Tuesday, 8 February 2011.
Energy Bill [HL]
Committee (6th Day)
I must advise the Committee, as is usual on these occasions, that if there is a Division in the Chamber while we are sitting the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes—it says that on my brief, but it is give or take 10 minutes; it sometimes takes a little longer.
35: After Clause 97, insert the following new Clause—
(1) Within eighteen months of this Act coming into force, the Secretary of State shall, after a period of consultation with industry, geological experts, the devolved administrations, local authorities, energy producers and other interested parties, put into place for the United Kingdom a licensing system and regulations for the exploitation of heat from deep geothermal sources for both the direct use of that heat and for the generation of electricity.
(2) The licences shall relate to—
(a) individual geographically delineated areas on land;(b) the heat held by rocks greater than one kilometre below the surface.(3) Licences shall give exclusive exploration and production rights for the purpose of energy production from geothermal sources, both direct heat and electricity generation, to the licensee, for that area, and for a specific period of time.
(4) The Secretary of State shall lay down regulations for the method of allocation of licences to those organisations wishing to explore or exploit those resources, or both.
(5) The Secretary of State shall undertake the first round of allocations within six months of the licensing regulations under subsection (1) being approved.
(6) Any organisation already undertaking exploration or exploitation from geothermal sources within the United Kingdom, in that they have already undertaken, at the time the licensing regime comes into force, boring for the purpose of exploiting geothermal heat to below one kilometre, shall be entitled to hold the first licence awarded for that licence area, and any licence fee or other consideration for that licence area as a part of the licencing regime will then be determined by arbitration under rules determined by the Secretary of State reflecting the fees or other consideration paid for licences deemed to have similar potential.
(7) The holding of a licence for the exploration or exploitation of deep geothermal heat, or both, shall not convey any automatic rights in terms of planning permissions for surface development, or give any rights in terms of surface access.”
My Lords, we come to a specific issue here, which is around one of the older renewable technologies in many ways—geothermal or, in this case, deep geothermal. I do not wish in any way to give noble Lords a lecture, but I would like briefly to summarise the position of geothermal energy. It is a tried-and-tested technology in many parts of the world. In the volcanic areas of our globe, hot water rises naturally—it does not need persuasion or drilling—and is used for heating directly or for generating. That part of the technology has existed for some time in places such as Italy, Japan, New Zealand and Iceland in particular. It is a fundamental part of electricity and power generation in those countries. It is also possible to have a variation where there is drilling, often down to five or 10 kilometres, with cold water pushed down and hot water coming out at the top. That is the clever bit—the bit that needs to happen. In the oil industry and other industries, drilling technology is pretty proven.
A great deal of work is taking place on geothermal in Australia, the United States and Europe to make the technology work. The good thing about it—this is where I will end my sales pitch—is that it is the one renewable technology that can produce large-scale electricity, but it is also consistent in its operation. It is not intermittent, as so many other of the renewable technologies—tidal, wave, solar and wind—can be, which is important. In many ways, the United Kingdom led the field in the 1970s and 1980s. Then, as happened with so many of these technologies, with the crash of oil prices the research stopped taking place and progress happened elsewhere in the world. Various bits of the technology are proven; it is highly desirable in its characteristics; and it is available in the United Kingdom, particularly but not only in the south-west, so it could be an important part of our renewable energy mix. Indeed, two planning permissions have been granted in Cornwall for geothermal stations of a smaller scale than the large ones that there can be. Visually, they have a small footprint and do not have great impact either.
However, as noble Lords will understand, one of the areas that must be tied up for exploitation of any energy resource is certainty for investors and the engineers who make these systems work. Elsewhere in the world, in Ireland next door, Germany, Australia and various other parts of the world, licensing regimes have been introduced. What should not happen is that if there is a strike and a well is made that produces hot water— 200 degrees plus is the optimum—someone in the next field should not be able to exploit that resource and that heat for themselves because they have not had the risk or made the investment for exploration.
The amendment would do one simple thing. It would give power to the Secretary of State to consult and then put into place within a certain time period, which I will come back to, a licensing regime for geothermal. The industry feels that one key part of the jigsaw is to allow investment with some certainty on the return, so that investments can be made.
The amendment refers to 18 months in terms of the licensing regime. When I tabled this amendment for the last Energy Bill I thought it should be two years, but now that these types of agreement have moved on, I feel that 18 months is perhaps the maximum. The industry feels that it could go through this process within a year. Since the industry has said that it can cope, I would prefer 18 months.
That is why the amendment is so important. It fits very well in the Bill because it has a whole area on renewable technologies. It is something that the United Kingdom still has an opportunity to lead on. That may be difficult because other nations have got further ahead at the moment, but it is an important technology. It works in other parts of the world and we should benefit from it in terms of meeting our own renewable energy targets—not necessarily up to 2020, although it may make a small contribution, but certainly beyond that. I beg to move.
My Lords, I am happy to support the amendment, to which I put my name, and I support everything that the Lord, Lord Teverson, just said. The Government have very challenging targets for renewable energy by 2020. They will achieve those targets only if there is sufficient private investment. Investment decisions depend on assessment of risk.
In the case of geothermal in this country, there is a really no doubt about the existence of the resource. Indeed, a couple of decades ago, I was co-leader of the group that produced the first geothermal map of the UK. The resource is certainly there. I declare an interest as a technical consultant to one of the companies to which the noble Lord, Lord Teverson, just referred.
We know that we have the hot rocks at depth. The real question is whether we have adequate technology to extract the heat from those rocks. Therein lies the uncertainty and the exploration risk. There is a good chance that we can do that, but if an investor is going to invest in this he really wants to see the risks minimised. As the noble Lord pointed out, after the demonstration of a successful well in one place, there is a real danger of someone else coming in and drilling nearby.
At an earlier stage in informal discussions, the Government’s position was that that could probably be managed through local planning consents, but I do not think that that is the case. Modern drilling technology allows you to drill in one place, maybe 10 miles away, and then turn your well horizontal and go into anywhere within a pretty wide radius. In other words, if we are really to give investors the kind of security which I suspect they will demand in order to support this kind of investment, we really have to have a licensing regime which effectively pre-empts others who come in later and have not made the primary investment from tapping in on the risky exploration work that the initial company has done. I am not sure whether this amendment is in the exact terms that we need, but there will not be significant investment in geothermal in this country, I believe, unless something along these lines is done fairly rapidly.
What we have to bear in mind is that capital moves between countries and that any company interested in investing in geothermal will compare the opportunities in this country with those elsewhere. For example, I believe that Ireland has legislation in place to give the kind of protection that we are asking for here. Ireland has comparable geothermal possibilities; the same is true in other parts of Europe. If we do not do this, the capital will simply move elsewhere and this contribution to the 2020 target will not be realised.
Perhaps the noble Lord can help me. I understand exactly where he is going on the protection of the investment but he is being incredibly coy about telling us what the scope of the possibility would be. He said that he conducted an inquiry some years ago. How many gigawatts or megawatts of electricity could there be in the UK? I am not wanting to pour cold water on this—I stumbled into that one. However, are we going to do something here that could, at the end of the day, be worth while or are we just kidding ourselves? Perhaps this is another technology that might be appropriate in countries or areas of the world where tectonic plates are crashing. In Iceland, that is self-evident but one does not get the feeling that there are too many serious earthquake areas in the UK where you are likely to access those kind of geothermal possibilities. Can the noble Lord be a little more specific about what he would regard as the likely output from a geothermal electricity industry?
My Lords, that is a difficult question to answer at the moment; we would be in a better position to answer it after the Cornish exploration has gone ahead. The fact is that this work was killed around about 25 years ago, as the noble Lord, Lord Teverson, said, by the crash of the oil price and by the DTI, as it was then, simply being no longer interested in supporting this work. Until that time, we had very good support from the DTI. In fact, the one geothermal source in this country that is functioning at the moment, which is the one around Southampton, was the outcome of the PhD work of one of my students at the time.
Since that time, drilling and fracturing technology has improved enormously. The oil companies have developed that to a very fine art. One can now drill, with control of the drill tip, to about the same precision as a brain surgeon uses when operating on a brain. It can be a very fine control indeed. We really have to see how successful this is at exploiting these resources, which have been known about for quite a long time. It is very simple to tell the noble Lord how many gigawatts of energy could in principle be removed, but that is a meaningless figure until we have some feeling about how effective the new technology is going to be. I would not want to say at this stage that this will save our renewables targets. At the moment, I would say there is a good chance that it will amount to good housekeeping but it may be considerably more than that.
My Lords, I would like unreservedly to congratulate those who tabled this amendment, which makes a great deal of sense. I have for a long time been a bit bemused about why the geothermal dimensions of energy policy have not had greater prominence in the UK approach. That anxiety has been greatly strengthened because I have the privilege of being a member of Court of Newcastle University and Professor Younger at Newcastle has done a lot of really important research on this.
To reassure my noble friend a bit about his anxieties, I hope, this amendment is very topical because the news has just broken that with government support there is to be a very significant project in the heart of Newcastle. There is a proposal to drill 2,000 metres in search of this form of energy. The Department of Energy and Climate Change has awarded £400,000 to Newcastle and Durham universities to take this work forward. The borehole will be the deepest ever drilled in a UK city. Scientists believe that at that depth it will bring up hot water at a temperature of 80 degrees centigrade. It will be an unlimited source of water that will be hot enough to heat any domestic or commercial central heating system.
This project has been described not only as imaginative but as full of good prospects. The scientists concerned are saying that, depending on the mix of rock at the depth to which they are drilling, they are optimistic of reaching temperatures not short of boiling point. This will provide a fully renewable energy supply and will massively reduce reliance on fossil fuels. It will strengthen Newcastle’s position as a sustainable city. The project is expected to last for six months only, and the team hopes to be able to pump out the first hot water in early June. If it is successful, it will open up all sorts of prospects not only in the north-east but across in the west in places such as Carlisle where the geology is not dissimilar. If it proves successful in Newcastle, the same techniques could apply.
Taking up the very important point made by the noble Lord, Lord Oxburgh, about the knowledge, experience and professionalism available, there are still a lot of resources from the old mining industry around in some of these parts of the world. They could be rejuvenated to play a very important part in this. I think that this amendment is very timely because it comes just as practical work is going forward. I commend it.
My Lords, in principle we are surely all in favour of this technology playing a part in our energy policy. It is simply practicalities that I want to ask the noble Lords, Lord Teverson or Lord Oxburgh, or the Minister about. First, we have been told by the Minister that the Government will not favour subsidies for developed technologies, but for developing technologies, such as offshore wind. We are told by the noble Lord, Lord Teverson, that this is a well developed technology. Does his proposal require some structural subsidy in the regulations he anticipates? It would be helpful to the Committee to know what financial arrangements are envisaged because there is no point in going into all this work if it is never to going to happen.
Secondly, does the success of geothermal depend on some combination of electricity generation and community heating systems? Do you need to have both? If so, there has to be a big enough community near to the geothermal unit for that to be possible. I understand that Cornwall is geologically the best area in this country in which to exploit this technology, not the north-east.
Thirdly, I understand that once a well has been drilled, the heat is gradually depleted in that locality under the surface. A typical geothermal station might operate for 20 or 25 years, which is a decent length of time for some purposes, but not if you are designing a heating system for a substantial urban area. Those are some practical questions on which either the mover of the amendment or, in due course, the Minister might want to comment.
