Energy Bill [Lords]

Public Bill Committee, 22 June 2023.

Clause 270 - Prohibition of new coal mines

James Gray (Conservative, North Wiltshire)

I remind the Committee that with this we are considering:

Clauses 271 to 273 stand part.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

It is a pleasure to serve under your chairmanship, Mr Gray. I want to make quite a few comments on the clauses, but I hope we are more than halfway through the debate, given how long we spent on it on Tuesday. You were not here then, Mr Gray, but the Labour Front Benchers shared their contributions, which is a luxury that I do not have as the only SNP Front Bencher. I warn the Committee to buckle up for what is now going to be an Alan monologue for a wee while, so be prepared!

First, I want to make some comments about Tuesday’s discussion of the merits of clause 270, which was inserted by the Lords. I am sorry that the hon. Member for South Ribble is not in her place; I would rather be saying this with her directly opposite—

Alec Shelbrooke (Conservative, Elmet and Rothwell)

Will the hon. Gentleman give way?

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Shortly; I will make the point first. On Labour and the SNP being against opening coal mines, the hon. Member for South Ribble said:

“This is one of the most jaw-dropping moments I have ever had in my parliamentary career. The Scottish National party and the Labour party are arguing against domestic jobs, our proud coalmining heritage and energy security for this country. Is that not flabbergasting?”––[Official Report, Energy Public Bill Committee, 20 June 2023; c. 356.]

That was a week in which the former Prime Minister resigned and was proven by the Privileges Committee—with a Tory majority—to be a serial liar, and in which Parliament voted to effectively sanction what would have been a 90-day suspension. I find that a bit more jaw-dropping than ourselves and Labour opposing new coal mines.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

To help the hon. Gentleman, I merely say that my hon. Friend the Member for South Ribble is unfortunately detained in the Chamber because a huge bomb factory was found in her constituency this morning and she needs to raise that on the Floor of the House. I know that my hon. Friend will be here later.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I thank the right hon. Gentleman for that clarification. I was not casting any aspersions about the hon. Member not being here; I was just saying that it was unfortunate when I am addressing her comments. I note how important that issue in her constituency is and hope it gets resolved.

On coalmining heritage—I do not think I need to point this out, but I will anyway, as an obvious history lesson—the coalmines were shut down as a result of Maggie Thatcher putting her anti-union ideology ahead of the coalmining industry. At that time she was more than happy to import coal from the likes of Poland and bring it in from overseas while shutting the coalmines here. That is a fact.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

indicated dissent.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

The Minister can shake his head but that is a fact.

Mark Jenkinson (Conservative, Workington)

Does the hon. Member agree with the former Labour leader of one of the Aberdeen councils, Barney Crockett, that Labour’s energy policy will wreak more harm on industrial communities than anything that Margaret Thatcher ever did?

James Gray (Conservative, North Wiltshire)

Order. Before we allow ourselves to get into what might be an amusing, if controversial, area, I remind the Committee that we are dealing specifically with clause 270, which prohibits new coalmines in the six months after the Bill is passed. Perhaps we could restrict ourselves to that, rather than getting into more exciting rabbit holes.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Excitement is sometimes quite tempting, Mr Gray, but I will try my best. I am trying to draw together the history of the coalmines and the issue of whether we should go forward with more. On the intervention, it is not usually for me to agree with Barney Crockett, but Labour’s energy policy is certainly all over the place.

We are debating opening new coalmines, but the reality is that there are now not too many people, even of working age, who have actually worked in coalmines—that is how long ago they were shut down—so there is not even a skillset out there that would be able to operate much of the mines. I realise that technology has moved on—the proposed mine at Whitehaven will use modern technology—but skilled labour will still be hard to get and the Government’s immigration policies will prohibit skilled miners coming from elsewhere.

Labour and the SNP are against coalmines, but we need to look at the wider context and consider the comments of the right hon. Member for Kingswood (Chris Skidmore), who was commissioned by the Tory Government to undertake a net zero review. His report was supported and commended by Members on both sides of the House, who agreed with its recommendations. Before the decision on the Whitehaven mine, he said:

“Opening a new coal mine in the UK would send the wrong signal across the world. We are international leaders when it comes to tackling climate change. To act differently, having pledged the ending of coal, would be to surrender that leadership.”

After the decision to grant planning permission for the coalmine, the right hon. Gentleman stated that if the recommendations in his report, such as on net zero tests, were part of the process, the coalmine would have been refused. He added:

“I obviously personally believe the coal mine decision is a mistake.”

A senior Tory parliamentarian is saying the same things as us. He is against the opening of new coalmines, and by default therefore supports clause 270. On international leadership, he effectively said that by opening new coalmines, the UK can no longer claim to be world leading on climate change.

