Energy Bill

Public Bill Committee, 5 January 2010.

Hugh Bayley (Labour, City of York)

Before we begin, I have a few preliminary announcements. Members may, if they wish, remove their jackets during Committee sittings, or, given the current weather, put on their overcoats—no hoodies though; I want to see who’s who. Please would all Members ensure that mobile phones, pagers and so on are turned off or switched to silent mode during sittings. I remind the Committee that there are money and Ways and Means resolutions connected with the Bill, and they are here in the room. I also remind Members that adequate notice should be given of amendments. To be eligible for selection at a Tuesday sitting, amendments must be tabled by rise of the House the previous Thursday, and for a Thursday sitting, amendments must be tabled by the previous Monday. As a general rule, I and my fellow Chairman do not intend to call starred amendments.

Not everybody may be familiar with the process of taking oral evidence in Public Bill Committees, so it might help if I briefly explain how we will proceed. The Committee will first be asked to consider the programme motion on the amendment paper, for which debate is limited to half an hour. We will then proceed to a motion to report written evidence, and then to a motion to permit the Committee to deliberate in private in advance of the oral evidence sessions, which I hope we can take formally. Assuming that the second of those motions has been agreed to, the Committee will then move into private session and, once it has deliberated, the witnesses and members of the public will be invited back into the room and our oral evidence session will commence, at around 11 am. If the Committee agrees to the programme motion, it will hear oral evidence today and Thursday, and revert to the more familiar proceedings of clause-by-clause scrutiny next week. I call the Minister to move the programme motion standing in her name.

Joan Ruddock (Labour, Lewisham, Deptford)

I beg to move,

That—

(1) the Committee shall (in addition to its first meeting at 10.30 am on Tuesday 5 January) meet—

(a) at 4.00 pm on Tuesday 5 January;

(b) at 9.00 am and 1.00 pm on Thursday 7 January;

(c) at 10.30 am and 4.00 pm on Tuesday 12 January;

(d) at 9.00 am and 1.00 pm on Thursday 14 January;

(e) at 10.30 am and 4.00 pm on Tuesday 19 January;

(f) at 9.00 am and 1.00 pm on Thursday 21 January;

(2) the Committee shall hear oral evidence in accordance with the following Table:

TABLE

Charles Hendry (Conservative, Wealden)

We discussed the programme motion previously and are broadly happy with that arrangement.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Happy new year to you, Mr. Bayley, and colleagues. I have no problem in principle with the programme motion, but a practical issue arises from the welcome fact that the Secretary of State is to make a statement this afternoon on the Copenhagen summit, which is obviously a matter of interest to all members of the Committee. It is scheduled to be the second statement, which means that it will be at a slightly uncertain time, but I would be grateful if the Committee would consider allowing us to be present for that. I think that there is a general interest, and it is highly relevant to what we are talking about. My best advice is that it will not start until after 4 o’clock—probably more like 4.15 pm—and I wonder if we could therefore be prepared to adjourn this afternoon’s sitting to attend the statement and then return. That is not seeking a change to the programme motion, but accommodating—

Hugh Bayley (Labour, City of York)

If the Committee wanted to do that we would have to amend the programme motion. I am asking the Clerk to look at that.

Joan Ruddock (Labour, Lewisham, Deptford)

I agree with the hon. Member for North Southwark and Bermondsey. It would be in everybody’s interest, and I was going to ask to be excused from the Committee for that time and to leave my colleague in his place. We would be happy if it were possible to make that adjournment.

Hugh Bayley (Labour, City of York)

There is a practical problem, which is that we have invited witnesses to come on the assumption that we are starting at 4 o’clock. Is it the best estimate that the statement will start at about 4.15 pm?

Joan Ruddock (Labour, Lewisham, Deptford)

Probably. One never knows.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

The practical solution, Mr. Bayley, would be that we start with the witnesses at 5 pm instead of 4 pm. That is the realistic implication, because by then the significant part of the statement would be complete.

Hugh Bayley (Labour, City of York)

It seems to me that that is what the Committee wants to do, but the practical issue is that we have scheduled the first group of witnesses this afternoon to begin at 4 o’clock, the second at 5 and the third at 6. It seems sensible to keep the Green Alliance and WWF at 5 and Ofgem at 6. Does the Committee want to run an hour later?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

It would be easier for everybody if we were to do that today.

Derek Twigg (Labour, Halton)

I have other commitments, so I want to stick to the schedule.

Hugh Bayley (Labour, City of York)

Members have the programme motion in front of them, which suggests that the Committee meet at 4 pm this afternoon. Will anybody move an amendment to the motion?

Joan Ruddock (Labour, Lewisham, Deptford)

I do not seek to move an amendment to the motion, but perhaps if the three Front-Bench spokespeople were in attendance at the statement, that would be to our satisfaction and not to the detriment of the Committee.

Hugh Bayley (Labour, City of York)

Mr. Hughes?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I cannot speak for colleagues; I was trying to accommodate the general interest in ensuring that the statement was well supported and well responded to. It is a practical suggestion, if it works and if colleagues are unwilling to run later—

Hugh Bayley (Labour, City of York)

The practical problem is that we would have to reschedule the witnesses and I cannot tell you whether that would be possible. I think that the wisest course is to meet at 4 pm as proposed in the programme motion, but to recognise that one Front Bencher from each party—including you, Mr. Weir—may not be present for the first hour of questioning.

Hugh Bayley (Labour, City of York)

Copies of any memorandums that the Committee receives will be made available in the Committee Room.

Hugh Bayley (Labour, City of York)

As a consequence of having passed that motion, I ask the members of the public in the room to retire. We will commence the oral evidence sessions at around 11 am, but when we have decided who will ask which questions somebody will announce that we are ready for the public hearing.

