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Energy Bill [HL]

Volume 771: debated on Tuesday 10 May 2016

Commons Reason

Motion A

Moved by

That this House do not insist on its Amendment 7TB to Commons Amendment 7, to which the Commons have disagreed for their Reason 7TC.

Lords Amendment in lieu

7TB: Line 179, at end insert “, or

(e) evidence that—

(i) an application for 1990 Act permission or 1997 Act permission was made on or before 18 June 2015 for the station or for additional capacity,

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

(iii) planning permission was granted no later than three months after 18 June 2015, and

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

Commons Reason

The Commons disagree to Lords Amendment 7TB for the following reason—

7TC: Because it is not appropriate for renewables obligation certificates to be issued in respect of electricity generated after the date on which the Energy Bill is passed by onshore wind generating stations for which planning permission was granted in the circumstances described in the Lords Amendment.

My Lords, the elected Members in the other place have again sent a very clear message to this House. I do not wish to prolong the debate on this issue. We have discussed many times now the importance of ensuring that the Bill comes to a swift conclusion. As I noted during our last debate, industry bodies such as Energy UK, RenewableUK and Scottish Power have highlighted the need for swift passage of the Bill. In addition, the GMB Scotland secretary, Gary Smith, said today:

“'The Energy Bill contains important measures to help alleviate the severe pressures on jobs… across our oil and gas sector”.

He went on:

“It makes no sense whatsoever to compromise the Bill and the future of Scotland's oil and gas sector over a taxpayer subsidy that will only end up in the pockets of the hedge funds and wealthy landowners”.

He added that,

“some 200,000 jobs in Scotland depend on our oil and gas industry”.

He then urged MPs and noble Lords to get the Bill passed —I agree.

I do not wish to repeat the arguments that have been much debated both here and in the other place. We are all aware that this is a manifesto commitment which was signalled well in advance of the 18 June announcement last year. Indeed, the noble Baroness, Lady Parminter, acknowledged as much in the previous debate.

The noble Lord quoted Gary Smith, whom I know well. He is the Scottish secretary of my own union—the GMB. We all want the Bill passed in relation to oil and gas, but there are different ways of getting it passed. It could be passed very simply if the noble Lord, Lord Bourne, agreed to accept our amendment. There would be no problems; it would be passed straightaway. Am I not right?

My Lords, the noble Lord appears to disagree with the general secretary of the GMB, who said quite clearly that we did not need taxpayer subsidies. That is where the Government stand and that is where he stands, and 200,000 jobs are at stake, of which we should be conscious.

Onshore wind is a well-established technology, the costs of which continue to fall, so it is right that Government should scale back subsidy. The Government have a mandate to deliver on their manifesto commitment to end new subsidies for onshore wind. Yesterday, Members in the other place removed Amendment 7TB, inserted at our last debate on the Bill. Amendment 7TB sought to widen the scope of the grace period to allow certain projects to accredit under the renewables obligation beyond the early closure date. As I have said before, these are projects that did not have planning permission when the early closure was announced on 18 June last year, and therefore do not meet the grace period criteria proposed by the Government. The date of 18 June 2015 was set out as a clear, definitive line for industry, and the Government have continued to maintain the importance of this as a clear cut-off date. As I have said previously, the prolonged debate on this issue is stopping the Bill proceeding to Royal Assent—Royal Assent which is so urgently needed so that we can implement the much-needed measures relating to the Oil and Gas Authority.

As my honourable friend the Minister of State for Energy and Climate Change, Andrea Leadsom, noted in the other place:

“It is vital that the Oil and Gas Authority gets the functions and duties it needs to maximise the economic recovery of the UK’s remaining oil and gas reserves, while building its capacity and capability to attract investment and jobs, and helping to retain valuable skills in the UK. I received an email just this morning from the head of Oil & Gas UK urging me to ensure the safe passage of the Bill at what is a very challenging time for the industry. The need for an independent, robust and effective regulator for the North Sea is greater than ever. We cannot afford the loss of confidence that delaying the establishment of the Oil and Gas Authority would generate among existing operators and the regulatory uncertainty it would generate among investors”.—[Official Report, Commons, 9/5/16; col. 447.]

The policy as set out by the Government strikes a fair balance between the public interest, including protecting consumer bills and ensuring an appropriate energy mix, and the interests of onshore wind developers.

Once again, I urge noble Lords to take careful note of what Members in the other place have said and not seek again to undo the Government’s clear position by insisting on amending the Bill repeatedly. I beg to move.

Motion A1 (as an amendment to Motion A)

Moved by

My Lords, today, once again your Lordships’ House returns to the Energy Bill.