I support one of the points made by the right reverend Prelate. I am sure that the principle underlining this Bill, and other Bills, is not that we have a totally random system of subsidies but that we have a consistent system of subsidies, a point to which the Minister will perhaps respond when I move my amendment a little later. Nothing would be more fatal than for people to think that any fool can get energy from any place they like and receive unlimited subsidy to do so. As I understand it, that is not part of the principle of a Bill, but it deals with how this consistent pattern of subsidies, or a consistent pattern of carbon taxes, for that matter—that is the reverse side of the coin—will operate, so that it is transparent to all. I am sure that the noble Lord, Lord Teverson, would agree with that principle. It would mean that we would not have the anxieties that have been revealed.
I am all in favour of geothermal, by the way; in fact I spent much of last summer in Iceland and Greenland, where one can see boiling water coming out of the earth all over the place; it is a good form of cheap energy. However, we have to look at the competing forms of energy with some consistent system of units, whether a price per kilowatt hour delivered or whatever. I am sure that this is capable of being embraced within the spirit of the amendment.
I am grateful to the noble Lord, Lord Teverson, for tabling his amendment today, as both he and I mentioned it at Second Reading last year. The Minister replied in that debate that he was actively looking at a licensing system. I trust that he will be able to update us today with a positive proposal. As we know, the industry has spent £4 million of the £6 million allocation from our previous Labour Administration, and from the remaining £2 million, the Conservative-led Government have cut the funding by 50 per cent to £1 million with no arrangements in place thereafter.
The noble Lord, Lord Judd, has already updated us on one such proposal. My noble friend Lord O'Neill will also know that geothermal energy has been tapped into since Roman times, with the enjoyment of hot springs, and shallow geothermal projects such as ground-source heat pumps are slowly growing. Even conservative estimates calculate that deep geothermals a few kilometres down could provide 10 per cent of the UK's electricity. It operates 24 hours a day and is always hot; emission levels are virtually non-existent and it should not run out. We agree with the noble Lord, Lord Teverson, that the timing in his amendment specifying within 18 months gives an unnecessarily long leeway within which the Secretary of State could operate such a system. We would support a shorter timeframe.
I would also add to the suggestion of my noble friend Lord Lea that perhaps we could look at increasing the feed-in tariff threshold to 10 megawatts and include a deep geothermal tariff of 23p. If the Minister's plans have extended that far, he could update us on what those might be. We look forward to that.
My Lords, welcome back to what I hope will be the last day of our Committee stage. I also welcome back the noble Baroness, Lady Smith of Basildon. I hope that her foot is much better. Should we have a vote later today, a number of coalition Peers will be very happy to push her into the Chamber in her wheelchair to ensure that, for once, she goes into the right Lobby.
The coalition Government welcome this amendment. I have telegraphed this before in various debates that we have had on the subject. The noble Lord, Lord Teverson, is a recognised expert and, as usual, is thumping the drum for Cornwall. I am very grateful to the noble Lord, Lord Judd, for thumping the drum for the north-east, which I looked at very closely and from where I have also had representations. The noble Lord, Lord Oxburgh, is absolutely right that capital moves within countries and, if we are to take this matter forward, we should do it as quickly as we can to look at the possibilities.
To answer a number of questions, geothermal does benefit from two ROCs. There is financial support available. As recently as December, we gave grants to Keele, Newcastle and Southampton universities to continue their activities. I hope that that deals with part of what the right reverend Prelate the Bishop of Chester said.
As I have said before, we are looking actively at the practicalities and, in particular, the legal aspects. In fact, only the other day we looked to see whether we could use the Irish licensing system, legal system and legal documents to do it, but it is a huge amount of work. It is not a question of just adopting their system and using it as a template. Unfortunately, because the UK legal system is silent on this issue, we start with a blank sheet of paper and have to create our own licensing regime, which, those of you who have been in government will know, is quite complex.
Given the potential complexity of the licensing scheme, it is my proposal that the Government continue to work on this issue and to take the matter away. I can assure noble Lords, as I have done in the past, that looking closely at trying to find a regime that suits is something that has my sympathy and support. I am very grateful that we should have the scientific evidence that the noble Lord, Lord Oxburgh, mentioned to support this excellent amendment. However, I ask the noble Lord to withdraw his amendment.
Before the Minister sits down, I want to press one of the points I made. Imagine an electricity generating station in Cornwall, generating electricity from this source. Will the Government view this as akin to nuclear generation and offer no subsidy so that it has to stand on its own commercial feet or will it be regarded as equivalent to offshore wind, where there is an ongoing subsidy for the actual units produced?
Giving it a ROC is an incentive to use it. This means that it is in a totally different category from nuclear and therefore fits into the same category as onshore and offshore wind, which also benefit from the same revenue contributions and financial support. I hope that clarifies the point.
Following on from that question, will the Minister confirm that, if there turns out to be a need for a subsidy for geothermal energy in the way discussed, and the subsidy is in the same form as that for onshore and offshore wind, the cost would fall, as with those two generating systems, on the consumer?
Lord Marland: I cannot confirm the costs on the consumer at this early stage of the procedure. However, I can confirm that there are two ROCs already in place available for deep geothermal. Therefore, there is a system in place for rewarding the person who produces it.
The noble Lord mentioned two ROCs as a subsidy to the industry. My understanding from submissions I have received is that the industry feels that this is insufficient. Has his department looked at increasing this? The submissions asked for these to be upgraded to four.
I imagine that this will be part of the electricity market review. We cannot keep adding more subsidies provided by often impecunious consumers to the research fantasies of the British generating industry. There has to be some degree of control. One would imagine that the electricity market review, to which the Government are committed, will give proper consideration to this so that we do not have the creeping incrementalism that results in the submerged and disadvantaged groups in the country subsidising such research programmes.
The noble Lord makes a good point. We have been looking at this matter very carefully for the past month or so. There is a framework in place; we have a deep geothermal challenge fund and have been allocating funds towards research. There is a ROC that is currently cast in stone and we are in a very adequate space to take this issue forward. I invite my noble friend to withdraw his amendment.
I am sorry. To repeat, 25 to 35 years is a plausible length of time for a field such as this to operate. There are various possibilities of rejuvenation, but it is too early to think of that.
The right reverend Prelate also asked whether there would be low-grade heat available as well. Yes, there normally is low-grade heat available after you have generated electricity. The aspiration is that a project such as this would wash its face commercially simply on the basis of electricity generation. If you can find a local use for low-grade heat associated with it, whether it is for agriculture or for district heating, that is an additional bonus.
I thank all noble Lords who have taken part in this debate. I should like to follow through on a couple of questions. The noble Lord, Lord Oxburgh, was talking about generation that was purely electricity or purely heat. If there is a demand for hot water, whether it be for market gardening or district heating, the most energy-efficient thing to do would be to use as much of it as you could for that purpose. This is primarily for electricity generation although you could theoretically have one or the other.
In terms of depletion, as I understand it—the noble Lord, Lord Oxburgh, knows about it far better than I do—that is a conservative estimate. It could be argued that there should be no depletion over time on very deep exploration; there is a chance for rejuvenation. The industry is rightly conservative regarding those estimates because ultimately the earth is being heated from the core upwards. Cornwall and Devon are particularly good in this respect because there is a layer of limestone over granite, which makes it a particularly good cocktail. I have probably got that slightly wrong. I see from the noble Lord, Lord Oxburgh, that I have. That is what someone from the industry told me, but there we are. It is not just Devon and Cornwall—this relates to other areas as well.
On remuneration, the two-ROCs regime is already in place, as the Minister said. The industry would like to look at the renewable heat initiative in terms of the hot water that comes out. That is probably an area of future discussion.
I am very encouraged by the Minister. I know that these things are not necessarily easy to achieve. Other countries, particularly in Europe, have these systems in place and they are the sine qua non. Without them, you will not get development of this technology. That is why it is important to get on with it. I would have thought that setting up a licensing regime from fresh would be a civil servant’s heaven—that there would probably be people queueing up in DECC to invent the British geothermal licensing system. That clearly has a cost in people power, but there is no ongoing cost to the department afterwards. Indeed, I hope that in due course revenues will come in from this technology, as in oil or whatever.
I am encouraged by the Minister’s remarks. I am sure that this will be a point of discussion between now and Report, and on that basis I am pleased to withdraw my amendment.
Amendment 35 withdrawn.
Clause 98 agreed.
36: After Clause 98, insert the following new Clause—
“Secretary of State not to grant petroleum licence incompatible with offshore renewable energy site
(1) In this section, “offshore renewable energy site” means a site in United Kingdom territorial waters or the REZ which is developed or operated, or is intended to be developed or operated, for—
(a) generating electricity from wind, wave or tidal energy, or(b) transmitting electricity generated in that way,in respect of which the Crown Estates have granted a lease, licence, agreement to lease or agreement to license for that purpose.
(2) The Secretary of State may not grant a licence under section 3 of the Petroleum Act 1998 (licence to search and bore for and get petroleum) to the extent that the licence would permit an activity within an offshore renewable energy site, unless the person entitled to the benefit of the lease, licence or agreement in respect of that site so agrees in writing to the grant.”
My Lords, as the noble Lord, Lord Oxburgh, said on the previous amendment, it is clearly the general target of the Government—as shown by providing the ROCs incentive—to increase the amount of renewable energy in this country by 2020, and to make offshore wind the major component of the provision of that quota. We have already done reasonably well, in that there are already 1.3 gigawatts of offshore wind operating around our coasts, and other projects are in the pipeline. However, the process takes considerable time. For it to happen—again, as the noble Lord, Lord Oxburgh, said—we need not only the incentive of the ROCs in place, but the means of mobilising substantial sums of private capital. That private capital needs to minimise risk. At the moment, the problem for an offshore wind facility, either in operation or provisional—with a lease granted by the Crown Estate or with an agreement to lease—is that the prospect of an oil or gas facility being put in the same area will kill that investment stone dead. It would certainly put off prospective investors in that scheme or potential scheme.
The amendment therefore seeks to ensure that investors in the industry and the supply industry—an important economic by-product of offshore wind—have sufficient confidence to invest sums of money in offshore facilities that are not threatened by effectively being displaced by a future oil or gas facility. That is needed because of the present disparity of provision in the rules governing offshore oil and gas consents. The amendment would prevent a forced intervention by the Secretary of State to consent to an oil and gas works on top of an existing lease, or agreement to lease, for an offshore renewable project. It would allow the offshore oil or gas project to occur were consent to be given by the operator or potential operator of the offshore activity—in other words, provided that negotiations could operate and an agreement could be reached, there could be coexistence. Although theoretically both sides of the equation recognise the need for coexistence, there is no balanced system for dealing with them.
It is not that we are creating a special, privileged position for offshore wind, because the consenting system for offshore renewables in general—tidal and wave power would also be covered by the amendment— includes a requirement to negotiate with other sea users. The offshore operator is required to negotiate with the potential gas operators and other users of the seabed. On the other hand, the current guidance from the Infrastructure Planning Commission—which, until the Government get their way, is the planning authority—requires that the views of other sea users must be sought out, that action taken in response to those views must be reported and that justification must be given where no action is taken. However, the Petroleum Act requires oil and gas activity to take due regard of other projects, such as renewables, but there is no requirement to negotiate in those circumstances. We are not talking about a level playing field at the moment, and I therefore hope that the Minister and the Government will recognise that there is an issue here.
