– in the House of Commons at 3:05 pm on 23rd March 2023.
I beg to move,
That this House
has considered the matter of tackling the energy trilemma.
I am grateful to the Backbench Business Committee and to the many colleagues from across the parties who have supported today’s important debate on tackling the energy trilemma. It is perhaps the most critical issue facing us today. Putin’s invasion of Ukraine highlighted the extraordinary pressure on the energy systems of countries right across the world, and also demonstrated the crucial importance of energy sovereignty. For us in the UK, although the risk to security of supply remains low, the Russian invasion has demonstrated as never before the importance of balance in tackling the energy trilemma.
We can think of the energy trilemma as being a bit like a three-legged stool. Its three equally important legs are first, keeping the lights on; secondly, keeping the cost of energy bills down; and thirdly, decarbonising right across the world. If we are to sit comfortably on that stool, all three legs must be in balance, and be given equal consideration. Achieving that balance is by no means easy. As chairman of the 1922 Back-Bench committee on business, energy and industrial strategy, I have, along with my hon. Friend Jo Gideon, who is vice-chairman of the committee and is here, the noble Lord Lilley, the vice-chairman of the committee from the other place, and other colleagues from across our two Houses, been looking in detail at the practical steps that need to be taken to meet this enormous challenge.
The Government are, I know, already working hard to tackle the energy trilemma, but while they already have a great deal in hand, a shove here and a push there could make a huge positive difference in very short order to consumers, businesses and our decarbonisation efforts. In our recent report, “Energy Market Reform: Tackling the energy trilemma,” our committee made 34 recommendations. They include unblocking renewables; cutting energy demand; improving the flexibility of energy pricing; looking at the future of the energy price guarantee; and creating a new energy Department in Whitehall. I was very pleased to see that the Prime Minister came to the same conclusion on that last point, and created the new Department for Energy Security and Net Zero. I sincerely hope that we will be as successful with our other 33 recommendations. I am keen to use this debate to make the case for them to Ministers.
There is no doubt that the UK has been a world leader in deploying renewable energy projects, coming from almost a standing start in 2010. By 2020, solar and wind produced nearly 30% of the UK’s electricity—a tenfold increase on 2010. The UK is proud to have almost half the world’s offshore-deployed wind, all created under successive Conservative Governments—a great record of commitment that we can point to. However, renewable energy projects face increasing bottlenecks, including delays in the planning system, delays to grid connections, shortages in supply chains and a creaking electricity market design. In addition, there is an increasing risk of skills shortages as the deployment of offshore wind ramps up this decade. To tackle these problems, the Government should consider a number of measures that should already be in hand.
First, we should speed up the planning system by straight away implementing the new national policy statement for renewables, which has been good to go since 2011, and which would provide much greater investability. In particular, the concern over developers reserving grid connections and allowing years to pass without using them means that vital housing and infrastructure projects cannot go ahead because they cannot get a grid connection.
Secondly, the Government should consider officially committing to the development of an offshore ring main for offshore wind. Some projects are already sharing infrastructure, but clear guidance from Government would speed that up and make it much more acceptable to communities who do not want the huge onshore infrastructure currently being pushed onto their beaches and sensitive onshore conservation areas.
Thirdly, the Government could immediately issue direction on where new power lines should be located. Overhead lines are much cheaper, but less acceptable to communities. Underground lines, on the other hand, are potentially six times more expensive. There is a lack of clarity on policy in this critical area, particularly because independent analysis has concluded that, to meet our 2030 targets for electrifying our energy system, the National Grid will need to build seven times as much infrastructure over just the next seven years as we have achieved in total over the last 32 years—a huge mountain to climb.
Fourthly, although there has been progress on floating offshore wind projects, the Government should take seriously the evidence that floating offshore wind on Britain’s west coast in particular could strengthen our energy security, improving electricity resources in Northern Ireland as well as providing a hedge against low wind speed around other parts of the British Isles.
The right hon. Lady is making excellent points. She served as Energy Minister, I think, and I am reminded that the best part of 20 years ago one of her predecessors as Energy Minister, Brian Wilson, was promoting the case for an interconnector to go down the west coast of the United Kingdom and through the Irish sea. That did not happen, essentially because of concerns in Ofgem about the danger of stranded assets. I think her idea is a good one, but does she agree that in order to achieve it there will have to be a fundamental rethink about the way we regulate the industry?
The right hon. Gentleman is absolutely right; of course regulation, safety and considering the impact of potential stranded assets are vital. I do not think there should be any fundamental objections to expanding the use of interconnectors, but I am talking specifically here about floating offshore wind, which has huge potential but is not yet being deployed in the UK.
Fifthly, the Government should stop paying offshore wind farms in Scotland to switch off when it is too windy, which is already costing bill payers billions a year. Instead, we should look at piloting local electricity pricing, encouraging producers to work with business and consumers to use more electricity when it is plentiful and to reduce usage or use stored energy when the wind stops. That could be valuable for everyone, from Scottish citizens accessing cheap electricity when the wind is blowing to Cornish residents doing likewise when the sun is shining. Local electricity pricing offers transformational change that would make much better sense of the successful deployment of so many renewables.
One key recommendation made by the 1922 BEIS committee is on how to make these projects more acceptable to local communities. Local referendums and local compensation caused a bit of a stir when we announced them, but the idea has a lot of merit. In short, the report recommends that any proposed onshore wind, solar or shale gas extraction project should be subject to a local referendum on the basis of a simple majority. Where 50% or more of those who vote are in favour, the project can then go to normal planning considerations, but without the prospect of being overturned for lack of local support.
In return for the community accepting that limit on individual objections, our report proposes that local residents should receive free or subsidised energy bills for the entire lifetime of the project. That would have the effect of not only encouraging local communities, but forcing developers to think twice before locating renewables too close to sensitive communities because of the impact on the financial viability of their project. At the same time, bearing in mind the need for an urgent increase in the amount of electricity infrastructure, the committee recommends that the National Grid should be encouraged to build new pylons alongside transport corridors, and that renewables developers should be encouraged to locate alongside them, resulting in cheaper grid connections.
The second area of investigation in our report was how to cut energy demand. Every unit of energy that is not used is one that does not have to be generated. That reduces carbon emissions, cuts the cost of energy to consumers and to businesses, and improves our energy security—a genuine triple win. Ever since the committee’s first report in April 2022, we have been recommending a wide range of energy-saving actions, and I will highlight just a few of them.
First, boiler installers should focus not only on safety, as they do at present, but on efficiency. Every boiler installation should provide only sufficient power to heat that particular home or business, and the temperature gauge should be set at the most efficient level.
Secondly, the completion of the smart meter roll-out should be prioritised and the move to half-hourly pricing brought forward, to put control in the hands of consumers through smart tariffs. They could then choose to wash clothes, cook or charge their car when energy is cheap. Likewise, businesses could plan their energy use around cheaper periods. That could have a big impact on flattening the overall daily peaks in energy demand, with massive benefit for energy security and cost. It would then make sense to regulate for white goods to be smart as standard, to automate the way in which customers take advantage of cheaper price windows.
Thirdly, the report proposes that the Government should bring forward enforcement of the new homes standards and expand the energy company obligation—ECO4—scheme to insulate more cold homes, which would offer far better value for taxpayers than our current policy of subsidising heating for draughty homes. We also recommend that an organisation modelled on Home Energy Scotland should be introduced in England to provide better advice and support to households.
An area in which the committee feels that Government policy has taken a wrong turn is the energy cap itself. It was a well-intentioned policy to stop customers being ripped off by their energy supplier if they did not switch provider often enough, but the current energy crisis has exposed major flaws in the operation of the cap. The cap is below the true cost of supplying energy, so almost all customers are now on capped tariffs in addition to extremely costly additional taxpayer subsidies. That has killed the market for switching between energy suppliers, and has exacerbated the bankruptcy rate of energy suppliers. The report recommends, first, a thorough review of the energy price cap; secondly, that the green levies on energy bills be permanently moved to general taxation to take away some of the regressive nature of levies on energy bills; and thirdly, that a more targeted system for energy bills be introduced. One specific proposal that is worthy of consideration is a cap for basic electricity usage per household, above which households are exposed to the full unsubsidised costs of energy.
Fourthly, our report recommends a new requirement for energy suppliers to offer long-term, fixed-price energy deals so that consumers and businesses have the budgeting certainty that so many achieve through taking out fixed-rate mortgages for their homes or buildings. Fifthly, energy regulator Ofgem must shoulder much of the blame for supplier failures. Financial regulation of energy suppliers has been far too weak. The Government should direct Ofgem to implement banking-style financial stability requirements to avoid a repeat of recent history, whereby an energy supplier can make money when energy costs are below the cap but goes bust if energy costs rise above the cap, leaving all bill payers to pick up the tab.
There are days when the renewables fail and, when that happens, we have to buy electricity in, particularly from places such as Belgium. Should the Government not be expanding what they have started in looking at nuclear, which my right hon. Friend has not mentioned, and particularly small nuclear reactors? The Government are looking at one type of small nuclear reactor, but there are two. Should we not be encouraging the Government to move into that field, fast?