Hugh Bayley (Labour, City of York)

We will now hear formal evidence. For the record, could the witnesses please introduce themselves to the Committee?

Hugh Bayley (Labour, City of York)

Thank you all for coming to speak to us today. Before calling Brian Binley to ask question one, I remind Members that questions should be limited to matters within the scope of the Bill and that we must stick strictly to the timings in the programme motion agreed by the Committee. I hope I do not have to cut people off mid-sentence, but I am required at 12 o’clock precisely to bring this panel to an end. As I have indicated to colleagues, we will work through formal questions before I turn to the Front Benchers to see whether they have further questions.

Brian Binley (Conservative, Northampton South)

Thank you, Mr. Bayley. The panel will know that Professor Stuart Haszeldine has described the CCS—carbon capture and storage—competition as “dead on its feet”, with only ScottishPower potentially being able to deliver by 2014. How feasible is the Government’s target of having a CCS demonstration project up and running by 2014?

Brian Binley (Conservative, Northampton South)

The Government hope to have four demonstration projects running by that time. Is that feasible?

Brian Binley (Conservative, Northampton South)

It certainly is the aspiration to have four projects running as a part of that programme.

Brian Binley (Conservative, Northampton South)

Can I finally ask whether you feel that the Government will have the money available to fund the projects in the way they hope?

Tobias Ellwood (Conservative, Bournemouth East)

Britain is obviously involved in carbon capture and storage. Looking over your shoulder, are you aware of any other projects around the world that are at this level or ahead of us in the game, that we could use as a successful example of a CCS project?

Tobias Ellwood (Conservative, Bournemouth East)

I pose the question because there is a lot of talk and positive inclination towards carbon capture and storage, but it is a very new science. I was searching for evidence to say that it is a workable solution. You are talking about continuing to do test projects and pursuing various initiatives across Europe. Are you aware of anywhere else outside your own interests that already has it up and running?

Tobias Ellwood (Conservative, Bournemouth East)

Is that why you think, following on from the question asked by my hon. Friend the Member for Northampton, South, it is questionable as to whether we will be able to do this by 2014?

John Robertson (Labour, Glasgow North West)

You mentioned the Kingsnorth CCS tower and how it has been delayed. Five years ago at a Scottish Committee, it was said that the earliest we could have a CCS plant up and running properly would be 2025. With the four projects that we are talking about going ahead, is there any likelihood at all of reaching that 2025 deadline that the scientists said was the earliest possible time we could expect up and running, fully functional CCS?

John Robertson (Labour, Glasgow North West)

For one. We are not talking about projects; we are talking about going on to the next step.

John Robertson (Labour, Glasgow North West)

Perhaps I could ask Sara Vaughan whether the delays at Kingsnorth are an example of what is going to happen in years to come. Will you give us some kind of solid promise that those things are going to be in place and by a reasonable time?

Michael Weir (Scottish National Party, Angus)

You have talked a lot about competition, but the reality is that only ScottishPower and E.ON are now involved. Can you tell us why other companies have dropped out? Given the situation at Kingsnorth is there, in reality, a competition going on?

Michael Weir (Scottish National Party, Angus)

If 2014 is no longer the important criterion, we were told that carbon capture and storage was essential to meet our climate change targets. If you are now telling us that 2014 is slipping, and might be slipping badly from what we hear, what does that say about our ability to meet those targets?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Procrastination seems to be not only the thief of time. On this issue, it appears to me that what the big power companies actually want is for somebody else to foot the bill, so that at some future time you would make all the profits. That is the reality of what we are talking about and that has been the case for some considerable time. Picking up on John Robertson’s point, it is not simply about building a demonstrator; the Bill is really about getting a demonstrator that moves quickly into a fully fledged CCS-equipped plant. Given that the European Commission has allocated some â‚Ź165 million to a possible CCS facility using the Yorkshire power stations, why are you not jumping at that not only to use it as a demonstrator but to move very quickly, post-demonstration, into a fully operational post-capture, retrofit system?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

This is the point of my question. Would the three of you support amendments to the Bill that widened its scope in order to take in pre-combustion as well, to allow areas such as Yorkshire and the Humber—which are some of the most polluting areas in Europe, never mind in Britain—to be able to be fully utilised?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Do you think that the Bill, with some amendment, is sufficient to deal with those issues?

Hugh Bayley (Labour, City of York)

Charles, you are trying to catch my eye.

Charles Hendry (Conservative, Wealden)

I have a specific point on that: how many clusters can the UK sustain? We have a project in the firth of Forth and the Thames. That is difficult to put into a cluster, and there is obviously the Humber in the middle. Is it reasonable for the UK to look at having three clusters or should it be prioritising and saying that there can be only one?

Charles Hendry (Conservative, Wealden)

On a more general question, can you help us to understand how the competition has worked and not worked? Most of the companies involved in bidding have pulled out and it is significantly behind schedule on where it had hoped to be. What has gone well with the consultation process and the bidding and what could have been done better, so we can learn for the future?

Hugh Bayley (Labour, City of York)

This needs to be the last question on carbon capture.

Michael Weir (Scottish National Party, Angus)

I want to follow up something that Sara Vaughan mentioned about the pipeline and the gas. The Bill restricts the funding to plants powered by coal or coal and biomass. Should that be extended to cover natural gas and other fuels?

Alan Whitehead (Labour, Southampton, Test)

Can I turn to the method of funding CCS? You mentioned, Mr. Steele, that the funding had been sorted out and is to be via the CCS levy. What principles do you think should be applied in that levy? Should it be market share? Should it be profit? Should it be turnover? How could it be levied effectively and fairly?