There is particularly an issue about discouraging the substantial amounts of private investment that will be needed in these offshore technologies in order to meet the Government’s targets for renewables. It is already public policy to reach those targets, but the present system threatens confidence in investments in those targets. It is certainly the case that for those seeking finance from the City and elsewhere for these projects—particularly as we go further offshore, as we will need to do—questions of confidence and the possibility of the leases being overridden by a subsequent decision on oil and gas facilities are major considerations and some of the reasons why such investment is inhibited. I hope that the Minister will at least recognise that this is a problem. If he is not prepared to accept the exact wording of this amendment, I hope that he will recognise that this is something that the Government have to address and that some degree of equal treatment will be needed down the line.
I think all sides of this Committee recognise the importance of meeting these renewable targets and want to remove any inhibition in doing so. Therefore, this amendment, or something like it, is a necessary step to ensure that the investment is there to meet those targets. I beg to move.
Is the basis for this amendment that somehow it is preferable for us to have offshore wind rather than access to oil and gas? For many of us, it is as important in this country that we have access to the reserves of oil and gas in order to sustain a number of our vital industries. They will depend on electricity for a lot of their fuel sources. If I were still speaking as a constituency MP representing a seat near Grangemouth, the last thing I would want to do would be to support offshore wind at the expense of adequate supplies of gas and oil to go into the oil refinery and the chemical processing plants that are a major source of employment for my constituents. My noble friend needs to be rather more frank with us. Is it just for the convenience of investors or it is based on the assumption that somehow oil and gas are bad and windmills are good?
Indeed. Many of those jobs have the skills that will be required in renewable technologies as well. However, at the moment it is the Government’s policy, the previous Government’s policy and the policy of all parties in this House to reach the target for renewables in this country. That is not saying that we should close down oil and gas opportunities; it is saying that in future we should give the renewables industry, whether wind, tidal or wave, equal opportunity with gas and oil facilities. When offshore wind providers are seeking private investment in a relatively new technology, the confidence of those investors and the realisation of government policy in this area are inhibited by the threat of the oil and gas facilities trumping them. To look at it the other way around, if proposers proposing a renewables process operation are faced with the possibility of an oil and gas facility coming in, they have to negotiate. At the moment, there is no obligation on the oil and gas companies to negotiate, which is the injustice that I am addressing.
To be frank with my noble friend, I think that, yes, it is a matter of public policy to give some preference to renewable industries and that we reduce the carbon content of our energy supply. It is therefore important to reduce the reliance on carbon-based fossil fuel. But that is not quite what this amendment is addressing. It is to address the disparity of treatment between the two sectors and to ensure that confidence can be inspired for developing renewable technologies offshore.
I was not going to speak on this amendment, but I have to say that there is a lot of water up in the North Sea and I am not sure why the two cannot coexist. You cannot move the oil and gas fields, but a lot of windmills can be moved because there is rather a lot of wind up there, which tends to be spread over a bigger area. I think that it is incumbent on the mover of this amendment to be more explicit about in which areas he would envisage a degree of overlap or competition. At the moment, he is seeking to legislate by assertion, not by evidence, and seeking to tell us that there could be some need for reassuring of investors. Frankly, there are lots of other reasons why investors are a bit leery of offshore wind farms. The technology, the durability of the metals and the exposure to all kinds of elements mean that the North Sea is more inhospitable than a lot of areas where offshore wind developments have taken place so far.
However, perhaps the noble Lord can tell us where there is likely to be an overlap; that is, where there is a clear need for wind power in addition to reservoirs of oil and gas. I have to come back to the point that not all the output of the North Sea is used for energy-generating purposes. A lot is used for the high-tech existing industries. We are in the process of losing Pfizer, but the petrochemical complexes across the United Kingdom are sources of high-tech, well paid employment for large numbers of people. These jobs exist and they will carry on as long as oil and gas is coming through to be reprocessed. National security and various economic objectives would stand up just as robustly and strongly as anything in relation to renewable targets, from which I do not demur.
I have yet to see where we would find that there would be a conflict on such a scale as to require amendments of this kind. If there is a case, it has not been made. If there is not a case, I think that it is part of the anti-oil and gas mentality of certain sections of what chooses to call itself the green and renewable movements in this country. Therefore, it has to be balanced out. I do not think that the case has been made adequately for such an amendment.
In the interests of reducing internecine strife, I think the prospects of serious incompatibility here are quite small. There is not really as much scope for moving wind farm locations as it might appear—wind is pretty variable—but, given the kind of technology of which I spoke in relation to the previous amendment, one can now exploit gas fields or oil fields at an angle from some distance without too much difficulty. It is important to give some confidence, as far as it is needed for investors in this area, but I do not think this is going to be a big problem.
My Lords, the noble Lord, Lord Oxburgh, is absolutely right. The more I have looked into this, the more I see that it is a very complex problem. It has been under discussion with the two industries and my noble friend’s department for some years. From time to time, pressure has been brought on one or the other to try to find a solution. I am sure that the noble Lord, Lord Oxburgh, is right but the prospects of a serious overlap are pretty small.
It seems to me that often the problem is bringing the product ashore. The problems with offshore oil and gas are well known but I know that some wind farms have found difficulty in finding ways of getting their supplies ashore. It has been suggested to me—I think this has been discussed with my noble friend’s department—that there might be some form of compulsory purchase onshore to ensure that the product of a wind farm can be brought ashore at the most appropriate place, even if at present the landowners are reluctant to give permission. However, it does not seem to me that this complex matter has been dealt with by a single amendment in a Bill of this sort.
I entirely take the point made by the noble Lord, Lord O'Neill of Clackmannan, that oil and gas will be very important—particularly gas—for many years ahead. It is not so long ago that there was a major discovery off the coast of Scotland—the Buzzard gas field—and that could still happen. These things are far from certain and gas has to be exploited where it is. Yes, as the noble Lord, Lord Oxburgh, implies, there is a limited capacity for drilling horizontally, if necessary, or at an angle to develop a field but my impression is that the two industries have tried over a long period to reach an accommodation about how this might be handled. I think we would be a little unwise to start legislating in the way the noble Lord, Lord Whitty, suggests and simply say that there can be a retrospective revocation or variation of a lease that has been given in respect of which a great deal of capital investment may have taken place.
On the whole, I do not support the amendment in the name of the noble Lord, Lord Whitty, but I think that the discussions should continue. If it appears to my noble friend’s department that some legislative provision needs to be made, perhaps the Government could look at that for the next energy Bill, whenever it appears. My impression is that we may not see it this Session.
In the cause of cohesion on this side of the Committee, might I say that it has been very intoxicating to have the thesis and the antithesis and, like others, in all humility I would like to put myself on the side of the synthesis? It seems to me that it would be tragic if we got into a vicious either/or battle. The issue is how to bring these things together constructively. I make the observation—no doubt I could be described as an unreconstructed politician of former days—that it seems to bring home to me the hazards of a market-dominated approach in these crucial strategic issues and that we really need very effective strategic planning into which the private sector can then feed its contribution. This debate brings home the need for a strategic approach, not just targets but how they are to be delivered because that is the crucial issue all the time. It is not just to spell out the aspirations; it is actually to have the mechanisms there to ensure they happen.
I take the urgency and importance of the vigorous argument of my noble friend Lord O’Neill seriously, and if I have one anxiety it is on that point. Employment, security, economy, the real immediate needs—those are all crucial and it would be naive to overlook them. However, I am fearful because we seem to keep getting caught up in the immediacy of the management situation, but the Bill should unashamedly take a visionary approach to the long-term future. I am sure that my noble friend Lord O’Neill would be the first to agree that he is talking about what we all know to be finite resources. That is crucial at this juncture. Sooner or later, this country will have to face the issue. It is not an ephemeral kind of idea; it is absolute fundamental practicality that the economy of this has to keep going at some future point without the availability—it is taken for granted—of the finite resources. If we always get into the crude argument, the long-term thinking will always be pushed to the side. We will always hear about all the difficulties and doubts.
Objective considerations about the reality of what is proposed are important, but many of these things are challenges to be overcome and to be got right; they are not excuses for delaying and pushing to one side. I for one put firmly on record that whether or not the idea is acceptable as an amendment, my noble friend Lord Whitty is to be warmly congratulated on again having brought it home to the Committee, in his characteristically firm way, that either we are serious about alternatives or we are not. If we are, we have to start putting some consistent muscle and priority behind those alternatives and stop saying that they are an also-ran to be fitted in when there are no other objections to be raised.
I support the principle of creating a level playing field, to which the noble Lord, Lord Whitty, referred. The question seems to be about whether a reasonable dispute resolution process is in place for future conflicts between renewable energy and oil and gas. That is the heart of the issue, on which the Committee ought to focus. As it stands, the law gives the Secretary of State the ability to terminate offshore wind farm leases early, which implies primacy to oil and gas developments. That is clearly not the wish of the Government or in support of the policy developments with which we seek to move.
The noble Lord, Lord Whitty, has done well to remind us that that could seriously undermine the financing of future developments. While it is fair to say that until now financing has been less controversial and difficult, it is clear that offshore wind projects are moving further offshore, are larger and are going within known oil and gas provinces. That will make the financing of those projects more complex, so we need to consider seriously any barrier to the investment for them.
We all recognise that there is an importance to the coexistence between oil and gas companies and renewable operations. I pay tribute to organisations such as RenewableUK that have put a lot of effort in, with the support of DECC, to draw up protocols and guidance so that the respective companies can work in harmony, as they have done until now, finding a way forward where there are areas of the seabed on which they both wish to operate. The issue is whether a reasonable dispute process is there for the future; we need that level playing field.
Therefore, while there might be questions about this amendment, it is right and proper that the noble Lord, Lord Whitty, has raised it. As my noble friend Lord Jenkin has mentioned, I too hope that this issue will get further consideration. If this clause is maintained, would it not be more appropriate that there should be compensation if these leases were terminated early in order that there is a degree of parity between the respective businesses in the field?
I welcome the principle of the necessity for a level playing field and I hope that ongoing discussions might look at some of the wider issues around compensation for a reasonable dispute resolution process.
My Lords, now that the point has been put in terms of a mechanism, I begin by not having any knowledge about whether a conflict is likely. Assuming that it is conceivable, as in the case made by my noble friend Lord Whitty—my noble friend Lord O’Neill has questioned whether it is just either/or as regards renewables having preference—I thought that the general philosophy with which we deal with energy policy is that we put a price on market externalities. In other words, we level the playing field financially, whether that is through Kyoto, carbon tax or something else. Everyone pays the same price through a carbon tax or something like that, but once you have done that, you do not make a separate judgment about preferring renewables to hydrocarbons. That market externality to meet our medium-term targets should be incorporated into the fiscal system. We are gradually doing that through the myriad consultations about carbon price floor, entry tariffs, the document produced by the Treasury before Christmas entitled Carbon Price Floor, and so on.
If I could take the suggestion that has just been made a stage further, the word “criteria” is not just a mechanism because the Department of Energy and Climate Change cannot be left just holding a pup, it has to know the criteria on which it has to operate. How far is it that this famous level playing field can be made level by not treating all forms of energy alike? That is not what we mean. We are trying to make the level playing field level on the basis of market externalities which are made into financial quantities in the tax and subsidy system. We do not need to do it twice. As I understand it, that would be the criterion.