I understand the importance of the jobs that go along with coalmines. My constituency needs new jobs, but we cannot use the phrase “local jobs” to justify bad decisions. Prioritising jobs above everything else leads to a race to the bottom. We could create jobs by chopping down all the trees in the UK and burning them, but that is a ludicrous proposition, so we cannot use new jobs as a justification.

If we want to talk about jaw-dropping comments, I was surprised to find that the hon. Member for South Ribble was a Parliamentary Private Secretary to the COP26 President, the right hon. Member for Reading West (Sir Alok Sharma), so it is worth while to look at what he said about the proposals for opening new coalmines. He said:

“Over the past three years the UK has sought to persuade other nations to consign coal to history, because we are fighting to limit global warming to 1.5C and coal is the most polluting energy source…A decision to open a new coalmine would send completely the wrong message and be an own goal. This proposed new mine will have no impact on reducing energy bills or ensuring our energy security.”

Our comments were deemed jaw-dropping, but I assume that those of the COP26 President, who led the worldwide negotiations on emissions reduction, and those of the chair of the net zero review should not be regarded as jaw-dropping and should be respected.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

The hon. Gentleman said the proposals will not improve our energy security, but will he comment on what will happen to the steel industry if we are not able to produce the electricity needed to move to arc furnaces in the timeframe outlined by the clause? As I said at the end of the previous sitting, we keep identifying areas that will be powered by electricity, but we do not seem to have the ability to catch up with that. On energy security, will he comment on what will happen if we are unable to generate the electricity that the steel industry needs?

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I am happy to comment on energy security, but I remind the right hon. Gentleman that those were not my words but the words of the former COP26 President. He said that the proposed new mine will not deliver energy security. I am sure that, like me, the right hon. Gentleman respects the President of COP26 and believes that he did a good job.

This argument about supplying coke and coal to the steel industry has already been debunked: 85% of the coal from the new coalmine will go abroad, so it will not provide energy security by supporting the steel industry in the UK. That is a bogus argument.

Mark Jenkinson (Conservative, Workington)

The hon. Gentleman says that that point has been debunked, but I actually debunked the debunking in the previous sitting. I am sure he heard those comments. On the issue of 85% being for export, that all depends on whether we want a UK steel industry and whether we want to grow it. Does he agree that we should be growing the UK steel industry and using 100% of that coal here?

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I want to debunk the hon. Gentleman’s debunking of the debunking. Let me come to the comments of the chair of the Climate Change Committee, Lord Deben, who the last time I checked is a Tory and was a Tory Minister.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

On that very point, will the hon. Gentleman give way?

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I am trying to answer the other point first.

James Gray (Conservative, North Wiltshire)

Order. This has become a bit chatty. I think perhaps we should restore a bit of order.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

This is an important point. The chair of the Climate Change Committee condemned the opening of the new coalmine and said that opening it would mean the UK emitting 400,000 tonnes of additional carbon dioxide into the atmosphere. He also pointed out that 85% of the coal will be exported because it is high in sulphur and therefore not suitable for the UK steel industry. A former chief executive of British Steel, Ron Deelen, said:

“This is a completely unnecessary step for the British steel industry”.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

The hon. Gentleman is being exceptionally generous with his time. He said that exporting 85% of the coal does not add to our energy security, but does he accept that if we have energy at home and do not have to import it, that is energy security by definition?

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I agree, which is why I want to see more renewables deployed. That is why I keep arguing for pumped-storage hydro, but the Government have fought that. It would give us storage and additional security and resilience. Obviously, I want the UK to become a net exporter of energy overall—that is the ideal place to get to—but renewables and storage are the answer.

Plenty of other senior Tory voices are saying that we should not open coalmines, so I do not see why the SNP and Labour should not be on the side of science and of such otherwise-respected senior Tory parliamentarians. It is also ludicrous that we are still effectively banning onshore wind in England but the Government will not accept a ban on opening up new coalmines and burning fossil fuels. When we talk about trying to lead the world on energy change, that is rank hypocrisy.

I realise the reality is that the transition will use some carbon fossil fuels. We need to understand that. That is why I believe in a just transition and have tabled a new clause that asks the UK Government to follow the lead of the Scottish Government by setting up a just transition commission. I have also tabled a new clause about net zero impact assessments. That in itself should underline Government policy and make the decision-making process transparent, so that we fully understand the impacts of policy decisions on net zero.

The Minister said it was important we ensure that industries that rely on coal can rely on domestic sources of coal, but that is a vacuous comment, because any coal mined in the UK goes on the open market and to whoever pays the most money for it. Having a new UK coalmine does not mean that that coalmine will automatically supply UK-based steel makers.

Bim Afolami (Conservative, Hitchin and Harpenden)

Would the hon. Gentleman accept that any new piece of energy infrastructure or production from the North sea, or indeed on the land in the UK, can be subject to whatever licence terms the licence issuer, which is the Government, decides? Would he therefore accept that, if the licences have specific restrictions, what he says may not necessarily be true?