I am grateful to my hon. Friend for raising the issue of nuclear. I am a huge supporter of both small modular reactors and advanced modular reactors. They offer massive potential for baseload energy here in the UK, which is crucial. While there are not recommendations in this particular Back-Bench committee report, I agree with him.
To conclude, I congratulate the Government on creating the new Department for Energy Security and Net Zero. There is no doubt that having a specific focus on tackling the energy trilemma is vital if we are to meet our goal of leading the world in tackling global climate change while building secure and affordable energy sources at home.
It is a considerable privilege to follow Dame Andrea Leadsom, and I thank her for securing this vital debate for all of us.
This has been an important week because we have had the latest Intergovernmental Panel on Climate Change report, which bluntly gives what is essentially a final warning to humanity. The report lays bare what is already happening because of the damage that we are collectively doing to our planet as a direct result of the energy choices we have made for the last century. Extreme weather caused by climate breakdown has led to increased deaths from intensifying heatwaves in all regions, millions of lives and homes destroyed in droughts and floods, millions of people facing hunger and “increasingly irreversible losses” in vital ecosystems. That is the damage that has already been done, and if we continue down this path, the final consequences will not simply be about deepening that damage. It is much more fundamental; it is about whether we can continue to live and survive on this planet. That is the harsh reality of where we are, and that is why this debate is so vital.
In the years to come, energy is everything. It is quite literally the be-all and end-all, because the types of energy we use will determine whether we meet the challenge of climate change, and it will determine whether humanity can live on this planet for the foreseeable future. Unless we move immediately to a completely new system of energy production, we will have neither security nor prosperity. We often talk in this House about the scale of the challenges we have faced since the financial crisis in 2008: how to deliver sustainable economic growth, drive investment in our economy, drive prosperity and drive up living standards. The enormous opportunities that we have in green energy would enable us to kick-start that, to answer the questions on the supply chain that the right hon. Member for South Northamptonshire raised and to ensure we have the skills, so that we can lead the way in not only providing energy for ourselves but exporting green energy, just as we did with the oil and gas revolution in the 1970s. We have to rise to that challenge, and we have to rise to it here and now.
The terrible truth is that the UK is being left behind when it comes to green energy and green growth. The US and the EU are powering ahead, and we need to make sure that we are not playing catch-up in the United Kingdom. The Inflation Reduction Act passed in August 2022 makes a remarkable $369 billion available to climate and clean energy programmes in the US—just think of the scale of the opportunity that comes from that ambition. Where is our ambition to match that? President Biden’s programme is a real levelling-up agenda, making green energy the economic catalyst to restore and renew the industrial heartlands of the US. Likewise, the European Union is powering ahead. It is debating the passing of the green deal industrial plan, with which it wants to grow clean energy production, revitalise manufacturing and support well-paid jobs.
If I may, I will just look narrowly at Scotland for a minute or two, because I know the figures there better than the figures elsewhere. Last year, the SNP Westminster group commissioned what has been called the Skilling report—“The Economic Opportunity for Scotland from Renewable Energy and Green Technology”—which I know some colleagues in the House have read. There is no fantasy in that report, because we are just reflecting on what we already know.
When the report was published, Scotland was producing 12 GW of green energy. It is now producing about 13 GW, but the report highlights the potential to increase that figure to 80 GW by 2050: a fivefold increase over the course of that period, generating as much as four times the green energy that Scotland needs. That represents the opportunity to keep the lights on—a phrase that was referred to earlier—right across the United Kingdom, and ultimately to produce hydrogen on a scalable basis and export to other parts of the European Union as well. We need to take advantage of the natural opportunity that we have in green energy, making sure that we are at the cutting edge of that. According to Skilling, the transition from fossil fuels will ultimately deliver more jobs than we currently have in oil and gas—over 300,000 jobs by 2050.
The right hon. Member for South Northamptonshire talked about the planning regime and the skilled jobs that we need to develop in order to make this happen, but there needs to be a sense of urgency in doing all of those things, or we will miss that opportunity. There is an enormous challenge, if I may say so, in making sure that we have the jobs in turbine manufacturing and providing cabling. We will achieve that only if we have the visibility of the orders coming in that will encourage people to invest here from across the United Kingdom, and indeed, to come and invest from elsewhere.
I am genuinely grateful to the right hon. Gentleman for giving way, and I agree with pretty much everything he has said so far, which is unusual. I am sure he is familiar with the report by Professor de Leeuw at Robert Gordon University in Aberdeen, which assessed that at least 90% of the skills required for the net zero future already exist in the oil and gas industry. We should make the most of those skills while we can.
Actually, I agree with those comments from the professor and from the hon. Gentleman. When I have been in Aberdeen and been out looking at some of the offshore technology there, it has struck me that there is that transferability—if I may call it that—of skills from the oil and gas sector. Of course, we need to make that happen.
But what I would say is that, if Skilling is right—and I believe he is—the scale of the opportunity goes way beyond the jobs that we currently have in oil and gas. We need to make sure that we have the research and development and the innovation right across the supply chain, and that we are utilising not just our higher education sector, but the further education sector to deliver people with the appropriate skills to do this. That is an enormous opportunity. Out of that, there is an enormous opportunity to make sure that we have an industrial strategy that is fit for purpose as well. I would be delighted if we had these kinds of debates more often in this House—if we were actually having detailed discussions about how we do all this. What do we have to do to make the planning system work in a way that is respectful to local communities, but recognises the need and desire to move ahead?
On the subject of planning and the delays that are associated with it, I have no doubt that the right hon. Gentleman is aware that, in Canada, the time from consent to installation for a tidal device is around three years, whereas in this country, it is seven or eight. It comes down to something as simple as the fact that we do all the different impact assessments and the rest of it sequentially, when with a bit of imagination and creativity, they could all be done side by side.
I agree. The right hon. Member has made an important point. Often, the question is: how do we make sure we are protecting the rights of stakeholders and the rights of communities, while being able to do things at pace? What we have been talking about highlights the potential loss of technological leadership, because if we cannot do these things, we will not get that investment. In that context, let me go to the side a little, because I want to talk about one of the subsets of the green industry that has enormous potential for us.
We heard a comment earlier about nuclear and the opportunity to provide baseload. I have mentioned this in the House on a number of occasions, and I do not apologise for doing so again: there is enormous opportunity in tidal, and that has been demonstrated with the success we have seen with a number of projects. I encourage everyone in the House to examine a peer-reviewed Royal Society report published just ahead of COP26. It highlighted the opportunity of developing 11.5 GW of energy from tidal. If we look at the projects already developed in the United Kingdom, we tend to find that as much as 80% of that supply chain has been generated domestically. A number of the companies doing that are supplying equipment to such countries as France and Canada, as has been mentioned. There is a real danger that unless we recognise the scale of the opportunity, we will lose that leadership.
I am delighted that in the last contracts for difference round, the UK Government put in place a ringfenced pot of £20 million for tidal. That got us off to a degree of a start in fulfilling that ambition laid out in the Royal Society report. It was not as much as I would have liked. For us to fulfil that potential, we need to provide as much as £50 million annually, but I regret that over the past few days we have seen that that ringfenced pot will be cut to £10 million. I say to the House that we run the risk of losing this industry, and I appeal to the Government to revisit this issue. We can provide that baseload from tidal, as an alternative to nuclear energy. If we are ambitious about getting to that kind of scale in tidal, ultimately we will be providing that baseload on a more affordable basis.
I do not want to interrupt the right hon. Gentleman’s flow, and we can all agree that we wish there was more money available for different things, but he might not be aware that the £20 million that was initially ringfenced was for a two-year period. It has since been changed to a one-year or annual allocation. The £10 million for one year is essentially equivalent to £20 million for two years.
When the announcement was made, it was on the basis that it would be £20 million pot. [Interruption.] I have spoken to many of the operators over the course of the last while, and they do not share the hon. Gentleman’s view. But let us try to find consensus where we can and see the opportunity in all this, because that is key to this matter.
The right hon. Gentleman said that tidal would be an alternative to nuclear, but it should be in addition to nuclear. The demand that is coming and the demand if we move into hydrogen will be massive—beyond anything we can imagine.
I have talked about the Skilling report and the ability to get to 80 GW. There is the opportunity with tidal to provide the baseload. I argue on that basis that we probably do not need the investment in nuclear to get to where we need to get. One thing I referenced was that I did not believe there is any fantasy in the numbers we have from Skilling. They are eminently achievable on the roadmap that we talk about.
Let us look at some of the choices and where the money has to come from, and put that in the context of the debate we are having over the trilemma and the choices that many people are having to make because of the cost of energy. We know that a number of producers have made eye-watering profits as a consequence of high energy prices over the past year. This Government have rightly introduced a windfall tax. If we had wanted, we could have hypothecated some of that to make sure we were speeding up investment in renewables. We could have provided the £50 million that I am asking for on an annual basis so that we could fulfil that potential in tidal.
