Amendment 22

Great British Energy Bill - Committee (1st Day) (Continued) – in the House of Lords at 8:30 pm on 3 December 2024.

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Lord Ashcombe:

Moved by Lord Ashcombe

22: Clause 3, page 2, line 18, at end insert—“(e) the exploration of oil and gas in the North Sea where the UK’s energy security is compromised.”Member’s explanatory statementThis would amend Great British Energy’s objects to include the exploration of oil and gas in the North Sea where the UK’s energy security is compromised.

Photo of Lord Ashcombe Lord Ashcombe Conservative

My Lords, Amendment 22 in my name is about energy security. Energy security is a matter of utmost importance—a foundation on which our homes, businesses and industries depend. We must ensure that our nation can provide reliable power to keep the lights on and our economy running.

I was not in this country during the 1970s but lived in the Republic of Ireland. We suffered power cuts that caused significant disruption. I recall a farming friend who lost his entire pig herd due to a lack of ventilation—a stark reminder of the devastating consequences when power systems fail. We cannot afford to let such a situation arise here.

While I wholeheartedly support the goal of achieving net zero by 2050, we must temper ambition with pragmatism. The United Kingdom accounts for 1% of global carbon dioxide emissions, compared with 33% from China and 12.5% from the United States. While we strive for cleaner energy, we must be realistic about the scale of transformation required. Getting electricity production to net zero by 2030 is a noble aspiration, but it remains a significant challenge.

Progress has been made. According to the Department for Energy Security and Net Zero, the UK’s carbon dioxide emissions decreased by almost 50% between 1990 and 2023, including a 6.6% drop in the year ending 2023. Electricity generation contributes 11% of our greenhouse emissions. Efforts to reduce this share are ongoing. However, our energy mix relies on a delicate balance. Nuclear power—which we have just discussed—and biomass provide baseload capacity most of the time, while solar and wind offer renewable contributions that are inherently variable. Interconnectors, though helpful, depend on surplus supply from neighbouring countries.

The swing producer in our energy system remains gas, which under certain circumstances—when the wind is not blowing and the sun is not shining—supplies upwards of 60% of our energy needs. As the Government push for greater electrification, whether in transport, heating or industry, the strain on our grid will only increase. Targets for offshore and floating wind are ambitious, as are those for solar power, which raises concerns about land use and its impact on food production—an amendment for later discussion, I am sure.

Onshore wind also faces resistance, and these challenges make clear that gas generation will remain a critical component of our energy mix for years to come. Let us not forget that electricity accounts for only 20% to 25% of the energy consumed in this country, and that 87% of UK homes rely on gas for heating and hot water, yet domestic gas production declined by 10% between 2022 and 2023 and nearly 14% to August this year, according to Offshore Energies UK.

This leaves us increasingly reliant on imports, as our current production is about 40% of requirements. Imported gas comes via pipelines from Europe or as LNG shipments. Global instability, such as sanctions on Russia, has tightened supply, while demand in Europe has risen. Norway, a trusted ally, provides the majority of gas imported by pipeline, some 35%, placing many of our eggs in one basket. The additional 25% required comes as LNG, sourced from countries such as the United States and Qatar, both of which have indicated that their supplies will increase. This has a significantly higher carbon footprint—on average four times more than our domestic production—due to transport and production methods.

The North Sea Transition Authority’s 2024 Emissions Monitoring Report indicates that UK gas production is a top-quartile performer according to kilograms of carbon dioxide equivalent per barrel of oil equivalent—kgCO2e/boe. The NSTA report also shows a good methane emissions performance—arguably a greater concern than carbon dioxide emissions—with the UK having an intensity of 1 kgCO2e/boe versus the global average of 16 kgCO2e/boe. I apologise for all the figures.

New UK developments are being delivered far more cleanly than the average of current existing UK developments. New UK developments are significantly cleaner than imports, producing emissions roughly 10 times cleaner than LNG imports. We are fortunate to have an abundance of hydrocarbons in our offshore waters. Despite the decline, there is still potential for two or three decades of production, as I mentioned at Second Reading. Exploiting this resource responsibly would protect some 200,000 direct and indirect jobs, sustain some critical industries and provide a bridge to the renewable future. Moreover, recommencing the issuance of oil and gas licences would help reduce global emissions by avoiding the higher carbon intensity of imports, stabilise our energy and bolster our economy.

However, I must caution that the current tax regime risks an 80% slump in investment in the UK oil and gas industry over the next five years, according to OEUK. This would undermine both energy security and our ability to transition effectively. Lifting the ban on new exploration and production licences, while ensuring robust environmental standards, offers a pragmatic path forward. It will protect jobs, reduce emissions and, most importantly, help secure the energy future of the United Kingdom. I very much look forward to the Minister’s response and beg to move.