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I cannot disagree with that premise—that could happen—but it is interesting that an ardent free marketeer is advocating for special conditions to be put on licences such that oil, gas or coal could be sold only in the UK. I think the hon. Gentleman knows as well as I do that international companies would be loth to accept a licence on that premise. We would be better off nationalising the industry than putting conditions such as those on licences, but in theory the hon. Gentleman is right: we could make that a condition of the licence.

To return to Tuesday’s debate, for me it seemed that there were mixed messages about the possible burning of coal for electricity generation. The right hon. Member for Elmet and Rothwell stated:

“I believe that we cannot just disregard the opening of coalmines, because this is about where we generate all this electricity from. If we cannot generate that electricity, we need back-up plans, including these mines.”––[Official Report, Energy Public Bill Committee, 20 June 2023; c. 376.]

Could the right hon. Member tell me how many new coal mines he envisages opening for the burning of electricity?

Alec Shelbrooke (Conservative, Elmet and Rothwell)

I do not know, but what I do know is physics. The physics says that we have to maintain a baseload. If we are unable to maintain that baseload, other options may have to be looked at, as Germany has done.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

The whole point is that coal is not being used to support baseload. Even if we believe in the concept of electricity baseload, it is not coal that is doing that. Coal is being used as a back up to the back up for when peak demand is hit, so that argument is wrong. Coal is not used for baseload.

The hon. Member for Workington stated:

“We are far too parochial on the subject of net zero and emissions.”

He seemed to be saying that if we do not do it, somebody else will, which is not showing international leadership. He went on to say:

“if we can export to Germany or somewhere else where people make large quantities of steel using coking coal, that is a reduction in total global emissions that we should champion.”––[Official Report, Energy Public Bill Committee, 20 June 2023; c. 373.]

The hon. Member has still not explained how the UK shipping coal to Germany is going to reduce global emissions—I still do not see how that follows—but I do share his concern that a lot of emission reductions have come from that offshoring manufacturing and industry. That is something we have to stop, so I fully agree with him on that, but opening a coalmine to export coal to Germany is not the way to re-shore industry.

Mark Jenkinson (Conservative, Workington)

The hon. Member is being incredibly generous with his time. On the point on how shipping coal from the UK to Germany lowers emissions, if that happens instead of coal being shipped from the US, Russia or somewhere further afield, then the shipping emissions are greatly reduced. As my right hon. Friend the Member for Elmet and Rothwell points out, it is also much cleaner coal to start with.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I understand the point that Government Members are trying to make but, at the end of the day, if we are shipping coal to Germany, we are still increasing UK shipping emissions. We are increasing emissions from the UK to about 400,000 tonnes of CO2. In the global context, there is no saying whether those coal emissions are getting displaced if the coal is going to Germany, so we cannot guarantee a reduction in global emissions. We would be putting more coal on the market, which is coal somebody else will snap up elsewhere. The likelihood is that we would actually increase emissions.

I should have said in my opening remarks that I represent a former coalmining area, so I recognise the devastation caused by pit closures. My area recovered some jobs through open-cast coalmining, but even that industry collapsed a few years ago, leaving us with devastating blights on the landscape and huge craters that needed filling. Unfortunately, again, there was no help from the UK Government when we needed it. I understand the legacy of coalmining and I want support for these areas, but opening new coalmines is not the way to do it.

We cannot turn back the clock. What we need to do is create jobs for the future. We need green-based jobs in coalmining areas such as mine, using geothermal energy and making use of the closed mines. Let us make them an asset for the future, providing clean energy and reducing energy bills at a local level.

The Committee will be pleased that I am bringing my monologue to an end. I hope that my comments are going to convince the Government and Conservative Committee members that there is no need for new coalmines going forward. I would be delighted to hear the Minister, in his summing up, say that he is not going to move against clause 270, but is going to retain it and listen to those of us who want it.

Clause 271 is to be replaced by new clause 52. I welcome the Government’s change on that and their making reaching net zero a statutory duty of Ofgem. Will the Minister tell us whether new clause 52 and Ofgem’s new statutory duties will make it much easier for Ofgem to allow anticipatory investment? That has been one of the issues, so we want to make sure that it can do that and do that forward plan-ahead, rather than building more constraints into the grid while upgrading it at the same time.

Turning to clauses 272 and 273, it seems like for ages Energy Ministers have stated their support for the principle of the Local Electricity Bill—community electricity generation and the sale of electricity locally—but they have always said that the Bill was not the right solution to facilitate that. The original drafters and MPs who have tried to bring forward private Members’ Bills have changed the Bill to try to address the concerns of Ministers, but that still was not enough.

