given up on the North sea and the North sea transition deal, and the jobs that it represents. My hon. Friend’s excellent speech was about how Labour is giving up on Scotland. We have seen the right hon. and learned Member for Holborn and St Pancras (Keir Starmer) implicitly doing a deal with the SNP—it was implicit in one of his rare visits to Scotland just this last week.

My hon. Friend the Member for Poole (Sir Robert Syms) made another excellent speech, rightly pointing out that energy prices are rising due to world economic recovery and praising the work of this Government on job numbers and economic recovery. I agree with him. The North sea is a great British success story. He also made a really strong point about nuclear energy.

I want to correct a few points made by Labour Back Benchers. The hon. Member for Birmingham, Hall Green (Tahir Ali) made an extraordinary speech. He seemed to be saying that companies cannot make a loss without going bust. That is extraordinary: of course companies can make a loss without going bust. The hon. Member for Sunderland Central (Julie Elliott) made some important points about the supplier of last resort processes. If she has constituents whose credit balances are not being transferred from their previous suppliers to their new suppliers, could she write to me—or even better, to Ofgem—with details? I am sure we could look at that.

The right hon. Member for Leeds Central (Hilary Benn) made his usual quality speech. He said that there are not enough heat pumps—of course there are not. The role of the Government, though, is not to provide a heat pump for every home but to stimulate the private sector heat pump market, so that it can provide that solution. He asked where our plan was for 10, 15 or 20 years’ time. The answer is the net zero strategy, which we published back in October and which the Climate Change Committee says is a leader in the world.

We then heard from the SNP spokesman, the hon. Member for Aberdeen South (Stephen Flynn). I am afraid his nice words about oil and gas are at odds with his party overall, which has a nonsensical energy policy. The people of Scotland will be relieved that energy policy is reserved.

Not only is the SNP anti-nuclear, cheering the closure of plants such as Hunterston and Chapelcross and reportedly telling Rolls-Royce that its small modular reactors are not welcome in Scotland, but the hon. Gentleman’s colleagues and the Scottish First Minister seem to be opposed to new gas licences off the Scottish coast. They want to close oil and gas down. They say they want a windfall tax—just not the same windfall tax that Labour wants. They are still on a mission of trying to close down the industry. The SNP is against Scottish energy consumers, it is against Scottish energy jobs and it is against Scotland’s energy transition.

To finish off, Labour is still in a state of confusion. This time, the motion is not four pages. It has been shortened to around 100 words—or perhaps 280 characters; I am not quite sure. Where Labour has cut the words, however, it has not made up for them with any numbers. The motion includes no costings. There are no numbers in it at all. We have no information about this windfall tax and no information on the package of support for families and businesses. There is no detail there, but still a lot of confusion. There are no impact assessments on the taxes raised, on jobs—there are 40,000 jobs in north-east Scotland and 195,000 jobs in all—on fuel bills or on gas production.

Labour has split energy from climate change; the right hon. Member for Doncaster North is the person who combined them, and now the Labour Front Bench has split them, which means inevitably it is following a policy of hammering business. Labour is not the party of business; it is the party against business. The hon. Member for Kilmarnock and Loudoun (Alan Brown), who often makes quite acerbic interventions on other Opposition parties’ policies—I sometimes wish he would probe his own party’s policies as well as he probes those of others—asked whether the Labour Front Bench had spoken to anybody in the sector, and there was no answer. We did not hear anything about whether it had engaged with anybody in the sector.

Does Labour agree with our ground-breaking North sea transition deal? No answer. Its solution is, again, to hammer domestic UK continental shelf production and increase imports, reducing our energy security and increasing our emissions at the same time. Labour’s approach is confused and misguided. It is not a plan, it is a motion for less energy security, higher emissions and higher fuel bills. I urge the House to stick with our approach: North sea transition, support for households and the UK’s remaining open for business.

Gas and Electricity Costs

Wera Hobhouse Excerpts

Tuesday 18th January 2022 Westminster Hall

[Wera Hobhouse (Bath) (LD)]

It is a pleasure to serve under your chairship, Sir Edward. I reassure you that I will be brief. I congratulate my hon. Friend the Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing this urgent debate. In Bath, in north-east Somerset, more than 10% of households are already living in fuel poverty and, as we have heard, that is likely to increase dramatically.

The council is working hard to provide a local household support fund, with grants of £250 to help the least well off with their energy costs this winter but, again as we have heard, energy costs are likely to rise by about £600. That grant is something, but it is clearly not what is needed. Many more of my constituents are worried about their next heating bill. What have the Government done to protect them? They have scrapped the programmes to insulate our homes, which would have reduced bills long ago. They have cut universal credit and increased the UK’s dependence on imported gas, rather than investing in renewables: green energy homemade in the UK—something the Minister knows I keep saying in these debates. That is what should have happened a long time ago.

I hear reports that the Treasury is scrapping the energy company obligation scheme, which has been a powerful driver in reducing household emissions. The Government must not touch that scheme. Instead, they should double and extend the warm home discount, as has been said. It cannot be right that gas companies are profiting from record prices, way up from where they were last year, when millions cannot afford to heat their homes. The Liberal Democrats are calling for a one-off windfall tax on the profits of oil and gas firms, to fund support for those who are struggling. Seventy-one per cent. of people support that move, as do 75% of the Government’s own voters. Why are the Government not severely and sincerely looking at the proposal of a windfall tax on the profits of oil and gas companies?

We need a long-term plan to prevent another energy crisis. Where is the urgent plan for a long-term home insulation programme that will cut bills permanently? This is a particular challenge for my constituents in Bath. Bath and North East Somerset Council proposes that the Government require landlords to bring housing up to an agreed energy certification standard, and I urge the Minister to look at that. The Government’s heat and buildings strategy was a missed opportunity for real ambition in this area. We have one of the oldest, least energy-efficient housing stocks in Europe. It is an emergency, and the Government should finally treat it as such.

Liberal Democrats are committed to reducing most emissions by 2030, which means a massive expansion of renewables and the replacement of the gas grid. In the context of this debate, we all know that there are some energy companies leading the way. Companies such as E.ON pride themselves on the fact that nearly all of their electricity is generated from renewables, but the shocking fact is that, while the price of renewables falls continuously, the customers of E.ON and other renewable electricity companies will find that their electricity bills go up by just as much as those of customers who buy electricity from burning gas. I have asked E.ON directly—

[Craig Mackinlay]

The hon. Lady has a high number of listed properties in her constituency of Bath, as I have in mine. Sandwich is the oldest medieval town in the country. Has she considered how old buildings, which are listed or in conservation areas and structurally virtually impossible to insulate, can be dealt with in a way that is affordable or achievable?

[Wera Hobhouse]

I thank the hon. Gentleman for his intervention. We have had a debate on listed buildings and how we can help owners. It is complicated, but I do believe it is important that owners of listed buildings get proper support, including help from the council to change the structure of their buildings to make them more energy efficient.

As I said, it is shocking that those trying to do the right thing by buying from companies getting their electricity only from renewables are facing the same cost rises as those buying their energy from companies making electricity from burning gas. It is a massive failure of Government, who have set the terms of the wholesale market to ensure that everybody pays when gas prices go up, even if they do not use gas. That is shocking and unforgivable. The Government must urgently look into how this issue can be fixed now.

--- Later in debate ---

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

I congratulate the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing the debate. I think the best way to sum up this afternoon’s debate is to call it a united front. I was going to say a cross-party united front, but the party that was going to be in that united front is now no longer in that party—the hon. Member for Newton Abbot (Anne Marie Morris) had the Whip removed for daring to say that there should be a VAT reduction on bills as a result of the energy crisis. I commiserate greatly with her. It is shameful that she has had the Whip withdrawn under these circumstances. I would have expected hundreds of her colleagues to vote with her on that occasion, because we all know that we have to do something urgently about the perfect storm in energy prices that is coming towards us. It is a perfect storm because it will be added to the ending of the universal credit uplift and other cost of living increases.

As my hon. Friend the Member for Makerfield (Yvonne Fovargue) eloquently put it, millions of people in this country are spinning plates every day to keep their bills, rent and other costs under control. To have a £600 increase in their bills coming their way very shortly—the decision may well be made within a couple of weeks—will inevitably cause those plates to come crashing down across millions of households. This is a crisis emergency that we absolutely have to tackle with equal emergency and resolution as the crisis unfolds.

Hon. Members have talked about both the causes of the crisis and the things that could be done about it. I acknowledge that one of the key bases of the crisis is the unprecedented increase in wholesale gas prices coming into the country, which has had a knock-on effect for electricity prices and bills. Of course, the crisis does not involve a spike in price; it is likely to be a price dome rather than a spike, and it will probably last a couple of years.

The Government are not responsible for that, but they are substantially responsible for making the crisis much worse, as a number of hon. Members have talked about. The Government have managed the retail markets with extraordinary negligence over recent years, allowing a large number of companies to come in and sell us gas and electricity, with no hedging and no serious support behind them. Some 28 of those companies have now gone bust, leaving the customer to pick up the bill, and not just for the transfers that they had to undertake.

About 4 million people have lost their supply and are having to transfer to other companies at the price cap, rather than at the prices they were previously charged, so there is an additional increase on their bills. The companies are potentially having to bear the costs, at about £100 per customer, for the carnage that has taken place with the energy companies that have gone bust and the cost of putting those companies into “supplier of last resort” arrangements.

The Government have also been negligent by allowing gas storage effectively to disappear in this country in 2016, putting us at risk, to a much greater extent, of volatility in the markets, as we have seen recently. There are a number of things that can be laid directly at the Government’s door for their stewardship of the energy economy over the last few years, in addition to what we know are the problems of world prices. That is a double reason why the Government have to act now to put right a number of the things that they have so negligently allowed to happen.

