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House of Commons Hansard
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Public Bill Committees
04 February 2016

Energy BILL [ Lords ] (Sixth sitting)

The Committee consisted of the following Members:

Chairs: † Philip Davies, Mr Adrian Bailey

† Boswell, Philip (Coatbridge, Chryston and Bellshill) (SNP)

† Cartlidge, James (South Suffolk) (Con)

† Dowden, Oliver (Hertsmere) (Con)

† Fernandes, Suella (Fareham) (Con)

† Hall, Luke (Thornbury and Yate) (Con)

Harpham, Harry (Sheffield, Brightside and Hillsborough) (Lab)

† Heaton-Harris, Chris (Daventry) (Con)

† Hoare, Simon (North Dorset) (Con)

† Kinnock, Stephen (Aberavon) (Lab)

† Leadsom, Andrea (Minister of State, Department of Energy and Climate Change)

† Lewis, Clive (Norwich South) (Lab)

† Lynch, Holly (Halifax) (Lab)

† McCaig, Callum (Aberdeen South) (SNP)

† Maynard, Paul (Blackpool North and Cleveleys) (Con)

† Pennycook, Matthew (Greenwich and Woolwich) (Lab)

† Reynolds, Jonathan (Stalybridge and Hyde) (Lab/Co-op)

† Smith, Julian (Skipton and Ripon) (Con)

† Sunak, Rishi (Richmond (Yorks)) (Con)

† Warman, Matt (Boston and Skegness) (Con)

† Whitehead, Dr Alan (Southampton, Test) (Lab)

Katy Stout, Ben Williams, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 4 February 2016

(Morning)

[Philip Davies in the Chair]

Energy Bill [Lords]

New Clause 1

Onshore wind power: closure of renewables obligation on 31 March 2016

‘(1) In Part 1 of the Electricity Act 1989 (electricity supply), after section 32LB insert—

“32LC Onshore wind generating stations: closure of renewables obligation

(1) No renewables obligation certificates are to be issued under a renewables obligation order in respect of electricity generated after 31 March 2016 by an onshore wind generating station.

(2) Subsection (1) does not apply to electricity generated in the circumstances set out in any one or more of sections 32LD to 32LL.

(3) In this section and sections 32LD to 32LL “onshore wind generating station” means a generating station that—

(a) generates electricity from wind, and

(b) is situated in England, Wales or Scotland, but not in waters in or adjacent to England, Wales or Scotland up to the seaward limits of the territorial sea.

(4) The reference in subsection (1) to a renewables obligation order is to any renewables obligation order made under section 32 (whenever made, and whether or not made by the Secretary of State).

(5) Power to make provision in a renewables obligation order or a renewables obligation closure order (and any provision contained in such an order) is subject to subsection (1) and sections 32LD to 32LL.

(6) This section is not otherwise to be taken as affecting power to make provision in a renewables obligation order or renewables obligation closure order.”

(2) The Renewables Obligation Closure Order 2014 (S.I. 2014/2388) is amended as follows.

(3) In article 2(1) (interpretation), after the definition of “network operator” insert—

““onshore wind generating station” means a generating station that—

(a) generates electricity from wind, and

(b) is situated in England, Wales or Scotland, but not in waters in or adjacent to England, Wales or Scotland up to the seaward limits of the territorial sea;”.

(4) In article 3 (closure of renewables obligation on 31st March 2017)—

(a) in the heading, after “solar pv stations” insert “or onshore wind generating stations”;

(b) in paragraph (1), after “solar pv station” insert “or an onshore wind generating station”.”’—(Andrea Leadsom.)

This New Clause prevents renewables obligation certificates from being issued in respect of electricity generated after 31 March 2016 by a generating station that generates electricity from wind and is located onshore in England, Wales or Scotland. There are exceptions to this in certain cases: see New Clause NC2.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Division 7

4 February 2016

The Committee divided:

Ayes: 11
Noes: 6

Question accordingly agreed to.

View Details

New clause 1 read a Second time, and added to the Bill.

New Clause 2

Onshore wind power: circumstances in which certificates may be issued after 31 March 2016

(1) Part 1 of the Electricity Act 1989 (electricity supply) is amended as follows.

(2) After section 32LC (inserted by section [Onshore wind power: closure of renewables obligation on 31 March 2016]) insert—

“32LD Onshore wind generating stations accredited, or additional capacity added, on or before 31 March 2016

The circumstances set out in this section are where the electricity is—

(a) generated by an onshore wind generating station which was accredited on or before 31 March 2016, and

(b) generated using—

(i) the original capacity of the station, or

(ii) additional capacity which in the Authority’s view first formed part of the station on or before 31 March 2016.

32LE Onshore wind generating stations accredited, or additional capacity added, between 1 April 2016 and 31 March 2017: grid or radar delay condition met

The circumstances set out in this section are where the electricity is—

(a) generated using the original capacity of an onshore wind generating station—

(i) which was accredited during the period beginning with 1 April 2016 and ending with 31 March 2017, and

(ii) in respect of which the grid or radar delay condition is met, or

(b) generated using additional capacity of an onshore wind generating station, where—

(i) the station was accredited on or before 31 March 2016,

(ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 April 2016 and ending with 31 March 2017, and

(iii) the grid or radar delay condition is met in respect of the additional capacity.

32LF Onshore wind generating stations accredited, or additional capacity added, on or before 31 March 2017: approved development condition met

The circumstances set out in this section are where the electricity is—

(a) generated using the original capacity of an onshore wind generating station—

(i) which was accredited on or before 31 March 2017, and

(b) generated using additional capacity of an onshore wind generating station, where—

(i) the station was accredited on or before 31 March 2016,

(iii) the approved development condition is met in respect of the additional capacity.

32LG Onshore wind generating stations accredited, or additional capacity added, between 1 April 2017 and 31 March 2018: grid or radar delay condition met

The circumstances set out in this section are where the electricity is—

(a) generated using the original capacity of an onshore wind generating station—

(i) which was accredited during the period beginning with 1 April 2017 and ending with 31 March 2018,

(ii) in respect of which the approved development condition is met, and

(b) generated using additional capacity of an onshore wind generating station, where—

(i) the station was accredited on or before 31 March 2016,

(iii) the approved development condition is met in respect of the additional capacity, and

32LH Onshore wind generating stations accredited, or additional capacity added, between 1 April 2017 and 31 December 2017: investment freezing condition met

The circumstances set out in this section are where the electricity is—

(a) generated using the original capacity of an onshore wind generating station—

(i) which was accredited during the period beginning with 1 April 2017 and ending with 31 December 2017, and

(b) generated using additional capacity of an onshore wind generating station, where—

(ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 April 2017 and ending with 31 December 2017, and

32LI Onshore wind generating stations accredited, or additional capacity added, between 1 January 2018 and 31 December 2018: grid or radar delay condition met

The circumstances set out in this section are where the electricity is—

(a) generated using the original capacity of an onshore wind generating station—

(i) which was accredited during the period beginning with1 January 2018 and ending with 31 December 2018,

(ii) in respect of which both the approved development condition and the investment freezing condition are met, and

(iii) in respect of which the grid or radar delay condition is met, or

(b) generated using additional capacity of an onshore wind generating station, where—

(i) the station was accredited on or before 31 March 2016,

(ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 January 2018 and ending with 31 December 2018,

(iii) both the approved development condition and the investment freezing condition are met in respect of the additional capacity, and

(iv) the grid or radar delay condition is met in respect of the additional capacity.

32LJ The approved development condition

(1) This section applies for the purposes of sections 32LF to 32LI.

(2) The approved development condition is met in respect of an onshore wind generating station if the documents specified in subsections (4), (5) and (6) were provided to the Authority with the application for accreditation of the station.

(3) The approved development condition is met in respect of additional capacity if the documents specified in subsections (4), (5) and (6) were provided to the Authority on or before the date on which the Authority made its decision that the additional capacity could form part of an onshore wind generating station.

(4) The documents specified in this subsection are—

(a) evidence that—

(i) planning permission for the station or additional capacity was granted on or before 18 June 2015, and

(ii) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached,

(b) evidence that—

(i) planning permission for the station or additional capacity was refused on or before 18 June 2015, but granted after that date following an appeal or judicial review, and

(ii) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached,

(c) evidence that—

(ii) the period allowed under section 78(2) of the 1990 Act or (as the case may be) section 47(2) of the 1997 Act ended on or before 18 June 2015 without any of the things mentioned in section 78(2)(a) to (b) of the 1990 Act or section 47(2)(a) to (c) of the 1997 Act being done in respect of the application,

(iii) the application was not referred to the Secretary of State, Welsh Ministers or Scottish Ministers in accordance with directions given under section 77 of the 1990 Act or section 46 of the 1997 Act,

(iv) 1990 Act permission or 1997 Act permission was granted after 18 June 2015 following an appeal, and

(d) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, planning permission is not required for the station or additional capacity.

(5) The documents specified in this subsection are—

(a) a copy of an offer from a licensed network operator made on or before 18 June 2015 to carry out grid works in relation to the station or additional capacity, and evidence that the offer was accepted on or before that date (whether or not the acceptance was subject to any conditions or other terms), or

(b) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, no grid works were required to be carried out by a licensed network operator in order to enable the station to be commissioned or the additional capacity to form part of the station.

(6) The documents specified in this subsection are a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, as at 18 June 2015 a relevant developer of the station or additional capacity (or a person connected, within the meaning of section 1122 of the Corporation Tax Act 2010, with a relevant developer of the station or additional capacity)—

(a) was an owner or lessee of the land on which the station or additional capacity is situated,

(b) had entered into an agreement to purchase or lease the land on which the station or additional capacity is situated,

(c) had an option to purchase or to lease the land on which the station or additional capacity is situated, or

(d) was a party to an exclusivity agreement in relation to the land on which the station or additional capacity is situated.

(7) In this section—

“the 1990 Act” means the Town and Country Planning Act 1990;

“1990 Act permission” means planning permission under the 1990 Act (except outline planning permission, within the meaning of section 92 of that Act);

“the 1997 Act” means the Town and Country Planning (Scotland) Act 1997;

“1997 Act permission” means planning permission under the 1997 Act (except planning permission in principle, within the meaning of section 59 of that Act);

“exclusivity agreement”, in relation to land, means an agreement by the owner or a lessee of the land not to permit any person (other than the persons identified in the agreement) to construct an onshore wind generating station on the land;

“planning permission” means—

(a) consent under section 36 of this Act,

(b) 1990 Act permission,

(c) 1997 Act permission, or

(d) development consent under the Planning Act 2008.

32LK The investment freezing condition

(1) This section applies for the purposes of sections 32LH and 32LI.

(2) The investment freezing condition is met in respect of an onshore wind generating station if the documents specified in subsection (4) were provided to the Authority with the application for accreditation of the station.

(3) The investment freezing condition is met in respect of additional capacity if the documents specified in subsection (4) were provided to the Authority on or before the date on which the Authority made its decision that the additional capacity could form part of an onshore wind generating station.

(4) The documents specified in this subsection are—

(a) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, as at the Royal Assent date—

(i) the relevant developer required funding from a recognised lender before the station could be commissioned or additional capacity could form part of the station,

(ii) a recognised lender was not prepared to provide that funding until enactment of the Energy Act 2016, because of uncertainty over whether the Act would be enacted or its wording if enacted, and

(iii) the station would have been commissioned, or the additional capacity would have formed part of the station, on or before 31 March 2017 if the funding had been provided before the Royal Assent date, and

(b) a letter or other document, dated on or before the date which is 28 days after the Royal Assent date, from a recognised lender confirming (whether or not the confirmation is subject to any conditions or other terms) that the lender was not prepared to provide funding in respect of the station or additional capacity until enactment of the Energy Act 2016, because of uncertainty over whether the Act would be enacted or its wording if enacted.

(5) In this section—

“recognised lender” means a provider of debt finance which has been issued with an investment grade credit rating by a registered credit rating agency;

“the Royal Assent date” means the date on which the Energy Act 2016 is passed.

(6) For the purposes of the definition of “recognised lender” in subsection (5)—

“investment grade credit rating” means a credit rating commonly understood by registered credit rating agencies to be investment grade;

“registered credit rating agency” means a credit rating agency registered in accordance with Regulation (EC) No 1060/2009 of the European Parliament and the Council of 16 September 2009 on credit rating agencies.

32LL The grid or radar delay condition

(1) This section applies for the purposes of sections 32LE, 32LG and 32LI.

(2) The grid or radar delay condition is met in respect of an onshore wind generating station if, on or before the date on which the Authority made its decision to accredit the station, the documents specified in subsection (4), (5) or (6) were—

(a) submitted by the operator of the station, and

(b) received by the Authority.

(3) The grid or radar delay condition is met in respect of additional capacity if, on or before the date on which the Authority made its decision that the additional capacity could form part of an onshore wind generating station, the documents specified in subsection (4), (5) or (6) were—

(a) submitted by the operator of the station, and

(b) received by the Authority.

(4) The documents specified in this subsection are—

(a) evidence of an agreement with a network operator (“the relevant network operator”) to carry out grid works in relation to the station or additional capacity (“the relevant grid works”);

(b) a copy of a document written by, or on behalf of, the relevant network operator which estimated or set a date for completion of the relevant grid works (“the planned grid works completion date”) which was no later than the primary date;

(c) a letter from the relevant network operator confirming (whether or not such confirmation is subject to any conditions or other terms) that—

(i) the relevant grid works were completed after the planned grid works completion date, and

(ii) in the relevant network operator’s opinion, the failure to complete the relevant grid works on or before the planned grid works completion date was not due to any breach by a generating station developer of any agreement with the relevant network operator; and

(d) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, the station would have been commissioned, or the additional capacity would have formed part of the station, on or before the primary date if the relevant grid works had been completed on or before the planned grid works completion date.

(5) The documents specified in this subsection are—

(a) evidence of an agreement between a generating station developer and a person who is not a generating station developer (“the radar works agreement”) for the carrying out of radar works (“the relevant radar works”);

(b) a copy of a document written by, or on behalf of, a party to the radar works agreement (other than a generating station developer) which estimated or set a date for completion of the relevant radar works (“the planned radar works completion date”) which was no later than the primary date;

(c) a letter from a party to the radar works agreement (other than a generating station developer) confirming, whether or not such confirmation is subject to any conditions or other terms, that—

(i) the relevant radar works were completed after the planned radar works completion date, and

(ii) in that party’s opinion, the failure to complete the relevant radar works on or before the planned radar works completion date was not due to any breach of the radar works agreement by a generating station developer; and

(d) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, the station would have been commissioned, or the additional capacity would have formed part of the station, on or before the primary date if the relevant radar works had been completed on or before the planned radar works completion date.