The cross-party group of peers who drafted clauses 272 and 273 to mimic the effect of the Local Electricity Bill again tried to address the Government’s concerns. I fail to understand why the Government are still against the two clauses. It is worth pointing out that 323 MPs overall, including 128 Tory MPs—let alone myriad local authorities, environmental groups and individuals—have supported the Bill. The feet-dragging makes no sense. I commend the hon. Member for Bristol East for pointing out that the Minister himself was a signatory to the Local Electricity Bill. I wonder what about a ministerial car made him change his mind about supporting it.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Jealous!

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Not of one down here!

Community energy schemes have seen almost no growth for six years, despite renewables clearly being cheaper than ever. Of course, that is tied in with the removal of feed-in tariffs, which were very successful in delivering the likes of small-scale hydro across the highlands, for example.

The Government are pressing ahead with voting to remove clauses 272 and 273. What are their proposals for facilitating community energy generation and providing the certainty of price that groups and companies need to be able to move forward? The Minister must be aware that the smart energy guarantee does not deliver at present and, as I say, there has been no growth in community energy schemes in six years.

At the moment, community energy schemes account for just 0.5% of the UK’s electricity. According to the Environmental Audit Committee, that could increase twentyfold in 10 years, so something like 10% of energy by community generation could be achieved in 10 years if the right conditions are put in place. Even if that is overstated and the reality is only 5%, that would still represent a huge shift in generation and would provide local grids with stability and resilience. That would be much better value than the new £35 billion Sizewell C nuclear station.

If we consider nuclear, price certainty is not a new concept. It underpins the contract for difference auction rates, and it is what is provided for Hinkley Point C. A great example of the potential scope for community energy generation is a study being undertaken in my constituency by the Newmilns Regeneration Association, which is investigating the installation of solar panels on the brownfield site of the former Vesuvius factory. The aim is to sell electricity to local industry, reducing its bills and helping it to be sustainable, and for Newmilns to be a net zero town going forward. The national regulatory authorities believe that the Local Electricity Bill, or the alternative in the form of clauses 272 and 273, needs to be in place to facilitate trading of the electricity that would be generated. That is why I fully support the clauses’ retention in the Bill.

Clause 272 would provide guaranteed income for electricity for small-scale renewable energy generators, and clause 273 would enable community schemes registered under the clause 272 guarantee to sell the electricity they generate locally. The Committee Clerks circulated additional written evidence today, in which professors from the University of Manchester say there should be no fear about clauses 272 and 273, because they will not unduly affect the prices that suppliers have to pay for electricity; at worst, the effect will be marginal. They also recommend that the Government retain the clauses. I really hope that they do.

Andrew Western (Labour, Stretford and Urmston)

It is a pleasure to serve under your chairmanship again, Mr Gray. After a fairly lively start to the morning, I want to focus predominantly on the matter about which we are all largely in agreement: the addition of new clause 52 to replace clause 271.

I will briefly address clauses 270, 272 and 273, which we have debated at length. I do not wish to add anything particularly new; I will just reiterate colleagues’ comments about the clauses’ importance. The Minister and the hon. Member for Hyndburn previously supported clause 270, so I am bewildered by their shift, given that, as we have heard, building a new coalmine will not make a material difference to the British people’s energy prices, yet it certainly grates against our broader net zero ambitions.

It is a real shame that the Government intend to strike clauses 272 and 273 from the Bill, not least because all we seek is surety for smaller generators that their investment is worthwhile. The other day, my hon. Friend the Member for Southampton, Test gave the example of a hydro turbine that costs in excess of £1 million. It is incredibly difficult for a small-scale producer to make that investment without a guarantee, which the clauses would provide, that it will see a return in the form of a guaranteed purchase by energy suppliers. None the less, although we have not heard in detail why the Government are opposed to the clauses, we are where we are.

As I said, I want to focus most of my comments on new clause 52. I am a little surprised that the Government feel the need to rework clause 271, but we should none the less take the concession for what it is. New clause 52 is incredibly welcome, as it will legally require Ofgem to ensure that its decisions assist the Government’s drive to deliver net zero by 2050. Reaching net zero is, of course, one of the most urgent and challenging tasks that we face as a nation, and it is right that we pull every lever at our disposal to achieve it. I am pleased that the Government have conceded that the new clause is a necessary step, given that they previously stated that Ofgem’s existing decarbonisation objective was sufficient. That objective was set in 2010, it is limited to targeting greenhouse gases only, and it has no specific timescale attached to it.

The move to update Ofgem’s duties so that it has a statutory requirement to support the UK in reaching our net zero emissions targets has huge backing from every part of the energy industry, as well as from consumer campaigners and climate activists. It was recommended by the Skidmore review and by the Climate Change Committee earlier this year. Crucially, it has the support of Ofgem itself. Ofgem’s CEO, Jonathan Brearley, said that the net zero duty is

“the best option, not only from a climate perspective, but to ensure a secure, low-cost energy future.”