Alan Whitehead (Labour, Southampton, Test)

So you are suggesting that this should be universal? Should anyone be exempt from paying the levy—such as, for example, renewables suppliers?

Hugh Bayley (Labour, City of York)

I think we should move on to social tariff questions.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Obviously, the Government are moving in the Bill from a voluntary system to a compulsory one. Do you accept that that is because the voluntary system has failed?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

So you both support the statutory footing, although you do not think that, so far, the system has failed. Do we therefore have a common definition? There are lots of debates about fuel poverty, but, for the purpose of this one, are you prepared to accept that the normal definition—people spending more than 10 per cent. of their income on their fuel bills—is the right one and should be the backdrop to the debate about what we do next and what we seek to achieve?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Thank you. I may want to return to that, but may I now ask about the cost? The implication of the legislation is that the amount spent on social tariffs might be increased. Consumer Focus has estimated that, in the past year, across the board, your companies spent half a per cent. of your turnover on social tariffs. What was the figure in cash terms and what was the percentage in your spend terms for the last full year for which you have the figures? Moreover, what will the Bill’s implication be in relation to how much you expect it will cost you for the first year of the compulsory system, in terms of both cash and percentage?

Hugh Bayley (Labour, City of York)

Simon, I have one or two other colleagues to bring in on this topic.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Can I ask one last question? Then I will hand over to colleagues.

Hugh Bayley (Labour, City of York)

Yes, of course.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

One of the other definitional questions is, “Which groups should be included?” Chronic illness is a suggestion, as well as old age. Can you give us your wisdom as to the categories that should benefit, including on the controversial issue—if you wish to comment on it—of whether everybody of pensionable age should benefit?

John Robertson (Labour, Glasgow North West)

Can I get you to write to us with the up-to-date figures and percentages that the questions asked by the hon. Member for North Southwark and Bermondsey were about?

Hugh Bayley (Labour, City of York)

Could I just go back to this question of additional information? I think Simon Hughes and John Robertson were asking the question in relation to your individual companies—how much your companies spent on the social tariffs last year. Sara said she would be able to provide information. Rupert, would you provide it in relation to ScottishPower?

Hugh Bayley (Labour, City of York)

Thank you. As we will discuss this in Committee early next week, would you provide the available information by the end of this week?

Natascha Engel (Labour, North East Derbyshire)

Can I just add something? It would be most interesting to have the projected figures after this is on a statutory footing. I mean the future projected figures of the amount spent on social tariffs by individual companies after this is on a statutory footing, as opposed to past years, when it has been on a voluntary basis.

Hugh Bayley (Labour, City of York)

That point was well made. I want to call Anne Main, who has waited patiently.

John Robertson (Labour, Glasgow North West)

We know what the prices were, so we can have a percentage up to date.

Hugh Bayley (Labour, City of York)

Thank you, both. Anne Main.

Anne Main (Conservative, St Albans)

Thank you. I noted with interest, Mr. Steele, that you said it was about finding people to ensure that they get the support they may need. Would you then support the provision in clause 10 of the Bill to allow a redistributive mechanism to recognise that some suppliers have more people eligible for social tariffs? Secondly, do you think that having all these different targets—of people who are elderly, chronically sick and so on—is going to be so complex that it may be unworkable? I am a little concerned about whether we are going to get it focused enough and I would like your view on that.

Anne Main (Conservative, St Albans)

I would like to go to Ms Vaughan on that point. You said that there were customers who could be helped in certain ways—some with more installation, others with the billing. Do you think that billing has been addressed enough in the Bill, so that—rather than it being in legislation—customers can have information about how to help themselves and about how you can help them?

Hugh Bayley (Labour, City of York)

We should move on to the question of Ofgem’s powers. Mike Weir, you were going to kick off on that.

Michael Weir (Scottish National Party, Angus)

What impact will the provisions in clauses 16 and 17, which require Ofgem to take into account carbon emissions and security of supply, have on how Ofgem works?

Michael Weir (Scottish National Party, Angus)

One of the great arguments has been on the question of transmission charges and their impact on renewables. Do you think that putting those under Ofgem’s regulation will mean that it will take a different view on issues such as these? Will it impact to that extent, or is it more of an aspirational thing for the future, as you seem to imply?

Michael Weir (Scottish National Party, Angus)

We could have an interesting argument on that one. Moving on, specifically to national grid, clauses 18 to 25 introduce a market power licence condition, strengthening Ofgem’s power to investigate sanctions in respect of abuse of the market. Can you explain how the current system of balancing transmission-related constraints gives electricity generating companies an opportunity to abuse their market position? To what extent is that being done?

Hugh Bayley (Labour, City of York)

I am going to turn now to John Robertson. I said that at a quarter to 12 I would run around the Front Benchers to see whether they had any further questions. If we have some time left I may come to other colleagues who want to ask about these regulatory matters.

John Robertson (Labour, Glasgow North West)

I want to come back to a question that Mike Weir asked and which I do not think you answered. To what extent have the companies exploited the system?

John Robertson (Labour, Glasgow North West)

I am sorry, Sara. I want to ask Rupert a question because his company is one of the companies that were investigated in the past, along with Scottish and Southern Energy, following the allegations that they had supplied electricity to National Grid at excessive prices. This did not go forward under the Competition Act, mainly because of the time constraint; basically, they were not sure whether we would get a result on it. Do you think the market power licence condition that is going to be introduced in clauses 18 to 25 will allow the Bill to provide a fair and proportionate means of dealing with these kinds of alleged abuses?

John Robertson (Labour, Glasgow North West)

And the market power licence condition?

Hugh Bayley (Labour, City of York)

I must turn now to the Front Benchers.

