Amendment 1

Energy Bill [HL] - Committee (1st Day) – in the House of Lords at 3:21 pm on 5 September 2022.

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Lord Lennie:

Moved by Lord Lennie

1: Before Clause 1, insert the following new Clause—“Part A1Purpose and strategy and policy statementPurpose (1) The principal purpose of this Act is—(a) to increase the resilience and reliability of energy systems across the United Kingdom,(b) to support the delivery of the United Kingdom’s climate change commitments, and(c) to reform the United Kingdom’s energy system while minimising costs to consumers and protecting them from unfair pricing. (2) In performing functions under this Act, the relevant persons and bodies must have regard to—(a) the principal purpose set out in subsection (1),(b) the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008 (carbon targets and budgets) and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change,(c) the desirability of reducing costs to consumers and alleviating fuel poverty, and(d) the desirability of securing a diverse and viable long-term energy supply. (3) In this section “the relevant persons and bodies” means—(a) the Secretary of State;(b) any public authority.”Member's explanatory statementThis amendment, along with other new clauses before Clause 1, add a new Part setting out the purpose of the Bill and a requirement for a Strategy and Policy Statement in line with this Act.

Photo of Lord Lennie Lord Lennie Opposition Whip (Lords), Shadow Spokesperson (Business, Energy and Industrial Strategy and International Trade)

My Lords, Amendments 1 to 4 and 245, along with other new clauses before Clause 1, add a new part setting out the purpose of the Bill and a requirement for a strategy and policy statement in line with the purpose of the Act.

The context for this is threefold. First is the cost of living crisis: the energy cap has risen to £3,549 a year for an average household, and National Energy Action, of which the noble Baroness, Lady McIntosh, is chair, predicts that the number of households in fuel poverty will rise to 8.9 million.

The second is net zero: the Conservative leadership candidates—including Liz Truss, the new Prime Minister—ran away from this during the recent campaign. The High Court found that the net-zero climate strategy is inadequate, and the Climate Change Committee found that credible plans existed for only 39% of emissions, citing “major policy failures” and scant evidence of delivery. The 2021 International Energy Agency report found that the current commitments will not achieve net zero on schedule as they fall well short of what is needed to reach net zero by 2050.

The third is energy security: gas prices are expected to surge to record highs this week after the Nord Stream pipeline shut down. They could reach 800p a therm, and on Friday of last week they were 320p. European prices have risen by nearly 400% over the past year already, and the UK relies on gas for approximately 40% of its power generation—even more on the coldest days when demand increases and wind generation is low. The 2017 BEIS report included a scenario of the complete cut-off of Russian gas and concluded that the UK could see significant unmet demand if the cut was prolonged and continental European countries paid whatever was necessary to keep gas flowing. In the most extreme scenario, this could result in 28% of demand being unmet and lead to cut-offs or rotations of supply.

The Bill, as we said at Second Reading, is a pick and mix of things thrown together; it lacks ambition and an overarching theme designed to tackle these issues. There is no reason to believe that the current energy crisis will not happen again as the impact of global warming is a long-term issue.

Consequently, our amendments would, first, set out a purpose for the Bill by increasing resilience and reliability of energy systems across the UK; support the delivery of the UK’s climate change commitments; and reform the energy system. Secondly, they would bind the Secretary of State and the public authorities to these purposes, to our international commitments on climate change, and to the desirability of reducing costs and alleviating fuel poverty and securing a diverse and viable long-term energy supply. They would require the Secretary of State to designate a statement as a strategy and policy statement with regards to the purpose of the Act and require the Secretary of State to review both the strategy and the policy on a five-yearly basis. This would, in turn, force successive Governments into long term thinking, widen the impact and ambition of the Bill to address both short- and long-term issues, and help to ensure that, for the future, action does not come either too late or too little to solve a crisis.

I turn briefly to the other amendments in this group. Amendment 5 in the name of the noble Lord, Lord Moylan, adds a new clause requiring an assessment of the cost of achieving net zero and contrasting this with achieving net zero by later dates. Not achieving net zero by 2050 would be a breach of our international agreements and would be hugely damaging to health, livelihoods and human security, as well as our reputation on the global stage. The cost feasibility of not acting by 2050 and leaving net zero until 2065 or 2080 would be incomparable.

Amendment 6 in the name of the noble Baroness, Lady McIntosh, makes energy security the primary objective of the Bill, and while we agree with the importance of this objective, we would point to the wider focus our amendments require of the Bill. Amendment 7 in the name of the noble Lord, Lord Ravensdale, focuses on increasing the resilience and reliability of energy systems, supporting the UK’s climate change commitments, and reform of the UK energy system while minimising costs to consumers—protecting them from unfair pricing—and requires the Secretary of State to report annually to Parliament on these matters. This links in well with our amendments.

Amendment 231 in the name of the noble Lord, Lord Moylan, probes the intentions behind the Government’s proposal to alter the current pricing system of wholesale electricity based of the marginal cost of the last source of supply. I would be interested to see what lies behind the Government’s rationale for this change. Amendment 242 in the name of the noble Lord, Lord Ravensdale, sets out a national electrification and power plan; this links in with opposition thinking.

According to McKinsey, renewables could produce more than half of the world’s electricity by 2035 at lower prices than fossil fuel generation. On 18 May 2022, the EU presented the REPowerEU plan to end its dependence on Russian fossil fuels and tackle the climate crisis through energy savings, diversification of energy supply and accelerated rollout replacement of fossil fuels in homes, industry and power generation by renewable energy sources. The EU plan includes a massive scaling up and speeding up of renewables—solar, heat pumps, hydrogen, biomethane—which is not present in the Bill, and the EU plan suggests that replacing coal, oil and natural gas in industrial processes will reduce greenhouse gas emissions and strengthen security and competitiveness. Energy savings, efficiency, fuel substitution, electrification and an enhanced uptake of renewable hydrogen, biogas and biomethane could save up to 35 bcm of natural gas by 2030 on top of what is predicted under the Fit for 55 proposals. The UK must not be left behind. We must scale up our ambition. I beg to move.

Photo of Lord Moylan Lord Moylan Conservative 3:30, 5 September 2022

My Lords, I rise to speak to Amendment 5 in my name, and thank the noble Lord, Lord West of Spithead, and my noble friend Lord Frost for their support, and to speak to Amendment 231, also in my name. Before doing so, I should say that since I joined your Lordships’ House, my entry in the register of interests has shown my membership of the advisory board of Stirling Infrastructure Partners, a relatively new corporate advisory boutique. Stirling Infrastructure seeks business with a wide array of major corporations, some engaged in the energy field, and it struck me after speaking at Second Reading that I should perhaps have specifically drawn the House’s attention to my registered interest at that point. I have not received any remuneration during my time on the advisory board, and I have since then terminated the interest.

