Considered in Grand Committee
My Lords, on 31 December 2020, when the transition period ends, direct EU legislation such as this, which forms part of the legal framework governing our energy markets, will be incorporated into domestic law by the European Union (Withdrawal) Act 2018. This statutory instrument will ensure that Great Britain’s energy legislation continues to work effectively after the end of the transition period. It forms part of the department’s wider package of work to ensure the continued smooth functioning of the UK’s energy system after the transition period.
Great Britain has a reliable energy system, and maintaining a safe and secure energy supply is a key priority for this Government. The UK’s exit from the EU will not affect this. This statutory instrument applies to Great Britain and makes amendments and revocations to Regulation (EU) 2019/941 on risk preparedness in the electricity sector, amending existing rules to ensure they operate effectively in domestic law, while revoking provisions no longer relevant after the transition period. The risk-preparedness regulation came into force in June 2019 and creates an EU framework for preventing, preparing for and managing electricity crises. The regulation requires, among other things, that member states identify all possible electricity crisis scenarios at national and regional levels and then prepare risk-preparedness plans based on those scenarios.
The changes made by this statutory instrument reflect our intention to continue to develop measures for robust risk-preparedness management in the electricity sector, especially as we work to further decarbonise Britain’s energy system. Specifically, this statutory instrument amends provisions relating to the development of electricity crisis scenarios and a risk-preparedness plan to ensure they operate properly after the transition period. By retaining these functions, we will ensure that our understanding of the risks continues to improve and that we have robust mitigations in place to maintain our secure and reliable electricity system.
BEIS is the lead government department for electricity emergencies and works closely with industry partners, including National Grid and Ofgem, to consider risks to supply and ways to manage these risks effectively. This SI will build on and supplement existing arrangements and plans, ensuring there is a clear framework for the identification of risks to the electricity system and setting out measures to mitigate these risks within a risk-preparedness plan. This plan will complement existing documents that require industry consultation and development, including the regularly updated national emergency plan for downstream gas and electricity.
The Secretary of State for Business, Energy and Industrial Strategy will work with these GB bodies and market participants—for example, the transmission system operators—to fulfil the obligations to develop crisis scenarios and risk-preparedness plans by specified dates. This provides clarity on roles and functions after the transition period for electricity crisis planning and management in Great Britain. This includes consultation with the transmission system operator, the regulatory authority, Ofgem, distribution network operators and other relevant parties to identify the most relevant electricity crisis scenarios that may impact the electricity system.
After the transition period, the UK will make independent decisions on our energy policies. This statutory instrument therefore revokes certain obligations within the regulation, such as the obligation to submit risk-preparedness plans to EU bodies and institutions. It also corrects deficient references to EU bodies and institutions—for example, by removing references to the European Network of Transmission System Operators for Electricity, and the European Commission. It also replaces the term “member state” with references to “the Secretary of State” where necessary to ensure continued operability.
The revocations made by this SI are proportionate and necessary to ensure the continued functioning of the regulation in domestic law after the end of the transition period. Overall, this statutory instrument will ensure the operability and integrity of GB energy legislation, providing certainty for market participants and safeguarding the resilience of the electricity system by ensuring the continued functioning of risk-preparedness planning provisions.
These regulations are an appropriate use of the powers of the withdrawal Act and will maximise continuity in our energy regulation, provide certainty to market participants and support a well-functioning, competitive and resilient energy system for consumers. I beg to move.
I begin by declaring my renewable energy interests as set out in the register.
This is an increasingly important issue. Electricity demand will rise over the coming decades and we will be increasingly dependent on electricity for powering our vehicles and heating our homes, as well as for existing uses such as televisions, lighting, computers and much more. I welcome the preparation of a risk-preparedness report by Ministers. I believe this should be given considerable urgency, and I hope the report is ambitious and helps to drive the energy transformation we need, rather than being purely protective and defensive to avoid disasters, breakdowns and blackouts.