Ofgem’s support is most welcome, and the new duty makes its responsibility for ending our reliance on fossil fuels crystal clear. Making net zero one of its core duties will empower Ofgem to deliver the long-term investment in our electricity network and grid that the National Infrastructure Commission has said is critical to achieving the large-scale shift to renewable energy and low-carbon transport and heating that we need. Indeed, there seems to be a broad consensus in the industry that the lack of a clear duty that specifically refers to our net zero targets is a key reason for the historical underinvestment in the grid. This overdue duty can play a key role in reversing that trend and putting an end to a situation in which the absence of investment in the grid has made it very difficult for new renewable infrastructure to be connected to it.

Placing this duty on a national regulator that was created to serve consumers is, in effect, a statutory recognition that the needs of consumers and the planet are very much aligned. The long-term investment that will help us to achieve net zero will also mean sustainable, cheaper forms of energy for consumers and an end to the volatility in the market that has caused such misery to millions of households across the country in recent years. I therefore fully support new clause 52, and I pay tribute to everybody, across parties, who was involved in bringing it to this stage.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

It is a pleasure to see you back in the Chair and to serve under your chairmanship, Mr Gray.

James Gray (Conservative, North Wiltshire)

It is a pleasure to see you.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Well, I hope it will remain a pleasure—I am sure it will. Here we are on day eight, sitting 15 of the Committee. There has been a comprehensive debate on the clauses, and I thank all Members on both sides and from all three parties represented for their full contributions. I will respond to some of the points that were made.

The hon. Member for Stretford and Urmston just referred to the Ofgem net zero duty. I am delighted that the Committee has welcomed the Government’s commitment on the duty and our new clause, and I pay tribute again to Members across the House and in the other place for their constructive dialogue on the issue. I confirm to the hon. Member for Kilmarnock and Loudoun that the measure will allow for anticipatory investment. I have engaged with industry and others, and they are confident that that is the case and welcome this step.

Community energy projects can have real benefits for the communities in which they are based, which is why so many Members supported the private Member’s Bill on the issue. However, the Government and I do not believe that every consumer should have to bear the cost of such projects. That does not seem a fair way to fund them.

Kerry McCarthy (Labour, Bristol East)

Will the Minister explain why he does not think that consumers should bear the cost of community energy projects but does think that they should bear the cost of new hydrogen, through the hydrogen levy? That seems rather inconsistent.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

As the hon. Lady knows, we are listening and acting on the concerns raised by many in this place and the other place, including on Second Reading in the Commons, when issues regarding the hydrogen levy were raised. I am sure that we will have much more to say on that when the Bill comes back to the Floor of the House.

I am also not convinced that the Lords amendments tackle the real issues faced by community energy groups: high start-up costs and lack of expertise. I have had positive engagement with Members on that. The Government are therefore considering other options that could tackle such issues in a fairer and more proportionate way ahead of Report stage. I hope that members of the Committee and those who are following our proceedings with interest are reassured by those comments.

The hon. Member for Kilmarnock and Loudoun spoke at length, as did other Members—I hope to cover most contributions in my response—about coal. The hon. Gentleman specifically mentioned exporting coal to Germany. It is rather ironic that the only reason that Germany is importing coal is its nonsensical position on nuclear and new nuclear power—a position that is shared by the Scottish Government in Edinburgh. The hon. Gentleman might want to take that away and consider it.

The hon. Gentleman also mentioned that he disagreed with the comment by my hon. Friend the Member for South Ribble that the debate in Committee the other day was one of the “most jaw-dropping” moments of her political career, given the events of the week. I concur with the hon. Gentleman that that was a bit surprising, given that this was the week that a former leader of Aberdeen Labour claimed that Labour’s energy policies were the “final straw”—this is a Labour councillor saying this—and that

“Margaret Thatcher never delivered a more brutal put down of an industry than that delivered by Keir Starmer in Edinburgh.”

In the same week, a Green Minister in the Scottish Parliament faced a vote of no confidence, the Whip was withdrawn from a former SNP Minister, and a person of interest in an ongoing police investigation professed their innocence but could not do the same for another person of interest, to whom she is married. The last week was quite an exciting week for politics—I agree.

Our reliance on coal is rapidly diminishing, but there is still a need for it in industries such as steel and cement, so now is not the right time to make these licensing changes. I thank colleagues, including my hon. Friend the Member for South Ribble, for highlighting the role that these industries play in our constituencies, where they provide jobs and contribute to the economy.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

On coalmines, what does the Minister think about the suggestion from the hon. Member for Hitchin and Harpenden that any new licences could be supplied on the condition that the coal be sold only on the domestic market?

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I would not like to shut down any of the ideas put forward by my hon. Friend the Member for Hitchin and Harpenden; the Government will consider all suggestions for the future licensing of coalmines. I do not want to go down a rabbit hole and make commitments on matters for which I may not be responsible in future.