(6) The documents specified in this subsection are—

(a) the documents specified in subsection (4)(a), (b) and (c);

(b) the documents specified in subsection (5)(a), (b) and (c); and

(c) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, the station would have been commissioned, or the additional capacity would have formed part of the station, on or before the primary date if—

(i) the relevant grid works had been completed on or before the planned grid works completion date, and

(ii) the relevant radar works had been completed on or before the planned radar works completion date.

(7) In this section “the primary date” means—

(a) in a case within section 32LE(a)(i) or (b)(i) and (ii), 31 March 2016;

(b) in a case within section 32LG(a)(i) and (ii) or (b)(i) to (iii), 31 March 2017;

(c) in a case within section 32LI(a)(i) and (ii) or (b)(i) to (iii), 31 December 2017.”

(3) In section 32M (interpretation of sections 32 to 32M)—

(a) in subsection (1), for “32LB” substitute “32LL”;

(b) at the appropriate places insert the following definitions—

““accredited”, in relation to an onshore wind generating station, means accredited by the Authority as a generating station which is capable of generating electricity from renewable sources; and “accredit” and “accreditation” are to be construed accordingly;”;

““additional capacity”, in relation to an onshore wind generating station, means any generating capacity which does not form part of the original capacity of the station;”;

““commissioned”, in relation to an onshore wind generating station, means having completed such procedures and tests in relation to the station as constitute, at the time they are undertaken, the usual industry standards and practices for commissioning that type of generating station in order to demonstrate that it is capable of commercial operation;”;

““generating station developer”, in relation to an onshore wind generating station or additional capacity, means—

(a) the operator of the station, or

(b) a person who arranged for the construction of the station or additional capacity;”;

““grid works”, in relation to an onshore wind generating station, means—

(a) the construction of a connection between the station and a transmission or distribution system for the purpose of enabling electricity to be conveyed from the station to the system, or

(b) the carrying out of modifications to a connection between the station and a transmission or distribution system for the purpose of enabling an increase in the amount of electricity that can be conveyed over that connection from the station to the system;”;

““licensed network operator” means a distribution licence holder or a transmission licence holder;”;

““network operator” means a distribution exemption holder, a distribution licence holder or a transmission licence holder;”;

““onshore wind generating station” has the meaning given by section32LC(2);”;

““original capacity”, in relation to an onshore wind generating station, means the generating capacity of the station as accredited;”;

““radar works” means—

(a) the construction of a radar station,

(b) the installation of radar equipment,

(c) the carrying out of modifications to a radar station or radar equipment, or

(d) the testing of a radar station or radar equipment;”;

““relevant developer”, in relation to an onshore wind generating station or additional capacity, means a person who—

(a) applied for planning permission for the station or additional capacity,

(b) arranged for grid works to be carried out in relation to the station or additional capacity,

(c) arranged for the construction of any part of the station or additional capacity,

(d) constructed any part of the station or additional capacity, or

(e) operates, or proposes to operate, the station;”.”—(Andrea Leadsom.)

This New Clause provides for cases in which renewables obligation certificates may continue to be issued in respect of electricity generated after 31 March 2016 by onshore wind generating stations in England, Wales or Scotland, despite the general closure effected by New Clause NC1. The cases are those described in the new sections 32LD to 32LI of the Electricity Act 1989.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Division 8

4 February 2016

The Committee divided:

Ayes: 11
Noes: 6

Question accordingly agreed to.

View Details

New clause 2 read a Second time.

Amendment proposed to new clause 2: (a), in new section 32LJ(4) at end insert—

“(da) evidence that either—

(i) a grant of planning permission was resolved by the relevant planning authority on or before 18 June 2015,

(ii) planning permission was granted after 18 June 2015 but not later than 18 September 2015, or

(iii) planning permission, consent or development consent was granted after 18 June 2015 under section 73 of the 1990 Act, section 42 of the 1997 Act, section 36(C) of this Act, or under the Planning Act 2008 varying a planning permission, consent or development consent granted on or before 18 June 2015,

(db) evidence that—

any condition as to the time period within which the development to which the permission relates must be begun have not been breached.”— (Dr Whitehead.)

This amendment would include schemes within the grace period that have received planning consent from local planning authorities by the relevant date, but have not received final documentation, providing that final documentation is received by three months after this date.

Question put, That the amendment be made.

Division 9

4 February 2016

The Committee divided:

Ayes: 7
Noes: 11

Question accordingly negatived.

View Details

New clause 2 added to the Bill.

New Clause 3

Use of Northern Ireland certificates: onshore wind power

(1) The Electricity Act 1989 is amended as follows.

(2) Before section 32M insert—

32LM Use of Northern Ireland certificates: onshore wind power

(1) The Secretary of State may make regulations providing that an electricity supplier may not discharge its renewables obligation (or its obligation in relation to a particular period) by the production to the Authority of a relevant Northern Ireland certificate, except in the circumstances, and to the extent, specified in the regulations.

(2) A “relevant Northern Ireland certificate” is a Northern Ireland certificate issued in respect of electricity generated—

(a) after 31 March 2016 (or any later date specified in the regulations), and

(b) by a Northern Ireland onshore wind generating station accredited after 31 March 2016 (or any later date specified in the regulations).

(3) In this section—

“NIRO Order” means any order made under Articles 52 to 55F of the Energy (Northern Ireland) Order 2003;

“Northern Ireland certificate” means a renewables obligation certificate issued by the Northern Ireland authority under the Energy (Northern Ireland) Order 2003 and pursuant to a NIRO Order;

“Northern Ireland onshore wind generating station” means a generating station that—

(a) generates electricity from wind, and

(b) is situated in Northern Ireland, but not in waters in or adjacent to Northern Ireland up to the seaward limits of the territorial sea.

(4) Power to make provision in a renewables obligation order by virtue of section 32F (and any provision contained in such an order) is subject to provision contained in regulations under this section.

(5) This section is not otherwise to be taken as affecting power to make provision in a renewables obligation order.

(6) Regulations under this section may amend a renewables obligation order.

(7) Section 32K applies in relation to regulations under this section as it applies in relation to a renewables obligation order.”

(3) In section 32M (interpretation)—

(a) in subsection (1), for “32LB” substitute “32LM”;

(b) in subsection (7), for “32L” substitute “32LM”.—(Andrea Leadsom.)

This New Clause allows the Secretary of State to make regulations preventing an electricity supplier in England, Wales or Scotland from using a renewables obligation certificate issued in Northern Ireland to discharge its renewables obligation, where the certificate was issued in respect of onshore wind power generated in Northern Ireland after 31 March 2016. The regulations can specify exceptions.

Brought up, read the First and Second time, and added to the Bill.

New Clause 4

Carbon capture and storage strategy for the energy industry

‘(1) It is the duty of the Secretary of State to—

(a) develop, promote and implement a comprehensive national strategy for carbon capture and storage (CCS) for the energy industry to deliver the emissions reductions required to meet the fifth and subsequent, carbon budgets at the scale and pace required;

(b) develop that strategy in consultation with HM Treasury, the Department for Business, Innovation and Skills, the Oil and Gas Authority, the National Infrastructure Commission Scottish Ministers, Welsh Ministers and other relevant stakeholders including the CCS industry; and

(c) have that strategy in place by June 2017 and report to Parliament on the progress of its implementation every three years thereafter.

(2) The strategy provided for by subsection (1) shall, amongst other things, include—

(a) the development of infrastructure for carbon dioxide transport and storage;

(b) a funding strategy for implementation including provision of market signals sufficient to build confidence for private investment in the CCS industry;

(c) priorities for such action in the immediate future as may be necessary to allow the orderly and timely development and deployment of CCS after 2020;

(d) promotion of cost-effective innovation in CCS; and

(e) clarification of the responsibilities of government departments with respect to the implementation of the strategy.” (Callum McCaig.)

This new Clause would compel the Secretary of State to bring forward a strategy for carbon capture and storage for the energy industry.

Brought up, and read the First time.

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I beg to move, That the clause be read a Second time.

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With this it will be convenient to discuss new clause 10—Carbon capture and storage strategy for the energy industry

‘(1) It is the duty of the Secretary of State to—

(a) develop, promote and implement a comprehensive national strategy for carbon capture and storage (CCS) for the energy industry to deliver the emissions reductions required to meet the fifth and subsequent, carbon budgets at the scale and pace required;

(b) develop that strategy in consultation with HM Treasury, the Department for Business, Innovation and Skills, the Oil and Gas Authority, the National Infrastructure Commission and other relevant stakeholders including the CCS industry; and

(c) have that strategy in place by June 2017 and report to Parliament on the progress of its implementation every three years thereafter.

(2) The strategy provided for by subsection (1) shall, amongst other things, include—

(a) the development of infrastructure for carbon dioxide transport and storage;

(b) a funding strategy for implementation including provision of market signals sufficient to build confidence for private investment in the CCS industry;

(c) priorities for such action in the immediate future as may be necessary to allow the orderly and timely development and deployment of CCS after 2020.”

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The future of carbon capture and storage became a lot more opaque following the Government’s decision just after the autumn spending review to scrap the £1 billion of funding for the competition to deploy CCS at Peterhead and White Rose. That has caused a not unsubstantial amount of consternation within the nascent CCS industry, which thought it had a clear path to developing a viable proposal that would enable the industry to get off its feet, with support from the Government to develop something that would be to the advantage of British industry and have the potential, according to the Committee on Climate Change, to deliver the carbon reduction targets in a cost-effective manner. That decision has been made, and however regrettable it is, we are where we are.

The new clause calls on the Government to bring forward a strategy in conjunction with relevant Departments and, importantly, the devolved Administrations. I know the Scottish Government have worked closely with industry and indeed the Department of Energy and Climate Change on the phase 2 projects, including joint funding of research into the proposals on Grangemouth. That proposal was important. As for the timing, June 2017 may seem a little far away, but I think that timescale is required, given where we will be by the time the Bill becomes an Act. Considerable discussions will be required—ideally at the next carbon budget—to establish what the UK Government are going to do on carbon reduction as a whole, and in particular to allow a CCS strategy to be developed appropriately. I see no reason why we should not all wish to do that, and I urge hon. Members to support the new clause.

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I rise to speak to new clause 10. Hon. Members may observe that new clause 10 is remarkably similar to new clause 4; alternatively, one could say that new clause 4 is remarkably similar to new clause 10—it depends on one’s point of view.

We hope to see a comprehensive carbon capture and storage strategy developed to put in place the various structures and arrangements necessary to enhance the CCS industry and open the possibility of development over the next 20 years. As the hon. Member for Aberdeen South mentioned, the abrupt ending of the CCS pilots in Peterhead and White Rose, with very little notice, forms a sad background. It was widely assumed that not only was it the end of those two pilots, but carbon capture and storage was dead. I would argue that that is certainly not the case. Notwithstanding the ending of those pilots, it is vital that we make solid progress toward making carbon capture and storage a central part of our energy strategies for the future, particularly up to 2050.

The Committee has discussed how the North sea might play a role in that strategy. At the storage end of carbon capture and storage, not only could the North sea provide a storage facility for some schemes in the UK, but it has the capacity to accommodate easily substantial deployment of CCS across the UK and Europe; in fact, it could be a world-class carbon repository. We have also discussed how best to ensure that decommissioning in the North sea is undertaken with due regard to what carbon capture and storage might require in the future. I observe that several sentences relating to carbon capture and storage that were inserted in the Bill in another place have not been removed by the Government in the Commons, so I imagine they will remain in the Bill as it completes its stages in both Houses of Parliament. There are therefore elements in the Bill already that suggest a requirement for greater strategy where CCS is concerned.

In addition to our commitment to the strategy, I suggest that Government Members should support it, given its appearance in that apparently flexible friend, the Conservative manifesto. My hon. Friend the Member for Norwich South said in a previous sitting that we should look very carefully at the wording of the manifesto and immediately do whatever it says about the future of wind, particularly onshore wind, and I imagine that Conservative Members are keen to do the same for other elements of their party manifesto. The manifesto stated that the Government would support carbon capture and storage by putting £1 billion into a pilot project, but that has not really been carried out yet. I imagine that Conservative Members want to make up for that bump in the road—the Government’s failure to deliver on that part of the manifesto—by ensuring that the manifesto’s wider commitment to carbon capture and storage is fulfilled. That strongly implies that the Government need to set out a proper CCS strategy.

Perhaps I am dancing close to the edge of flexible principles, but the previous Government, which had a substantial Conservative majority, produced a “CCS Roadmap” in 2012, which stated:

“We want CCS to succeed.”

It said:

“We have made £1 billion available to support the capital expenditure of early CCS projects… We want CCS to succeed. But it will only be part of the future energy mix if it can be cost-competitive with other low carbon technologies… That is why our CCS programme—and this Roadmap—is focused on identifying cost reductions, and then realising them.

Our aim is to enable industry to take investment decisions to build CCS equipped fossil fuel power stations in the early 2020s… As part of our commitment to achieving that aim, we will:

Create an electricity market that will enable CCS to compete with other low carbon sources;

Launch a CCS commercialisation programme…

Work closely with industry to reduce costs…

Remove barriers and obstacles to deployment…

Develop the regulatory environment…

Promote the capture and sharing of knowledge to accelerate deployment; and…

Help build a stable foundation by supporting private sector access to skills and developing the supply chain.”

Although there is no accompanying document to say that it constitutes a CCS strategy, the “CCS Roadmap” document at least appears to set out a number of markers on the way to a strategy. Do the Government stand by that document on the future deployment of CCS, or is it a coalition Government document that is therefore not relevant to what the current Government do? It would be helpful to know whether the “CCS Roadmap” remains part of Government thinking on future CCS deployment.

It is clear that the “CCS Roadmap” does not constitute the sort of strategy we need to ensure that CCS is deployed in the future, and that is what the new clause is about. The Government will soon be entering into discussions on the fifth carbon budget, so we will see what their reaction to it is. They will have to pay close attention to the “CCS Roadmap” and perhaps a future carbon strategy, because the Committee on Climate Change’s advice on the fifth carbon budget states:

“Carbon capture and storage…is very important in meeting the 2050 target at least cost, given its potential to reduce emissions across heavy industry, the power sector and perhaps with bioenergy, as well as opening up new decarbonisation pathways (e.g. based on hydrogen). Estimates by the Committee and by the Energy Technologies Institute…indicate that the costs of meeting the UK’s 2050 target could almost double without CCS. At the global level the IPCC has estimated that its absence could increase costs by over 100%.”