By this, I mean that the greatest prize in electricity security is not simply avoiding power cuts. Of course, we have all seen the dire headlines, and there has been an increasing number of mega power cuts over the last decade, which have caused huge problems in Pakistan, Canada, America, Turkey and the Philippines, for example. Sadly, the UK has not been immune, as we saw on 7 August last year. But it is about more than stopping the system falling over. It is about how you drive the future and seize opportunities as quickly and early as possible. In short, do you wait for a crisis to hit you, as they did in Australia—you might remember Tesla riding to the rescue with its 100-megawatt battery, delivered in 100 days—or do you realise there is an imperative of central importance here: tackling climate change and delivering on the target of net zero by 2050?
The scale of the challenge is simply huge. Our UK target for new offshore renewables by 2030 was 30 gigawatts, and the Government have now raised that to 40 gigawatts. To achieve net zero, the Committee on Climate Change estimates that we will need to go much further: 70 gigawatts of new installed capacity by 2050. The target, I believe, could go higher still.
To give this some sense of scale, back in the old days, when we relied on coal, nuclear and gas plants, with a few hydropower stations too, the total installed capacity for the whole of the UK was around 60 gigawatts. Across Europe, the numbers are going to be even more staggering, with perhaps as much as 900 gigawatts or even a terawatt of new renewable capacity required over the coming decades.
This all amounts to an enormous challenge. We do not have anything like the strength and flexibility of grid onshore or offshore, or the interconnectors, ocean cables and HVDC infrastructure needed to cope with this exponential increase. We do not have anything like the scale of investment required in batteries and other forms of electricity storage, nor yet do we have the legislative and regulatory structure to be certain that we can make it happen. However, I firmly believe that that can change; it must, and we have to do it as fast as humanly possible.
As an aside, if we happen to have—as media reports suggest—£10 billion or £20 billion of taxpayers’ money available then this is where the priority should be for investment, not supporting a new generation of nuclear power stations that might take 15 or 20 years to come online and which will cost far more, megawatt for megawatt and pound for pound, than the power that is already coming from renewable sources. Let us commit right here, right now to this investment in upgrading the grid and creating long-term electricity storage; it is urgent and vital. That is why entrepreneurs such as Eddie O’Connor are now investing in projects such as SuperNode. Eddie is a renewable energy visionary and, having founded both SSE Airtricity and Mainstream, is one of the most respected individuals in the sector. His latest venture is all about the grid, kick-starting progress towards the vision of a hugely interconnected Europe powered by renewable energy.
Let us be clear: if the UK is determined then we can be the engine, the driving force, right at the centre of the renewables revolution. The UK could lead the way with a strong, stable grid, exporting our wind, tidal and wave power and delivering the future. If all we do is prepare for crisis, and if we do not invest, then our grid will stagnate and big opportunities will be lost. Sadly, if that happens then we will have more days like 9 August last year when our lights went out and more than 1 million people across Britain were left without electricity. We must not let that happen ever again. We do not want to be like Australia, sending for the cavalry and calling on Elon Musk to patch up the damage.
We want to seize the future. We want to be at the heart of a booming renewables sector with a strong modern grid, far more battery storage and way more interconnectivity, working with our European partners and neighbours to deliver the very best and cleanest supergrid in the world. It is complex and difficult but, perhaps today of all days as America goes to the polls, it is worth remembering the words of a great US President who said that we do these things
“not because they are easy, but because they are hard.”
Yes, it is hard and it sometimes feels like shooting for the stars, but I am convinced that we can do it and that the future is bright if we get out there and make it happen.
Before dealing specifically with this SI, I want to refer to a point repeatedly being raised by colleagues across the House on the delayed handling of SIs. Members have naturally argued for earlier consideration, but at the end of the day there are now huge numbers of measures going through the process and I would not like to see a process introduced that further delayed the introduction of those SIs that are urgently required.
I turn to the SI before us. I will concentrate my remarks on what has been described in Commons debates as smooth working in the supply of energy, as well as the need to avoid a crisis in supply and the development of risk preparedness planning. Providing certainty for market participation and resilience in supply systems is clearly critical if we are to plough our own furrow in the new Europe we are embarked on.
That brings me to the whole issue of interconnectors. In the Commons, Minister Kwasi Kwarteng, when pressed on interconnectors, responded that
“we intend to build many more.”—[Official Report, Commons Delegated Legislation Committee, 7/10/20; col. 3.]