You cannot just ask the department to have a mechanism without stating so that there is no ambiguity how the market externality is translated into a level playing field price. I hope that that can also be fed into the thinking and the way in which my noble friend Lord Whitty takes forward this thought in his amendment.
My Lords, I hope that noble Lords will forgive me for not standing up because I may fall over. I thank the Minister for his comments and for his good wishes to my foot, which were gratefully received. I hope that he will not mind if I do not take him up on his offer to take my wheelchair through the voting Lobby. I will rely on my noble friends to ensure that I get into the right place. On a serious note, I am grateful to him for agreeing to suspend last week’s Committee sitting so that we could sit today and I could be here. I am grateful to noble Lords for their indulgence on that.
I thank my noble friend Lord Whitty for bringing forward this amendment. It has invoked a lively discussion. I am not sure that there is as much disagreement between us as might seem apparent from some of the debates. We are all trying to seek a sensible energy mix and to ensure that there is access for all forms of energy. The Government have targets for renewable energy. If those targets are to be met there has to be some certainty for the renewable energy industry.
It is worth reminding ourselves that my noble friend’s amendment is not anti-oil or anti-gas—I did not see it in that way at all—but tries to find a way in which both can coexist sensibly on a level playing field and one does not undermine the other. Like the noble Baroness, Lady Parminter, I pay tribute to the work of RenewableUK, which has been trying to seek the kind of protocols, or guidance, required that means that problems can be addressed before they arise so that we do not have to move to the position we would have to under this amendment.
However, there may be cases where a proper disputes procedure has to be in place to ensure that we are not in the position that we are at the moment. If oil or gas is always a priority, there will be a difficulty in ensuring investment in renewables. Indeed, the amendment talks about a site that is developed or operated for renewables, or is intended to be developed or operated, or for transmitting electricity from renewables,
“in respect of which the Crown Estates that have granted a lease license, agreement to lease or agreement to license for that purpose”.
It is not just a site that has been chosen but a site that has been granted a licence already.
The proposed new clause says that the Secretary of State is not able to grant a licence for activities within an offshore renewable energy site without the agreement of the holder of the lease, licence or agreement. One problem is that, with no disputes procedure, there is no compensation for a licence-holder if their licensed renewable site is to be overridden for access to gas and oil.
I do not think that there is much disagreement. There is, and has been, a clear wish within this Committee to ensure that we maximise all our resources for all energy sources. However, I have concerns that, if some kind of dispute procedure or something along the lines suggested in the amendment is not put in place, the Government could be unable to reach their targets on many renewables. If a licence can be revoked purely on the order of a Secretary of State, that lack of certainty will lead to a lack of investment.
I understand that the Minister may have concerns about the wording and the way forward. It would extremely helpful, however, if he could take this away and give some thought to the principles behind the amendment to look for a way forward that gives certainty to licence-holders of renewable energy sites.
Baroness Northover: My Lords, the Government are committed to a rapid increase in offshore wind deployment to maintain a secure energy supply, to tackle climate change and to meet our renewable energy targets as well as to deliver green jobs for the UK, which pick up the points of both the noble Lords, Lord Whitty and Lord Judd. However, we are also committed to securing full benefit from our oil and gas resources, which remain of great potential value to our economic well-being and energy security. I hope that the noble Lord, Lord O’Neill, will be reassured by that. As the noble Baroness, Lady Smith, puts it, it is about coexistence and ensuring that this works well.
We believe that both the offshore wind industry and the oil and gas industry are needed and can successfully coexist to ensure the nation’s energy needs are met. DECC is working with both industries and their trade associations to encourage effective co-ordination and co-operation in their respective development processes. Our expectation is that suitable consultation, planning and phasing of the respective operations will in most cases allow both developments to achieve their objectives in full, or with only minor compromise. I note what the noble Lords, Lord Oxburgh and Lord Jenkin, said on this.
At the stage of formal consent, an application from either industry to exploit the natural resources of our marine environment would be considered as part of the standard procedures of the relevant authority and be consulted upon with interested stakeholders. Any user of the sea—including oil and gas and offshore renewables industry players—is able to make representations at a number of stages, including the formal consent process and the environmental impact assessment. We recommend that interested parties do so, so that their views can be taken into account in any decision-making.
It is worth noting that the Government are well aware that this issue is causing concern, particularly to the offshore wind industry. Therefore, the department is working on a solution that is acceptable to all parties. I hope that that will help to reassure the noble Lord, Lord Whitty.
Clearly, in terms of the financial compensation that has been referred to, if the oil company is not prepared to offer appropriate compensation, there is no question of the Secretary of State intervening to override what is happening there.
We understand the motivation behind what the noble Lord, Lord Whitty, is proposing, and it is extremely important that there is equal treatment. I am a great believer in equal treatment. Therefore, we understand why he has brought this forward. We do not think it appropriate at this stage to agree this amendment to primary legislation—to hardwire it in—but we understand the issue. It is being looked at currently in DECC. Obviously we do not want any situation to develop that will disadvantage what we are trying to do with the Bill as a whole. As the noble Lord, Lord Judd, pointed out, it is the vision of where we are going as a whole that is important in this Bill. That is apparent from the Bill and everybody's involvement in it. If we bear that in mind, it is important that these issues are resolved and DECC is looking at that at the moment. I hope that in the light of that explanation, the noble Lord will feel able to withdraw his amendment.
My Lords, I thank the Minister and everybody who took part in what was a rather wider debate than I originally envisaged. I thank particularly the noble Baroness, Lady Parminter, and my noble friend Lady Smith for their support for the amendment. My noble friend Lord O'Neill, not for the first time and I suspect not the last, provoked me into saying more than I ever intended and more than was particularly helpful to this amendment. As my noble friend Lord Lea said, the preference or otherwise is largely a matter for the fiscal system, which is already there. But if there is in addition a disadvantage to one sector as against another in the process, we should address that as well.
I am grateful to the Minister for saying that this is at least on the radar screens of the department. But it has been on the radar screens of the department and predecessor departments for at least eight years to my knowledge. We need to hurry this up.
Whatever I may have said earlier, this is not about giving a preferential position. Nor is it dealing with the whole of the ocean. It is dealing with those areas where a licence or lease has been given or is about to be given or where a project is already operating. The rest of the ocean is open to the oil and gas industry in any case. Nor is the amendment saying that in no circumstances will oil and gas be allowed to operate there. All I am requiring them to do is to negotiate to reach an agreement. I hope that the Government can help to set up a process whereby that happens and thereby to equalise the hoops that any new developer will have to go through. There are two different forms of consenting and they are not the same. Some would say that they slightly—I think they are significantly—disadvantageous to renewables as against oil and gas.
I am grateful to the department for the terms in which the Minister has responded. However, I ask her and her officials to hurry up because this is an outstanding issue. In a sense, the oil and gas industries can go to their boards—the noble Lord, Lord Oxburgh, used to sign these off himself. Yes, they have the option of going anywhere in the world, but so does the kind of City finance that, by and large, offshore, wind and certainly the newer technologies of tidal and wave will have to go for. They also have the option of going elsewhere and it is important that the element of risk is reduced and that coexistence is a reality. It must be coexistence between equal partners in the delivery of our energy mix and not one that gives an advantage to one sector as against another.
Having said that, I accept the Government’s good faith in looking at this. I would be grateful if in a month or two we could complete that process and come back with a system that addresses the problem. In the mean time, I beg leave to withdraw the amendment.
Amendment 36 withdrawn.
Clause 99 : Agreement about modifying decommissioning programme
36A: Clause 99, page 75, line 31, leave out subsection (2)
My Lords, this is a probing amendment. It may help the Minister to know that I am just seeking some clarification because I was puzzled. In an earlier debate, the noble Lord, Lord Jenkin of Roding, referred to the complexity of some of the legislation. We have to go back to previous legislation and previous Energy Acts to understand the Bill before us today. I did that. Section 46 of the Energy Act 2008 relates to the approval of funded decommissioning programmes and the Section 48 referred to here is about the modification of such funded decommissioning programmes. I do not understand why it is necessary—and if it is necessary, it seems rather a Henry VIII clause—to insert into Section 48 of the Energy Act that: “When approving a” funded decommissioning,
“programme the Secretary of State may agree to exercise, or not to exercise, the section 48 power … in a particular manner … within a particular period”.
What on earth does that mean? If the Minister can enlighten me, I will be very grateful.
The rest of the clause goes on in the same way. It seems unnecessary because if you read Section 48 of the 2008 Act, those powers seem to be available already. “In a particular manner” and “within a particular period” are very wide and do not make much sense to enable the reader to understand this legislation. Why does the Minister think we need to insert those phrases in legislation that seems already clear to me? If he is able to enlighten me, I will be very grateful.
I have words of comfort for the noble Baroness. I have on previous occasions said that I totally share her dismay at the complexity of the legislation, and I have arranged a meeting next week with the chairman and the chief parliamentary counsel of the Law Commission to discuss the whole process of consolidation, how the Law Commission approaches it, where the initiative lies and whether it considers that the Electricity Act and the Gas Act would be a case for consolidation. I am not just talking the talk; I am, I hope, walking the walk. I hope that Ministers and officials in the department will recognise that some of us are not going to let that matter rest.
I am very glad that the noble Baroness said that this is a probing amendment, because the issue is extremely simple. Section 48 of the 2008 Act gives the Government power to impose changes on a funded decommissioning programme after it has been done. It has, no doubt, been represented by the nuclear industry that it contains a considerable element of uncertainty about additional charges possibly being made after the original programme had been agreed or about changes being made to the timing of the payments. At the moment, the payments are intended to be spread over the life of a plant so that by the end of that time there will be a sufficient fund available to cover the decommissioning and waste treatment. It is absolutely right that that should not now fall on the taxpayer but is part of the cost of producing the electricity. Under that section, the Government have the power to impose a change. All this clause is doing, as I understand it, is requiring the Government to agree a change with the developer. It may well be possible for the Government to suggest there should be changes, but the developer has to agree. Given what we have been saying in earlier debates about the need to try to create certainty, I think this clause is entirely right. I am glad the noble Baroness decided to table merely a probing amendment because I think the clause should be allowed to stand in the interests of certainty for the nuclear industry.
My Lords, one thing that has struck me about this House is that although we often talk about scrutiny we rarely use the probing amendment, which is one of the regular tools of the discredited Standing Committee process in the House of Commons. It is often used there for time-wasting purposes as well. However, in today’s case it is useful when there is a certain degree—in fact, a large degree—of opacity in the wording of the Bill, for quite understandable reasons. You have to work your way through the network to try and get to the point.
On the substance of the issue, speaking as the chairman of the Nuclear Industry Association, we are quite relaxed about this. We think that there will always be something which we have not anticipated—God forbid that, in terms of nuclear power generation or waste management, it was of the order of any terribly serious or dreadful prospect. My real point is that we recognise that there can be unforeseen circumstances. The Government have, on occasion, to change step for whatever reason but should do so, as far as is reasonably possible, with the agreement and understanding of those who are going to be affected by that. At the moment, with the agreement which has been reached on waste management—in terms of both the funding of the Nuclear Decommissioning Authority and the costing programme for its long-term cost—the industry is, within reasonable bounds, happy on that issue. On that point, I hope that my noble friend is only probing and will withdraw.
Sitting suspended for a Division in the House.