One aspect of the events of the past 12 months has been the enormous increase in share buy-backs from energy producers. In essence, what are share buy-backs? They are in effect a return of capital to shareholders. We have taxed the profits of the generators to some extent, but we have not taxed the return of cash to shareholders—windfall gains. On a one-off basis, we could have taxed share buy-backs in the same way that we tax dividends, and provided the ability to generate the investment that we need in our energy transition. That would have been the sensible thing to do.
Let me come back to the European Union, because there is already an €800 billion NextGenerationEU post-coronavirus pandemic recovery scheme. EU member states must reserve 37% of their spending for that green transition. About €100 billion of the EU’s 2021 to 2027 cohesion fund, which is dedicated to regional development, goes to green spending. Horizon Europe, the EU science and innovation programme, allocates €40 billion to green deal research and innovation, and industry partnerships. The investment I am asking for and that I believe we need in tidal has to be seen in the context of the scale of that investment.
On a subject that many of us discuss, carbon capture and storage, the EU has commenced its third round before the UK has come close to completing its second. We are all aware of the promises that have been made about carbon capture and storage in the north-east of Scotland. There are Members in this Chamber who are as passionate as I am about making sure it happens, and let us remember why. If we are serious about getting to our net zero targets—whether 2045 in Scotland or 2050 in this place—then carbon capture and storage has to happen.
We have failed to back carbon capture and storage, and the harsh reality is that the renewable energy budget has been cut by a third and there has been the cut to the ringfenced budget for tidal stream. We need to make sure that we create competitive advantages out of the bounty that we know is there. Let us come back again to the green industrial strategy, because if we are able to develop our green energy sources to the extent that I believe we can, we need to make sure there is a competitive advantage for our industries and the industries of the future.
We also need to make sure that our communities benefit from the investment that is taking place. To take my own home island of Skye, an enormous increase in investment is coming down the line over the next few years in wind generation. We will be producing many times the amount of energy that the island of Skye can absorb by itself, yet there is an additional cost to access the network from producing in such remote and rural areas. There is a double whammy: because of the nature of the regional distribution market, we pay the highest prices to get the electricity back again. It simply is not good enough, and the communities making legitimate sacrifices in producing that energy have to be compensated effectively.
While we are talking about onshore, offshore and tidal, we should not forget the opportunities we have with pumped hydro storage. I delighted that, this week, SSE has announced a £100 million investment in the biggest pumped hydro storage scheme in the United Kingdom for 40 years. The Coire Glas scheme will power over 3 million homes, more than doubling the United Kingdom’s electricity storage capacity. Again, it is demonstration of what can be done in providing the baseload that is so necessary.
We need to pose the question why—in what is, for Scotland and arguably for the UK, an energy-rich country—people are facing the kind of costs that they have done over the last year. The average household bill in Shetland, if I may refer to that, in October 2022 was £5,578, more than double the UK average of £2,500, according to evidence submitted to the House of Commons Scottish Affairs Committee by Shetland Islands Council. The latest available figures show that a third—33%—of households in remote and rural areas in Scotland are in extreme fuel poverty. That statistic has not been updated since 2019 due to covid, and therefore does not reflect the current cost of living crisis. There will have been a massive increase in the percentage of our households that are not just in fuel poverty, but in extreme fuel poverty.
The only place where the UK Government seem to be increasing investment is in nuclear energy, which is far more expensive than the renewable alternatives. The Institute for Public Policy Research said:
“If the Government are serious about reaping the benefits of the transition and levelling up, it should learn from Joe Biden, scale up public investment, and bring forward a serious strategy to build an economy that is prosperous, fair and green.”
The CBI said:
“The UK is falling behind rapidly—to the Americans and the Europeans, who are outspending and outsmarting us.”
The world faces an energy trilemma, but the UK faces a simple binary choice: will it continue to be left behind, or will we collectively work in humanity’s self-interest to tackle climate change and embrace the opportunity for green growth?
It is a pleasure to serve under your chairmanship, Mr Deputy Speaker—I have not had the pleasure before now, so welcome to the Chair.
It is a pleasure to follow Ian Blackford. I found that I agreed with most of his speech, although perhaps not with some of it. In particular that last point about there being a simple binary choice—I think it is a mistake to think it is either one side of the argument or another. This issue is far more complex than that, and I will try to cover some of those points in my speech. I congratulate my right hon. Friend Dame Andrea Leadsom on securing this important debate. I joined her committee as the report was being completed, but I was delighted to play a small part in that report and provide a forward to it.
The energy trilemma refers to the need to find a balance between energy security, affordability, and sustainability. As we continue through the energy transition, which we have already started, we need to keep the lights on, generate heat, and enable transportation—in other words, we need to keep our society and economy alive and well, and do that in an affordable and sustainable way. We are all aware of the increased energy prices right across the globe, caused initially by global shortages as the world economy started to recover from the covid-19 pandemic, and exacerbated further by Vladimir Putin’s invasion of Ukraine and the ongoing conflict there.
On affordability, I welcome the Government’s support for households and businesses through this difficult period, and particularly for those hardest hit. Fundamentally, however, affordability is best achieved by securing a reliable and plentiful supply of energy from a range of sources. Sustainability can also be defined in terms of keeping a secure and prosperous energy sector alive, including jobs and communities that the energy sector supports. More typically, sustainability usually refers to the impact that our social and economic activity has on the environment, and specifically to the impact on climate change from the emission of greenhouse gasses. Therefore, we need to keep the energy flowing, we need to make that energy affordable, and we need to reduce the impact on climate change created by the production and consumption of that energy. That is the energy trilemma.
The generation of energy for power, heat and transportation has, for many years, depended greatly on the combustion of hydrocarbons. That combustion of hydrocarbons has been shown to have a direct impact on the climate. So clearly, we must do something about that, and we are. The United Kingdom has already reduced carbon dioxide emissions by almost 50% compared with 1990 levels. Until covid, we had also grown the economy by more than 70% while doing so. In June 2019, the UK became the first major economy in the world to pass legislation to end our contribution to global emissions—in other words, net zero—by 2050.
Net zero means that any emissions would be balanced by schemes to offset an equivalent amount of greenhouse gases from the atmosphere, by planting trees or using technology such as carbon capture and storage. However, if climate change is a man-made problem as we keep hearing, it will need a man-made solution. Planting trees will make a contribution of course, and it is important we do that, as a return to nature, providing habitats and so on is very important.
Direct air capture is an exciting technology by which CO2 can be stripped directly from the atmosphere using a facility that, although large, takes up only about one 100th of the footprint that an equivalent area of forest would take to do the same job. That very expensive solution is still under development and we should keep a close eye on it. Besides, the captured carbon from such a process will still need to be utilised and stored somewhere.
That leads me to carbon capture, utilisation and storage. The inconvenient truth—if I can borrow that phrase—for some is that today about three quarters of the UK’s energy comes from oil and gas. Some 20% of our energy today is electricity. The rest of our energy use is fuel for transport, heat for homes, and industrial power and processes. It is absolutely right that we accelerate the installation of as many renewable sustainable and low carbon sources as possible, and as fast as possible. The UK Government’s 10-point plan for a green industrial revolution, launched in November 2020, set out plans and commitments for a range of technologies, many of which have been discussed and will be discussed today, including CCUS.
That was followed in March 2021 by the North sea transition deal, incorporated later into the British energy security strategy in April 2022. The deal was and is a transformative partnership between the UK Government and the UK’s offshore oil and gas sector to harness the power of that industry to help deliver net zero by 2050. As well as formalising energy transition and decarbonisation commitments, the North sea transition deal unlocks up to £16 billion of private investment, supports up to 40,000 jobs, and reduces emissions by up to 60 million metric tonnes. In the two years since the deal was agreed, the offshore oil and gas industry has made significant strides in supply decarbonisation, developing CCUS and hydrogen, transforming the supply chain and facilitating workforce mobility, as was discussed earlier. The industry has reduced its own production emissions by 20% since 2018. Leasing rounds are being developed for electrification. Access to the grid is very important, something that has already been discussed. Just last week, the Chancellor committed £20 billion for CCUS development. Offshore Energies UK, the trade body that represents the offshore energies sector, has developed the world’s first well decommissioning guidelines for carbon capture and storage, and is advising on best practice for things like methane emissions reduction.
But some of the key pillars of the deal—Government support for domestic energy supplies, a stable fiscal regime for the sector and encouraging continued investment—have taken a little bit of a hit. I will come back to the energy profits levy later in my speech. Part of the deal is to ensure oil and gas for as long as we need it, and there continues to be demand. Even by 2050, it is estimated that we will still require between 15% and 20% of our energy, heat and transport to be supplied by hydrocarbons. It therefore makes sense that our own domestic source of oil and gas will need to be maintained and expanded to supply that demand, even as it continues to decline. We produce a little under 50% of our own gas at the moment, with a majority of the shortfall being supplied by other countries such as Norway, the US and Qatar. The carbon footprint of just getting that gas here can be up to twice as high as if it was produced here.
