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Energy Bill

Volume 701: debated on Wednesday 21 May 2008

My Lords, I beg to move that this Bill be now read a second time. Of the many challenges we face, few can be more significant or more urgent than tackling climate change and maintaining the security of our energy supplies. International Energy Agency projections indicate that global energy demand is set to increase by 53 per cent between 2006 and 2030, in turn driving a 55 per cent increase in carbon dioxide emissions over the same period.

It is clear that we need decisive action at home and abroad to tackle these major issues, including driving forward significant new investment in energy infrastructure. The IEA forecasts that between now and 2020 $20 trillion of investment will be needed to meet these challenges. The UK itself will need investment in around 30 to 35 gigawatts of new electricity generation capacity over the next two decades, around two-thirds of which will be required in the next 12 years. We also need new import and storage infrastructure as the UK becomes increasingly dependent on imported energy. These are large-scale and long- term investments, and the investment decisions taken over the next decade will be critical in determining how successfully the UK and the rest of the world move towards a secure, low carbon energy future.

The Government set out their strategy for tackling these challenges in the 2007 Energy White Paper. This Bill is one of the key legislative strands for implementing that strategy, alongside the Climate Change Bill, which noble Lords have already considered, and the Planning Bill, which is currently in the other place. The objective of the Energy Bill is to help to deliver an environment that will encourage investment not only to maintain the UK’s diverse energy mix but also to make that mix increasingly low carbon. The Bill will update the legislative framework to reflect the availability of new and emerging low carbon technologies, meet our changing requirements for security of supply infrastructure, and ensure suitable protection for the environment and taxpayer as our energy market fundamentally changes.

I turn now to the specific measures. The Bill is split into six parts. Part 1 relates to offshore gas importation and storage. This country currently imports around 20 per cent of its gas, but that is probably going to rise to up to 80 per cent by 2020. As we increasingly rely on international energy markets, our strategy for ensuring secure energy supplies must evolve. We must not be dependent on unstable and possibly sometimes conflicting economies elsewhere in the world. Part of this evolution will be a growing need for new offshore gas storage and import infrastructure. It is important to ensure that there is a clear regulatory framework which will support the private sector investment in this type of project. Current offshore legislation was designed largely for the oil and gas production that has dominated the last half century, and as a result there is no single piece of legislation that covers the kind of new offshore gas infrastructure that this country now needs. The current regulatory process is therefore complex and a barrier to new investment from the private sector. Clauses 1 to 16 create a new regulatory and licensing framework specifically designed for offshore gas storage and offshore liquefied natural gas unloading projects. This will allow us to simplify the regulatory process, create greater clarity and, importantly, provide certainty about the way forward for investors from the private sector.

This part of the Bill also creates a new regulatory framework for offshore carbon dioxide storage projects. It is clear that fossil fuels will continue to be part of the UK’s diverse energy mix for a long time to come. The IEA predicts, under the most optimistic scenario, that fossil fuels will still provide around 38 per cent of global electricity in 2030. The successful development of carbon capture and storage technology is vital if we are to achieve a low-carbon future. Clauses 17 to 35 will establish a licensing framework that allows the storage of carbon dioxide under the seabed. This is a key part of enabling the long-term development of CCS. Through this Bill and the Government’s demonstration project—I remind noble Lords that we are one of only three countries in the world undertaking this type of demonstration project, the other two being Norway and the United States—our aim is to drive forward the development of a technology that has the potential to reduce carbon emissions from fossil fuel power stations by as much as 90 per cent.

Part 2 focuses on renewable electricity; that is, electricity generated from renewable sources. The Government are committed to an increasing role for renewables in the UK’s energy mix and want to build on and strengthen the existing renewables obligation— the RO. The changes to the RO include the power to band the obligation to allow differentiated levels of support to technologies. That will help to promote the more rapid deployment of a wider range of renewable technologies. It will include more support for technologies such as offshore wind and less for those technologies which are more cost effective, such as landfill gas, helping the UK to see electricity from renewable sources grow over the medium to long term.

The RO has been highly successful. Since its introduction in 2002, we have seen renewable electricity more than double, from around 2 per cent to more than 4 per cent of the electricity generated in the United Kingdom, with a further 18 gigawatts now in the planning systems. By 2010, in some 20 months’ time, alongside exemption from the climate change levy, the RO will be worth around £1 billion per annum in support to the renewables sector. Our reforms will make the RO 30 per cent more efficient in terms of renewables deployment in the period from next year to 2015. As a result we expect to see the electricity generated by RO-eligible renewable sources triple between now and 2015.

The Government expect offshore wind to make a significant contribution to renewable electricity in the United Kingdom in the future. We already have plans, potentially, to open our seas to up to 33 gigawatts of offshore wind energy, subject to the outcome of a strategic environmental assessment of the seas surrounding the UK. Underpinning these ambitions, the Bill will also ensure that we have the infrastructure in place to transmit offshore renewable electricity to the onshore grid. To help enable that, we must establish an effective regulatory regime for offshore transmission. The Energy Bill will add to existing powers in order to ensure that Ofgem can run cost-effective and efficient competitive tender exercises for offshore transmission licences. Introducing competition in offshore transmission infrastructure will help to avoid unnecessary delays and cost to the development of offshore renewables projects, and ultimately reduce risk and support investment. Noble Lords will have seen from the Energy Bill impact assessment that our analysis indicates that a competitive tender process for the construction and operation of these transmission assets could reduce costs by between £230 million and £400 million on investments of around £2.5 billion.

Part 3 of the Bill covers the decommissioning of energy installations. While one of the objectives of our energy strategy is to create the right environment for investment, the Government have a responsibility to ensure that both the taxpayer and the environment are adequately protected. Noble Lords will be well aware that it is the Government’s view that new nuclear power should have a role to play in the UK’s energy mix. New nuclear power will contribute to the diversity of our energy supplies and will definitely help to reduce carbon emissions. The developers and operators will have to fund, build and operate any new nuclear power stations. They will have to meet the full costs of decommissioning and each operator’s full share of waste management and the cost of disposal.

The new legislative framework that we are putting in place through Clauses 42 to 65 of the Bill will ensure that all operators have in place a funded waste and decommissioning programme, approved by the Secretary of State, before operation of the specific power station commences. The programme will have to set out a costed technical plan for how a developer proposes to decommission that station and a financial plan for how those costs will be met. It will be a criminal offence to operate a new nuclear power station if a programme such as that is not in place.

As part of their approved programmes, and to ensure that potential investors from the private sector fully understand the level of their potential liability, the Government committed, in the nuclear White Paper, to establishing a fixed unit price for disposing of waste from new nuclear power stations. This will be based on the expected costs of waste management and disposal and will include a significant risk premium. Clause 63 gives the Secretary of State the power to implement that.

The regulatory structure we are putting in place through the Bill is just one of the measures we announced in the nuclear White Paper earlier this year to facilitate the building of new nuclear power stations. Together with the clauses in the Bill, these measures will ensure that nuclear is available as an investment option to companies alongside other low-carbon technologies. Neither will be crowded out from the private sector investment mix.

This part of the Bill also strengthens the existing decommissioning regime for both offshore renewables and oil and gas installations. Developers already have an obligation to ensure that redundant offshore installations are decommissioned properly to protect the marine environment and to ensure the safety of other industries, such as shipping. Provisions in the Energy Bill will strengthen the existing regimes, including, for example, ensuring that funds put aside for decommissioning are expressly protected for that purpose, even in the event of a corporate insolvency.

Part 4 of the Bill covers a number of issues related to the oil and gas sector. The UK still meets around two-thirds of its energy needs from the UK continental shelf, but our ability to continue to maximise domestic production economically will depend on how we incentivise production through a regulatory framework. The Energy Bill makes minor amendments to the oil and gas regulatory framework to reflect the evolving commercial environment, including the growing number of smaller players on the UK continental shelf. The proposals in the Bill, supported by business, will help to ensure that we can continue, efficiently and effectively, to manage the UK continental shelf. To that end, we are making minor changes to the oil and gas licensing regime, including, for example, taking a power partially to revoke a licence in the event of the insolvency of one, but not all, of the parties to that licence. That will benefit consortiums of companies where one party defaults but all the others in the consortium are able to continue.

In addition, to enable fair access by all parties, we are extending the coverage of the existing upstream oil and gas infrastructure third-party access regime and introducing a similar procedure in relation to oil processing facilities.

Part 5 deals with a number of areas of legislation. That includes an enabling power to underpin the rollout of smart meters to medium-sized businesses, in the first instance, and then potentially to all energy consumers, smaller businesses and finally the 44 million domestic consumers. Part 5 also deals with a range of more minor legislative changes, including rationalising energy policy reporting requirements and aligning them with the new requirements that are being introduced as part of the Climate Change Bill. Part 5 also gives effect in legislation to the transfer of electricity safety functions from the Department for Business, Enterprise and Regulatory Reform to the Health and Safety Executive and the transfer of the technical regulation of gas and electricity meters from Ofgem to the National Weights and Measures Laboratory.

Finally, the Bill also updates the regulatory framework for nuclear security, thus ensuring that we have stronger sanctions to prosecute people attempting to steal the most sensitive information from specific designated sites. The recent restructuring of the sector means that sensitive information related to uranium enrichment may now be stored off licensed sites, such as a research facility. These provisions will mean that, no matter where this type of sensitive information is held, it is properly protected, including through the availability of appropriate sanctions.

The provisions of the Bill will further improve our regulatory framework so that our energy market can operate more effectively, we can ensure that we have the right environment to encourage timely investment and we can increase the diversity and the low-carbon nature of our energy supplies, ensuring at the same time that we have security of that supply in an ever-changing and often dangerous world. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Jones of Birmingham.)

My Lords, I thank the Minister for introducing the Bill. We have long awaited the great Energy Bill, but this is only a small part of the energy picture. The Marine Bill, the Climate Change Bill, the Planning Bill and a future nuclear waste Bill are all vital to securing Britain’s long-term energy supply and climate change strategy. Even that list leaves out measures that are vital to that strategy, including feeder tariffs, smart metering—which I notice the Minister mentioned today—and other measures to help domestic customers experiencing fuel poverty, and a carbon capture regime that includes liabilities.

While we on this side of the House welcome the proposal for a nuclear decommissioning fund, there are no measures on nuclear waste. It is impossible for the private sector to develop robust financial models when the position on deep depositing is not known.

On Second Reading in another place, my colleague, the shadow Secretary of State, Alan Duncan, while welcoming the broad thrust of the Bill, criticised several specific measures. He said that the Government’s handling of carbon capture and storage—known from here on in as CCS technology—had been poor and that it was not clear what provision, if any, the Bill made for liabilities. While he praised provision in the Bill for banding the renewables obligation, he said that the proposal did not go far enough to enable the UK to meet its EU renewables target. He also regretted that no provision had been made for feed-in tariffs.

The Conservatives and the Liberal Democrats have each pointed out that what is most controversial about this Energy Bill is what is not in it. They used the miscellaneous section of the Bill in the other place to try to generate debate about such important provisions as feed-in tariffs, smart metering, prepayment meters, electronic electricity devices, social tariffs and the role of Ofgem. I have no doubt that the Government will hear forceful argument from all sides of the House on these important omissions, both today and in Committee. Ten years’ dithering over energy and consultation after consultation and now, as the Minister says, there is no time left to waste.

The Minister himself has admitted that the UK faces a looming energy gap. Approximately 30 per cent of the UK’s existing capacity will shut over the next 20 years. All our nuclear power stations except for Sizewell B are scheduled for closure, and many older coal-fired power stations will be forced to close under EU law. It will leave a significant capacity gap.

The United Kingdom used to be a net exporter of oil and gas, but by 2004 it became a net importer of gas and last year became a net importer of oil. UK gas production peaked in 2000 at 108 billion cubic metres and has since declined by about 1 per cent every year. From 2008 a rapid decline in production is forecast. The Government have estimated that imports could be meeting 90 per cent of gas demand by 2020 and admitted that the UK’s reserves of gas have declined faster than they expected—how vulnerable this makes our country, our industry, our homes and our economy.

The UK currently imports only 7 per cent of its overall gas requirement but that is expected to rise, as the Minister said, to 40 per cent by 2010 and 90 per cent by 2020. More widely, the European Union currently imports 52 per cent of its gas, a proportion that is steadily growing. The European Union is already the world’s leading importer of such resources, and the Government estimate that by 2020 we may be reliant on overseas resources for 80 per cent of our energy needs.

This is affecting everyone. Companies and consumers alike faced a gas and electricity price shock in the winter of 2005-06 as the margin between supply and demand was too tight. Then, in February, there was a fire at the UK’s largest gas storage facility. By March 2006 a cold snap across Europe and insufficient gas flow through the interconnector led to a gas balancing alert being issued by the national grid. We were suddenly faced with the possibility of gas supply interruptions—unplanned, with nowhere else to turn.

Increases in the price of oil on the international market sent prices shooting up. Domestic bills have risen by 35 per cent in real terms in the past seven years. Bills for medium-sized firms have risen by 50 per cent in two years. The Department for Business, Enterprise and Regulatory Reform set a target to eliminate fuel poverty in vulnerable households and now the total is likely to rise. Despite a target set by Labour to reduce carbon emissions by 20 per cent, emissions are higher now than when Labour came to power. What a mess. The quicker the Government take action, the better. We will, of course, do all we can to hasten the Bill along and to improve it where we can. Let me start with some questions for clarification.

The Energy Bill contains a framework for CCS, but what use is it without provision for liabilities? What does the Minister plan to do if the Scottish Parliament blocks plans to build a new nuclear power station in Scotland? Do the Government have any plans to change the nuclear safety targets for a new generation of nuclear power stations? According to the Nuclear Installations Inspectorate, the migration of skills has placed a severe strain on its ability to find, recruit, train and retain the number of skilled employees it requires to assess and approve the different types of reactor that are seeking a licence. What are the Government doing to address this?

The Government have recently voiced their support for three major international agreements which all have higher ambition levels than the targets in the Climate Change Bill—the G8, the Vienna climate change talks and the European Council spring summit. Why have the Government not put the same level of ambition on our own home-grown Bills?

During debate in the other place the Minister announced several forthcoming government consultations, including ones on carbon capture readiness, a renewable energy strategy, and environmental and social guidance for Ofgem. Surely these consultations should have taken place before the Bill was published. The noble Lord, Lord Jones, is a Minister of action—surely he is not going to let the Executive hold up the Government’s business any longer than he has to.

Whatever I have said so far, we are where we are. We must work with what is in the Bill, limited though it is. I make a plea today on behalf of the whole House. The Minister prides himself on travelling the world, banging the drum for Britain and British products—and he is very good at it. But unless he stays put and sees the Bill through all its stages, there will be no products to sell. To paraphrase Lord Grey of Fallodon at the end of the First World War, “The lamps are going out all over Britain, and we shall not see them lit again in our lifetime”.

My Lords, following on from the doom and gloom of the noble Baroness’s concluding remarks, perhaps I should start my speech on a rather downbeat note. The papers in the Library are full of the future spot price of oil, which has hit a record high. That is rather unfortunate, as many traders believe we are reaching a point where oil scarcity will become the order of the day. In that light, the Energy Bill is most welcome.

At first glance, the Bill seemed extremely uncontentious, partly because most of the issues we are most interested in have been left out of it. That seems unfortunate. However, even though the Bill will probably go into Grand Committee, I hope that the Minister does not take that as an indication that there will not be a good deal of consensus on a number of areas between both opposition parties as well as many Back-Bench Labour Members and Cross-Benchers before we send it back to the House of Commons. In fact, we will be sending it back to the House of Commons to look at areas it has not scrutinised due to the rather strange system there whereby important issues can be neglected and not called for debate. We have a wonderful system here whereby issues are debated on their importance.

That, I think, will be crucial and the Minister should take it particularly seriously. One issue on which the Government faced a vote was the subject of one of the largest Back-Bench rebellions in this Parliament. That rebellion will gain traction if the proposal is returned from this place. I therefore hope that the Minister can look at feed-in tariffs with an eye to adopting the measures rather than the confrontational politics. Feed-in tariffs are not a political issue.

We will be focusing on a number of important issues which should be added to the Bill because of timing. Having just sat through debates on the Climate Change Bill, we are greatly concerned that we are running out of time to introduce technologies and act as a world leader. As the Minister stated, we must develop these technologies in short order if we are to meet our climate change commitments. I therefore hope that the Government will look at a number of these issues with a view to reducing carbon.

The first issue we are particularly concerned about, which will take a good deal of the Committee’s time, is the feed-in tariff. I have dealt with this for a number of years, introducing a Private Member’s Bill, the Renewable Energy Bill, four years ago, which raised it. I went to the DTI and discussed it, but there was absolutely no interest whatever on the part of the Government; it was seen as a small or non-issue. Of course, the Government are entirely right: it is a small issue, but that is due to their inaction. In France and Germany, for example, whose Governments have taken a great deal of interest, feed-in tariffs have become a major component in meeting their renewables obligations. The Government have said that renewables are being taken seriously, but I see little action on the ground. Without mechanisms to ensure that this area grows, small, or even larger, renewables will not become economically viable, with economies of scale driving their prices down so that they become an everyday feature of life.