My Lords, I am grateful for this amendment because it provoked my noble friend Lord Jenkin to use the full majesty of what used to be his office, and probably should be again, to demonstrate clearly the reasoning for this subsection staying in the Bill. I am grateful that we should have the support of no greater or more august figure than the chairman of the NIA itself, the noble Lord, Lord O'Neill of Clackmannan. Both noble Lords gave extremely good reasons for it.
I will explain briefly that the real reason for this change is to remove the power to subsequently modify an approved programme that has the potential to create uncertainty for operators and investors financing significant long-term investments. The key to this is giving long-term investment commitment to those who are investing in new nuclear. I have nothing to add to what the two noble Lords have so aptly said with their greater experience of the subject, and I invite the noble Baroness to withdraw her amendment.
Amendment 36A withdrawn.
Clause 99 agreed.
37: After Clause 99, insert the following new Clause—
“Bodies able to produce and supply renewable energyProduction and supply of renewable energy by National Park authorities and the Broads Authority
(1) Section 11 of the Local Government (Miscellaneous Provisions) Act 1976 (production and supply of heat etc. by local authorities) is amended as follows.
(2) After subsection (1) insert—
“(1A) In subsection (1) the definition of “a local authority” shall be understood to include the Broads Authority and National Park authorities when applied to subsection (1)(a), (b) and (d) (production of heat or electricity or both; establishment and operation of generating stations for production of heat or electricity or both; and use or sale of heat or electricity).”
(3) In subection (3), after “a local authority” insert “including the Broads Authority and National Park authorities”.”
My Lords, I must say how grateful I am for the cross-party support and indeed the support of my own Front Bench. It is good to have that for an amendment. I should make plain that I am not a member of a park authority, but I take a close interest in their affairs both as vice-president of the Campaign for National Parks and as president of Friends of the Lake District.
The amendment would put national park authorities on an equal footing with the rest of local government in terms of the ability to generate and sell renewable energy. The current position for other local authorities is that they can sell electricity from renewable energy resources. Existing legislation—Section 11 of the Local Government (Miscellaneous Provisions) Act 1976—already allowed them to generate electricity and heat. Following the change made by the Government last summer through the sale of electricity by local authority regulations, they were given these additional powers.
This change makes it much easier from a financial point of view for local authorities to install renewable technologies and so play their part in the transition to a low-carbon society because they can benefit in full from the Government’s feed-in tariff. For their part, the national park authorities are tackling climate change on a number of fronts, including providing leadership on low-carbon innovation and national park communities, while also reducing the greenhouse gas emissions from their own activities. An important aspect of this can be the installation of small-scale renewable energy measures that are suitable for a protected landscape. Since the park authorities are not included in the relevant piece of legislation—Section 11 of the Local Government (Miscellaneous Provisions) Act 1976—it would appear that they do not currently have the power to generate or sell renewable energy. Through amending the relevant provisions of the 1976 Act to include the Broads Authority and the national park authorities as set out in this amendment, it would be possible to put this right. The prescriptions on the sale of electricity as set out in the 2010 regulations would then also apply to the Broads Authority and the national park authorities.
There might be other means of achieving the same outcome which the Government prefer. However, what is important is to put the national parks on an equal footing with other local authorities in terms of the generation of the electricity and heat from renewable energy and the potential to sell any surplus electricity from this renewable generation. I hope that the Minister will be able to respond positively. The national park authorities are keen to set an example of what can be done in an environmentally and aesthetically acceptable way. It is surely important for us all to give them every possible support.
My Lords, first, I am surprised that my noble friend is surprised that the Front Bench has signed the amendment. It would be somewhat remiss on our part if we did not see merits in it. He made an excellent case. What he kindly—for the Government—left out of his analysis of the situation is an actual feature of the national parks and the Broads Authority themselves: their powers in relation to the Public Bodies Bill that is before the House at present. Perhaps the Minister will offer some reassurance on that front. Suffice it to say that one can already see the national parks adjusting to a changed future in terms of the pressures upon them. We all know the particular circumstances of the Broads Authority, which was considered by this House only 18 months ago.
I emphasise the obvious fact that it is a good move to associate the national parks with the same capacity as local authorities. In fact, it seems somewhat surprising that this issue has not been pressed somewhat earlier than this Bill. I congratulate my noble friend on that point. I emphasise to him that we are in full support. I hope that on this constructive amendment the Minister is able to give a rather more positive response than has been the case on the most constructive amendments thus far. I look forward to his reply.
I am not sure that I quite caught the end of that last sentence. Perhaps it is best that I did not. Suffice it to say that I welcome the amendment tabled by the noble Lord, Lord Judd. I am grateful that it should have the support of his Front Bench, which is excellent news. It is not the first time that his amendments have found favour with government. We are obviously extremely disposed to look at this amendment. Unfortunately, the timing was too tight for us to consult as widely as we wanted with the national park authorities before introducing this Bill, so we have to do that. Of course, like the noble Lord, I welcome their ambition to generate electricity on their own land and support that commendable ambition. With that in mind, and knowing that we will give this amendment consideration in coming days and months, I—
My experience of working with the national parks was not anything like as cheerful as that presented by the noble Lord, Lord Judd. In many cases, the national parks have not been helpful for enterprises within them. I hope that when he talks to the national parks, he will make it clear that he wants them to make it as easy as possible for others within national parks to generate electricity and that this will not be another occasion for the national parks to make it extremely difficult for anybody who is not themselves to do things within their areas.
I note what my noble friend Lord Deben says. If we are going to look at the national parks and what they will do with their microgeneration, we should obviously encourage them to practise as they preach, which I think are the words he is looking to hear from us. With that in mind, I hope the noble Lord, Lord Judd, will withdraw his amendment.
I thank the Minister for that encouraging and warm response. I am sure it will be noted by everybody and bodes well for the future. We look forward to what he brings forward at a later stage on the Bill, because he has indicated that he will respond to this. That is great. I say to others who have intervened that we should not tilt at windmills. I see no evidence whatever of the danger or the prospect to which the noble Lord referred. By contrast, I am very much encouraged by the Minister. I beg leave to withdraw the amendment.
Amendment 37 withdrawn.
Clause 100 : Additional powers of the Coal Authority: England and Wales
Debate on whether Clause 100 should stand part of the Bill.
I rise to speak—or not, as the case may be. One of the oddities of procedure in your Lordships’ House is that sometimes it seems that we have to say the exact opposite of what we want to say in order to have the opportunity to, in this case, congratulate the Minister. I have had to give notice of my intention to oppose the Question that the clause stand part of the Bill, which is the opposite of what I want to do. In fact, I congratulate the Minister: he will recall that, under Schedule 7 to the Public Bodies Bill, I have proposed an amendment to delete the Coal Authority from that Bill. It seemed to me that any change to the functions of the Coal Authority should be undertaken not by secondary legislation—by order—but by primary legislation. That is exactly what the Minister has done in Clause 100 of this Bill, so I merely congratulate him as it is the appropriate way to make such changes. I hope that he will either support my amendment to Schedule 7 to the Public Bodies Bill or take other action to ensure that the Coal Authority is no longer in it.
I understand from the impact statement on this that some possible competition issues will need to be addressed as to whether the Coal Authority will have, in some way, a preferred position as against other contractors that may compete for the business. I hope that my noble friend can give me some assurance that that will be taken account of.
My Lords, I am delighted to have been assigned this clause stand part debate, because therefore I am by proxy receiving congratulations that are not deserved, which is a great pleasure. My noble friend has raised another issue on the substance of the clause, so I shall spell out what it seeks to do.
This simple clause extends the Coal Authority’s powers in England and Wales, which would enable the Coal Authority to use, and charge for, its existing expertise in remediating coal-related environmental and safety liabilities in non-coal related contexts. For example, it could assist other public bodies and private landowners in dealing with mine-water treatment and subsidence or surface hazard remediation outside the coal-mining sphere, but that would not take precedence over the authority’s existing statutory duties.
On whether we are talking here about non-flat playing fields again, I assure my noble friend Lord Jenkin that the clause enables the Coal Authority to work in the area without cutting across its statutory duties, but it does not give it precedence in the area. It does not even place an obligation on the Coal Authority to act in this way or on others to use it; it is just an enabling power. I hope that that reassures him. We will return to the Public Bodies Bill—maybe not, depending on what happens with the AV Bill—and no doubt we will get into further discussions on what it says. In the mean time, I hope that the noble Baroness will be happy not to oppose the Question that the clause stand part.
My Lords, I am grateful to the noble Baroness who I think has taken on board my comments about Schedule 7. I apologise if I was not more explicit when I asked the noble Baroness the question, but will there be extra funding to go with those extra responsibilities for the Coal Authority?
To clarify, this is not an extra responsibility. It extends the powers of the Coal Authority. This would not lead to an additional call on the public purse as the authority would be able to charge for this additional non-coal work if it wishes to undertake it. It is not appropriate even to be thinking about whether this should be a further charge to the public purse.
Clause 100 agreed.
Clause 101 agreed.
37A: After Clause 101, insert the following new Clause—
“PART 4AEnergy revenues and taxes: price effectsStatement on energy revenues, taxes and subsidies
(1) The Treasury shall publish an annual financial statement of all fiscal instruments, including revenues, tax expenditures and subsidies, currently in force which relate to the supply of energy, and the quantum of money generated or provided by each of them.
(2) The statement shall also list any relevant regulations relating to those fiscal instruments.
(3) The Treasury shall also publish, along with the statement, an assessment of the degree to which each fiscal instrument differentially affects consumers with different levels of income.
(4) The statement published under subsection (1) must assess the effect of any revenue, expenditure or subsidy on the Energy component of the Retail Prices Index, and must specify what effect those fiscal instruments have distinct from other impacts on the energy component.”
My Lords, expenditure on energy in Britain before tax is now about £76 billion. With tax, it is about £145 billion. That is of the order of just over 10 per cent of total UK expenditure. The statistical series which is the most obviously pertinent for this discussion is the annual statement produced by the Office for National Statistics called Environmental Accounts 2010. In 2009, environmental tax receipts—the label given by the ONS which includes hydrocarbons, unlike some other definitions of environmental tax receipts—totalled £40 billion. The tax take was £40 billion a year, which is double—I repeat, double—the amount collected in 1993. Therefore, it doubled in about 16 years.
It would be foolish to suppose that we will not see another move like that in the next 16 years, notably through the commitment to introduce carbon taxes of one sort or another. At present, by far the largest contributor to that £40 billion is hydrocarbon oils, which accounts for two-thirds of the above number—that is, £26 billion. The Institute of Fiscal Studies has a table showing all green tax receipts—on the same definition as the ONS and not the DECC definition—rising from £40 billion to £60 billion by 2015-16. That, noble Lords will notice, indicates that it will take six years for, on the face of it, the next 50 per cent increase. That shows the acceleration doubling every 12 years. It is an obvious acceleration. The GDP deflator for the six years concerned aggregates to 17 per cent, which brings the 50 per cent increase in real terms down to between 35 per cent and 40 per cent. Even so, that is an increase to £1,400 for a family presently paying £1,000 a year.
The statistical picture on taxes and transfers is becoming a jigsaw on which it is essential to get some clarity. I studied physics and mathematics—the noble Lord, Lord Oxburgh, will recognise this—and the thing you have to do is have a consistent system of units. You cannot compare apples and oranges all the time. That is true of energy finances as well. We are getting into a jigsaw where a great many of the pieces do not easily fit together. It is easier to double count or miss things out. There are things like the winter fuel allowance and a plethora of means-tested benefits. This is a pattern of complexity across the piece.