I congratulate the noble Baroness, Lady Blake, and the noble Lord, Lord Lennie, for bringing forward Amendments 1 to 4 as a matter of general principle, because they are right that a Bill which seeks to articulate and implement our energy strategy, particularly our energy security strategy, should have a preamble that is strategic in character and should provide a setting so that we know where the Bill is heading and what it is trying to achieve. My difficulty with their amendments is that they are rather general in character and not entirely strategic. I hesitate to say this, conscious as I am that the noble Lord, Lord West of Spithead, may choose to speak, but simply aiming to win the war is not a strategy. A strategy requires something on resources, a plan and a general conception of how you are going to do it. If we are to achieve net zero, there are certain knotty issues that the Government need to be clear about so that we understand exactly what their strategy is at the level of detail appropriate to strategy. I, for one, am rather confused about the whole thing.

The purpose of my Amendment 5, which I have to admit is drafted in a rather convoluted way, for today’s debate is to elicit from my noble friend on the Front Bench some answers to three particular knotty questions. The first is the cost of net zero by 2050. One would have thought that we knew what the cost was going to be, but my understanding is that the only estimate the Government have had available to rely on was produced by the Climate Change Committee, which estimates that it will be in the order of 1% of GDP a year.

I do not have an objection to dedicating government expenditure on the basis of a certain percentage of GDP. If the Government want to say that they will spend 2% or some other percentage of GDP on defence, or they will spend 0.7% or 0.5% on international aid, for example, that is perfectly legitimate. But, of course, the figure of 1% a year from the Climate Change Committee is not of that character. We are pledging to spend not 1% a year but whatever it takes to deliver net zero by 2050, and 1% a year is an estimate. Moreover, it is an estimate that relies to a high degree on certain built-in assumptions, particularly that things are going to get cheaper—that the various inputs will fall in price over time. While that might be true of some, there is no reason to think it is going to be true of all. Part of the purpose of this amendment is therefore to call for the Government to commission an independent assessment of the cost of meeting net zero by 2050.

Then, we come to the question of affordability. Achieving it by a certain date—the date set in statute—doubtless has one cost attached to it. This amendment also calls on the Government to consider as part of that assessment what it would cost to achieve it. Would it be cheaper—more affordable—especially in the current crisis we are facing, if the terminal date were not 2050 but later? I put in two particular dates but if the Government choose others, I would be happy to go with those. The issue is the principle of whether achieving net zero over a longer period would be more affordable for the people of this country.

That is the first thing this amendment is trying to elicit the Government’s views on: do they have a reliable cost for achieving net zero by 2050, and would it be affordable if we took longer over it? As I said at Second Reading, bearing in mind that this country contributes a very small fraction of global emissions, the idea that achieving it by 2065 or 2050 will save the planet is simply self-delusion. We are doing this principally for exemplary purposes, rather than because of its practical effect.

Secondly, I do not wish to cause the slightest difficulty or embarrassment for my noble friend on the Front Bench, but I find the Government’s existing strategy, particularly the energy security strategy, the 10-point plan and so forth, rather weak in terms of strategic content and cost assessment. What are they going to cost? Also, implementation dates are largely lacking. We also need to know the relative contribution that each of the Government’s proposed measures will make to achieving net zero. Some might be very significant and others not, but we do not understand that from the documentation. That is the second purpose of this amendment. It is an important strategic question and I hope my noble friend will be able to say something about it.

The third point concerns the crucial issue, which I raised at Second Reading, of the intermittency of renewable sources. What do you do when the wind is not blowing or the sun is not shining? An obvious source to use to make up for that at the moment is gas, and that is largely what we do. Will we continue to use gas? That is one option. At Second Reading I quoted Professor Sir Dieter Helm saying that that makes the gas expensive in itself, because switching it on and off all the time is very inefficient and increases costs. However, is that the strategy? When I said that at Second Reading, the noble Baroness, Lady Bennett of Manor Castle, drew my attention to a recent report from a Finnish university that said that intermittency can be dealt with without recourse to gas. Afterwards, she kindly gave me a link to it, and I have studied it. The solution suggested—it is not unique to that university; it is fairly widespread—is that intermittency should be dealt with by way of battery power. When the wind is blowing and you do not need the electricity, you charge up the batteries, and when it stops blowing—it is the same for solar—you take the electricity out. That seems plausible at one level, and maybe it is the solution the Government are coming to; there is stuff about batteries in the Bill. However, it raises questions about the environmental consequences of extracting the minerals needed for the batteries, and about their disposal, siting and so forth. Can the Government tell us what role they see for batteries—if it is to be batteries; maybe it is not—in dealing with intermittency?

The third suggestion I have heard is that pumped water should be used. This involves using surplus electricity to pump water up so that, when you need it, it falls down again. I believe that some installations do that—indeed, one of them is hidden inside a mountain in Snowdonia—and that a couple are to be built in Scotland shortly. My understanding is that they produce very little power. They are an interesting idea. Is it the Government’s intention to roll them out at scale? What is the cost? Where are they to be sited? These are the things on which we should have some indication before we give the Government these powers. I note that there is stuff in the Bill on exactly this.

Finally, I have heard that we should use surplus power to produce hydrogen, but that assumes that there is a distribution network to take the hydrogen where it is needed when the wind is not blowing. So there are serious potential solutions to this problem. All of them have costs, both financial and environmental. Which do the Government prefer?

I have spoken quite long enough so I will come to Amendment 231 in my name, which asks a question that has been on many people’s lips over the past few weeks: how do we price wholesale electricity? At the moment, as I think noble Lords are aware, the price paid to generators is the price of the highest input needed to achieve the demand that exists in the system in a particular half-hour period. In recent weeks and months, that has become gas. Whatever they use to produce electricity—be it wind, solar or whatever—everybody is receiving the same price as for gas.

To be perfectly clear, though, not everybody is receiving the same price because many of those producers will have entered into a contract for the difference—a swap arrangement—with a government-owned company. Effectively, this means that they have a guaranteed price, and it does not matter what the price is in the pool. At the moment, this is something that the European Union is looking aggressively at in terms of whether it should be changed, whether we should have a different system and whether there should be two separate pools, with one for carbon and one for renewables.

These are all things that I would like to hear the Minister say something on. I sympathise with him because today is the last day of the current Administration. Tomorrow, there will be a new Prime Minister. It may be that the Minister does not have the answers to all these questions at his fingertips in the way we would all like to hear at the moment, so an answer in due course as Committee goes on would be extremely welcome.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative

My Lords, I will speak to Amendment 6 in this group; I am grateful to the noble Lord, Lord Lennie, for his reference to it. It is intended as a probing amendment. I like to think that it is short and perfectly formed; I am grateful to the clerks for their assistance in drafting it. I remind the Committee that I am the president of National Energy Action. As the noble Lord, Lord Lennie, referred to, there are worries about households that have already fallen into fuel poverty and the strong likelihood that, by October this year or January next year, 1.5 million more households may be at risk.

Some further background to this amendment is my concern that most of the talk in the White Paper and the British energy security strategy from April, most of the talk in the recent leadership election campaign and most of the concentration of the press and media seem to focus on household fuel bills and the price cap relating to them. We must not lose sight of the impact of fuel and energy costs on small, medium and large businesses. Many have recently cited the instance of launderettes, which may not be big employers but serve a particularly useful function and are obviously highly intensive users of energy.