I want to press the Minister on that response as it begs the question: what further interconnector arrangements are under consideration? I have in mind proposals for an interconnector with Iceland, originally made some years ago. But before referring to that particular project, I need to state that my wife is Icelandic and she has relatives who are engaged in the energy debate in Iceland.
The Icelandic proposal is to build an interconnector between Iceland and the UK. It would extend over 700 miles and would carry between 800 and 1,400 megawatts of power. I understand that it would be the largest subsea interconnector in the world. The project partners are National Grid, the Icelandic state-owned generator Landsvirkjun, and Landsnet, the transmission system operator. I want to press the Minister on where we are in the debate on a way forward. I know that she has taken a historic interest in this project as part of her keen interest in energy-related environmental matters, which also include barrages, but there have been hold-ups which are placing question marks over the whole project’s development.
The latest information available to me points to difficulties over the need to upgrade the transmission system which encircles Iceland and which is limited to 100 megawatts’ transmission capacity. An interconnector would be dependent on that ringed transmission system, which is clearly inadequate as currently operated. It would need to be substantially upgraded, if only to supply power to the interconnector. The ring is, in effect, the collector. The problem is further aggravated by the very vocal environmental protection movement in Iceland—which normally I strongly support—which is deeply concerned about damage to the visual environment from ugly power plants and overhead power lines. These considerations form part of a balance of arguments which are perfectly understandable in a country where environmental protection issues are crucial. They are key to Iceland’s ability to attract a worldwide tourist trade.
However, there are now dark clouds on the horizon for the Icelandic economy. First, the future of the aluminium industry, which hitherto has been internationally competitive, is threatened by increasing Chinese competition subsidised by cheap coal. Secondly, the pandemic has long-term implications for the Icelandic economy, which is increasingly dependent on tourism, and huge pandemic-related reductions in tourist movements have had a major effect on national income. Energy exports could certainly help alleviate downturn damage. The country will inevitably have to have that in mind when considering the perfectly legitimate concerns of the environment movement. Equally, the environment lobby there will need to consider the consequences of what may be a long-term dilemma arising out of reduced national income. No one knows where the pandemic is going to take us. The powers that be in Iceland will not be unaware of the looming dangers if alternative sources of national income cannot be found.
Admittedly, Icelandic resilience saw the country through the fisheries crisis in the 1960s and the recent financial crisis, but nevertheless the balance of these arguments may be such that Iceland has to make major compromises in its economic and industrial strategy, which could include a serious debate on potential interconnection business, from which Britain could benefit. I do not envy the heartfelt debate that may now have to take place. No doubt Björk, the Icelandic singer, will wish to consider these matters when she makes her next very substantial financial contribution to the Icelandic environmental movement.
This order is about electricity supplies in the new Europe. It will inevitably lead to the reshaping of the energy supply market, with Europe to the south and, potentially, Iceland to the north. It will be interesting to know where the Government stand on the use of these interconnectors in the policy of preparedness referred to by the Minister which stands at the heart of this statutory instrument.
My Lords, I declare my interests as set out in the register as chair of the advisory board of Weber Shandwick UK. I am grateful to the Minister for her summary of the legislation. As so often with EU exit regulations, it not only raises issues of detail in relation to the statutory instrument itself, but gives rise to a whole series of questions about our future relationship with EU member states and the extent to which the Government are prepared to work collaboratively with our European neighbours going forward. In this case, it would be to ensure the security of our electricity supply in a crisis and to provide mutual aid to neighbouring countries should they require it.
My noble friend Lord Stephen has also raised critical issues about how we get ahead of the crisis to come, particularly with regard to investment in renewables. He made the important point that we need to focus in this area, not on new nuclear. The truth is that the economics of nuclear have been destroyed by the success of renewables, largely due to the vision of the then Secretary of State for Energy and Climate Change, Ed Davey, in pursuing offshore wind in particular.