If the Minister cannot consider feed-in tariffs now, maybe he could write to me on what the Government see as the power level to be considered. You could have an unlimited feed-in tariff, but many speakers talk about microgeneration and go up to a much larger scale. It would be interesting to discover the Government’s view on a level for feed-in tariffs. They are dealt with differently in Germany—we have the ROC system over here—so it would be interesting to know how the Government see the level affecting the market in ROCs.

The second issue that I am particularly keen on, which, strangely, was not raised in another place, is the change in the primary responsibilities of Ofgem as regulator. It is important that Ofgem considers carbon a major issue and a primary responsibility. It has been argued that Ofgem deals with the market, competition and supply. However, I have spoken to a large number of energy companies over the past few years, and they constantly ask how they can invest in new generating capacity if they do not understand what the carbon regulations will be. Carbon, therefore, has completely skewed the market in new generation because, as it has not been dealt with in the right way, there is little confidence in those public sector energy companies that will fill the gap in the energy market over the next few years.

I realise that we now have a Committee on Climate Change, but it will only be making recommendations. We really need to add carbon into the regulator, Ofgem, so that other market mechanisms must take the role of carbon into account. While it would be easy to say that ETS will be the panacea to solve all of our problems, I do not believe that will be the case—and if not, it would be much more helpful if Ofgem were to deal with it. This is particularly important because BERR, in its former role of DTI, has completely ignored carbon as an issue that has to be dealt with aggressively, and has therefore sidestepped its responsibility for it.

Another area we will be looking at is that of carbon storage and capture. As was stated in the Question earlier today from the noble Lord, Lord Ezra, it is unfortunate that the Government have chosen one pilot project. I understand the costs, but we have the opportunity to invest in technologies that could make us a world leader in an area with massive market potential. Look at what happened with wind turbines: we missed an opportunity when we could have been in the forefront. The Danes took wind turbines and now have more than 60,000 people working in that industry. One problem that we now have, especially with offshore where, as the Minister mentioned, there has been a massive expansion, is that we do not produce the turbines ourselves. Therefore, the shortage and growing queue for the turbines to be produced drives up the price of those that we are installing. That is no small consideration when the London Array will be the largest offshore turbine farm in the world, so it is unfortunate that this country had no stake in producing those turbines.

Smart metering is the other major area which we will be looking at and, since the Government have brought forward an amendment, the Bill now includes it. However, I was particularly concerned with the Minister’s choice of words. He said that customers will “potentially” be able to put in a smart meter. Perhaps that is a change in policy, for in a speech of 19 November 2007, the Prime Minister said that,

“For every household over the next decade there will be the offer of a smart meter that will allow two-way communications between the supplier and customer, giving more accurate bills … and making it easier for people to generate their own energy through micro generation and sell it onto the grid”.

In that speech, the Prime Minister stated not only that smart meters will be available to everybody within 10 years, but that feed-in tariffs will also be part of that. Is the Minister now saying that that is potentially not the case? The issue that we will raise on smart meters is that, while the clause is fine as far as it goes, there is nothing to make sure that the Government actually bring them about. We will, then, look to introduce a clause giving a timescale under which smart meters should be brought about. That is only fair for the energy companies, because there is an enormous amount of investment for them to meet, and for them to be given no specific timescale to work to will cause uncertainty in the market, potentially raising costs.

In these debates on energy, I often talk a great deal about nuclear issues. Many of your Lordships will be glad to know that I am very happy with the Bill’s provisions for nuclear, although I might raise a couple of probing amendments over potential subsidy in the market and whether the Government are getting full cost for the planning gain on land surrounding present British Energy sites, because the new sites will be built next to the old ones. However, that is for a later date.

I am particularly annoyed about the omission of a renewable heat obligation. I have spoken to BERR and the DTI about it on numerous occasions and it has been raised in many debates. It is almost immoral to leave it out, considering the implications for carbon. I very much hope that that issue will be considered as the Bill proceeds. In order to meet our renewable obligations by 2020 without legislation including renewable heat, will the department add renewable heat into their figures? Some of the documentation gives the impression that renewable heat will be added into the figures to meet our renewable target, but there does not seem to be anything in the Bill which gives us hope that renewable heat will be a government priority.

Leaving social tariffs out of the Bill is another rather unfortunate omission. In an age when electricity prices have gone up considerably in the past few weeks, and will go up even further, the failure to include social tariffs to protect those, especially the old and vulnerable, who will increasingly suffer fuel poverty is unfortunate. Another measure that is not included in the Bill, but which I hope to look at, is energy storage. Energy storage for electricity is becoming a major field in America where it is being looked at as a new technology that could iron out the spikes in grid demand. It would be helpful to include provision for that. We are considering the Energy Bill. I cannot see there being an energy Bill in the next term of Parliament, which means that the next Bill to be enacted will be two to three years down the line. If we do not have clear guidance in regulation in many of these areas, new technologies will suffer badly, which will have massive climate change implications.

This is an interesting Bill and Grand Committee will be a relaxed and consensual way of dealing with it, but the Minister should be under no misapprehension —come Report, we will ensure that it will go back to another place for further consideration.

My Lords, it is a pleasure for me to encounter the Minister in his new guise for the first time, but I am afraid that I shall strike a somewhat dissonant note. I start by declaring an interest as a director of Infinis, the renewable energy company.

Unless and until the scientific consensus shifts and produces either new insights or new solutions, the world must make rapid progress towards low or no carbon means of supplying energy. Unavoidably, human kind will in due course have to meet its energy needs by harnessing the power of the sun, or the gravitational pull of the moon, or the turbulence of the weather, or the heat in the earth or the awesome energy locked into every atom in the microsecond that the universe was first created.

In the foreseeable future, however, it is hard to imagine anything other than our all remaining hungry for energy. The Minister gave some chilling statistics. We can be far more energy-efficient, but the notion that we will be able massively to reduce our energy needs appears to me fanciful and at odds with all the evidence. We will not want to stop seeing at night, or to stop being warm in winter, or to stop travelling for business or pleasure. It is likely, however, that the cost of producing energy from non-carbon sources will be high, that the price of energy will rise substantially and that its use will become ever more of a luxury.

Britain cannot be proud of its progress on energy issues, not just over the past decade but over the past few decades compared to other leading countries. We are laggards in nuclear power, having allowed our capacity to diminish and not to grow. We are near to the bottom of the hierarchy of nations embracing renewables. As a result, in the short term we have no choice but to burn even more of the world’s finite and diminishing stocks of hydrocarbons to supply Britain’s future energy needs. At least in the medium term, we will remain net importers of energy, with weak hedging of national risk against the incalculable vicissitudes of a troubled world. As the noble Baroness, Lady Wilcox, reminded us, we are far too exposed, and we have not managed our energy security risk prudently. This Bill is a welcome step, but it is a small step on the way to a position of which we can be more proud. I suspect—this note has already been struck by other noble Lords—that we will need to return to these issues again and again in the coming years before we attain a steady equilibrium.

We shall have to establish that the Government’s framework for nuclear offers sufficient incentives for resurrection and for growth. Nuclear brings attendant risks, as we all know, which are significant and which must be managed; but nuclear must none the less be a major source in the future of our and the world’s energy needs. The energy market untrammelled would just produce black smoke. If we want an energy policy that meets our environmental and security objectives, self-evidently Governments have to intervene, and we shall have to pay more for our energy. Subsidy is hard-wired into the system. In nuclear, we have to hope that the Government’s hands-off policy in passing almost all the risk to the private sector will work and that it will lead to a substantial growth in nuclear power. If it does not, we shall have to think again quickly and consider whether the Government need to shoulder more of the risk, particularly the risk of future Governments adding to the cost of owning a nuclear plant.

As for renewables, it is very hard—indeed, for me, it is impossible—to see how Britain can meet Europe’s targets and our own, or even come close to them. That should concern us, because those targets are not now plucked from the air but are rooted in the science. There are, beyond the Government’s reach, important reasons why our progress in meeting our renewable energy targets will be slow. Some of the renewable technologies—for example, offshore wind or biomass—are still not robust, though I am sure that they will soon become so. As the noble Lord, Lord Redesdale, reminded us, some of the technologies that are tried and tested are experiencing worldwide demand, so there are now significant supply bottlenecks.

There are many other impediments in the way of reaching our renewable targets that the Government can affect. First, our planning regime is very costly for renewable energy suppliers, and it generally moves at a snail’s pace. We have to hope that the proposed new planning legislation will enable a more timely and cost-effective means of reconciling competing global, national and local objectives.

Secondly, agencies of government, particularly the MoD, as well as other public agencies, need to curb their understandable instinct to object, except on the most material of grounds. Thirdly, our onshore grid was designed for a different power era, and we need to inject some urgency into ensuring access for highly dispersed renewable energy providers.

Fourthly, the Government must be wholly reliable in setting down and keeping to the economic framework that they set if investor confidence is to be maintained in this sector. If the April 2009 date for the new renewable regime were to slip, for instance, it would wholly undermine many investment projects already under way, undertaken on the reasonable assumption that it would not.

Fifthly, compared with best practice in other countries, our incentives for renewable heat do not match those for renewable power. As a result, an enormous amount of heat from our power stations and large plants escapes into space, when, as others have already suggested, it could be used to supply neighbourhood heating systems. Sixthly, again unlike some other countries, we lack a system of feed-in tariffs for microgenerators of renewable power.

The Bill, I am sorry to say, addresses only some of those issues. Given the disproportionately high burden overall that EU renewable energy targets will place on renewable electricity generation in the UK, and given the gulf between where we need to be and where we are, it is hard to escape the conclusion that the Government will need to revisit their renewable energy policy even before the ink is dry on the Bill.

Finally, renewables policy in the next phase may need to focus even more on the natural advantages enjoyed by the British Isles. As the main bulwark against the fierce North Atlantic, a high proportion of Europe's wind blows across our shores. For the same reason, we are buffeted by power for ocean waves. With a huge and complex island coastline, we have access unparalleled in Europe to the push and pull of tidal forces.

We have a national interest, therefore, in ensuring—if it can be done—that economic technologies for harnessing those energy sources are developed as quickly as possible. As we all understand, however, progress on the national front is not a sufficient condition of real progress on climate change. We will resolve the issue of burgeoning carbon emissions across the planet only if we act globally. That means above all that the EU, the US and other rapidly developing countries must come together to put a global and ever-reducing cap on carbon and institute a regime of carbon pricing and trading. As a nation, we must do all we can to foster that coming together, but we will have the moral authority—let alone a moral compass—to lead that debate if we put our own house in order first.

The Bill is a welcome step on the way, but we have a very long journey ahead of us.

My Lords, in taking part in this debate, I declare my relevant energy interests as stated in the Register of Lords’ Interests and as recorded by the Advisory Committee on Business Appointments.

The greatest security challenge for the 21st century will be the competition for natural resources, primarily water, food and energy. Global warming, population growth and increased competition for resources from elephant emerging economies make that inevitable. From Sakhalin Island to Ashgabat, from Baku to Caracas, from the Arctic north to the southern tip of Africa, we are witnessing a new global great game for influence and resources.

There is nothing new about resource nationalism and the desire of producing nations to keep control of the lion’s share of the profits from their oil, gas and other natural commodities. We have been here before as recently as the oil spike of the 1970s. As the noble Lord, Lord Redesdale, pointed out, with oil touching a record $129 a barrel and with future prices touching $140 a barrel at least until 2016, the era of cheap energy seems well and truly over for the foreseeable future, as suggested by the noble Lord, Lord Birt. There is, however, no real evidence that we have reached peak oil prices, but the global levelof competition for dwindling resources and evermore investment-intensive extractive processes in often hostile political and geological territory is increasing.

The issues that we are debating today in your Lordships’ House echo across Europe and beyond. Central to this discussion is balancing our long-term energy needs with our long-term environmental responsibilities. This debate has a particular resonance in the UK.

It is relatively uncontroversial to say that the UK’s energy profile is going through a transition. I was fortunate and privileged to serve as the Energy Minister in the old Department of Trade and Industry—the DTI, since renamed BERR, or the Department for Business, Enterprise and Regulatory Replication.

My Lords, I am sorry. Did I get that wrong? I am proud to have been involved in drawing up the 2007 Energy White Paper that looked to address many of the energy issues before noble Lords today.

Before turning to the Bill, it is worth dwelling on the wider energy context. As I have mentioned, large portions of the world’s proven hydrocarbons are located in politically unstable or unpredictable environments. Some 80 per cent of oil and gas resources are controlled by national Governments. Security of supply is an issue, and we need to ensure that we do not become dependent on any one country or any one form of energy.

As your Lordships have already heard, the EU imports about a quarter of its gas from Russia alone. The UK will import around 80 per cent of its gas supplies by 2020. Yet the greatest threat to security of supply remains the slow-down in energy investment and production in Russia and the former Soviet Union.

The North Sea is a maturing asset, but there is still much to play for. With some 16 billion to 25 billion barrels of oil remaining from the UK continental shelf, we should not squander the opportunities that they afford us.

The Government must look for greater co-operation with the energy industry and look to provide adequate investment, incentives and an effective decommissioning regime. The Bill takes the right steps in providing the framework for storage and exploitation capabilities. We must also to look to cultivate other indigenous energy sources such as clean coal, which was mentioned earlier by the noble Lord, Lord Ezra. Those should be developed alongside government support for pioneering a wide range of carbon capture and storage technology, which the Bill provides, through the licensing of offshore carbon dioxide storage.

The Bill takes a number of sensible steps. It provides a regulatory framework for our evolving energy infrastructure; it provides for new technologies such as carbon capture and storage and for smart meters; it makes licensing provisions for decommissioning energy installations and provides for offshore electricity transmission. Importantly, it creates the conditions for investment in offshore gas storage. In today’s volatile gas market, it makes a lot of sense to increase the UK’s gas storage capacity. However, the Government must have regard to the need to develop long-term energy supply contracts, as witnessed on the Continent, if they want to ensure security of supply and avoid the level of volatility in energy prices that we are seeing today. European energy liberalisation will not suffice.

The Bill tightens the regulations for nuclear waste management for the next generation of nuclear power stations. The Government’s nuclear waste management proposals are welcome, not only in themselves but also in addressing public concerns about nuclear waste. Nevertheless, the Government should accelerate the programme of securing the UK’s legacy nuclear waste and boost the number of nuclear inspectors.

As already noted by the noble Baroness, Lady Wilcox, the UK will lose a third of its generating capacity during the next 20 years as low-carbon directives kick in and existing nuclear power stations are closed. Nuclear currently accounts for 18 per cent of our generating capacity. Most of our existing stations are due for retirement within the next 15 years, as my noble friend the Minister indicated. Current estimates project a need for between 30 and 35 gigawatts of new-generation capacity during the next 20 years.

If we are committed to making any new capacity low carbon and wish to avoid a new dash for gas, a new generation of nuclear power stations must be brought online. This would complement the developing renewable sector alongside greatly improved energy efficiency. I still remain to be convinced that as much is being done in the latter sphere as necessary to meet the Government’s ambitious targets.

The Government’s provisions for smart meters in the Bill are to be welcomed, not least for ending the inequities for pre-payment customers. I know the Government are consulting further with a view to roll out for medium businesses by early 2009. I hope we will hear a similar announcement on rollout to small businesses and domestic consumers later this year, along with a commitment to a definitive timetable.

On biofuels, last year world wheat prices rose 77 per cent and rice 16 per cent. With Indian and Chinese appetites growing, EU and US biofuel programmes are taking cereal and farmland out of the food supply chain and diverting resources into meeting biofuels targets instead. As a result, we are seeing food riots across the developing world and steep increases in food prices and inflationary pressure at home. I know that the Government share these concerns and I hope that they will put pressure on the EU either to revise its 2020 10 per cent biofuels target and/or look to alternatives.

We also need a frank discussion on renewable energy targets, a point made by the noble Lord, Lord Birt. Renewable energy currently accounts for 2 per cent of the UK generating capacity. There have been great strides in this area. Yet the 20 per cent target by 2020, agreed under the German presidency, looks quite frankly unrealisable, even with a reduced target of 15 per cent for the UK. A seven or eight times increase in renewable energy in the UK between now and 2020 is frankly not achievable. The Government need to take this on board and come up with a workable solution, one based on more than just pure aspiration. Buying carbon credits abroad will be a costly cop-out. They should reconsider their opposition to feed-in tariffs. I agree with the noble Lord, Lord Redesdale, on this matter.

From the excellent speeches we have already heard and those that will surely come later, a picture will emerge. We do not want to be looking over our shoulder in 20 years’ time unsure of our energy supplies. Equally, we do not want the next generation of decision-makers to blame our current leaders for failing to reduce our carbon footprint. We have a clear choice: develop a diverse energy portfolio drawn from clean, affordable and low-carbon energy sources, or sleepwalk into an energy crunch. It will be with us soon enough if we fail to act. For some countries such as South Africa, energy shortages and black-outs are a daily reality. This will all play out against the backdrop of potentially devastating climate change.

There is a fashionable phrase doing the rounds in Europe at the moment: act today to save tomorrow. From the Bill before us today and the broader legislative package that the Government have proposed, we are witnessing a significant gear-change that tries to achieve just that. The Government do not yet have all the answers but taken together this Bill sows the seeds for a low carbon economy while working to ensure security of supply. For that, Her Majesty’s Government should be commended.