However, there are many others. In what was previously the Vale of York constituency, there is the York brick company, which has kilns to make its clay bricks on the go for probably two-thirds of each day—often over weekends, I imagine, if it is trying to complete an order. If we lose many such small and medium-sized companies, this especially will have a grave impact on the UK economy going forward.

I am also very concerned—and I am not sure that this was pointed out in the policy paper—that the current price cap does not cover oil, solid fuels, and LPG. These are particularly important to those of us living in deeply rural areas, where we are off the gas grid and have no access to alternative fuel supplies. Many of those living in the countryside are old people, pensioners, or people living on fixed incomes, in some of the most poorly insulated housing not just in this country but, dare I say, in the whole of Europe, if not the world.

I have family in Demark and went to visit, among other places, the little summerhouse that we used to play in during our summer holidays on the fjord. Theirs is an all-year-round house built 20 or 30 years ago, with triple glazing and a modern state-of-the-art heating pump that fires up all their fuel costs except for their hot water. It is small, it is inobtrusive and it does not make a noise. Why this country always seems to be 20 or 30 years behind many others in terms of technology I simply do not know.

Amendment 6 is intended as a probing amendment. The energy security strategy policy paper and the Queen’s Speech originally referred to an energy security Bill, so I accept that this Bill has gone broader than that, but I hope that my noble friend the Minister will give a commitment today that energy security will remain paramount and underlie all the terms and priorities of the Bill.

The introduction to the policy paper from the current Prime Minister—that is probably the last time that I will be able to say that—says:

“We need a power supply that’s made in Britain, for Britain—and that’s what this plan is all about.”

No man, and no country, is an island. In energy policy, we are heavily dependent on interconnectors bringing energy from Norway and France, if not from other countries too, bringing in LPG in tankers. I accept that a global crisis underlies this, Putin’s invasion of Ukraine, with all the background that is in the policy paper. However, I hope that we will work closely with Europe and other countries to ensure that we do not go it completely alone in trying to work our way through this energy crisis.

There are other points that I hope this amendment can encapsulate but which I do not see in the Bill. I hope that my noble friend can put my mind at rest in this regard. First, there is a lack of focus on tidal energy. Scotland has focused very heavily and very effectively on tidal energy, as have other countries. Why are we possibly turning down the potential for tidal energy? Secondly, as my noble friend will be aware, I am a great fan of energy for waste. I am not saying that it is not there, but I do not see in the policy paper or in the Bill opportunities to have more energy from waste. At the moment in North Yorkshire, bizarrely, we are exporting a lot of our household waste to Holland, where it is burned and forms an energy source for local households. This seems a bizarre and very expensive way of getting rid of our household waste, so effectively, through energy from waste, we will be resolving two issues: how to dispose of our waste which we can no longer send to landfill because it is full and creating a strand of energy.

I make a plea to my noble friend that the energy created in this way, such as that at the energy waste plant in Allerton Park in North Yorkshire, should go to the local community. That will bring communities on side. It gets rid of one of their waste outlets—household waste—and creates a source of energy that I should like to see them being able to use.

I will mention onshore and offshore wind. It is not often stated that both these forms of energy are entirely dependent on pylons and overhead energy transmission to feed them into the national grid. My understanding is that this amounts to 30% of energy being lost in transmission, which seems hugely wasteful. If we have an energy crisis, how is it that we are creating this new energy source with either onshore or offshore wind farms and not undergrounding it—we certainly are not in the north of England—while losing 30% of our electricity through overhead line transmission?

A further plea, which I hope will be close to the heart of the noble Lord, Lord Teverson, is that we should ensure that, when we have a dash for further offshore wind farms, there will be an independent review of the damage that current and future wind farms on the scale envisaged will have on marine life. We have not yet established that, but it is deeply disturbing and could lead to loss of marine life, as well as sea mammals and birds.

To conclude, in speaking to Amendment 6, I support a great deal of what is in the Bill, but I feel that it is silent on many points and should go further in securing our energy supply, which I understood was its original focus. I hope my noble friend will put my mind at rest in this regard.

Photo of Baroness Bloomfield of Hinton Waldrist Baroness Bloomfield of Hinton Waldrist Baroness in Waiting (HM Household) (Whip) 3:45, 5 September 2022

Before we continue, I remind noble Lords that the Companion asks noble Lords to make their speeches directly relevant to the amendments they are proposing and—please—to keep those comments as short as they possibly can. Thank you.

Photo of Lord Ravensdale Lord Ravensdale Crossbench

My Lords, I shall speak to Amendments 7 and 242. I declare my interests as a project director working for Atkins, which is in the energy industry, and as a director of Peers for the Planet. I thank the noble Baroness, Lady Worthington, who I have worked with to develop these amendments.

Amendment 7 has similar objectives to Amendment 1 in the name of the noble Baroness, Lady Blake, and spoken to by the noble Lord, Lord Lennie. I concur with his comments on the necessity of clearly setting out the purpose of the Bill and legislating for a strategy and policy statement on its implementation. Amendment 7 brings out two specific aspects that are further detailed in Amendment 242. These are the importance of a plan for delivering against the 2035 target to decarbonise our electricity system and for the electrification of energy use in the UK.

The reason that electrification is so important stems from the second law of thermodynamics. As my favourite physicist, Richard Feynman, said in his superb analysis of the “Challenger” disaster in 1986, “Nature cannot be fooled”. Whatever options we come up with for decarbonising our energy system, and whatever laws and policies we make, we run up against fundamental constraints from the laws of thermodynamics. For example, using hydrogen to fuel road transport will always be much less efficient and use far more energy than electrification, no matter what technical advances are made in hydrogen production. Similarly, using electricity to heat homes via a heat pump will always be more efficient than producing hydrogen for the same purpose. This is not to say that hydrogen production should not be pursued as a matter of urgency, as it will be vital in some areas, but its use should be focused on areas that are absolutely necessary. The efficiency gains and the reductions in primary energy use from electrification mean that this is a vital metric to consider as our energy system evolves.

The enabler of all of this is a decarbonised electricity system. We have a world-leading target to decarbonise our electricity system by 2035, but I worry about delivery. Atkins has undertaken a calculation of the rate of new capacity required to hit the 2035 target. This is not anything complex: it simply divides the capacity in the BEIS scenarios by 12 and a half years, allowing for an estimate of the capacity that will be decommissioned over that timeframe.

As I stated at Second Reading, this calculation results in a minimum of an average of 12 gigawatts of annual installed capacity being needed every year between now and 2035 to hit that target, so the next question is, with a baseline of 12 gigawatts, what have we managed in recent years? In 2019 we managed 2.8 gigawatts of new installed capacity. In 2020 we managed 1.1 gigawatts and in 2021 we managed 1.6. If we go on like this, it is very hard to see how we will meet the 2035 target. The upshot is that to replace ageing power plants and ensure that enough generation is built to meet peak demand requirements, the UK needs to build a minimum of 159 gigawatts of new generating capacity by 2035—the equivalent of building the UK’s entire electricity generation system one and a half times over in slightly more than 12 years. It is not only generating capacity but all the grid infrastructure to support it, as well as energy storage and data management.