Again with reference to the Conservative manifesto, if the Government are keen to follow the least-cost routes to decarbonisation, they will clearly—certainly according to the advice of the Committee on Climate Change—have to think carefully about carbon capture and storage when they respond on the fifth carbon budget since CCS, among other things, represents a substantial implementation of least-cost routes to decarbonisation in the longer term.

Indeed, the shameful pulling of the two CCS pilot projects, in essence on the grounds of cost, represents a missed investment in potentially reducing costs of decarbonisation at a much later date. That is an important element of our approach to a future CCS strategy. It is important to be clear that the cancellation of the projects does not mean the end of CCS in this country. We will have to bring about large-scale CCS, probably sooner than a number of people consider is likely, to stay even remotely on course to meet our climate change targets in the longer term. That is especially true because CCS relates not only to energy production, but to energy-intensive industries and other intensive carbon emitters. In effect, we will have to start importing technology from the rest of the world instead of having the lead in the technology in this country that we might have had had the pilot schemes gone ahead.

Some people have suggested that CCS is simply a process that is not proven at scale and that needs a great deal more development work, but that is not the case. If we look around the world, a number of developments are taking place, such as the fully working CCS plant at Boundary Dam in Saskatchewan, which has been operating for several years. This year, CCS plants in Kemper county in Mississippi and the Petra Nova project elsewhere in the United States will come on stream. As for the energy-intensive sector, the Abu Dhabi CCS project in the iron and steel sector is a full-scale, working and complete project. It is likely that we will have to import technology from such projects for our own CCS progress. It is important to reflect on how we will do that in a CCS strategy and ensure that if we are to import technology, as much as possible of the rest of the supply chain and other CCS arrangements stay in the UK. In particular, the substantial developments and intellectual property gained from the White Rose and Peterhead projects must be retained in the UK for use in future CCS developments. All of that should be part of a strategy that we simply do not have at the moment.

I ask hon. Members to think carefully about what we will have to do—it will probably be unavoidable—in the next period to ensure that our energy is produced and used at the lowest carbon level. I believe that everyone on the Committee shares that aim and that CCS will be a most important part of that process. Having a strategy in place could enable us at least to recover substantially from the immense setback caused by the cancellation of the pilot projects and put us back on the road to being clear about what we need to do for the good of our energy-generating industries, our energy-intensive industries and the country as a whole.

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It is a pleasure to serve under your chairmanship, Mr Davies. I rise to speak in support of new clause 10, which stands in the names of my hon. Friends the Members for Southampton, Test and for Norwich South, and new clause 4.

No one doubts—at least, I hope not—that carbon capture and storage is accepted as a crucial element if we are to keep total global emissions within safe limits and avoid irreparable harm to our planet. As the executive director of the International Energy Agency, Maria van der Hoeven, says, it is essential. Different projections give slightly different numbers, but the broad scientific consensus is that the sequestration process should account for between a sixth and a fifth of the net reduction needed by 2050 if we are to keep global warming below 2° C, let alone the 1.5° C that emerged from Paris as a result of the efforts of the high ambition coalition, in which the UK was a leading player. I give the Government due credit for their role in that.

I do not wholly endorse the view expressed by Sir David King, the former Government chief scientific adviser, who argued that

“CCS is the only hope for mankind”

but the consequences of not making sufficient progress are stark. As the Prime Minister put it in 2012 during an appearance before the Liaison Committee, if CCS is not available,

“you are in quite serious water, because you would be only relying on nuclear and renewables. If carbon capture and storage didn’t come forward and you had a very tough carbon target, you would have no unabated gas at all.”

Lack of sufficient progress on CCS will therefore result in either the UK failing to meet its climate change objectives or the Government’s planned expansion in gas-fired generation being obsolete by 2030.

We know that the technology works. The Prime Minister no longer holds that view, I believe, given his recent remark that he did not think the technology stacks up, but witness after witness who came before the Select Committee on Energy and Climate Change during its recent hearings on CCS said that that was plain wrong. As my hon. Friend the Member for Southampton, Test outlined, 22 projects across the world show that CCS is working. Statoil’s Sleipner West project, now in its 20th year, captures 1 million tonnes of CO2 a year, and Exxon Mobil’s Shute Creek gas processing plant in Wyoming started in 1986 and captures 7 million tonnes of CO2 a year. Despite teething problems, the world’s first major commercial power plant to employ CCS, the Boundary Dam project in Canada, will capture 90% of the emissions from that 110 MW coal unit. We know that the technology works. The problem is that, once those 22 projects are up to speed, they will shave only 0.1% off global emissions each year, so we need a strategy for transportation and storage in particular to bring CCS to scale quickly.

The tragedy is that until recently the UK had been at the forefront of EU efforts to develop the technology and Government policy on CCS was particularly clear. As I said on Second Reading, as far back as 2007, the Prime Minister set out the Conservative party’s approach to carbon capture and storage in a speech at Chongqing University when he said:

“I want to make this bargain with you. We will strain every sinew to create viable and affordable green coal technology.”

CCS has been part of the UK’s energy framework for some time, not just under the Climate Change Act 2008, but under electricity market reform, and it was central to justifying the technology-neutral approach that I believe the Government have now abandoned in their decisions on onshore wind,.

The banks and commercial funding community had clearly bought into the commercialisation programme and the £1 billion of capital funding that was allocated to it. The Government billed it as the entry point to the future application of CCS in this country and the Conservative party manifesto was absolutely clear in this regard. I do not think I have misunderstood it, unless it is another case of the Government being able to interpret the manifesto as they see fit. Under the heading “We will protect our planet for our children” it said the Government were

“committing £1 billion for carbon capture and storage.”

Hon. Members may disagree and perhaps they will intervene to do so, but most reasonable people would say that that is a pretty unambiguous statement of intent, and that the industry in this case cannot be accused of being myopic or in any way ostrich-like—that is what the hon. Member for North Dorset accused the onshore wind industry of being at our last sitting—in believing that its investments were safe. That makes the Government’s decision to renege on their manifesto commitment and pull £1 billion—

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I gently point out to the hon. Gentleman that the reference to CCS in the Conservative party’s manifesto was as an example, not as a manifesto commitment.

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We will have to agree to disagree again. I am probably one of a handful of people who have read the manifesto in the name of which so much is being enacted. I think that is just another example of the Government trying to have it both ways and to interpret what I and, more importantly, industry and commercial funders took to be a clear statement of the Government’s intent.

It is worth bearing in mind—the Minister touched on this—the context in which the decision was made. Funding was abruptly withdrawn at a time when a number of companies had been working tirelessly for many years to progress their projects, and just weeks before they were expected to submit their bids. Business and investors were given no notice. We heard evidence in the Select Committee that the industry first got wind of this through the Financial Times, when it reported expectations of the Government about that settlement. That was just a few hours before Department of Energy and Climate Change officials posted the notice on the London Stock Exchange and a week after the “reset” speech in which CCS was mentioned as a central part of the Government’s energy policy. To say it was unexpected is an understatement. As a witness in the Select Committee said, it was a shabby way to treat those involved in trying to further this technology.

It is important to bear in mind that millions of pounds of public money have already been wasted, for example, in proving up the Goldeneye store for the Peterhead project through two competition processes, or in the White Rose projects. Those are public investments and public money has been put into them, but they are now at risk of abandonment and sterilisation. Like the Government’s decisions on onshore wind and in a host of other areas, it reflects incredibly badly on their relationship with business and their ability to drive long-term investment in this area.

As Richard Simon-Lewis, financing director of Capture Power Ltd told the Committee, the decision had

“the effect of taking the wind out of our sails. I think the cancellation by UK Government of the competition signals to the market that there is a question mark in the UK Government’s mind over CCS.”

I think the only thing captured here is UK energy policy by Her Majesty’s Treasury. The justification given that in a tight spending review—we all accept that it is tight—now is not the time for this simply does not stack up.

Waiting or buying in technology from other parts of the world will have an impact and costs down the line. It is important that the Government come forward with a strategy for carbon capture and storage. We do not have one in place as things stand. We have uncertainty and muddle.

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I should state an interest, having previously been involved in the carbon capture project at Peterhead—I moved it from Longannet to Peterhead—so I know something about the issue. I have been on record a few times exactly anticipating this reduction. Matthew Bell, the new chief executive of the Committee on Climate Change, when asked what we would have to do without CCS to hit our targets replied:

“You really need to virtually completely decarbonise your transport sector and completely decarbonise your heating sectors, in order to deliver on the 2050 ambition, without being able to benefit from the CCS.”

Does the hon. Gentleman agree that that is extremely unlikely?

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I know it is extremely unlikely. As we touched on at our previous sitting when discussing onshore wind, the Secretary of State has admitted that the Government do not have the right policies in place to meet their targets on heat and transport. From what I can see, they do not even have any institutions within Government to make it happen. We have been told there is an interministerial group on carbon growth but we do not know how many times it has met or what its terms of reference are to drive forward progress in this area. The implication of that, as I will come to, is that we will see greater costs down the line if we do not get serious about CCS.

We need a strategy. The Minister has explained why she believes the Oil and Gas Authority’s function should not be extended to incorporate the regulation of CCS activity. I disagree with the case she made, but I hope she does not dispute the need for more clarity in this area and for some kind of strategy. In the absence of an effective carbon price, we need to have a comprehensive strategy from the Government on CCS development and deployment. Such a strategy would be formed in consultation with a number of Departments, including the Treasury and the Department for Business, Innovation and Skills, the OGA and the CCS industry itself, as the clause makes clear.

The strategy would have to include some of the following elements, which I mention in the hope that the Minister will take them on board. It would need a strategy for maintaining those strategically important pieces of UK-critical infrastructure, such as Peterhead, that have been put at risk by the recent decision to withdraw CCS funding. It would need provisions for the development particularly of transport and storage, to incentivise what we know we need, which is large clusters of CCS, where multiple operations are linked into a single plant, because that is how to get the economies of scale. It would need a strategy to facilitate the industrial application of CCS, particularly in the iron and steel industry, cement production and petrochemicals. Those three sectors account for 45% of CO2 emissions that need to be captured by 2050.

Above all, we need a strategy because the private sector needs some certainty about funding, so that it can build confidence, investment and support for CCS projects, importantly where the finances in such projects do not rely on carbon being reinjected to maintain reservoir pressure in producing oil and gas fields. That happens in a large majority of the CCS projects that are up and running, and is, I think, questionable in terms of its long-term impact on climate.

Why do we need to do this for funding, to touch on the point made by the hon. Member for Coatbridge, Chryston and Bellshill? If we do not get a strategy soon, not only will the UK lose direction, but it will cost us a great deal of money. As I said, a significant amount of UK taxpayer money has already been wasted as a result of the abrupt decision to withdraw the £1 billion CCS funding. That is why the National Audit Office is going to look into the matter, and why the companies involved are now seeking to recover the costs they have sunk into the projects. There are other greater and more significant long-term costs at stake: the costs of avoiding dangerous climate change if CCS does not come forward to scale.

Let me put on the record the assessment of the Energy Technologies Institute. According to the ETS, delays in deployment as a result of the CCS competition cancellation have

“a high chance of significantly increasing the cost of carbon abatement to the UK economy. Delay adds an estimated £1-2 billion per year throughout the 2020s to the otherwise best achievable cost for reducing carbon emissions.”

While delays in CCS infrastructure are still likely to mature, the legacy effect of the Government’s decision will in the decades ahead

“still result in an additional cost estimated to be around £2–3 billion per year”.

From a public interest perspective we have to get this right. We need a comprehensive strategy and now is the time to do it. I urge the Minister seriously to consider the new clauses.

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May I say what a pleasure it has been to serve under your chairmanship over the last couple of weeks, Mr Davies?

As the Opposition Whip in this Committee, I would not normally speak at any length, but I hope Members will forgive me for making an exception to speak in support of new clause 10. I do so as an MP from Yorkshire, where the decision to cancel the £1 billion CCS competition fund has been a real blow for the region, as I have no doubt it was for Peterhead and for other hopeful projects and their surrounding areas up and down the country.

Earlier in the week, we heard from the Minister, the hon. Member for Daventry and others about the tenacity with which this Government are committed to delivering an end to any public subsidy for onshore wind. I heard the Minister’s intervention earlier and perhaps that is the very crux of the issue. I hope that Members will not mind my quoting from a sitting earlier in the week, when that commitment to end subsidies for onshore wind was referred to as an absolute “manifesto commitment”—no ifs, no buts—and I think people might be forgiven for assuming that the commitment to end the £1 billion fund may have come with the same terms.

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Absolutely not.

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I think people would be forgiven for making that assumption, having read the manifesto.

The White Rose project at Drax was set to be the first CCS project of its kind in Europe and it had been awarded Government funding to carry out a feasibility study, as has been mentioned. The project, once it was up and running, was expected to generate enough low-carbon electricity to power 630,000 households, with hopes that up to 2,000 jobs would be created, bringing much needed investment, jobs and growth to Yorkshire. If Yorkshire had been the first region in Europe to get CCS up and running on this scale, the economic benefits of exporting the expertise, the skills and the transferrable technologies all over the world could have been such a boost for the local and wider economies. With the cancellation of the £l billion fund, we also sent €300 million euros from the European Commission back to the Commission. That sum had been awarded to the White Rose project in match funding, because the project was the Commission’s preferred option in its NER 300 competition.

Getting to this stage has involved years of hard work and missed opportunities. The Energy and Climate Change Committee published a report in 2014 urging the Government to reach a final investment decision on the two projects that had made it through to the final stages of the competition by early 2015, which was in line with the Government’s original timetable. The report stated that it was critical that the Government did not waste any more time on unnecessarily delaying the start of the first CCS projects, stressing that we had already lost a decade. It has taken years to bring viable schemes such as the White Rose project into alignment with a Government commitment to invest in the technology and into alignment with the European Commission’s NER 300 timeframe, in order to secure match funding. With the cancelling of the scheme, we are now much further away from bringing those projects online than we were in 2014.

Against that backdrop, I urge the Government to consider the future for CCS, to commit to a strategy and to recognise that new clause 10, and new clause 4 for that matter, present the opportunity to do just that. I think we all agreed earlier in the week about the importance of investor confidence and we have talked about it again today. My hon. Friend the Member for Norwich South made a great analogy about picking the furthest point on the horizon and getting our troops there as fast as we can. In CCS, it is fair to say that investor confidence could not now be any lower. The chief executive of the Carbon Capture and Storage Association, Dr Luke Warren, said the announcement to axe the fund was “devastating”. He went further, saying:

“Moving the goalposts just at the time when a four-year competition is about to conclude is an appalling way to do business.”