My Lords, most speakers hitherto have ranged a little wider than the provisions of the Bill—quite properly because, as everyone has said, the Bill deals only with some of the matters which we need as a country to address. The Bill as it stands is a mixed bag and so will be my speech. I am following other noble Lords in that. The measures outlined by the noble Lord, Lord Jones of Birmingham, in Parts 1 to 4 of the Bill, about gas and CO2 storage, renewable obligation certificates and decommissioning are all much as expected. All are urgently necessary and essential for the development of these sources of energy.

Before I turn to the Bill—there are some provisions that I particularly want to look at—I shall talk about what I have called the new kid on the block. When, last year, the Nuclear Decommissioning Authority awarded a substantial decommissioning contract to a company called Energy Solutions, of Salt Lake City, Utah, in the United States, I am sure I was not the only one to be taken by surprise. Indeed, I tabled a Question, which I showed last week to the managing director of that company, and he laughed.

Since then, I have made it my business to learn about the company. I am quite satisfied that its presence in the UK and its remarkable record, particularly on decommissioning and dealing with waste, is enormously important and gives rise to two issues of fundamental importance to our immediate energy policy.

First, as recently as the nuclear White Paper last January, there seemed to be a widespread assumption that we were talking about replacing our decommissioned nuclear stations and that we might not therefore be planning for more than about four or five new nuclear reactors. Further, because of the need to avoid what I call the AGR mistakes—seven different designs for seven different stations—there was a widespread view that we needed to go for one design and replicate it to get all the benefits of scale. EDF—Électricité de France—and British Energy, perhaps in partnership with E.ON of Germany, have been seen as strong contenders for this. Their project would be based on the EPR reactor designed by Areva.

Since then, however, we have had a very important speech by John Hutton, the Secretary of State, on 26 March. He said:

“I don’t want to see just a like for like replacement of nuclear capacity in the UK … But energy security and climate change should provide the push for a significant expansion of nuclear in the UK in the coming decades”.

He went on to offer the promise that this could lead to 100,000 new skilled jobs. Many people have interpreted this, quite rightly, as meaning not only four or five new nuclear power stations but if anything, eight, 10 or possibly 12. This is why the arrival of Energy Solutions is now very important. It has publicly announced its intention—and that of its partners, RWE Power International of Germany, and Westinghouse, which we still regard as American, although it is Japanese-owned—to enter the market with a series of AP1000 reactors, which is the Westinghouse design. They may use not British Energy sites but sites that are being cleared by the NDA. They have mentioned Wylfa in Anglesey, Hinkley Point and even possibly Bradwell. There may be others.

If there had been only one competitor in the UK market, I would have envisaged every prospect of a competition investigation, perhaps by the OFT, by the EU, or both. Ofgem will be able to offer initial advice, but it has told me that such a process could not take less than six to nine months. We cannot afford that delay. Now with the prospect of two entrants into the market, however, there will be competition. Although we do not expect Ministers to comment at all on the present negotiations, which are clearly highly market-sensitive, can they say whether having two entrants, with different partners with different reactor designs and based on different sites, obviates the need for any competition investigation? That is the first point.

My second point about Energy Solutions relates to the contribution that it could make to managing our waste. I am told that it has been having detailed discussions with government departments, the NDA, the Environment Agency and the other regulators—the HSE and the Nuclear Installations Inspectorate—which hold out a real possibility of a step change in the plans which have hitherto been projected by Ministers, as approved by CoRWM, for dealing with our waste. Energy Solutions has told me that, while spent fuel and the waste from fuel reprocessing must go into a deep repository in this country, much of the so-called intermediate waste does not need to be managed in that way but can be either recycled for use in new nuclear build or transported to Energy Solutions’ own disposal facility, called Clive, in the Utah desert. I have no means of ascertaining this, but it claims that this could lead to substantially lower costs with a significantly smaller repository for new-build waste and so save us a great deal of money.

I should like to ask the Minister a detailed question on the Bill. Of course we cannot decide; we have not even got the White Paper yet on waste. But Clause 45 in Chapter 1 of Part 3 of the Bill—this is the chapter which includes the funding of decommissioning and waste that many noble Lords have talked about—allows for the modification of an approved programme for funding and disposal. If the regulators approve a significantly less costly process of decommissioning and waste disposal, which is the offer held out by this company, will that clause allow the Government to modify an existing approval so as to allow the companies to reduce significantly the amount of money that they have to set aside for funding the obligation? I totally support the idea of funding the obligation, but will Clause 45, as it stands, do that, or will it need to be strengthened?

I turn to the other end of the energy scale—

My Lords, I have been following the noble Lord’s novel argument with some interest. My only concern is that the proposal that he is referring to will have to be the subject of a fairly rigorous competitive process, organised by the NDA at least, following on from what the NDA is presently doing. Is the noble Lord not putting too much emphasis on one company’s option which is to be the subject of very rigorous competitive analysis and adversarial attacks by other companies as well? It seems that he is embracing the first one that comes along.

My Lords, the noble Lord makes a very sound point, but as I think we will see when we get the White Paper on waste, which we have been promised before the end of this month, it is a very long-term programme. It will be a long time before we are able to embark one way or the other on a waste programme. Of course these things will need to be rigorously examined by the competition authorities, if that is relevant, and certainly by all the regulators and by the Government. I would not expect anything less. All I am saying is that on the information which I have, there seems to be something here of which the Government should take careful note. I know they are being apprised of this because I have been told that.

Noble Lords will not be surprised by my next point if they remember the debates we had in January on the arrangements for reducing emissions from domestic properties—the so-called CERT programme. In our debates on that, one of the key provisions was for the energy companies, in seeking to reduce the emissions from domestic properties, to provide 40 per cent of their savings from the target group, which includes everyone on benefits, tax credits, housing benefit and so on, and, rather surprisingly, pensioners; and I declared an interest. Those present in the House when we debated that order will know that I felt that it was entirely wrong that the companies could not be told who was in the target audience. When asked who the people are and where the households are, the answer given was that the information is protected by data protection.

At the end of April, a very important fuel poverty summit discussed many issues, including not only the social tariffs mentioned by the noble Lord, Lord Redesdale, but also the CERT programme and prepayment meters. There was clear recognition that there has to be a system for identifying the households. I have received a letter from Sir John Mogg, chairman of Ofgem, who, shortly, will join this House, which is admirable. He said:

“Our remit and the focus of the Summit was on how to target and make more productive the help available by suppliers to the vulnerable and fuel poor”.

I warmly welcome that. Recently, when I asked the noble Lord, Lord McKenzie of Luton, when that would be, he said that it would be very soon. I hope that the noble Lord, Lord Jones, will be able to give me a more precise answer. I shall certainly return to this matter in Committee.

An issue which appears to be in dispute between members of the Government is whether this will require further legislation—for instance, an amendment of the Data Protection Act. If further legislation is needed, why cannot that be done in this Bill? Do we have to wait until the next Session of Parliament before we can have a Bill to deal with that? I really would like an answer to that.

Transparency is another issue that I have pursued on every Bill we have had on energy. Why cannot the extra costs imposed by climate change legislation be shown on customers’ bills so they can know what that is? Again, I am told by Ofgem that a typical domestic customer has within his annual bill £31 a year for the emissions trading scheme; £38 a year for the CERT programme; and £10 a year for the renewables obligation, which of course falls on the customer and not on the Government. Together, that amounts to £79 a year, which goes straight on the customers’ bills, including those of the fuel poor. Is not the first step to make that clear, so that people know what they are paying for all that? I should warn the noble Lord that I shall pursue that too in Committee.

I would say more about the Ofgem remit but have run out of time and will have to come back to that in Committee. It has been approached the wrong way around. The right way would be to impose clear statutory duties on the suppliers and then to get that properly regulated.

Finally, much has been said about the price of carbon as being essential for new investment, which, again, I have referred to on previous occasions. Last week, a paragraph in the Wall Street Journal, said:

“Luckily for Euro utilities, the British government is mulling an energy bill that would set a minimum price for carbon”.

It is not in this Bill. Can the Minister tell us whether the Government are mulling the possibility of putting a floor price under carbon? I am sure that the industry would be very interested to know the answer to that, and so would I.

My Lords, energy policy is a sensitive subject and a difficult one, too, because it is not easy to foresee what the future will bring, although the actual decisions in the policy areas are generally long term in nature. A key plank of government policy for many years now has been to look for market-driven solutions and to seek to direct the market by various degrees of regulation, but keeping these to a necessary minimum. Certain aspects of commercial energy projects can be developed only in direct response to government policy, of course, and that takes us to the heart of this Bill: its provisions to encourage CCS initiatives, an expanding range of renewable technologies and a renewed investment in nuclear energy. I wish to make brief comments on each of those areas and then move on to an issue that was discussed in some detail in the White Paper but which has not featured in the current Bill.

One’s view of CCS will be heavily determined by the view that is taken of global warming and, more specifically, the separate question of the contribution that rising CO2 levels are making to global warming. In previous debates in your Lordships’ House the scientifically best-qualified noble Lords among us, including the noble Lord, Lord Oxburgh, who is to speak next, have argued that the case is essentially proven, and the Government seem to have accepted that. In a previous incarnation I was a scientist, and from the very modest foothills of my own scientific judgment—at the end of the day we all have to exercise a judgment that is amateurish in character—I regard the question as in some respects still open.

There does seem to be a greater consensus among scientists from other disciplines than among climate scientists themselves that CO2 levels are the key determinant of rising temperatures. But climate science is a notoriously imprecise and poorly understood area of science. That is because the phenomena under investigation are so large: the whole of the earth’s surface, the whole of the earth’s atmosphere, and the sun itself. That makes precision difficult to achieve. The history of science is littered with scientific consensuses that have come to be overturned one way or another.

The fact that there has been a degree—somewhat less than one degree—of global warming over the past century does seem to be fairly clearly established. Its correlation with CO2 emissions is less so in my view, although there may be—and we should probably say, “probably is”—a link. But it is still, I think, in the realms of probability. That means that it is right to test out CCS technology on a commercial scale. This will be a hugely expensive operation. As we heard at Question Time, the cost simply of a demonstration site, much smaller than a commercial power station, will be £1 billion. That is for only one out of a range of possible technologies which could be put into place.

Given the rate at which India and China and other countries are building coal-fired power stations, more than one a week, without CCS, we need to be sure that the cost of fitting CCS is going to be realistic in the future and will not be disproportionate. One way or another it seems likely that global warming will continue come what may and for whatever reason. There have been trends over the centuries of the coming and going of global temperatures. There is a movement up and that global warming is going to produce consequences, particularly among some of the poorer in the world. Alongside the proper attention to CCS technology, there needs to be an equal attention to alleviating the consequences by flood defences and so forth. We need a mixed economy in these two areas; otherwise we could end up having very expensive CCS technology, which is something like tilting at the windmills of CO2 increases. Be that as it may; history will tell.

Turning briefly to renewable technologies, I welcome the changes to the renewable obligations scheme which are envisaged. It does all seem late in the day as we chase the target of 10 per cent of our energy generation by 2010 and 20 per cent by 2020. It would be good to hear from the Minister whether the 20 per cent target by 2020 is still regarded as realistic. Leaving things mainly to the market has so far discouraged investment in what, at least in the short term, are more expensive forms of electricity generation. The renewables obligation scheme represents a major tweaking of the market to encourage the greater use of renewable sources of electricity. It is arguable that more direct and longer term planning in this area should have been in place years ago.

Picking up on noble Lords’ earlier comments on the present arrangements, it seems to me that the renewables obligation process is really targeted at large-scale suppliers of energy. I think that we need a mixed economy of taking that approach while encouraging microgeneration, which needs a feed-in tariff to complement it. Encouraging microgeneration would help to change the culture in this country, which is still shifting towards a properly responsible approach to energy conservation. So there is a case for feed-in tariffs, particularly in relation to small-scale projects. Some churches with photovoltaic and other schemes are finding it difficult to set up connections to the grid for the contribution they may make.

There is also the question of whether the encouragement of energy crops, as envisaged in the White Paper, is now slightly out of date. There is quite a bias in the proposed differential renewable obligations tariffs towards encouraging energy crops, but given the recent changes in the area of food production and the rise in food prices, I wonder whether that remains the wisest course.

Turning to nuclear energy, I welcome the prospect of a new generation of nuclear power stations. The Bill seeks to set up a framework within which the Government can regulate new nuclear stations, and particularly in relation to the storage of radioactive waste. As I understand it, a company which owns and operates a nuclear power station will need to set aside money to pay for the storage of waste and the eventual cost of decommissioning the station and the site. In his opening speech the Minister said that operators would meet the full costs, but given that the full costs of storage potentially stretch over thousands of years and not just over the lifetime of the nuclear plant, it would be helpful to have some confirmation of what the term “full costs” means. Does it extend to the full costs incurred over the long period of storage that is envisaged?

My own view is that the present arrangements may end up slightly discouraging investment in nuclear energy, which would be regrettable. Because of the more or less equally beneficial carbon footprints of both renewable technologies and nuclear, I would prefer to have a slightly more level playing field for the two areas. We await the detailed proposals for the permanent underground storage of nuclear waste. It is difficult to see how these costs can be assessed with any confidence until we know about the actual plans—a point also made by the noble Lord, Lord Jenkin, and others. Can the Minister give us any idea of when he expects a permanent underground site to become operational? Given the subsidy which is provided for renewable generation, it would be a pity if delays in agreeing arrangements for storage were to prevent companies entering the market again, not least because if we allow the nuclear component in our electricity generation capacity to fall out of the mix, that will more than represent the whole contribution, prospectively, of renewable energy until 2020. It really is a big factor in the overall balance.

The issue which I feel should have been addressed in the Bill is that of fuel poverty. The White Paper, on page 77, gives estimates of households in fuel poverty, and the modelling was based on fuel prices in 2006. Could the Minister provide updated projections in the light of recent and projected rises in the price of oil, gas and electricity? The table showed a prospect of 3 million households in fuel poverty by 2015 on the least optimistic assumptions which were in place in 2006. How do those least optimistic projections in 2006 relate to the reality of intervening price rises for oil, gas and electricity? Fuel poverty, I suspect, will become a very significant factor in the coming years.

The White Paper sets out the schemes which the Government have in place to assist households in countering fuel poverty, including targeted improvements in insulation and energy efficiency. Although the White Paper sets out some options that require energy companies to have adequate programmes to support their most vulnerable customers, I feel that the problem will be sufficiently serious to suggest that a more formal regulatory environment should be provided in this area to address the needs of those who are most vulnerable. It has always seemed odd that the winter fuel payment is made indiscriminately to everybody, however wealthy or poor they are. There is much more to be done in targeting those who are in greatest fuel poverty.

Finally, I offer a general comment on the direction of government energy policy and, to a degree, on the absence of overall policies in recent years. One of the difficulties is that Governments have an immediate electoral horizon of five years. Within that time they are subjected to ever more intrusive and critical investigation by other political parties, the media and external commentators. That can result in a tendency to take short-term decisions and to put off unpopular ones. That has affected both the development of renewable energy in this country and the question of replacing our nuclear capacity. Energy policy needs a horizon of at least 50 years, not five. The Bill illustrates grappling with delays in developing long-term strategies. For example, the “dash for gas” was essentially a short-term provision, which future generations may look back on to see our generation as burning a valuable national resource in a short time, meeting a short-term Kyoto obligation but ending up by importing—probably—at least 80 per cent of our gas by 2020. Other examples of the tendency to look at implications in the shorter term could be given.

In relation to climate change, we have the climate change committee, which is deliberately tasked with looking at the longer-term horizons and taking the issue at least partly out of the immediate political agenda. Whether Ofgem can fulfil that remit, if it is given to it, I am not sure, but the need for some agency which advises the public and the Government on long-term issues over the whole range of energy policy is compelling. In its own way, this Bill represents a need for that, as did the rather acerbic comments of Allan Asher, chief executive of Energywatch, before the Commons committee yesterday.

My Lords, I declare an interest as president of the Carbon Capture and Storage Association. I am also a director of two renewable energy companies: blue-ng and Falck Renewables. This Bill is important but complicated. Its complexity arises not only from the regulatory and technical matters with which it deals, but from the way it intertwines with the two other pieces of legislation to which reference has been made several times already; namely, the Climate Change Bill and the Planning Bill. The Climate Change Bill, which we have already considered and is now with the other place, aims to make a substantial reduction in this country’s greenhouse gas emissions. However, it will be impossible to implement these changes fully without the provisions in the other Bills. We have a three-legged stool which will fall over if one of the three legs is weak or missing.

I shall turn to some of the detailed provisions of the Bill later, but I begin by addressing what seems to be a fatal weakness in the stool as a whole, as we have it today. It is, however, a weakness that can be addressed, at least in part, within the Bill before us. As has been pointed out by the Minister, the 2007 energy White Paper established the Government’s high-level energy policy. The present Bill deals with a range of detailed mechanisms by which individual projects may be supported and regulated. What we do not have—I think the right reverend Prelate made this point—is a large-scale and accepted vision of the infrastructure that should link the two. I shall argue that, without that vision and without certain other changes, we shall have serious difficulty in developing the low-carbon economy that we seek to achieve.

Although a range of technologies will contribute to the new energy mix to meet the proposed 2020 target of 15 per cent of our energy coming from renewables, it is inevitable that within the electricity generation sector the greatest contribution will come from wind. Meeting that obligation will involve adding around 30 gigawatts of wind generating capacity to the distribution grid. That may be compared with the existing generating capacity of around 90 gigawatts, some of which is due to be retired as the wind capacity is brought in. That is a minimum addition, and there are several scenarios under which more wind could be needed.