I welcome the UK Government’s launch of the 33rd UK offshore licensing round. Many have asked—I was hoping for a Labour intervention on that point, but the Labour Benches are woefully empty today—how that can at all be consistent with our net zero objectives. For the reasons I described, a barrel of oil or cubic metre of gas produced in this country is better for us than those produced elsewhere while we are still using it. Hydrocarbons produced here are done so much more responsibly, under the strictest of regulatory regimes, and create fewer emissions from transportation than those imported from elsewhere.
We also need to make sure we retain the skills, expertise, technology and the capital and revenue generated by oil and gas, which is still significant, despite being in decline, to help deliver the energy transition. Unlike previous licensing rounds, this licensing round has been launched following the introduction by the Government of the climate compatibility checkpoint. The checkpoint ensures that no offshore licence will be awarded that puts the UK’s Paris agreement and COP26 commitments at risk. It also puts more emphasis on the industry’s own operational emissions than previously, as well as keeping a close eye on the status of the UK as a net importer of oil and gas. We have been a net importer of oil and gas since 2004.
We will not get to 2050 with the lights on, our homes and offices heated and our economy still moving without oil and gas. It follows that we will certainly not get to net zero by 2050 without CCUS. The Acorn CCS and hydrogen project in my constituency forms part of the Scottish CCUS cluster. At the time of track 1 bidding it was generally regarded as the most advanced cluster and ready to go, and was selected as the reserve cluster for track 1. Crucially, as Ian Blackford said, it is the only CCUS cluster in Scotland. It is vital for capturing emissions from industrial complexes such as Grangemouth in the central belt or Mosmorran in Fife.
There are plans for a new CCS power station in Peterhead in my constituency, which, when complete, will be able to provide a stable baseload powered from natural gas but with the Scottish cluster activated, and 95% emission free. This new CCS power station will help to maintain energy security into the future, particularly as—unless we hear differently today—there is unlikely to be new nuclear anytime soon in Scotland. I look forward to the further detail on the £20 billion announced by the Chancellor last week on CCUS and the progression of track 2. I also look forward to the Energy Bill, currently on Report in the other place but due to come back here soon, I am told.
Even if we were to get to absolute zero emissions—never mind net zero—across the whole of the UK, those UK emissions add up to around 1% of global emissions. We often hear that as an excuse for not doing anything, but I do not believe that for a second. The real opportunity that we have as a United Kingdom is for Governments and Parliaments to come together and work constructively with industry, not only to get where we need to be in future but to use the skills, experience, technology and resources available to us here in this country. That will enable us to make the energy transition to net zero in the most predictive and successful way, to take the opportunity to lead the world in the process of energy transition and to show not just how it is done but that it can be done.
I want to finish on the subject of the energy profits levy. Opposition parties have called for and continue to call for ever higher taxes on oil and gas producers. Compared with almost every other business that currently pays corporation tax of 19%—due to rise next month to 25%—oil and gas companies were already paying 40%, with the EPL bringing them to 75% overall. Contrary to Opposition parties’ calls for a straightforward punitive tax, I welcome the investment allowance provided by this Government. However, the allowance is not available for all investment opportunities, including in renewables, as has been pointed out. I am told by OEUK that over 90% of members have downgraded their investment plans in the UK as a result of the EPL. I recognise that the revenues raised by this tax go some way towards paying some of the energy support provided by this Government, but I look forward to engaging with the industry and Government on how and when the profits made by these companies in this country are deemed to have returned to a more normal level.
The EPL has a particular impact on smaller independent operators such as Harbour, Ithaca, Spirit, EnQuest and a number of other small businesses, which do not have the resources of BP and Shell to invest elsewhere in the world. Another impact on the small independent producers comes from the revisions to the EPL to eliminate the price floor, which has had the unintended consequence of reducing lending capacity available from banks to the sector. Unlike some larger companies, the smaller organisations cannot afford to fund capital expenditure solely from their own balance sheets.
The independent operators will be vital to ensure the continued development of North sea oilfields as the major companies redeploy assets elsewhere, and are therefore critical to help the Government avoid the costs of stranded North sea assets in the medium to long term. That will be critical to safeguard the UK’s security of energy supply in years to come, while at the same time those companies’ resources, skills and expertise are used to ensure that we make the energy transition to net zero as planned.
I congratulate Dame Andrea Leadsom on bringing this subject to the House. Her metaphor of the three-legged stool is a very good one. If we can move away from the immediacy of the problems, this debate allows us a few minutes to think about the issue in a more strategic manner. The point about the three-legged stool is that it works as a stool only if it has all three legs. If we take away any one of the three legs—affordability, security or decarbonisation—the other two will not achieve their purpose. The debate is often frustrating and ill served by false, binary choices. The point about a “trilemma” is that the choices that have to be made are about the balance of the progress we make on the three heads of the challenge, as well as the different means by which we seek to achieve them.
For years, to my certain knowledge, the debate has been bedevilled by easy options, and that remains true about some parts of the debate today. I remain to be convinced about nuclear, either in its own right or as a source of baseload, but sceptics like me have to then ask, “Well, where does the baseload come from?” From my point of view, there are enormous opportunities from developments such as tidal energy, which I will come on to as it matters a lot to me and my constituency. There is also the issue of storage and, beyond that, the flattening of the curve through supply-side and demand-side management. Again, it is all about balance. There is no silver bullet here; there is no one technology, area or direction of travel that will solve all our difficulties.
The right hon. Member for South Northamptonshire also spoke about local involvement in planning decisions. There is one other item that I would commend to her in terms of managing these issues: local benefit. Communities that are to have a wind farm, for example, have the opportunity to see some money coming back directly to their community, which makes an enormous difference.
In my own parish, we have a development of five wind turbines that provides a fund, which is administered by the local community council. My student sons have both benefited from that fund in terms of support given to them during their years at university. The support provided by such funds is small but meaningful. If we are to change the way in which we generate energy, from it being produced in large amounts in a small number of places to a much more diffuse pattern of generation, we have to find different ways of doing that.
The Back-Bench committee proposed that individual households living very close to a renewable project should have their energy bills subsidised or free for the duration of that project, so I agree with the right hon. Gentleman but I think it should be even more direct than just a pot, as is so often the case.
Absolutely. We make progress on these things incrementally, so if we can get to that situation that would be music to my heart and to the hearts of my constituents.
In Orkney, we already generate more energy from renewables than we can use in our own community. However, as Ian Blackford observed earlier, because of the way in which the market is regulated and structured, we actually pay more for it. That is something that generates not just energy, but an enormous amount of resentment in the community as well.
I congratulate the right hon. Gentleman on the progress he is making. There is a real issue about the disbursement of these funds because they are becoming particularly meaningful; it is a hot topic at the moment in Skye. We need to reflect on the powers that often lie with developers to make the determination as to how that pot is disbursed. We will have to be very careful across Government, here in Westminster and in the devolved Administrations, about setting the principles that have to be followed. If not, we will end up in a situation in which communities will, quite frankly, not get the benefit to extent that they should. We need to have effective governance in all of this to make sure that people are protected properly.
The right hon. Gentleman is absolutely right. With a commitment to the principle from the top, everything underneath tends to fall into place.
There is another aspect of community benefits in which we may have missed a trick in Scotland recently. Although we missed out on a sovereign wealth fund, apart from in Orkney and Shetland, in the 1970s, there would have been an opportunity to generate more of a sovereign wealth fund from offshore renewables in the ScotWind round. We missed the boat this time, but I hope we can make up for it in future.
In many ways, Orkney and Shetland demonstrates the energy transition issues and the trilemma in microcosm: we have long, dark, cold winters, we have poor-quality housing stock and we are off the mains gas grid, so we do not have the same opportunities for access to cheaper heating as other parts of the country. The affordability element therefore very much matters to us. We generate more electricity from renewables than we can use for ourselves, but because of how the market was regulated until recently, when we finally got consent for a cable to the Scottish mainland, we have not been able to maximise the benefits. It is galling that although we are leading the way in decarbonised energy production, we end up paying more because we are part of a market that is regulated for the UK as a whole and that relies too heavily on the wholesale price of gas, as we are now seeing.
Let me just vent parenthetically for a second or two about the energy company SSE and its occasional choice simply to stop paying people who are entitled to feed-in tariff payments. I always seem to have at least one such case on the go among my constituency casework. Just last week, I was able to secure eventual, long-overdue repayment from SSE of £72,000 to one farmer in my constituency. That was money that SSE owed him and there was absolutely no reason for it not to pay, but for arbitrary and unaccountable reasons it seems occasionally just to decide to stop paying people. To my mind, that is an abuse of the privilege that it has been given by successive Governments.
Orkney is home to the European Marine Energy Centre, which is just about to celebrate its 20th anniversary. It has been at the forefront of the development of tidal stream energy generation; no doubt it could now play a similar role in the development of floating offshore wind.
Like other hon. Members, I was delighted to see the ringfenced pot in the round 4 allocation, but I share the concerns of the right hon. Member for Ross, Skye and Lochaber. That is not just me speaking; the UK Marine Energy Council, RenewableUK and Scottish Renewables have all reacted badly, so I hope that the Department is already thinking about how to maximise the opportunities by getting some of the money back.