Many hon. Members have mentioned the idea of reducing VAT for an extended period while the crisis in gas prices runs through. That could easily be afforded because of the increase in VAT that the Government have received recently. A windfall tax on companies that have been supplying the gas is an important idea. After all, whether it is supplied to the UK from the UK sector, from the Norwegian sector or from liquefied natural gas, the price that it is sold for is the same in the end. International spot prices are the same, whatever the origin of the gas. That is why a number of companies supplying within the UK sector have made super-profits from this episode, and it is right that they should be subject to a windfall tax that can be clawed back for customers to reduce the level of prices that they are likely to pay.

Hon. Members mentioned increasing the level and extent of the warm home discount, which would be a particularly targeted way of ensuring that those who can least afford it—the real plate-spinners in our society—have an additional plate to spin in the shape of a much more generous warm home discount, and one that expands its range.

[Wera Hobhouse]

Will the hon. Member pick up on a point that I made? Customers who wanted to do the right thing and bought their energy from renewables only should not be subject to energy price rises when renewable prices are falling because energy supply companies can lump the prices together.

Nuclear Energy (Financing) Bill

Wera Hobhouse Excerpts

Report stage & 3rd reading
Monday 10th January 2022 Commons Chamber

[Alan Brown]

My ideal recommendation would be not to invest in a new nuclear plant. That would be the first thing, but if we take the situation as it is and look at the position going forward, the Government first need to satisfy themselves on the design. Bear in mind that the EPR system is still not working anywhere in the world. The whole point of the amendment is to at least have yearly assessments and reports to Parliament that advise on reliability. As I say, that would allow parliamentarians to understand that, challenge the Government if need be, and help to put pressure on nuclear consortiums if they were not performing to plan. That, for me, is critical to actually getting what has been signed up for.

[Wera Hobhouse (Bath) (LD)]

Does the hon. Gentleman agree that increasingly, the view that we need a permanent base-load for energy supply is outdated thinking, and that most modern thinking around the idea of energy supply all day, every day is that we do not need the idea of base-loads anymore?

[Alan Brown]

I agree wholeheartedly with that. Actually, as far back as 2015, Steve Halliday, the then chief executive of National Grid, said that baseload was an “outdated” concept and a false argument, so I agree with that. This goes back to my point that nuclear is too inflexible because it is either on or off, and it is actually nuclear that leads to wind turbines being turned off so often. The bizarre thing is that nuclear has hidden costs because of the energy constraint payments that are made.

To return to the amendments, our amendment 10 relates to clause 32, as does Labour’s amendment 5. I would point out, as I stated in Committee, that I do not support the Labour amendment because I believe that compelling the Government to take over a plant confirmed to have been economically unviable would be throwing good money after bad, which is the polar opposite of the rationale behind our amendment 10. However, to be fair, I certainly support all the other Labour amendments, particularly those about foreign ownership, and I will be happy to support them if they are pushed to a vote.

Finally—people will be glad to know—I turn to new clause 1. This is another attempt at transparency in what could otherwise be the Secretary of State committing huge sums of money via the special administration route. Again, I do not think it too onerous for the Secretary of State to have to report to Parliament on the likely costs of a bail-out of an insolvent company.

In Committee, the Minister argued that it would hamper the process, but given that the SAR process is only being implemented for the first time through Bulb going bust, it is unclear to me why a report to Parliament would unduly delay the anyway complicated process of going through the courts. The Minister stated that the court process would provide enough transparency, but also that the reporting requirement might have commercial implications and affect the Secretary of State’s ability to bring the administration to an end. Both aspects of that cannot be true: there is enough transparency or there is not. It seems to me that reporting to Parliament should not hinder the transparency process, and it should not have commercial implications, so this new clause has been put forward to ensure clear reporting of information to Parliament.

In conclusion, I have made it clear from the outset that this Bill lacks transparency. Clauses 2 and 3 give way too much power to the Secretary of State to assess what he or she believes to be a value-for-money nuclear project and then commit bill payers to paying for it. While I am opposed to the Bill, I have not even proposed wrecking amendments because the amendments today are all designed to ensure that, first, parliamentarians and, secondly, bill payers know exactly what money is being committed and for what reasons.

If the Government have faith in their arguments that nuclear energy is required and that it represents true value for money, it seems to me that they should willingly accept these amendments and new clause 1. If the amendments get defeated in votes, we will know that it is all about continued backroom deals that they fear will not stand up to scrutiny if they were to report on the actual sums.

--- Later in debate ---

[John Redwood]

Yes. I fear I may be wandering a little from the actual Bill, Mr Deputy Speaker, but given the general context of energy shortage and the crucial role that gas has been playing in recent months in generating electricity, because we are short of nuclear power and short of wind power when the wind does not blow, I would strongly recommend that we get on with exploiting our own gas reserves. That is greener and cheaper than relying on gas being brought halfway round the world in a liquefied natural gas tanker or on Mr Putin’s gas routed via the continent. That is probably an argument for another day, but I am grateful to the Deputy Speaker for allowing me to answer my hon. Friend’s very good point.

In conclusion, I would like the Minister to set out a little bit more of the context of when nuclear might start contributing to our electricity demand and need, and how he sees the balance of that developing between small nuclear being rolled out at greater scale and the one or two large nuclear projects that might still be around. Also, given the hugely radical electrical revolution that the Government wish to encourage, with switching home heating from predominantly gas to electricity and switching much transport from predominantly diesel and petrol to electricity, we are going to need a massive expansion of total capacity. Would he agree, however, that we are starting from a position where we do not have enough capacity for our current levels of demand and where the nuclear element of that capacity will contract quite a lot over this decade?

[Wera Hobhouse]

As a lifelong anti-nuclear power campaigner, I could not fail to speak in this debate or to represent the views of the many Bath constituents who have written to me over the last weeks and months about voting and speaking against this Bill. We need to get to net zero by 2050 at the latest, but do we need nuclear power to get there, and is nuclear energy a fair deal for our consumers? While nuclear power is not a carbon fuel, it is enormously expensive, costing twice as much as generation from renewables. In answer to the right hon. Member for Wokingham (John Redwood), I believe that we just need to roll out renewable energy. We have the capacity. Britain is a country surrounded by sea, and there is a lot of wind further out. Projects such as floating wind are out there—I speak to that industry a lot. If only the Government had the political will to make that renewable energy revolution happen.

[John Redwood]

What difference would it have made if we had had double our wind capacity in recent weeks when it was supplying only 2% of our total electricity because there was no wind?

--- Later in debate ---

[Wera Hobhouse]

As I said, there is the potential for offshore wind, particularly further out where the wind blows all the time—the right hon. Member needs only to talk to the industry about that—if only the Government were prepared to invest much more in that and not just rely on the small projects that we currently have.

Yes, we doubled our offshore wind capacity thanks to the Liberal Democrats in government—some time ago now—but there is still no level playing field for the renewable energy sector. We speak of this again and again. If only the Government were prepared to set a regulatory level playing field, we could see a lot more renewable energy to cover our energy costs.

Let me repeat that while nuclear power is not a carbon fuel, it is enormously expensive, costing twice as much as generation from renewables, and in the end that cost will fall on the consumer. We have seen the disasters of that in recent weeks. Quite apart from the long-term costs of decommissioning, disposal and storage of waste, nuclear is an unusual technology that sees costs rise instead of fall over time. In other words, it has a high need for Government subsidy.

The Government say that the Bill is about saving consumers money by removing barriers to private investment in the nuclear sector, but that is misleading. Their proposed regulated asset base funding model provides no protection for consumers; instead, evidence shows that costs under this model for abandoned nuclear power stations have still been passed on to consumers.

Let us look at what happened in the United States, where a version of the regulated asset base model—early cost recovery—was introduced more than 10 years ago. As in Britain, ECR was sold to policy makers as a way of lowering the cost of capital, thereby making nuclear power more competitive with other sources of generation. However, the lower capital cost was not a true saving. The nuclear renaissance’s 2009 peak consisted of applications to build 31 units pending at the Nuclear Regulatory Commission. Of those, 29 have been cancelled, and despite expenditure exceeding $20 billion, no new US nuclear plants have gone into service. In South Carolina, ratepayers are having to pay $2.3 billion for a cancelled nuclear plant. While US electricity customers are exposed to paying more than $10 billion for cancelled nuclear plants and another $13.5 billion in cost overruns, no reactors have come online as a result of the US shift to early cost recovery. Florida and South Carolina have repealed the laws allowing early cost recovery, and no states have enacted such laws in the last decade, so why on earth are the Tory Government introducing a failed financial model from the US?

In contrast, the cost of renewables is falling globally. Renewables are significantly undercutting fossil fuels as the cheapest form of energy as the cost of renewable technologies falls. According to the International Energy Agency, the world’s best solar power schemes offer the “cheapest…electricity in history.”

[John Redwood]

rose—

[Wera Hobhouse]

I will not give way again.

Renewable energy is the future, and we in the UK are ideally placed to take advantage of the wind and wave power all around us. When UK tidal wave projects were cancelled in the past, that was always on a cost basis. Why do we not look at those projects again? They are truly renewable and truly the future. We could be an exporter of renewables. Onshore wind is now the cheapest form of electricity generation in the UK—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I have been incredibly generous, as I was to Sir John Redwood. Could the hon. Lady tell me which clause she is speaking to?

[Wera Hobhouse]

Thank you, Mr Deputy Speaker; I am coming to the end. I could not miss the opportunity to speak in this debate because I believe that the whole Bill is a complete failure. However, I will be supporting all the amendments that are proposed today because they will improve it, but I will vote against the Bill.

[Virginia Crosbie (Ynys Môn) (Con)]

It is a pleasure to speak in this debate. As the co-founder of the nuclear delivery group, along with my fellow atomic kitten, my hon. Friend the Member for Copeland (Trudy Harrison), I have been at the forefront of campaigning for nuclear energy to form a key part of our 2050 net zero strategy since becoming MP for Ynys Môn.