This says to me that there is a significant risk that the Government will not be able to meet their 2035 target. I work on the coalface, as it were—I am not sure that is the best analogy. The industry has a long way to go to gear up for this pace of delivery, so alongside the 2035 target we urgently need a strategy for delivery. This reflects one of the priority recommendations from the CCC’s 2022 progress report: we need a delivery plan to provide visibility and confidence for private sector investors, to reduce costs and to build up supply chains. There is a key gap here in comparison to other sectors. We have the Heat and Buildings Strategy and the transport decarbonisation plan, but we do not have a plan for electricity decarbonisation, despite it being so important as an enabler for those other plans. I would be grateful if the Minister could, in summing up, state that the Government will bring forward such a delivery plan for electricity system decarbonisation.

Amendment 242 details our approach to legislating for this strategy. The noble Baroness, Lady Worthington, pointed out to me that we already have a toolkit to approach this via the Energy Act 2013—the mechanism of a decarbonisation target range and decarbonisation orders. If we take these existing powers and modify them, we can set a range for carbon intensity of electricity production in the UK each year and targets for electrification of the energy system. The report must also include the expected volumes of installed capacity and energy produced by electricity energy source for each calendar year to 2035. This rigorous approach will deliver the required strategy and plan to give industry and investors a clear road map to 2035, which, lest we forget, is only slightly more than 12 years away.

There is a great opportunity in this Bill for the Government to legislate for a strategy to give industry and investors the confidence they need to reduce costs and build up supply chains for 2035, significantly reducing delivery risk, with efficiency and minimising primary energy consumption at the forefront. I strongly support the Government in their ambitions for 2035 and the target that they have set, but there is much to do in a short time, and I hope the Government will take this opportunity to ensure that there will be a clear plan for delivery to ensure the success of their ambitions.

Photo of Lord West of Spithead Lord West of Spithead Labour

My Lords, I stand to support the rather convoluted, as was stated, Amendment 5 in the name of the noble Lord, Lord Moylan. Sadly, we have shied away from a national energy strategy for some decades. As head of the National Security Forum in 2009, I pushed to produce a national energy strategy but was stopped and shot down in flames by the Cabinet Office—and indeed the Cabinet—as the Government were unwilling to identify all the various things that were needed to achieve that.

Now we are moving slowly towards a policy, but the devil is in the detail and broad, sweeping statements of commitment based on no solid evidence of cost and impact are highly dangerous. The aim of this amendment is to quantify the cost and risk of achievement and to monitor and assess performance as the plans move forward. Too often there is a willingness to move ahead hoping for the best rather than forensically analysing what is, can be and has been achieved and what the true costs are—both financial and in terms of their impact—on other policies and commitments.

I feel particularly strongly about analysing the shortfalls in electricity generated by renewable sources. Our nation has a clear demand for a constant base loading of electrical supply and needs to manage intermittency of supply from wind and solar. I am clear that only nuclear power can ensure that need in a clean way.

I will be very interested to hear the Minister’s views on this requirement to monitor and quantify the measures being enacted.

Photo of Lord Howell of Guildford Lord Howell of Guildford Conservative 4:00, 5 September 2022

My Lords, I shall speak to Amendments 1, 2, 3 and 4, as well as Amendment 5, on which my noble friend Lord Moylan made an extremely interesting speech, as were the speeches just made by the noble Lords, Lord Ravensdale and Lord West. I declare my interest in energy matters as an adviser to Mitsubishi Corporation—one of the world’s largest producers of heat pumps, as well as of all connectors and the switching stations associated with them, both here and overseas—and the Kuwait Investment Office, with which the linkage, through its oil and gas production, is obvious.

I am afraid this sounds suspiciously like a Second Reading debate rather than a Committee debate. That is perhaps inevitable, given that we are in the midst of a first-class energy crisis—the biggest certainly in my active lifetime. Naturally, your Lordships are taking any opportunity—as we are entitled to do—to relate remarks on this enormous Bill to the very difficult dilemmas that the nation now faces, with no obvious way out, a cacophony of new views about what should be done, an absence of views about the international dimension, which I will mention in a moment, and a general bewilderment that, somehow or other, we will have to borrow a great deal more money to prevent real suffering, collapse and bankruptcy across a large part of the enterprise and small business sector, and so on.

I am not going to support Amendments 1, 2, 3 and 4 because they do not add much to the purposes, or indeed deficiencies, of the Bill. If they did, I would say let us support them, but that is not what they do.

I want to comment in passing on my noble friend Lord Moylan’s remarks on pump storage. He mentioned the Dinorwig installation in north Wales. I had the honour and pleasure of authorising not the original installation itself but the expansion in the early 1980s. One interesting fact for your Lordships is that it was capable then of delivering within 12 minutes 2 gigawatts into the system. The remarkable fact is that it never needs to work at all to be an enormous addition to our generating system and an enormous saving. Why? It is because the fact of what it can do enables the rest of the power system and all the power stations to operate at slightly higher capacities, with lower safety margins, than they otherwise would—in the knowledge that this extra is always there. So we have the extraordinary situation of a vast installation that never need actually operate to make substantial savings. That is one of the anomalies of the national energy system that we have to familiarise ourselves with.

As for the amendments—to a Bill that, frankly, does not leave me totally happy anyway—first, I am unhappy about the lack of any address in the amendments, let alone in the Bill, to the international dimension; at most, they very slightly address it. I admit there is a section on interconnectors, and that is very important. In fact, the interconnector element in our future diversity of supply is going to increase substantially; I think the Bill mentions 18 gigawatts of interconnectors. I understand that Morocco is thinking of adding an enormous 3 gigawatts of clean energy—solar energy using linked cabling from Morocco all the way to the UK—and there will be many similar sources. They all raise very complicated issues since they have to be managed under direct current, because you cannot put alternative current underwater; they have to have amazingly extensive energy transformations from direct current back to the AC that we can use inside our system.

The truth is that the resilience and security of our system is going to depend not less but more on the international environment, international supply and the sorts of issues that have been raised by the horrors of Ukraine and Russia’s determination to distort to the maximum the entire energy system of western Europe—and that includes us physically. All these issues need addressing in intense detail, but I do not see that detail mobilised in the Bill.

Secondly, the amendments talk, as does the Bill, about our climate commitments. Obviously our climate commitment in law, in the Climate Change Act, is to achieve net zero by 2050, but what actually are our climate commitments? I would like to hear from the Minister what new thinking is going on in this respect. Surely the aim of our endeavours in our climate commitments is to limit global emissions and greenhouse gases. The question that we have to ask ourselves, again and again, as we struggle towards net zero, is not only whether we can afford it—and many people say it is going to cost a lot of money—but whether, when we have got there, it will have any effective impact on curbing the growth of global emissions, getting to the Paris targets and halting greenhouse gases. There seems to be an assumption that the greenhouse gases will stop at the white cliffs of Dover if we can achieve net zero. It does not work like that. I am afraid the world is integrated, in the sense that greenhouse gases are increasing very rapidly, and our efforts and contribution need to be rethought again and again in order to make a serious impact on that.