A few moments ago I referred to the treatment of energy subsidies, or quasi-subsidies of one sort or another. To give one example, right in the middle of the Bill there is a tweaking of the rate of interest for the Green Deal. You have to have a consistent system of financial accounts which treats all such moneys equally.
Dealing with regressiveness is a central purpose of my amendment, if we are to keep the people with us. There is a rather obscure publication—it was obscure to me, at least, but I am most grateful to the officials of DECC and the Treasury for drawing it to my attention at a meeting which the noble Lord, Lord Marland, kindly facilitated last Wednesday—called Estimated Impacts of Energy and Climate Change Policies on Energy Prices and Bills. I recommend it as bedtime reading for anyone who wants to, as it were, spend more time looking at these statistics.
The document shows the remarkable contrast between the top and bottom deciles in the impact of energy and climate change policies—particularly on what you might call home heating, because that definition does not include hydrocarbons. I shall come back to that in a minute. The tables are very vivid. They are all in the form of the steeply declining share of a household’s income spent on energy as you go from the bottom decile of income distribution to the top decile. This is quite a remarkable contrast: the top decile pays 2 per cent of income on household energy bills and the bottom decile 16 per cent.
There are also three interesting paragraphs in the text, which I shall read out. They are paragraphs 17, 18 and 19 of this document, which was produced last July, after a very thorough and expert review of all of these quasi-subsidies, subsidies and arrangements. I am taking only these three points but noble Lords can perhaps see why I think they illustrate an important principle. Paragraph 17 says:
“The increases in gas and electricity prices accelerate closer to 2020 as the ambition of the policies that are rolled out increases. However, there are a number of policies that already have some impact in 2010 (including the”,
renewables obligation—there are a lot of acronyms here—the,
“Carbon Emissions Reduction Target … Feed-in-Tariffs … and EU”,
Emissions Trading Scheme.
Paragraph 18 says:
“Table 1 also shows the estimated impact of energy and climate change policies on an average domestic energy (gas plus electricity) bill. In total, policies are estimated to increase the average bill by £13 (1%) compared to a bill in 2020 in the absence of these policies. The breakdown of the energy bill into separate gas and electricity bills shows that the biggest percentage increase comes from the rise in domestic gas bills”.
Now, noble Lords might say, “£13? Well, that’s peanuts”, but let them listen to paragraph 19:
“The impact of policies on gas and electricity prices is much greater than the impact on gas and electricity bills. This is because bills are a combination of prices and energy usage, and therefore include the impact of a range of policies which improve energy efficiency by helping households and businesses reduce energy consumption, lessening the overall bill impact. Chart 3 … shows the estimated average bill impact of individual policies in 2020”.
If I translate that into my English and read it aright, it is a bit rich to pray in aid that a rise in world prices, which means that we do not have to do so much on our own carbon taxation, is a benefit to poorer people by lowering the consumption of the poor. They are lowering their consumption because they cannot afford it. They move out of the income distribution energy expenditure statistics because they no longer have a car or heat their house so much. Somebody at some point may come back to me and think I have got it wrong, but I can see no other interpretation of those paragraphs.
Let me move on but that is part of regressiveness, is it not? Likewise, a recent Institute for Fiscal Studies table showed that if a carbon tax were introduced at an average—and it has reasons for taking these numbers—of 0.22 per cent of income for all deciles, the bottom decile of the population would pay 0.51 per cent of their income, which is well over 4 per cent of the burden of the top decile, as a carbon tax. A carbon tax will grow very rapidly if that is going to be the main instrument of our Kyoto and Copenhagen responsibilities. A carbon tax will be a real game changer. It will change the balance slightly from the hydrocarbons, which a lot of people think are meeting the environmental limit of their contribution to environmental policies, quite apart from the social uproar of some of them. We have to think about how we can still have an effective low-carbon energy policy while avoiding devastating consequences for income distribution, which is already reaching a critical stage.
One issue is how we share this information on tax or price increases with the public. I will take a public bar in Burton upon Trent as my archetypal place to be on a Friday night. In a public bar in Burton upon Trent, how are people supposed to know any of this and have any buy-in to any of it? How do they know that figures are not being manipulated or double-counted—adding oranges to apples and so on? The first thing we need, in technical jargon, is an overall regressiveness table for all energy consumption before and after taxation. I do not think that is all that difficult an exercise, once you have decided how you are going to treat a whole list of things statistically. When you have done that, you just do it and publish it. The electricity market reform is more ambiguous. One point is the removal of ambiguities in press releases. For example, an important and yet everyday remark made in the press—I quote a newspaper—is:
“Consumers are facing big increases in their energy bills to pay for the £130 billion plan to build a new generation of ‘green’ power stations over the next decade”.
Everyone agrees that these are the numbers: £100 billion for generation and £30 billion for rebuilding and extending power transmission systems.
I have two worries about the way this is explained. One is that presumably not all of this is a gross increase—that is, it is not all new money—as opposed to the earlier assumption. There must have been some level of renewal in the previous projections. Another is that it is not public expenditure. I think people are getting totally confused about what sort of money we are talking about.
Thirdly, all this is at a time when world energy prices might be on the rise again. However, that is part of another debate, even though I accept that it cannot be easily separated out in the public bar in Burton upon Trent. A further refinement, which is not a footnote, is the totally different price elasticities of demand for different types of energy. On the face of it, again because of social problems, price elasticity is very low in home heating simply because there is a limited range within which people need to heat their homes—all the electricity propaganda says it should be between 65 and 70 degrees Fahrenheit. Therefore, doubling the price of home heating would simply double the household expenditure on that element, whereas petrol taxes are far more price elastic. Unlike home heating, they will, in practice, be coupled with people at the bottom end.
In terms of home energy costs, surely price elasticity is directly related to the income group that you are relating to. In a fuel poverty area, price elasticity is extremely high, which is one of the big problems of the energy crisis that the noble Lord is talking about. At the higher income levels, price elasticity is remarkably low, which I should think is the thing that affects price elasticity rather than the particular source of energy.
I say this as a really serious point. One of the biggest obscenities in this country is that people die because they do not heat themselves sufficiently. It is a real issue and I am sure that others share my concern. Statistically, when the temperature goes down in this country, we get a significant increase in deaths, which is because people will not put on the heat.
I am comparing the price elasticity of home heating with the price elasticity of petrol for your car. That is my main point. It is precisely because people do not generally in this country freeze to death that price elasticity is different.
It is necessary to note that, in practice, the people at the bottom are stopping motoring. There is another statistical problem, or fallacy, built into the ONS statistics. Because they have disappeared from the statistics, it does not look as if the detailed distribution for motorists is as bad as it was. It is rather like saying, “The working class can no longer go to the Costa Brava for their holidays. We do not want that riff-raff going there anyway”. They are out of the statistics and they are out of the motoring statistics. This is another problem with the idea that we can easily use the price mechanism to determine consumption, even though in an ideal world it might be somehow very nice if there was a big reduction in motoring or airline expenditure. As I said in an earlier intervention, the logic is to have the same market externality carbon price, whether it is for aviation or for anything else. But how do you deal with the poverty effects on home heating?
I have three other points. At Second Reading, I used the phrase, “hypothetical hypothecation”, which will not get wider circulation in the bar in Burton upon Trent. We need a statistical picture which would be revealed by hypothetical hypothecation—I will not use the word again I can assure you—but would be quite separate from the actual amount of recycling of revenues within the system to deal with the actual regressiveness.
On the consultative forum, people will ask themselves intuitively, “Where is all this money going?” There is an extent to which we want to say that it is obvious how we are going to spend it. My noble friend Lord Prescott always used to say, “It doesn't matter if someone is charging £50 to drive 100 yards down Piccadilly in a Rolls-Royce. You can throw £50 notes out of it and that will satisfy the Rolls-Royce driver”. But Ken Livingstone or somebody like that would put it all into new buses. That is hypothecation. There is implicitly some undercurrent of the need for hypothecation—with a less fancy word—in what we are talking about. We need a statistical picture that would be revealed by hypothecation even though that is separate from the actual amount of recycling of revenues.
Finally, on fiscal arithmetic, there is a price floor for carbon, which is currently £15 per tonne. The power industry argues that the price needs to be about £35 a tonne to provide a viable return and the noble Lord, Lord Stern, for his part, is in a different fantasyland with an assumption of £75 a tonne at 2010 prices to make his scheme work.
Putting all that together, we have to take a crack at what I am saying in my first amendment so that there is no doubt that we have an agreed statistical basis. Who is going to agree it? That is the second amendment. A consultative body, I might be told by the noble Lord, Lord Marland, is not going to be flavour of the month with a coalition Government who is scrapping public bodies right, left and centre. However, I will make a practical point that even the Government’s own philosophy on the Public Bodies Bill is that it is not supposed to be the slaughter of the innocents. It is supposed to be ostensibly the slaughter of those who are not fit for purpose. I radically disagree with some of the conclusions that they make about that, but fit for purpose this would be. It would have a very clear purpose to get agreement, understanding and therefore some ownership of buy-in on behalf of their constituents—in every sense of that word—and all the different stakeholders in the country.
We have got to a point where this will literally begin to make sense in the bar in Burton upon Trent. It is those people who will complain about the price of heating, petrol, congestion taxes, parking taxes or whatever. This is where the regressiveness issue provides a bridge with the consultative stakeholder forum I referred to on Amendment 37B.
I should leave it there. I thank the noble Lord, Lord Marland, for his co-operation in getting some of these statistics sorted out with the department and the Treasury. I beg to move.
My Lords, I rise to support the principle behind the amendment of the noble Lord, Lord Lea of Crondall. I am not sure that the wording is easy to follow because it starts with the term “fiscal instruments”. The noble Lord went on to talk about a lot of the things that are leading to increased energy prices. He referred to the document put out by the department last summer showing the impact of policies on prices. Most things that have an impact on prices are not fiscal instruments in the way that you would customarily describe them in the sense of specific moneys going in or out of the Treasury. They are items that are borne by the energy companies and passed on to consumers. At the heart of what the noble Lord, Lord Lea of Crondall, was talking about is an important issue: there is a complete lack of transparency on the impact of the Government’s various energy policies and the way in which they impose costs on the energy sector, which are in consequence passed on to consumers. It is important that we have greater transparency.
In our previous day in Committee, I was trying to do the impossible thing of being in two places at the same time. While I was in the Chamber for the Budget Responsibility and National Audit Bill, I missed being able to speak to my Amendment 30A in Committee. I will not go into it in detail, but that amendment was about transparency in how the costs of the energy company obligation will fall on consumers via tariffs. That is just one part of the whole picture that the noble Lord, Lord Lea of Crondall, has tried to describe.
I believe that it is important that we find a way of communicating how these various costs flow through to consumers and especially, as the noble Lord said, to particular categories of consumers. That is not easy to do. The figures produced by the Department of Energy and Climate Change make some heroic assumptions about energy consumption, which tend to disguise what is happening. However, there is a case for regularly producing a comprehensive statement on how these costs are flowing through to consumers and their impact on different types of consumers. We also need some way of getting the debate into the public domain. While the former is complicated, the latter is very difficult, because it is hard to mount conversations based on complex economic interactions. However, I think that that is worth trying. An important gap in all the policies that have come forward to date is the lack of transparency about this one important fact, which is that it is consumers who are paying for the vast majority of the policies that have been pursued around energy, renewables and so on. That subject is seriously underdebated in our society. I support the principle behind the amendments, but I am not sure that I can quite sign up to them.