It is deeply disappointing that the Government are unable to agree an entirely fair, minor adjustment to the grace period concessions that have had to be woven into the Bill following the opportunistic inclusion of the decision on the early closure of the renewables obligation.

I, too, will not repeat all the arguments used two weeks ago when your Lordships’ House agreed to ask the Government in the Commons to reconsider. By bringing this measure back again, the Government have hardly won the argument on the issue. Yes, the Conservatives won the election and had included in their manifesto a commitment not to undertake new subsidies for onshore wind. However that may be interpreted, it cannot really mean that voters—especially the little over a third of the electorate who voted Conservative at the last election—thought that they were voting for disruptive, arbitrary decisions regarding schemes with local backing that were nearing implementation. That the Government understood that there had to be a grace period with reasonable conditions to allow an orderly process to scheme completion must at least be recognised and congratulated. That a line must be drawn in these circumstances is saying the obvious. However, it behoves the Government to be equitable, consistent, logical and proportionate with where the line is drawn.

To allow through schemes where they meet approved development conditions, where they can demonstrate financing arrangements were disrupted due to legislative uncertainty, and where there were unforeseen grid or radar problems—all this can be applauded. However, where a scheme has only a three-month delay due to a Section 75/106 agreement and is being ruled out, while another was initially denied planning approval but subsequently won on appeal after the cut-off date, we must draw this to the attention of the House and ask the Government to reconsider their unfair, illogical concessions.

The concession promoted by this amendment was the very minimum, limited case put to your Lordships’ House and supported. Many other cases promoted by the noble and learned Lord, Lord Wallace, and my noble friend Lord Foulkes are well worth considering. But this amendment whittles the merits of all those cases down to this obvious anomaly. Limiting these few schemes caught by how the Government have drawn their line down to four seems highly reasonable and a fair compromise. By turning this down, the Conservative Government are following an ideological belligerence against onshore wind farms that enjoy local support and offer value for money, while simultaneously defending generous handouts to fund more expensive alternatives.

Your Lordships’ House has returned this Bill twice to the Commons for reconsideration. We now have to recognise the constitutional position we are in, with two days to Prorogation. The Minister has given a clear view that the Government are emphatic, even if that view was won by only a small majority in the Commons. This side of the House recognises that the House has looked carefully at the Bill and proposed common-sense amendments to the Government. Naturally, we are disappointed that the Government continue with their disagreement.

Before I finish, I should reflect that on this minor point we are contesting wider issues to which this gives rise. This Energy Bill is concerned primarily with setting up the Oil and Gas Authority. That the Government are willing to hold up, and even put at risk, support for our struggling North Sea industries underlines the extent to which they are prepared to go to block these few popular schemes from going ahead. Blocking projects with local support that have done everything correctly regarding planning consents before an arbitrary cut-off date shows how ideological the Government now are. As has been said and underlined, the litany of actions taken by the Government is generating uncertainty and putting up household energy bills, such that the House of Commons departmental Energy Committee conducted an inquiry into investor confidence in the energy sector, highlighting that policy inconsistencies and contradictory approaches have sent mixed messages to the investment community. Today is another example of the Government claiming to want to decarbonise at lowest cost while simultaneously halting onshore wind.

A study by the Royal Academy of Engineering reported that replacing a single onshore wind turbine with offshore wind power would cost UK taxpayers an extra £300,000 a year in subsidies. The Institute for Public Policy Research, among others, has warned that ruling out onshore wind—the cheapest energy option—could put up energy bills by millions of pounds. Today, Ernst & Young published the Renewable Energy Country Attractiveness Index, showing that the UK has slipped to an all-time low of 13th place among the 40 most attractive renewable energy markets globally, primarily due to the Government’s decision to opt for gas and nuclear rather than be technology-neutral. This approach goes against the grain of almost universal global support for renewables and obstructs a growing energy imperative, as ageing power plants are retired, given the UK’s strong natural resources and efficient and effective capital markets.

Today the Government may get their way but tomorrow the UK will start paying the price. I beg to move.

My Lords, I support the Motion which has just been so eloquently moved by the noble Lord, Lord Grantchester. I do not intend to rehearse all the arguments that we have been through, but I will make some points which have arisen in our lengthy debates and again this evening. The Minister seeks to raise the red herring of this Bill being totally threatened and of the threat to the oil and gas industry. There is no division across your Lordships’ House on the importance of setting up the Oil and Gas Authority. We want to see it as much as he does and, as the noble Lord, Lord Foulkes of Cumnock, said, the simple way for the Government to do that would be to accept the amendment which your Lordships’ House passed last week.