I can talk about the various amendments tabled by the Opposition, but the reality is that this Bill is critical if the UK is to tackle climate change, and it is critical for the UK’s energy security and stability. The demand for electricity will only rise as we phase out carbon-based energy. Although renewables such as solar, wind and tidal energy must form part of our zero-carbon mix, they simply do not currently offer the capacity or reliability that we will need to go forward. Nuclear power is the only viable alternative to fossil fuels that the UK can implement in the timeframes required.

--- Later in debate ---

[Bob Seely]

I rise to speak to amendments 1 and 2. If I have time, I will get to amendment 9, but I will speak for no more than five minutes.

I hear what people say about the importance of renewables, but it is not a choice between renewables or nuclear. Frankly, if the world is to have any chance of meeting its carbon targets, it is not “either/or” but “and”. I am afraid to say that we see the environmental, energy and security disaster that is Germany’s imbecilic energy policy, caused by the shutting of nuclear and the dependence on Russian gas and lignite coal, the dirtiest form of energy production known to humanity.

[Wera Hobhouse]

I am not speaking on behalf of Germany, because Germany is in a very different position from that of Britain. It is more or less landlocked, it does not have sea, and it does not have wind in the same way. Britain has a massive opportunity to invest in new renewable energy that no other country has apart from Greece, which is doing so.

[Bob Seely]

I am half German and I think my German relatives would confirm that they have wind in Germany. [Interruption.] And the Baltic sea—thank you very much indeed. There is no reputable case, including in reports from the UN and others, that disagrees that, if we are to meet zero carbon at some point in the next 20, 30 or 40 years, nuclear will play an increasingly significant element, whether we like it or not. It is a very low-carbon form of energy, with no greenhouse gas, and it is important for us to take that on board.

On foreign ownership and foreign funding, would I start from here? No. I am uncomfortable with the idea that we would ever want to build an untried, untested Chinese nuclear reactor in this country, especially one that has not been built anywhere else, to say nothing of the geopolitical ramifications of that. I am not hugely happy that we have Chinese funding in place, but I understand the critical point that we need a sense of momentum to make progress on this issue. In a perfect world, though, we would not be starting from here.

--- Later in debate ---

[Richard Graham (Gloucester) (Con)]

What a pleasure it is to join the debate. One of the most enjoyable moments for me was to hear the hon. Member for Warrington North (Charlotte Nichols) making the case strongly and proudly for nuclear power. It was wonderful to hear that, and many of us on this side of the House have shared that feeling for a long time, while perhaps not everybody on her side has done so. It was fabulous to hear it being said.

This debate comes in a week when one of our most important nuclear power stations has just closed. It is a moment to pay tribute to all those involved in Hunterston B, which was designed to last for 25 years and actually did its job for 46 years—a tribute to the huge engineering skills and safety operation involved. It generated enough carbon-free electricity for the whole of Scotland for 31 years. In that context, I find it puzzling that the SNP continues to take such a strong anti-nuclear power position, after all the good work that Hunterston B has done for people across Scotland.

[Wera Hobhouse]

We always say that in the past it delivered so much energy, but what about the radioactive waste that is still there? We just close our eyes to that.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I just remind Richard Graham before he continues that the new clause and amendments should be spoken to, as opposed to a general debate.

--- Later in debate ---

[Greg Hands]

No, I will not. I will try to respond to the debate.

Amendments 3 and 4, tabled by Labour, address how additional costs beyond the financing cap could be paid for. I agree that any RAB scheme must have adequate protections in place for consumers. However, given the size and importance of a new nuclear project, there must be a mechanism in place, with appropriate protections, to allow additional capital to be raised to ensure completion of a project where the financing cap is likely to be exceeded. The amendments proposed by the official Opposition would nullify the ability to be flexible. We are making sure that we do not have to go down that course to carry out robust due diligence on the project in the first place, having learned from existing and current projects to set a robust estimate of project cost.

SNP amendments 7 and 8 refer to reporting requirements. Planned outages at nuclear power stations may happen for a variety of reasons, and it is right that they are governed by the amount of time required to complete the maintenance—the actual cause of the outage in many cases—rather than the arbitrary time limit set out in the SNP’s amendment. Both the Office for Nuclear Regulation and National Grid already work closely with nuclear operators with regard to outages and availability, and they should do so independently of the Government. Nevertheless, I would like to reassure the hon. Member for Southampton, Test that we are aiming to design the RAB regime so that the nuclear company is incentivised to maintain availability.

I turn now to amendment 5, tabled by Labour. It deals with situations whereby a RAB project

“cannot be rescued as a going concern”,

having entered special administration. Of course, I share the wish of the hon. Member for Southampton, Test that the special administration regime should protect consumer interests, but the amendment could have the impact of damaging those interests. We expect the insolvency of a nuclear RAB company to be a highly unlikely event. However, there may be even rarer circumstances within this where it is actually in the best interests of both consumers and taxpayers to discontinue the project, and for it to be safely decommissioned—for example, if a safety fault, which is very unlikely, discovered at a plant made it, in practical terms, inoperable. It is important that the Secretary of State retains the discretion to act in whichever way can achieve the best outcomes for consumers or taxpayers during the insolvency of a relevant licensee nuclear company, and the Opposition’s amendment would remove this discretion.

Finally, I would like to discuss amendment 10, tabled by the SNP. It is important to make it clear that special administration is a court-administered procedure and that the nuclear administrator is an appointee of the court. There is already an appropriate level of transparency through the court process for the transfer.

I will now deal with other points raised in the debate. My right hon. Friend the Member for Wokingham (John Redwood) asked about new supply, particularly in relation to gas, which is not on the face of the Bill. I can tell him that six new gas fields came on stream in the last quarter of the last year: Arran, Columbus, Finlaggan, Tolmount, Blythe and Elgood. It is not the case that there are no new gas fields coming on stream. Gas is, of course, heavily incentivised at present, simply by the price, for there to be more extraction. According to the developers’ estimates, Hinkley Point C could be online or start to come online as early as 2026. However, my right hon. Friend is right that we need to think ahead. I should Make it clear that I welcome the official Opposition’s support for the Bill overall, but let us not forget that awful 1997 Labour manifesto, which said:

“We see no economic case for the building of any new nuclear power stations”—

not just state-owned nuclear power stations, as my right hon. Friend said. Hinkley Point is being built, and an amazing job has been done to keep that construction work going through the pandemic. Our nuclear industry deserves congratulations.

The hon. Member for Bath (Wera Hobhouse) said that we should be rolling out renewable energy. That is exactly what we are doing. We have massively expanded our offshore wind power, and we are quadrupling it over the next decade. I think she said that Germany did not have any wind, but it has a target of 30 GW of offshore wind. There is a lot of wind in Germany. I know that she is from Hanover, which is a long way from the sea, but there is even a famous film—it is one of the best German films—called “Mit dem Wind nach Westen”, which is all about wind carrying people in balloons from east Germany to west Germany. There is most definitely wind in Germany.

[Wera Hobhouse]

Will the Minister give way?

[Greg Hands]

No, I will not give way.

My hon. Friend the Member for Ynys Môn (Virginia Crosbie), who described herself as one of the original atomic kittens—my hon. Friend the Member for Copeland (Trudy Harrison) is the other one—gave a passionate speech in favour of civil nuclear power. She is right that the Bill is all about financing, making cheaper and alternative sources of finance.

Again, I welcome the Opposition’s support for the Bill, but the hon. Member for Warrington North (Charlotte Nichols) was wrong to point the finger of delay at the Government. I should point out the 1997 Labour party manifesto and how nothing happened for 13 years. Hinkley Point C is now being built.

My hon. Friend the Member for Isle of Wight (Bob Seely) made a fantastic speech. He was quite right that the Bill’s purpose is to reduce dependence on foreign developers. He is right that we are not in a perfect position when it comes to energy or to nuclear power, but the Bill will significantly improve that position by creating options and establishing expertise for us to go forward.

The hon. Member for Strangford (Jim Shannon) made important points about Northern Ireland. I speak to Gordon Lyons quite often, and obviously Northern Ireland has a special status for energy and electricity.

My hon. Friend the Member for Gloucester made a fantastic speech and fantastic interventions. I am sure that his hub of expertise in Gloucester will come in incredibly useful, and I of course agree to visiting it.

I turn finally to my right hon. Friend the Member for Maldon (Mr Whittingdale). Bradwell, which has been a successful site in Britain’s civil nuclear experience, is at a very early stage of development and not a decision for now. Of course, in terms of the future of the site, the Bill is not site-specific; it is all about financing.

This has been an excellent, wide-ranging debate and I thank all right hon. and hon. Members for their contributions.

--- Later in debate ---

[John Redwood]

I wish the Secretary of State, the Minister and the Bill every success. I think we might call this Secretary of State brave, because experience tells us that it is extremely difficult to land one of these really big projects and keep it to time and budget, and it is extremely difficult to get agreement to cheaper power. I am delighted that Ministers are motivated by the wish to have both more reliable generating capacity and more affordable power. Those are two excellent objectives of energy policy.

However, I fear that what I have learned from this debate, and from previous debates like it, are these things. First, we are going to have less nuclear power in 2030 than we have today, whatever Ministers do—they are prisoners of their inheritance. Secondly, it will be difficult signing up big projects in particular, or getting smaller projects that are available and working in good time so that there is more nuclear, rather than less, in the decade that follows, and it will be difficult securing that at prices that customers think are good.

In the meantime, we have the problem that, on a typical day, we are already 10% import dependent for our electricity—I think it should all be generated in the UK—and that we are very dependent on the sun shining and the wind blowing, but the wind not blowing too much. When those things did not happen towards the end of last year, we had to reopen three old coal plants. People would rather not have to burn coal, but coal stations were reliable and actually worked when the wind did not blow and the sun did not shine. If the plan is to close them down and make them unavailable in future before we have anything else as a good stand-by, we will be trying the patience of the international community and trying our own luck rather too far.