Achieving net zero by 2050 with clean power and electricity requires a multiplication by about seven or eight times of our existing clean power sector—that is, wind, solar and now of course nuclear, which is recognised by the European Union as part of the ESG group and therefore clean energy. That needs to be multiplied by six or seven times, including a vast increase in wind power and solar power, as well as in our nuclear power. That would mean several new nuclear power stations, but they are not being built and are not going to be. No one is planning on building them. We are building one now but it is in considerable difficulties. The ex-Prime Minister said in his outgoing speech that he wanted to build a lot more, but that would be 10 or 15 years away, and the chances of the system working and doing so efficiently, if it is a replication of Hinkley C, are very slight indeed.

All that is just to get to net zero. Beyond that, we must have legislation—and understanding in that legislation—to achieve a genuine contribution to climate change curbing. That is not going to be done. Adaptation is going to be needed on a massive scale to prevent really bad heat in summer, really cold winters and enormous flooding that will affect us as well as many others. That is the element that is not in the Bill, and the amendments would not add very much to it.

As to minimising costs, which the amendment mentions—it is also mentioned in the Bill itself and in the explanatory documents for it—how is this to be done? We will not minimise costs by trying to build, very rapidly, these enormously expensive new, large-scale nuclear stations. We will not minimise costs unless we remain totally integrated into the world energy supply system or unless we deal, day by day, on a sensitive basis, with our Norwegian suppliers of natural gas and electricity. If we take our mind off that for a moment, that gas will probably go elsewhere, as is happening now as Germany tries to fill up its strategic gas storage tanks, as are many other countries. All this is creating not stability, resilience or security but the opposite.

I therefore ask the Minister that when he turns down this amendment, as he no doubt will—he is quite right to do so, because it is unnecessary and adds nothing—he gives us a little assurance that in this new and changing situation, this long-term future which we have to build on and in which, by failing to build on that of 40 years ago, we have now plunged ourselves into this terrible crisis, these things are being addressed and will be taken account of. Perhaps as we go through the Bill clause by clause, we will hear something from him about how the new situation is to be addressed. I do not think this amendment does it; nor, frankly, does the Bill.

Photo of Viscount Trenchard Viscount Trenchard Conservative

My Lords, I must declare my interest as a member of the advisory board of Penultimate Power UK Ltd. By the Government’s own admission, the Bill introduces 26 separate measures, based roughly on three pillars, which aim to give the Bill a modicum of coherence. Many of the amendments in this group, however, seem also to be intended to serve as a kind of preamble to the Bill, which, as my noble friend Lord Moylan and others have said, would improve it.

Amendment 1, as eloquently spoken to by the noble Lord, Lord Lennie, seeks to add a principal purpose to the Bill. Amendment 7, spoken to by the noble Lord, Lord Ravensdale, aims to do the same thing. However, these amendments would add not one principal purpose but three. Furthermore, I consider that principal purposes (a) and (b) in Amendment 1 are in conflict with each other, in the sense that while delivery of the country’s climate change commitments is obviously highly desirable, it conflicts with purpose (a) in that resilience and reliability are not served, at least in the short term, by abandoning natural gas as a source of energy with unnecessary haste. Actually, purpose (b) is also in conflict with purpose (c), because it is hard to argue that maintenance of the climate levy helps to minimise costs to consumers or protects them from unfair pricing.

I therefore urge my noble friend the Minister not to accept this amendment, or indeed Amendments 2, 3 and 4 in this group in the names of the noble Baroness, Lady Blake of Leeds, and the noble Lord, Lord Lennie. I understand why they want to introduce a requirement for a strategy and policy statement in line with the Bill, but I regret that the Bill does not cover the whole of the country’s energy strategy or policy. Furthermore, these amendments give a higher priority to meeting climate change commitments than they do to developing reliable sources of energy, which protect the consumer against the risks of intermittency.

That is why I support Amendment 5 in the name of my noble friends Lord Moylan and Lord Frost, and the noble Lord, Lord West of Spithead. This amendment recognises that the Government must have regard to the Ten Point Plan for a Green Industrial Revolution, the Net Zero Strategy, the British Energy Security Strategy and all the other strategies; but that, crucially, they need to compensate for the huge reliance on wind and solar energy contained in those strategies by ensuring that we will have electric power to replace that generated by renewable sources, which are subject to intermittency.

As my noble friend Lord Moylan pointed out, it is necessary for the Government and the public to understand how much achieving the objectives of net zero by 2050 will actually cost. The Government have been, and continue to be, far too cautious in their policy towards nuclear power, but Amendment 5 will require the Government to support nuclear to a far greater extent than they have done so far, because nuclear is completely reliable and not subject to intermittency. One of the points in the 10-point plan covers the delivery of new and advanced nuclear power, while the subsequently published strategies increasingly recognise its greater importance.

Much has been made of the Prime Minister’s commitment in May that we will build one new nuclear power station every year, instead of one every decade. But he did not clarify whether he was talking about a new power station such as Hinkley Point C, with two large reactors each generating 1.6 gigawatts of electricity, or perhaps a bank of NuScale reactors, producing 77 megawatts, or of U-Battery reactors delivering 4 megawatts each. Could the Minister clarify how much new nuclear capacity the Government expect to commission every decade or year?

Could the Minister also confirm that the Government recognise that the only way to achieve energy security without watering down our net-zero commitments is to accelerate significantly programmes for the development of both SMRs and AMRs, which have been and still are considered—illogically—different technology sectors? The acceptance of Amendment 5 or a similar amendment would make it more likely that the necessary strategic policy changes could be made.

I am also inclined to support Amendment 6, in the name of my noble friend Lady McIntosh, to establish one “principal objective”: energy security. On Amendment 231, eloquently spoken to by my noble friend Lord Moylan, it is interesting to seek to distinguish and separate carbon and non-carbon sources of electricity and the pricing mechanisms of those two subsectors. I would like to know what the Minister thinks about that and the other amendments in this group.

Photo of Baroness Worthington Baroness Worthington Crossbench 4:15, 5 September 2022

My Lords, I will speak to Amendment 7, to which I have added my name. I declare my interest as a co-chair of Peers for the Planet. I apologise for not being present at Second Reading; I wrote to the Minister, and I am grateful for his detailed response to some of my points. I will endeavour to be brief, as this is Committee, and will simply explain why we consider that Amendments 7 and 242, together, bridge the divide that is evident between the two sides of the House, as witnessed in this debate.

The noble Lord, Lord Moylan, was absolutely right that you cannot simply declare that you want to win a war; you need to have tactics and a strategy for winning it. Our Amendment 7, complemented by Amendment 242, provides that strategy, which is, as the noble Lord, Lord Ravensdale, eloquently articulated, fundamentally underpinned by physics. Energy is a question of physics and, if we understand that, we will know that we are not struggling towards net zero but in fact doing very well on that path.