With the synergy between oil and gas, we have been at the forefront of the country’s energy needs for 40 years now, and the development of offshore renewables is the obvious next step. When I speak to apprentices, as I did during National Apprenticeship Week last month, they tell me that although they are starting apprenticeships in the oil and gas industry, they fully expect to have transitioned to something different by the end of their working lives.
For the past 40 years, my constituency has been home to the two largest oil terminals in western Europe: Flotta in Orkney and Sullom Voe in Shetland, which provide a visual demonstration of the just transition. EnQuest, the terminal operator at Sullom Voe, is now working on projects involving hydrogen, carbon capture, use and storage, and offshore electrification of production. It is a visual illustration of transition, but again it shows just how ill served we are by binary choices. All the time, we seem to be told, “You can have renewables or you can have hydrocarbons, but you can’t have both.” That is dangerous nonsense. We have allowed production of oil and gas on the UK continental shelf to decline in recent years, and it has been to our detriment. It was never put in these terms at the time, but I cannot think why anyone ever thought it would be a good idea to rely on Vladimir Putin for the purchase of our gas and Mohammed bin Salman for the production of our oil when we have a rich resource on our own doorstep. As we heard from David Duguid, the production of oil and gas in the North sea or to the west of Shetland is much less carbon-intensive than importing it from other parts of the world.
The point, surely, is this: it is not an either/or. There is no route to decarbonisation and achieving net zero other than one that goes through oil and gas production. I do not want to see the future generations of my constituents working in oil and gas. I do want to see them work in renewables, but I think that that will be much more likely if we take a long, hard, clear-eyed look at what happens in the future with oil and gas production on our own continental shelf.
There are many other things that we should be doing, such as managing supply and demand and increasing the amount of storage and smart grid—something that offers great opportunities for those who can turn on their washing machines at the other end of the country using their smartphones, although I suspect that it would be a bit more challenging for the members of the community who would benefit most from opportunities of that kind.
The right hon. Member for South Northamptonshire has done us a great service in initiating this timely debate. I hope that its strategic aspects have been heard and understood on the Treasury Bench, and will be acted on.
I shall need to start the winding-up speeches at about 4.30 pm. Three Members are still waiting to speak. So far the speeches have been running at about 13 minutes, but I am afraid I must ask Members to confine themselves to about seven minutes if everyone is to get in.
I shall be happy to accommodate your request, Mr Deputy Speaker.
I thank my right hon. Friend Dame Andrea Leadsom for securing the debate. Her framing of this issue—her description of it as an energy trilemma—is typical of her shrewd and clear thinking: it does an excellent job of setting out the nature of the challenge. I was delighted to be able to feed into the report that she produced, along with my hon. Friend Jo Gideon, on deep geothermal and mine water technology.
This issue is more important than ever. The western world has come to learn, in an abrupt and challenging way, the cost of relying on states such as Russia for energy supplies. The record of Europe in this regard, and that of Germany in particular, will be viewed through the long lens of history as naive, and I am glad to see Europe now united in understanding the importance of prioritising our security—energy or otherwise.
I know that these Backbench Business debates are held in a less party political spirit than others, but I must say that I have been surprised by what the Opposition have had to say about this issue in recent months. Let me remind them, and the House as a whole, that it was Tony Blair who said, during an EU-Russia investment conference that he chaired in 2005, that increasing reliance on Russian oil and gas was not something to be concerned about. Both Mr Putin and Mr Blair insisted that the EU’s growing reliance on Russia for energy would not compromise the ability of EU leaders to express concerns, and that our economic futures were “bound together”. Opposition Members should remember that.
I have also noted with interest that it seems that the original Captain Hindsight, the Leader of the Opposition, has now been joined by a lieutenant in the form of the shadow Energy Secretary, whom I notified that I would mention him. When I looked through Hansard to find his contributions over the last few years, I was shocked to discover that he had not spoken about energy security in 2021, or in 2020, or in 2019; in fact, he had not spoken about it for 10 years when he finally did so in March 2022. Maybe he has spoken about it elsewhere and I have missed it. I can, however, confirm that the shadow Minister has been much more successful in that regard, raising the matter repeatedly. Perhaps he should put in for a job from the Leader of the Opposition.
Would the hon. Member like an edited copy of the speeches that I have made about energy security over the years? I think he might find something useful there.
As I explained, the hon. Member has a good track record. I was talking about the shadow Energy Secretary—as he was called until recently. I apologise if I did not make myself clear; I thought that I had. As I said, I think the Opposition should be cautious in their criticism of us. I make that point not to suggest that they have been unacceptably slow in this regard, but to show how, across the western world, we politicians have been too slow to recognise the danger and too quick to work with Russia.
As my right hon. Friend the Member for South Northamptonshire clearly laid out, we must find a path forward. Many of us in the House have advocated a variety of approaches, and I encourage the Government to be ambitious and innovative. I want to use the rest of my speech to talk about one technology that I think can help us meet the demand of the energy trilemma: deep geothermal heat and energy.
Deep geothermal heat and energy is an environmentally friendly, dependable and cost-effective source of heat and energy that can be found right under our feet. The technology is based on relatively simple concepts: first, that heat radiates from the earth’s interior; secondly, that while it dissipates once it reaches the surface, the heat remains significant at depths accessible with current drilling technology; and thirdly, that water can be used to absorb and transmit that heat to the surface.
Those mechanisms are what heat hot springs, most famously demonstrated in the UK by the Roman baths. Iceland has uniquely conducive geology and enjoys vast utilisation of geothermal energy. While natural occurrences of any significance are relatively rare, boreholes can be drilled to access this natural resource.
Deep geothermal energy heats 250,000 homes in Paris, and across France more than 600 MWh of heat is produced annually as the Government aim to increase the number of schemes by 40% by 2030. Munich is pouring in €1 billion through to 2035 to develop geothermal energy and make the city’s heating carbon neutral. Germany already produces more than 350 MWh of heat annually, and its Government are targeting at least 100 new geothermal projects.
The primary method by which we assess the scale of the opportunity for geothermal heat in Great Britain is geological temperature data collected from petroleum borehole data, mining records and a number of boreholes drilled as part of geothermal studies. I have been introduced to deep geothermal technology since my election as Member of Parliament for Crewe and Nantwich in December 2019, and my research has encouraged me to see its potential. Theoretically, it is able to provide enough heat energy to meet all our heating needs for at least 100 years, and even a conservative estimate of what we could utilise suggests that it could provide 15,000 GWh of heat for the UK by 2050.
In the UK, perhaps because of our past success in drilling for oil and gas and our status as a world leader for cheap wind and solar, we have fallen further behind on geothermal. But getting to net zero by 2050 in such a way that we share the proceeds of investment and utilise as much of our existing skills and workforce as possible will require us to pull every lever, and deep geothermal is an important one that will help us in the transition from oil and gas with our existing industries.
Like wind and solar were at the outset, schemes in Europe have been supported by things such as insurance and incentive schemes from Governments. I think it is the lack of such schemes in the UK that has led us to fall behind. I do not think the industry is asking for the open-ended subsidies that were originally in place for wind and solar, but a time-limited, targeted scheme of support would make a difference. I was pleased to see the set-aside in contracts for difference for tidal power and the green gas support scheme, which mirror the sort of thing that the industry is asking for.
I was delighted to be asked by the Prime Minister to conduct a review of geothermal technology and its potential in the UK. I am pleased to say that the first draft has been completed, and the report should be published shortly. It contains interesting figures on the potential overlap with levelling up, and I look forward to sharing the findings with the Secretary of State and the rest of the ministerial team.
Whether the technology is deep geothermal or nuclear, tidal or hydrogen, there are opportunities to create jobs, grow our economy and make us more secure. I look forward to seeing us drive this agenda forward, for the benefit of my constituency and the whole country.
I thank my right hon. Friend Dame Andrea Leadsom for securing this important debate. We do indeed face a worrying trilemma as we seek to balance energy affordability with security of supply and sustainability. I believe the solution lies in clean energy, with renewables generated here in the UK tackling security concerns. As the renewables sector develops, prices come down.
One cannot talk about energy without being aware of the source of our current focus: Putin’s illegal invasion of Ukraine. Even though we were not directly reliant on gas from Ukraine, our reliance on fossil fuels links our energy prices intrinsically to the international market, which shot up post invasion.
Under this Government, huge strides towards green, sustainable energy sources have been taken. The UK is ranked fourth out of 127 countries on the world energy trilemma index, our energy generation in the last decade having reversed from 40% coal in 2012 to 40% renewables last year. We need to continue this drive towards affordable, sustainable energy generated in the UK. But is renewable always sustainable, and is sustainable always renewable?
Living somewhere as beautiful as North Devon, where we have renewable energy sources in abundance—the wind rarely stops blowing, we have massive tides and the sun shines most of the year—it is no wonder that locals look to community energy and are increasingly bewildered that they cannot plug their solar panels into the grid. I know the new Department is working to upgrade our grid, but the pace of that is reducing our ability to move more rapidly towards our own energy supply. We must rapidly improve access to the grid for small businesses and farmers who wish to generate energy using solar or wind turbines on their property, and who wish to sell the excess back to the grid or hope that battery storage technology will rapidly catch up to enable them to use the energy later.