I urge the Secretary of State, on the back of this Bill, to consider ways of increasing reliable power for this coming decade—the decade that we are living in and that we will be battling over in immediate elections to come—because that is what will matter to our voters. We should have in mind security of supply, availability of supply and affordability as the crucial things that we need to take care of so that we do not have a self-imposed energy crisis. Linking us into the European system is not a secure thing to do, because those countries are chronically short of reliable green power. Poland and Germany are in the middle of trying to phase out coal and lignite. Germany is in the middle of phasing out nuclear altogether. France needs to think about replacements for its ageing nuclear fleet and it is chronically short of gas, which is a sensible transition fuel, so it needs to rely on Putin and Russia.

[Wera Hobhouse]

We talk again and again in this House about Britain being a global leader. Does the right hon. Gentleman agree that Britain could be a global leader in renewable energy? We are not making the most of the areas in which we could be a global leader, which are renewable energy from tidal, wave and offshore and onshore wind power.

[John Redwood]

I would be delighted to see a mixture of renewables, so that the reliability issue is taken care of. The problem with wind is that it is erratic. In the industrial revolution, people tended to prefer water power over wind power because it was a bit more reliable. The hon. Lady must understand that, like me, she is answerable to constituents who will expect the lights to stay on throughout this decade and will expect electricity and gas and other main energy sources to be affordable and available. The danger is that, if we do not do more to expand our capacity of the transition fuels as well as working on improving and increasing renewables, we will not be able to guarantee the crucial features of a good energy policy: availability and affordability. So, yes, fine to the Bill, but it is about the 2030s. We need also to think about the 2020s.

Community Energy Schemes

Wera Hobhouse Excerpts

Tuesday 30th November 2021 Westminster Hall

[Mr Clive Betts (in the Chair)]

Before we begin the debate, I remind Members that, in line with the guidance from the House of Commons Commission and the Government, they should wear face coverings except when they are speaking. I also remind Members to take a lateral flow test twice a week, which can be done in the House or at home, and to give other Members and staff room and space when seated as well as when entering or leaving the room.

[Wera Hobhouse (Bath) (LD)]

I beg to move,

That this House has considered the matter of empowering community energy schemes.

It is a pleasure to serve with you in the Chair, Mr Betts. I start by thanking Steve Shaw and Power for People, who have worked tirelessly on the campaign to unblock community energy. I also thank the hon. Member for Wantage (David Johnston), who is promoting the Local Electricity Bill in this Session. I am pleased to see the hon. Members for Waveney (Peter Aldous) and for Ceredigion (Ben Lake), with whom I have worked closely on the campaign, in the Chamber. They are enthusiastic champions for community energy in the House, and I look forward to their contributions.

Imagine a future where people can purchase clean electricity directly from a local supply company or co-operative and where every pound spent on powering our homes or cars is recycled back into the local community, supporting jobs, funding new facilities and services and contributing to renewable energy infrastructure. That is what community energy is about: ensuring that people everywhere support and benefit from the clean energy transition.

Solving the climate crisis and meeting our net zero ambitions will require huge changes that will be seen and felt directly by people everywhere. We need a radical shift in industrial systems, technology and business models, which must be underpinned by strong and decisive Government action and the right policies. However, one of the most crucial requirements is bringing people on board for the transition to net zero, because they have to pay for the transition through their energy bills and taxes, they have to host new infrastructure in their neighbourhoods and on their landscapes, and they need to alter their routines and behaviours.

Unless we bring people on board for the transition to net zero, there is a huge risk that the public will not welcome or even accept the necessary changes. The consequences of that will be that our progress to net zero will be much more lengthy, costly and contested, and it will be less inclusive, equitable and environmentally sustainable. The real strength of community energy is its connection to people and places. It is people who make community energy what it is, and it is people who will see the benefits. That is what we are trying to achieve with the Local Electricity Bill.

Community energy is one of the few tried and tested means of engaging people in energy systems. The Bill would lead to energy market reforms that would empower community-owned and run schemes to sell local renewable energy directly to households and businesses. It would make new community energy businesses viable and, by bypassing large utilities, those businesses would keep significant additional value within local economies.

[Hilary Benn (Leeds Central) (Lab)]

I congratulate my hon. Friend—she is my hon. Friend on this subject—on securing the debate. As I understand it, the Government argue that the means to enable new suppliers to come into the system are available. However, when I recently inquired about how many Licence Lite applications, which are meant to help new energy suppliers enter the market, had been granted by Ofgem, the answer was that three licences have been granted since 2015 and none has been applied for since 2019. Might that not suggest some changes are needed to make it easier for new suppliers to enter the market?

[Wera Hobhouse]

The right hon. Gentleman is absolutely right. Something does not work, and I will come on to why it does not work. The whole system is outdated and does not allow for the changes that we need to make to get to net zero. We have to test what works on the ground. The number of licences that have been granted speaks for itself. We have made no progress, yet the Government accept that community energy is a good thing and we should all support it.

[Caroline Lucas (Brighton, Pavilion) (Green)]

I congratulate the hon. Lady on securing this debate. On the issue of the Government saying it is a good thing, does she agree that the trouble in this country is that community energy is seen as a thing on the side? It is a cherry on the cake, and not the substantial part of the energy mix that it could be, as it is in places such as Germany, where there is a right to sell to the rest of the community. When we have that, we end up with a proliferation of local energy companies, a real diversity and ecology of energy companies, and a much stronger sector as a result.

[Wera Hobhouse]

In other countries there are much more diverse markets for this, and we really have to look at why it does not work in this country. I agree with the hon. Lady—absolutely, it has to be at the core of the transition. It is about power and people, so we are here to make a strong case to the Government to listen and really understand the benefits of local community energy.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I fear that much of the difficulty that we will encounter in promoting this case will be found along Millbank in Ofgem, which has never been an enthusiast for this sort of diversity in the market. In the northern isles, we have the highest rate of fuel poverty anywhere in the country. We already produce more clean electricity from renewable sources than we can use. We do not have the opportunity of exporting that to the transmission grid, so I am happy to offer us up as an early testbed for community energy.

[Wera Hobhouse]

If I were the Government, I would happily take up that offer. It is about the surplus energy that can go back into the community. If we look at the crisis in the energy market and the fact that people will probably face higher prices, anyway, the Government’s argument that there might be unintended consequences, particularly around price, has proven not to be the case. It will ultimately become cheaper if we go along the lines of community energy.

[Jeremy Wright (Kenilworth and Southam) (Con)]

I am grateful to the hon. Lady for giving way and for securing this debate. In dealing with the objections to the course of action that she is setting out, she will know that the Government maintain that the right to local energy already exists. Does she agree that the right way to look at that is the way I look at my right to buy a Ferrari, which already exists, but my financial obstacles to doing so are considerable, and that that is true in the case of community energy too?

[Wera Hobhouse]

I thank the right hon. and learned Gentleman for that analysis. Do we all want Ferraris? Who knows? But we probably all want community energy. The problem is indeed the cost of entry for small local suppliers, and that is what the Government need to look at. As we have already heard from the right hon. Member for Leeds Central (Hilary Benn), it does not work on the ground. When the right exists, fine, but what is the practice? We need to look at what we can do to change the practice and at what is affordable for the small companies that want to enter the market.

[Patrick Grady (Glasgow North) (SNP)]

The hon. Lady is being very generous with her time. As I have said in previous debates, I have local constituent groups who are dead keen on community energy and really want to be able to rise to the opportunity. In addition to rising to climate change targets and reducing emissions, there is an issue about resilience to climate change. We now have people in different parts of the country who have been without power for four or five days because of climate change-related weather storms. If we had local generation, there would be additional resilience in the system that would perhaps protect or shelter people a little bit from some of the damaging consequences of changing weather.

[Wera Hobhouse]

The hon. Gentleman makes a very good point. Lots of small and diverse players are probably the answer to our future energy demands. The Government in the past have always considered bigger is better, economies of scale and all the rest of it, but we need to look much more favourably at smaller, diverse suppliers.

I need to make some progress, so I will remind everybody where we were. The Bill would lead to energy market reform that would empower community-owned and run schemes to sell local renewable energy directly to households, rather than small companies buying energy from bigger companies, then selling it on. It would make new community energy businesses viable and by bypassing large utilities, they would keep significant additional value within local economies. More of the money that we use to pay our electricity bills would circulate back to our local communities to create more skilled local jobs, more viable local businesses, stronger local economies and greater resilience.

Let us take my constituency of Bath as an example. Bath and West Community Energy has delivered 12.35 MW of community-owned solar photovoltaics, in addition to one hydro scheme. Many of these projects have been installed in schools and community buildings across Bath, including Ralph Allen School, Oldfield School, Walcot rugby club, Newbridge Primary School and Lewis House. Bath and West Community Energy systems generate enough electricity to match the annual equivalent of 4,000 homes. They have distributed nearly £300,000 back into local community grants, which go into supporting community action on carbon reduction and fuel poverty, which has been mentioned.

The group supports a wide range of schemes, ranging from community orchards and reuse and repair schemes to fuel poverty advice and even a cycle-to-work scheme using e-bikes. I am delighted that our local electricity distribution network operator, Western Power Distribution, is a registered supporter of the local electricity campaign. However, there are a number of problems facing local suppliers, including those in my constituency. Bath and West Community Energy has identified and is developing nearly 40 MW in a pipeline of projects that will work with communities, commercial developers and site owners, but its ability to commission the pipeline will depend on a number of different factors.

One key factor is grid capacity. This area is currently heavily constrained. Investment is needed in grid improvement, but Bath and West Community Energy must compete with commercial companies with much more resources to secure a grid connection. Smaller operators do not have the financial resources that big commercial operators have. Another factor is partnership with local authorities. There is huge potential, and I am delighted that Bath and North East Somerset Council supports the Local Electricity Bill. Councillors keep telling me how popular community energy projects in their wards are in the consultation stages, but many projects do not make it to reality. There must be stronger support for local authorities to establish joint ventures and utilise local authority finance to invest in local community projects that generate local social and economic benefits on both public estates and in the wider community.