The new windmills will be built, pretty obviously, in places with the best wind. To a first approximation, that is in the north-west and around the coasts of the UK. However, the greatest demands for electricity are in the Midlands and the south. That means that there will have to be changes in the electricity distribution system that are massive in scale and cost. When discussing electricity supply, we commonly concentrate on the cost of the generation technology without realising that the investment in the grid is of the same order as that in the generating system. Even though demand may not change, the new system will have to be significantly larger than what we have at present. Massive interconnectors will be needed between north and south and from the windy coastal areas to the inland. This will be the largest change in electricity transmission since the Second World War, and arguably the largest change ever within the UK. Transmission systems typically have a life of 40 years, so we are speaking of system that will be with us until around 2050.

Not only will the grid changes involve construction on a very large scale but there will be technological challenges as well. The grid will need to be intelligent enough to deal with wind intermittency. At a local level, as local generation assumes a greater role, the distribution networks will have to be able to deal with connections at different scales that sometimes connect demand and at other times provide supply. Therefore, the question is: how is this major infrastructural change to be planned and implemented? At present we do not seem to have the proper machinery for doing that, and what machinery we have is encumbered in so many ways that it cannot function effectively.

It is instructive to consider how the machinery operates in connection with a proposed new power generation development today. Such a proposal has to receive sanction from four independent and unconnected bodies: the planning authority for the generating facility, whether it is a power station, a wind farm or whatever; the planning authority for the transmission line that connects to the grid; the national grid itself that manages all the connections and has to give its consent; and Ofgem, the body that has to give approval to any proposal to spend money on infrastructure, bearing in mind that the costs will ultimately be borne by consumers. Those four bodies have to give their approval. None of them has within its remit the achievement of the national objectives on climate change or renewable energy. All have the power either to veto projects or to seriously delay them, and to do so in ways and for reasons that do not take into account the national interest. In one sense they cannot be blamed for that, because the national interest has not been clearly defined.

The Planning Bill should go some considerable way to dealing with the first two problems by allowing the same application to cover both electricity generation and its connection to the grid. Furthermore, by establishing an infrastructure planning commission there will be a means of evaluating particular projects in the light of the national interest. However, one should not be misled by the name of the proposed planning commission. It does not plan; it simply assesses whether any particular proposal is consistent with something known as a national policy statement. The Planning Bill discusses how such a policy statement should be established only after a process of lengthy consultation and how this statement is intended to be a definitive statement of national interest.

The first requirement is that we should have a national planning statement for electricity generation and distribution. Such a statement may already exist, but if it does I have not been able to find it. In the absence of such a statement we cannot make sensible progress on key elements of the infrastructure that is needed to make all the things we have been talking about today work. This will be required by the Planning Bill, and there seems to be no reason at all why BERR should not immediately begin consultation on such a plan. I should be grateful if the Minister could give the House an assurance that this progress will begin forthwith if it has not already done so, and provide the House with a timetable for its completion. That statement should provide the framework against which all new developments can be assessed.

It is all very well to have a framework, but if the expenditure to implement it is not authorised it will simply remain a paper framework. Nothing will happen. This is where it is important to examine the role of Ofgem, the Gas and Electricity Markets Authority. This body was established in the 1990s with a view to ensuring that vigorous competition in the energy market was used to drive down consumer prices. It has to approve expenditure and price changes proposed by bodies involved in the generation and distribution of gas and electricity. The Ofgem remit has been modified to some extent in subsequent years, and today the office has such a mind-boggling array of secondary objectives to be borne in mind when making its decisions that one cannot but have some sympathy for it. In practice, Ofgem struggles to approve expenditure that cannot be demonstrated beyond reasonable doubt to have a clear, short-term and low-risk justification.

My conclusion, and that of many others, is that although the remit of Ofgem was appropriate for the time that it was established, it is no longer appropriate today. If it is to retain its existing authority over expenditure on energy infrastructure, that authority must be exercised in a different framework. It is essential that the Bill should be amended to do that. One possibility is to do so along the lines of an amendment offered in the other place by Dr Desmond Turner but not called or debated. I will not detain the House with the details of the amendment but its essence is captured in the following brief extract:

“The principal objective of the Secretary of State and Gas and Electricity Markets Authority”—

that is, Ofgem—

“in carrying out their respective functions … is to deliver a secure and sustainable energy system operating within greenhouse gas emission limits notified by the Secretary of State”,

and so on. I believe that there is considerable support, both inside and outside the House, for an amendment along those lines.

Having devoted a considerable amount of time to what is not in the Bill, perhaps I may now turn more briefly to provisions that are there. I think that much of the Bill is devoted to what I would call sensible housekeeping, although we shall no doubt have discussions over some of the details.

I wish to draw attention to only two sections at this stage. The first relates to the scheme for renewable obligation certificates—the ROCs—which have already been discussed. The proposed banding is to be welcomed. It is clear that the support needed by different renewable technologies is different and the intention to double certificate allocation for electricity generated by emerging renewable technologies is to be welcomed. However, we have to recognise that emerging technologies are slow to come to market and no one will invest in an emerging technology today unless they are confident that it will be possible to deploy it on an economic scale before 2015, which is when the present scheme ends and when the Government hope that their current renewables target will be reached. If this support for emerging technologies is to have any realistic hope of bringing new modes of generation to the market, the Government will need to extend the time horizon for their introduction to 2020 at least, otherwise there simply will not be time.

The Government probably need to extend the timescale for another reason. Many are sceptical that it will be physically possible to build the planned new wind capacity by 2015 to reach the 15 per cent renewables target. There will be no investment beyond 2015 unless the scheme is extended. I suppose that there is a consistency argument for retaining the ROC system for the future, but it is an excessively complicated and arcane system. Once the principle of banding is accepted, it is not a million miles from feed-in tariffs which are used in most other places and are a great deal simpler.

The second part of the Bill to which I wish to draw attention is that relating to carbon capture and storage. It is certain that, whether we like it or not, we shall be obliged, as various noble Lords have pointed out, to go on using fossil fuels for power generation for a number of decades. Because coal is very different from oil and gas in its geographic distribution and because traditionally it is less expensive, it is likely that it will play an increasingly large role worldwide in electricity generation, particularly in India and China. The problem is that coal is a very CO2-rich energy source. It produces about double the amount of CO2 per unit of electricity produced as does gas. There is a vital need to develop technologies that can separate CO2 and other greenhouse gases at power stations and immobilise them, probably in suitable geological features underground. It is in our interests that we in the West should develop these technologies as quickly as possible so that they can be implemented in places where they are urgently needed.

As the price of carbon in the European trading scheme rises, in an ideal world it would be sufficient to meet the costs of capturing carbon at power stations. Unfortunately, the lead time for developing the technology is very long. If we wait for the carbon price to rise high enough to meet the costs, the opportunity for useful deployment is likely to be missed. The magnitude of the coal problem is so great that it is fair to say that although carbon capture and storage is not a complete answer to managing emissions, there can be no complete answer without it. I welcome the attention that the Government are paying to this important technology.

In conclusion, I reiterate three points. The Energy Bill, the Planning Bill and the Climate Change Bill must dovetail seamlessly if they are to be effective. Perhaps the Minister would inform the House about the interdepartmental machinery that is in place to achieve this. Secondly, it is urgent that we have a national planning statement on electricity generation and distribution so that the infrastructure planning commission and Ofgem have a clear statement of national interest when considering proposals put before them. Thirdly, it is essential that Ofgem’s remit should be broadened so that it is able to take a wider and longer-term view of the expenditure that it can authorise. It must be in a position to approve major infrastructural investment.

In all the documents I have seen, I get little sense of the urgency of our present situation. After all the consultative processes are over, development and heavy engineering take time, and time, my Lords, is not on our side.

My Lords, I should like to make the most of the time available to me by simply supporting everything—everything—the noble Lord, Lord Oxburgh, has just said in a very compelling speech. I intend energetically to follow the arguments he has set out to what I hope and anticipate will be a successful conclusion.

It is hard to take issue with the contents of the Bill as set out by the Minister. However, in common with other noble Lords on all sides of the House, I will argue strongly for the inclusion of a number of new clauses which might go some way towards offering hope of an energy strategy that could honestly be described as “fit for purpose” for the complexities of the 21st century. As I see it, failure to make those arguments would be a serious dereliction of responsibility to both present and future generations.

This is the third occasion in the past five years on which I have had the opportunity to question and, I hope, help to redefine statutory duties and responsibilities in the regulatory world. It is worth recalling that our present concept of regulation was developed as a means of heading off those who argued against the principle of privatisation on the grounds of consumer protection. Needless to say, regulation has been in a fairly constant process of evolution, as the individual sectors have evolved or, in some cases, even changed out of all recognition. However, regulation is still failing to keep up with the pace of change.

Some regulatory lag is perhaps inevitable. None the less, I am of the view that at the design stage—where we are at the moment—we must do everything in our power to ensure that there is the right combination of rigour and suppleness within our regulatory framework to anticipate the consequences of change and, most particularly, to protect and even enhance our control over the means of supply.

As the Bill proceeds through your Lordships’ House, I will argue that, in the rapidly evolving energy sector, neither the remit nor the resources available to Ofgem have adapted with anything resembling the urgency and importance of the issues they are required to address. It is also vital that we continually balance our actions in the energy sector with the overwhelming importance of our commitment to environmental sustainability. To pretend that there is some kind of either/or option in consideration of these twin challenges is entirely fatuous.

Many in this House will remember the so-called “family silver” speech made by the Earl of Stockton in November 1985, in which he roundly criticised the economic policy of the then Government. Last weekend, on my computer, I listened to the whole of that remarkable 30-minute speech; it is available at the click of a mouse on the Tory Reform Group website. What seems to have been forgotten is that the true burden of Harold Macmillan’s speech was a call to what he described as a “third industrial age”, the first having been driven by coal and steam, the second by oil and the third—I paraphrase because there is no hard copy of the speech available and I am afraid my shorthand proved entirely inadequate—was going to have to be a “post-oil economy”: an economy based on what we would today term renewable forms of energy.

Here was a 91 year-old statesman setting out a vision for our country and our world remarkably similar to that in which we find ourselves living today. He talks about laying aside our divisions, as we did in wartime, because the urgency and gravity of what we are likely to face make them a luxury we can ill afford; the issues surrounding feed-in tariffs might well be a case in point. He correctly chides us for having squandered the God-given reprieve of North Sea oil instead of using it to build a national infrastructure robust enough to deal with the many uncertainties that undoubtedly lay ahead. And remember, my Lords, the greatest threat of all—that associated with climate change—had barely raised its head as being among the uncertainties that he was referring to.

Shortly thereafter, a rising politician, possibly encouraged or even inspired by Harold Macmillan's prescience, was making a name for himself writing books and pamphlets addressing many of the same issues, and in much the same way. To quote briefly from Where there is greed, a book published in 1989, addressing the inadequacies of privatisation in general and of the regulatory system in particular:

“There has been no substantial extension of consumer rights, no new right of redress for consumers, no new right to refund or right of representation, no guidelines or legislation for improved service or improved consumer safeguards, and little in the way of improved safety standards … Indeed there has been very little attempt to stand up for ordinary people against the vested interests of business and vast corporations”.

Later, in a speech on 12 February 1991 in the House of Commons, the same politician said that the Government,

“would appease the vested interests of their friends in the private sector before advancing the public interest which it is their duty to uphold … We will ensure that the public interest is upheld”.—[Official Report, Commons, 12/2/91; col. 754.]

That young politician was, of course, the present Prime Minister, Gordon Brown. In advancing my argument for the overriding importance of a public interest test in respect of mergers and acquisitions in the energy sector I am confident of having in my corner at least two Prime Ministers. I could easily add a third—Winston Churchill—but that is probably another speech for another day.

Your Lordships will remember that, some five years ago, this House successfully added a clause to the Communications Act 2003, requiring almost exactly that which I and others now seek from this Bill. Few would argue against the proposition that, important as a balanced communications ecology is to an informed and stable democracy, energy security trumps it on just about any national list of priorities. That being the case, why would we even countenance passing this Bill without the most rigorous safeguards in place regarding the long-term ownership of our means of supply? The family silver, along with the furniture in the salon and the Canalettos, may well have long since gone—at a heavily discounted price, I might add—but it is still within our political gift to ensure that we retain discretion over whose hands all of this is allowed to pass into.

The Minister is an old and valued friend of mine and I made him aware some time ago that I intended to raise what is, for me, an absolutely fundamental issue. I have also apologised to him for the fact that I may not be here when he winds up; unfortunately, I have to give prizes at a function. But I am pretty sure that in his notes his excellent officials will have supplied him with any number of assurances that there is no cause for worry and that any attempted amendment could easily be seen off by reference to the powers already vested in the Secretary of State. In his earlier life, however, the Minister had a reputation as a shrewd solicitor and, like any good solicitor when dealing with a matter of this gravity, he would, I am sure, always advise a belt-and-braces approach. I hope that the House will insist upon exactly that: something far more robust than any set of vaguely framed assurances or limp over-reliance on existing competition law—let alone a suggestion, in desperation, that we trust the goodwill of the marketplace.

In this vital area of our national interest, as with the financial crisis currently assailing the banking industry, I see the situation as precisely analogous to that set out in an article on lessons learnt from the credit crunch in the current issue of the Economist. Our long-term energy security cannot become vulnerable to what it describes as,

“the collective misjudgment of risk; a zealous search for yield; and the failure of oversight”.

That section of the article finishes by observing:

“Regulators lack the knowledge, the clout (and often the talent) to keep up with the … next brilliant scheme”.

As I see it, our job as the Bill passes through this House is to ensure that Ofgem and its sponsoring department have the knowledge, clout and talent—as well as all of the resources and powers that they need—to head off what may well prove to be the most brilliant, or even the most devious, of schemes devised by the most powerful of those global energy interests which may already be casting a covetous eye at our marketplace and, indeed, our all too obvious vulnerabilities.

If I seem overly anxious, that is only because increasingly, in the past few years, I find myself agreeing with an observation repeated last month in the Guardian by Professor Ulrich Beck of the London School of Economics that, in his words, the,

“market has shrugged off any responsibility for democracy and society in the exclusive pursuit of short-term profit maximisation”.

That, in synthesis, is precisely what I believe Harold Macmillan was warning us of 25 years ago, and what Gordon Brown was telling us 20 years ago. If it were true then, I would argue that it is even more profoundly true today. That is certainly not a political or economic reality that we can afford to bow before, as if it were some kind of force of nature, at the very moment that we are being asked to give urgent consideration to this nation’s energy needs for the early part of the 21st century, and well beyond that.

My Lords, the noble Lord has just referred to a post-oil economy. When, in anticipation of a strike, the Grangemouth refinery was shut down recently, motorists in my part of the world realised for a brief moment the importance of security of fuel supply. People on the whole did not panic, but it took only three days of a bit of extra topping-up for there to be no diesel at all left in our town, while a number of petrol pumps were empty. The situation was relieved only by tankers arriving in the River Forth from elsewhere. We realised, momentarily, that security of supply is crucial to our lives and not to be taken for granted. The Bill is partly about that. It may be limited to only a few aspects of our energy future but it is nevertheless necessary and is, as most noble Lords have said, very urgently needed. Taken together with the Climate Change Bill and the Planning Bill, it is the outcome of the Government at long last beginning to make up their mind and give a lead on the many practical changes that have to be made in the energy field.

Airy discussion of global warming and the charm of renewables is comparatively easy, as we have seen over a number of years, but the reality of what has to be done, and done in time and paid for, if we are to have security of supply in the United Kingdom, is much more difficult.

Some noble Lords may remember that not long ago two French politicians from opposing parties came to speak to an all-party group here on how France set about persuading its electorate several decades ago that their future lay in building a large number of nuclear power stations. This was achieved by different political parties coming together in a campaign to educate the public about nuclear power generation and about why it was the best way. France has no oil of its own. The people had to be persuaded, and they were. There are now 59 nuclear power stations in France generating more than 78 per cent of its electricity. That was necessary leadership. Albeit there were few alternatives for France, needs must when the devil drives, as they say.

It is only now, as the hitherto oil-rich UK begins to realise the implications of oil and gas dependency coming to us and the likely timetable ahead, that the Government are getting down to the detail. From now on leadership will be of the essence. Great urgency is needed in developing the matters dealt with in the Bill and those not in the Bill. I shall not reiterate them as we have heard about them several times. My main point is that leadership is now needed not just at Westminster but in the devolved Administrations as well. What is happening in Scotland is not encouraging. Under the Scotland Act, energy is reserved to Westminster, which is sensible. Nowadays, Scotland’s energy generation is an integral part of the United Kingdom system, so the Bill applies to Scotland, apart from chapter 1 of Part 3, to which I shall return in a moment.

The problem is that the populist minority Scottish National Party Administration, in their desire always to please and never to ask for difficult decisions, are trying to lead in two opposite directions at once. They want a much stronger economy and a Scotland better able to stand on its own feet, which is wholly laudable, but they also want a nuclear-free Scotland and aim to use existing planning powers to block any proposal for a new nuclear power station in Scotland. Incidentally, those powers will not be affected by the Planning Bill now in another place as it does not extend to Scotland—I suspect, disastrously. At the same time the Administration have just called in, and blocked, planning permission for a vast 181 turbine wind farm on the Isle of Lewis which would have made a major contribution to Glasgow’s electricity and would have created 400 new jobs. However, there was a row about the effect on the island’s ecology so Ministers blocked it.