We have also heard another red herring about the manifesto commitment. I will not go into all the details again about how ambiguous, or not, it was. Let us take it at its best from the Government’s point of view and accept that it was a manifesto commitment. They are actually going to get that commitment because a substantive clause which brings forward an even earlier closure of the renewables obligation for onshore wind is already passed: it is there. What this amendment is about, what we are currently debating and what we have been ping-ponging about is a very limited point about the kind of grace period given to developers who have spent millions of pounds—not to mention time, energy and effort—to try and bring their projects to fruition but who have been thwarted by a very arbitrary cut-off date. It was probably a date which had to be fitted in with other announcements in the No. 10 grid, yet these people are being frustrated in taking forward their developments.

This begs the question of what is the scrutiny role of your Lordships’ House. We have accepted the principal manifesto position, but if your Lordships’ House means anything it must go into detail and try to ensure fairness. There has been no movement whatever from the Government on these points since, very late in the day, they brought forward their amendments immediately before Report in this House. The Opposition have put forward a number of improvements to the grace period which we have whittled down and down until we now have one which applies to only about four developments, all of them in Scotland.

The Minister has been very generous with his time; he has wanted to engage with us and I have huge respect for him, as he knows. But I must ask myself: what was the point of it all? What was the point of all these cups of tea and discussions in the tea room if the Government never intended to give anything? I think I know where the noble Lord is: I think that he does recognise the strength of the arguments. No doubt—well, I am not going to speculate but will stop there. Your Lordships’ House would hope that there might be some give and take, but we have not seen any of that.

This is a very limited amendment. It will affect the confidence of investors who will no longer trust what the outcome will be when they have made investments. The Minister referred to public subsidy. On the four developments we are talking about, the amount of public subsidy will be infinitesimally minimal compared to the amount that Hinkley Point will be getting over 35 years. So the public subsidy argument does not ring true.

I will finish by talking about the constitutional role of your Lordships’ House. Having conceded that the manifesto commitment will be substantially delivered, we are just looking at the detail. It is important that there is one House of Parliament that will stand up and look after the interests of developers and private individuals who invest their money and yet find that their rights and reasonable expectations are thwarted by an arbitrary decision of government. I repeat that when Andrea Leadsom was asked the purpose of the grace period by the Energy and Climate Change Committee in the other place, she said that it was to ensure fairness, and,

“that those who have spent money in a significant investment and achieved everything technically to meet the cut-off date, but through reasons beyond their control have not actually made it, are not penalised for reasons beyond their control”.

I do not think that it could be put any more succinctly or eloquently. That is what this amendment tries to do for a very limited number of cases and that is why it is worthy of support.

My Lords, I also speak in favour of my noble friend’s Motion. Unfortunately, the noble and learned Lord, Lord Wallace, has stolen just about every point that I wanted to make, so I shall be mercifully brief. I remind the Minister of what I said earlier. As the noble and learned Lord said, we are all in favour of the Oil and Gas Authority. The Government could have had this Bill weeks ago if they had accepted the arguments that we have been putting forward. It is the Government’s recalcitrance which has delayed the Bill.

I will make just two points. In the House of Commons yesterday, Andrea Leadsom said:

“The other place has seen fit yet again to try to overturn that manifesto commitment”.—[Official Report, Commons, 9/5/16; col. 446.]

That is not the case. We are not trying to do that. I do not know how many times we need to repeat that and argue the case before noble Lords and honourable Members understand it.

Whether we like it or not, the subsidy date has been brought forward. All that we are talking about now are the grace periods. Three of these have been accepted: we are down to the last one. I cannot say it any better than my honourable friend Alan Whitehead, who said in the other place yesterday:

“The amendment from their Lordships’ House does not seek to alter the premise of grace periods. It does not seek to overturn the early closing date for onshore renewables, sad though that is. It does not seek to alter in any way the vast bulk of this well-crafted Bill, with all its important provisions concerning the North Sea oil industry. It simply seeks to put right one of the great anomalies in the grace period sections of the Bill, and, in that way, strengthen the proper application of those periods. As the Minister may have noted, it now does so in a way that it did not do in a previous amended incarnation. It places a specific time limit after the cut-off date of three months, reflecting the view that grace periods should be just that. This is now a very brief grace period window in which to put right the most difficult cases frozen out for doing the right thing”.—[Official Report, Commons, 9/5/16; col. 449.]

As I said on a previous occasion, one example of doing the right thing is in Sorbie. This family farm has, unfortunately, not been running so profitably in past years. Under advice, guidance and suggestion from the Government, they diversified into onshore wind and are now suddenly being told that they cannot get the subsidies that they were promised. As a result, they are in danger of going into liquidation. These are the kinds of small employers who are going to suffer if the Government press ahead with their policy.