What is the biggest barrier to community energy? It is the right to local supply. Current energy market and licensing rules mean that community energy schemes to build new renewable generation infrastructure and then sell power to local customers face costs that are too high to make the schemes financially viable. A report by the Institute for Public Policy Research states that the financial, technical and operational challenges mean that initial costs exceed £1 million. As the Environmental Audit Committee has said, community energy contributes 278 MW of renewable energy as of 2020. That is less than 0.5% of total UK electricity generation.

Community energy has seen almost no growth in the past six years—a great waste of potential. However, there is a solution. I urge the Minister to add his support to the Local Electricity Bill, which was introduced by the hon. Member for Wantage and is supported by 281 MPs from all parties. The Bill sets out the mechanism that can fix the UK’s local supply problem. Clause 1 states the purpose of the Bill—to enable the local supply of electricity. Clause 2 sets out the aim of smaller-scale renewable generators to supply electricity directly to a local area. Clause 3 gives Ofgem the task of setting up the local supplier licence process. Crucially, it requires that the process ensures that local suppliers face set-up costs and complexity proportionate to the scale of their operations.

[Stephen Hammond (Wimbledon) (Con)]

Is the hon. Lady not right that clause 3 is the nub of this Bill, because all too often in regulation we have a one-size-fits-all approach that is not proportionate to the scale of the operation or the ambition? If a specific duty was placed on Ofgem to ensure that both the regulation and the cost were proportionate to the size of the ambition and the operation of the local generator, we would see that 0.5% figure rise quite dramatically.

[Wera Hobhouse]

Indeed—I completely agree. I urge the Minister to look at clause 3 of the Bill, which would give Ofgem the task of setting up the local supplier licence process, which should be proportionate to the size of the operator.

The Government have said many times that they support community energy; I am grateful for that, as are all of us in the Chamber. In the last debate on community energy, the former science Minister, the hon. Member for Derby North (Amanda Solloway), outlined the Government’s agreement with the broad intentions of the Local Electricity Bill, which was very welcome.

Those who support the Local Electricity Bill accept that it can be improved. We want to work constructively with the Minister and his Department to improve it, so today I will address some of the Government’s concerns. I will take each concern as outlined by the Government in turn.

First, the Government have said that there is already a right to local supply through existing rights and flexibilities, but we have heard why that system probably does not work; Ferrari analysis springs to mind. The existing rights and flexibilities simply do not address the problems faced by local suppliers. The huge potential for more community energy generation is not being realised. Community energy has seen no significant growth in the last six years, standing at a mere 278 MW of electricity generation capacity. No existing community energy group in the UK is licensed to sell its electricity directly to local customers.

Licence Lite, the scheme set up in 2009 to award geographically-based energy supply licences, has resulted in only three such licences being granted since the scheme was established. The key flaw in Licence Lite is the need for local renewable generators to partner with a willing licensed energy utility.

Secondly, the Government say that changing the rules risks distortion in the energy system. The energy markets and the energy system are the result of the rules that govern them. These rules are much as they were when they were introduced for the 1990 privatisation. They might have made sense at that time, but now that there is such huge potential for distributed smaller-scale renewable generation they are now outdated.

Thirdly, the Government say that changing the rules risks increased costs for consumers. The evidence shows the opposite. In 2020, community energy organisations spent nearly £900,000 on energy efficiency upgrades, helping over 45,000 people to reduce their energy bills. A twentyfold increase could be achieved from community energy schemes by 2030.

Fourthly, the Government say that changing the rules risks further unintended consequences. However, they have not really outlined what those unintended consequences are, so I hope that the Minister can say what he thinks they might be. Those of us who support the Bill want to work together with the Government, as I have said.

I draw the Minister’s attention to a recent report from the UK Energy Research Centre, to which academics from Imperial College London have made a significant contribution. It is a very important report, and it identified five different business models that could work together to ensure a thriving community energy sector. It is clear not just about the important role that collaboration between communities and the private sector has to play in community energy but about what the Government must do to support community energy solutions.

The report also says that the Government should set clear and sustained targets for growing the community energy sector, and introduce policies and regulations that allow space for small actors, which we have heard about. That must go hand in hand with sufficient investment in energy efficiency retrofitting, an area where the Government do not have a very good record.

I have three questions for the Minister today. I have sent them to him in advance, so I hope that he has had time to prepare his response to them. My first question is simple: will he commit to including the Local Electricity Bill in future energy legislation? Secondly, he said in recent letters to Members of this House that the Local Electricity Bill risks creating distortions in the energy system and having other unintended consequences—apart from the increased cost, which I have addressed. Can he outline what these distortions and consequences are, because knowing them will allow me and other supporters of the Bill to work on improving it?

Finally, I wrote to the Minister earlier this month, together with the hon. Members for Wantage, for Waveney, for Ceredigion, as well as the hon. Member for Glasgow North (Patrick Grady) and the right hon. Member for Leeds Central, asking him to meet us. We are keen to work constructively with the Government. Will he agree to that meeting? There is a great deal of cross-party support for the Bill, as we can all see in this room. We have an opportunity to do something significant on our path to the net zero transition, building the public consensus we need. Otherwise, we might face significant delays to deliver the necessary changes. Community energy is not just nice to have and it is not just a cherry on the top of a sustainable economy cake; it should be at the heart of what we do to get to net zero.

[Several hon. Members rose—]

--- Later in debate ---

[Caroline Lucas (Brighton, Pavilion) (Green)]

It is a pleasure to serve under your chairship, Mr Betts, and I congratulate the hon. Member for Bath (Wera Hobhouse) on securing this important debate.

It is just two weeks since the conclusion of COP26 in Glasgow and I welcome the focus that the debate places once again on how we practically deliver on the UK’s climate targets. We know that the Government’s recent pledge to decarbonise the UK power system by 2035 will require not just leaving fossil fuels in the ground where they belong, but a significant increase in renewable energy generation. Although progress has been made, with renewables generating 42.9% of electricity generation in the spring of 2020 and the Government committing to 40 GW of offshore wind by 2030, it is clear from everything we have heard this afternoon that community energy generation remains the missing part of the equation.

As we have heard many times, a failure to remove the barriers being faced by local suppliers is what is holding us back. Indeed, while large developers will soon benefit from the contracts for difference scheme, projects smaller than 5 MW continue to be excluded. Yet as the Minister will be aware, the potential for community-scale renewable energy generation is enormous. I am particularly delighted to hear the number of times that a report by the Environmental Audit Committee has been cited in this afternoon’s debate already. As a member of that Committee, I was pleased to sit in the deliberations as we came up with the figures that by 2030 the sector could grow by up to 20 times, powering more than 2 million homes and saving 2.5 million tonnes of CO₂ each year. It is a very powerful report and I commend it to those who have not yet had a chance to look at it.

The report made it clear that the UK’s outdated regulations are unfit for the present, let alone for the future. As things stand, as the hon. Member for Bath reminded us, community energy generation makes up less than 0.5% of the UK’s total electricity generation and there has been almost no growth in the sector in the past six years. Compare that with a country such as Germany, where there are 200 local energy companies, and with energy systems in countries such as Denmark, which are entirely decentralised. In comparison, the UK is an incredibly centralised four-nation country with an incredibly centralised energy system, and local energy companies have been little more than collective purchasing vehicles.

In other countries, local energy systems incorporate all aspects of generation, storage and supply. Households, communities, schools and businesses become joint producers and consumers in the local energy system, with vested interests in generating clean energy as well as consuming it, yet here at home, as Community Energy England has so clearly set out, Government policies have made it more difficult for the sector to flourish. The outdated market that we have largely dates back to the 1990s, when the sector was privatised, and prohibitive costs combined with the complexity of licensing laws are stifling community energy schemes.

[Wera Hobhouse]

Can the hon. Lady outline that the whole idea does not work because the improvements to the grid have not materialised in the way that we had hoped, or rather the way that the Government had hoped, and that we need big grid improvements to deliver net zero?

[Caroline Lucas]

I welcome the hon. Lady’s intervention and she is absolutely right. It feels to me as though this absolute reinforcement of the grid is often the poor cousin in these debates and does not get much of a look-in when we talk about what needs to be done, yet it is absolutely critical. If we do not do that, the rest of what we are discussing will not count for much because it will not be possible for it to be realised if the grid is still in the dilapidated state that it is in now.

Earlier this year, the right hon. Member for Ludlow (Philip Dunne), the Chair of the Environmental Audit Committee, on which I am pleased to serve, wrote to the Secretary of State following our inquiry into community energy and specifically recommended that the Government remove the regulatory barriers to allow community energy projects to sell their energy to local communities. The Secretary of State subsequently promised to publish the Government’s future plans for community energy in the net zero strategy, yet disappointingly that strategy contains neither a plan nor the practical support measures needed and that the Committee had recommended. That is why the Local Electricity Bill, of which I am also a proud co-sponsor, is so important, and why it seeks to remedy successive policy failings, by giving people the right to local electricity generation. As others have said, it would create the right to the local supply of electricity, allowing community generators to become local suppliers, and require Ofgem to establish the local supplier licence process, ensuring that the costs and complexity of becoming a local supplier were proportionate. Other measures to support community energy schemes include expanding and extending the rural community energy fund to include urban, heat, energy-efficiency and retrofit projects.

I want to say a last word about how community energy has a role to play in helping to build thriving, resilient communities. I was struck by the fact that in its final report, Climate Assembly UK placed a strong emphasis on fairness and leadership from Government. Community energy is that chance to deliver on both those fronts. Quite simply, enabling community energy projects means supporting thriving communities, where the profits from generation are reinvested locally. It means that, in transitioning to a zero-carbon economy, we are not simply building a new industry on the same old model, with profits concentrated at the top and communities denied a share of the benefits or unable to access the jobs. We are turning that on its head. We are creating something new and better, delivering decent green jobs and energy, investing at a local level in those resilient local economies. That is what a green new deal worthy of the name looks like in practice.