Charles Hendry (Conservative, Wealden)

Going back to the carbon capture element, the objective of the Bill must surely be to make Britain one of the most attractive places in the world for CCS development. We have the skills in the North sea, we have the sequestration sites and we have the need. Does the Bill on its own move us from where we are—I would argue that we are lagging globally—to being in a position where we will be natural leaders? Does it give you, particularly the two companies with foreign parentage, the ability to go to your boards in Germany and Spain and say, “This now does enough to make Britain the most attractive place to invest”?

Charles Hendry (Conservative, Wealden)

Do you think that primary legislation is needed to address those issues or can it be done through different policy announcements or secondary legislation?

Charles Hendry (Conservative, Wealden)

Okay. On a different part of the Bill, can I ask your views on clause 27, “Adjustment of charges to help disadvantaged groups of customers”, which gives the Secretary of State power to make a regulation to require charges to be adapted if, in his view, some customers are being treated less favourably than others? Are you anxious about the very open-ended nature of that or is that something you are comfortable with and think is an important move forward?

Hugh Bayley (Labour, City of York)

Can I ask whether Simon or Mike have questions they want to come in with?

Simon Hughesindicated assent.

Mr. Weirindicated dissent.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I should like to ask one question on CCS and one on charges. On CCS, there is an argument that says that, given developments in the States and elsewhere, the technology will be developed in other countries and it is nonsense for us to replicate other efforts and spend all the money here, because we will be able to benefit from other countries and other companies—your companies—elsewhere doing the same. Is there a real need in your mind for us to proceed to develop CCS, to have the funding and to work through the technology on UK land?

You have talked about the uncertainties, but is it not better just to be told from the beginning, and should not the Bill tell you, that all new coal-fired power stations will have to have CCS? Would that not give you much better certainty than this possible retrofitting later—this equivocation—that is the policy at the moment?

Hugh Bayley (Labour, City of York)

I have no discretion to extend this part of the sitting beyond 12 o’clock, so I turn to the Minister.

David Kidney (Labour, Stafford)

I have two issues to raise on social price support. First, the energy companies usually get nothing but brickbats, so I say thank you for taking part in the data matching pilot that is to take place this year. Thank you also for overspending on the voluntary agreements—the extra £57 million in year 1; keep it up! On that point, what does each of your companies do under the voluntary agreement other than offer a social tariff?

David Kidney (Labour, Stafford)

And you, Sara?

David Kidney (Labour, Stafford)

Sara, how does the reconciliation mechanism benefit your company if the measure is in kilowatt-hours rather than customer account numbers?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Do I have time for one question?

Hugh Bayley (Labour, City of York)

Simon, you have about 50 seconds and counting before the chopper comes down.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Clause 26 proposes allowing Ofgem to impose penalties on companies over a five-year period rather than a one-year period. Would you have any objection if that allowed complaints already lodged, or arising from issues that have already happened, to be investigated for five years—that is, it would not be simply prospective, but would deal with issues that have already arisen?

Hugh Bayley (Labour, City of York)

You had better stop there, Simon, or there will be no time for an answer.

Hugh Bayley (Labour, City of York)

Thank you. That brings us to the end of the time allocated by the Committee to ask questions of these witnesses. On its behalf, I thank Rupert Steele, Sara Vaughan and Nick Winser for attending the sitting and for their answers. Could the next set of witnesses please come forward?

Hugh Bayley (Labour, City of York)

Good afternoon. I would like to welcome the second panel of witnesses. Could you please introduce yourselves to the Committee?

Hugh Bayley (Labour, City of York)

Thank you very much for coming to meet and talk with us today. I call Brian Binley.

Brian Binley (Conservative, Northampton South)

Just to prove that this is not a game of two halves, I shall ask questions similar to those that I asked in the first part of the sitting. I would like to know from each of you how feasible the Government’s target is of having a CCS demonstration project up and running by 2014. I do not care who kicks off.

Brian Binley (Conservative, Northampton South)

But in seriousness, we have been talking about this issue for some time. Is that really a viable answer to give us when you should have been working on this some time ago?

Brian Binley (Conservative, Northampton South)

Any other comments?

Brian Binley (Conservative, Northampton South)

Is the real truth that you really did not want to get involved in this rather frontier, pioneering stuff and you wanted other people to do it? What other factors made you decide not to be involved in the competition?

Tobias Ellwood (Conservative, Bournemouth East)

Looking at the statistics, the amount of electricity that you supply, whether by coal or otherwise, is impressive from the UK perspective. Therefore it is quite sad that you have not been able to embrace this opportunity to participate in carbon capture and storage. You obviously have your own reasons and you have illustrated some of those now. They seem to hinge round the concern about pre-combustion. If the Bill were to be amended so that funding could apply to pre-combustion, although there is a question as to whether it is the Bill itself or just the intention from a retrofit perspective, would that change your stance at all?

Tobias Ellwood (Conservative, Bournemouth East)

How do the other panellists feel?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

This is really important. Does the Bill as currently drafted give sufficient encouragement and an appropriate regulatory framework for pre-combustion for the three remaining plants to go forward? Is all the pipework, which is essential if we are to move from demonstrated to full production, covered in the Bill? Can you give the Committee sufficient comfort that our drafters have got it right, or should they be sacked?

Tobias Ellwood (Conservative, Bournemouth East)

May I ask David Mannering a specific question? You mentioned that you were at advanced stages with the Government on looking at a project in Tilbury. For the record, can you state why you decided to withdraw?

Tobias Ellwood (Conservative, Bournemouth East)

So Brian Binley was right when he suggested that you are allowing other people to do the dirty work and see what comes up.

