Energy Bill [HL] — Second Reading

Part of the debate – in the House of Lords at 12:03 pm on 22nd July 2015.

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Photo of Baroness Maddock Baroness Maddock Chair, Works of Art Committee (Lords), Chair, Works of Art Committee (Lords) 12:03 pm, 22nd July 2015

My Lords, before I begin, I declare one or two interests. I am a vice-president of the Local Government Association, president of the Sustainable Energy Association and vice-president of National Energy Action, which is a fuel poverty charity. If we are serious about tackling climate change we need not only to reduce the amount of carbon we produce but to make sure we find sustainable solutions for our energy needs. In scrutinising the Energy Bill, the Liberal Democrat Benches will be looking to see how it stands up to those criteria.

As has already been made clear, the Bill falls into two parts. We want to maximise the potential of our North Sea oil and gas reserves but we are also planning to change the way we subsidise and plan onshore wind power. The first is by far the greatest part of the Bill. It implements, as we have heard, the recommendations of the Wood review into maximising the economic recovery of oil and gas from the North Sea, which was set up during the previous coalition Government under the leadership of the right honourable Ed Davey, who was Secretary of State at the Department of Energy and Climate Change.

As we have heard, it establishes the Oil and Gas Authority, which will be an independent regulator, but it also transfers functions from the Secretary of State for Energy and Climate Change. It would seem in many ways to be the least controversial part of the Bill. It looks forward and sets out a long-term framework, and I understand that it draws quite closely on what Norway has done to maximise its gas reserves in the North Sea. Last year, I was part of a parliamentary delegation to Norway, and we had a series of meetings and presentations in Stavanger about how Norway has made the most of its oil and gas resources in the past and its plans for the future.

As we have already heard from the Minister, the North Sea is very important to us. It provides 56% of our oil product and just over half of our gas demand. There is every reason to believe that there is the potential to supply a significant proportion of our needs to 2020. Indeed, we know that these resources are needed as we transition to a low-carbon future. We also know that large numbers of jobs are involved—the noble Lord, Lord Grantchester, said more than 400,000, although my figure is a bit less than that. Particularly where I come from in the north-east of England, this is a very important contribution to our economy.

Those involved with North Sea oil and gas extraction support the recommendations of the Wood review, but consultations on the levy that will fund the oil and gas body are still ongoing. I understand that the levy structure and amounts will be introduced through secondary legislation, under powers contained in the Infrastructure Act 2015, and that the Government are still analysing the feedback from the consultation. Will the Minister be able to give us this information before the Committee stage of the Bill in September?

There are numerous points in the Bill where the Secretary of State is given powers to make regulations. When will we get details of these? We are in recess between now and Committee, and the ability for scrutiny of secondary legislation is somewhat limited. However, I have no doubt that this House will, as usual, give thorough scrutiny to this part of the Bill in due course.

The second area covered by the Bill is onshore wind, and this is somewhat more controversial. Clause 59 changes the planning regime for onshore wind turbines and Clause 60 changes the closure date of the renewables obligation for this sector. The Department of Energy and Climate Change briefing for the Bill claims that onshore wind has deployed successfully to date, and that we have enough onshore wind in the pipeline to meet our 2020 aim of generating 30% of electricity from renewable resources. Have the Government at any time indicated that this was the point at which they would consider changing their commitment to subsidy for onshore wind? Is the Minister aware that RenewableUK, which represents the wind and marine energy sectors, does not agree with DECC’s analysis of the situation, saying:

“The share of renewable electricity will need to increase if we are to meet out 2020 renewables target. Ruling out … further contribution from onshore will increase our dependence on more expensive technologies and, hence, the cost of meeting the 2020 renewables target and longer-term low carbon reduction objectives”.

The Minister must be aware—the noble Lord, Lord Grantchester, talked about this—that this change of direction sends a terrible message to those prepared to develop all forms of renewables and, equally and very importantly, puts off those who are prepared to provide finance for projects. Again, I quote from RenewableUK, which says:

“Early RO closure threatens investor confidence in the stability of UK energy policy and increases the risk premium attached to energy infrastructure investments—projects which make up the largest part of the national infrastructure pipeline identified by the Treasury. Confidence has been further undermined by the retroactive cut to LECS”— and, indeed, by the announcements that I woke up to on Radio 4 this morning.

Many of the UK’s independent renewable-power developers and generators have collectively invested millions of pounds in onshore wind generation. They point to the commitment given by the noble Baroness, Lady Verma, at the beginning of this year and pointed out by the noble Lord, Lord Grantchester. It is clear that removing the support mechanism for onshore wind has the potential to destroy investor confidence in the wider energy market, putting investment in all energy infrastructure at risk. Wind, as has already been noted, is the lowest-cost source of low-carbon power we have. Without onshore wind, British bill-payers will have to pay hundreds of millions of pounds more every year as more expensive alternative technologies are substituted for it. Uncertainty around the arrangements for grace periods needs to be removed at the earliest opportunity if we are not to lose valuable projects that are already in the pipeline. What information can the Minister give us on these matters today?

Turning to the changes in the planning regime for onshore wind, it is not clear to me exactly how this will work. We on these Benches have always believed in devolution but believing in devolution when you come late to it means that sometimes you do not always carry it out in a way that works and is democratic. I am still not clear how the changes will work. We heard from the noble Lord, Lord Grantchester, about his concerns about this. I hope that our deliberations in Committee will give more clarity, especially as it seems that so much of the detail will be in secondary legislation.

Finally, I should like to dwell for a moment on two areas that have not been considered: energy efficiency and fuel poverty. Can the Minister explain a little more clearly how the measures in this Bill support the Department of Energy and Climate Change’s work,

“to power the economy with clean, secure, affordable energy supplies while keeping bills as low as possible for hard-working people and businesses”?

We know that meeting the UK’s energy needs through increased domestic energy efficiency can reduce the UK’s dependence on imported fossil fuels, so it does increase our energy security. It is also a part of tackling fuel poverty at the same time as supporting many other national priorities, including carbon reduction, reduced pressure on general practices and emergency services, economic development and regeneration, to name but a few. Currently, not £1 of the UK’s public infrastructure budget has been spent on initiatives to make homes warmer and healthier and to, in turn, encourage economic growth. This is in spite of Her Majesty’s Treasury receiving a significant windfall from domestic energy consumers, some of whom are in fuel poverty.

In the first few months of this new Government, we have found it very disappointing to see us moving a little backwards in our efforts to combat climate change. It is particularly so in the light of the joint pledge made in the last Parliament. Only last February, Mr Cameron, Mr Clegg and Mr Miliband agreed a pledge to tackle climate change which they said would protect the United Kingdom’s national security and economic prosperity. The pledge committed them to seeking a fair, strong, legally binding, global climate deal which limits temperature rises to below 2 degrees centigrade and to work across party lines to agree UK carbon budgets and accelerate the transition to a competitive, energy-efficient, low-carbon economy. My colleagues on these Benches, particularly my noble friend Lord Purvis, will enlarge on some of these matters later in the debate. Meanwhile, I have indicated the thrust of how we on these Liberal Democrat Benches view the Energy Bill. I look forward to the Minister’s response to some of my questions and to our deliberations when we return from the Recess in September.