Other significant wind farm developments are alarmingly slow to materialise. Clyde wind farm, promoted by Airtricity, is five years behind schedule, the local planning authority having taken three years to refer it to a public inquiry in 2006. Also stuck in a public inquiry—the noble Lord, Lord Oxburgh, referred to this kind of thing—is a huge line of giant pylons cutting through the beautiful countryside between Beauly, near Inverness, and Denny, near Glasgow. It is essential for transmitting electricity from a large number of intended wind farms to the centres where most people live, but vast pylons conflict with tourism; and tourism is crucial where the line is planned, so there is a public inquiry. It seems that, across Scotland, projects spend two or three times as long in the planning system as in England, and in the end only 56 per cent are approved, compared to 65 per cent in England, 77 per cent in Wales and 93 per cent in Northern Ireland.

To replace outdated electricity generation in a clean, green way, in sufficient quantity and in time, is in fact probably impossible without nuclear power. Far from planning, as it might, to export electricity, Scotland is going to depend on England for supply. By the same token, Scotland in its Cairngorm Mountains has the right sort of rock for the deep down, permanent disposal of nuclear waste. However, the SNP boasts, “No nuclear dumping in Scotland”. It could well, given safe, proven techniques, be missing out on a lucrative new industry offering many jobs, provided by natural resources.

That leads me to ask the Minister one question. Chapter 1 of Part 3 of the Bill, which includes the clauses dealing with decommissioning and clean-up of future new nuclear installations, does not apply to Scotland. I understand that that is because the Scottish Executive want no nuclear power. If, as seems inevitable, the present or a future Scottish Executive find new nuclear build unavoidable, do they have the power under Head D4 in Schedule 5 to the Scotland Act to legislate for themselves? If not, would it not be better, with a view to the future, to apply Chapter 1 of Part 3 to Scotland now? That is a serious question, which the Government should perhaps look at. If the Minister is able to answer now, that would be excellent; but if not could he perhaps write to me about it? It matters very much.

To summarise, the French have shown what leadership can do in the difficult business of changing energy policy. It involves political parties taking responsibility courageously and together. In this country, that involves the devolved Administrations as well as Westminster. I hope that will soon be better understood in Scotland. For our part, I hope that this House, while improving the Bill where necessary, will give it a fair wind today.

My Lords, it is a pleasure to follow the noble Baroness, Lady Carnegy of Lour, most of whose points I agree with strongly. I declare an interest as a professor of climate modelling at University College and a member of the EDF energy stakeholder advisory group.

The Government have moved a long way since the energy White Paper of 2003, which set unrealistic objectives for reducing carbon emissions solely through conservation and renewables. Now the Government have developed a sensible portfolio of energy plans, which I am pleased to hear the Liberal Democrat Front Bench now supports. Despite the views of various nationalist parties, which we have just been hearing about, my first question to the Minister is: will nuclear policy apply throughout the UK?

I am pleased to see that there is now greater consensus about the portfolio approach in all the major industrial and emerging countries. I am a vice-president of GLOBE—Global Legislators Organisation for a Balanced Environment. I agree with the noble Lord, Lord Oxburgh, that it has been very useful to hear the views of other countries. That consensus now includes the United States, which has become much more aware of the need to adapt its energy policy to deal with global warming.

One should realise that certain elements of the energy portfolio will or could develop much faster than others. Hence the concept of the so-called wedge approach is a little misleading—I refer to the sausage approach, because some areas will grow very rapidly and others much more slowly. For example, energy conservation, wind power, small-scale river power, carbon sequestration and very high efficiency coal/gas power stations may emerge quickly, while areas, such as nuclear power and wave power, will take longer.

As the Minister implied, the Government now have a more flexible approach through the renewables obligation. That is necessary as we have such different timescales for the new technologies as they emerge. All those technologies present exciting challenges to the UK engineering community and industry at every level, which as other noble Lords have said, should provide a tremendous range of jobs.

As nuclear power becomes as widespread as it is in France, it will perhaps overtake certain of those technologies. Carbon sequestration may become less significant and we should be able to dispense with large onshore wind farms—a point of view expressed by the American Department of Energy. Onshore wind farms are clearly unpopular and scar much of our landscape, so I look forward to the idea of smaller, cleaner nuclear power stations, which have less impact. However, it should be mentioned that there is no trend in that direction in France, where there is not only continuing nuclear power and the building of a new nuclear power station but the rapid development of onshore wind power in many parts.

As the Minister explained, this welcome Bill has a number of critical elements. They are all necessary if the programme of energy supplies is to be secure and produce much less carbon than we do now. As noble Lords have mentioned, this programme must be urgent as the ice sheets melt and start slipping into the sea faster even than the IPCC estimated in its report last November. The IPCC is a consensus body; if anyone on the committee suggests that things may be happening more rapidly and others object, that is not included in the estimates.

The target of 60 per cent or, perhaps, 80 per cent reduction becomes even more essential as the global temperature averaged over the land areas, not over the land and the sea, continues to rise rapidly—by about 0.2 degrees per decade. That may worsen as the greenhouse gas emissions from the growing economies of India and China continue almost unabated. Furthermore, the earth may be worsening the situation. The long-threatened extra emissions of methane into the atmosphere from the unfreezing of the Arctic tundra is beginning to be as bad as was feared, with the possibility of an extra one or two degrees of global warming by the end of the century. Serious as that effect may be, it is still not included in the rather conservative estimates of the IPCC.

I hope that as part of their energy trading with Russia, the Government will encourage much closer scientific collaboration—which, in the view of the Royal Society here and the Russian Academy of Sciences is currently rather weak. International action will be much more likely to succeed if there is agreement about the scientific measurements on which policy needs to be based.

The need for storage is made clear in the Bill. We should make use of the oil companies' past expertise in pumping carbon dioxide for secondary oil recovery. My question for the Minister is: what kinds of European and international collaboration will there be on that technology? The implication of what we were just hearing about was a UK approach. It is important that there is widespread collaboration on this technology. Since the possibility of the gases coming out from the underground reservoirs has been raised, accurate monitoring of the sites is extremely important. Which body will be responsible for that?

Nuclear is a secure and well tried method for producing electricity with minimum carbon emissions. It is interesting to note that the EDF nuclear power station being built in Flamanville in Normandy is on time and on budget. It is always commented that nuclear power is impossible economically; that is not the experience in France. The size of the site needed is much smaller than that for any other non-carbon-emitting method. That is generally welcomed by the communities where they are located, as I have seen on visits to the north-east of the UK. We see this in France, the UK and the United States. There are many supporters of nuclear even in Germany, especially for importing electricity produced by nuclear power stations in France.

The two main technical issues which concern many members of the public are decommissioning of sites and dealing with nuclear waste. The UK demonstrated decommissioning of a small plant in the 1960s, and as the noble Lord, Lord Jenkin, said, there are companies in the United States which are greatly familiar with this. The costs are reasonable, and I understand that the industry is quite satisfied with the provisions in the Bill for its contribution to the costs. It sees a plan with solid political support going forward in the UK, and the economic case is quite satisfactory to it. Its only reservation is that the Minister may intervene in determining the decommission process. That is quite reasonable, but there should perhaps be some system for appealing the Minister’s decision.

The Bill does not deal with nuclear wastes, but I am informed that new plant will store wastes on site for perhaps 20 or 30 years before either the deep-storage facilities have been introduced, which is the policy of CORWM and the Government, or the research being funded by Euratom and around the world—in which UK scientists are involved—leads to new technologies for enabling nuclear wastes to be turned into other materials and elements via the so-called transmutation technology. As a result of it, wastes, instead of lasting 10,000 years in the ground, will last perhaps 100 years. Noble Lords should be reminded from time to time that storing material in the ground for 10,000 years is neither necessary nor, in the usual definition of the word, sustainable.

The renewables obligation will encourage more renewable energy production, be it from large offshore, or small river-water, turbines. However, there is concern among the smallest operators, as I have found in speaking to some of them along the rivers of Somerset, about the rigidity of the banding scheme. An increase from a 50- to 60-kilowatt system can penalise the operator. Is there to be a fair system for such small operators to avoid disincentives? Officials in BERR who have to deal with these tricky matters—I presume that they continue to be tricky under this legislation as boundaries are changed—have been very open to discussion with the operators, but such a system must be introduced. It would be useful to know exactly how it would come about. Will it be by way of private discussions with officials or will there be some more open, transparent method?

At the larger end, offshore wind schemes will as I understand it from those who are planning them benefit from the renewables obligation clause, but they are concerned about the considerable planning hold-ups in the schemes, to which the noble Lord, Lord Oxburgh, referred.

All the issues in the Bill pose considerable scientific and engineering problems where research is essential for greater efficiency and safety. In the fields with which I am familiar, offshore wind and some nuclear issues, the amount of research sponsored by the UK Government has been very limited in relation to the vast investment that is required. I hope that there will be the kind of expansion in energy research—new organisations exist for that—that will bring it up to levels proportionate with those in the United States. It is essential for the future.

My Lords, it is a great pleasure to follow the noble Lord, Lord Hunt of Chesterton, as I have had to do on other occasions. It is rather daunting to hear his great scope of expertise, everything from icebergs in the north down to small generators in Somerset. I am following on slightly from my noble friend Lady Carnegy who put her finger on what will possibly be the major issue in devolution questions. I will talk more on some of the smaller ones.

The ramifications of the Bill into the fringes of devolution are great. I am glad to see in the Explanatory Notes that the Government have decided to seek a Sewel Motion. The one area stated that first gave me worry is CO2. Is the disposal of waste material from power generation really an energy matter and so reserved for Westminster—particularly if it becomes a separate process—or is it environmental and so first a responsibility of the Scottish Executive? A Sewel Motion is probably the best way to make sure that we are still covering the point from both angles. Presumably by this stage of the Bill, this Motion will already have been passed. Is this so and have there been other issues? Obviously there still remains the problem of obtaining the Scottish local authority of executive’s agreement to planning permission for the construction of any site for that separate process.

It is also interesting that under Chapter 2, on the storage of combustible gases, the Government have ensured that land in Scotland is land,

“landward of the low water mark”,

whereas in Chapter 3, on the storage of CO2, Scotland’s authority over the territorial sea adjacent to Scotland is again recognised. This raises another question on Clause 41, on offshore transmission, which I presume has also to be considered under the Sewel convention, both for lines coming from the territorial sea to Scotland and also for any long distance underwater inter-connector. Will these all have to be subject to planning permission in the area in which they occur?

In Part 2, we have a great section amending the Electricity Act 1989 to make more regulation for electricity from renewable resources, though the matters in the Bill are almost entirely to do with renewables obligation certificates. I declare an interest as a farmer and landowner who, like almost anyone else, could have an interest in microgeneration in one form or another. The renewable energy question is now beginning to show up some of the difficulties, as we saw yesterday when discussing the renewable transport fuel obligation. The noble Lord, Lord Bassam of Brighton, told us of the current review of the wider economic impacts of global biofuel production and was happy to state that currently 1 per cent of UK road transport fuels are made up of biofuels. This is still a long way short of the 2.5 per cent target for this year in order to reach the much-trumpeted commitment of 5 per cent by 2010. The Minister emphasised the need in this whole field for long-term and sustained decisions but this review coming up is a prime example of the great tendency to have headline announcements and then second thoughts. On the issues that come up throughout the Bill, it is the opposite of what is required for an activity that needs large investments and long-term stability.

On bioethanol, I know of plans for three major production units costing many millions of pounds, which ties in with this question of renewable transport fuels. At last year’s harvest levels, these would use up the equivalent of our total exportable tonnage of wheat. The Renewable Energy Association is currently estimating that much of these could be abandoned. The right reverend Prelate the Bishop of Chester expressed his concern at the effect that this use has on the price of food. I do not know whether I can reassure him by telling him that from a world total of 600 million tonnes of wheat last year, a UN paper I saw yesterday estimates that this year’s harvest will be 660 million tonnes. The outstanding thing about last year was that we had a bad harvest in a great many places, which we should of course be prepared for. We should have the stocks to carry us through. The world still has a capability for producing food to a much greater level than it did last year. If we abandon our efforts to create bioethanol, we then have to buy it to meet our commitments. What is that likely to do to the conservation of tropical forests and world food supplies? It is a great dilemma.

The Government started out on this road with a great sense that we would foster innovation, remain at the forefront of world energy activity and obtain great financial gain by being able to supply our new-found technology to the rest of the world. A main area envisaged in the Bill is carbon capture and storage. We are all in favour of this approach and it would be good to have properly thought-through regulation. In the mean time, it appears that the industry’s attention is much focused on the Government’s carbon capture and storage competition, which will promote one enterprise of their choice. A proposal for developing a carbon-capture facility for a gas-fired power station at Peterhead had recently been abandoned because it has been found that the Government’s attention is much more focused on supporting carbon capture for coal-firing and post-combustion technology. Even this is not the best cutting-edge science. Are they not also prepared to consider parallel pre-combustion projects which can be integrated with post-combustion technologies? Has the Minister’s department received any approaches from the industry for them to look at this technology?

Many noble Lords have expressed disappointment that there is nothing in the Bill allowing for development of a policy which would include a feed-in tariff. We have heard that the Government are frightened of the cost to individuals but this afternoon we have had some interesting figures. My noble friend Lord Jenkin of Roding said that the current cost of the incentivisation of renewables per household is £79 per annum. Speaking in another place, a member of the Minister’s own party pointed out that the feed-in tariff costs in Germany—by far the most successful system in incentivising microgeneration as part of the whole renewable world—is around £25 per household. I cannot say whether this is in addition to other costs, but for anyone who can put up a solar panel or microgenerator this cost of £25 might well offset or even give a positive outcome.

As everyone has been pointing out, there are, no doubt, some massive hurdles to be overcome. The noble Lord, Lord Oxburgh, emphasised that the timescale available appears very short. The big task for those of us in Parliament is to keep our people engaged and enthused with the efficient use of energy.

My Lords, I too welcome this Bill but it seems only yesterday that we had before us another Energy Bill. It is shattering how quickly four years can pass by.

I must declare an interest as a farmer and as a member of the Renewable Energy Association. I was a little perturbed by the comments of the noble Lord, Lord Truscott, about biofuels. The price of wheat in real terms was higher back in 1995. A small percentage of 0.6 per cent of the worldwide wheat stocks went into the biofuels sector. I hope that allays some of his fears.

I have only four topics to cover. First, the ROs must be truly sustainable. We must avoid getting into a muddle like we are with the renewable transport fuel obligation, as mentioned by the noble Duke, particularly with government scientists coming out with conflicting reports. We all agree that cutting down the rainforests of South America to grow sugar, making that into ethanol and then shipping it half way round the world is pure madness. To impose a cap on co-fired ROCs unfairly discriminates against one form of renewables, and surely it would make sense to treat all forms of sustainable renewable energy equally. For fairness, equality and maximising the potential for co-firing and for reducing CO2 emissions, I urge Her Majesty’s Government to drop the proposal for a cap on non-energy crop co-firing.

My second point is about Clause 90 and the idea that electricity safety standards should be transferred to the Health and Safety Executive. I hope that the Minister will be able to explain how this will happen in reality and whether there will be sufficiently qualified personnel to deal with this aspect of the proposed legislation.

My third point returns to renewables, but this time to what is not in the Bill. It is astonishing that the Government know that the Bill will bring only 5 per cent of renewables by 2020. Yet, a year ago, they committed themselves in Europe to at least three times that, so why have they not used the Bill urgently to introduce new measures to which they have committed us? We do not have much time to waste, as other noble Lords have mentioned. It must not be forgotten that this House committed in the Climate Change Bill to securing at least 70 per cent of ambitious CO2 cuts at home. Surely it is vital that we match these targets with urgent action.

It does not altogether surprise me that, in the Public Bill Committee, MPs from all parties took an interest in proposed amendments to secure new measures for renewables. The Renewable Energy Association and Friends of the Earth are arguing for a tariff measure that is clearly effective across Europe for smaller scale renewables to work alongside the renewables obligation. The aim is to reach the investors and technologies that the renewables obligation does not reach, with a much more user-friendly support scheme. That means not only domestic microgeneration but community-scaled schemes. There may not be many community schemes in the UK, but in countries with excellent records on renewables, such as Sweden, Denmark and Germany, communities, farmers and individuals are the major investors. I urge the Government to look again at this proposal and its clear merits for making renewable energy accessible to a far wider constituency.

Similarly, I welcomed MPs’ proposals to align the remit of the energy sector regulator, Ofgem, to climate change objectives. Again, it was this House, back in 2004, that gave the regulator a secondary duty to pursue sustainable development. However, we clearly need to go further. More than 10 gigawatts of renewables are currently held up due to a lack of network access, and if we are seriously to encourage local renewables, local distribution networks need to work very differently. Again, targets mean little without confronting the bold and difficult measures needed to deliver them.

