Energy BILL [ Lords ] (Sixth sitting) - 4th February 2016

Here are the climate-related sections of speeches by MPs during the Commons debate Energy BILL [ Lords ] (Sixth sitting).

Full text: https://hansard.parliament.uk/Commons/2016-02-04/debates/92FEAAE2-A77C-48B1-B229-6007BCB1C1DD/EnergyBILLLordsSixthsitting

The Chair

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

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

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

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

Callum McCaig

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

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

Dr Alan Whitehead (Southampton, Test) (Lab)

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

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

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

Matthew Pennycook (Labour)

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

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

We know that the technology works. The Prime Minister no longer holds that view, I believe, given his recent remark that he did not think the technology stacks up, but witness after witness who came before the Select Committee on Energy and Climate Change during its recent hearings on CCS said that that was plain wrong. As my hon. Friend the Member for Southampton, Test outlined, 22 projects across the world show that CCS is working. Statoil’s Sleipner West project, now in its 20th year, captures 1 million tonnes of CO 2 a year, and Exxon Mobil’s Shute Creek gas processing plant in Wyoming started in 1986 and captures 7 million tonnes of CO 2 a year. Despite teething problems, the world’s first major commercial power plant to employ CCS, the Boundary Dam project in Canada, will capture 90% of the emissions from that 110 MW coal unit. We know that the technology works. The problem is that, once those 22 projects are up to speed, they will shave only 0.1% off global emissions each year, so we need a strategy for transportation and storage in particular to bring CCS to scale quickly.

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

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

Matthew Pennycook (Labour)

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

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

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

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

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

Matthew Pennycook (Labour)

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

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

The strategy would have to include some of the following elements, which I mention in the hope that the Minister will take them on board. It would need a strategy for maintaining those strategically important pieces of UK-critical infrastructure, such as Peterhead, that have been put at risk by the recent decision to withdraw CCS funding. It would need provisions for the development particularly of transport and storage, to incentivise what we know we need, which is large clusters of CCS, where multiple operations are linked into a single plant, because that is how to get the economies of scale. It would need a strategy to facilitate the industrial application of CCS, particularly in the iron and steel industry, cement production and petrochemicals. Those three sectors account for 45% of CO 2 emissions that need to be captured by 2050.

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

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

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

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

Holly Lynch (Halifax) (Lab)

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

Holly Lynch

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

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

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

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

Andrea Leadsom

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

Andrea Leadsom

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

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

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

Andrea Leadsom

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

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

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

Clive Lewis (Labour)

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

Andrea Leadsom

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

Andrea Leadsom

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

Andrea Leadsom

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

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

Callum McCaig

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

Philip Boswell

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

Andrea Leadsom

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

Dr Whitehead

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

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

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

Andrea Leadsom

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

The Chair

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

Callum McCaig

New clause 5 suggests that there should be a CfD allocation every year in which the carbon intensity of electricity generation in the United Kingdom exceeds 100 grams per kWh. That figure comes from the policy recommendations from the Committee on Climate Change in “The Fifth Carbon Budget: The next step towards a low-carbon economy”. One of its recommendations was that the Government should develop policy approaches consistent with reducing the carbon intensity of the power sector to below 100 grams of CO 2 per kWh in 2030. That compares with 450 grams in 2014 and the projection for between 200 grams and 250 grams by 2020. That last point indicates that significant and welcome progress is being made on reducing the carbon intensity of the power sector in terms of electricity generation, but it suggests that there is still a long way to go.

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

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

Callum McCaig

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

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