I confess that I am still confused about what the Government strategy now is. Ministers have spoken about a future for CCS, but the Prime Minister’s suggestion that there are doubts hanging over both the technology and the economics has really left potential investors with nowhere to go. That is why I ask the Committee to consider supporting new clause 10, to give Members, but most importantly the sector, a much clearer picture about what the future for CCS now means.

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It is a pleasure to serve under your chairmanship today, Mr Davies.

New clauses 4 and 10 would place a duty on the Secretary of State to produce and implement a CCS strategy by June 2017, and to report to Parliament on progress every three years. I very much welcome the debate on CCS today. I recognise that the spending review announcement last year confirming that the £1 billion of ring-fenced capital funding to support the CCS competition was no longer available has led to questions regarding the Government’s CCS policy, but I can assure the Committee that the Government’s view remains that CCS has a potentially important role in the long-term decarbonisation of the UK’s power and industrial sectors.

The hon. Member for Greenwich and Woolwich raised the issue of bidders’ costs; I can tell him that the competition rules were clear that the Department would not meet bidders’ costs and that the competition was subject to value for money considerations.

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Will the Minister give way?

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Let me make some progress.

As hon. Members have said, the matter was subject to a very difficult spending review where all capital infrastructure costs were reviewed and measured against clearly set out value for money targets, and the competition did not meet those targets, but that is not to say that CCS does not play a part; it certainly does.

The Prime Minister is regularly accused of saying that CCS does not work. In fact, he said that at the moment it is not economic where it is already working, so it does not represent value for money. Hon. Members have asked whether we are effectively turning out back on CCS and not preparing ourselves, and they have asked about when we bring on new gas as part of new policy reset. I can assure hon. Members that any new gas plants for power generation will be CCS-ready, so there is no sense that, by not doing certain things now, we are closing the door for the future.

The Committee on Climate Change argued that meeting the 2050 targets would cost more without CCS, but we are absolutely not ruling out CCS. I want to make that clear.

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The Minister mentioned that the competition was clear that the companies involved would not have their risks or costs mitigated by the Government. The problem that the companies have, and that I and other hon. Members have, is that the competition did not conclude. The rules of the game were ripped up at the 11th hour. Does the fact that the competition was incomplete change the Minister’s interpretation of the competition’s rules?

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No, it does not.

The Government continue to invest in the development of CCS. This includes investing more than £130 million in CCS research and development since 2011. For example, in October last year we invested £1.7 million to support three innovative CCS technologies—Carbon Clean Solutions, C-Capture Ltd, and FET Engineering Ltd—and there is the potential to reduce costs. We have continued to support, jointly with the Scottish Government, the CCS developer, Summit Power, with £4.2 million in funding to undertake industrial research and development at its proposed CCS Caledonia clean energy plant in Grangemouth in Scotland.

We have invested £2.5 million in a project to investigate a suite of five stores for the storage of carbon dioxide in the North and Irish seas. We have continued to invest in the development of industrial CCS, providing £1 million to Tees Valley for a feasibility study on an industrial CCS cluster in Teesside. We remain committed to exploring with Teesside how to progress its industrial CCS proposals as set out in the area’s devolution deal, published last October, and in the context of the Lord Heseltine-led taskforce on Teesside.

Through our international climate fund, we have invested £60 million in developing CCS capacity and action in priority countries, including Indonesia, South Africa, Mexico and China, and we work with CCS partners, including the United States and Canada, through the international carbon sequestration leadership forum.

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I do not think anyone would argue that the Government have not made financial commitments to the specific technologies. I am looking at the manifesto again—I know we are obsessing about this—but it says,

“We will protect our planet for our children”,

and it mentions

“committing £1 billion for carbon capture and storage.”

Most members of the public would see that as a straightforward commitment of £1 billion, and yet it has been taken away. The point is that a thread seems to be running through the Bill and the rest of the Government’s actions, whether on community energy, on the subsidies and tax exemptions for solar tariffs, on ending the renewables obligation a year early, or on carbon capture and storage. They are making it more difficult and more expensive for investment to come into renewables by pulling the rug from under the feet of these nascent industries. The important thing is that the Government are making investment in this country’s renewables sector less attractive and forcing up the price of low-carbon technologies.

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Only yesterday, in a debate in Westminster Hall, the hon. Gentleman and I were discussing the very real issue of fuel poverty in this country. We were discussing the plight of people who cannot afford to heat their homes, yet today he is advocating more subsidies and more billpayer investment in technologies when I have already made it very clear that we have not gone ahead with the competition project because of the relative value for money versus other infrastructure projects. This is about protecting consumers. The hon. Gentleman cannot have it both ways.

Similarly, the hon. Gentleman talks about cutting subsidies, but although we continue to support the renewables sector, which is absolutely amazing and I pay tribute to it for its enormous success, he must see that as its costs come down so should the subsidies that are paid for by people who cannot afford to heat their homes. He must agree with that. I just cannot understand why yesterday he was arguing that we should be cutting costs and today he is arguing that we should be increasing them.

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I can answer that. Ending the renewables obligation a year early has saved the average consumer 30p a year off their bill, yet we know that the Carbon Capture & Storage Association has concluded that CCS could save the average consumer £82 a year off their bill by 2030. It is a false economy. The Government are either going to be saying in a few years’ time, “We’re not going to meet our carbon targets,” or they will have to go for a more costly way of bringing carbon down and out of our economy. That is the reality. Ultimately, this is about taking a long-term view, not a short-term one.

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The hon. Gentleman hangs himself with those remarks. He is saying, “Don’t save 30p today; save £82 by 2030.” Yesterday, we were discussing fuel poverty. The Government do see a role for CCS in our long-term decarbonisation efforts, but the point is that people are unable to heat their homes today. He derides 30p off people’s energy bills, but the central case is that it is £30 million saved over a one-year period or, at the most, if we had greater than expected deployment, up to £270 million. Why does he not write the cheque? If he thinks it is a trivial amount of money, I am very happy to accept his cheque and we can see whether we should continue with these things. It is simply unconscionable to try to equate something that you might achieve by 2030, according to some think-tank, with the very real issues today, including the state of our economy and a very difficult spending review, and the reality of people who simply cannot afford to heat their homes.

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rose—

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I will give way to the hon. Gentleman one last time, but then I will continue.

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Thank you, Minister; you are being very generous with your time. On fuel poverty, I will say what I think your fellow Conservative Members were saying yesterday, which is that the key thing for them was that energy efficiency has fallen through the floor. The green deal is finished and the energy company obligation has no funding beyond 2017. That leaves a big gap by 2018. On your own estimates, you are not going to achieve your own targets for warming and insulating people’s homes for another century, so I will take no lessons from the Minister or Government Members on energy efficiency and fuel poverty.

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Order. I hope that in future the hon. Gentleman will not drag me into the debate, because I am not expressing any opinions. If he wants to refer to the Minister, he should refer to her, rather than to me.

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I think we will leave it there. We are straying well out of order in terms of our discussion of CCS. All I can say to the hon. Gentleman is that he just put a lot of words into mouths that were not said yesterday. I made it clear from the Front Bench that the Government are absolutely committed, in all our policies, to being the consumer champion and to doing everything we can to keep energy bills down. It is therefore unconscionable to try to tie this in as if somehow spending more billpayers’ money on CCS would save billpayers money in the short term.

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Will the Minister give way on that point?

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No, I think we have had that discussion.

As part of our commitment to the future of CCS, we will continue to engage widely, including with Lord Oxburgh’s CCS advisory group, which met for the first time yesterday. I have also met the all-party parliamentary group on CCS, whose meeting I attended and spoke at last month, and the joint Government-industry CCS development forum, which I co-chair and which met at the end of last year. We are engaging widely with the CCS industry on what more can be done, supporting individual pilot schemes and measures to try to bring costs down, and ensuring that what we are building to maintain our energy security will be CCS-ready.

We need to take this opportunity to get the next steps right. We will then set out our thinking for the way forward for CCS, using the expert advice from industry, Lord Oxburgh’s group and the APPG. I hope that I have reassured hon. Members that the new clauses are unnecessary as the Government are already considering how they can support the further development of CCS.

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The Minister has spoken a lot. Splitting hairs on what is a commitment and what is not is perhaps interesting for folks watching elsewhere given the voracity of the defence of a Tory party manifesto commitment to end new subsidies for onshore wind that could, in fairness, be read in a multitude of ways. When is a commitment not a commitment? When they do not want to do it. It was clear in the manifesto that it should happen. That it has not is regrettable. I am interested that the Minister believes that there will be no comeback from any of the companies involved in the bidding process. That may essentially be welcome for the sake of the taxpayer, but it is by no means assured and underlines the Government’s atrocious handling of the competition. I want them to make amends and to provide a clear strategy for the CCS industry.

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Does my hon. Friend agree that there is something striking about the Government’s contradiction? The Minister spoke about fuel poverty, which we all agree must be addressed, but, almost in the same breath, she supports a £92.50 strike price for EDF for a French Government power station. Where was the due diligence when they are now considering a £37 billion debt? With renegotiation probably on its way, the price will only go up over 35 years. It never goes down. At the same time, they have cancelled the RO for electricity when some of the prices for renewable wind are actually much cheaper. The Minister cannot have it both ways. Instead, there is a blind focus on the rash dash for gas and nuclear, and we are walking away from solar, from CCS, from onshore wind and from the green investment bank. Does my hon. Friend agree that there is a contradiction?

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Perhaps unsurprisingly, I agree with my hon. Friend’s assessment. The inherent contradictions and the differing values that are placed on certain technologies, depending on the voracity of opposition from certain Tory Back Benchers, mean that the criteria are perhaps not applied anything remotely near fairly. That lack of clarity, vision and planning is why the Government need to put strategies in place. That is what the new clause and new clause 10, tabled by Labour Members, seek to do. They are remarkably similar because we have engaged in similar manners with the industry, which is crying out for clarity from the Government.

The only significant difference between the new clauses—it could be seen to be splitting hairs—is the requirement in new clause 4 for genuine consultation with both Scottish and Welsh Ministers in the development of the strategy, which would add to the process. Most of the strategy would ostensibly be required, in terms of reserved areas of legislation, the skills that could be supported and the industrial strategies into which it would feed, particularly in Scotland, where there has been proper engagement from Scottish Ministers, which I would like to see carry on.

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I assure the hon. Gentleman that Lord Oxburgh’s group on CCS will be advising the Government. We have recommended that the hon. Member for Coatbridge, Chryston and Bellshill be invited to join that group, because we agree that it will be important for Scottish Members to take part, give their thoughts and views and have an input into that.

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I thank the Minister for that. That would be sensible; my hon. Friend has considerable expertise in this area and would make a significant contribution to that group.

We need to be careful in this House to recognise the difference between Scottish National party Members of this Parliament and of the Scottish Government. It is clear that we have different roles. While we are of the same party, I cannot speak on behalf of the Scottish Government or commit the Scottish Government to things, in the same way that Labour Members cannot commit the Welsh Government to things. Recognition of the different roles and responsibilities of the different Parliaments, Governments and Executives is required, in order for the strategy to happen. New clause 4 would achieve that in a marginally better way than new clause 10, and I hope it will win hon. Members’ support.

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Frankly, the Minister’s response to these measures was really poor. She did not speak in a really poor way—as always, she spoke eloquently and comprehensively—but the material she had to deal with in her response was, as anyone can judge, extremely poor in its own right. Giving a few small grants to particular projects, having a working party—useful though it is—and, as the Minister mentioned, an aim for new gas-fired plants, if they are built, to be CCS-ready is not enough. I could easily make my house burglar-ready by leaving the doors and windows open when I go out; that would not necessarily mean I had a great a strategy concerning crime.

The substance of what the Minister had to say about what the Government are doing on CCS only underlined the need for a comprehensive strategy and emphasised Opposition Members’ criticisms that have arisen from about how confused and disoriented industry and the whole sector are at the moment about an appropriate way forward on CCS.

In short, the Minister had no answer to the question of whether there should be a CCS strategy in future. I was sorry that she did not even answer my question about whether she continued to endorse the nearest thing we have to a CCS strategy: the CCS road map of 2012. I hope she will rectify that omission today. Does she endorse that road map? Does she think the Government should continue to operate on the basis of that road map?

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I assure the hon. Gentleman that my Department is looking carefully at our next steps for CCS, and although the specific strategy that he refers to may no longer be the approach that we take, a further strategy for CCS will come from my Department in due course.

Question put, That the clause be read a Second time.

Division 10

4 February 2016

The Committee divided:

Ayes: 8
Noes: 11

Question accordingly negatived.

View Details

New Clause 5

Contract for Difference

“After section 13(3) of the Energy Act 2013 insert—

“(3A) An allocation round must be held at least once in each year in which the carbon intensity of electricity generation in the United Kingdom exceeds 100 grams per kilowatt hour.””.—(Callum McCaig.)

This new Clause would compel the Secretary of State to hold a Contract for Difference allocation round at least once in each year that the carbon intensity of electricity generation in the UK exceeds 100g per kilowatt hour.

Brought up, and read the First time.

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I beg to move, That the clause be read a Second time.

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With this it will be convenient to discuss the following:

New clause 6—Contract for Difference: devolution

“In Section D1 of Part 2 of Schedule 5 of the Scotland Act 1998, in the exceptions, insert—

“Exception 2: The subject-matter of Chapter 1 of Part 2 of the Energy Act 2013.””

This new Clause would devolve control of Contract for Difference in Scotland to the Scottish Parliament.

New clause 12—Contracts for Difference

“After section 13(3) of the Energy Act 2013 insert—

“(3A) An allocation round must be held no less than annually in each year in which the UK is not on target to meet the 2020 EU renewable energy target.””

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I thought that we were having another vote, so I was not quite ready. You have taken me by surprise, Mr Davies, but I shall soldier on valiantly.

Many of our discussions during the last few days of this Committee have been about subsidies for onshore wind and how they can best be dealt with. I am not sure that we have dealt with them in the best manner possible, but there we are. The Minister has said today, in debate between her and the hon. Member for Norwich South, that as the costs come down, so should the subsidies. The renewables obligation was not perfect in its operation. That is probably widely accepted and why it was replaced with a much better form of subsidy or price control or stabilisation mechanism—whatever one wishes to call it. I am referring to contracts for difference. That model has provided a competitive option whereby energy producers’ projects come forward and suggest a price that they can provide their electricity at. That has brought a greater sense of competition and a greater bearing down on costs. It is an important part of the development of the industries to enable us to meet our carbon commitments and, I would argue, to deal with our security of supply issues in a cost-effective manner.