Hugh Bayley (Labour, City of York)

I should say that a lot of colleagues are trying to catch my eye on this group of questions, so I ask colleagues to be brief.

Michael Weir (Scottish National Party, Angus)

I want to follow up on pre and post-combustion. Given the terms of the Bill on restricting funding and the terms of the Government’s competition, what realistic chance is there of any pre-combustion research and development being done in the UK in the current circumstances? Has that boat effectively now sailed? Is it now post-combustion or nothing?

Michael Weir (Scottish National Party, Angus)

What sort of time scale would you be looking at for that? Given that many of our stations run on natural gas, it seems crazy that we are not thinking of looking at that, at least in the short term.

Hugh Bayley (Labour, City of York)

I wonder whether the Minister will clarify.

Joan Ruddock (Labour, Lewisham, Deptford)

I am very happy to clarify that point. There is scope for both pre and post-combustion. That is covered by the levy arrangements proposed in the Bill.

Tobias Ellwood (Conservative, Bournemouth East)

But Joan, that did not apply to the trials and that is the problem.

Hugh Bayley (Labour, City of York)

One at a time, please.

Joan Ruddock (Labour, Lewisham, Deptford)

There is a competition that is still continuing for one demonstration project. That is for post-combustion. We have agreed that there will be a total of four and so there remain three that could conceivably be pre or post-combustion. The limit is on the first competition project, not the subsequent three projects.

Hugh Bayley (Labour, City of York)

I say gently but firmly to colleagues that we have witnesses here and this is not the time to debate the issues that we will cover in our clause-by-clause deliberations. Mike, did you have a further question?

Michael Weir (Scottish National Party, Angus)

No, I am fine.

Alan Whitehead (Labour, Southampton, Test)

You are not all participating in the competition, but you are all likely to pay the levy. Do you think that the best way of securing a fair allocation of the levy is to go for simplicity, for carbon intensity or for other methods that might reflect other views of what a fair levy might be?

Alan Whitehead (Labour, Southampton, Test)

But with respect, there will be a renewable heat incentive.

Alan Whitehead (Labour, Southampton, Test)

On the question of the allocation of the levy, a lot of this, as Dr. MacLean has mentioned, is still in the lap of secondary legislation, or will be. Do you have a view about the extent to which that secondary legislation might incentivise allocations through knowledge sharing? Should the knowledge sharing simply be a public good, as a result of the allocation, or should those who are the first movers perhaps receive some benefit, as a result of that allocation?

John Robertson (Labour, Glasgow North West)

This question was asked of the previous group of witnesses. The Bill restricts funding to plants powered by coal, or by coal and biomass. Should it be extended to cover natural gas and/or other fuels? I get the feeling that the answer will be yes, so could you explain why?

John Robertson (Labour, Glasgow North West)

Philip, you seem to be outnumbered. What do you say?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I am pleased to find that you agree with social good—that was quite an exciting answer you gave earlier—but can I return to pre-combustion?

There seems to be a huge advantage that none of you have mentioned, which the previous panel did not mention either. If you go to post-combustion, you end up with CO2, which is a cost in terms of being able to transport and store it. If you go for pre-combustion, you are creating hydrogen, which could be used and sold extensively for other purposes, particularly involving the transport revolution, including for hydrogen fuel cells and what have you. Have any of your companies factored in the effects of being able to develop a hydrogen economy as part and parcel of future pre-combustion use of carbon capture?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I am worried that the Bill is leading us down a track of post-combustion. You have probably gathered that my particular interest is to try to move it in a different direction. The technology will be redundant by the time that we have completed the demonstrators, because the science is moving on at such a pace that if we are going to attract the Chinese, particularly, into this market, pre-combustion will be the only way for us to have a much more saleable technology in terms of using fossil fuels for other chemical processes. Do you agree with that?

Hugh Bayley (Labour, City of York)

We really have to move on. We have only 15 minutes or so to ask questions about social tariffs, Ofgem and regulation before I turn to the Front Benchers.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I will not exactly replicate the questions to colleagues, but rather I will focus on some of the specifics.

First, David, your company made a submission to our Committee about social tariffs that has some pretty robust comments in it. It says that you support a social price system in principle, but it is critical of the proposals. You also say that there needs to be a whole look at the winter fuel payments scheme and so on. Describe for the Committee, if you will, what you would now wish us to do in the legislation as we change it. I accept the premise, but let us change from a voluntary to a compulsory system. Describe what you think the system should be.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Can you just hold it there? You are beginning to open up the argument. Can I short-circuit that by asking all four colleagues, given that we have a little time before we come on to this part of the Bill, if they would each let us have a note about how they see a compulsory scheme best working? The beginning of next week would be helpful. Can I ask David to finish by asking if he supports the principle of clause 10, which would allow the Secretary of State to create a scheme to redistribute costs between suppliers? Do you accept that as a principle?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

May I ask one more question? I ask all of you this, starting with David Love. The question we asked to colleagues before: in the last year for which you have the records, how much of your current spend is on social tariffs and what do you each project your spend to be under the first year of a regulated compulsory regime?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

So you spent £10.6 million?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Philip?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

And was that what you had targeted and expected?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

By a margin of about what—10 per cent. or 20 per cent.?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

David?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Keith?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

And you could let us have your best-guess projection, for the first year of a compulsory system. Obviously, there are lots of variables, but you must have a view on whether it would cost you double the amount, or treble the amount.

Hugh Bayley (Labour, City of York)

I think, actually, in view of the time, we probably want to move on to our final questions about regulation. I hope that the four companies will be able to respond positively to the questions that Simon has asked, if possible by the end of this week. That may limit the amount of thought and research you can put in, but it will mean that the Committee will have it in time. Thank you for that. Mike.