Community energy projects deliver significantly more social value than commercial models. Although the sector currently relies on volunteers, Power for People estimates that almost 60,000 skilled jobs could be created up to 2030, if policies such as those in the Local Electricity Bill are implemented. As I said, community energy is not just a nice-to-have extra to be excited about—the cherry on the sustainable economy cake. It is a fundamental part of the total energy mix.

Finally, I pay tribute to Brighton and Hove Energy Services Co-op—BHESCO—an award-winning social enterprise in my constituency, which since 2015 has completed 58 community energy projects, estimated to reduce CO₂ emissions by more than 7,000 tonnes over their operational lifetime. They have told me clearly that they could do so much more if the rules were changed and they were allowed to fulfil their potential. All they are asking for is a fair playing field for community energy projects that now struggle to make a business case, so that they could do the practical local projects that involve people and communities in inventing and adopting climate solutions, which bring huge social and community benefits.

--- Later in debate ---

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

I congratulate the hon. Member for Bath (Wera Hobhouse) on obtaining the debate this afternoon and on putting forward the case for local energy, particularly for a community energy Bill, in such a succinct and complete way. That means I do not have to say all the things that I was going to say about a local community energy Bill, other than to say that we on the Opposition Benches thoroughly support such a Bill. We think it would make a tremendous difference to the way that local energy can move forward.

At its heart, it has a simple proposition, which is that people should be able to sell the energy they produce to their neighbours, their friends, the people down the road, their local industry and shops. As we can envisage, that sort of environment would not only make a tremendous change in how people relate to their own energy, but would potentially be a great step forward in the appreciation of what we need to do, as far as energy is concerned, in the low carbon environment we will have in the future. Energy is something that people do, rather than something they simply receive. That seems to be the essence behind the idea that people can sell the energy they produce to their local community.

It is a simple proposition and we know what a difference it would make, so why not just do it tomorrow? What are the barriers in the face of the proposal? To go to the point made by the hon. Member for Waveney (Peter Aldous), we seem to have been here on a number of occasions. He has a similarly long pedigree in talking about the same issues that I have raised, both on the Environmental Audit Committee and elsewhere. He is right that we seem to turn up in the House talking about this issue on a fairly regular basis, and nothing whatsoever changes.

My particular involvement in the issue goes back to a 2013 Energy and Climate Change Committee inquiry on local energy, which I chaired, that looked at the barriers to how local energy can go forward, remarked that there was not a great deal of local energy going on and talked about the potential for local energy. We have heard this afternoon about the potential from now on, but at the time we were saying we could have perhaps 3 GW of local energy overall in this country by 2020. What have we got today? About 270 MW, something like that.

If we look at the various projects have contributed to that 278 MW, we have heard mention of a number of the co-operatives and organisations that have actually produced local energy, but pretty much to a project—I have seen a lot of projects in my time—they have been carried out with heroic dedication, overcoming tremendous obstacles and, in some instances, have failed at great cost to themselves and other people. It would be so easy just to make it possible for those schemes to happen. I congratulate and commend all those people who have generated the 278 MW of local energy that we have so far. The fact that we have any at all is a remarkable tribute to them, not to the system we have.

That is where we need to be very clear. The obstacles in the way of local energy are very much about the question of local supply, but there are a lot of other obstacles as well, which hon. Members have mentioned this afternoon. The idea is that people are trying to set up a local scheme to produce a pretty modest amount of energy for local consumption, important though all those local schemes are in terms of aggregation across the country. However, people have many obstacles to overcome and are required by the planning system to get permission in place. They need to spend perhaps a million pounds per project just to get a modest scheme going. If the rules were different, people would be able to put that million pounds into the development of the project and not throw it away on a possibly unsuccessful scheme in the first instance.

         The hon. Member for North Devon (Selaine Saxby) gave the example of the local brewery getting its cars on the road. People might think that is a fanciful example, but it is absolutely how the grid system works at the moment. There is an assumption that every single electron that is produced goes literally from Land’s End to John O’Groats and back again before going into a lightbulb and that it is charged as such, even if it had come from two doors down the road. That is the assumption. The introduction of local energy into the system is often regarded as a tremendous nuisance and loss of load. We cannot actually see where it is, and it is not easy to balance in the grid. That means that the last to get connections into the distributing grid are the local energy schemes. The charging regime for those schemes, once in operation, assumes that they are national schemes, just locally based.

[Wera Hobhouse]

I listened very carefully to the hon. Gentleman’s explanations about the complexities of the grid. Does he agree that, when thinking about licensing for a new devolved scheme, we need to look at things such as liabilities when there are outages, for example? It is not impossible to overcome these difficulties.

[Dr Whitehead]

The hon. Member is absolutely right. It is not particularly difficult to overcome these problems. I am emphasising this deep mindset of how the grid works that has been with us for a long time. The hon. Members for Strangford (Jim Shannon) and for Kilmarnock and Loudoun (Alan Brown) mentioned the fact that the grid was designed for a bunch of providers to produce x amount of energy, which would go through the grid until it got to a lightbulb. The world is completely different these days, but the grid still operates as if that were the case. That is inimical to the success of local energy projects.

As the hon. Member for Bath says, it would not be difficult to fix that, but there is a problem. Ofgem and, to some extent, the Department are particularly concerned that if we start dismantling the grid in its old system and localise it to enable the development of local energy in the way we have discussed, there could be distortions in that original system. I suspect the Minister will talk about some of those distortions, but let us be clear: they are distortions to an old system that does not work. We actually need those distortions to come into place to make the new, low-carbon overall renewable system work in the first instance. Making local energy work in that context is a very important change we need to make.

We need to make these changes to the system as a whole. We need to get the grid on to a much more friendly basis for local energy. We need to make the possibility of local energy much more real in terms of the hurdles it needs to overcome before it can get going. We need to have positive Government support for the development of expertise and the assistance and support that local energy schemes need to go ahead. That particular area, with the preponderance of volunteers in the local energy system, would be really good to have as a draw-down arrangement for local energy for the future.

Yet again we are meeting with the idea that the future for local energy could be really bright, but I fear that we will be here in a few months’ time talking about the bright future that has not quite emerged, but may in the future. We have not got time any more to keep going round the houses before we get to a decent settlement that will allow local energy to proceed. Local energy is so important, as we have heard this afternoon, for the future of low-carbon renewable energy.

I was delighted that the Local Electricity Bill has been amended to ensure that local energy is low carbon and renewable, so that we do not have diesel reciprocators coming in and providing local energy as a result of the ability to get a local licence. That is a very good amendment, and adds further to the Bill’s force.

I have questions for the Minister that are similar to the three questions asked by the hon. Member for Bath. I hope that he can give us some reassurances about the Government’s earnestness to bring about changes to the grid arrangements that can underpin local energy, and that they will be treated as a move forward as opposed to a distortion of the system. The answer to one of the questions posed by my right hon. Friend the Member for Leeds Central (Hilary Benn) about the German system is that cities in Germany, in many instances, own their own grids—and are doing so in increasing numbers. Germany does not have the grid system, a system that is regarded as just common sense in the UK. We have to turn that common sense around and start from the bottom up, with grid and district-grid management, rather than assuming that we should work from the top down. If we do that, then there will be a fundamental turning of the tide in favour of local energy for the future. I look forward to what the Minister has to say. I hope he will be fully supportive of the local community energy Bill, but I hope he will also be understanding of what differences need to be made to the system to allow local energy to come into its own.

--- Later in debate ---

[Greg Hands]

Thank you, Mr Betts; let me carry on. It is important that we take a broad view of all consumers when making changes to the energy markets. That includes consumer protection measures, which form an important part of the supply licence. Suppliers play a key role in providing support to customers, particularly the vulnerable. For example, the energy company obligation requires suppliers to install energy efficiency measures in the homes of vulnerable people. The warm home discount applies a reduction to the bills of vulnerable households, and the price cap protects households from poor-value tariffs. The priority services register is used by suppliers to identify consumers who may need additional support with their energy supply. Of course, suppliers sometimes fail, but we have vital safety nets to ensure supply—as we have seen since the last debate—through the supplier of last resort, or SoLR, process. I would be concerned about the deliverability of such protections under a local electricity supply regime.

Let me turn to the three questions that the hon. Member for Bath asked specifically. I think that I have answered the question on future energy legislation. I have outlined, I think, some of the difficulties with the current Bill as proposed. Also, I think that I have gone into the distortions to the energy system just now and before in some detail. And will I meet her? As I have mentioned, I have an existing commitment to my hon. Friend the Member for Wantage, but I am happy for people to come together. That was the commitment that I made to him—to meet Members with an interest in this area.

[Wera Hobhouse]

I was originally a little disappointed that the Minister’s invitation went only to his colleague the hon. Member for Wantage (David Johnston), but if he has already fixed a meeting and he is opening it out, may I ask whether there is already a fixed date for it that he can share with us?

[Greg Hands]

I appreciate the hon. Lady’s line of questioning. I replied specifically to a letter from my hon. Friend the Member for Wantage seeking a meeting. I think the best thing to do would be for me to speak to my hon. Friend or for her to approach him—it would effectively be his meeting—to find the best way forward. I am keen to be as accommodating as possible to Members across the Chamber, but I responded to the letter that my hon. Friend the Member for Wantage sent me, which I think was on behalf of a group of Members. [Interruption.] In that case, I think the best thing to do would be for the hon. Member for Bath to approach, first, my hon. Friend the Member for Wantage.

On the question of the cost to consumers, though costs are reduced for the few in the scheme, that avoids market costs, which fall on those not in the local scheme. That often includes the fuel-poor, who cannot buy into such schemes.