Community energy is hugely popular. While recognising the grid constraints that may limit the feasibility of supply in some parts of the country, I hope we can find ways to enable sites that generate low-carbon electricity on a small scale to export their energy to an electricity supplier on fair terms. Larger suppliers should work with community schemes to sell the power they generate to local customers. Amendments to this effect have been tabled in the Lords, and I hope steps can be taken to accommodate the amendments regionally, where viable, and to explain why that cannot happen in other regions. What is being done to progress these measures, which have cross-party support from almost half the MPs in this House?
Localised schemes tend to be supported, and innovative biomass schemes, such as the chicken dung generator in South Molton in my constituency, help local farmers while generating enough energy for the town. But is all biomass equal? Small biomass schemes that use local resources are, indeed, sustainable and, through replication, potentially scalable. I would argue, as would numerous eminent scientists, that biomass generation involving 4 million trees a year, shipped around the world on diesel vessels, is neither sustainable nor scalable.
Woody biomass energy generation in sparsely populated countries with large forested areas may be able to claim sustainability, but, in a country that is already importing wood to build houses because of the low levels of forestation, that is not the case. Not only do we need to build homes and furniture, but much can be built from the same waste wood currently burnt for energy, which is causing surging wood prices, not to mention that burning wood releases carbon into the atmosphere, whereas building retains the carbon in the product.
We need to ensure that we are accurately calculating the true carbon costs of our different energy sources, including the costs of bringing the raw materials to the site of energy production. As we go through the current transition to a cleaner and more secure energy supply, we clearly need many different energy sources, but we also need to be honest about the true environmental costs of some of the decisions we are taking, and we need to ensure we have a strategy that increasingly relies on affordable, home-grown energy sources that are genuinely sustainable.
Genuine renewables are, indeed, sustainable. Some of the newer sources, such as floating offshore wind, are themselves dealing with inflationary pressures. Although I warmly welcome the Department’s commitment to floating offshore wind, and recognise that annual auction rounds will attract more developers into the market, the progress of allocation round 5 has, to date, not been smooth. As chair of the APPG for the Celtic sea, I am delighted that today we have seen the announcement of the Celtic freeport and remain optimistic that the announcement on funding for ports will recognise the importance of supply chains to securing fantastic jobs all around the Celtic sea—not to mention that, although the wind does not always blow, it blows the other way round in the Celtic sea, to the north-east, which is why it is vital that multiple schemes progress tangentially.
There is great optimism about the future of floating offshore wind in the Celtic sea, and that the current round’s budget can be extended to recognise the increase in the number of schemes ready to progress, but this does not tackle the damage already done due to the nature of the negotiations. Developers have repeatedly expressed concern that the strike price in this round is too low. I recognise that this is a complex negotiation and that there is an element of who blinks first, but to retain our world-leading position in the sector we need to recognise that other international opportunities are rapidly opening up for the same companies. Why would they invest here if they start with a cripplingly low strike price? Developers that have already invested many millions of pounds into these schemes have been told that officials do not believe their figures and would rather let the round fail than discuss the price—not to mention that it is not all about price, as this debate clearly highlights. Floating offshore wind is fundamental to our longer-term energy security. As we have seen with other sectors, new technologies need a leg up to get them up and running.
I struggle to understand how we are now committed to developing a Celtic sea supply chain, yet have possibly created an auction round that may see no projects progress in the Celtic sea. The Spanish Government recently saw a round more or less fail because of a similar failure to recognise the inflationary pressures developers are under. One investor has already publicly stated:
“UK Offshore is over for us now”.
I fear that we are sleepwalking into a missed opportunity, with unintended long-term issues with developers. I hope that no one needs to blink and that with eyes wide open we can work with the developers to ensure that multiple projects progress in this round.
We have come so far, led by this Government. I hope that the new Department will continue this journey, recognising that it is already named to tackle energy security and sustainability. I know that, given the huge amount of financial support already given to consumers and businesses, affordability is drummed into everything it does. I hope that this tripod approach continues and that legs do not get lopped off in problematic negotiations as we move through the transition from fossil fuels to a cleaner, greener, cheaper and more secure future energy supply.
First, I thank my right hon. Friend Dame Andrea Leadsom for securing this debate and for being a fantastic chair of the 1922 Back-Bench business committee. It has been an honour to be her vice-chair. As she mentioned, the committee has looked in detail at the challenges of the energy trilemma over the past year. Like her, I am delighted that the Government have agreed with our analysis that energy issues have moved up the agenda so far that they merit a stand-alone Department.
The trilemma of the cost of energy, energy security and achieving our net zero ambitions affects every household and every business in every corner of the globe. Policy changes have emerged in reaction to the impact on energy costs of Russia’s war on Ukraine. The price of gas and electricity has spiralled, and much of our thinking has been dominated by the challenges of cost and energy security. Renewable energy created here in the UK, as a domestic source of energy, will not only reduce our reliance on international fossil fuel markets that can be influenced by bad faith actors, but offer great opportunities for green jobs and growth right across the UK. There is potential to revitalise UK manufacturing to support the growing supply chain in pursuing energy sovereignty.
Offshore wind will be the backbone of the UK’s future electricity system. In 2020, solar and wind produced nearly 30% of the UK’s electricity, which represents a nearly tenfold increase on the level in 2010. However, we know the wind does not always blow and the sun does not always shine. As renewables become a bigger share of the market, this intermittency problem will become a bigger issue, particularly when we are trying to get above 80% to 90% low-carbon generation. In part, onshore wind and solar have a role to play in this. Despite it being one of the cheapest sources of power, onshore wind still faces barriers to development. Therefore, it is a welcome shift in Government policy to consult on devolving planning decisions on new onshore wind in England to local authorities, to enable onshore wind to be installed where communities want it and with their benefiting.
Intermittency can also be mitigated by changing the design of the UK’s electricity market. Today, there is a single national price for electricity across the whole of the UK. Moving to a system of local pricing in the electricity market would also incentivise building production capacity closer to demand, thus reducing the overall amount of infrastructure. Other solutions to intermittency exist. We can do more to encourage investment in short- term storage such as batteries, and long-term, inter-seasonal storage, for instance, hydrogen storage and hydropower.
The recent inquiry by the 1922 Back-Bench business committee heard from witnesses on barriers to deploying energy projects in the UK, which include the planning system and delays in connecting to the electricity grid. Members will forgive me, but being from Stoke-on-Trent I have to give the ceramics industry as an example here. Many UK ceramics businesses could make the switch from gas to electricity for the firing of the kilns, but several hurdles block that, one being that the cost and time delays for connection through distribution network operators make it prohibitive. Whether the energy is gas, electricity or perhaps, in future, hydrogen, security of supply is critical. Kilns are designed to slowly warm up and cool down. If the energy is suddenly cut off, the damage to the kilns can be irreparable. That means that a method of storing renewably generated energy must be found that enables us to deliver a consistent and continuous supply.
To address the energy trilemma, we also need to think seriously about how to transition effectively to clean energy, and about sustainability and our net zero goals. To achieve net zero, the UK needs to decarbonise its power sector by 2035. While emissions from electricity generation have fallen by 69% since 2010, we still have a long way to go to achieve that goal. That is why the first part of our Back-Bench report looked at ways to unblock renewables. My neighbour, my hon. Friend Dr Mullan, mentioned deep geothermal, which uses the high temperatures and pressure deep inside the Earth. There are no fully operational deep geothermal plants in the United Kingdom, but there are two close to completion in Cornwall, and I am delighted that my constituency of Stoke-on-Trent Central is also destined to be an early adopter. As the city of pits and pots, we have a long history of energy-intensive industries, which also means a history of innovation in energy efficiency. Just as our potteries will move from being coal-fired to gas-fired, so we must be at the forefront of the next energy revolution and embrace geothermal energy, which has great potential.
Another recent project in which I have been involved is the Commission for Carbon Competitiveness, an effort to explore how the UK can reach net zero without undermining the competitiveness of British industry. Our industries can play a key role in the transition to net zero by investing in new technologies that are vital to decarbonisation. However, we are not operating on a level playing field; they face international rivals who can dominate supply chains without having to worry about net zero regulations or environmental targets. It is important that the challenge be addressed, so that we can transform our energy-intensive industries and industrial communities, and so that they become the nexus for green growth, and not the victims of an inevitable decline.
My final issue is the cost of energy. I have lobbied the Government on behalf of local energy-intensive industries in Stoke-on-Trent Central, and on behalf of small businesses and charities that are struggling with their bills, and I welcomed Government support for families faced with a choice between heating and eating. However, the need to choose between energy and food extends to food production, too. Horticulture businesses decided to postpone early crop production where the cost of heating the growing environment was unaffordable. That, combined with crop failure due to extreme weather conditions in continental Europe and north Africa, led to UK supermarkets having gaps in their fruit and vegetable sections. Given that we are looking to reduce the air miles in our food system in support of our ambitions to decarbonise and move towards net zero, we need to produce more in the UK, and British farmers need support with energy costs. We need to rebalance our food production and accept that the UK’s cheap food culture is unsustainable.