Before I turn to the broader questions, I wonder if the Minister will be able to help the Grand Committee with some of the detail of these new regulations. As she explained, the instrument makes a number of amendments to Regulation EU 2019/941. She and the Explanatory Memorandum set out that these are intended to remedy deficiencies in retained EU law by, for example, substituting references to EU institutions for references to the Secretary of State and removing obligations for the UK to provide information to EU institutions. However, a dive into the detail of the statutory instrument suggests to me that it goes beyond such necessary technical changes, and I hope that the Minister will be able to provide some clarity here.
For example, the new regulation omits Articles 5 and 6 of the existing regulation. These relate to the methodology for identifying regional electricity crises and the identification of such scenarios. This has some logic, given that we are no longer part of the regional planning framework. However, incorporated within Article 5 are the key issues to consider in identifying regional crisis scenarios, and these are then referenced in relation to national crisis scenarios under the existing Article 7. They include for example, that
“The proposed methodology shall identify electricity crisis scenarios in relation to system adequacy, system security and fuel security on the basis of at least the following risks: (a) rare and extreme natural hazards; (b) accidental hazards going beyond the N-1 security criterion and exceptional contingencies; (c) consequential hazards including the consequences of malicious attacks and of fuel shortages.”
The existing Article 7 is amended under this regulation to omit the first sentence of paragraph 3, which states that
“The national electricity crisis scenarios shall be identified on the basis of at least the risks referred to in article 5(2)”.
Presumably, this sentence is deleted on the basis that Article 5 is omitted in its entirety from the new regulations. However, this means that we no longer have any agreed minimum criteria which the Secretary of State has to apply when identifying national electricity scenarios. Can the Minister tell us what criteria the Secretary of State intends to apply? If she cannot do so, can she explain on what basis Parliament will be able to determine whether the Secretary of State has discharged his responsibilities properly in this regard?
Secondly, the new regulation omits paragraph 4 of the original Article 7, which requires member states to inform the Electricity Coordination Group and the Commission
“of their assessment of the risks in relation to the ownership of infrastructure relevant for security of electricity supply, and any measures taken to prevent or mitigate such risks, with an indication of why such measures are considered necessary and proportionate”.
Again, I understand the change to omit the reference to the Electricity Coordination Group and the European Commission, but why is there no provision to provide this information to Parliament? During the Brexit discussions, we heard much about a return to parliamentary sovereignty once we had left the EU, but we seem to have returned to executive dominance. Perhaps the Minister could deal with that allegation by explaining how Parliament will be kept informed on these matters.
The new regulation also omits Articles 8 and 9, relating to
“short-term and seasonal adequacy assessments”.
Naturally, these articles would need to be amended as they refer to EU institutions and a regional approach, but why are they omitted entirely rather than amended? Do we think we will be immune to short-term and seasonal adequacy challenges simply because we have left the EU? In fact, are the impacts of these not likely to be even more acute given that we are no longer part of the regional crisis framework?
Lastly, on issues of detail, can the Minister explain why the new regulation omits the second sentence of paragraph 7 of Article 10? This relates to the
“protection of the confidentiality of sensitive information”
on the basis of the principles set out under Article 19. As Article 19 is retained in amended form in the new regulation, why has this reference to the protection of information been removed? I hope the Minister will be able to address these detailed questions in her response.
However, beyond the detail is the wider issue of post-Brexit co-operation with our neighbours and friends. The new regulation omits requirements for regional and bilateral measures, but, surely, whatever one’s views of the European Union, it makes sense to have such arrangements in place both for our benefit and the purposes of mutual assistance. Can the Minister outline the Government’s approach in this regard?
The Government’s guidance on trading in electricity after 1 January 2021 makes it clear that, from that date, we will no longer be governed by EU legislation, which
“provides for efficient trade and cross-border cooperation in operating the electricity system”.
Instead, we will be reliant on alternative trading arrangements, which, less than two months from exit from the transition period, have still not been determined. Given our reliance on interconnectors and the Government’s estimate that, by 2025, they will account for nearly a quarter of all our supply, it is vital that we sort out these issues, establish a co-operative approach with our friends and neighbours, and start with regulations that adequately protect us in the event of an electricity crisis scenario being played out.