I will make one last plea. I know that the Minister in this place has some sympathies. We have had the tea and we have had some sympathy: we have not had the result. We have not had anything because people down at the other end are so blind that they cannot see. I hope that Members of this House will understand it and that we will send it back and ask them, once more, to think again.

My Lords, I am grateful to noble Lords who have participated in this debate. They are three of the most fluent and persuasive Peers on the other side and I quite understand their intent and the passion that drives them. I will come to the points in the order in which they were raised. First, the noble Lord, Lord Grantchester, very generously acknowledged that it was in the manifesto and that we have moved on grace periods to address radar/grid delays. In his words, he “applauded” the concessions we have made. We have also made some on the investment freeze. But he seemed to suggest that we were engaged in some kind of ideological and belligerent—I think those were his words—warfare against renewables in general and wind in particular.

The United Kingdom has a proven track record of growth in renewable electricity, which goes on. We will be spending more this year than we did last year, and in every year of this Parliament we will be spending more on renewables. Nearly £52 billion has been invested in renewables since 2010. More than half the total investment in the EU in 2015 occurred in the United Kingdom, and that was just another record year based on several earlier record years. So I hope the noble Lord will accept that that is not the case. We recognise the vast importance of renewables.

One reason for the action and for it being in the manifesto was that we were deploying at a far speedier rate than had been anticipated. It was not anticipated by the coalition Government that we would be well above the top range of what could be expected. We are not taking action for any ideological reason. We have massive deployment and that deployment goes on. But we are reaching the end of subsidies for solar and for onshore wind because they can be deployed without the subsidy. It is widely recognised, including by the general secretary of GMB Scotland, whom I quoted, that we do not need these subsidies any longer and that often we are subsidising people who do not need the subsidy. That is another reason for the action.

The noble and learned Lord, Lord Wallace, put the case very eloquently, as he always does. I think he accepted that we had moved on grace periods. He suggested, as did the noble Lord, Lord Grantchester, that the date we set was arbitrary. Well, it was—only in the sense that any date is arbitrary. The noble and learned Lord will know very well that dates are set and they are very often arbitrary and somebody will fall the other side of them; even if you move the date, somebody else will fall the other side of it. I do not accept that it was arbitrary in the sense that he seemed to be suggesting—that it was somehow capricious. That was not the case and it was not a question of it fitting in with the grid. It was the date that the Government chose to announce the policy that had been signalled in the manifesto. I hope he will accept that the case is borne out: we accepted many amendments on the Oil and Gas Authority as the legislation went through; and we have amended the position on onshore wind to take account of grace periods, appeals and radar grid delays. All these things we have done.

The noble Lord, Lord Foulkes, was very generous and spoke with great passion and very eloquently, as he always does. Yes, I accept that the intentions are benign but the will of the other place has been expressed now three times. Surely now is the time to recognise that this House should not keep overriding the will of the other place on an issue where it has expressed its position very clearly.

Can the Minister indicate any amendment to the grace period provisions, which have been there since they were first tabled when the Bill was recommitted to the Grand Committee?

As the noble and learned Lord knows, those provisions were not there when the Bill was introduced. They were introduced subsequently, after consultation with industry. I accept that they were not subsequently altered but there was consultation, as he will recall, about what was fair on the grace periods. I think many people recognise that these amendments from the original position were fairer and more just. That is the position. They were not amended subsequently—he is quite right on that.

We have been round the circuit on this so many times that I will not delay the House any further. The view of the other place is clear. We do not want to hold up this legislation with its vital Oil and Gas Authority provisions. I beg to move the original Motion.

I am very grateful to noble Lords who have responded on my behalf to the Government’s stance regarding the position we are now in, and to the Minister for the way he has replied. I may well have been injudicious in the words I used regarding the Minister’s motives. However, I am disappointed that I still find his remarks less than convincing. I am not entirely satisfied with his response and I am not happy with the lack of movement towards a compromise.

This issue will not go away. It goes beyond the few cases in the amendment. It concerns the lack of inclusion and the ability of the wind industry to take part in the future bidding rounds for contracts for difference. There is a concern that the Government are not being technology-neutral. It also concerns jobs and investment in Scotland. We remain as determined as ever that we will return to this, but we accept where we are now with the Government—they are not listening and they will not concede. Indeed, it could well be the end of the parliamentary road. Reluctantly, I beg leave to withdraw the Motion.

Some Lords objected to the request for leave to withdraw the Motion, so it was not granted.

Motion A agreed.

House adjourned at 7.57 pm.