New clause 5 suggests that there should be a CfD allocation every year in which the carbon intensity of electricity generation in the United Kingdom exceeds 100 grams per kWh. That figure comes from the policy recommendations from the Committee on Climate Change in “The Fifth Carbon Budget: The next step towards a low-carbon economy”. One of its recommendations was that the Government should develop policy approaches consistent with reducing the carbon intensity of the power sector to below 100 grams of CO2 per kWh in 2030. That compares with 450 grams in 2014 and the projection for between 200 grams and 250 grams by 2020. That last point indicates that significant and welcome progress is being made on reducing the carbon intensity of the power sector in terms of electricity generation, but it suggests that there is still a long way to go.

Why is it important that we hold auctions annually, in terms of the CfDs? I think it comes back to what has been another key theme of this debate, the need for investor certainty and investor confidence. I believe that this would provide that. While there is a requirement to decarbonise the electricity sector, there must be a clear path for us to do so and a clear indication given to businesses that scale up their investment, if they put forward the proposals that are required—the research and development, the site appraisal work and all that is needed to bring forward whatever it is, whether it is a solar farm, a wind farm, offshore wind or other technologies, including tidal, perhaps, which is further from the market but I hope will play a considerable part in electricity generation, certainly by 2030, given the potential that we have to do it.

That potential is important. The certainty that this new clause would provide would enable the significant investment that needs to come from the sector following the Paris agreement and in terms of meeting our own climate change commitments. By providing the certainty that there will be a market, that there will be potential for projects to be deployed, provided they are cost-competitive, that will, in itself, drive down costs. So it is good for the Government, in terms of meeting their climate change commitments, but it will also ultimately be good for the consumer.

New clause 6 suggests the devolution of the contract for difference mechanism to Scottish Ministers. The operation of the renewables obligation had been dealt with by Scottish Ministers previously and in discussions I have had with many in the industry in Scotland they were very pleased with how the Scottish Government approached the renewables sector. There was the kind of clarity I have just discussed. We need to recognise that there are differing means and differing desires in the different nations of the United Kingdom about how we are to meet our electricity needs and our carbon-reduction targets. This Government legitimately wish to pursue nuclear, which is not something I advocate, largely on a cost basis. That is their right. I do not oppose the principle of their pursuing that, should they wish. I have issues around costs, which will be borne by GB consumers as a whole, but it needs to be recognised that if parts of the UK wish to pursue one form of energy policy, it is legitimate that other parts should be able to pursue a distinct process.

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It is a national grid, is it not? I am not stating the obvious, but Scotland, for example, cannot cut itself off from the electricity generated by nuclear power in other parts of the country. So we still need a UK-wide policy on the fundamental supply. They may take a different view on onshore wind, but on the fundamentals it is a UK grid.

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It is a GB grid—I do not mean to be pedantic and split hairs. At this moment, yes, I agree with that. What I am asking for is the replication of what happened previously with the renewables obligation. There was a process by which differing processes were put in to manage that form of support for renewables, and I think that could be replicated in the round. I think National Grid is comfortable with different forms of electricity generation in different parts of the country.

We have heard that National Grid views the concept of traditional base-load to be somewhat outdated: it is about balancing and managing the reserves, providing it knows what there is to be developed in different parts. It would require considerable engagement, should this happen, between both Governments and between each and National Grid in order to work out how it would be developed. I see the Minister champing at the bit to come in.

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On a point of clarification, is the hon. Gentleman suggesting that National Grid could somehow prevent electricity generated from a nuclear power station from going to Scotland?

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Absolutely not, no. I am talking about how Governments in the different jurisdictions are allowed, in collaboration with each other and National Grid, to pursue different energy policies. It would be unwise to suggest that power generated in any parts of these islands should not sensibly be allowed to flow in any way dependent on need. Through the Irish interconnector there is collaboration with the Republic of Ireland and likewise with the French and Dutch interconnectors. The move is towards greater interdependence, but that still allows a degree of autonomy in how the individual parts pursue their policies.

It will come as no surprise that I would like to see Scotland have greater control over large aspects of our lives. That is my party’s position.

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I did not mean to interrupt the hon. Gentleman right in the middle of that point, but earlier he mentioned that his main argument was about cost and in the three contract for difference competitions that will be open, the strike price will be far higher than the cost of nuclear. I believe that the price for offshore wind is about £145 at the moment.

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The price of offshore wind is coming down and I think the Government have suggested that, if further offshore wind contracts for difference are to come forward, it needs to do so significantly. The curve is downwards and the point of the contracts for difference mechanism and the competitive process is to allow for active discussions and bidding to drive down costs, but I am not clear that that there has been such an open, transparent process in the strike price at Hinkley.

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Does my hon. Friend agree that that some of the offshore wind strike prices have been as low as £80, which is considerably below £92.50? Does he believe that the implementation of transmission charges differentiated geographically in Great Britain has rendered Longannet uneconomical and its closure effectively some four years early could turn Scotland from being a net exporter of energy to a net importer? That would be to Scotland’s disadvantage, so we should have more local input.

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I think my hon. Friend was referring to the strike price for onshore rather than offshore wind. On transmission charging, that does not help how we in Scotland would wish to form our energy supply. We have limited control over that and the cost of producing a gas-powered plant in Scotland, as opposed to within the M25, is prohibitively expensive. I do not think that the process is working, because I do not see a whole new fleet of gas plants being built in close proximity to London and if we do operate a GB grid, that should be done on a level playing field.

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I do not want to labour the point, but I would like to clarify why I asked that question and why I think the Minister is supportive. When we were discussing amendment 14 or 15, whereby the SNP wanted the power to operate the renewables obligation in Scotland, I asked the hon. Gentleman if his party would be prepared to pay for that and he said that it would not. However, on the nuclear price he said that that must be paid for and that balances it. The SNP seems to assume that Scotland can cut itself off from the nuclear-generated electricity coming into the GB grid, to which presumably Scotland wants access. With respect, it seems that the SNP wants to have its cake and eat it.

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I have been trying to get on to funding for some minutes but I keep being intervened on. I would like to see developed at a much greater level better connections between not only Scotland and England, which are coming on in terms of the grid, but the British Isles and the continent. The way forward has to be much greater interconnection throughout Europe. That argument has been put forward by the Secretary of State, which is welcome, but it should not be seen as interconnection for the sake of getting energy from elsewhere.

We, as a nation, have issues in terms of the balance of trade, and relying more than we do now on imports of energy would be detrimental. If we can unlock the huge potential we have, particularly of renewables and particularly in Scotland, there is the potential to be a net exporter, though not at all times; the new clause would play a part in that. That should be the ambition, in my view. If we are going to have a European grid, we should not limit our ambitions to being an importer.

We need to respect the differing modes and choices of the people of these islands, if we are a family of nations that respects our divergent views. If England chooses to produce nuclear, that is fine. Whatever the relationship between the two countries, I see a point where there will be a need for nuclear from England, but likewise, there is a need for energy from Scotland at times. That is the level of co-operation.

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I think I am right in saying that the SNP’s position is that even in an independent Scotland, there would be a common GB energy market; it would effectively be the same as it is now. What I cannot quite follow—I am not against the hon. Gentleman’s new clause; I am just trying to follow the logic of it—is why this measure would be in Scotland’s interest. If Scotland is exporting electricity to the rest of the UK, or certainly to England, why have two different support regimes for the subsidy to be paid by the Scottish Government? Surely, if it is one common energy grid, it should have one set of support behind it.

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I am not suggesting there should be different funding—I am still trying to get on to the issue of financing but am being deterred from doing so. I envisage the pots being one. Let us take the two issues together. If we had an annual CfD allocation, there would need to be discussions. I imagine those discussions being conducted similarly to those we debated yesterday, in terms of the fiscal agreement from the Scotland Bill. Agreements would be made about what proportion of the pots could and should go to Scotland and/or anywhere else. That would give the Scottish Government the ability to tweak that support and tailor it to our specific needs and aspirations.

The UK rightly lauds the success of the deployment of offshore wind. That is a good thing, but because of the technology and the different costs, it is easier to do that in the shallower waters off the shores of England than in the deeper water off the shores of Scotland. The wind resource, I am reliably informed, is greater, but the initial costs and the curve of diminishing returns requires a higher level of support initially.

Should there be a desire in Scotland for greater support for offshore wind in deeper waters—the global potential of that is enormous, given that most coastal waters are deeper than the ones we have here—that would be a benefit for not only Scotland but the UK, in terms of developing a supply chain for it. That can be looked at in different ways. A one-size-fits-all approach to renewables might work in the short term, in terms of deployment, and it has worked well, but we need a more nuanced approach and a long-term vision of the opportunities. New technologies—offshore wind in deep water is one, but there is also tidal and wave energy—are there to be exploited, should the support mechanisms be right.

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I want to be sure I understand. Is the hon. Gentleman saying there would effectively be different rates for contracts for difference in Scotland and the rest of the UK? There would be different rates for different technologies, depending on which side of the UK they were on.

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I am saying that there would be a different bidding process, so that we could allocate the contracts differently. The bids may all come in the same. We cannot predict the outcome of a competitive auction before we have held it, but we must allow such nuancing of the competitive auction.

In summary, while we are pushing toward the targets set out in the Climate Change Act 2008 and waiting to see what comes from the fifth carbon budget, we need to provide certainty to industry that will enable it to plan for the future. That is what new clause 5 would deliver. New clause 6 would deliver the ability, through collaboration between both Governments, to unlock what is still a considerably untapped enormous resource in Scotland in the renewables sector. That would be beneficial to Scotland and to the United Kingdom as a whole.

Ordered, That the debate be now adjourned.—(Julian Smith.)

Adjourned till this day at Two o’clock.

Energy BILL [ Lords ] (Seventh sitting)

The Committee consisted of the following Members:

Chairs: Philip Davies, † Mr Adrian Bailey

† Boswell, Philip (Coatbridge, Chryston and Bellshill) (SNP)

† Cartlidge, James (South Suffolk) (Con)

† Dowden, Oliver (Hertsmere) (Con)

† Fernandes, Suella (Fareham) (Con)

† Hall, Luke (Thornbury and Yate) (Con)

Harpham, Harry (Sheffield, Brightside and Hillsborough) (Lab)

† Heaton-Harris, Chris (Daventry) (Con)

† Hoare, Simon (North Dorset) (Con)

† Kinnock, Stephen (Aberavon) (Lab)

† Leadsom, Andrea (Minister of State, Department of Energy and Climate Change)

† Lewis, Clive (Norwich South) (Lab)

† Lynch, Holly (Halifax) (Lab)

† McCaig, Callum (Aberdeen South) (SNP)

† Maynard, Paul (Blackpool North and Cleveleys) (Con)

† Pennycook, Matthew (Greenwich and Woolwich) (Lab)

† Reynolds, Jonathan (Stalybridge and Hyde) (Lab/Co-op)

† Smith, Julian (Skipton and Ripon) (Con)

† Sunak, Rishi (Richmond (Yorks)) (Con)

† Warman, Matt (Boston and Skegness) (Con)

† Whitehead, Dr Alan (Southampton, Test) (Lab)

Katy Stout, Ben Williams, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 4 February 2016

(Afternoon)

[Mr Adrian Bailey in the Chair]

Energy Bill [Lords]

New Clause 5

Contract for Difference

“After section 13(3) of the Energy Act 2013 insert—

‘(3A) an allocation round must be held at least once in each year in which the carbon intensity of electricity generation in the United Kingdom exceeds 100 grams per kilowatt hour.””—(Callum McCaig.)

This new Clause would compel the Secretary of State to hold a Contract for Difference allocation round at least once in each year that the carbon intensity of electricity generation in the UK exceeds 100g per kilowatt hour.

Brought up, and read for the First time, and Question proposed (this day), That the clause be read a Second time.

Question again proposed.

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I remind the Committee that with this it will be convenient to discuss the following:

New clause 6—Contract for Difference: devolution

“In Section D1 of Part 2 of Schedule 5 of the Scotland Act 1998, in the exceptions, insert—

‘Exception 2: The subject-matter of Chapter 1 of Part 2 of the Energy Act 2013.’”

This new Clause would devolve control of Contract for Difference in Scotland to the Scottish Parliament.

New clause 12—Contracts for Difference

“After section 13(3) of the Energy Act 2013 insert—

‘(3A) An allocation round must be held no less than annually in each year in which the UK is not on target to meet the 2020 EU renewable energy target.’”

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I want to make a short comment on new clause 5. [Interruption.] There is so much barracking, Mr Bailey. It is unbelievable.

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You could have changed your mind.

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That is what my wife says.

I believe that new clause 5 is incompatible with the Government’s stated objective of affordable decarbonisation. I want to take the opportunity to ask the Minister how the Government are progressing towards their goal of having a truly competitive single pot for each of the contract for difference auctions, and how the Government will try to encourage investment in new, consistent and dispatchable renewable energy.

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As we heard this morning, new clause 12 approaches similar aims, though in a slightly different way, from the clauses put forward by the hon. Member for Aberdeen South this morning. It concerns the allocation rounds for contracts for difference and the extent to which they should be held on an annual basis.

I appreciate that the Government have indicated in principle that there will be further allocation rounds, although we are still waiting to see what might be in them. For example, would onshore wind be included in allocation rounds in future? In the context of the levy control framework, which I am pleased to see is now being investigated by the National Audit Office, we are not sure whether there will be any substance in those allocation rounds. We are not sure whether there are any allowances in the pot that can be put into the allocation rounds in order to make them realistic for operators to bid into them.

We also understand that the process for bidding in allocation rounds means, as we heard this morning, that what comes out as the auction strike price will not be the same as the allocated strike price originally announced for various different categories of renewables. While that suggests that there should be an annual allocation round in each year where the UK is not on target to meet the 2020 EU renewable energy target, what those allocation rounds actually cost would be a variable factor. The suggestions that went around a little while ago on the possible emergence of subsidy-free CfDs could mean that the allocation rounds could be held with little or no effect on the levy control framework. Can the Minister say whether subsidy-free CfDs are a current question in her Department? If there are future allocation rounds, might they be a part of the allocations? If no clear answer is forthcoming this afternoon, perhaps it would be easiest for her to consult her departmental adviser who, I know, had a substantial hand in advancing the idea of subsidy-free CfDs before he became an adviser. I am sure his expertise on this issue could be put to good use on CfDs.