I thank the Minister for her introduction of the statutory instrument before the Committee today. As she said, this relates to risk-preparedness in relation to electricity failure now that the UK has left the EU, whether a deal on the future relationship with the EU is reached or not. The instrument transfers into UK law Regulation (EU) 2019/941. I will approve it, as it does not differ materially from the case that held previously, when the UK was a member state.
Great Britain will produce its own risk management plan. However, I have a few questions to ask the Minister. I have just made reference to Great Britain rather than the United Kingdom. I understand that, with the Executive now up and running again in Northern Ireland, Ministers there will be making the decisions. However, could the Minister go further and make any comments around the implications for the situation across the island of Ireland? The regulations could well be different from those in the rest of the UK for these reasons in themselves.
Risk management is a function that has to be recognised, with assessments and procedures reflected at all levels of organisational management. Can the Minister confirm that this will continue to be the situation throughout Great Britain, as before?
The EU directive included a provision that the UK’s plans were published and circulated with neighbouring countries, with the EU as a whole and with the EU co-ordination body ENTSO-E. Can the Minister inform the Committee whether Great Britain will publish and share its plans in the future? Will that be partially answered by whether a deal is struck with the EU before 31 December 2020 or not?
There are interconnectors for grid access to the continent that I am sure will continue, and I am grateful to my noble friend Lord Campbell-Savours for identifying the importance of interconnectors and their future development, especially to Ireland, and how they could reshape the UK energy market. Will Great Britain publish the risk management plans and share them within the UK, including Parliament and the devolved Administrations, or would that make the plans vulnerable to terrorist attack in some way different from the way plans were published prior to circulation under the EU? Will plans be published merely to necessary electricity authorities? Who might those authorities be in the new Great Britain context? Ultimately, is it the responsibility of the Secretary of State? I am grateful to the noble Lord, Lord Oates, for his questioning of future intentions to share plans with members of the EU, and on what basis.
I have some more questions. The Explanatory Memorandum makes reference to the Downstream Gas & Electricity Resilience and Energy Resilience and Emergency Response units at the department. Can the Minister confirm any different role in risk management terms of these units and how they co-ordinate effectively in the risk management plans? It was a little difficult to hear her introduction with the noise interference of the Division bell, and I apologise.
Finally, can the Minister say who is responsible for auditing these plans now that the UK has left the EU? There must be some transparency in regard to the risk preparedness of Great Britain in the event of failure in the electricity system. I agree with the noble Lord, Lord Stephen, that future resilience in terms of climate change and renewables needs to be recognised. These risks are more likely to be identified and challenged with management at the audit stage. Any further clarity that the Minister may be able to provide would be most helpful.
I thank noble Lords who have contributed to this debate, which has widened out considerably—as indeed it should—from the rather dry statutory instrument that we are faced with.
The noble Lord, Lord Stephen, raised an important point about the transformation of our energy system. As we transition towards net zero, maintaining energy resilience will continue to be a priority for the Government. The electricity system operator has a plan in place to transform the operation of Great Britain’s electricity system and put in place the innovative systems products and services to ensure that the network is ready to handle 100% zero-carbon by 2025. I hope that this provides some reassurance to the noble Lord, Lord Oates, that this is our goal that we are working towards. This statutory instrument will ensure the continued security and resilience of the electricity system by identifying and mitigating new risks to the system.
The noble Lord, Lord Campbell-Savours, raised the issue of additional interconnector arrangements, and in particular the proposed Icelandic interconnector. Although I cannot comment on specific projects, I can assure the noble Lord that interconnectors will continue to play an important part in our energy system. There are currently six interconnectors between the GB electricity market and near neighbours, with a total capacity of 6 gigawatts. In 2019 net imports accounted for 6.1% of total supply. There are further plans for the delivery of a large number of electricity interconnectors, adding 11.9 gigawatts to the existing operational 6 gigawatts by 2023. These interconnectors provide significant benefits, including lower consumer bills as well as security of energy supply and, after the end of the transition period, our energy system will still be physically linked to the EU. Further interconnection is in the mutual interest of the UK and the EU, and we have continued to see new interconnector projects progress.