As a result of the rise in the cost of production, the percentage of household income spent on food and non-alcoholic drinks has risen from 10% in 2021 to 16% this year. Before the cost of living increases, Britain spent less on food and non-alcoholic drinks than any other country in Europe, and our diet has remained the highest in fat, salt and sugar. We need a fundamental recalibration of the value that we place on a healthy diet, and we need to accept that growth in local food production comes at a price worth paying.
If we get it right, the energy trilemma will create new opportunities to grow the economy, achieve our net zero ambitions, and guarantee affordable, reliable and sustainable energy for the future. This is the moment to embrace a green industrial revolution.
I, too, congratulate Dame Andrea Leadsom on securing the debate. I must admit that I did not realise when she secured the debate that I would effectively be responding to a Tory Back-Bench 1922 committee report. It comes as an even greater surprise to me that I agree with the recommendations she has raised. She did say that there were 30-odd recommendations, though. She did not go through them all—I thank her for that—but I suspect that I would find some among them that I disagree with.
As I say, I agree with the right hon. Lady on the points that she brought forward. We really do have to unlock renewables, and I agree about the need to reduce demand. One way to do that is to increase energy efficiency installations; the Government must really ramp up action on that. One thing I would say to the Minister is that I am now getting feedback that the roll-out through ECO4 is not going as quickly as suppliers would like it to go; they are already behind on progress this year, so maybe we need to look at ways to target the right homes for energy efficiency upgrading.
The right hon. Member for South Northamptonshire obviously took credit for the creation of the new stand-alone Department for Energy Security and Net Zero. I welcome that new Department; to be honest, it was long overdue, but at least it now seems to have the right priority within Government. I also completely agree about the number of grid upgrades that will be required. We need much better forward planning, and it was certainly an eye-opener when she said that we had seven times the amount of infrastructure still to be built. There is no doubt that Ofgem has failed on that. National Grid ESO confirmed two weeks ago to the Business, Energy and Industrial Strategy Committee that it paid £4 billion in constraint payments last year. That is effectively £4 billion wasted that could have gone towards grid upgrades, storage or other mechanisms, and it shows how Ofgem needs to get a grip on the issue and allow anticipatory investment.
We need to imagine what the grid will be required to look like in 2050 and start planning for that now. I am concerned at the piecemeal approach that has been taken; even when the grid has been upgraded, we are building in future constraints already instead of putting in the right capacity. That will cost more money in the long run and block renewables from coming online.
I must say I also welcome the right hon. Lady’s conversion to referendums. She will find that on the SNP side we completely agree with the need for referendums, and I look forward to her support on that matter. I was also glad to hear her compliment the independent advice body Home Energy Scotland, and it would be good to see a completely independent body set up in England to give free and impartial advice and help people to get the measures required.
It is no surprise that I agree with the points my right hon. Friend Ian Blackford made. He is right that the IPCC report highlights the urgency to take action now, before it is too late. He also highlighted the fact that investment is relocating to the United States where there is momentum because of the Inflation Reduction Act. Meanwhile, here we have the electricity generator levy, but no renewables investment allowance. We really need to look at some form of that. My right hon. Friend obviously mentioned the Skilling report, the opportunity potentially to scale up to 80 GW of green electricity generation in Scotland and how important that could be in a just transition, creating 300,000-plus new jobs.
I also agree with my right hon. Friend on tidal stream. I have been trying to highlight the issues with the funding pot announced for AR5—it is definitely not enough money, especially with inflationary pressures. MeyGen in the Pentland Firth is the biggest tidal stream site in the world, but it has confirmed that it now faces inflation pressures of +50% on the AR4 strike rate that it bid against. The only way that that project can grow is if it gets to scale up through a bigger proportion agreed in AR5, and for that there needs to be a much bigger budget. I am pleased to say that the Exchequer Secretary to the Treasury has agreed to meet me next week, and I will certainly make the case for at least £40 million, which is what I have been asking for.
In a real twist, I agreed with the points made by David Duguid. There is no doubt that we will still be using oil and gas in 2050 and will still need to utilise them as an asset. As he rightly said, Scotland is a net exporter of oil and gas. In fact, it supplied almost 50% of the UK’s gas consumption last year and 75% of the oil.
When we talk about energy security, though, we must be realistic and accept that, while even a lower percentage increase in production for the North sea increases energy security, that oil and gas can be traded on the international market and does not necessarily come directly into the UK market. There has been a 30% reduction in oil refinery capacity in the UK since 2010, so even a lot of the oil for use in end products here has to go abroad to be refined and then come back. The security issue is not quite straightforward, but I agree that that is an asset we must continue to utilise.
What view does the hon. Gentleman take, then, of the Scottish Government’s current consultation on presumption against future development?
There is no harm in consulting. We need to look at that and have proper climate compatibility checks—I think that is the right way to go about it.
I agree with the hon. Member for Banff and Buchan about direct air capture, which could, of course, play a role as part of the wider Acorn cluster, but I repeat that, with £20 billion announced for carbon capture and storage, it is disappointing that we are still waiting to hear any firm commitments on Acorn. The Budget mentioned a possible track 1 expansion, so can the Minister advise me on whether Acorn might be included in that this year, or will it rely on track 2? If so, when will we hear an announcement about the track 2 process?
Mr Carmichael rightly mentioned the fantastic EMEC facility. I urge the Government to come forward with funding to replace EU funding and keep EMEC going. He said that he was not too sure about nuclear. My views on nuclear are well known, but I repeat that I am completely against it. Hinkley is costing £33 billion; Sizewell C will cost something like £35 billion. Think what we could do with that money in energy storage, energy efficiency and even grid upgrades. That £35 billion is just a waste of money. Sizewell C will not be constructed for 12 to 15 years, and there is not even one successful EPR project in the world. SMRs are being promoted, but there is not even an approved SMR design in the UK. Rolls-Royce tells us that it will somehow get them up and running by 2029, but that is a fallacy when the regulator has not even approved the design yet. At £2 billion a time, SMRs are not exactly cheap, and that money could be better spent elsewhere.
Dr Mullan made a good point about the potential for geothermal, and I agree with him. We have a lot of former mineworking areas in Scotland and other areas of the UK, and they could be a place to start on the potential for geothermal. It would be good to see Government support for that.
Selaine Saxby mentioned community energy, an effective Local Electricity Bill, and amendments to the Energy Bill. Certainly, I have been a supporter of the Local Electricity Bill. I would be happy to consider that on a cross-party basis when the Energy Bill comes to the House of Commons.
Jo Gideon mentioned intermittency issues. Yes, we need to deal with them, but that can be done with pumped-storage hydro, which my right hon. Friend the Member for Ross, Skye and Lochaber mentioned. All that is required to get Coire Glas over the finishing line for final investment and approval is a green cap and floor mechanism for revenue stabilisation. Some £1.5 billion will be fully funded by SSE Renewables—no subsidy or Government guarantees have been asked for; just the revenue stabilisation mechanism.
The right hon. Member for South Northamptonshire made a good analogy, which everyone picked up on, and I agree with her, but although we are calling it the energy trilemma, we also need to look at it as an opportunity —the opportunity that comes with decarbonisation, green energy, new jobs, just transition and by bringing bills down in the long run. We have to grasp that opportunity to have a truly green renewable energy grid supplying homes across the UK.
This has been an interesting debate, and I congratulate Dame Andrea Leadsom on securing it. I thought that it was about tackling the energy trilemma, so I have prepared all sorts of interesting things about the energy trilemma and how it works. However, although the contributions have been interesting, the debate has not necessarily been about the energy trilemma.
The right hon. Lady spent a lot of her contribution talking about the 1922 Back-Bench committee report on energy, which sounds very interesting. Indeed, it appears to contain quite crucial insights, particularly on the need for speeding up the planning system as far as grid development is concerned, speeding up connections, and developing new connections and ring main in offshore wind. As far as I am concerned, those things are crucial to delivering the rest of our green agenda. I can offer her a slogan, “no transition without transmission”, which she might want to put on the front of a future report. They are crucial insights, and it would be a good idea for her to provide a submission to the Labour party national policy forum on this, because she would get a better hearing than she would from the present Government.
The right hon. Lady mentioned the three-legged stool. This is about how we achieve our net zero outcomes while taking the whole question of affordability and of energy security along with us as we go. This is not a zero-sum game. It is not the case that if we consider affordability and security, we take away from our net zero ambitions. After all, we in this House already decided which of those legs we are going for most strongly when we decided on net zero as our target as far as climate change is concerned. That means we have to consider the energy trilemma from the point of view of not whether we will get there but how we can get there with those other matters being taken into account.
I would prefer to put the question of energy security into a slightly different mode, and that is the one it was put in by the World Energy Council, which has done a lot of work on the energy trilemma as a tool for deciding how we make progress in these areas together. It has produced an isosceles triangle—I am confident that the word “isosceles” has not been recorded in Hansard before—that has spines going to the centre of it, and we can advance further along to each corner from the centre with various elements of the energy trilemma in it. We have decided to advance substantially down the left-hand spine, which is the sustainability part of the triangle. The job we have to do is make sure that what happens with the other two legs does not draw back the sustainability leg but enhances it, which is exactly the point that Alan Brown made.