The clarity with which I now see industry communicating on this issue is far greater than it has been over the last decade. It is saying: “Electrify everything that can be electrified and use our abundant resources of clean electricity to decarbonise.” That is how you square the three principal objectives of energy policy: affordability, cleanliness, and resilience and security. That pathway is so clear now that the Bill could be hugely enhanced by having this set out at the front.

I support the Government’s intentions. They seek to address the trilemma of those three objectives, which are fundamental to winning this war against climate change and against the energy crisis that we currently face. That very energy crisis is an interesting reason why we are powering towards net zero faster than ever before: it is absolutely clear that the volatility of gas and oil underpins it, and we cannot forget that. What is the Government’s current policy? It is to reduce our reliance on those volatile commodities, which would serve everyone’s needs: it would help us reduce bills and would give the consumer a reliable source of energy.

The Bill has many measures which we will come on to debate that will help us along that path. But it lacks an overarching statement of objective. We now need to revisit the debates we had on the Energy Act 2013 about the need for a decarbonisation target to provide clarity over this direction of travel. We all sat there—many noble Lords here today were there—and had debates on why knowing our way towards that target was needed for investor and stakeholder confidence. It is now very clear that it is needed because, as the noble Lord, Lord Ravensdale, pointed out, simple mathematics shows that we still have a lot of technology that needs to be put into place to become operational, and we need a plan that monitors progress towards that.

Subsequently, we have added an extra dimension to this: electrification. As I said, physics tells us that electrification is fundamentally more efficient; you will get six to seven times more usable energy from an electricity-based system than if you rely on fossil fuels or hydrogen. Six to seven times fewer wind turbines will be needed to provide the same benefit in terms of heat or transport. That should be of interest to everybody; it saves costs and helps make the system more secure.

So I hope that the Minister will look at our amendment carefully. It adds an extra dimension to this Bill, which will give it so much clarity so that everybody will have a clear sense of the path that we are on. As I have said, the UK should be very proud of the efforts it has taken to date. We are not as exposed to the energy crisis as other countries, because of investments we have made over the last two decades and because we have taken seriously this objective of making our system more resilient and fit for the future. There is an international dimension—I am sure we will come on to talk about this in other parts of the Bill—but it is absolutely clear that the thing that we can do best at the moment is continue on the path of decarbonising our electricity system using technologies that locate cheap power on our shores, to rid ourselves of the insecurity and volatility of gas prices and to move forward to an efficient system that converts primary energy into heat, transport and work. If we can do that, we will show the world how it should be done: do not pick winners but instead create a system that is sensible and will provide the right guardrails for capital investment so that money will flow and we will all benefit. I look forward to the Minister’s response to our amendment.

Photo of Lord Teverson Lord Teverson Liberal Democrat Lords Spokesperson (Energy and Climate Change), Chair, EU Environment Sub-Committee, Chair, EU Environment Sub-Committee

My Lords, it is always a great pleasure to follow the noble Baroness, Lady Worthington, and although we do not always agree on absolutely everything, I reckon that I agree with about 99.5% of her speech.

First, I declare my interest as chair and director of Aldustria Ltd, an energy storage company; I will try to avoid too much discussion of that area. On these amendments, I very much thank the noble Lord, Lord Lennie, for having opened our debate today. I very much agree with the principle of what the Opposition Front Bench is trying to achieve here. What this Bill does not have—the noble Lord, Lord Moylan, put it very well indeed—is great focus or coherence. It would be good to start trying to improve that through a type of preamble that puts context, including strategic context, at the beginning of the Bill. I hope that we can refine that more on Report; it may not be perfect, but perhaps we can find a way of doing that between us.

I also agree with the noble Lord, Lord Moylan, about the pricing of electricity and how that works. As he says, our European colleagues are looking at that very strongly now. There must be a better way of doing this; it cannot make sense to the public that we charge and price our main energy sources on the marginal cost of the last producer. Clearly, that does not make sense, and it does not do the reputation of the fossil fuel industry any good either. Yes, they might use their money to give back to shareholders—hopefully they will use it for different types of investment and diversification—but it besmirches the whole sector, and we need to find a way around that.

Where I would disagree very strongly with the noble Lord, Lord Moylan, is around trying to game or look at alternative dates for net zero. It seems to me that in September 1939 the Cabinet probably did not look at whether to declare war on Germany this month or two years later or four years later. We may criticise Neville Chamberlain for all sorts of things in retrospect, but I guess that is not one of them. It was an absolute threat to our future security, and we made a decision. If we think of the costs to this country, and to us and consumers, of our right stand on Ukraine, I guess that we have not done those calculations either—because we know that Putin’s war has to fail and that, for European security and our long-term security, we in the western world need to pursue the tactics that we have.

I thank the noble Baroness, Lady McIntosh of Pickering, for her amendments, particularly in mentioning rural aspects of oil—my own household is on oil, and we are not covered by a price cap—and in particular business. In all the media coverage that we have had on this very real energy crisis over the past months, it is funny how business has very much taken second place to households and consumers. Clearly, households and consumers are ultimately the most important, but business is completely fundamental to our economic performance and being able to solve this crisis in the long term.

I am not absolutely sure about energy from waste plants. Clearly, it does not make sense to export it, but the real challenge there is in starting to raise recycling again, or even AD in terms of other parts of household waste. I was so impressed by the forensic look by the noble Lord, Lord Ravensdale, at investment need and the scale of the challenge, and also at how we need to measure that and put proper planning into how we meet it.

The one other area that I would like to mention comes back to 2013 and the then Energy Bill, mentioned by the noble Baroness, Lady Worthington. At that time, one big thing that we discussed was the energy trilemma of security, cost and decarbonisation. The noble Viscount, Lord Trenchard, brought that back up again. But what this crisis, and the almost a decade between these two Bills, has shown, is that it is no longer a trilemma—they all work in exactly the same direction. Renewables are now cheaper than fossil fuels, as we know—it is why we have the huge price increases that we do. Our security is reinforced by having much more renewable generation on our own seas and our own land—and, as a result, we have lower costs and a decarbonised energy system as well. We have moved on since that time.

We need to have a focus in this Bill, and I support the amendments. We need to move on in this debate, but I am absolutely sure that we will need that coherence when we get to Report.

Photo of Baroness Jones of Moulsecoomb Baroness Jones of Moulsecoomb Green

My Lords, the whip, the noble Baroness, Lady Bloomfield, has spoiled a lot of my fun today, because I was going to tell the Government exactly what they needed to do if they were going to produce an Energy Bill that deals with the crises that we are facing. We are facing three immense crises at the moment, and one of them is, of course, the climate crisis. There are strong whiffs of climate denialism in your Lordships’ House, which I find absolutely staggering, considering that the science is so very clear on it. However, it is a bit last century, that sort of attitude, so I understand why it might exist here in your Lordships’ House. But we have those crises—the climate emergency, the ecological crisis and the cost of living crisis—and this Energy Bill is so topical. It is exactly the sort of thing that we need to bring forward so that we can deal with all these crises, and I guess make life better for millions of people in Britain and the rest of the world.