I found the comments by my right hon. Friend the Member for Elmet and Rothwell fascinating, as I do all his comments. I was particularly interested in his intervention on the hon. Member for Southampton, Test regarding the situation in Germany, which I also referenced.

A number of Opposition Members mentioned the coalmine in Cumbria. The decision by the Secretary of State for Levelling Up, Housing and Communities followed a comprehensive planning inquiry, which heard from 40 witnesses, and considered matters including the demand for coking coal and its suitability, climate change, and impact on the local economy. The full reasons for the Secretary of State’s decision are set out in a published letter, which should be read in its entirety, but he concluded that

“there is currently a UK and European market for the coal,”

and that

“it is highly likely that a global demand would remain”.

Alongside that, the UK is working to support the decarbonisation of steel and other industries that still rely on coke and coal through our £315 million industrial energy transformation fund, which helps businesses with high energy use to cut their energy bills and carbon emissions by investing in energy efficiency and low-carbon technologies.

For those reasons, I do not agree with the hon. Members for Bristol East, for Southampton, Test, and for Sheffield, Hallam. A complete ban is not appropriate, and risks our having to meet future demand for the industries that I mentioned from our own resources. The hon. Member for Sheffield, Hallam—I am sorry that she is not here today—mentioned the Government’s commitment to COP26. As I said in my opening remarks, coal’s share of our electricity supply has already declined significantly in recent years; it has gone from providing almost 40% of our electricity in 2012 to less than 2% in 2021. I do not agree with professions from Opposition Members that we are surrendering our lead on climate issues to the Biden Administration in the USA. It is not for me to question the decisions of that Administration, or to say whether they are for good or ill, but they have just approved a drilling licence in the Arctic circle, so I suggest that our lead on these issues remains extant.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Remember, we are talking about comments from not just Opposition Members; comments about us losing our international lead were made by the right hon. Member for Kingswood, who did a net zero review; the COP26 President, the right hon. Member for Reading West; and the chair of the Climate Change Committee. That is three senior Tories who are saying that the UK is losing its international lead.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I recognise that. I speak with my right hon. and hon. Friends on thisissue and others, and I understand the concerns, including those of Committee members. However,I reassure all right hon. and hon. Members that phasing out unabated coal power generation within timeframes that keep 1.5°C within reach remains a key UK Government priority, and the Government are leading on that. That builds on our COP26 energy transition legacy, which included securing agreement to accelerate efforts

“towards the phasedown of unabated coal power”

in the Glasgow climate pact, our co-leadership of the Powering Past Coal Alliance, and launching an international just transition declaration at the Glasgow summit. I would be very surprised if we did not return to some of these issues on Report, but I hope that the Committee will carefully consider my remarks.

James Gray (Conservative, North Wiltshire)

I call Alan Brown, if he wishes to wind up.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I had not expected to be given that privilege, Mr Gray. I remain unconvinced by the Minister’s arguments, and I refer him again to the fact that comments about the UK losing its international leadership have come from senior members of his party. He really should reflect on that, instead of arguing that opening new coalmines is the way forward.

Alan Whitehead (Labour, Southampton, Test)

On a point of order, Mr Gray. May I ask for clarification of the voting process on clause 271 and Government new clause 52? As I am sure all Committee members are aware, new clause 52 will effectively replace clause 271, with the consent of each side. However, although we will be voting on clause 271 stand part today, we will not be voting on new clause 52 until the end of the Committee’s business. We could therefore conceivably end up with clause 271 being dropped but not replaced by new clause 52. Is it within procedure to retain clause 271 but assume that new clause 52 will replace it in due course, or are there other ways of doing it?

James Gray (Conservative, North Wiltshire)

The hon. Gentleman makes an interesting point, but he is of course not correct.

Alan Whitehead (Labour, Southampton, Test)

It was a question.

James Gray (Conservative, North Wiltshire)

Well, I am answering the question in that case. The answer is that I will put the Question on clause 271 now and, depending on what the majority decides, it will either remain in the Bill or be removed. At the end of consideration, we will come to new clause 52. If there is a majority for it, it will be added to the Bill. If there is not, it will not. The two are not conditional on each other; they are entirely separate.

Clause 271 - GEMA general duties relating to climate change

Clause 272 - Community and Smaller-scale Electricity Export Guarantee Scheme

Clause 273 - Community and Smaller-scale Electricity Supplier Services Scheme

Clause 132 - Transfers

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following:

Government amendment 20.

That schedule 7 be the Seventh schedule to the Bill.

Clause 133 stand part.

That schedule 8 be the Seventh schedule to the Bill.

Clauses 134 and 135 stand part.

Government amendment 19.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I now return to part 4 of the Bill, which relates to the independent system operator and planner, or ISOP.