The issue with holding allocation rounds annually is not necessarily or even reasonably disposed of by the idea that this is simply about keeping control of how much money goes out under the levy control framework, because there are ways to hold an annual contract round without overthrowing those arrangements. The new clause would ensure that the issue of frequency of allocation rounds was about what it should be about—the extent to which CfDs drive the deployment of renewables towards the goal of achieving our renewable energy targets. That has been publicly stated as one of the goals behind the working of the levy control framework. We have not heard about this yet, but there is also the possible allocation of further targets after 2020, so the proposal could continue to drive forward the deployment of renewables and ensure that those targets were reached.

We have also discussed what we mean by reaching the 2020 EU renewable energy targets. We have emphasised that that means the discharge of the obligatory target agreed by the UK for the provision of 15% of energy from renewable sources by 2020. In turn, that means that the sub-targets that were set in the UK but nevertheless contribute towards the overall EU target should themselves be either on target or be underpinned by other areas being on or above target. The letter from the Secretary of State to other Departments in October set out precisely what that means and I trust that on this occasion the Minister has a copy easily to hand, which would be a good step forward. It states that the trajectory towards reaching those EU targets “increases substantially” after 2017-18 and

“currently leads to a shortfall against the target in 2020 of around 50 TWh (with a range of 32 - 67TWh) or 3.5%-points (with a range of 2.1 - 4.5% points) in our internal central forecasts (which are not public).”

So the Secretary of State emphasises that the trajectory and the shortfall are not public but goes on to say:

“Publically we are clear that the UK continues to make progress to meet the target.”

I trust that the Minister, now having a copy of that letter, will agree that that is an accurate depiction; the Secretary of State was clear that we are on target not to be on target as far as EU 2020 goals are concerned. Although the fact that we are on target not to be on target has not been made public, nevertheless, that very clear conclusion stems from departmental trajectories and is robust in terms of what the departmental modelling represents.

I take that internal observation as the starting point for this amendment and I hope that the Minister will confirm it to be the case. Secondly, I hope she will be able to change the status of those internal central forecasts, on which this is based, from not being public to being public. That would be very helpful to our discussions in the longer term. The idea that the UK is not on target, overall, to meet the EU 2020 renewable energy targets—and, as the letter makes clear, it is largely not on target because of factors relating to quite substantial failures in heat and transport—suggests, among other things, that in order to make sure that the Government are on target, other areas perhaps need to over-perform, and among those would be those projects which would be in line for contracts for difference through the allocation auctions.

Of course, I remind the Committee that that is not about onshore wind or renewable obligations, it is about a variety of renewables that may qualify for those contracts for difference—biomass, offshore wind, other forms of renewable energy which, together, could make a contribution to getting to the target by overachieving in that area. So it is a mechanism, essentially, to ensure that we are straining every sinew to get to that EU target and using the devices that we already have available to us to get there through a competitive process that ensures best value for money in the process. I therefore commend this amendment to the Committee and trust that the Minister will take it on board.

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New clauses 5 and 12 seek to amend the Energy Act 2013 so as to require contracts for difference, or CfDs, allocation rounds to be held at least once a year. This would be either when the carbon intensity of electricity generation in the UK exceeds 100 grams per kilowatt hour or when the UK is not on target to meet the 2020 EU renewable energy target. I completely acknowledge that it is important that developers and investors have some foresight as to the frequency of CfD allocation rounds. However, this must be balanced with levy control framework budget availability, which, as hon. Members know, is funded by a levy on consumer bills.

I will answer a couple of specific questions. My hon. Friend the Member for Daventry asked how CfDs will include less developed technologies. As the Secretary of State said last November, the current intention is to hold the next CfD allocation round for “less established” technologies, which are defined as pot 2, in late 2016. We are currently working with the Treasury to finalise the budget as part of discussions on the next levy control framework period. We will set out details on that as soon as we can.

The hon. Member for Southampton, Test put the question of whether the levy control framework would be updated post-2020. I can assure him that that is something we are looking at now. He also asked about our work on market-stabilising CfDs, effectively subsidy-free CfDs for onshore wind. That is something that we are continuing to look at and would be delighted if industry or hon. Members want to provide input to that discussion, as it is something we are very interested in.

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I welcome that statement from the Minister but I want to ask about the process. What kind of information is she looking for, from whom and when?

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Through normal channels. Discussions on the early closure of the onshore wind subsidy included lots of bilateral stakeholder meetings. Some industry workshops were held. If the hon. Gentleman wanted to submit information to me or my Department, we would be delighted to hear from him, his party or companies he is aware of that are interested. We are very interested to hear views on that, though we obviously want to make progress with it at the same time.

Coming back to the LCF, its function is to limit the amount paid by consumers. It is crucial that the Government are able to take account of the latest evidence and use the LCF budget in light of latest evidence around deployment projections and costs. The hon. Member for Aberdeen South talked a lot about the difference in cost of different types of CfDs. He will be aware that we are talking with the Scottish Government about the remote highlands and islands and the potential for onshore wind projects there, which by nature of their remoteness would have big transmission costs that might make them more akin to offshore than onshore wind.

The hon. Member for Coatbridge, Chryston and Bellshill mentioned that onshore wind CfDs are around £80 and for offshore wind, as hon. Members pointed out, they are still well in excess of £100, some at £145 and so on. Our hope and expectation is that those costs will come down. That is a key reason why my right hon. Friend the Secretary of State set out in her policy reset speech that we would look to the offshore wind industry to bring their costs down in order to participate in further auctions, which we think is achievable.

Hon. Members have reflected that, when looking at the budget for the levy control framework, which is how consumers pay for all of this, and the CfD pots that add costs to the LCF, we must look at the latest evidence and technologies and have a proper balance.

To answer the hon. Member for Southampton, Test, the UK is continuing to make progress towards the 2020 renewables target of 15% of final energy consumption from renewable sources. Renewables accounted for 7% of energy consumption in 2014, up from 1.3% in 2005. We have exceeded both our 2011-12 and our 2013-14 interim targets.

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I am sorry to have to tell the Minister, but that was exactly what the Secretary of State’s letter stated would be said in public on targets. Although I appreciate what the Minister is saying, it does not add anything to the core of the letter that, while Ministers may say something in public, something else is the correct position in private.

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I have to disagree with the hon. Gentleman. The Secretary of State has set out that we are making progress. As Ministers do, she was talking about what needs to be done next. Since then, we have had the spending review, where the renewable heat incentive scheme budget was confirmed to March 2021, rising each year to a total of £1.15 billion.

That is in excess of where we are today and goes a good way towards meeting some of our heat targets, which were referred to in the letter as needing those decisions. Life is not static and for the Secretary of State to write to colleagues saying what needs to be done is not tantamount to saying that we have no plans or efforts in place to meet this. I am sure that the hon. Gentleman would acknowledge that.

We are also making progress in decarbonising the power sector. Investors want to know that we have clear, credible and affordable plans for the sector. That is what the Secretary of State set out in her speech in November, highlighting the important role that gas generation, nuclear power, offshore wind and innovation can all play. For example, as we have discussed, we have a world-leading offshore wind industry, with the UK making up about half of all deployed offshore wind in the world. This is an area where the UK can help to make a lasting technological contribution to supply chains, and certainly to the UK supply chain, supporting a growing installation, development and blade manufacturing industry in the UK.

By committing to annual CfD allocation rounds, the new clause would inhibit the Government’s flexibility to apply appropriate mechanisms to achieve renewable and decarbonisation targets. The Government should retain their ability to respond to evidence on technology cost reductions, costs to consumers and of course opportunities in other sectors such as heat and transport. The hon. Gentleman’s proposals would unnecessarily tie the Government into a course of action that may neither benefit the consumer nor provide any certainty to renewable energy generators or investors. We are committed to our energy and carbon targets and continue to make strong progress towards meeting them. For that reason, I cannot accept the amendments but I hope that I have addressed his concern and that he will be content to withdraw them.

New clause 6 seeks to devolve the matter that, when exercising electricity market reform functions under the Energy Act 2013, including in respect of contracts for difference, the Secretary of State should consider matters specifically in respect of Scotland. It also seeks to devolve annual reporting on how the Secretary of State has carried out the functions under part 2 of the Energy Act 2013 during each year. EMR, including CfDs, is GB-wide. That is, electricity market reform, including contracts for difference, is Great Britain-wide––I am sorry, I am trying not to use acronyms––and does not operate in a regionally specific way. That is linked to the fact that we have a GB-wide, integrated energy system on which the CfD scheme relies. The costs of the CfDs are spread across all consumers in Great Britain, which results in a fair distribution of the burden. That means that when exercising EMR functions under part 2 of the Energy Act 2013, it is appropriate that the Secretary of State has regard to the matters in section 5(2) of the Act on a Great Britain-wide basis. Having a GB-wide system ensures that support is directed as efficiently and cost-effectively as possible, which helps keep down the cost ultimately borne by bill payers.

Under current energy policies, Scotland has more than proportionally benefited from financial support from all GB bill payers. Around 9% of the UK population is in Scotland but around 30% of UK renewable electricity generation capacity is in Scotland. Of the 25 successfully signed contracts for difference, 12 have been awarded to projects in Scotland. That includes the 448 MW offshore wind farm in the outer firth of Forth and 11 onshore wind farms with a combined capacity of more than half a gigawatt. Transferring the power to Scottish Ministers to award contracts would go well beyond the Smith commission agreement. It was not the intention and nor is it appropriate.

I do not think it is necessary to devolve the publication of the annual report to Scotland. Every year, we publish an update that reflects the scheme’s GB-wide nature and sets out the progress the Government have made over the past year in implementing electricity market reform and how the Secretary of State has carried out functions under part 2 of the Energy Act 2013. Furthermore, the Secretary of State is already required to send the published report to Scottish Ministers, so I urge the hon. Gentleman to withdraw his amendment.

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I have nothing to add to what I have said already.

Question put, That the clause be read a Second time.

Division 11

4 February 2016

The Committee divided:

Ayes: 8
Noes: 11

Question accordingly negatived.

View Details

New Clause 6

Contract for Difference: devolution

In Section D1 of Part 2 of Schedule 5 of the Scotland Act 1998, in the exceptions, insert—

“Exception 2: The subject-matter of Chapter 1 of Part 2 of the Energy Act 2013.””—(Callum McCaig.)

This new clause would devolve control of Contract for Difference in Scotland to the Scottish Parliament.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Division 12

4 February 2016

The Committee divided:

Ayes: 2
Noes: 11

Question accordingly negatived.

View Details

New Clause 11

Decarbonisation target range

‘(1) Section 1 of the Energy Act 2013 is amended as follows.

(2) Leave out subsection (2) and insert—

“(2) The Secretary of State shall by order (“a decarbonisation order”) set a decarbonisation target range, which shall be reviewed annually thereafter.””—(Dr Whitehead.)

Brought up, and read the First time.

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I beg to move, That the clause be read a Second time.

The new clause relates to the undertakings that were provided in part 1 of the Energy Act 2013 about setting a target for decarbonisation of the energy sector by 2030. Part 1 of the Act makes it clear that the Secretary of State has a duty to ensure that the carbon intensity of electricity generation in the United Kingdom is no greater than the maximum permitted level of the decarbonisation target range. That is a clear undertaking in the Energy Act to set a decarbonisation target range, requiring the Secretary of State to take related actions.

At the time, it was made clear that that measure was in line with the Climate Change Act 2008, to ensure that the contribution of energy to decarbonisation was sufficient and would not drag down other sectors, and would add to the basket of decarbonisation measures required for the UK to meet its way station targets and the final 2050 target. That is a very important part of the Energy Act.

That target was put in place at that time and becomes important with the emergence again of our flexible friend, the Conservative manifesto. It has been said in another place that the commitment in the Conservative manifesto to no new and distorting targets covers everything. I anticipate that the Minister has a reference to that manifesto in front of her ready to go. I say to her kindly that that target is already there and has been since the Energy Act 2013.

The only issue outstanding then was not whether there should be a target but what the target range should be. Clearly, no new target is simply an exemplification of that target range. Under the legislation, it is up to Ministers, via secondary legislation, to clear up that small matter of the target range. One may say that is not a particularly small matter, since it is within the gift of Ministers to decide whether the target for decarbonisation is strong or not.

During the discussions that took place during the progress of that legislation it was clear that Members across the Committee envisaged that the target should be strong and in line with carbon reductions making a proper contribution. I say that because I have another letter, which I fear the Minister will not have. It is a letter from a fellow Minister in her Department sent on 18 September 2015 relating to this Energy Bill. About decarbonisation range targets, the letter says:

“As you will know, under the previous administration”—

which was, of course, a Conservative Administration, with a few others—

“a power was taken within the Energy Act 2013 which gives the Secretary of State the ability to set a ‘decarbonisation target range’ for the electricity sector, for a year ‘not before’ 2030. This allows a target to be set on the same date or after setting the Fifth Carbon Budget which must be set before end of June 2016 (measured in emissions intensity in grams of CO2 per kWh)…it is the intention of this Government not to exercise this power. This position is consistent with our manifesto pledge not to support additional distorting and expensive power sector targets.”

That is where the flexible friend comes in.

That letter from a Government Minister in the other place appears to say that, whatever the Energy Act 2013 says, the Government will not do anything about it. They are not going to set a decarbonisation target range at all and, for not doing that last bit of business relating to the 2013 Act, they are going to use the excuse that, as in the manifesto, it is somehow swept up by new and distorting targets for the future, which patently it is not.

We now have a position where, in order to ensure that the provisions of the 2013 Act are properly carried out and that the decarbonisation target range becomes clear to all, and is hopefully adhered to thereafter, the response to the onerous task of setting that decarbonisation target range is to do nothing at all—let us not forget that the decarbonisation target range could be whatever the Government decide it should be, so it could be a gentle target or a stronger target. That is not good enough. It is clearly incumbent on the Government to take action on the decarbonisation target range through secondary legislation, and this amendment would marginally change the wording of section 1 to give stronger guidance to do that, rather than what might be argued as slightly weaker guidance that a Minister in the other place clearly thinks is sufficient for him to jump clear of the obligation.

The new clause would provide that the Secretary of State should set a decarbonisation target and discharge section 1 of the 2013 Act. I trust that the Secretary of State, sorry the Minister—I have promoted her—understands the importance of that section and will take this modest amendment in the spirit in which it is intended, to ensure that the Act is carried out, and will act accordingly.