I agree with a lot of what the noble Lord, Lord Howell, said. He made the point that this does not do the job. Also, I am very sympathetic to Labour’s initial amendments. I understand why they are in there, but it reads a lot more like the sort of issues that a Labour Government would bring forward—hopefully not too long in the future.

I am concerned that our time is going to be wasted on this Bill, because we have a new Prime Minister—a climate-wrecking ideologue who will make it incredibly difficult for us to get the sort of issues into this Bill that we need. The noble Lord, Lord Howell, and other noble Lords also mentioned nuclear. We have to get real on the fact that nuclear is not the answer. Nuclear power stations take a long time to come online. There will be all sorts of problems even getting them started, so they are not the answer. We have to think faster than that; they just will not work.

I am sympathetic to the early amendments. Amendment 5 is a bit of a right-wing, net-zero-wrecking amendment, so I definitely would not support it. Amendment 6 from the noble Baroness, Lady McIntosh, is also a bit of a wrecking amendment in terms of the climate goals, so I definitely would not support that. Interestingly, Amendment 231 in the name of the noble Lord, Lord Moylan, would be a very good idea because, as the noble Lord, Lord Teverson, just said, it is ridiculous that people who have installed solar power, for example, and have renewable sources for their own electricity end up paying the top rate like everybody else. Those people have cheaper electricity. We should split the renewable electricity market from the fossil fuel-based electricity market—it is absurd that they have been bundled together—because renewable is so cheap and abundant. I would therefore probably support that sort of amendment if it came up later.

I am sceptical about whether this Bill will even get through. It could easily be overturned—it might not even get past this week, of course—but we must seize the opportunity to fix a broken system. We are living through a market failure. It will destroy the lives of millions of people, push more people into poverty and make life harder. If the Government cannot get a grip of the issue, they will deserve to be out of power for a generation.

Photo of Baroness Hayman Baroness Hayman Crossbench 4:30, 5 September 2022

My Lords, I declare my interest as co-chair of Peers for the Planet. I will speak very briefly to the amendments. I have amendments of my own later in the Bill on energy demand reduction and the regulator’s responsibilities.

I support the amendments in the name of the noble Lord, Lord Ravensdale. It is important that this Bill is specific about the implementation of the aspirations that we hear from government. We have not had enough detail about the plans to implement the strategies, and we have not had enough detail in the strategy. For that reason, I have some sympathy with the amendment of the noble Lord, Lord Moylan. He raises important issues about putting flesh on the bones of the aspirations, but I disagree with him about changing the timetable. I also disagree with the noble Viscount, Lord Trenchard, on the question of whether, because our contribution to global emissions is low, we should go ahead with the contribution we can make in innovation and leadership, which completely ratchets up the effect of this country’s own policies on a global scale.

One serious point I want to make about the noble Lord’s amendment is that I am extremely worried about the suggestion that the Secretary of State should commission and publish “an independent assessment” of the costs, the implementation dates and the risks of the net zero strategy. We have the Climate Change Committee, which is admired for its work throughout the world. It is an important and respected body and it is independent of government. It would be ridiculous to try to get different independent advice: if we go down that road, we are in “anyone’s view is the best view” territory. We have an independent adviser for government. We have the Office for Budget Responsibility; we have lots of people who can comment on the advice it gives, but it would be quite wrong to put in this legislation anything that undermined its position.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

Let me say first what a pleasure it is to open for the Government in today’s discussions: I am sure we will have lots more as we go through the Bill. I thank the noble Lords, Lord Lennie, Lord Ravensdale and Lord West, the noble Baronesses, Lady Blake and Lady Worthington, and my noble friends Lord Frost, Lord Moylan and Lady McIntosh, for their amendments, which seek to address the purpose and strategic aims of the Bill and of course the Government’s energy policy more generally. That allowed us to have a debate with more of the flavour of a Second Reading debate, rather than addressing the specifics of the Bill, but that is understandable given the nature of the amendments.

I turn first to Amendments 1, 6 and 7 from the noble Lords, Lord Lennie and Lord Ravensdale, the noble Baronesses, Lady Blake and Lady Worthington, and my noble friend Lady McIntosh. These amendments all seek to address the fundamental purpose of the Bill. While they are well-intentioned, it is my strong contention that these amendments are not necessary as the Bill already has a clear purpose. Provisions in the Bill as drafted not only have regard to the outcomes those noble Lords seek, but they are actually designed with those outcomes in mind. For example, a number of measures in the Bill will contribute to the resilience of the UK’s energy system—most obviously, those powers related to the ensuring the security of the core fuel sector. I am happy to give the assurance that my noble friend Lady McIntosh sought today: that energy security is of paramount importance to this Government.

Amendment 245 would give effect to Clause 1 once the Act is passed and, for the reasons I described, I do not believe that it is necessary. On Amendment 5, from my noble friends Lord Moylan and Lord Frost, and the noble Lord, Lord West of Spithead, relating to energy strategy statements, I reassure them that the Energy Bill is to a significant extent an expression of the Government’s strategic intent as set out in the 10-point plan, the energy White Paper, the net-zero strategy and the various sector-specific policy papers we have published. Furthermore, government policy evolves over time and strategies do not always neatly replace others. Some aspects may remain government policy, and some are updated in response to a changing landscape—of course, we have seen that very recently with the Ukrainian invasion. I submit that, rather than prescribing policy intent in primary legislation, it makes more sense to allow Ministers to exercise discretion in these matters and respond to a changing policy environment and international environment.

I move on to the requirement to publish a strategy

“for managing intermittency of electricity supply”.

Intermittency is an important issue, but the National Grid Electricity System Operator is responsible for balancing electricity supply and demand, because while production is intermittent, so is demand. The Government remain confident that they have all the tools needed to operate the electricity system reliably. We can call on a wide range of technology types to do this, some of which were mentioned in the debate today, including emergency gas-fired generation, interconnectors and, crucially, demand-side responses such as insulation, retrofit measures, et cetera.

The capacity market is the Government’s main mechanism for ensuring the security of electricity supply. It has done a great job and we have already secured the majority of Great Britain’s capacity needs to meet future peak electricity demand out to 2025-26. The Government have also committed to ensuring a flexible system which involves the use of a wide range of technologies—again, a number of them were mentioned in the debate today—including battery storage and pumped storage, which I was really interested to hear my noble friend Lord Howell talk about. In my electrical engineering degree many years ago, we studied that particular development; for those who have not been able to see it, it is an incredible feat of engineering.