Finally, I refer to one of the four main goals:

“To ensure that every home is adequately and affordably”—

that magic word “affordably”—“heated”. I have long been extremely concerned about fuel poverty and whether government help is correctly channelled to those who are most in need. I strongly believe that fuel poverty payments, especially to the elderly, ought to be means-tested. I echo much of what the right reverend Prelate the Bishop of Chester said. In fact, it does not take much to see that a fixed tariff for domestic renewables could help us to address some instances of fuel poverty. I understand that Energywatch, which supports the tariff proposal, is talking to the social housing sector about the potential for this.

In this day and age, it is a criminal shame that there are still 4 million fuel-poor households in the United Kingdom. These figures come from a time when fuel costs were relatively stable and do not take into account the different climatic regions in the UK. To give one small example, 23 per cent of households in the north-east are fuel poor, whereas the number of comparable households in London is a mere 9 per cent. This must be grossly unfair. If the Minister were to come to my part of rural Scotland on the hottest day of the year, he would find smoke coming out of every chimney. This would not happen if he focused on an area in the south-east of England.

Sadly, the UK Fuel Poverty Strategy is in disarray. The positive progress in fuel poverty reduction between 1996 and 2004 has been halted and reversed by domestic energy price increases of more than 90 per cent for gas and 60 per cent for electricity. Further onerous price increases are definitely imminent, as mentioned in all today’s newspapers, which carried horrific headlines such as “Consumers ‘getting it in the neck’”. My major concern is that the political will may diminish as fuel poverty targets, which had once appeared eminently achievable, become even more challenging. There are worrying signs not only that targets will not be met but that the Government are resigned to this position. I hope to table amendments to ensure that this does not happen.

My Lords, much can be welcomed in the Bill but, as I think Ministers and Whips have realised by now, if I speak from these Benches rather than from the Benches behind them, I am not entirely at one with government policy on a number of issues.

After the wide-ranging White Paper and the promise of the Climate Change Bill, to which we are all committed, this Bill is rather disappointing. So far as the climate change targets are concerned, not much in the Bill will bring us any closer to achieving the demanding trajectories which the original Bill set for us and which, as the noble Lord, Lord Hunt of Chesterton, said, may be very conservative.

I put this into a context that is slightly broader even than the one that has already been touched on. Oil prices, at $130 a barrel and rising, will indeed drive energy efficiency and a switch from carbon. However, the effect of that rise, particularly on the poor, to whom the noble Lord, Lord Palmer, has just referred, can be absolutely devastating. Fuel poverty is, as he says, rising inexorably. The Bill does not contribute to resolving that dilemma. The rising cost of energy might be desirable in terms of climate change and for fuel security and a switch from carbon, but it has enormous distribution effects on the poor. Many of the measures which government and the market direct at more environmentally desirable outcomes—such as nuclear power, renewables, green taxes or an alteration of the market structure to provide a higher proportion of green energy—disproportionately hit the poor. There are no off-setting measures. The Bill does not change that, but it and government policy could move a little way towards squaring the circle.

Before I go any further, I had better declare a few interests. I am chair of the National Consumer Council, which will merge very shortly with Energywatch, which has been referred to, and I have a number of interests in fuel poverty and combined heat and power, all of which are recorded. Even when I was in the Government, I had certain misgivings about government policy. Energy policy seems to have two aspects that are contradictory and do not add up to a coherent whole. If I may exaggerate slightly, on the one hand we have a rather Stalinist obsession with grandiose, big-scale projects, and on the other we have an obsession with maximising the competition, primarily to ensure that the average price reduces rather than taking into account the distribution effect on the very poor. We therefore have a combination of Stalinist economics and Ronald Reagan economics. This mixture has not delivered on any of the four main targets for energy policy, which include our social duty to reduce fuel poverty, environmental sustainable energy and fuel security.

We need some big projects and I am in favour of the provisions in this Bill for the Government’s commitment to new nuclear build, even though it will not really affect the balance until the 2020s. I am, on balance, against another big project, the Severn barrage, but I am persuadable even on that. But what the Government need to focus on rather more than large-scale power stations and large-scale projects is the area of decentralised energy, distributed energy and local production.

Before I go on to that, my main point relates to fuel poverty, and the noble Lord, Lord Palmer, has spelt out the statistics and the progress which has been so tragically reversed in the past few years as prices have doubled. Government policy has not responded. Indeed, in a sense, it has gone in the opposite direction. The Warm Front programme has been cut; the new version of the EEC, called the CERT, now only has 40 per cent gearing to the poorest rather than 50 per cent, although it is in total an increase; and the increased focus on social tariffs, which I am gratified to see Ofgem is now taking seriously, has yet to produce any results in terms of giving better options to the very poorest, both within companies and by switching between companies. I do not blame the regulator for this. The regulator has probably improved its focus on both the environmental and social outcomes in the past couple of years or so. While I have often criticised Ofgem, I think the real problem is the direction and framework that the Government give to Ofgem. Ofgem’s primary duty is still far too narrow, as others have said, and we need to interpret the sustainable development duty that was given to Ofgem in the 2003 Sustainable Energy Act—and it took a bit of argument with the Minister’s predecessor to get that duty in there in the first place—but it has not really altered the primary focus of Ofgem’s activity because it is not a direct instruction from the Government.

We need a renewed focus on delivering social tariffs; we need extra resources into programmes like Warm Front; and we need social housing expenditure under the successor to Decent Homes to be more focused on energy-efficiency improvements. All these will require changes in the role of Ofgem and in government funding. I am very keen on smart metering, which is referred to in this Bill and which will be delivered, though on a slightly slower timetable than I think is possible and necessary. I also assume that this will subsume progress on the outrageous premium on pre-paid meters which is paid, by and large, by some of the poorest in our society.

As well as ensuring that the social objectives of energy policy are re-emphasised, the environmental ones—particularly the commitment to renewables—also need to be underlined and strengthened. The European target, as others have said, looks pretty unattainable on present policies and trends. I am sitting on your Lordships’ Sub-Committee B, which is looking at these matters. I do not want to pre-empt its decision, but it certainly looks at the moment as if that renewables target is not attainable. Indeed, in some ways, we seem to be going slightly backwards when you look at what is in the pipeline. On wind, for example, we have the combination of both government and big business decisions recently. There was the Scottish decision not to back the big wind farm up there, and a major oil company, which I will forbear from mentioning in my proximity to the noble Lord, Lord Oxburgh, has apparently pulled out of the Thames Array. Both those decisions are disappointing.

Of course, the incentive system for renewables depends very heavily on the ROC process. ROCs have had some success and it is an attractive process for the big operators which trade within the ROC market. But we are still at around 2 per cent of renewables. Germany has nearer 20 per cent and Denmark twice that. We have a solely ROC-based incentive; they have feed-in tariffs. I know correlation is not causation, but I think the Government need to have another look at what is being proposed as an equivalent to a feed-in tariff. I appreciate that some other relatively successful countries, like Spain in relation to wind power, have market-based systems. We need to look at the whole picture but, in the area of relatively small-scale companies—not only microgeneration but somewhat bigger than that—which are unlikely to be playing in the ROC market in the long term, the certainty that a feed-in tariff gives is more likely to bring online the kind of technology at a local level that those companies will be most interested in.

All sorts of technology—local wind, solar, anaerobic digestion, farm-based or community-based biogas—can be much more efficiently and certainly delivered in the light of a tariff which is guaranteed for a period of time. The economic and environmental benefit of this can be pretty substantial. We have virtually no market in biogas in this country. Germany has over 3,000 installations and they are locally based. They use feedstock, which is waste locally generated and locally delivered, and even the second-degree waste can be reused as fertiliser or fuel for the vehicles delivering the waste in the first place. So you have a benign cycle which does not impact on the rest of the economy and certainly does not deliver increases in carbon emissions.

We need, in general, to look at more decentralised energy, CHP-based and renewables-based in particular. There are costs to the grid, as the noble Lord, Lord Oxburgh, has said, of connecting all these, and there could be local networks, both in relation to gas and decentralised energy. If we are worried about security of supply—and we must be obsessively worried about the level of carbon emissions—then the role for decentralised energy must be given greater attention by the Government and by the regulatory framework which they impose on the regulator and on the industry.

Although these things are only touched on briefly in the Bill, we ought to be taking the opportunity to develop them further in proceedings on this legislation. I will certainly support or bring forward amendments relating both to fuel poverty and to feed-in tariffs for renewable energy, and I would think that around the House there was support for extending the scope of this Bill, many of whose provisions, I now reassure the Minister again, I fully support.

My Lords, I am grateful to my noble friends on the Front Bench for encouraging me to join them in contributing to this debate in order to reinforce the connection with the Climate Change Bill. As the Minister pointed out in his introduction, this Bill is linked both with the Climate Change Bill, which has gone on its way, and the Planning Bill which has yet to come. It also has links, particularly in the field of fuel poverty, with the Housing and Regeneration Bill and, as has been pointed out, with the forthcoming Marine Bill. They share a common agenda and I hope that, as the Bill proceeds through this House, every opportunity will be taken to make clear the obligation this Bill owes to the carbon reduction targets and our climate change targets. I was one of many noble Lords determined to drive the idea of climate change across departments as a necessity, as the noble Lord, Lord Oxburgh, so powerfully pointed out.

Much of what has been presented in the Bill is uncontroversial and, notwithstanding the critique of the noble Lord, Lord Whitty, there has been a general and widespread sympathetic voice across the House during this debate. What, however, have been voiced are widespread concerns at the missing links—those energy-related measures which could, should and will, I expect, if this House has its way, be included in this Bill. The Bill has been long awaited. It comes after much dithering and delay. Of course energy policy has involved difficult decisions, but the Minister knows all about difficult decisions. He comes from business and successful business is dependent on making difficult decisions. I hope that he will bring his decision-making skills to government, who certainly need it. In this matter, time is of the essence, and big decisions will need to be made and made quickly.

Fuel security requires that we construct gas storage. As the noble Lord, Lord Oxburgh, has pointed out, carbon capture and storage is also a prerequisite. On the particulars in the Bill—the licensing procedures and the reporting requirements—I hope that these matters will be addressed in detail in Committee. Underlying Chapter 3 is the acknowledgement that for us to begin undersea carbon storage, there will have to be amendments to existing EU directives. Can the Minister explain what these are, how far discussions have progressed and what remains to be agreed? What linkage exists within the EU jurisdiction on marine matters beyond the six-mile line, the use of submarine storage in general and offshore transmission in particular?

I expect many noble Lords will want to be involved in discussions on renewables. Many different aspects have been raised. Wind power generation has been by far the most visible constituent of the programme to date. But co-firing is another key element. However, we see Cinderella is at the ball and if we are to have the decentralised energy policy, we need to look at photovoltaic solar power, wave power and tidal power. Will the variability in funding, to which the Minister referred, be used to encourage investment in these areas?

Part 2 on renewable obligation certificates will no doubt cause its fair share of amendments, probing or otherwise. But at this stage I have only one question for the Minister. What sort of specified case—under Clause 37, which inserts new Section 32C in the Electricity Act 1989—might be wholly or partially free of the requirement for such a certificate?

Like many noble Lords, I look forward to hearing the Government’s objections to a feeder tariff—the renewable energy tariff. The noble Lord, Lord Oxburgh, expressed the view that it was much more effective than the ROCs. The Minister needs to be aware, as he surely must be, that there is widespread support for such a concept—not just at the 50 kilowatt microgeneration level, but for a higher level—if we are to encourage investment in this important area.

So far I have focused, as does the Bill, on energy producers. The greatest missing ingredient is the consumer. The government amendment at Third Reading in another place has provided for the introduction of smart meters, albeit without the direct enthusiasm that their introduction requires. Like the noble Lord, Lord Redesdale, I am seeking a timeframe for their universal introduction to all Britain’s 45 million households. Will the Minister confirm that the mandate for the introduction of smart meters, for which industry has been pressing, will form part of this Bill?

One of the biggest reasons for the use of smart meters is to address fuel poverty. The right reverend Prelate the Bishop of Chester, and the noble Lords, Lord Palmer and Lord Whitty, also spoke on this issue. Many noble Lords have expressed concerns. The House has heard the passion and determination with which my noble friend Lord Jenkin has pursued the issue of the supplier obligations in this matter. The Bill is silent on the social tariff. It fails to address the inconsistent way in which those who have to use a prepayment meter pay more for heat, light and energy, which cannot be right.

This is a useful Bill, but it is surely waiting to be improved. I expect noble Lords will seek to do that and I hope that the Minister will encourage them in that objective.

My Lords, I am very pleased to follow the noble Lord, Lord Taylor, who made a most thoughtful speech. He offered a range of options and considerations which were sadly lacking in the two Front Bench speeches so far. It is fashionable to suggest that the Labour Government, after 10 years in office, have run out of ideas and steam. If that is what the Cameron-Clegg axis can provide as alternative solutions to our energy problems, God forbid that Labour loses the next election.

I am very pleased to participate in this debate. I have interests in energy recorded on the register. A number of the areas that I have advocated for some years are being followed and I am very pleased that there has been this change of recognition by the Government. It can be argued that this is not a lurch; it is certainly a rather slow change. The tanker took a long time to move, but we have had incontrovertible evidence of the need and the urgency from, for example, the Stern report, that a great deal more has to be done and should be done very quickly.

It is certainly the case that we have come to the renewables issue rather later in the day than a lot of countries. We did not have renewables in the 1990s when the Conservatives were in power because we had gas. We not only had gas, we had a dash for gas. A year after the Labour Government came to power, having assessed the situation, they embarked on an embargo on gas power stations. Otherwise we would have had an even greater commitment to them and an even earlier shortfall in our gas supplies. Some Conservative speakers today seem to be incapable of remembering their own political history and the rather cack-handed way in which they went about privatisation, regulation, and, only at the very last gasp, liberalisation. It was such an ill thought through process of liberalisation that we now have no national champions to speak of, apart from National Grid, on energy in this country.

We do not have British-owned companies which could have been capable of defending the national interest in any major way. That is not to disparage Iberdrola, RWE, e.on or EDF. But large foreign companies with deep pockets are able to acquire vulnerable British businesses and the blame lies at the door of the Conservative Party for the way in which they reorganised British energy when it was privatised.

In the first instance, I welcome the commitment to nuclear power, about which I have spoken here. The Government have a realistic programme. More will have to be done on skills. We are moving on at a reasonable pace in respect of the generic design assessment of the new reactors. I am confident that we will be able to see nuclear power being generated within the next 10 to 11 years in this country. I would hope that nuclear power will bring a degree of stability to price, because dependency on gas means that we are thrown to the four winds as far as the vagaries of the international pricing system are concerned.

Much has been said about gas and gas storage, which I welcome. It is long overdue and should have been set in train 15 years ago. The Government were incredibly complacent over the whole issue of gas storage over the years. Some of us on Select Committees in the other House argued with the Government that it should be dealt with as a priority. We were told that if the market was left to its own devices, everything would be for the best in all possible worlds. Pangloss has little place in the energy debates and the energy markets, and has never had much of a place. I am not advocating state direction, but I am advocating facilitation, encouragement and incentivisation, if the profit motive is not in itself enough. However, I find it hard to believe at times that when there are all these fantastic opportunities, the entrepreneurial instincts of British business cannot rise to the challenge of building windmills or of getting their act together on what, obviously, is a very attractive and important issue; namely, carbon capture and storage.

We are told that people take their ball away in a huff if they do not receive sufficient subsidy or incentive from Government. We are receiving in a new form the old argument about backing national champions. I thought that we had left all that behind and the idea of subsidising companies to take advantage of market opportunities when these market opportunities are so blindingly obvious that even latter-day socialists like me can see that. Anyone with a bit of wit and intelligence should be able to get something going there.

Certainly, if the Government are going to have another competition it should be modest in scale and they should be selective in which of the two technologies they want to have judged. Broadly, I sympathise with the position that has been adopted. We will have to have a debate about the forms of tariff and the ROCs arrangements in much of the provision in the renewables area. We may have a fight about what is very little in terms of the respective merits of one option against another, but the Committee stage of the Bill will be helpful in this area.

I share the anxieties of the noble Lord, Lord Oxburgh, about the implications of disparate and limited, on occasions, renewable generation and the cost that that will have on the funding of the National Grid. The National Grid will have to have an alternative grid to accommodate intermittent sources of supply while at the same time having the usual motorway system to deliver the power from the baseload generators that we will have to live with in the future, whether they are gas, nuclear, or, as I hope, coal. But let us not forget that coal is an imported fuel. If we were going to restore the coal industry in the United Kingdom to even a shadow of its former state it would require degrees of training, investment and new forms of technology, the like of which we cannot begin to realistically think of at the present moment. We will have to use coal but it will not be cheap in the future. If we have the almost exponential increase in demand that we see from India and China, this is bound to impact on the price of coal at a far greater rate than we have envisaged over the past two or three years.

That brings me to my final point. Much of what we have been talking about is in the medium to long term. However, fuel poverty, about which the noble Lords, Lord Palmer and Lord Taylor, have spoken, is with us and is growing worse. It is growing worse primarily because no one anticipated the dramatic increases in gas and oil prices and the impact that they have had: a 100 per cent increase in domestic gas prices and a 70 per cent increase in domestic electricity prices.

There are 24 million households in the UK. I do not think that the figure is 45 million; it may be that second homes owned by Members of this place or houses abroad were lumped in. I believe that the Minister said 45 million: it is only 24 million, but it is bad enough at 24 million, because if we take England on its own there are around 3 million-plus households in fuel poverty. Some 15 per cent of households in England are in fuel poverty. That means that we have to spend in excess of 10 per cent of gross income to fund the heating bills of those households to keep the house warm or the water hot.