I oppose the amendment, first, because it suggests that the Treasury will be able to do things that even it cannot do. I am always suspicious of requests for the Treasury to do something, but this seems to go beyond the normal. In the interesting discussion between the noble Lord on this side of the Committee and the noble Lord, Lord Lea, on whether one situation is more elastic than another, we missed the important point: people make very different decisions, which are not necessarily connected with their income. Many of us have had the experience of canvassing in not the richest parts of constituencies and being hit by a wall of heat. That is in circumstances where people are clearly in the quartile to which the noble Lord, Lord Lea, referred. As I said, people make very different decisions. To ask the Treasury to produce some sort of documentation in which it applies these requirements to so wide a range of individual decision-making seems to me not sensible.
Secondly, the amendment does not fit into the whole context of the Bill and what we are trying to do. I say to my noble friend Lady Noakes that of course we want to have an effect on the consumer; that is part of what we have to do. However, the idea that there is some secret thing that we are not putting forward misses the point. The point is that we do not pay the proper price of our energy because we do not pay the price for destroying our climate. I know that my noble friend does not believe that the climate is changing, but most of us do. In those circumstances, we would do great harm to a future generation if we allowed people to go on treating energy as if it did not have these costs. Therefore, those of us who believe in a marketplace have to make sure that the market pays the costs.
We ought to be a bit bolder in telling people what we are about; that we are hoping to provide alternative means which do not destroy the future for our children and our grandchildren. The idea of trying to twist the argument in order to say that it is somehow unfair on a statistical fault is one that I have always found so difficult in politics. Of course it is true that if you have a smaller income, any increase has a bigger effect. It says nothing to say that. You can put up the price of anything and it is bound to affect those on the poorest incomes by its nature. That is not a statistical statement but a fact of life which is obvious to all.
The question is: can we take alternative measures in order to help those who are most hurt by this? However, you do not do that by providing even those very erudite people who clearly speak in the pubs of Burton with the material suggested in both these amendments. I cannot believe—although it may be true of Burton, it certainly is not true of any town that I know—that this would be the subject of discussion in the saloon bar, let alone the public bar. The fact of the matter is that there would be a general moan about the increase in prices.
We have to face the problem that if we are to deliver a world in which our children are able to live comfortably, we have to change our energy arrangements. In this Bill, we are doing that to help poor people to have the kind of housing which does not need as much heat. That is part of what we are trying to do and I hope that the Minister will be extremely robust in her reply to the noble Lord, Lord Lea. This seems to me to be both out of date and not a sensible use of Treasury time. I would like to see the Treasury getting down to understanding why on earth it cannot allow sensible borrowing from the private sector to improve energy efficiency. It pretends that that is somehow or other on the books when it could quite easily be off them.
There are a lot of things that the Treasury can be doing but it should not be doing this and we certainly should not kid ourselves that we either make these changes or, in fact, leave the world a worse place. I am a Conservative; I believe in passing on to the next generation something better than I have received. That is why I am very much in favour of this Bill and I hope that we will be really tough about the proposals in this amendment.
Perhaps I might intervene after my two noble friends, partly because I would like to introduce a little bit of hope. I should say to the noble Baroness, Lady Noakes, that in fact the consumer pays for it all. We should not duck on that. Even if they do not pay for it through their use of the fuel, they do so through their taxes. The consumer has to pay the total bill, one way or another. Of course, through the tax system we share the bill out a little differently from the actual consumption figures, which are what I really want to talk about. My noble friend Lord Deben brings me to my feet, because I want to look backwards instead of forwards.
The fact of my life is that in 1960, I paid one shilling and thre’pence and three-eighths of a penny for a gallon—that is, five litres—of farm red tractor diesel. Petrol prices were commensurate but the duty rates were of course higher. In the case of petrol, prices have risen as they have with red diesel oil but the duties have risen even further.
Sitting suspended for a Division in the House.
My Lords, I do not need to go back to the beginning. My point was that I was paying one shilling and thre’pence and three-eighths of a penny for a gallon of tractor diesel in 1960—50 years ago. I suppose I had better convert that to metric currency, as most people here are probably not familiar with one shilling and thre’pence and three-eighths of a penny. It was about 6.25p for a gallon of fuel or a fraction more perhaps than 1.25p per litre. Currently, the price is around 61p to 62p per litre. That includes an element of tax, which of course has gone up on that as it has on everything else. That, over my lifetime—or all our lifetimes—is an energy price rise of 5,000 per cent.
If anyone had stopped to think about that in 1960, they would have thought that the world would collapse. For sure, the noble Lord, Lord Lea of Crondall, has a point when he is concerned about the future. We need to be concerned about the rise in the price of energy and about the way in which that use affects people’s lives. Having said that, we have all lived already through enormous change and I see no reason to believe that we cannot continue to do that.
My Lords, whether one takes the view that current government policies will lead to an unpleasant, unfortunate and regrettable increase in energy prices through the renewables obligation and so forth or one takes the line of the noble Lord, Lord Deben, who is not back from the vote yet, that this is all in order to save the universe, the public needs a certain amount of transparency on the issue.
Another reason it is important concerns the great increase in energy prices since the youth of the noble Lord, Lord Dixon-Smith, who must be even older than me if it was that cheap when he was young. The key question going forward is how energy prices in this country relate to energy prices in other countries. If such prices in this country get out of step internationally, that would have profound implications precisely for the people in the pub in Burton upon Trent who would find their jobs under threat if they were dependent on energy usage.
Whichever way you look at it, a consistent, annual process of reporting should be as far as possible value-neutral. We can all then make our minds up on a fair and accepted basis of available information, which is important for going forward. It would be very hard to say that that is available at the moment. As has been said, there is a great deal of confusion. One way or another, I do not doubt that this amendment is not right in its present form—perhaps this is not the Bill for it—but we need to have information or there will be misinformation. It needs to be a priority as we go forward with our energy policies.
My Lords, I broadly support the thrust of these amendments. It seems to me that there are four separate issues. First, on transparency, most people who have spoken think that there should be more transparency. The noble Lord, Lord Deben, is not in his place, but it would not be that difficult for the Treasury to provide more transparency in this area. Between DECC, the Treasury, Ofgem and DWP, a lot of information needs to be pulled together. It should be presented in such a way that debate can be focused and different policy options can be properly addressed. That does not exist as effectively as it should. The first of these amendments attempts to address that issue.
The second issue is, faced with that information, what is the policy? To address the point made by the noble Lord, Lord Deben, we clearly all agree that if you are going to have behavioural change, somebody has to bear the price. It is a question of who bears that price, what the social consequences are of bearing it, what the structure of tariffs is—to go back to the point raised a few days ago by the noble Earl, Lord Cathcart and the noble Lord, Lord Teverson—and how they affect people’s behaviour and energy use. We can draw different conclusions. We can have a proper policy debate as long as we have the basic information in a form that is understandable, at least at some level, not only by us but in a public bar in Burton upon Trent.
The third dimension is the narrative. Wearing my consumer hat until very recently, I have argued that the narrative to consumers about where we are going on energy has been missing. Without that narrative, we are not going to convince the public in general that we have an energy policy that works for them and which has a clear outcome. From their different perspectives, the energy companies, consumer groups and the Government are in desperate need of a clear narrative, but it depends on having clarity of figures.
The last point addressed by the second amendment is about where we discuss this. Whether or not the exact form that my noble friend Lord Lea proposes is suitable for our approach to government, clearly there has to be somewhere where energy policy issues are addressed from the different objectives of energy policy: decarbonisation, fuel poverty, climate change, energy security, investment necessities, the structure of regulation and other government interventions. Of course, there are going to be definitional problems even with regard to the basic information. Is road fuel duty an environmental tax or not? It was started by Lloyd George when climate change was not a well known problem. It is difficult to say that it is entirely an environmental tax as distinct from a general tax-raising power. Likewise, is the winter fuel payment really to address fuel poverty or is it a supplement to social security policy?
There will be serious definitional problems, but let us get them out in the open. We can then move on to clearer policy discussion and to a narrative that the public might eventually be persuaded to understand. Although noble Lords will no doubt have some problems with aspects of the amendments as down, it would behove all of us to recognise that these four issues need to be addressed. At the moment, one of the problems of energy policy is that people have got hold of part of the problem but cannot see the totality. One of the reasons for that is the lack of agreed and clear statistics and information on the basic facts about energy.
I agree with my noble friend that our noble friend has opened up huge issues, but does he not agree that what this exchange really illustrates is that we limit ourselves by talking about energy as though it were a commodity, when it is not? Like water and the atmosphere, it is a public good, in effect, because human societies simply cannot operate without it. From that standpoint, these strategic considerations and how they come together are crucial.
It is a public good, but public goods also have a price, and somebody has to bear that price. The public good of energy is a variable commodity in the form in which it comes, in the way that water and air are not. Therefore, there are more policy options and more complications.
It is not often that I express thanks for the result of the last general election, but I do on this occasion. I am really glad I am not in the position of having to respond to this amendment because it raises areas of such profound complexity and objectives to which we all ought to subscribe. This is a very difficult debate to respond to and my sympathy goes out to the Minister as she prepares herself for that response.
The first and obvious fact I want to emphasise is that we owe a considerable debt of gratitude to my noble friend Lord Lea of Crondall. It is important that we address the total perspective of energy pricing which, after all, lies at the heart of everything that we are trying to do with regard to the green deal and the green revolution. It affects the whole way in which our society adjusts to the levels of consumption of energy and how we generate cheaper forms of energy. If we are not successful with the new strategies, the pressure on energy sources will be such that the increases energy prices over the past 50 years, to which the noble Lord, Lord Dixon, referred, may look absolutely marginal compared with what might obtain over the next 50 years.
However, the noble Lord, Lord Dixon-Smith, did fulfil an adage which I often use in general discussion, which is that men may not know too many prices but there is always one price that they know and that is the price of petrol or diesel for their car. That is not just because stations are obliged to put it up in lights but because men have one great consumption factor which is their cars. That does not mean to say that rational behaviour takes place. We all know those who would go the extra 15 miles to save something like 40p on filling the car up but they consume that amount and perhaps more getting there and back. One should not underestimate the issue of irrationality even when a price is transferred.
My noble friend must have taken some sustenance from the fact that the noble Baroness, Lady Noakes, offered some support for his position: she emphasised the fact that this is a plea for transparency, and we need transparency. Our present factors of production, our present modes of consumption are such as to make it extremely difficult for people to respond accurately and effectively to energy prices or to know the factors that produce the price. This is particularly the case with the householder in terms of the supply of electricity and gas. My noble friend has made a most valiant effort to try to see the way in which the Treasury might throw some light on some very dark and murky quarters in circumstances where we all appreciate that we will not get the community response to the energy transformation of the future unless people have confidence that what our society is doing, what our Government are doing on behalf of our society and what individual productive units in our society are doing is fair and reasonable and clear in terms of policy.