Clause 132 introduces schedule 7. The purpose of the schedule is to empower the Secretary of State to make transfer schemes to create the ISOP and give it the capacity to carry out its functions. As discussed already, the ISOP will be founded on the existing capabilities and functions of National Grid Electricity System Operator and, where appropriate, National Grid Gas. That will require several transactions between Government, National Grid plc and other relevant parties, because the property that the ISOP requires is not currently owned by a single entity. The transfers could include matters such as personnel, IT systems, physical assets, methodologies, models, data, and other resources and inputs used by the existing entities in performing their functions.

Schedule 7 sets out a set of principles, procedures and expectations in relation to the transfer scheme that will help provide clarity to affected parties. For example, it outlines that the Government are required to consult the transferor or transferors when the transfer scheme power is expected to be used. Not all the detail of the scheme can be determined in advance, so the Bill also includes a small number of time-limited powers to make regulations, which include regulations to provide further details to all parties, including third parties, on procedures for agreeing and paying compensation.

Government amendment 19 makes a minor procedural amendment to clause 275, to include the Treasury in the list of persons that can make regulations under the Bill. Amendment 20 clarifies that, because regulations under paragraph 9 of schedule 7 deal with financial matters, they can only be annulled in the House of Commons.

Clause 133 introduces schedule 8, which relates to pensions. As part of the transfer of functions, some employees will transfer into the ISOP. The purpose of the schedule is to allow the Secretary of State to separate the pension arrangements of the ISOP and to provide scope for various forms of reorganisation that may be appropriate in the light of the transfer. That includes making provision for the responsibility for the affected employees’ qualifying pension schemes and protecting the value of their benefits during the transfer. In exercising powers, the Secretary of State must ensure that the arrangements made for each employee’s pension provision is, in all material respects, at least as good immediately after any transfer-related changes are made as they were before that point.

Clause 134 grants the Secretary of State the power to provide financial assistance to the ISOP—that is, to draw on the financial resources available to Government in the kind of circumstances when the existing electricity system operator and gas system operator would have relied on the financial strength of their corporate group to raise capital sums. The Secretary of State will have the power to set conditions on the financial assistance provided, which may include conditions about repayment with or without interests or other return. In the highly unlikely situation that the ISOP faces financial difficulty, the power would also allow the Secretary of State to step in and avoid any disruption to the electricity and gas sectors.

Finally, clause 135 removes the barriers, in section 7 of the Electricity Act 1989 and section 7B of the Gas Act 1986, to payments raised in one sector being used to benefit consumers in the other. It also introduces a provision, in each Act, to expand licence holders’ statutory duties and require them to have regard to the interests of consumers of the other energy sector where directed by their licence. The removal of such barriers is fundamental, because it will enable the ISOP to co-ordinate and ensure strategic planning across the energy sector more effectively.

Alan Whitehead (Labour, Southampton, Test)

We come to a part of the Bill that we should have discussed a couple of weeks ago: clauses 132 to 139. When we discussed the rest of the business relating to the ISOP, these debates were moved by the Government towards the end of the consideration of later clauses in the Bill. At the time, I thought that was because there was some blockbusting new clause that the Government were thinking of introducing, which was not quite down the slipway at that point. I thought it would appear when we considered the clauses today.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Inspiration has arrived.

Alan Whitehead (Labour, Southampton, Test)

Good.

As I was saying, this is potentially important, because the clauses in this part of the Bill relate to the Secretary of State’s ability to provide the ISOP with finance. Will the ISOP undertake the job of providing the compensation due under the clause—presumably it would be provided with money by the Government to do that—or will the Government deal with that separately before the ISOP is set up?

James Gray (Conservative, North Wiltshire)

There is no need to pause. Please crack on.

Alan Whitehead (Labour, Southampton, Test)

This is something I specifically want the Minister to say something about. It is important that we get it right.

Assuming that compensation is given for the loss of the ESO and the companies concerned can recover that, do the Government intend for the ISOP to have a part in the mechanism whereby costs are recovered through standing charges on bills? As the Minister knows, standing charges are substantially made up of a combination of charges for TNUoS and DUoS—transmission network use of system and distribution use of system—and a balancing charge, and, as he and other hon. Members will know, standing charges are increasing substantially as a proportion of our electricity bills. They are now about 25% of our energy bills.

It looks as if the compensation, if it can be recovered by somebody—I assume it could be recovered one way or another by National Grid in its network charges, or by the ISOP in what it eventually contributes to the standing charge—will eventually work its way into the standing charge, and hence on to customers’ bills. That makes it important to understand what the Government have in mind about what compensation should be paid to National Grid for the loss of ESO and its transfer to the ISOP.