Michael Weir (Scottish National Party, Angus)

I want to start with the same question we asked the other panel. What do you think the impact the provisions in clauses 16 and 17—for Ofgem to take account of carbon emissions and security of supply—will have on the way they work, if any?

Michael Weir (Scottish National Party, Angus)

Picking up on some of these issues, the other part is the market power licence condition. ScottishPower and Scottish and Southern Energy have both had concerns about aspects of the balancing charges. Do you agree with ScottishPower that it would be contrary to consumers’ interests because it would put a significant question mark on investment?

Hugh Bayley (Labour, City of York)

I am trespassing on Charles Hendry’s time, but you wanted to ask a particular question, John, did you not?

John Robertson (Labour, Glasgow North West)

I want to ask about the market power licence condition itself, David Mannering. There is a really good case for having it. We agree that there are abuses; we have noticed the system is being abused by companies. The problem is that the Competition Commission and all the other bits and pieces that we have put in place do not work. Why should we not therefore have something like the MPLC in place? After all, our job is to look after the customer and not only the companies. It would seem that the companies want to look after themselves; customer complaints and problems do not seem to be addressed properly.

John Robertson (Labour, Glasgow North West)

That does not surprise me.

Hugh Bayley (Labour, City of York)

Thank you. I call Charles Hendry.

Charles Hendry (Conservative, Wealden)

We have heard from Dr. MacLean and Mr. Davies about the pre-combustion projects that SSE and Centrica were developing, which were dropped because of the way in which the rules of the competition were set. Will you give us some guidance? Are you now looking to revive those projects because pre-combustion has been brought back, or are they lost for the foreseeable future as a result of the initial terms?

Charles Hendry (Conservative, Wealden)

So it is therefore true to say that as a result of the way that the competition was structured, active schemes were lost.

You also spoke about investment in new plant and about the concern that there would be a requirement to retrofit that part of the plant that did not have CCS from the outset but perhaps not the financial support, which would make that difficult to justify. How much would that be changed if there was a floor price for carbon—for example, in conjunction with the EU emissions trading scheme—that would therefore give you a predictable price for carbon, looking forward to 2020 and beyond?

Charles Hendry (Conservative, Wealden)

Would you all support a permissive power for the Secretary of State to introduce a floor price for carbon, and using the Bill as a way of doing that?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Dr. MacLean, do you have a planning projection as to where in the world the first fully compliant CCS plant will be up and running? What is the earliest date you are expecting to see in this country or elsewhere a fully operating CCS plant?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I have a request for information, Mr. Bayley. Rather than put you on the spot now, could you all please let us have by the end of the week the number of tariffs currently operated by each of your companies? Will you let us know whether you have any plans to reduce the number of different tariffs? If so, by what date later this year will they be reduced?

Hugh Bayley (Labour, City of York)

That is something to add to the list of supplementary evidence. Do any other colleagues wish to contribute?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I am keen to ask the panel if they feel there is any serious omission from the Bill which, if they were drafting it, they would want to include.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

With a blank sheet of paper.

Brian Binley (Conservative, Northampton South)

Nobody has mentioned the possible relationship between CCS and North sea oil. Is that because you do not think there is any real value there, or because you have no real understanding of any possible connection—specifically, the ability to possibly get an extra 15 per cent. out of the North sea?

Hugh Bayley (Labour, City of York)

If Committee members have no further questions for the witnesses, that brings us to the end of this morning’s proceedings.

Peter Atkinson (Conservative, Hexham)

I thank the panel for coming. May I ask you, for the sake of the record, to introduce yourselves with your title?

Peter Atkinson (Conservative, Hexham)

It took me some time to work that one out, but I got there in the end.

Michael Weir (Scottish National Party, Angus)

The carbon capture and storage competition was launched way back in 2007 and we were told that it would be at least 2014 before a plant was up and running, even as a pilot. Why is it taking so long to get the technology to a usable stage?

Tobias Ellwood (Conservative, Bournemouth East)

If we had introduced the same Bill five years ago, would we have been at a disadvantage because we did not have the technology or the know-how, or would we just have saved ourselves five years?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Who is leading the race? I can remember meeting you five years ago when we were doing a Select Committee report on carbon capture. At that point we were ready with the technology, but we had no funding in place. Who in the five years since then has started to get a lead on us?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

So you don’t believe that it is a lack of investment by the Government over the last five years in R and D that has held us back; it is purely a lack of policy direction.

Brian Binley (Conservative, Northampton South)

With about 240 years of energy requirement beneath our feet in coal seams, this carbon capture and storage was a great opportunity for this country, yet Professor Stuart Haszeldine has described the CCS competition as “dead on its feet” with only ScottishPower potentially being able to deliver by 2014. How feasible is the Government’s target of having a genuine demonstration model up and running? Should we have done much more earlier to have a more competitive scenario than we appear to have?

Tobias Ellwood (Conservative, Bournemouth East)

But if it is such an excellent proposal, why have we got only two bidders for four projects? Why do we not have more bidders?

Tobias Ellwood (Conservative, Bournemouth East)

You think more people will come forward.

Tobias Ellwood (Conservative, Bournemouth East)

We had a series of representatives from companies this morning, as you are probably aware. You made reference to E.ON and ScottishPower, but the others said they have turned their backs on this and have moved their interests elsewhere. It did not sound at all like they were willing to see the Bill passed into an Act of Parliament and then be knocking on the doors of the Department trying to sign up.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Can I just come in? That is an important point because there is a difference between our witnesses this morning and what you are saying. It is important to stress that. One of the big issues that we were given this morning was that pre-combustion was ruled out of the competition, which therefore affected a number of people who were particularly interested. I declare an interest in pre-combustion, as I personally think capture post-combustion is madness. Do you think that was the real reason that they pulled out or were they just not prepared to make the investment in the technology?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I am confused as to what we are talking about. [Interruption.] I’m sorry, but this is important. My understanding was that the competition basically ruled out pre-combustion. What you are saying is that once the competition is over and company A has won it, the other three projects—the Government want to have four altogether—could all be pre-combustion.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Is it important that we have both?

