Here are the climate-related sections of speeches by MPs during the Commons debate Energy Bill [ Lords ] (Fifth sitting).
14:06 Dr Whitehead
This amendment seeks to clarify the position of decommissioned oil and gas plants that are not fully decommissioned before they are transitioned to a carbon capture usage and storage plant, and where financial responsibility then lies at the end of the CCUS lifecycle when it is due to be decommissioned. This amendment says that the Secretary of State must have regard for this complexity and assess where the responsibility lies .
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14:16 Andrew Bowie (Conservative)
The conditions to qualify for change of use relief are set out in sections 30A and 30B of the Energy Act 2008. In turn, it is proposed that sections 30A and 30B be updated by clauses 91 and 92 of the Bill. The amendments made by clauses 91 and 92 mean that, to qualify for the relief, the previous oil and gas owner would need to pay a top-up amount into the decommissioning fund to reflect the decommissioning liability that that previous owner is being relieved of. In addition, a decommissioning notice under section 29 of the Petroleum Act 1998 must have been served on other persons, such as the CCUS operator who will ultimately have to decommission the carbon storage installation at the end of its life.
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Andrew Bowie (Conservative)
Clause 88 gives the Secretary of State the power to make regulations on the provision of security for the decommissioning costs of CCUS transport and storage networks. That includes enabling the Secretary of State to make regulations requiring CO 2 transport and storage companies to establish decommissioning funds for each of their storage sites and associated transport networks. We must ensure that CCUS is prepared for decommissioning in an appropriate way to mitigate any long-term impact on our environment. Clause 89 sets out supplementary provision, including regulations made under clause 88, relating to the financing of the decommission of CCUS assets.
The Petroleum Act 1998 is, as I have set out, the principal legislation governing the decommissioning of offshore oil and gas. In addition, section 30 of the Energy Act 2008 allows for the decommissioning of carbon storage installations. Clause 90 makes several amendments to section 30 of the 2008 Act by clarifying how the part IV decommissioning regime applies in a CCUS context.
Industry has identified certain barriers to the repurposing of certain CCUS structures, which the Bill will address. Specifically, under the 1998 Act, the Government can reach back to current and previous owners of an installation or pipeline to carry out the decommissioning of that asset. That will create a chain of liability through the asset’s life, and may act as a barrier to repurposing. Owners of oil and gas assets may consider the relative uncertainty of CCUS decommissioning liabilities too great a risk to carry.
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14:29 Andrew Bowie (Conservative)
This group of clauses deals with designating a carbon capture, usage and storage strategy and policy statement. Although day-to-day regulatory decisions will be made independently by the economic regulator, policy direction for carbon capture and storage will continue to be directed by the Government. Clause 94 provides that the Secretary of State may designate a strategy and policy statement for CCUS, which the economic regulator must have regard to in carrying out its functions. Such a statement would set out the strategic priorities for CCUS policy, the particular outcomes to be achieved as a result of the implementation of that policy, and the roles and responsibilities of persons who are involved in implementing that policy or who have other functions affected by it.
Providing for a strategy and policy statement to be designated is consistent with the approach in other economically regulated sectors, including the energy sector. Given that there is potential for a CCUS strategy and policy statement and an energy strategy and policy statement to overlap in certain areas, in preparing a CCUS strategy and policy statement the Secretary of State must take account of any energy strategy and policy statement that has been designated.
Clause 95 requires the economic regulator to have regard to the strategic priorities set out in a CCUS strategy and policy statement and to carry out its CCUS-related functions in a way that aims to achieve the policy outcomes set out in the statement. In carrying out its functions in the manner best calculated to achieve the policy outcomes, the economic regulator remains subject to the application of the principal objectives in clause 1 of the Bill. As defined in this clause, in carrying out certain functions—those related to the determination of disputes and to competition—the economic regulator should not be required to take account of a CCUS strategy and policy statement. Nor do the duties set out in relation to a CCUS strategy and policy statement affect or override any other legal obligation or duty upon Secretary of State or the economic regulator under this Bill or any other Act. If the economic regulator considers that a policy outcome contained in the strategy and policy statement is not realistically achievable, it must inform the Secretary of State.
Clause 96 establishes timeframes and circumstances for reviewing a CCUS strategy and policy statement. The process of setting policy direction should not occur more often than once a Parliament. That reduces the risks associated with frequent change to policy priorities, and ensures a stable and predictable regulatory landscape for investors. However, there should be scope to review outside that timeframe if, for example, a general election has taken place outside this cycle, in order to ensure the strategy and policy statement reflects the priorities of the Government of the day. A review may result in a new statement, revisions to the existing statement or the conclusion that the existing statement remains relevant and appropriate. This is consistent with the approach in any other regulated sector and with the reviewing of an energy strategy and policy statement, as set out in the Energy Act 2013.