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I do have the letter. On reading it, a power is taken, but we take all sorts of powers in case we need them. Is it not simply the case that, because we are doing well against our own targets, we do not necessarily always want to legislate? I find it completely counterintuitive to say that, just because we have a power, we should therefore legislate to use it. That is just not the case. My noble Friend Lord Bourne made it clear to the shadow Energy and Climate Change Minister in the other place, Lady Worthington, that, in line with our Conservative manifesto, which I am pleased the hon. Member for Southampton, Test quoted accurately:

“We…will not support additional distorting and expensive power sector targets.”

Lord Bourne made it clear in his letter that that is precisely why we will not implement the power, even though we have it. In summary, just because we have a power does not mean that we need to use it. We will only use it if we need to use it, or if there are good reasons to do so.

New clauses 11 and 7—new clause 7 has now been withdrawn—have the same underlying purpose. Both new clauses would require the Secretary of State to set a decarbonisation target range for the electricity generating sector. New clause 11 would also require the target range to be reviewed annually, and amendments with very similar effects were debated and defeated during the last Parliament and during the passage of this Bill in the other place. Lord Bourne clearly set out the Government’s position on this matter, as the hon. Member for Southampton, Test has just explained.

We are committed to ensuring that the UK continues to do its part to address climate change, in line with the Climate Change Act 2008 and our international and EU obligations. I think all hon. Members recognise that we have played a leading role in the Paris climate change negotiations and done everything we can. The UK on its own cannot change the future for climate change, but acting internationally we can. We are determined to do our bit as cost effectively as possible to make sure that our own energy is secure and affordable, as well as low carbon. Locking ourselves into additional expensive and inflexible targets relating to the power sector is not the way to do that.

There are too many things that we cannot predict about how the energy system will develop up to and beyond 2030, and the costs of getting it wrong would be picked up by consumers for decades to come. Yesterday we were discussing fuel poverty and how we must do more to keep costs down for consumers, and now Opposition Members are urging us to sign consumers up to a distorting and expensive power sector target. It simply does not make sense, and our manifesto was clear that we will not do that.

Instead, investors want to know that we have got clear, credible and affordable plans—that is what my right hon. Friend the Secretary of State set out in her speech in November—including the role that gas generation, nuclear power, offshore wind and innovation can play in decarbonising the power sector. The Government are now setting out the next stages in their long-term commitment to move to a low-carbon economy, providing a basis for electricity investment into the next decade.

The huge investment that we have seen so far is evidence that our approach is working. Between 2010 and 2014 our policies have secured an estimated £42 billion of investment in low-carbon electricity, including £40 billion in renewables, and we have more in the pipeline for the future.

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I take the point that the Minister made. On occasion Governments allow themselves secondary legislation opportunities, which are then placed in a cupboard and never seen again. I deplore the tendency in Bills to provide possible powers that are never acted on because the Government subsequently feel that it is not a good idea to do so. However, the provision in the Energy Act 2013 is not a small power that was put in the back of a cupboard. Part 1, section 1 is the part around which the rest of the Act hangs. Other parts of the Act that refer to other targets make complete sense in the end only if the decarbonisation range is properly put in place by the Secretary of State. It is not at the front of the Act by accident, but because, in order to make sense of the Act overall, it is clearly incumbent on the Secretary of State to set that decarbonisation range at some stage.

If we are doing so well and we want to stand by our Paris commitments, why on earth would we not set a range? What is there to lose? I am more worried about what the Minister says than I am that the Government are unwilling to come forward with a range, because it suggests that—in the light of all these other matters—perhaps there is the beginning of a conscious view that targets will not only not be met, but consciously veered away from in future.

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Not only is there nothing to lose, but much to gain. Taking risk out of the investment picture for investors coming into our energy system will be a huge benefit. It comes down to the theme that we have returned to again and again in this sitting, which is that there is a lot of ambiguity about the Government’s position on these issues and a lot of investors telling all Members of Parliament that they simply do not trust the political will behind this.

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My hon. Friend makes an important point about how we settle the trajectory that we are on. It is a question not just of what tomorrow’s cost might be, but of the long-term cost and stability of our decarbonisation programme, and indeed the extent to which setting such targets and giving such certainty moves towards, rather than away from, what the Government have said about trying to meet targets in a low-cost way. Therefore, I am disappointed by the Minister’s response to this new clause, particularly as she appeared to give reasons in her own comments why the target decarbonisation range should now be set, but then concluded that it should not. For that reason, we would like to divide the Committee on this new clause.

Question put, That the clause be read a Second time.

Division 13

4 February 2016

The Committee divided:

Ayes: 8
Noes: 11

Question accordingly negatived.

View Details

New Clause 12

Contracts for Difference

“After section 13(3) of the Energy Act 2013 insert—

‘(3A) An allocation round must be held no less than annually in each year in which the UK is not on target to meet the 2020 EU renewable energy target.’”—(Dr Whitehead.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Division 14

4 February 2016

The Committee divided:

Ayes: 8
Noes: 11

Question accordingly negatived.

View Details

New Clause 13

Capacity mechanism

“After Section 42 (3) of the Energy Act 2013, insert—

‘(4) Fossil fuelled generating plant granted 15 year capacity contracts under the capacity mechanism established by this section shall be subject to—

(a) a carbon price;

(b) a requirement to fit the best available technologies to mitigate air pollution, and

(c) the emissions performance standard as established by section 57(2) of this Act.””—(Dr Whitehead.)

Brought up, and read the First time.

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I beg to move, That the clause be read a Second time.

The new clause adds to the Energy Act 2013 requirements relating to fossil fuel generating plant that is granted a 15-year capacity contract. The plant must adhere to certain conditions if the contract is to be granted—the three conditions are listed in the new clause. Regarding the final condition—the emissions performance standard—hon. Members will be interested to know that section 57 of the Energy Act 2013 contains a target, or, to be exact, a formula that under subsequent secondary legislation led to a performance standard of 450 grams per kWh being established.

To what does that section refer? It clearly does not refer to gas, because new plant for gas comes in at 378 grams per kWh and is below the emissions performance standard. What it refers to is diesel coming in to the provision of electricity, particularly in the context of what has occurred in the previous two capacity auctions, whereby diesel reciprocating engines, historically installed in industrial plants for standby generation, for example, are connected to the network to provide a regular system of electricity generation.

Those diesel engines escape the provisions of the Energy Act, because individually they are below the size at which plants are caught, but in terms of their individual emissions they are the most dirty of the various electricity generation devices. I mentioned that the combined cycle gas turbine plants being considered for commissioning come in at up to about 378 grams per kWh. Coal, which the Government are consulting on taking off the system entirely by 2015, comes in with existing plant above the energy performance standard at 930 grams per kWh. The carbon intensity of diesel generation sets is more than 1,000 grams of CO2 per kWh, so they are probably the dirtiest generating systems possible. However, in the last two capacity auctions, virtually the only type of plant to have obtained a 15-year capacity payment to develop is diesel; virtually every other plant that put in for such a payment failed to clear the auction. Because diesel is exempt from present EPS levels because of the individual size of the reciprocating sets, it has cumulatively obtained a substantial proportion of long-term capacity payments coming into the system.

Perhaps we should dwell for a moment on the supposed purpose of the capacity auction system, which is to bring new generating plant on to the system. The interesting thing about the first two auctions is that they signally failed to bring on to the system any new generating plant that looks likely to be built. From the earlier capacity auction, one plant, Trafford, looks like it will probably not be built, and in the most recent auction there were no plants at all except, mainly, for those small diesel generation sets. The net policy outcome of capacity auctions over the last two periods is that no new plant has come forward. Yet diesel generating sets have run in under the wire and have got a considerable amount of cumulative capacity, which I will come to in a moment, despite being the dirtiest form of generation. That is a completely perverse outcome compared with what one might have thought would be the case with both capacity auctions and the Government’s policy of taking coal off the system in the longer term.

Of course, one reason that diesel sets have been able to get into capacity auctions is that they have succeeded in coming under the clearing price for the capacity auction. When the clock auction comes down to the point at which the right amount of capacity has been procured, everybody under that point gets that payment, and diesel sets have been able to get under the clearing price whereas other plants have not. It is not because diesel sets are particularly cheap to run; it is, at least in part, because they already receive a substantial underwriting from HM Treasury through enterprise investment scheme payments for the establishment of those plants. Originally, it appears, the payments were set to encourage the plants to be established for standby purposes, but they have been used for other purposes in the capacity auction.

Although that route has been changed in the autumn statement, the most polluting generating plants have managed to get two lots of subsidies for generating and have got in through the capacity auction process as well. That is not only bad climate policy but bad public policy in general, and it is certainly a perverse outcome of the capacity auction process. I am sure the Minister agrees, if not publicly then certainly in private, as she is a sensible person. She might even agree publicly; it would be really helpful if she did.

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I absolutely agree with the hon. Gentleman and I can tell him that the loophole has been closed. An HMRC amendment to the Finance Bill has excluded reserve generating activities from eligibility for tax reliefs under venture capital schemes from 30 November 2015, and it has subsequently been announced that all electricity generating activities will be excluded from eligibility from 6 April 2016. We are now considering whether any consequential changes to the capacity market are needed to ensure that this position is reflected adequately. I am grateful to the hon. Gentleman for that point.

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Indeed, the Minister confirmed what I said: that the EIS loophole was closed in the autumn statement. I am interested to hear, and I previously understood, that the Department was actively considering ways in which the capacity auction could be amended. I am not surprised that the Department is doing that, because so far the capacity auction has completely failed to fulfil its purpose, which was to bring forward new plant. The Department will have to think rather carefully about how it amends the capacity auction process.

It does not seem to me that the EIS loophole has been closed and that that in itself removes diesel sets from future capacity auctions. Although one would hope that the Government, when they look carefully at capacity auctions, will ensure that that happens, it is by no means certain. I remind the Committee that we are not talking about a small amount of generation that has already come on to the system. In the first auction, 375 MW of diesel set generation were given 15-year contracts; in the second auction, 650 MW of diesel sets were given room in the auction. In case we have any difficulty in scaling that, I point out that the one gas-fired power station that is presently under construction and that might produce energy in the near future will come in at an overall capacity of 880 MW. In fact, we have more than one new gas-fired power station’s worth of diesel sets in the capacity auction. That is a substantial amount indeed, even though the diesel sets themselves are fairly small.

It is imperative that we close the loophole properly, and that is what the new clause would do. If the Government are thinking about how they can amend the capacity auction, they should regard the new clause as very helpful, because it would sort that out straight away and get us on a very good footing for future capacity auctions. That would allow us to concentrate on whether we can get any new gas-fired power stations. I assume that that is one of the things that the Minister will be particularly keen to achieve in future auctions.

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New clause 13 would introduce additional capacity market eligibility criteria for new-build capacity accessing 15-year capacity agreements based on a carbon price, a requirement to fit the best available technologies to mitigate air pollutants, and the emissions performance standard. As the hon. Gentleman says, the new clause targets his concerns on the potential growth of diesel engines participating in the capacity market. Although I do not accept the new clause, I am not unaware of or unsympathetic to his concerns.

I will explain the steps being taken on the issue, but first I point out that we are in this situation in large part because of the long history of inadequate emission controls, which we inherited. Also, there has been a lack of investment in future energy sources over a very long period—that is a matter of record. I assure Members that small-scale diesel and gas generators can offer big security of supply benefits, as they can help to meet peak demand quickly by producing electricity when it is most needed. I know that the hon. Gentleman, who is expert in these matters, knows that that is the case.

As it stands, diesel engines represented just 1.5% of the capacity procured in the capacity market auction that concluded last December. Like other forms of capacity, they will be paid a clearing price of £18 per kW. The capacity market will oblige participants to run in response to stress events, when the electricity system is otherwise tight. Those events are likely to be infrequent and may not occur at all in some years. The generators are there to switch on very quickly at times when we urgently need to meet shortfalls, because of issues such as the intermittency of renewables, unexpected downtime on traditional power plants and so on.

The emissions impact from diesel engines is often assumed to be larger than it is in reality. In fact, they have a relatively small impact on overall CO2 emissions because of the short hours that they run. They are typically used as peaking plant, running for less than 100 hours a year, whereas larger fossil fuel plants will run for 2,000 hours or more. In addition, per unit of generated electricity, diesel emits around 30% less CO2 than coal. Because they start up more quickly than bigger generators, diesel can emit less CO2 than larger gas plants when used for these short periods. The controls proposed on CO2 are not appropriate and are not likely to be effective.

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I take the Minister’s point that diesel sets can be used for very rapid start-up under peaking conditions, but does she agree that they are by no means the only device that can do that? There are other opportunities for quick start-up under peaking conditions, including, under certain circumstances, wind. Wind can start up and ramp very quickly. Historically, diesel sets have been used not for peaking purposes but for reserve purposes, should every other system go down; that has been the main use. It is their introduction into the main generation system as a peaking device under the recent capacity auction arrangements that is new, and it is that use we should be disturbed about.

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I do not disagree with the hon. Gentleman. Wind can ramp up very quickly and it will often be the first choice, but it cannot always be controlled—the wind does not always blow. Unfortunately, diesel generators still have their place. The concern about diesel engines is more relevant in the context of local emissions, particularly oxides of nitrogen, or NOx. I am fully aware of that and I emphasise that we are actively looking into that issue. Diesel engines typically run for under 100 hours a year, so we need to start by improving our evidence base on exactly what their local emission impact is.

I want to set out the steps that are being taken. First, DEFRA will begin transposition of the medium combustion plant directive into legislation this year. The directive sets limits on the levels of nitrogen dioxide that small, sub-50 MW generators can emit, because they fall below the minimum threshold for existing controls. DEFRA will provide more details when it consults later this year and is already building its evidence base to fully understand the risks from diesel engines so that it can take action accordingly.

Secondly, Ofgem is aware that many people are concerned that there may be a level of embedded benefit for these generators and is looking into whether action is needed. In particular, the transmission charging regime has been brought to my attention, as it can account for a significant share of revenues for small generators and so would be partly responsible for encouraging their growth.

Thirdly, we are looking at whether any further direct steps could be taken if there is evidence that future capacity market participants are at risk of subsequently contributing to breaches of local air quality limits. However, as I am sure the hon. Gentleman realises, any measure would need to have state aid clearance, which requires that the capacity market does not discriminate against types of technology. We need to ensure that we do not do anything that creates security of supply risks by depriving the electricity system of a fast, flexible form of capacity before there are reliable and viable alternatives.

For those reasons, I cannot accept the new clause. We need to ensure that we are taking the right action in the right places, where there is clear evidence that it is needed, and without placing our energy security at risk. I hope he is reassured by my explanation and will be content to withdraw the new clause.