We know that the Government have been concerned about the matter and that tough words have been exchanged in Victoria Street. People have complained that Ministers have not been nice to these shrinking violets from the energy companies and that they have succeeded in wringing out of the energy companies an increase of £100 million this year, £125 million next year and £150 million in 2010-11. That is in contrast to the £50 million spent at the moment.

We can argue about who is to blame for the price rises and express concern about the level of profits that these companies make, but I do not particularly want to go down that road. If there is a 1 per cent increase in energy prices, 40,000 households go into fuel poverty. But if there is an increase of 2.5 per cent, 100,000 people go into fuel poverty. If it is 25 per cent it is another 1 million. At the present moment, the Government are cutting £80 million per annum for the next three years from the Warm Zones project. Somewhere down the line the Government have their priorities wrong. They are not nearly harsh enough on the utilities. It was said that if the Government did not obtain some money from the utilities they would introduce a mandatory social tariff. I do not believe that the two are mutually socially exclusive.

I believe that we need to have a mandatory social tariff. At the moment we have a free market in utility charity towards the fuel poor: a market of such inconsistency, complications and contradictions that we can have a mix and match of any one of about four or five or maybe more forms of assistance. There are price discounts and freezes, fixed price bills and forms of cold weather payments. We could have tariffs on low income households or people living in deprived areas, or occupants of fuel poor areas; households facing difficulty paying bills; all households on supplier priority service registers and then we could have the catch-all of the elderly.

It is not beyond the wit and intelligence of either the Government or the House to produce this social tariff and I hope that some of us can make common cause across the divide of the House to get a social tariff on to the statute book. We have to recognise that, even though there are six or seven major suppliers in the country, most of them are geographical in character. If they are offering a good policy in one area, the chances are that it is either not taken up by the poor or not available to them in other parts of the country. So it is incumbent on us to try to have a national gold standard by which companies can be judged. That can be the form of the social tariff.

John Maynard Keynes said that in the long run we are all dead. In the short term, a large number of poor, disadvantaged and elderly people will die as a consequence of their inability to afford to keep themselves warm. That is one of the saddest facts and statistics that we have in the United Kingdom. It is not the severity of our winters or the inadequacy of our social benefits; it is the fact that we have a grossly inadequate housing stock, the improvement of which, in the Government’s proposals for Warm Zones, will result in reduced funding for amelioration. That is one example of the problem that we have here. We are dealing with a number of issues in a number of contradictory areas. We can talk until we are blue in the face about smart meters in the certain knowledge that it will take 10 to 12 years to run them out. The companies cannot decide which kind of smart meter they want. They do not even know which parts of the country they should start in. They do not know whether there are low hanging fruit that could be plucked quickly so that disadvantaged people could be helped. Indeed, it could be argued that those who have difficulty handling their bills and payment systems may also find it difficult to handle more complicated meters than they have now. What there is no doubt about is that if you have a prepayment meter, it is a damn sight more expensive than paying a discounted rate by direct debit. There are things we can do.

In broad terms, I support this legislation. It can be tweaked and improved, and I welcome the commitment to increases in large-scale generation and the recognition at long last of the need to secure gas supplies and build storage facilities. It was said earlier that we are trying to construct a three-legged stool. Our job at this point is to make sure that the energy leg of the stool is as strong and effective as we know it can be. I think that the Government are making a good start.

My Lords, I congratulate the noble Lord, Lord O’Neill, on his speech, particularly his words about fuel poverty, which I shall move on to later. I hear his criticism of these Front Benches, which was balanced by his criticism of his own Government in certain areas. Again, I shall come to that later. One of the key impressions I have from the debate, like the noble Lord, Lord Taylor, is that the Bill is comparable with the Climate Change Bill, but there was some enthusiasm for that legislation. It might not have been that strong and a number of flaws were pointed out, but people were enthusiastic about it as marking a way forward. With this Bill, there is a lack of enthusiasm and a reluctant consent to its provisions, but, frankly, it does not go far enough and it does not meet the challenges that many noble Lords have outlined. In fact, perhaps that is why I sensed from the Minister’s opening speech that his usual ebullience and enthusiasm and urge to move forward were not evident to the degree that they have been on some of the other issues he has been involved in. I would say he is quite right in that.

It is certainly the case that a number of issues in this area, such as energy security and energy supplies, are quite downbeat and difficult at the moment. The noble Baroness, Lady Wilcox, mentioned the fact that one third of our energy production capacity is going to disappear over the next 20 years. We are also facing the highest oil prices in real terms in recent times. Moreover, we are moving towards net imports as opposed to net exports. Where are we in terms of renewables? We all see renewables as part of the low carbon economy future, but we know that we are near the bottom of the European league table even though we talk up our abilities in this area. We know that we will miss the Government’s 2010 target of 10 per cent; that was pretty much confirmed by the Minister. We know that even where we are trying to build renewable projects, we face equipment supply problems and that British industry has no place whatever in the supply chain. We have missed the boat in that area.

Some 50 years ago, coal provided 80 per cent of the UK’s energy needs. It is now down to 20 per cent, so the position is completely reversed. But because of the issues around gas supplies, coal is now potentially starting to rise again, and yet we do not have in place standards for how new coal-fired power stations need to be built to meet potential carbon capture in the future. I was particularly taken by the fundamental point made by the noble Lord, Lord Truscott, that we have no control at all over the supplier of a huge amount of our energy, the Russian Federation. We have no control over investment levels. British industry wants to invest, but has been gradually taken out of the equation. We see a very nationalistic and chauvinistic approach to energy supplies in the Russian Federation which is going to affect Britain and the whole of Europe.

Lastly, in terms of downbeat issues, we have the problem of timescales. Even if we get on with nuclear build and plough ahead with carbon capture and storage immediately, there will be a lag of around 15 years until those technologies come on stream. Again, that is in complete contrast to the challenges set by the Climate Change Bill where we saw ways to move forward. This leg of the stool does not come anywhere near to fulfilling what the Climate Change Bill requires. We knew it was a framework Bill and we forgave it for being that so long as it was followed by legislation on energy supplies that would fill in the gaps and ensure that we would be able to meet the very demanding targets. This Bill does not do that.

On carbon capture and storage, the Scottish plant that was originally going to be tested is no longer moving ahead. On offshore energy, the noble Lord, Lord Palmer, mentioned that Shell has pulled out of London Array. We welcome the fact that provisions for gas storage are included in the Bill, but again it is an administrative necessity that needs to happen and is not something that is going to change the world. On renewables obligation certificates, changing the weightings for different sources of renewable energy is fine, but that will not meet the challenge of sourcing renewable energy supplies for the future. Nuclear waste is also a key area, but again it is administrative. Even on legacy nuclear waste we need to move forward with those solutions.

I think that all noble Lords have said that the key areas are those that we have left out. I will not go through them all again, but the one I want particularly to emphasise has not been mentioned a great deal: it is energy efficiency. All the studies show clearly that investment in energy efficiency measures provides the best return of all the areas that seek to tackle energy issues and carbon reduction. Energy efficiency is way ahead of renewables, yet the Bill says nothing about it. We could have used this opportunity to put into legislation the Government’s target for zero carbon homes by 2016, a target which not many people understand how to meet. We could have had a discussion about financing energy efficiency measures in a proper way because they have started to fall back in many areas. The noble Lord, Lord Jenkin of Roding, mentioned the very important point about revenues from the auction of carbon permits. Should we not ensure that the huge revenue that will come to the Government in future years really is ploughed back into energy efficiency measures?

I somewhat disagree with the pessimistic view of the noble Lord, Lord Birt, on our ability to reduce energy consumption. While I agree that it is difficult, in the 1980s the Japanese showed how you can effectively decouple energy use from economic growth. Indeed, over the past 10 years even in our own economy we have seen flat energy usage during periods of economic growth. Through energy efficiency measures we should be able to push energy reduction further, although the difficulty at the moment is the increase in oil consumption to meet the growth in transport.

I was going to say quite a bit about fuel poverty, but it has been very well summarised by the noble Lord, Lord O’Neill. The fact is that energy prices have doubled over the past five years and that, whatever the figure, many millions of people will be brought into fuel poverty. In Cornwall and the south-west, fuel poverty in rural communities presents the same level of challenge as it does in urban areas.

Ofgem may have changed its approach to many of these issues, but it needs to make its top priority the development of a low carbon society in the future. Smart meters very much tie in with fuel poverty and are, potentially, one way forward on that. I agree that smart meters are classically middle class, pushing the power to make good decisions back to consumers. That is an important part of decentralising energy-use decisions and democratising energy use. Is there not a way in which that clever technology can start to calculate for itself and find the cheapest tariffs, even for those people who do not necessarily take much interest in it day to day? That technology may be there, whether people watch their smart meter on their PC every day, or leave it there, simply to do its work every year.

One important area is the £215 pre-payment that the poor pay. As has been shown in Northern Ireland, that can disappear; it is no longer there. The other provision that is no longer necessary—and it says something that it was not in the Energy Bill—is the Merton principle, which gives local authorities the ability, in planning permission, to be far more stringent over a number of environmental and energy areas. The Government even resisted the Private Member’s Bill at Second Reading but, I am pleased to say, have now adopted that Bill, which will come through in parallel, and will no doubt come to this House in due course.

My noble friend Lord Redesdale has already referred to the Prime Minister’s speech in November, which I always look back to. The Prime Minister likened the fight against climate change to the reconstruction efforts and international co-operation that took place post-1945. The Climate Change Bill, with all its targets and what it wants to achieve, clearly demands that sort of concentration. The Stern report very much said, “It is great what you do over the next 50 years, but what is most important is what you do now, and over the next 10 years”. This particular Bill does not meet that challenge. From all the points that have been made, there is a great deal of consensus in this House. I only hope that we can amend this Bill in a number of ways. Many Members of the other place would be sympathetic to that. It will be necessary to do so, or there will soon have to be yet another energy Bill.

I would describe this Bill as “managerial”. It is not particularly focused or ambitious; it does not, in any way, go towards meeting the Government’s own vision on climate change. Its challenge to global warming is tepid legislation. That is a great shame. This Chamber will make a number of changes to this Bill, which will be welcomed by many people at the other end, on both sides of the House. I look forward to working with other Members of this House, from both sides, in making the changes that we have discussed today.

My Lords, I thank the Minister for introducing the Bill and the many noble Lords who have contributed such considerable expertise to this evening’s debate. It has clearly shown how complicated this subject is, and how urgent the action is needed. We were told at the opening of this Session of Parliament by Her Majesty that her Government would,

“introduce legislation to provide clean, secure and affordable supplies of energy”.

We strongly support those words, but are concerned about whether her Government have entirely delivered upon that intent with this Bill. The Bill, as far as it goes, and as many noble Lords have said, is welcome. It sets the framework for investment in nuclear power, renewable energy, and carbon capture and storage. It also lays down some necessary structures to address the issues of gas importation and offshore storage. These are all, as I say, welcome measures. Yet, we, much like the noble Lord, Lord Teverson, feel that they do not go far enough.

We appreciate that the Bill includes an attempt to address the framework for the importation and storage of gas. We are, as the noble Lord, Lord Birt, said, no longer a net exporter; we are, in fact, a net importer. Without sufficient storage, prices would continue their upward trajectory, as the noble Lord, Lord Teverson, mentioned, continuing to hit the poorest hardest. In addition, we would face an ever-increasing energy security risk. The noble Lord, Lord Truscott, made some important points about this risk. I would be grateful for the Minister’s view on how much of a reserve is necessary to ensure the security of our gas supply. Does he know, and if so, how should this be monitored? I hope the Minister agrees that knowing how much we need is vital, and is surely the first step to ensuring that we can get it.

As my noble friend Lady Wilcox rightly noted, the United Kingdom faces a looming energy gap. Several noble Lords have commented on the fact that about 30 per cent of our existing generating capacity will close over the next 20 years. All bar one of our nuclear power stations will be shut down. Many older coal-fired power stations will also close, compounding the problem. This means that there will be a serious gap in our energy capacity. The Bill, as I mentioned earlier, provides a framework for nuclear investment. After—it has to be said—considerable delay, the Government have finally announced that they will give energy companies the option of investing in nuclear power stations. Perhaps other noble Lords will be as interested as I was to hear what my noble friend Lord Jenkin of Roding had to say about the fact that we might now have the potential for some genuine competition in our future nuclear industry.

As welcome as the green light for nuclear investment might be—and forgive me if I appear churlish—it still seems a half-measure. This is because there is nothing meaningful to resolve the problem of the disposal of nuclear waste. The right reverend Prelate the Bishop of Chester asked how the Government would establish the cost of that. The announcement to allow nuclear investment has not been matched with any plan, or intention to develop a plan, on the deep-depositing of nuclear waste, as my noble friend Lady Wilcox and the right reverend Prelate said. The Bill claims that it will make provision for the management and disposal of nuclear waste, but as we found out from the debate on the Bill in the other place, we must wait for future legislation to address this. How do the Government expect a potential developer of a nuclear-generating site to prepare accurate financial projections—essential, as the Minister, of all people, knows, to raising the necessary finance—when it cannot work out the back-end cost? Surely the Minister would be the first to make the point that industry needs certainty if it is to make such substantial investments. There was some encouragement for us all in what my noble friend Lord Jenkin and the noble Lord, Lord Hunt of Chesterton, said, but as a country we need to get to grips with all of this. Echoing my noble friend Lady Wilcox, I ask: what do the Government plan to do if the Scottish Parliament blocks plans to build nuclear power stations in Scotland? My noble friend Lady Carnegy of Lour also raised her concerns about what the future holds in Scotland and, indeed, in each of the devolved Administrations.

Meanwhile, the British nuclear industry faces a major skills crisis. This is partly the result of an ageing nuclear workforce that is not being adequately replaced by graduates. According to British Energy, fewer than 6 per cent of the 100,000 people who work in the industry are under 24, with over 40 per cent of staff set to retire over the next 10 years. To make matters worse, there is the risk that skills will migrate to China, India and Russia, where demand is high and rising. According to the Nuclear Installations Inspectorate, as my noble friend Lady Wilcox noted, the migration of skills has placed a severe strain on its ability to attract the skilled employees that it requires to assess and approve the different types of reactor for which licences will be sought. The noble Lord, Lord Truscott, and several other noble Lords referred to that. What are the Government doing to address that? Half measures and too much dithering risk making it difficult to convert the good intentions behind the Bill into the power to boil the kettle.

There is another overarching problem here. How does all this fit into the framework of our obligations, both at home and abroad, to cut emissions and promote renewable energy? Despite the commitment to reduce carbon emissions by 20 per cent below the 1990 baseline, carbon emissions have risen, as has been widely publicised. We can commit ourselves to targets, but without a genuine vision of how to reach them we will end up in breach of international agreements, like the EU target on renewables, and British law, like the Climate Change Bill, which would require a 20 per cent reduction in carbon emissions in the next 12 years. Business as usual will result in failure; the noble Lord, Lord Teverson, referred to that.

My noble friend Lord Jenkin referred to the remit of Ofgem and suggested how to resolve that issue. The noble Lord, Lord Oxburgh, referred to the need for amendment here in his masterclass, if I may call it that. The noble Lords, Lord Puttnam, Lord Palmer and Lord Whitty, also mentioned the Ofgem remit. Once again, the legislation’s attempt to solve all this addresses only part of the problem. Already, in their draft legislative programme for 2008-09, hidden among an avalanche of additional legislation, the Government say that there is to be a new round of consultation,

“on the options for increasing the use of renewable energy, in the context of the EU target for 20 per cent … from renewable sources by 2020”.

Is this the horse wandering after the cart?

Take also, for example, the Government’s plan to promote carbon capture and storage in an attempt to create a new generation of clean-coal power stations, to which the noble Lords, Lord Oxburgh and Lord Truscott, and the right reverend Prelate the Bishop of Chester, among others, referred. The Bill certainly makes provision for the promotion of CCS and creates a licensing regime to certify them. Yet, as my noble friend Lady Wilcox said, it does not address the chance that something might go wrong. It is unclear what, if any, action would be taken against licensees who are responsible for leaks. I think the noble Lord, Lord Hunt of Chesterton, may have referred to that. Does the Minister not think that there needs to be some provision for liability?

The Government’s energy White Paper vowed to triple the amount of energy we get from renewable sources. We currently get 2 per cent, and my noble friend Lady Carnegy of Lour and the noble Lord, Lord Palmer, both referred to the size of the mountain we have to climb. Like the right reverend Prelate, I would be interested to know if the Minister believes that we will be able to increase our figure substantially in the next decade to meet our target of 20 per cent. In fact, it will need to be more than a 10-fold increase, assuming, as seems certain, that our energy usage continues to rise. Indeed, the Minister confirmed that in his opening remarks.

The noble Lord, Lord Oxburgh, set out his concerns on, among other things, the cost of and the issues related to the necessary upgrading of the national grid. My noble friends Lady Carnegy and the Duke of Montrose spoke of their specific concerns about connecting Scottish renewable energy to its end users.