Peter Atkinson (Conservative, Hexham)

Thank you. John Robertson.

John Robertson (Labour, Glasgow North West)

Why do you think ScottishPower and E.ON are still in the process of competing for the No. 1 place?

John Robertson (Labour, Glasgow North West)

Where does that put the other companies? They are all big companies. Do they have their eyes on other things in other places?

John Robertson (Labour, Glasgow North West)

I am a bit confused as well. How do you choose the other three, if you don’t choose them through a competition?

John Robertson (Labour, Glasgow North West)

Are you saying that the Government should be put in a position of using selective powers to choose who they want for the other three? That is the kind of thing we really don’t want. We want this to be open, and to take the best.

John Robertson (Labour, Glasgow North West)

So if you were advising the Government today—and you can, because they are sitting with us—how would you get them to change the rules for the other three projects?

John Robertson (Labour, Glasgow North West)

The problem that I have with collaboration is that it can also be seen as manipulation, in that it is unfair competition if you have a collaborative view.

Tobias Ellwood (Conservative, Bournemouth East)

I am confused, as other Committee members are. We heard this morning that there was much concern on the part of all the companies that considered, or were successful at putting bids in, about the selection process and so forth. The impression I am getting from you is that you seem to imply that this is an effective mechanism for funding CCS demonstration projects, but perhaps that the process of going through a competition and selection—we are now dealing with the aftermath of that, with those people who deliberately avoided the competition now able to jump on the bandwagon—has not been a success story at all. Would that be fair, without putting words into your mouth?

Tobias Ellwood (Conservative, Bournemouth East)

Very delicately put.

Tobias Ellwood (Conservative, Bournemouth East)

With that in mind, those who are reading or watching this might not necessarily know their E.ONs from their National Grids and will be wondering why, given that we have just had this huge summit in Copenhagen—there will another one in Bonn and in Mexico next year—there is not more collaboration across the world to try to get CCS sorted. We seem to be reinventing the wheel here.

You said at the beginning that the US, Canada, China—I was surprised to learn—and Abu Dhabi are all pushing forward with this and are five years ahead of us at the moment. Why is there not some form of—

Tobias Ellwood (Conservative, Bournemouth East)

That came about because of my perhaps—

Tobias Ellwood (Conservative, Bournemouth East)

I do not doubt that at all. You actually make my argument for me—the fact that this will be a massive market—but it feels as though we are the tail-end Charlies here. We are actually coming behind these other countries. You say there is collaboration. Why isn’t there evidence of that, with those companies perhaps working in a collaborative process—which I think is something that you wanted to see anyway—and participating in this competition, to see that we get, rather than just four, the nine projects that you talked about before?

Peter Atkinson (Conservative, Hexham)

We need to move on. Mike Weir.

Michael Weir (Scottish National Party, Angus)

We have talked about pre and post-combustion, but Professor Gibbins, you said that the Bill needed to be extended to cover natural gas and other fuels. Can you tell us why that is; and, given the discussion that we have had, is research and development already going on into CCS with natural gas in the UK?

Michael Weir (Scottish National Party, Angus)

But one of the reasons given for concentrating on post-combustion on coal was to create an export industry basically in CCS technology. Are we in danger of effectively having to import natural gas technology to meet needs in the 2020s?

Alan Whitehead (Labour, Southampton, Test)

Can I ask some questions about the levy system and the assistance scheme following from it? You have said, Mr. Chapman, that it is a very workable and sound mechanism. How do you think it might best be implemented in terms of fairness to the sector? Do you favour simplicity in terms of market share, carbon intensity or other mechanisms for levying money across the sectors?

Alan Whitehead (Labour, Southampton, Test)

So what would you say at that point about renewable supplies, for example? Should they be in or out of the levy?

Alan Whitehead (Labour, Southampton, Test)

Most of the assistance scheme will be determined by secondary legislation, but how do you think it can best be organised to ensure that assistance goes to schemes in the best way—for example, for building oversized pipes for future development? Would that be in the assistance scheme, or would it be beyond it?

Alan Whitehead (Labour, Southampton, Test)

That underwrites the idea, which I imagine you would endorse, that the levy should essentially be a public good outcome with knowledge and infrastructure sharing for the future on the basis of the investment of the levy, and not a particular advantage to one company or another.

Natascha Engel (Labour, North East Derbyshire)

You were talking earlier about gas and coal and about decarbonising the whole power sector by 2030. How transferable in reality and in practice is the CCS technology from coal-fired to gas-fired power stations?

Natascha Engel (Labour, North East Derbyshire)

What I am interested in finding out is whether we need completely different kinds of demonstration projects or whether the demonstration projects that we are planning on—whether it is post or pre-combustion—will be sufficient to give us the answers that we need on gas.

Natascha Engel (Labour, North East Derbyshire)

So the answer is yes—you would want a separate demonstration project.

Natascha Engel (Labour, North East Derbyshire)

Finally, and very briefly, on the urgency of all this and the very tight deadlines to which we are working, what if that jump from R and D to a practical demonstration project that is working on a massive commercial scale fails or does not work? What happens then?

Natascha Engel (Labour, North East Derbyshire)

I was thinking about having a plan B, rather than about total failure.

Derek Twigg (Labour, Halton)

If it is not on a commercial scale, will the Government have to put money in, because it cannot be done at a profit?