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Because it is a Thursday afternoon and because the Minister gave me a little bit of reassurance, I will speak briefly. I still think we need to get to grips with this soon rather than later, but if the Minister undertakes the actions she has set out with some alacrity, so that they are done well in advance of the next capacity auction, we may make some progress. In those circumstances, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 14

Electricity storage

‘(1) Section 4 of the electricity Act 1989 is amended as follows.

(2) After subsection (1)(c) insert—

“(d) stores electricity for the purpose of giving a supply to any premises or enabling a supply to be so given,”

(3) At end of subsection (4) insert—

““Store” means the conversion of electricity into a form of energy which can be stored, the storing of the energy which has been so converted and the reconversion of the stored energy into electrical energy in devices with an individual capacity of more than 50MW.”

(4) Section 6 of the electricity Act 1989 is amended as follows.

(5) After subsection (1)(d) insert—

“(e) a licence authorising a person to store electricity for the purpose of giving a supply to any premises or enabling a supply to be so given (‘a storage licence’);”

(6) After subsection (2) insert—

“(2ZA) In addition to holding a storage licence, the same person may be a holder of—

(a) a distribution licence,

(b) a transmission licence, or

(c) a generation licence.

(2ZB) The Secretary of State may by order determine the circumstances under which a person may hold a storage licence in addition to a distribution licence, a transmission licence or a generation licence under subsection (2ZA).””—(Dr Whitehead.)

Brought up, and read the First time.

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I beg to move, That the clause be read a Second time.

Observant hon. Members will note that this is not only the last new clause to be considered this afternoon but the most helpful clause that we have yet seen in this Committee. I trust that hon. Members, being in the general mood they are in this afternoon, will see the new clause for exactly what it is and ensure that no Division is required by passing it with acclamation. That would be an appropriate way to round up our business.

I will not take an enormous amount of the Committee’s time. The new clause relates to something in which all Committee members should be very interested: the extent to which electricity supply can first, be given most value, and secondly, smoothed out in terms of when it does and does not arise, by the emerging technologies of battery storage. Indeed, a number of the issues we have discussed in the Committee—intermittency of wind, base-load problems and a whole range of other issues—can begin to be addressed by battery storage of electricity.

For example, if a battery storage system is attached to a solar array, the life of that solar array can be extended far beyond the period during the day when the sun shines. Clearly, the power that comes from it can go right through the night. We are already seeing that effect, to a minor extent, with solar arrays on streetlights, but on a much larger scale it could revolutionise the way in which solar is used in future.

Battery storage can also be used in relation to wind. We have heard that wind, quite self-evidently, does not always blow, and sometimes when it does blow, it blows rather a lot. Ensuring that the capturing of that variability is smoothed out into a regular supply through the attachment of battery storage to the wind turbine is clearly a positive step forward as far as wind supply is concerned.

Larger battery storage in distribution network operators can capture what would otherwise be downtime in terms of conventional energy production, inasmuch as that production does not necessarily then have to follow dispatch requirements, but can follow the requirements of filling up a battery associated with that distribution network system. When that power is needed in the system, it can then be released in a way that resists electricity storage arrangements that historically consist of cutting open a mountain, putting a large pond at the top and the bottom of it, pumping up water from the pond at the bottom and storing it in the pond at the top, and then letting it come down again at some considerable electricity value when it is needed. That process is undertaken already, but no new traditional forms of storage have been built for something like 30 years. The most well-known is Dinorwig in north Wales, which provides reasonably regular additional power at a cheap price uphill and a more expensive price downhill, and helps to balance the system.

Providing battery storage at scale in operating systems would clearly be a much more efficient way of doing that and a much more straightforward way of balancing the process. The good news is that battery storage is proceeding by leaps and bounds. The technology is now such that it is efficient to provide battery storage. I am sure that the Minister is concerned about the cost to the public purse or otherwise of battery storage roll-out, but with the right arrangements battery storage could be rolled out at no cost to the public. I will come to the necessary arrangements in a moment. Given the efficiency of battery storage and the ability to build substantial sets of it, which allows large amounts of electricity be stored, it is now feasible for the first time, and I think we are on the cusp of introducing it into the system.

The problem is that the system, as it stands, is not friendly to the introduction of battery storage for two reasons. First, under the BSUoS—Balancing Services Use of System—energy transit arrangements, operators that have large-scale battery storage arrangements will get charged twice, because they will be regarded as a generator when the electricity is going out of the battery, and as a supplier when the energy is going into the battery. Under the present transit arrangements, two charges are applicable to batteries. That is unlike any other form of electricity arrangement.

Secondly, under the Electricity Act 1989, which set up the licensing arrangements, licences were deliberately provided in a way that would prevent vertical integration of the system, although that has not quite worked out in practice. The licensing arrangements were separated out so that licences for generation, transition and supply could not be held at the same time. The 1989 Act is clear that that separation is rigid only up to a de minimis point. Anybody who puts in place battery storage on any scale will fall outside the licensing arrangements. Indeed, the only transition network experiments in large-scale battery storage have all been under the de minimis level. The 6 kW arrangement in Kenilworth is, I believe, the only one of any size, and it is relatively small due to the constraint on licences to DNOs for larger installations.

The new clause seeks to resolve one of those two problems. The other requires more detailed arrangements relating to how BSUoS works. It seeks to amend the Electricity Act 1989 to maintain the separation of generation, transition and supply licences, but make it possible to have a distinct storage licence that could apply to other forms of licence arrangements. It is a simple, straightforward amendment, which requires the Secretary of State to organise licensing arrangements so that that can be brought about. The content of the licence is entirely up to the Department; it simply separates out those licences.

I honestly cannot see any good reason why everyone with any concern at all for the future of the electricity system should not jump on the new clause and say, “What a good idea this is; it should be done immediately.” I know that the Government have announced that they are considering methods by which electricity storage might be advanced, but I suggest that the new clause is absolutely basic to even starting to consider it, because this is a fundamental impediment to battery storage getting going on any decent level, as far as our present landscape of generation, transmission and supply is concerned.

Therefore, I do not think that the new clause cuts across the Government’s planned consideration in more detail of how battery storage can be advanced. If it is not adopted, considerable time could be lost before another occasion arises on which a future Bill could be amended in such a way. That would be a substantial break in progress, regardless of what the Government may be thinking in terms of the details of discussions.

I therefore suggest that whether or not it completely fits the bill for achieving the purpose that I have described—I personally believe that it does; it has been consulted on considerably with numerous bodies that ought to know what they are doing as far as such licences are concerned—and even if it is not accepted exactly in the form that it has been tabled, the Minister should say, “We’ll have a look at it, come back on Report and put in something that does fit the bill.” I would be happy with that. Indeed, if that were the conclusion of our business in this Committee, I would consider that we had had rather a good time after all in these proceedings. I offer that to the Minister to consider, and I hope that she will be able to do so a positive light.

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I will keep my remarks brief. The issue of storage is underdeveloped in terms of a solution, GB-wide and from a European energy design perspective. We should invest in research and development, and the SNP welcomes any clause that would encourage such investment.

New clause 14 will hopefully open up many more storage projects, traditional and unconventional, as has been well pointed out by the hon. Member for Southampton, Test. Adequate storage is a solution to the intermittent nature of several types of energy, including solar and wind, as he also said. He also touched on battery power, so I will skip that and move on to a few other examples, such as compressed air energy storage and pump storage, which is particularly poignant in Scotland, given that we have Cruachan and Coire Glas sitting ready to go, should everything be suitable, as well as the usual hydroelectric solutions.

The only thing about battery power is the need for more research and development, as the hon. Member for Southampton, Test pointed out. It is often described as a megawatt solution to a gigawatt problem, in terms of energy generation in the UK. Something like the new clause is needed to open up and encourage further investment.

In compressed air storage, air is compressed and stored when cheap energy is available, such as on a windy night, and then released at peak times when required. The difference between that and current facilities for battery power is scale. The nuances of local solutions and local control touched on by my hon. Friend the Member for Aberdeen South during the debate on new clause 6 are relevant. Suitable salt basins are available onshore in England, where a pilot scheme could be run for about £45 million, whereas in Scotland we would need much more investment for an offshore solution. We are minded to support the clause inasmuch as it would encourage, as we sincerely hope it will, the uptake of much more storage.

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I should perhaps emphasise that although the clause is headed “Electricity Storage”, it is about storage licences and therefore the particular technologies that the hon. Gentleman mentions, such as compressed air storage, would come entirely within this arrangement. So that no one is under any misunderstanding about that, it is intended to deal with all forms of storage, not just electrical battery storage.

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I thank the hon. Gentleman for his intervention; it is most helpful and clarifies the position, should anyone be in any doubt. As such, we are minded to support this clause.

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Since this is our last new clause, I thank all hon. Members. We have had a very entertaining and at times quite feisty debate. I put on record my gratitude to Opposition Members for raising so many different issues. I reassure them that in a lot of areas we are not disagreeing, it is just that the proposals they have made on specific methodology is not what the Government agree is the right way forward. I am grateful to Opposition Members and, of course, to my hon. Friends who have contributed enormously to an interesting debate. On this last new clause, I am as keen as mustard on electricity storage; it has a vital contribution to make to dealing with intermittency and I wish we were five years ahead—it will be interesting to see how much we have managed to achieve in creating this new ability to store intermittent generation.

New clause 14 would create a new licence category for electricity storage operators and allow other licence holders, such as generators and transmission and distribution network operators, to hold an electricity storage licence. The creation of a separate electricity storage licence is an option that is being considered by my Department and one of a number of issues for storage operators to be included in a call for evidence in the spring. This will enable us to test it against other options, which may be less regulatory and burdensome, more targeted and, importantly, faster to implement. So, much as I would love to say, on this very last new clause, that we agree with the hon. Member for Southampton, Test, the problem is that licensing storage now would be premature. Indeed, the Electricity Storage Network, which is a key trade body for the storage industry, has criticised this new clause on the grounds that it

“pre-empts the current work by the Department”

and

“may hinder, rather than help, the progress of well thought-out strategies to support … the storage industry.”

I fear that the new clause could also have unintended consequences. For example, it could put the UK in breach of EU unbundling rules in the third energy package. These rules make it clear that transmission owners, in particular, must not own generation or supply assets, which could include storage. Also, and fundamentally for me, licensing storage is just not a simple or a quick solution. While, as the hon. Gentleman points out, we could include it in the Bill, it would require wholesale changes to the industry codes, which could take up to two years or more from licensing. This autumn, when we respond to the call for evidence, we will set out what actions we will take, and by when. These actions will include measures to address policy and regulatory barriers to storage.

I know that all hon. Members recognise how vital energy storage could be for our system. It is a feeling we all share, but I hope that they will also recognise the wider implications of acting too soon. I hope that hon. Members are reassured that the Government are actively seeking solutions to how best we can deploy storage while keeping an open mind about their proposals.

Before I sit down, I very much thank the Clerks, the Doorkeepers and you, Mr Bailey, for all your efforts in managing this Bill Committee so well.

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It is encouraging to hear that we share a sense of urgency about bringing forward energy storage and, indeed, a sense of inquiry about how that can best be done. As the Minister has said, the new clause that I proposed this afternoon appears to be one of the options that the Government might consider. I emphasised that it was not itself the solution, but part of a wider solution, and that it could be introduced in a relatively straightforward way, but the Minister said that there could be some issues with it. Nevertheless, I hope that it is considered with the same sense of urgency as we have heard this afternoon.

I remain concerned that we may miss the boat for legislation as far as the outcome of any discussions are concerned. The Government might introduce an Energy Bill next year, so that might be when such detailed legislation could be made. If that is the case, as the Minister seems to be convinced, that will be a step forward. On careful consideration of what she has said, I am happy to withdraw the new clause, but I hope that its content does not disappear and will be firmly on the table for future discussions.

I thank you, Mr Bailey, for your wise and careful chairmanship of our proceedings, and offer similar thanks to your co-Chair, Mr Davies. I thank the Clerks, the long-suffering—in terms of our proceedings—Doorkeepers, and all who have taken part. I concur with the Minister: we have had a good examination of the issues, and matters have been conducted in a spirit of considerable civility and, sometimes, conviviality. I particularly thank the Minister for occasionally actually laughing at my jokes, which was very helpful. Finally, I thank her for her excellent supply of raisins and associated commodities, which have helped the Committee in its deliberations. With that, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

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I must inform the Committee that the pleasantries were, to a certain extent, pre-emptive. I am sure Members will be delighted to hear that we must now deal with new clauses 15 and 16.

New Clause 15

Onshore wind power: renewables obligation

‘The power to make a renewables obligation closure order in respect of electricity generated by an onshore wind generating station in Scotland may only be exercised by Scottish Ministers.’ —(Callum McCaig.)

This new clause would return to the Scottish Ministers the power to close the renewables obligation in relation to electricity generated by onshore wind generating stations in Scotland.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Division 15

4 February 2016

The Committee divided:

Ayes: 2
Noes: 11

Question accordingly negatived.

View Details

New Clause 16

Strategy for incentivising competitiveness of UK-registered companies in decommissioning Contracts

‘(1) By June 2017 the Secretary of State shall develop a comprehensive strategy for the Department of Energy and Climate Change to incentivise the competitiveness of UK-registered companies in bidding for supply chain contracts associated with the decommissioning of oil and gas infrastructure (“the strategy”), which shall be reviewed annually thereafter.

(2) In developing the strategy the Secretary of State must consult—

(a) HM Treasury;

(b) the Department for Business, Innovation and Skills;

(c) the Oil and Gas Authority;

(d) Scottish Ministers, and

(e) any other relevant stakeholders that the Secretary of State thinks appropriate.

(3) The strategy must include, though shall not be restricted to—

(a) an appraisal of tax incentives that can be extended to oil and gas operators to incentivise their use of UK-registered supply chain companies; and

(b) an outline of other appropriate support that can be provided by the Government, or its agencies, to UK-registered companies which express interest in bidding for decommissioning contracts.’—(Callum McCaig.)

This new clause would compel the Secretary of State to bring forward a strategy for ensuring that UK-registered supply chain companies benefit from decommissioning contracts.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Division 16

4 February 2016

The Committee divided:

Ayes: 6
Noes: 11

Question accordingly negatived.

View Details

Bill, as amended, to be reported.

Committee rose.

Written evidence reported to the House

EB 26 The Royal Burgh of Sanquhar and District Community Council

EB 27 ScottishPower

EB 28 Renewable Energy Systems

EB 29 Dr G M Lindsay

EB 30 Department of Energy & Climate Change Memorandum relating to Standing Order No. 83L