Clause 21

Energy Bill – in a Public Bill Committee at on 26 February 2008.

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offence to carry on unlicensed activities

Question proposed this day, That the clause stand part of the Bill.

Question again proposed.

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

Good afternoon, Mrs. Humble, and welcome to the Chair. Later on, perhaps this afternoon, we will come to the debate about renewables and the renewables obligation, so we have prepared a handout that is now available to Committee members. It will save me from giving a rather long and pedestrian speech; it will enable me to give a short and pedestrian speech instead. [ Interruption. ] I always knew that the Liberal Democrats had their uses, and I am grateful to the hon. Member for Northavon for passing out the handout.

I shall touch briefly on a few issues that came up this morning about carbon capture and storage, to provide some clarification for Committee members, before focusing on the specifics of clause 21. The hon. Member for Northavon asked about the Government’s position on oxyfuel technologies. He knows that oxyfuel combustion involves burning fossil fuels in a highly oxidised environment as a means of stripping carbon dioxide. For the purposes of the Government’s competition, oxyfuel is included in the definition of post-combustion, and therefore oxyfuel products will be able to enter the competition. The hon. Gentleman raised a further issue about the go-slow on projects that will not be able to participate in the Government-sponsored competition for the full-scale demonstration of CCS. We are aware that several companies were planning pre-combustion projects, but the Government cannot sponsor all demonstrations, as I argued this morning. Sponsoring one project alone will already represent a major investment of hundreds of millions of pounds, so the Government have concluded that it is important and immediate to demonstrate post-combustion on coal technology, which is relevant to the vast majority of plants being built now, particularly in developing economies. We recognise, however, that different CCS technologies are likely to be valuable in helping to tackle climate change, and we welcome and support the development and deployment of all CCS technologies. We hope that private companies will join us in our leadership and initiative.

My hon. Friend the Member for Bolton, South-East asked several interesting questions about CCS. First, he asked whether transportation costs will be considered  when assessing projects for the purpose of the demonstration. I am advised that the Government will support up to 100 per cent. of the additional capital and operating costs for the full chain of capture, transport and storage of carbon dioxide. Therefore, transportation costs will form an integral part of the evaluation of the bidding projects.

Secondly, my hon. Friend raised some specific and technical points about the MARKAL economic model. For the benefit of other Committee members, I shall provide some context to the MARKAL modelling, which was undertaken for the 2007 Energy White Paper. The UK MARKAL macro model is one of the few models in existence that allows us to examine how energy use in the whole UK economy might evolve under a carbon constraint. It provides technological detail about the entire energy system, including electricity, heat and transportation. For the Energy White Paper, the model was constrained to deliver the 60 per cent. reduction in carbon dioxide emissions by 2050, which is consistent with our energy goal for carbon emission reductions. Once the data and assumptions are fed in, the model chooses the most cost-effective combination of technologies throughout all sectors over time to deliver the carbon reduction goal by 2050.

As with any model of that type, the outcomes are necessarily based on the input data and assumptions. In recognition of the fact that the future is impossible to predict with any great or detailed certainty over such long time scales, the analysis for the Energy White Paper was undertaken for a range of scenarios and assumptions, including different fuel prices and electricity generation cost estimates. Seven scenarios were considered, with sensitivities explored for each scenario. I emphasise that the model is not a predictor of the future; rather, it can be used to help provide useful insights and inform thinking and longer term policy making. It is only one of a range of considerations that informs Government thinking and policy making.

I wish to look at the process by which the cost estimates and assumptions that were fed into the MARKAL modelling were arrived at. It is one of the main issues raised by my hon. Friend the Member for Bolton, South-East. The cost estimates and assumptions were formulated following expert peer review from both internal and external experts, including companies engaged in power generation. Those assumptions were based on the best available information at the time of the analysis.

Finally, the hon. Member for St. Albans raised the issue of responsible arrangements proposed in relation to carbon dioxide stores. I will cover those issues in greater detail during the stand part debate for clause 30 and we will consult on that very shortly. However, I would like to clarify one of the points that I made this morning on the topic. While carbon dioxide is being injected into the store, the operator will be solely and fully responsible for that store, including any liabilities that may arise in connection with it. Security may need to be provided to ensure that the operator is able to comply with its obligations. Such liabilities will continue even after the store is closed, so that for a period of time the operator will continue to be responsible for a store that has been closed to any further injection. That period of post-closure liability must be sufficient to establish, on the basis of regular  monitoring and inspections, that the store is safe and stable. Only once the licensing authority is satisfied that that is the case would the operator’s licence be terminated, providing that the site had been fully decommissioned in compliance with the decommissioning programme. Upon termination of the operator’s licence, the long-term stewardship of the store, including any liabilities that may arise, would be managed by the Crown Estate that will monitor the closed store for as long as necessary.

That is a clarification because I think that in my remarks this morning, my suggestion that the injection would finish, the store would close and it would pass to the state was an over-simplification. I am now clarifying the matter by talking about what I am sure hon. Members will agree is an obvious interim period where the company maintains responsibility.

Photo of Anne Main Anne Main Conservative, St Albans

I thank the Minister for that clarification. Would the reasonable period of time that he has outlined be the same for every store that was used, or would each store be judged on its own merits?

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

The hon. Lady always expects me to predict the detailed future for an emerging technology. As I said this morning, we are only into the first pages of chapter one on this technology and I cannot predict the footnotes for chapter six. I am sorry, but I do not know the answer. I guess that it might vary from licence to licence and from store to store but until we get into greater detail and consultation, I will not have the answer to that. Someone else may, however, and if I change my mind about it, I will let members of the Committee know. It will be judged on its merits once it reaches a stable state, and whether that stable state might vary because of the geology is only an assumption. I am grateful to the hon. Lady for asking that question.

I now turn to the specifics of clause 21. As I began outlining this morning, the clause makes it an offence to carry on carbon dioxide storage activities without a licence, and it sets maximum penalties for an offence committed under the clause. The purpose of the clause is to ensure that any carbon dioxide storage related operations are carried out by appropriately licensed operators, thus minimising the potential negative effects on the environment, health and safety or other uses of the sea. Currently, the deposition of substances in the marine environment, including the sea bed, is governed by provisions in part 2 of the Food and Environmental Protection Act 1985. In the clause, we have sought to achieve consistency with the penalty arrangements that would have applied had the licences been issued under that Act. However, the provisions in the clause ensure that lower penalties will apply to exploring or building installations for the purposes of exploration without a licence, as the environmental risks associated with such activities are lower than those associated with storage.

We had a major debate on CCS this morning, and the next few clauses—up to clause 26 or so, I think—are in many ways similar to the ones that we discussed on gas storage. It is up to the Committee whether to debate them, but I intend to move some of them formally. I give early notice of that in case others would like a debate on them.

Photo of Joan Humble Joan Humble Labour, Blackpool North and Fleetwood

The Minister has been helpful to the Committee in answering questions that were asked earlier, but I remind any other Members who wish to contribute to the debate that they should limit their contributions to clause 21.

Question put and agreed to.

Clause 21 ordered to stand part of the Bill.

Clause 22 ordered to stand part of the Bill.