Photo of Lord Offord of Garvel Lord Offord of Garvel Shadow Minister (Energy Security and Net Zero)

My Lords, I thank my noble friend Lord Ashcombe, whose amendment I support, for his insightful contributions on the important issue of energy security. This issue cannot go unaddressed when discussing the Bill because of the consequences to our country’s energy production, supply and security. Indeed, Clause 3 explicitly states that GBE’s objects

“are restricted to facilitating, encouraging and participating in … measures for ensuring the security of the supply of energy”.

However, the Bill makes no provision to ensure the security and future of our energy supply, and I express my deepest concern that the tunnel-vision focus on renewable energy to achieve the Government’s overly ambitious target of clean energy by 2030 will inevitably compromise our energy security.

The UK’s energy security should indeed be at the forefront of the debate on the Bill. The Government have said that Great British Energy is part of their plans to ramp up renewables, which they say will result in cheaper energy and greater energy security. However, this is simply not true. Instead, the Government’s renewable plans will cost the British people and our national energy security.

We on these Benches of course recognise the need to cut household energy bills for families, to accelerate private investment in energy infrastructure, and to protect and create jobs in the energy industry across the UK, but the Bill gives no indication as to how this will be achieved. It does not include any measures to ensure the effective delivery of a reduction in household energy bills, nor an increase in British jobs, nor the long-term security of our energy supply. We understand that the purpose of Great British Energy will be to assist the Government in ramping up renewables to achieve their self-imposed target of 100% clean energy by 2030. This is a target that I believe to be driven by political ideology and which industry experts have described as aggressive, unrealistic and expensive, requiring far more than the allocated £8.3 billion of funding.

It is an undeniable truth that renewable energy will always be naturally unreliable. As my noble friend Lady Bloomfield brought to our attention at Second Reading, over the last couple of months, as was the case this time last year and in March, we have seen another dunkelflaute. Indeed, in March, the measure of how often turbines generate their maximum power failed to reach 20%, and we have recently seen levels drop to nearly zero. Relying on new interconnectors to Belgium and Holland will not offer energy security if their wind farms suffer the same weather conditions as ours or if their countries’ needs are greater than ours.

All this being said, it is therefore vital that we acknowledge the UK’s North Sea oil and gas industry when we discuss the future of our energy production and security. This industry has suffered under the Government, as they increase their taxes on North Sea oil to punitive levels. Energy firms have described increasing the windfall tax by 3%—with the headline rate of tax now a staggering 78%—and extending this to 2030 as a devastating blow. This hike will cut investment in UK natural resources and oil and gas production, as indicated by my noble friend Lord Ashcombe, which will make the UK increasingly dependent on imported supply. This will compromise our energy security, but consumers will also be exposed to price fluctuations. The country will become increasingly dependent on imported electricity and will therefore be forced to pay the market price for power as fossil fuel powered generators are closed at a quicker pace than we are ramping up the necessary capacity to replace them.

Not only this, but if investment in UK oil and gas decreases then the revenue generated from the energy profit levy, which the Government are relying on to help fund GBE, will decrease. By pressing ahead with ending oil and gas licences—a move no other major economy has taken—£12 billion in tax receipts have been lost from the North Sea. This, combined with the £8 billion which will be spent on GBE, is a staggering £20 billion of taxpayers’ money.

Analysts have spoken out and warned about relying on North Sea oil taxes to fund the Government’s green energy plans while the Government tax the operators to the point that revenues fall by 80%, as indicated by my noble friend Lord Ashcombe. We must address the fact that the revenue generated from the energy profit levy, or windfall tax, may fall if investment in UK oil and gas decreases. Alongside private sector investment, the Government are relying on windfall tax revenues to fund GBE and support the transition to clean power by 2030. Furthermore, the £8 billion allocated to GBE does not compensate for the amount of investment in energy projects that will be doomed by the Government’s plans to prematurely shut down the UK oil and gas sector.

The North Sea oil and gas industry is not only critical to the UK energy supply but a bedrock for many economies and communities. Economic ecosystems have developed around this industry. It is therefore critical that we manage the energy transition properly. The Government’s plan for GBE, combined with the energy profits levy, puts the industry at risk at this vital time. The proposed increases and the removal of the investment allowances could be detrimental to investment. Offshore Energies UK has warned that the tax increase could see investment in the UK cut from £14 billion to £2 billion between now and 2029. That is not scaremongering; it is what the industry is telling us.

The only detail we have heard about the number of jobs to be created by GBE came from the Secretary of State’s hand-picked chair of that body, who said that “hundreds” of people will be employed at the Aberdeen headquarters. We have since found out that the chair himself will be based in Manchester. More importantly, these few hundred people will hardly make up for the 200,000 jobs the Government are putting at risk with their plans to shut down the North Sea and the missed opportunity for jobs thanks to the go-slow on nuclear. On the Secretary of State’s watch, we have already seen thousands of jobs in the industry lost.