This amendment also has a requirement to commission assessments of the 10-point plan and of the costs of achieving net zero. My noble friend Lord Moylan raised concerns that progressing towards net zero is a “constraint” to achieving affordable and abundant energy in the UK. I reassure him that, as we transform the energy system, the Government are committed to pursuing the most cost-effective solutions, which, at the moment, are offshore and onshore wind. Ensuring security of supply and decarbonisation, and affordability to the consumer and the Exchequer, are of critical importance. While there will be costs, the costs of inaction in this sector, as we have seen through the invasion of Ukraine, are much greater. Had we not acted over the last decade or so to secure the second-largest supply of offshore wind in the world, the costs we would be facing now would be much greater and our security of supply would be at much greater peril.

As set out in the Net Zero Strategy, we estimate that the net cost to achieving net zero, excluding air quality and emissions-savings benefits, will be the equivalent of 1% to 2% of GDP in 2050. That strategy was informed by the Treasury’s 2021 Net Zero Review, which looked at the potential costs and benefits to businesses and consumers of the transition to a net-zero economy.

Furthermore, several mechanisms already exist to analyse the path towards net zero, as mentioned by my noble friend. For example, the Government’s approach to net zero is already subject to independent scrutiny by the Climate Change Committee, whose 2022 progress report included an analysis of the economic impact of decarbonisation. Much of this work already takes place.

I turn to Amendments 2, 3 and 4, tabled by the noble Baroness, Lady Blake, and the noble Lord, Lord Lennie. The Energy Act 2013 introduced the power for the designation of a strategy and policy statement that sets out the Government’s strategic priorities for energy policy, the roles and responsibilities of those implementing such a policy and the policy outcomes to be achieved. The Government have committed to laying a strategy and policy statement for energy policy later this year and a statement at the earliest appropriate time. Designation of a strategy and policy statement will ultimately be a decision for Parliament, not the Secretary of State. Therefore, I submit that these amendments are duplicative and unnecessary.

I thank my noble friend Lord Moylan for submitting Amendment 231. He raises an important point; splitting the wholesale market into two—namely, creating one market for variable renewables and another for firm generation—is already being considered as part of the review of electricity market arrangements, or REMA. An initial consultation, which included exactly this proposal, was published in July. Splitting the market is one of many options being considered within REMA. My department is currently assessing the viability of implementing a split market and the potential costs and benefits associated with doing so.

Based on stakeholder responses to the consultation and based on further policy developments, we will publish a second consultation in 2023 to set out any feasible options in more detail. Legislative proposals on how to implement recommended reforms will then follow. Adding a clause into the Bill that commits the Secretary of State to publishing legislative proposals on splitting the market by a specific point in time would, I submit, prejudge the outcomes of both the consultation and the review.

Photo of Lord Moylan Lord Moylan Conservative 4:45, 5 September 2022

My Lords, did I hear my noble friend say 2023? Did I hear that correctly?

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

Yes, it is a complicated area that requires proper and detailed policy analysis, but that work is under way, and we will do so.

Splitting the wholesale market would a necessitate a fundamental and irreversible design of our electricity market arrangements, and without the appropriate consideration of the potential costs and any potential benefits and without sufficient stakeholder input, it could well lead to higher bills for consumers, and it would create an investment hiatus which would jeopardise our ambitions for decarbonising the power sector by 2035—which is exactly the point I was making to my noble friend. So, this is an important issue, but it is one that needs to be looked at thoroughly, properly and professionally. I hope that my noble friend is assured that the issue is being closely examined and will therefore feel able to withdraw his amendment.

Photo of Baroness Worthington Baroness Worthington Crossbench

My Lords, would the Minister care to comment on the fact that—and this has been mooted as a potential solution in the short term during these unprecedented times where we see such high prices and so many people suffering—there is surely a logic to take a power now, to use it in extremis and then to continue with the longer-term conversation? I think the nation wants to see some action quite quickly and we have an Energy Bill.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I do not think it is important to do that at this stage; we have published the consultation, we are closely analysing responses, as the noble Baroness will understand. It is a difficult area, it is a complicated area, there are a number of potential ramifications, and we think it is worthy of consideration. If we took a power now, that might have a very destabilising effect on the market and on the amount of investment that is flowing into many of the sectors, so the Government’s position at the moment is that we do not think that is necessary or desirable.

I reassure noble Lords that the addition of electrification to the Energy Bill is also unnecessary. The net-zero strategy sets out the Government’s view on how electrification can enable cost-effective decarbonisation in transport, in heating and in industry—to that extent, I agree with the noble Baroness, Lady Worthington, and the points that she made—along with our approach to deliver reliable, affordable and low-carbon power. The energy security strategy accelerated, as I am sure the noble Baroness is aware, our ambitions for the deployment of renewables for nuclear and for hydrogen. I can assure noble Lords that the Government will never compromise our security of supply: that remains our primary consideration. But our understanding of what the future energy system will look like and the level of the demand that we will need to meet through electrification will essentially and inevitably evolve over time. So, we are not targeting a particular solution, but we rely on competition to spur investment in the different technologies and new ways of working, and new technologies such as more efficient batteries et cetera are coming onstream every day. We will closely take all these matters under consideration. We take the view that the Government’s role is to ensure the market framework is there and that encourages effective competition and, at the same time, delivers a secure and reliable system.

Finally, let me thank the noble Lords, Lord Howell and Lord Teverson, the noble Viscount, Lord Trenchard, and the noble Baronesses, Lady Jones and Lady Hayman, for their valuable contributions to the debate. I assure my noble friend Lord Howell that we are working internationally with the US, with the EU and with our other partners to produce a secure and reliable energy system together. In response to the noble Viscount, Lord Trenchard, I am sure he will be pleased to hear that through the £385 million advanced nuclear funds, we are providing funding to support research and development for precisely the small modular reactor designs that the noble Viscount wishes to see, and we are progressing plans to build an advanced modular reactor demonstration by the early 2030s at the latest. Therefore, with the reassurances that I have been able to provide, I hope that noble Lords will not press their amendments.

Photo of Lord Lennie Lord Lennie Opposition Whip (Lords), Shadow Spokesperson (Business, Energy and Industrial Strategy and International Trade)

My Lords, first, I apologise for not thanking the Minister for meeting us earlier today; that was helpful. To answer one or two points, the noble Viscount, Lord Trenchard, asked about what Boris Johnson said when he was Prime Minister—up to yesterday, or today. He raised questions about power stations being built and the figure of one a year for however many years necessary, and not being sure what power stations there were. The PM was never really good on detail and I think this proves that point. That does require some clarification.

The bigger point raised by the noble Lord, Lord Howell, and the Minister was in relation to the preambles. They asked: why these preambles? They are a combination, if you like, of the preambles to the climate change and sustainability Act and the Energy Act 2013, as the Minister pointed out. They seek to give some definition, some guidance, to what the Bill is intended to achieve, as opposed to its rather rambling, ongoing, imprecise nature. It is not so much that the Bill is objectionable; it is just not adequate to achieve what it intends.

We will look at this before Report. With those few comments, I beg leave to withdraw my amendment.

Amendment 1 withdrawn.

Amendments 2 to 7 not moved.

Clause 1: Principal objectives and general duties of Secretary of State and economic regulator