The Government’s mechanism for increasing investment in renewable energy is the renewables obligation, which gets an overhaul in this legislation. The introduction of banding to the renewables obligation might indeed encourage investment. We support using market mechanisms to encourage growth. The most cost-effective way to reduce emissions should triumph. We must be careful, however, that the bands do not result in skewed markets if the involvement of humans in allocating the banding results in their favourites being picked. Picking favourites will not lay the appropriate foundation for a renewable energy industry or a low-carbon economy.

What assurances can the Minister give that that has not already begun to happen under the renewables obligation? Can he convince your Lordships that the new banding provisions will not skew the market in the future? If he has a genuine belief in the utility of the market, why have his Government resisted feed-in tariffs so adamantly? Does he not consider supporting the microgeneration of renewables to be a priority? Renewable energy tariffs—as the right reverend Prelate, the noble Lord, Lord Birt, and my noble friends the Duke of Montrose and Lord Taylor, among others, said—could substantially improve the status quo. We will seek to pursue these in order to encourage smaller power generators and establish the viable market mechanism needed to tackle climate change and our looming energy capacity gap.

Much of what has been discussed today has, rightly, been about what is in the Bill, yet much of the debate here and in the other place, and virtually all the debate outside Westminster, has been focused on the issues that have been omitted. I notice that even the Government, in the shape of the Secretary of State for Defra, have already admitted that a renewables Bill will still be needed to address the necessary frameworks. In the other place, the Government conceded the principle of rolling out smart meters across the country, but, as the noble Lord, Lord Redesdale, and my noble friend Lord Taylor said, they have not given a timeframe for that. How are businesses supposed to plan ahead? Long-term planning requires making decisions, not putting them off for the long term.

Another crucial omission is that of fuel poverty, to which my noble friend Lord Jenkin, the right reverend Prelate and the noble Lords, Lord Palmer and Lord Whitty, among others, have referred. The Minister’s department has set a target to eliminate fuel poverty in vulnerable households, but Ministers have been forced to admit that, largely due to fuel price rises, the total number of vulnerable households in fuel poverty has actually risen in recent years. Smart metering, if rolled out properly, might help address that by making the price of pre-payment meters—to which, among others, the noble Lord, Lord Whitty, referred—more equitable. However, as my noble friend Lord Taylor and the noble Lord, Lord Redesdale, said, still more needs to be done. With the opportunity to address serious problems surrounding energy issues, the Government are in serious danger of missing their chance to help the most vulnerable.

Essentially, the Bill goes halfway very well. We on these Benches do not seek to hold it up unduly. We ask for the co-operation of the Government and the help of your Lordships to finish the task and make certain that it provides real solutions and underpins the affordability, cleanliness and security of our energy supply.

My Lords, we have had an interesting and wide-ranging debate. I hope that noble Lords will forgive me if I deal with it in considerable detail. Because I am not troubled by what is going on in Moscow tonight—those of us who support Aston Villa are never troubled—I make no apology for perhaps going past the time for kick-off. Noble Lords might catch the second half if they are lucky.

I assure the noble Lord, Lord Oxburgh, that I personally see this as an urgent matter, and Her Majesty’s Government do the same. I am surprised if the noble Lord, Lord Teverson, thinks that I am not bringing to it my usual degree of enthusiasm in these matters. Perhaps I could take noble Lords back to my time at the CBI when I was director-general. Having listened to the debate today, I give noble Lords on all sides of the House some fabulous qualifications in hindsight. At times, we at the CBI just never saw the initiative and support from either side of the political domain for this enormously important issue. I am new to this House, so I hope noble Lords will forgive me if I am not allowed to say this, but I have heard some things tonight from other Benches that have made me think, “You do have a nerve”.

The delay from both parties on this issue over decades is a reflection of the diverse and complex nature of the issues. The wider energy strategy that we now have to address is, in one way, the product of all that deliberation and consultation, as well as a shift in the political—with a small “p”—feeling in the country about it. Indeed, the noble Lord, Lord Teverson, said that the Bill does not allow us to make sufficient progress on climate change early enough, but at last we have a Bill that is bringing forward important enabling legislation which will allow companies to make investments in such important carbon technologies as carbon capture and storage. It will push forward nuclear at last and allow, through the banding of the RO, a more rapid expansion of renewables. The Bill makes significant progress which has long been lacking across the political piece, as those in business have known and talked about for so long.

The breadth of issues we have touched on today is also a reminder of the tensions inherent in how we respond to the challenges we are facing. We have to combine decisive urgent action to cut carbon emissions with cost-effectiveness while maintaining a competitive and growing economy. We have to ensure secure and reliable energy supplies though increasingly we know that we will rely on international markets. I am grateful to the noble Baroness, Lady Wilcox, who marched through the decline of domestic gas and oil reserves. That is a statement of the obvious. An alarmist walk through our history and where we are going will do nothing to instil confidence in people—businesses, overseas investors and the private sector—about investment in the future. It is so very important that as a nation we pull together to deliver a secure and low-carbon solution.

My noble friend Lord Birt, among many others, referred to the concept of this as an international issue. My noble friend Lord Truscott talked about how important oil and water were going to be in the 21st century. I make speeches all over the world talking about how the currency of power has fundamentally changed in the 21st century. Power in the 20th century was determined primarily by who had the biggest guns, the biggest armies and where they went. Power in the 21st century will be about the currency of oil and gas. I would suggest that the currency in 20 or 30 years’ time, and in some very surprising places, will be water. Then, there is the currency of the development, exploitation and transfer of knowledge. This country can succeed in that knowledge, that technological advance in dealing with so many aspects of climate change and security of energy supply.

It is arrogance of the very worst sort if the Americas, the Britains, the Frances, the Germanys and the Japans turn to the Indias, the Chinas, the Brazils and the Vietnams and say, “We got rich by fouling this planet. You can’t”. They will not believe us, for a start. They will ignore us, for the second. But at the end of the day we cannot allow them to be doing that. We must come to them as partners with technological solutions so that they can get wealthier and rich. By the way, that is not rocket science. If they get richer, they will buy our goods and services. But at the same time, we must make sure that we can partner with them and provide them with those technological solutions.

If we can reach some level of the moral high ground by making sure that we can go to those countries and say, “We are doing out best. We are trying very hard here. We even apologise for what we have done over the past couple of hundred years”, then we as the European Union can, I hope, have a crack at persuading our friends 3,000 miles west of here that they also must get to that moral high ground if they are going to make a difference in using the currency—the power—of the 21st century, which will so much depend on how they deal with this.

Five areas in the Bill are key to that. The first deals with creating a fit-for-purpose licensing regime to allow the private sector to bring forward offshore gas storage and unloading projects. The second deals with plugging the gap in the regulatory framework for carbon capture and storage, creating a licensing regime for the permanent storage of carbon dioxide under the seabed. The third is reform of the renewables obligation that will triple the renewable electricity promoted by the RO by 2015 compared to today. The fourth is putting in place measures to ensure the private sector covers the full costs of decommissioning and a full share of the waste management costs of any new nuclear power stations. The fifth is powers to underpin the roll-out of smart meters to medium-sized business in the first instance, but potentially to all energy consumers. I can assure the noble Lord, Lord Taylor of Holbeach, that the roll-out of smart meters will continue apace. We are going to get medium-sized businesses going by November 2008. We will then roll it out over the next five years, after more consultation, to smaller businesses and then into the private consumer.

It will not happen if we do not get buy-in from all sections of our society and I suggest that that is one of the important aspects of being leaders. It is interesting that the noble Baroness, Lady Carnegy of Lour, mentioned leadership in France—the leadership that I presume shows up so evidently in how they deal with their farmers and students. But the noble Baroness is right; they show distinct leadership in nuclear power and we can learn much from the way that their parties came together to deliver solutions which will endure for decades to come.

I now turn to specific points that have been raised. First, I will deal with one or two issues raised by the noble Baroness, Lady Wilcox. She says that the Bill fails to specify how the long-term liabilities arising in connection with carbon stores will be handled. The enabling provisions are in the Bill. For example, Clause 20(3) allows licences to include conditions on the closure of a store, and provisions about the obligations of the licensee after closure and about the termination of a licence. Clause 30 applies to the decommissioning arrangements that currently apply to offshore oil and gas facilities, to structures used specifically for carbon dioxide storage.

We want to consult on the detailed liability arrangements that will apply. Whatever the detail, these will ensure that the operator will be legally and financially responsible during the period that the store is licensed. The operator will be obliged to seal the store to a specified standard and remove to structures used for storage. Public funds will be protected against risks of the operator failing to meet its obligations through financial guarantee arrangements and the licence will not come to an end until the long-term stability of the store has been demonstrated.

The noble Baroness, Lady Wilcox, also asked whether the CCS regime should cover all of those liabilities. It does. Clause 31 relates to the termination of licences at the end of the life of the store. They allow the Secretary of State to make financial arrangements with the licensee in relation to the licensing authority taking on liability for the closed store.

The noble Baroness also asked whether the Government will change safety standards for new nuclear power stations. In the United Kingdom we have strict, independent safety protection regimes for nuclear power and any new station will be subject to safety licensing conditions. They will have to comply with the conditions set by the regulators in connection with their licences and their authorisations. The noble Baroness also asked why the 2050 target is not an 80 per cent reduction in CO2 and only a 60 per cent reduction. The figure is set at 60 per cent because that was what the science recommended at the time. Rather than making up a new figure, we have asked the Committee on Climate Change to assess that figure again in the light of updated scientific information.

The noble Lord, Lord Redesdale, mentioned that the Government should introduce a renewable heat obligation. The Government are focused on heat; the Prime Minister said last November that we will be doing more on the issue. That is why we have had a call for evidence on the subject, which considered a range of issues, including financial support mechanisms and obligation in that respect. The work is feeding into the renewable energy strategy consultation this summer. But heat is complex, as the noble Lord knows, and we need the time to make sure that we get the policy right before thinking about legislation necessary to deliver it.

I was interested to listen to the noble Lord, Lord Redesdale, when he said that it was difficult for companies to factor in CO2. That is not what I hear when I go around the businesses of Britain or inward investors to the country. In a commissioned survey, 50 per cent of respondents said that it was already having a strong, or medium, impact on the decisions to develop innovative technology.

My Lords, I was talking about power companies factoring in legislation about CO2 and their investment in new power-generating plant. They have been lobbying about it for the past five years.

My Lords, as it is presumably a question of just power generation companies and not companies in general, I will save time and move on.

Many noble Lords mentioned feed-in tariffs. It is true that Germany has been successful in deploying renewables by using a feed-in tariff, but at a very high cost. It cost €68 billion between 2000 and 2012. There are 500 different types of tariff, with 150 added every year. It is a regulatory nightmare, and extremely expensive. And, let us not forget, they have had that regime in place since the 1990s; comparing our levels of renewable energy with that regime is like comparing apples with pears. We have to get this into context. If we were to change now, we would destroy the consistency and stability that business craves and private sector investors need, and we would increase the delay and the cost.

I am grateful to my noble friend Lord Birt for the geographical context in which he put this situation. He raised a list of issues which will prevent the UK meeting its renewables target, including planning, radar issues and grid updates. On behalf of the Government, I wish to reassure noble Lords that we fully recognise that those are major factors. We are actively working with all the relevant parties to resolve those issues and we are making good progress. The financial framework must be consistent to ensure investor confidence at all times. That is why it is vital that we remain committed to the renewables obligation. Indeed, my noble friend said that the Government need to do more to support renewables. Too true—we have always said that we need to do more. That is why we are bringing forward the renewable energy strategy next spring. But we must implement the important changes to the RO in this Bill now. Indeed, the Bill will make the renewables obligation 30 per cent more effective.

My noble friend also said that we need to do more to support combined heat and power. Renewable CHP is already supported by the RO—the new planning policy statement on climate change will, I hope, help promote that even more. During the coming months, we will be examining how to make further use of combined heat and power, including heat in a carbon context and a greater use of waste heat.

I am very grateful to the noble Lord, Lord Jenkin of Roding, not only for his contribution today but for giving me prior notice of the issue he was going to raise concerning Energy Solutions, Inc. We will take that up over the next two or three days, but I can assure the noble Lord that if its solutions and ideas can be proven to be of use in what we are seeking to achieve, then yes, we are flexible and open to change. I would say that, wouldn’t I? I am one of the most passionate believers in an open market and in the free market working to bring in speedy innovation. I assure the noble Lord that I will get back to him on the specifics of Energy Solutions, Inc.

The noble Lord spoke about energy companies not being able to deal with the vulnerable. He also mentioned fuel poverty, as did so many of your Lordships. I guess that it would be seen as running away scared if I pointed out the obvious—that that is outside the scope of the Bill. If noble Lords wish it to come within the scope of the Bill, I presume that they will put down amendments with the aim of doing so. But the Government are not sitting back and doing nothing. We have spent £680 million more in the current CSR than in the previous one, especially on the initiatives of Warm Front and CERT. I said at the beginning of my remarks that I heard some things from other Benches that made me think, “You have a nerve”. Before 1997, I did not exactly hear the Conservative Government give fuel poverty the attention they feign for it now. But it is one of the blights on the fifth biggest economy on earth and I am grateful to my noble friend Lord O’Neill for his passionate and clear description of the issue.

I do not believe that there are 6 million people living in fuel poverty. We have got that figure down from 1997—it now stands at 2.5 million but, frankly, that is 2.5 million too many. It is very important not to ignore it, especially at a time of rising energy costs, and given the lack of education and investment there is regarding insulating homes.

My Lords, on the subject of having a nerve and the impact of fuel costs on fuel poverty, is not one of the major contributing factors the level of tax which the Government are adding to the cost of fuel? If the Government are so committed to this policy, why do they not reduce the amount of tax being taken so that they do not actually benefit from the increase in fuel costs?

My Lords, I am grateful to the noble Lord for raising the issue of taxation. That is a matter for the Treasury; it is a matter of fiscal policy, not a matter for tonight.

My noble friend Lord Puttnam spoke about the public interest test. I welcome his contribution. He gave his apologies as he had to leave to attend an awards ceremony. I would welcome a meeting with him and my officials to see if we can achieve resolution of his justifiable concerns. The Government have recently examined existing powers for dealing with unattractive takeover situations of UK energy assets. We take the view that at the moment the powers in the Enterprise Act 2002 are sufficient.

My noble friends Lord Hunt of Chesterton and Lord Birt asked what the Government are doing to roll out CCS internationally. We are very keen to support the EU’s ambition to have up to 12 demonstration projects operational across Europe by 2015. We intend our demonstration to be operational by 2014. We are the only country in the European Union right now to have one at all—the other two are in Norway and America. But we are working with our G8 counterparts to achieve the ambitious agreement arising from the G8 summit on CCS. We continue to drive that forward.

We have created a North Sea basin task force in order to work closely with Norway to remove barriers to the deployment of CCS. We are looking particularly at storage in the North Sea. My noble friend Lord Hunt also asked who will be monitoring the leaks from any carbon dioxide stores. The operators will be monitoring while they are licensees; they will have the responsibility to monitor as they perform their obligations as licensees. But when the store is delicensed, the state will take it over and carry out any monitoring required.

My noble friend also asked whether there should be an appeals procedure for the approval of any funded decommissioning programmes in nuclear. Our position is that judicial review is the best place to hear an appeal. People who sit on tribunals are used to hearing complex and technical cases.

My noble friend Lord Whitty and the noble Duke, the Duke of Montrose, both spoke about microgeneration. There are about 100,000 microgeneration installations in the United Kingdom. We are committed to microgeneration: we published the microgeneration strategy in 2006; we have simplified RO for microgeneration; and we have introduced CERT to encourage energy suppliers to support microgeneration technologies. It has been announced that we will look at alternative support mechanisms to ensure that they can continue. I assure noble Lords that we will continue to put government money and initiative behind microgeneration. We have made £86 million available in capital grants in the low-carbon buildings programme to reduce the cost of buying and installing equipment; that is putting taxpayers’ money exactly where our mouth is.

The noble Duke, the Duke of Montrose, asked whether the Government have been approached by companies to demonstrate pre-combustion technologies for CCS, as opposed to post-combustion. There has been huge interest from companies for all sorts of CCS technologies. I have been particularly pleased in my job at UKTI to see so many companies from other countries wanting to come here, invest their money and bring their technology so that we can see both pre and post-combustion technology for CCS proceed. It has been pleasing to see what interest there is. While the Government are showing global leadership in supporting the demonstration of post-combustion on CCS technology, we hope that we can encourage more countries and companies to move on with pre-combustion as well. The noble Duke specifically asked whether the legislative consent Motion has been passed. The answer is no, but it is being considered later this month.

In the interests of ensuring that noble Lords can at least catch the second half, I will undertake personally to get back to all other noble Lords who raised points. I will either have meetings with each of the interested parties or get my officials to come and meet people. This is an incredibly important issue. I have been going on about it for years. The business community has wanted leadership from politicians of all parties on this for a long time.

The noble Baroness, Lady Wilcox, ended her remarks at the start of the debate by saying that the lights are going out all over Britain. I assure her that they are not going out all over Britain. But they will go out if the politicians of all parties of this nation—and I include members of the Scottish National Party; the people of Scotland deserve better leadership than they are getting—do not pull together as one country. Our grandchildren would rue the day that we wasted the opportunity. I look forward to further detailed debate in Committee, and ask the House to give the Bill a Second Reading.

On Question, Bill read a second time, and committed to a Grand Committee.