It also means we have to take decisions in other areas that are compatible with the particular length of spine we have gone down on that triangle. I would politely say to David Duguid that, while it may be the case that the hydrocarbons we bring into the UK are more carbon-intensive than the ones we produce in the UK for transport reasons and others, they are still hydrocarbons. With what we have decided, yes, we are going to need oil and gas in our future economy, but in far smaller quantities than is the case in our economy at the moment. We have to think about the right use for oil and gas in our future energy economy, making sure that as much of that as possible is produced in the UK as opposed to importing, but also that the total that we have coming into the economy as a whole is compatible with that net zero goal on the left leg of the sustainability triangle.
I appreciate the hon. Gentleman giving me the chance to come back on that point. Surely he will recognise, as I think he did in his statement just now, that there will be a gap for some time, and that we need to keep that gap closed. As rapidly as we all want renewable and low-carbon energy to be developed, we need to make sure that that gap is closed, and that we do not become even more dependent on foreign imports than we already are.
The hon. Gentleman is absolutely right: we should not be dependent on foreign imports. However, we need to be thinking about a long-term overall reduction in what we are doing. I do not think that simply saying, “We’re going to increase oil and gas production over the next period” is an answer to our present problems, because in the end, that is incompatible with the commitments we have made on net zero. We cannot go down that path in the long-term future.
I was pleased to hear the hon. Gentleman say that he agrees that we should do as much of our own energy production as possible in the meantime, during the transition. Is that the official Labour party position—that we should be doing more oil and gas in this country while we’ve got to still be using it?
No, what I said was that we should be trying to make sure that the reduced amounts of oil and gas that, in the end, we use in our system are as indigenous as they can be. That does not mean that we increase oil and gas production overall. We have to make sure that what we are doing in terms of our route to net zero and our energy provision for the future is secure and affordable.
For example, we are, I hope, on track to make our energy economy—for power—based pretty wholly on renewables. Certainly, that is a Labour target for 2030; I think the official Government target is 2035. Of course, as hon. Members have mentioned, that means that we have to take account of what the issue is for variables in that energy economy. But, we should not back those up with a whole lot more oil and gas; we should back them up with things such as storage, which Jo Gideon mentioned, and methods of making sure that we can use our energy as flexibly as possible. Also, our variability must be accommodated by what we do alongside it to make the overall system work. That is actually working quite well so far, inasmuch as renewable energy is the cheapest form of energy there is at the moment. On the affordability criterion, we really are making progress on that front.
Selaine Saxby mentioned the Celtic sea. If we expand our offshore renewables into the Celtic sea, we will have a further security addition to what our energy supplies are going to look like, which will make that second leg work very well as well. Those are the sorts of things we need to consider for the future in terms of how we solve the energy trilemma: not going backwards with higher hydrocarbons, but making the lower hydrocarbons that we have work as well as possible.
I was about to denounce Dr Mullan for being nasty to me, but I gather he was not being nasty to me, but to someone else entirely. I thought he greatly redeemed himself with his passionate espousal of deep geothermal energy, which is bang on. We need to do a lot more work on geothermal energy for precisely the reasons I have mentioned in terms of the energy trilemma in this country, as it is affordable and low carbon at the same time.
I thank hon. Members for this excellent debate this afternoon. By the way, in how we balance out the three legs of the World Energy Council trilemma tool, we are fourth in the world. That may be a free gift to the Minister, but it is something we are not doing badly on in this country as a whole.
I am going to go through my speech as fast as I can, because this has been an incredible debate. I would so much have liked to have had more time, but I want to allow my right hon. Friend Dame Andrea Leadsom to come back in at the end.
I welcome the opportunity to debate this important issue, and I thank all hon. and right hon. Members for their contributions. We have had an informed and interesting discussion. I particularly thank my right hon. Friend the Member for South Northamptonshire for bringing this important topic to the House. I also pay tribute to her for the important work she did in advancing the nation’s energy and climate security as Secretary of State with responsibility for those matters, as well as in her role as Energy Minister prior to that. I welcome the work that she and other Members have been doing more recently to contribute to this policy debate.
I agree with my right hon. Friend about the creation of the new Department for Energy Security and Net Zero, which I am sure that the whole House will welcome. It will deliver policies at the heart of the Government’s agenda and tackle the energy trilemma. Indeed, the Secretary of State was mindful of the trilemma as he laid out his priorities, which are:
“To set Britain on a path to energy independence, in other words, delivering energy security.
To bring bills down as soon as possible, and keep them down, so wholesale electricity prices are among the cheapest in Europe, delivering consumer security.
To decarbonise energy as part of our commitment to net zero, delivering climate security.”
As the Minister with responsibility for energy consumers and affordability, I will be working hard with the Secretary of State to bring down energy bills for households and businesses and to tackle fuel poverty.
The Government have a clear plan to deliver our priorities, set out in our Energy White Paper, published in 2020, and in our “Net Zero Strategy”, published in 2021. The British energy security strategy, published in April last year, charted a pathway to reducing our dependence on imported oil and gas and achieving net zero greenhouse emissions by 2050.
In the 2022 edition of the index, the UK was ranked fourth overall, as Dr Whitehead mentioned, ahead of G20 competitors including France, Germany and the United States. We are clearly doing something right. We should not consider the three aims of having secure, affordable and clean energy as being in competition with each other. In fact, enhancing security means decarbonising electricity, and both mean keeping energy bills affordable. To illustrate that point, I highlight the role that wind and solar play in our energy mix. They are not only the cleanest sources of power that we have, but the cheapest, and they contribute to our energy security by reducing our reliance on imported fuels.
I want to mention the contributions from a couple of other Members. My hon. Friend David Duguid has a great depth of knowledge and brings real experience to the subject. He has a genuine commitment to the subject, and he mentioned carbon capture, usage and storage. That is a priority for the Government, and we are progressing as quickly as we can. The funding package announced at the Budget is unprecedented and demonstrates His Majesty’s Government’s strong commitment to delivering CCUS in the UK.
I am so sorry, but I just do not have time.
I would particularly like to mention my hon. Friend Dr Mullan, who is a strong and consistent advocate for energy security and net zero. The UK currently does not have access to large naturally occurring geothermal resources that countries such as Iceland have, but I welcome the review he is doing and look forward to reading it.
To meet our ambitions on renewables, I agree with my right hon. Friend the Member for South Northamptonshire that we should accelerate the planning processes and networks infrastructure vital to bringing these projects to fruition. That is why the Government have committed to dramatically reducing timelines for delivering strategic onshore transmission network infrastructure by around three years, with an ambition to halve the end-to-end process by the mid-2020s. We look forward to the report from the Electricity Networks Commissioner, Nick Winser, this summer, and will take action in response to his recommendations.
We are committed to ensuring that projects benefit not only the nation as a whole, but the communities in which they are built. Members rightly call for an electricity system that is smart and flexible, and by the end of 2022 there were 31.3 million smart and advanced meters across Great Britain. The flexibility of the system is underpinned by a growing pipeline of electricity storage projects, with nearly 23 GW of storage already online.
Members have rightly pointed out the crucial role in energy security of reducing consumption through targeted energy efficiency measures, and we are already off to a good start. In 2010, only 14% of homes were in energy performance band C or better, but thanks to Government and industry action, 46% of homes now meet this benchmark.
The Government are bringing all this work together through the Energy Bill, which is the vehicle for delivering our strategy. It will modernise the way that we heat people’s homes, it will turbocharge British technology and it will liberate private investment, scaling-up jobs and growth.
To sum up, the UK is firing on all cylinders to deliver a green, resilient and independent energy system, with these three elements going hand in hand. As my right hon. Friend will know, the UK is a global leader not just in clean energy, but, as the energy trilemma index confirms, in cheap and secure energy. So it is only right that our ambition is to completely decarbonise our power system by 2035, subject to ensuring security of supply. This will provide the cheap, clean and British energy we need for decades to come.
I would like to reflect what a fantastic debate this has been. I think it is very rare to find the spokesmen for the opposition parties actually agreeing with Conservative Members, and even in some cases suggesting they might like to join our Back-Bench 1922 committee—and they would be most welcome.
I think it is wonderful on such occasions that we see the House break out in agreement. As I said at the start of my remarks, this is perhaps the biggest challenge that faces not just the planet, but definitely the United Kingdom. Alan Brown said he believes in referendums. Well, I believe in energy sovereignty, and in all sorts of sovereignty for the United Kingdom, so we will have that little frisson of disagreement between us.
Generally speaking, it was wonderful to hear the many and varied views of all right hon. and hon. Members in this place. It demonstrates that, when we do get together and are determined to do something that is right for the world and our own country, we can really make swift progress. I urge the Government to take really seriously some of the submissions made today and to make very urgent progress on them.
Question put and agreed to.
That this House
has considered the matter of tackling the energy trilemma.