Going back to the Iceland interconnector, I agree entirely with the noble Lord, Lord Campbell-Savours, that it sounds like an appealing project until you get into the weeds of it. While you can build a 1,500-kilometre interconnector for up to 1.2 gigawatts between Iceland and the UK, there are a number of barriers under the water, thrown up by the seabed survey, which, while not showstoppers, would make it extremely difficult to do. From what I remember of the project, the main stumbling block was that most of the energy—geothermally and hydro-generated—comes from the south-west corner of the country, yet the best place to build an interconnector is the north-east. Getting over that terrain, much of which is bedrock, would have meant that the interconnector itself could not be buried. The effect on the environment of pylons or overland HVDC cables would have been enormous. Björk is the least of the issues there, I think; the entire environmental lobby would be very exercised by the prospect. Given that tourism is such a huge part of Iceland’s economy—and has been until the pandemic—I wish the project well, but there are a lot of difficult problems to overcome.
The Government are committed to achieving a smooth end to the transition period for our energy system. We have brought forward a package of legislation to ensure that retained EU law is workable and free of deficiencies by the end of the transition period. This draft instrument falls within this category of legislation. The Government retain their obligation to produce these resilience plans on the same basis as before; this statutory instrument merely removes our obligation to circulate these plans among the EU, but it remains very much in our interest to carry out these studies—in fact, it is now set in law that we should do so. The failure to address the deficiencies of the SI would have caused uncertainty and inefficiency in the operation of Great Britain’s market regulation, the role and functions of domestic and EU bodies in the markets, and requirements on market participants.
I must stress that this draft instrument and the UK’s departure from the EU as a whole do not, and will not, alter the fact that our energy system is resilient and secure. In Great Britain, the Government have been working closely with the electricity system operator, the national grid, and the regulatory body, the Office of Gas and Electricity Markets, to ensure that measures are in place to deliver continuity of supply and confidence in the regulatory framework in all scenarios. The Government are therefore confident that the UK’s electricity system is able to respond to any challenges, whether these are as a result of leaving the EU or other challenges facing the UK, such as the coronavirus pandemic.
Our energy system will still be linked to the EU after the end of the transition period through these interconnectors. The UK, as a result, has one of the most secure energy systems in the world and the industry has well-placed contingency plans to keep energy flowing and to ensure that our energy supplies are safe. This draft instrument will support this by ensuring that the sector is well prepared for a variety of risks that could impact the system. The noble Lord, Lord Grantchester, referred to the plans that were published previously, and asked whether these will be published in the future, and to which parties. We will publish the risk preparedness plans in 2022.
This draft instrument will help maintain a robust framework for electricity risk management, with continuity for the market and certainty for market participants. It will do this by retaining relevant functions to ensure the electricity risk preparedness regulations work properly and, where necessary, revoking provisions that will no longer be relevant after the transition period.
The noble Lord, Lord Grantchester, also asked how the SI affects risk preparedness planning with Ireland. We are working very closely with Northern Irish colleagues to determine what is in the scope of the Northern Ireland protocol, and how they will comply with their obligations under the risk preparedness regulation after the end of the transition period, which they will be obligated to continue by virtue of the Northern Ireland protocol. For example, this includes the reporting function to the EU and the more difficult issue of nominating a competent authority that would feed into the EU processes.
In conclusion, this draft instrument is required to ensure continuity for our energy system, and certainty for both market participants and consumers. In doing so, it will form an important part of the GB framework for preparing, preventing, and managing electricity crises. The noble Lord, Lord Oates, raised some very important points. Apart from the broader points he raised about the investments we are making in new forms of energy and, indeed, in battery technology, I was very interested to hear of the reports of new types of energy he mentioned, and I will look at Hansard. I will write to him on the other specific points he raised on the SI, so that his detailed questions receive the detailed answers they need.
On the emergency response, BEIS is the lead department for electricity emergencies, working closely with industry partners to consider risks to the supply and ways to effectively manage these risks. BEIS leads the emergency response, working closely with industry, with plans clearly set out in the National Emergency Plan: Downstream Gas and Electricity.
I commend these draft regulations to the Committee.
My Lords, that completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room.
Committee adjourned at 6.57 pm.