Derek Twigg (Labour, Halton)

I understand that, but what about afterwards? You are talking in terms of development, taking it forward and taking the risks and so on. But what happens if it is still not making a commercial profit in 20 or 30 years’ time?

Tobias Ellwood (Conservative, Bournemouth East)

May I ask your view about whether you would like carbon capture and storage for gas turbines to be included in the Bill?

Charles Hendry (Conservative, Wealden)

If the Bill goes through and becomes an Act, I can imagine the conversations that will take place in the boardrooms in Germany, Spain and elsewhere. People in them will say, “Right, the situation has changed—there is a lot of money there, what do we do now?” They would be told, “If you build a 1.6 GW plant, you will get 400 MW of CCS on that. You will get the levy that will support the funding on that.” The people in the boardrooms will ask, “What will happen after that—will we then be required to retrofit on the other 1.2 GW of capacity?” The answer would be, “Well, possibly.”

Those in the boardrooms would then ask whether they could get any funding. Actually, the Bill does not say whether they would or not; it says that the Secretary of State has the power to decide whether he will give some. And so there is no guarantee that the companies will get support further down the line for retrofitting the rest. From you have been saying, Professor Gibbins, by 2030 one would expect all of our plants to be retrofitted. How do you get round that issue and does there need to be a greater clarity in the Bill for the support mechanism which might be available in due course for retrofitting?

Charles Hendry (Conservative, Wealden)

What about the intellectual property? If the taxpayer, through a levy or some other form of subsidy, is putting a lot of money in, should the Government expect to have their share of the IP? Or would the companies walk away if they were not going to keep their own IP?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

One of my concerns is that these are old technologies, by your own admission, all of which have been used extensively elsewhere, particularly in the United States for enhanced oil recovery and things of that nature. Post-combustion is a relatively tried technology and is relatively easy to do—I say that in relative terms. Putting them all together I accept is a big challenge. Has anyone factored in, or should we factor in and make part of the Bill, producing hydrogen as part of the pre-combustion process to incentivise the hydrogen economy at the same time, so that Britain is not only leading the world in CCS but also in producing the next generation of hydrogen plants?

Peter Atkinson (Conservative, Hexham)

I thank the three witnesses making up our panel for coming here today and for the very valuable contribution that they are making to the debate. Thank you gentlemen.

Peter Atkinson (Conservative, Hexham)

Good afternoon. Before we start may I say that the hon. Member for North Southwark and Bermondsey would have been here but for the statement on Copenhagen? The Minister of State is also in the Chamber for that particular statement. It is rather sad that these two things clash but that’s life.

I welcome our panel for this afternoon and ask you to introduce yourselves for the record and say who you are and what organisations you represent.

Peter Atkinson (Conservative, Hexham)

Thank you both for coming here.

Brian Binley (Conservative, Northampton South)

A very simple question: are the Government right to focus on CCS?

Judy Mallaber (Labour, Amber Valley)

Moving on to the regulatory framework, which you have commented on, we have a detailed memorandum from WWF, Greenpeace and Friends of the Earth about the need for statutory limits on emissions from power plants. I take it that we are talking about all forms of power plants. Can you expand on why you think that is necessary and who it applies to if we are already going down the CCS path?

Judy Mallaber (Labour, Amber Valley)

Our previous panel, which I think you witnessed, were quite robust at the end about the expectations that CCS would work and the fact that all the elements were there. As you said in your memorandum, the Government have said that, if for any reason the technology does not work or proves too expensive, they would then look at contingency safeguard measures, which I assume would be in line with the sorts of things that you are talking about in relation to statutory limits on emissions. Why wouldn’t that work? Why is it so important to have that in place now? Would you actually put the limits in the Bill, or would it just be a provision that regulation could be introduced in certain circumstances?

Judy Mallaber (Labour, Amber Valley)

So you wouldn’t be talking about introducing statutory limits now for existing power plants, but about there being a framework in the Bill for doing that in secondary legislation.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I think that Judy Mallaber asked you about a specific date for that. Do you feel that there ought to be a specific date in the Bill by which, for instance, not only new plants but existing plants are retro-fitted to ensure that they are zero carbon?

Judy Mallaber (Labour, Amber Valley)

It wasn’t just zero carbon. You were talking about being in line with the reductions that have been put forward by the Climate Change Committee. Can you clarify that as well?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

What’s your view?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

So you don’t even want a date?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

New clause 5 does not give a specific date, other than that the Secretary of State shall within 12 months produce a timetable. That could be in 100 years’ time. Would you be happy with that?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Are you saying that as NGOs you are happy with having an open-ended situation whereby we can pass an Energy Bill in which the Government can give an indeterminate time for dealing with the issues?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Forget this amendment. Are you happy that we could have the Bill go through Parliament without there being specific end dates?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Sorry, why can’t WWF answer that?

Michael Weir (Scottish National Party, Angus)

We have been talking a lot about dates. We have had quite a lot of evidence about the technology of CCS and how far it has advanced—some of it contradictory as far as I can see—but can you tell us how feasible the Government’s target is of having a CCS demonstration project up and running by 2014?

Michael Weir (Scottish National Party, Angus)

When E.ON was here this morning, its view was that 2014 was a date but it could slip a few years. It was not the important point; it was one of a range of factors. I take it that you do not accept that, that something must be up and running by 2014 or it endangers the use of CCS of meeting our climate change targets.

Alan Whitehead (Labour, Southampton, Test)

Do you think the levy system of underwriting the development of the further three projects after the initial competition is a wise way of proceeding? I mean the levy to industry in order to fund the allocation of money for the CCS projects.

The rest of the debate is in Hansard.