Germany was mentioned many times. Without going off and setting up my own separate Adjournment debate, there are reasons why Germany works well, and less well, in this space. Germany’s grid, for example, makes it very difficult to get renewable energy from the North sea down to Bavaria. Its grid is not set up in the same way that ours is, on a national basis. That can have advantages and disadvantages. I also point out Germany’s reliance on imported gas from abroad. That again stresses some of the difficulties in scaling up; even in Germany, which has been praised for community energy, it does not necessarily offer a scalable solution in that same way.

The hon. Member for Brighton, Pavilion (Caroline Lucas) asked about the continuing expansion of the rural community energy fund. I will look at the options for funding as part of Department-wide planning.

My hon. Friend the Member for Waveney (Peter Aldous) asked five questions; I will try to deal with them as quickly as possible. First, derogation is possible; Ofgem consulted previously on widening the use and geographic premises licences are possible. Secondly, the right to supply is possible; BEIS will work with Ofgem on retail market reform. Thirdly, this is really a matter for Ofgem, which can do a local supply licence, but we can set out why we do not agree with a local supply licence. Fourthly, we are looking at the supply hub model as part of the retail market reform. It is a complex issue, which, of course, has implications for things such as the smart meter roll-out, and so on. Fifthly, I think we have already covered the smart export guarantee scheme.

The hon. Member for Strangford (Jim Shannon) asked about Northern Ireland. As he and I well know, it is a unique energy market. I am having a meeting with Gordon Lyons, the Northern Ireland Economy Minister, on wider issues tomorrow, and I will try to feed this into a conversation with him. The meeting is with the three devolved Administrations, but I will find an appropriate time to ask him about how we can work together on community energy schemes.

Mr Betts, I think you said we were finishing at four—

--- Later in debate ---

[Wera Hobhouse]

I thank all right hon. and hon. Members for contributing to the debate. It shows the Government that there is cross-party, cross-region and cross-nation support for the Local Electricity Bill and for overcoming the obstacles in the electricity market and the barriers to local electricity supply.

I thank the Minister for offering to meet us and have that engagement. I am a little disappointed that he has still not quite understood what we all think: that the current system does not work because it is too centralised, and that the Government must face the brave new world of decentralisation to set free the power of local electricity. As we have heard, community energy schemes currently account for 0.5% of the UK’s electricity supply; 20 times that would bring 10% of the energy market to the table —clean, renewable energy. We have heard today that the most important thing is that we fire on all cylinders, and it is surprising that the Government do not take up that opportunity for that extra 10% of local electricity supply—setting free people and power. I hope that we will receive a more positive reply when we come back to debate this topic, yet again, in this Chamber or the main Chamber.

Question put and agreed to.

Resolved,

That this House has considered the matter of empowering community energy schemes.

Income Tax (Charge)

Wera Hobhouse Excerpts

Thursday 28th October 2021 Commons Chamber

[Edward Miliband]

That is a very important point. The championing of ExcludedUK is a very important issue, and my hon. Friend is right to point it out.

This is about choices. Amazon gets help from the super-deduction, but our energy intensives are left out in the cold. I hope that in his reply, the Business Secretary will tell us where things stand for the energy-intensive industries, because they have been in touch with me saying, “What is going on? What is happening?” There is just complete silence from the Chancellor.

Let me talk about our high street businesses, because they face higher national insurance and business rates. I welcome some of the short-term measures in yesterday’s Budget, but it is not unfair to say that fundamental reform has been ducked yet again. The CBI said this in its Budget response yesterday:

“But the hard truth is that wholesale reform to unlock investment was rejected today. The Government missed the opportunity to truly reform a business rates system that diminishes Britain’s high streets and factories.”

I was quite mystified yesterday, because the Chancellor attacked the idea of fundamental reform of business rates, a system with a genuinely level playing field between traditional high streets and internet businesses. Four successive Tory manifestos have promised precisely that reform: 2010, 2015, 2017 and 2019.

When the Business Secretary was a humble Back Bencher—I think he was writing “Britannia Unchained” at this point—he was pamphleteering. I am not against pamphleteering; I have done some of it myself. He was a Back Bencher with his ideas, and he said we need

“a system that is fair for both traditional and internet companies.”

He is now the Business Secretary. Why does he not deliver it? He knows, because he talks to the business community a lot, that this is a massive issue for our high street businesses. They rightly say, “Look at the burden on us and look at the burden on tech businesses. Look at the unfairness.” That is why my hon. Friend the Member for Leeds West is so right to champion this issue.

The longer-term issue we face is how to create the growing economy that we need. Not for the first time, the Government talk a good game. We have the branding of the Budget. We know that the Chancellor is incredibly keen on branding, and his own personal branding more than anything. The Government are a bit of a sideline. It is more Rishi branding than Government branding, I think it is fair to say. There are some knowing looks from Members on the Government Benches. The Rishi branding of the Budget is the “plan for growth”. I have to say that a plan for growth that has growth of 1.3% at the end of the Parliament is not much of a plan. Growth will be just 1.7% when the economy returns to trend. That is woeful by historical standards. It is the biggest challenge we face as a country. This is an important point, because when people wonder how the Government manage to combine the highest taxes for 60 years and public services that are creaking, the terrible growth performance of our economy is a significant part of the answer.

[Wera Hobhouse (Bath) (LD)]

Did the right hon. Gentleman, like me, also miss any announcement that points to the transformation to the green economy and green jobs?

[Edward Miliband]

The hon. Lady is completely right about that. She anticipates my next point brilliantly; it is a useful segue. If we want to understand why growth is so anaemic, she is right that we need look no further than the Chancellor’s failure to seize the opportunities for green growth. This is an important point: the prudent and responsible economic call—I suspect the Business Secretary agrees—for economic growth is to invest at scale in the transition to a zero-carbon economy. Let us be honest, it is now a completely open secret that the problem is that the Chancellor is not a believer, and it showed yesterday. As we prepare to host the most important international summit ever on climate change, as delegates gather from all around the world, and as the eyes are on Britain, what did he unveil as his flagship measure yesterday? To cut air passenger duty for domestic flights. You literally could not make it up. People want good and affordable rail services, but the plan for rail seems to have been postponed again, and instead there will be 400,000 more domestic flights as a result of that decision. Once again, that shows that the Treasury is not signed up to the agenda.

I am such a nerd that I was reading the OBR report last night and there is an interesting and illuminating bit on, I think, page 176—Members can check—which says, in OBR language:

“the…costs involved in getting the rest of the way”—

to net zero—

“remain significant and their apportionment between businesses, households, and government…remains largely unclear. This leaves the costs associated with the transition to net zero as a major source of longer-term fiscal risk.”

Let me underline that point for the House. The July 2021 OBR report, which for the nerds among us is brilliant, and which I strongly recommend to Members as bedtime reading—Madam Deputy Speaker is laughing at me, or perhaps with me—warned of the danger of not acting on the climate and of debt climbing to eye-watering levels as a result. When my hon. Friend the Member for Leeds West said yesterday that debt would rise to 300%, I noticed a Conservative Member at the back look at his hon. Friend and say, “Oh that can’t be right,” but that is what it says. The interesting thing about that report is that it warns not just about the danger of not acting, but about the danger of delay. It says that delaying action on the climate by a decade will double the cost of the transition as we lock in high-carbon choices.

--- Later in debate ---

[Kwasi Kwarteng]

Let me make some progress. To intervene so soon after an intervention is unusual. I will come back to the hon. Member.

During the pandemic, people and businesses have demonstrated remarkable levels of resilience. I fully agree with the right hon. Member for Doncaster North when he says that business has been heroic and people have been heroic. I am also immensely proud of the work done by the British Business Bank, for which my Department is responsible. Its schemes supported people and our economy to the tune of £80 billion, with Government-backed finance for 1.7 million businesses. That comes to the point made by the hon. Member for Hornsey and Wood Green (Catherine West). When it comes to the fundamentals of the economy, the Government are securing our economy and getting Britain back to work.

Contrary to all the prophecies of doom and gloom that recently came from Opposition Members, the Office for Budget Responsibility now expects our recovery to be quicker and the economy to return to its pre-covid level at the turn of this coming year. As the OECD and the International Monetary Fund show, there is considerable expectation that the UK will rebound strongly. In that context, our task turns to ensuring that our people and our businesses have ability and opportunity. They will not simply look back and complain about the situation that we have come through. They are positive and forward-looking. They believe in their country—unlike many Opposition Members, dare I say. We will achieve a strong rebound not by splashing cash indiscriminately as a number of Labour Chancellors did, dare I say, but by spending taxpayers’ money wisely to foster an environment that encourages innovation and growth.

I turn to the net zero agenda. I fully appreciate that many years ago the right hon. Member for Doncaster North was Secretary of State for Energy and Climate Change—I do not think I was in the House at that time—and I know that he shares the view that net zero is absolutely one of the most important strategic objectives of any Government.

[Wera Hobhouse (Bath) (LD)]

If the climate emergency really is the most important thing for the Government, why did the Budget not mention it once?

[Kwasi Kwarteng]

It did mention a huge amount of investment in the net zero agenda. The hon. Member should know by heart the Prime Minister’s 10-point plan, and that was 100% backed by yesterday’s Budget.

Carbon Capture and Storage

Wera Hobhouse Excerpts

Wednesday 20th October 2021 Westminster Hall

[Wera Hobhouse (Bath) (LD)]

It is a pleasure to serve under your chairmanship, Mrs Miller.

It is in all our interests to stop climate chaos, and we must work together globally and nationally to find and implement adequate solutions. Carbon capture, utilisation and storage—CCUS—is the new big buzzword. As global warming is caused by emissions of carbon dioxide, a logical solution is clearly to capture the damaging gas. However, not all proposals are as sustainable in the long term as they seem. The Government have a clear favourite: to capture the CO₂ that is produced by burning fossil fuels, and to store it back in the Earth’s rock. It would allow Britain to continue extracting fossil fuels, burning them and pumping the carbon dioxide back into the seabed, where it is out of sight. That would be easy and very convenient for the existing fossil fuel industry, but not so fast. At best, it would not add to the carbon dioxide in the atmosphere. The question is: why not put all the much-needed investment into renewable energy, which is really where the future lies?