Clause 97 sets out the procedure the Secretary of State must follow before a CCUS strategy and policy statement can be designated. This process provides for consultation and parliamentary approval of a CCUS strategy and policy statement. The procedure set out in this clause follows the procedure for designating a strategic policy statement under part 5 of the 2013 Act. Therefore, I ask that clause 94 stand part of the Bill.
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14:30 Dr Whitehead
I have no particular objections—indeed, I strongly support the strategy and policy statement and everything that goes with it as far as the CCUS is concerned. As the Minister has pointed out, this does not cut across any other strategy and policy statement; conversely it should be guided by other strategy and policy statements where appropriate. Later, we will debate the extent to which the regulator, Ofgem, may have a strategy and policy statement of its own that gives it a carbon reduction net zero imperative in its operations. I assume that under those circumstances this particular strategy and policy statement would be subject to that strategy and policy statement as far as its operation is concerned. Will the Minister confirm that?
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14:31 Andrew Bowie (Conservative)
I am happy to confirm that. The economic regulator, Ofgem, would be required to take into account the strategic priorities set out in any CCUS strategy and policy statement when carrying out its CCUS-related functions. Clause 40, which we have already debated, requires Ofgem to publish a document as soon as is reasonably practicable after a strategy and policy statement has been designated, setting out the strategy it intends to adopt to further the delivery of the policy in the statement and how that will be implemented. I am very happy to confirm that that would be the case.
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14:44 Andrew Bowie (Conservative)
In terms of whether an organisation that was set up following the oil price crash in 2014-15 with the explicit aim of supporting the oil and gas industry and maximising economic recovery can work, and can have within its purview licences being issued for carbon capture, usage and storage, I disagree: I think that they are perfect bedfellows. One complements the other; in fact, the skills and requirements of the companies involved in oil and gas extraction are very much involved in the operation, or potential operation, of CCUS and other connected technologies. Therefore, I think that the OGA, the NSTA—call it what you will—is the perfect authority that should hold the power to issue those licences and have regulatory control over that industry as we move forward.
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14:47 Andrew Bowie (Conservative)
Clause 103 enables the Secretary of State to incur expenditure and provide financial assistance for the purpose of encouraging, supporting or facilitating activities for carbon capture, transport and storage, the production of low carbon hydrogen, and the transport and storage of hydrogen. This will enable the Government to deliver on their commitment of £20 billion investment in CCUS and support the establishment and subsequent expansion of the first two industrial clusters by the middle of this decade, and a further two CCUS clusters by 2030. Government support for CCUS will incentivise private investment, economically benefit our industrial heartlands and support in the region of 50,000 jobs by 2030.
It will also help enable the Government to deliver on their ambition for up to 10 GW of new low-carbon hydrogen production capacity by 2030, subject to value for money and affordability. That has the potential to unlock up to 12,000 jobs and £9 billion of private investment and could play a critical role in the UK’s commitment to net zero by 2050. It could be supported by the development of hydrogen transport and storage infrastructure, which represents the critical next step in the growth of the hydrogen economy to meet our levelling- up ambition. I commend Government amendment 21 and clause 103 to the Committee.
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14:57 Dr Whitehead
There are all sorts of issues in the current debate about the extent to which heat pumps can or cannot do the entire job. Within that debate, whatever the final assessment of the points at which heat pumps really do not work, we know that, under some circumstances, some heat pumps do not, and pretty likely never will, work. For those properties, it is therefore important that, rather than leaving them as they are, they have other low-carbon plans available so that we do not decarbonise most heat in properties throughout the country but leave behind a residual that does its own thing with its current heating arrangements and the carbon implications.
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Andrew Bowie (Conservative)
I thank the hon. Gentleman for his comments on his amendment. The Government have been clear that a range of low-carbon technologies will be needed to play a role in decarbonising heating and reducing the nearly 50% of UK fossil fuel gas demand that heating represents. District and communal heat networks with low-carbon heat sources have an important role to play in all future heating scenarios, as do heat pumps. Work is ongoing with industry, regulators and others to assess the feasibility, costs and benefits of converting parts of gas networks to supply 100% hydrogen, for example, for heating. Other technologies such as solid biomass and liquid biofuels, as well as direct electric heating where appropriate, may also play a supporting role.
The clean heat market mechanism provided for by this measure is another key part of our policy action. Ultimately, it will be for the market—and consumers and building owners—to determine the best solutions and combinations of technologies within the performance standards and market signals that it is the role of His Majesty’s Government to provide. Through establishing a strategic approach to developing that policy framework while building up key supply chains, the Government’s “Powering Up Britain” plans have set us on track for net zero. Another plan seeking somehow to prescribe the right solution for every property is not what is needed right now. I therefore respectfully urge the hon. Member for Southampton, Test to withdraw the amendment.
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