I thank my noble friend Lord Ashcombe for moving the amendment, which gives vital consideration to the role the North Sea oil and gas industry might play if our national energy is compromised. I support my noble friend’s efforts and thank him for his contribution. The establishment of GBE is an effort to fulfil the Government’s rushed, unprecedented and unilateral target for clean power by 2030, which will come at a great cost to the North Sea oil and gas industry and the UK’s energy security. I am therefore thankful to my noble friend for bringing this issue to the forefront of the debate on the Bill.

Photo of Lord Hamilton of Epsom Lord Hamilton of Epsom Conservative 8:45, 3 December 2024

I hope the Committee will forgive me. I was slow on the uptake and should have preceded my noble friend instead of following him. I think doing so is legitimate within the rules of Committee.

I very much support my noble friend Lord Ashcombe’s amendment. The Minister has already made the point that I have the greatest possible reservations about net zero. This is not because I have some tremendous hang-up and that I want to pollute the atmosphere and make the place less liveable than it might otherwise be, but because we are now reaching the point on net zero where the costs are starting to come in and getting very severe indeed. That is why we have to think very closely and carefully about where we go from here.

We have done an awful lot to lower our net emissions into the atmosphere, largely by closing down vast areas of our generation industry, in which coal-fired power stations have now been phased out almost completely. What has happened? We think we are setting a wonderful example to the rest of the world but our net emissions come down and world emissions go up. That is hardly surprising, because the Chinese and the Indians are still building coal-fired power stations. They account for massive amounts of coal-fired energy, which keeps their energy prices low and makes them very competitive with the rest of the world. Are we really going to see a change of heart from China and India? Will they suddenly say, “No, no, we’ve been polluting the atmosphere too much and we must now start cleaning everything up and working to net zero”? I do not think they will. They want to keep their competitive position.

That is why it is so essential, to refer back to my noble friend’s amendment, that we continue to accept that we will need oil and gas for much longer than we might originally have thought. The cost of saying we will not explore for any more oil and gas in the North Sea is absolutely massive in terms of jobs for people living in Scotland. The pigeons are starting to come home on all this. That is one of the reasons why I have the greatest possible reservations about driving on towards this net-zero target: the costs are becoming prohibitive. Our energy prices are already higher than almost everybody in Europe. This will cost us jobs and competitiveness in the world generally for years to come.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Minister of State (Department for Energy Security and Net Zero)

My Lords, one of the joys of debating energy is that, on every occasion, we come back to the substance of the whole argument about energy and where we are going. I am grateful to the noble Lord, Lord Ashcombe, for stimulating such an interesting discussion. The noble Lord, Lord Hamilton, in a sense, has brought this into the open. Clearly, it was his Government who signed up to the legislation on net zero by 2050. The last Government, as much as we do, saw the huge risks involved in climate change and the need to take action.

The international position is that, despite what the noble Lord says, the fastest growth in use of renewable energy is occurring in China. The International Energy Agency indicated in its recent renewable energy report that we will see a 2.7 times increase in the use of renewables globally between now and 2030. So, there is a global movement towards clean power and net zero. Yes, it is going at different paces, but we believe the UK can gain great advantage by taking a leadership role. The National Energy System Operator—NESO—has shown that there is a pathway to clean power by 2030. We are now committed to taking that and turning it into an action plan, which I hope we will be able to publish very shortly.

I would not deny that North Sea oil and gas still have important roles to play, and I am of course listening to what noble Lords say about the tax situation and proposals, and the investment issue. Clearly, the Government are in very close discussions with the industry. Our aim is an orderly transition, and that is what we mean to achieve. So we clearly see the value of what happens in the North Sea, and we need it to continue to provide supplies to the UK in the years ahead. Equally, however, we need to manage the transition to clean power and net zero.

On the issue of jobs, obviously, the number of people employed by GBE will not balance out the people who may be lost to the oil and gas industry in the future. This is important. It does not really matter where the chair comes from; the point is that the headquarters of GBE will be firmly based in Aberdeen. I have already referred to the extra 40,000 people we need in nuclear by 2030. If you look at the other sectors we are talking about investing in—CCUS, hydrogen—all of them will need more people. So, the energy sector as a whole will provide a huge number of opportunities, but I accept that, if there is a reduction in the number of people employed in the North Sea, it is our responsibility, with industry, to help manage that transition effectively.

In the end, we may disagree about this, but the Government are confident that we are right to go towards clean power as quickly as possible. We have had endorsement, both from the Committee on Climate Change and the Office for Budget Responsibility, that investing in clean energy now will pay dividends in the long term.

Photo of Lord Ashcombe Lord Ashcombe Conservative

I am grateful to the Minister and, indeed, to my noble friends. I continue to worry that, as we import LNG, our effective emissions, by passing the problem elsewhere, are significantly higher than they would be using our own production. That is an important fact in this debate. We may have to come back to this issue on Report, but for now, I beg leave to withdraw my amendment.

Amendment 22 withdrawn.

Amendments 23 to 34 not moved.

Clause 3 agreed.

Clause 4: Financial assistance