[Kirsty Blackman (Aberdeen North) (SNP)]

I do not disagree that we should be investing in renewable energy, but why should we not do both?

[Wera Hobhouse]

I thank the hon. Lady for that intervention, because it is always the argument that certain things are too expensive. All sorts of renewable energy production projects, including the use of tidal energy, have been rejected because they are too expensive. There is only so much investment that the Government can make, which we understand. Why not put it into renewable energies, rather than putting it into projects that keep the fossil fuel industry going? The Government should make it clear that the aim has to be to keep fossil fuels in the ground. They should do that now and support the development of renewable alternatives of power. It cannot be business as usual for the fossil fuel industry.

However, there are more ambitious ideas that involve the capture of CO₂ that is already in the atmosphere. It would mean that we remove some of the carbon dioxide that is sitting like an invisible film around our atmosphere. The Minister will know that such technology is called direct air capture. It, too, is not very well developed yet, but it seems to be a far more future-proofed direction to go for any Government. It is the way both to reduce carbon dioxide in the atmosphere and to produce a gas that can be used to make the replacement for fossil fuels.

One of the possibilities is to combine CO₂ and carbon monoxide with green hydrogen and produce a synthetic fuel that could be used in aeroplanes. I have made that point to the aviation Minister, and I hope the Government are listening. The technology has been thought of by a number of universities, among them the University of Leeds. This synthetic fuel behaves in similar ways to traditional aircraft fuel and can even be mixed with it. It would be one solution for aviation to become net zero.

Any of these new technologies will need to overcome many hurdles and need millions in investment, but they exist and they open up the possibility of a truly circular economy that will be much more future proof. I urge the Government to look beyond short-term fixes to keep the fossil fuel industry going and to look at CCUS for negative or carbon-zero emissions as one of the great opportunities for getting to net zero.

The Government need a clear vision for the long-term future of the planet. They must be clear that fossil fuel extraction and consumption will become the past not just as late as 2050, but long before that. Carbon capture to keep the fossil fuel industry going would be the wrong decision. We need long-term, good strategic decisions from the Government.

--- Later in debate ---

[Anthony Browne]

I thank the Minister for his clarification on various points, particularly on my key question about the future funding envelope, which he said would be announced next year. I very much look forward to that announcement.

I am blushing slightly, because everyone sung the praises not only of my introduction but of carbon capture and storage. Almost everyone, with one slight exception, the hon. Member for Bath (Wera Hobhouse)—

[Wera Hobhouse]

Will the hon. Gentleman give way?

[Anthony Browne]

Yes—

Net Zero Strategy and Heat and Buildings Strategy

Wera Hobhouse Excerpts

Tuesday 19th October 2021 Commons Chamber

[Greg Hands]

My hon. Friend is tireless in his ability and desire to get to the bottom of what lies behind Government figures. Perhaps I might commit to meet him, as, having taken on this brief four weeks ago, I know he takes a strong interest in all aspects of energy and climate change. Perhaps I might agree to meet him to discuss his concerns first, before committing to a new, huge audit of anything.

[Wera Hobhouse (Bath) (LD)]

I welcome the Government’s setting an end date for the use of gas boilers, but of course switching to electricity for heating our homes makes sense only if the electricity used is not derived from fossil fuels. Because of the Lib Dems in government, the renewables sector has made big strides, but it is by no means accelerating in the way it should be. So will the Government take the opportunity before COP26 to announce an end date for using fossil fuels in the production of electricity?

[Greg Hands]

We already have, as I mentioned in the statement, our commitment to a decarbonisation of our electricity system by 2035. However, may I take issue with her about renewables because we have had a massive amount of success, particularly since 2015? The cost of offshore wind, for example, has been reduced by two thirds since 2015, when there was a sole Conservative Government. We also have the commitment to have a really big increase in renewables. We currently have the world’s largest installed offshore wind capacity, at about 10 GW. We are committed to not resting on our laurels and to quadrupling that capacity in the next 10 years, to 40 GW.

Oral Answers to Questions

Wera Hobhouse Excerpts

Tuesday 21st September 2021 Commons Chamber

[Greg Hands]

My hon. Friend is right. Nuclear power is a vital part of our future energy mix. We have committed to trying to achieve at least one more gigawatt power plant during this Parliament and we have set out plans for small and advanced nuclear reactors.

[Wera Hobhouse (Bath) (LD)]

May I press the Secretary of State further on blue hydrogen? The source of blue hydrogen is natural gas, which is a fossil fuel, so how can a Government committed to net zero invest millions of pounds in new technologies based on fossil fuels? The Secretary of State has said several times that it is a “transition”, but since this is not a net zero technology, a transition to what?

[Kwasi Kwarteng]

We have spoken about this issue many times in this House, and the hon. Member will appreciate that carbon capture is a key part of our net zero strategy. I think that is widely accepted, particularly by the Climate Change Committee. With her knowledge of chemistry, she will also know that carbon capture works hand in hand with the production of blue hydrogen and that blue hydrogen is not particularly carbon intensive. The reason why countries such as Germany have not pursued a blue hydrogen strategy is that they do not have the physical infrastructure in the North sea to do it.

UK Gas Market

Wera Hobhouse Excerpts

Monday 20th September 2021 Commons Chamber

[Kwasi Kwarteng]

What my hon. Friend says is entirely reasonable. I pay tribute to him in his role as Under-Secretary of State in the Scotland Office, where he and I spoke about these issues almost continually, it would appear—we spoke about Acorn and we spoke about carbon capture. He will know that I am passionately committed not only to carbon capture but to ensuring that we have a decent domestic supply of natural gas.

[Wera Hobhouse (Bath) (LD)]

Natural gas is a fossil fuel, and we all know that fossil fuel extraction and consumption have to end by 2050 at the latest. What is the Government’s precise timeline—not a 10-point plan, not imprecise promises, but their precise timeline—to phase out the national gas grid and replace it with renewables, in which case we would not be here in the first place?

[Kwasi Kwarteng]

The hon. Lady will know that to answer that question we would have to have a much clearer view, in terms of the safety and applicability of hydrogen, for example, in the national gas grid. That is clearly a big part of our ability and the speed with which we can decarbonise the gas grid. She also knows that I am committed to decarbonisation; I am committed to the hydrogen strategy that was published six weeks ago, and there are ongoing trials to see whether we can use hydrogen to decarbonise the gas grid.

Ethnicity Pay Gap

Wera Hobhouse Excerpts

Monday 20th September 2021 Westminster Hall

[Wera Hobhouse (Bath) (LD)]

It is a pleasure to speak in the debate with you in the Chair, Mr Hosie. I congratulate the petitioners on bringing the important issue of ethnicity pay gaps to this Chamber so that we can have a good debate about it. I have listened carefully, and thoughtful contributions have already been made. It is not easy, but we are all in politics—I include the Minister in this—not to do the easy thing but to put our minds to the more difficult stuff. Anybody can do the easy thing. I hope we hear a positive reply from the Minister.

Saturday marked the UN’s International Equal Pay Day. In the UK, women make 87p for every £1 earned by men. I mention the gender pay gap because all too often the gaps within the gap are overlooked. We must recognise how financial inequalities disproportionately affect some women in our society, including LGBT+ women and women with disabilities. The right hon. Member for Romsey and Southampton North (Caroline Nokes) mentioned intersectionality and the fact that one disadvantage plus another disadvantage increases the problems that people face. While women in the UK earn 12.5% less than men, ethnic minority women earn an average of 2.1% less than white women. We must ensure that women from all parts of our society are included in our efforts to close the pay gap.

I mention the gender pay gap because we have seen the effectiveness of mandatory gender pay gap reporting. I echo the right hon. Lady’s words about the importance of making it mandatory. Some companies are already doing it voluntarily, of course, but the real need is for it to become mandatory.

I am proud of the Liberal Democrats’ role in introducing that legislation in 2015, and of our first female leader, who fought hard to get it on the agenda in her time as Business Secretary. Before that legislation was introduced, only six companies published their pay gap data under the voluntary initiative. There is no doubt that the policy has driven greater transparency and accelerated progress towards workplace equality.

In contrast, statistics show that the ethnicity pay gap has not significantly improved over that time. Given that recent reports suggest that ethnic minority workers have been worst hit by job cuts during the pandemic, there could be no more pressing time for action. The McGregor-Smith report identifies a lack of transparency in corporate Britain as a key barrier to progress. Without data, how can employers identify the disparities within their own companies and make informed decisions that will improve their recruitment, promotion and management policies? Research shows that most employers believe that ensuring workplace diversity is a priority, but little more than a third actually collect and analyse data to identify differences in pay and progression for employees from different ethnic groups.

The voluntary approach has driven, at best, slow and inconsistent progress. Currently, only 13 FTSE 100 companies report their ethnicity data publicly. Government action is needed if we are serious about tackling the pay gap, its causes and its effects. As with gender pay gap reporting, there is a clear case for introducing mandatory ethnicity pay gap reporting. I ask the Government to set out a timetable for getting that into law.

Equality monitoring of the workforce is also an essential step to carrying out ethnicity pay gap reporting. I ask the Minister, when will the Government introduce legislation to ensure that all listed companies and businesses employing more than 50 people publish workplace data broken down by race and pay band? I have listened carefully to the difficulties, but let us tackle them, because the end result will be so much more positive for employers and businesses.

It is four years since the McGregor-Smith review, four years since the Government committed in their manifesto to ask large employers to publish information on their ethnicity pay gaps, and three years since the Government launched a consultation on ethnicity pay gap reporting. We are still waiting for the results of that consultation. The Government must stop dragging their feet. Only once businesses begin to publicly report the diversity of their workforces will we see the start of real change. As the Black Lives Matter movement showed, action is needed now to build a more inclusive and more equal society. Addressing race equality at all levels in the workplace can no longer be optional.