I listened very closely to the noble Lord, Lord Deben, who has a great deal of authority on these matters, particularly in this area to which he contributed a great deal as a Minister. He says that it is all about price signals, that we have to ensure that people recognise that the costs will increase and that people will have to knuckle under and respond to it, but we do not say the same thing about food. The Government do not put VAT on food and yet there is a world crisis in food. Many of us believe that there is considerable overconsumption of food and consumption of the wrong cheap foods in our society. Which Government would dare to talk about sending out a price signal to make food more expensive by imposing VAT? I cannot recall either side of the House or even the third part of the House—I have difficulties adjusting to the coalition even now although I do not include the noble Lord, Lord Teverson, in that—the Liberal Democrats, during the freedom they had before they joined the coalition, talking about sending out price signals for food.
We operate within a situation where the Government seek to give support to certain essential goods, of which food is obviously one, and, clearly, we have to do that for energy. We do it with fuel payments. In this Committee, we have discussed whether the tariff should change so that consumption on the early parts of the tariff should be reduced, rather than the present position where it is the most expensive. These are very real issues that my noble friend has raised.
However, all Members of the Committee have raised some reservations about it. They have seen difficulties with these proposals. I am not sure whether it is a matter of the Treasury being overworked if it takes on this objective, although it looks like a massive agenda to me. The point is whether the Treasury could hit the objectives that my noble friend identifies, particularly as it is quite clear that he would also like to see the revenues received from energy prices put into a bundle— he was very gentle about his use of the word “hypothecation”—in which they could be directed to counter the most regressive elements in the present price inquisition.
That is a pretty challenging agenda. I have spent a small amount of time on Treasury matters over the past few years in your Lordships' House and taking that on seems to be quite a challenge for policy makers. I do not have the slightest doubt that the Minister is likely to say the same thing. I emphasise to my noble friend that he has done us a service with the introduction of these two very challenging amendments and I hope that the Minister, in reply, will indicate that she thinks that from these discussions there may be strategies which we can pursue and which will be effective.
My Lords, we come back to the heart of the Bill at its conclusion. At the very start, my noble friend Lord Marland laid out the vision of this Bill. These amendments, which are about the transparency required to ensure that we deliver what we are seeking to do, have brought us back there again. Therefore, I welcome the opportunity to be able to debate this set of issues. The Government are very committed to greater transparency, thus building on what the previous Government were committed to and we seek to take that further. It is extremely important that transparency enables the public to hold politicians and public bodies to account and we are strongly committed to that. We need to be very clear and very public about where we are heading.
On these amendments, I point out that publications by the Office for Budget Responsibility, the Treasury and the Department of Energy and Climate Change already provide information relating to revenues, tax expenditures and distributional impacts similar to those suggested in the amendment. They clearly are not especially popular in the sense that not everyone is totally familiar with them all. However, I thank the noble Lord, Lord Lea, for taking the time to go over these publications with DECC and Treasury officials and for discussing his amendments with them. His opening speech showed that a tremendous amount of material is already available and it reminded me of the discussions I hear my sons—both of whom are doing PPE—having about the economic effect of this and that and whether it will happen in this direction or that. Nevertheless, the noble Lord was able to do that, I suggest, because much of that information is available.
Obviously, we need to go further and faster, as I think we would all agree. However, a great deal of information is already available. We welcome the noble Lord’s suggestions about how to take this forward. I also point out that DECC produces an annual publication, alongside the annual energy statement, setting out the impact of energy and climate change policies on gas and electricity bills for households and businesses. People may not pay too much attention to that, but it is available.
The department is looking for opportunities to build on and refine the analysis so that it is more accessible to the public, and the noble Lord’s contribution will feed into that. For example, we expect the next publication to include an analysis looking at the impact on illustrative energy-intensive users, which was mentioned just now. It is also extremely important to remember—the previous Government deserve credit for this—that the Equality Act, which we passed just before the general election and which we are now implementing, requires an assessment of the impact in various areas, including on those who may be in deprived groups, of various policies right across government. Wearing one of my other hats, I know that this is indeed happening and that the assessment of the impact of policies is being made in a way which I think the noble Lord, Lord Lea, would welcome. This is an early stage of the development but it is very important and will be taken forward. It is already happening.
I turn to the important elements emphasised by the noble Lords, Lord Deben and Lord Whitty, which is that we need to stand back and look at what we are seeking to do here. Clearly, we need to get the case across. Transparency helps, but do not doubt that statistics will be used by both sides in different ways as they seek to bolster their own arguments. In the end, that is why it comes down to what the Government decide should be the right strategy. There is a tremendous amount of agreement in the Committee, although there are one or two dissenting voices, but generally speaking we know where we are trying to head and we certainly wish to have greater transparency so that we can take people with us. In the end, the decision will go beyond that. Either we have to tackle climate change and we have the tools in this Bill to do that, or we do not. Generally, I think we agree that we need to do that, which is why we have introduced the Bill and why we are taking these proposals forward.
As there is already a lot of information available and as we welcome the suggestions about how we improve on that, how we take that forward and how we ensure that there is as much public discussion as possible, although not necessarily on the details of hypothecation, I hope that the noble Lord will be willing to withdraw his amendment.
My Lords, I thank everyone who has spoken, not least the Minister, for a very positive and helpful conclusion. I will disappoint her if she thinks that I am inclined to leave the matter here. Some alterations are needed and some of this material needs to be altered by an amendment on Report. I hope my Front Bench agrees, but I have yet to find out.
I will just, if I may, say that I did not know the Equality Act had been a topic in looking at this. I know that there is horizontal equality, but I did not know that vertical equality was part of the scope of the discussion arising from the Equality Act.
Perhaps I can help the noble Lord by pointing out that you have to look at an impact assessment of everything you are doing to see how it might disproportionately affect different groups. Therefore, policies such as this come within that. Everything that the Government do comes within that.
I thank the Minister. She knows that I have the highest regard for her. But can I take it one by one, if I may put it that way? I am particularly grateful to the noble Baroness, Lady Noakes, for her broad support for the idea. She said that it was something that needed to be raised even though she stopped short of making it a mutual admiration society. That would be awkward for both of us. Many things that she said rang a bell with me. I will look at all the points that she raised.
We all know the noble Lord, Lord Deben, much better as Mr Gummer. He may remember Rio where I was a delegate, in 1991 or 1992. I am sorry that he adopted a slightly theological approach. I will rephrase that: it was an ideological approach. It was as if anybody raising the point that I was raising must be trying to destroy the policy. I have been on this wicket batting and scoring runs for as long as he has and we will hit a brick wall—to mix my metaphors, which I always do—unless we get some more buy-in in Burton upon Trent. I am very glad that Burton upon Trent has been mentioned four or five times. I will rechristen the right reverend Prelate the Bishop of Chester, the Bishop of Burton upon Trent. That will help also the scoreline.
I take issue with the noble Lord, Lord Deben, about this point. Surely it is making a mountain out of a mole hill to say that the Treasury cannot do the work. As we have just heard from the Minister, a lot of this material is around.
Sitting suspended for a Division in the House.
My Lords, I rather cut short my thanks to the noble Baroness, Lady Northover, but she will perhaps forgive me for that. I think I thanked the noble Baroness, Lady Noakes, and was addressing some remarks to the noble Lord, Lord Deben. I made one remark about this being a great cost to the Treasury. I do not think it is a great cost, but I think it is a challenge, and I make no apology for mentioning Burton upon Trent once again because we have to keep in mind the audience that we have to get to if it is not going to revolt. It is not just a statistical bulletin. Statistics unfortunately do not speak for themselves. That is where spin comes in. I would rather there was a stakeholder body that agreed on certain things that needed to be done or were self-evidently true. We cannot afford to be elitist. That is a statement of the obvious. There is a huge increase in taxation in these tables.
The second point on which I would very respectfully part company with the noble Lord, Lord Deben, is about his remark that this is the wrong Bill. When two or three years ago, my noble friend Lord Rooker was summing up on the Climate Change Bill, which was not a million miles different from this Bill, he said that his job was to get the Bill through, but he was not sure that it was the right Bill. I can foresee the next 10 energy Bills never being the right Bill, so I have got my teeth into the backside of this particular elephant.
I am pleased about that. It may have been the noble Lord, Lord Dixon-Smith, and as he is not here, he cannot deny it.
I thank my noble friend Lord Whitty for his broad support. I totally take his point about the need to make some adjustment. I say to my noble friend Lord Judd that rationing by price is a rather crude but accurate way of describing the world we live in. Whether it is capitalism or socialism, rationing by price is a fact of life in the middle of India or anywhere else. We also have to bear in mind that if we cannot change the income distribution in this country to be more reasonable than the outrageous distribution at the moment, we will have to fiddle around with a lot of discounts, exceptions and adjustments. Unfortunately, the question would then be whether so many people would be excluded from the heavy incidences of some of those price rises that we would not raise the revenue or have the carbon effect that we wished. That is the moral hazard that we are into, and it requires a lot of thought.
My penultimate point is that I do not think that today is the day when Treasury officials in the Room are going to stand up and say, “We’ve fallen in love with hypothecation”. What I am suggesting is in the Treasury’s interest. The priesthood in the Treasury is not separate from the rest of society, and we want to encourage it to be part of fronting up some of these matters. The consultative body and all the stakeholders have got to be able to communicate with Burton upon Trent. I think that community needs to be brought together.
Finally, my noble friend Lord Davies of Oldham was very kind in what he said. I can assure him that we are at one in wanting to get this in a form that does not have all the teething points. I do not think the amendment as it stands states as crudely as he implied that we put all these taxes into one bundle and redistribute them in energy. I go halfway to that to make sure that the quantum is clearly identified. I recognise that this is mainly for general taxation, but in Burton upon Trent, it is a huge selling point to be able to say, “This is what we are doing with some of the money”. I want to be a bit pedantic about that distinction. I hope that it is acceptable for me to say that one bundle does not quite sum up what I was trying to say. I will conclude on that note. Although I hope that we can come back to this on Report with a slightly different amendment, I would like to withdraw the amendment.
Amendment 37A withdrawn.
Amendment 37B not moved.
Clause 102 : Repeal of measures relating to home energy efficiency
Debate on whether Clause 102 should stand part of the Bill.
My Lords, I will be very brief. I cannot let this moment pass. Clause 102 comes under the heading of “Miscellaneous”. It might be miscellaneous to everybody else in the room but, to me, there is nothing miscellaneous about it. It repeals the Home Energy Conservation Act 1995, which I was lucky enough to steer through the other House when I was a Member of it. We have a little bit left: the definitions in Section 1 of the Act that have effect for the purposes of the Sustainable Energy Act 2003.
I have spoken about it before. A lot of people did a lot of work to enable that Private Member’s Bill to become law. It was when the Conservatives were last in Government. Unfortunately, the Labour Government never used it in the way that it was intended. If they had we might have more houses that were not in need of a lot of energy-efficient measures today. I pay tribute to all the people who helped and worked in local authorities as Home Energy Conservation Act officers. There was a whole army of them. It created lots of jobs. It led to homes becoming more energy efficient and I know that the Minister has said that he understands the important role of local authorities. They were particularly good at taking whole areas and rolling out programmes in streets. I hope that those are the sorts of lessons that can go forward as the Green Deal goes forward. On Report, I look forward perhaps to hearing a little bit more about the detail of the involvement of local authorities. However, I could not possibly let it go past.
Clause 102 agreed.
Schedule 3 agreed.
Clauses 103 and 104 agreed.
Clause 105 : Short title
Amendment 38 not moved.
Clause 105 agreed.
Bill reported with an amendment.
Committee adjourned at 6.53pm.