It may be that there has been a nice agreement that no one will pay anyone compensation, and National Grid will just hand over ESO to the ISOP. I suspect that is not the case, but I have not seen anywhere—and it is not explicit in the consultation—what the level of compensation might be, who will pay it, how it might be transferred to bills and standing charges, if necessary, and how the process overall might work. It would be helpful if the Minister could give us an understanding of all that. It would certainly enable us to better judge schedule 7, as it relates to the process of how those transfers take place and what their consequences are.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

On the question of why we have returned to these clauses, I am sorry that I was unable to turn up today with a blockbuster moment for the Committee. I know they were all expecting it and waiting with bated breath. Unfortunately, it is a simple matter of procedure. We temporarily skipped over the remaining clauses in part 4 to ensure that the necessary Ways and Means motion could be agreed by the House. I am pleased to confirm that the resolution was obtained on Tuesday, allowing us—I was expecting a “Hear, hear!”—to continue with clauses 132 to 139.

The Ways and Means resolution was necessary as a result of provisions that confer power on the Treasury to make regulations setting out the way taxes have effect in connection with a transfer of assets from one body to another. It was impossible to proceed with debate on the clauses until the motion was passed by the House. That has now been done, so we can proceed.

On the consultation that was published this morning, I cannot mandate when Ofgem publishes its consultations, so unfortunately that was not a consideration. However, we note that the Ofgem consultation launched today, and I will of course consider it in detail. I am happy to provide hon. Members with more detail in writing should they wish.

The hon. Member for Southampton, Test spoke about transfers. The Bill provides multiple steps for agreement on the value of compensation: first, simple agreement between parties—in this case the Secretary of State, National Grid and the owners of National Gas—secondly, in a situation of non-agreement, the joint appointment of an independent valuer to assess the value of the assets to be transferred; or, thirdly, as a fall-back option, the appointment of an independent valuer by the Secretary of State on behalf of both parties. The framework of considerations to be made by the independent valuer will be set out in regulations to be made under the Bill.

The entire process is an ongoing commercial transaction, so the Government are limited in the extent of the information they can provide at this point, although I recognise the importance of the hon. Gentleman’s questions. I will respond specifically to his point about the standing charge and his worry that that could have an effect on bills. We do not expect costs to rise at all as a result of the establishment of the ISOP. The ISOP will be funded by Government, and its ongoing operations will continue to be supported by funding from the network balancing charges at a level determined through a price-control mechanism, much like the current gas and electricity system operators are. However, we expect the ISOP to enable a long-term reduction in costs compared with the status quo.

Alan Whitehead (Labour, Southampton, Test)

I think the Minister just said that he expects compensation to be included in network charges, which means that in the end it will go on standing charges for customers. There will be an effect on customers’ bills.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I reiterate that we are not expecting any increase in customers’ bills as a result of the creation of the ISOP. There will be no increase. We expect the ISOP to enable a long-term reduction in costs, so its creation will have the opposite effect on customers’ bills. Future network decisions will be built on the expert and impartial advice of the truly whole-system body that many in the industry and outside it have been calling for for some time.

Alan Whitehead (Labour, Southampton, Test)

I appreciate that the Minister cannot tell me—presumably because of an ongoing discussion relating to commercial companies—what the compensation for National Grid is likely to be. However, I assume that, in stating that he cannot tell me, he has confirmed that that will be part of the transfer arrangements. I was trying to distinguish between the compensation for pot plants and desks, and compensation for the loss of the ESO by National Grid.

That leads us to an unsatisfactory position in which we do not know how much the compensation will be. Presumably, we have to take it on trust that the Government will be fairly rigorous about ensuring that the compensation is proportionate to the actual loss, but I am not sure how it will be determined. Sorry, Mr Gray, this is a long intervention.

James Gray (Conservative, North Wiltshire)

No, it is a speech. The Minister finished, and therefore the hon. Member is making a speech.

Alan Whitehead (Labour, Southampton, Test)

Good, I can go on forever then. I was trying to make my remarks as brief as possible in order to accommodate the Minister’s previous comments, so I will just round them off.

We do not know the detail of the procedure for determining compensation, we do not know even what ballpark figure the Government have in mind for compensation to National Grid for the loss of the ESO, we do not know what strategies the Government might adopt in their negotiations on what the compensation might consist of, and we do not know whether there is any process of arbitration if National Grid, for example, thinks that the compensation it receives is not the right amount, or what mechanisms—perhaps under the Bill—would enable the final amount to be determined to the satisfaction of all sides.

We do know that some compensation may find its way on to network charges, one way or another. Therefore, it is important for the economy and the effectiveness of network charges that we at least have a ballpark figure for the sort of compensation that might be considered. If the Government are minded to provide huge amounts of money in compensation to National Grid, that might have an inflationary effect on network charges; if they have a more robust view of what the compensation should look like, that would have a lesser effect on charges. Either way, as I think the Minister will agree, we are in a position of some fog.

As the Bill makes progress we legislate for all this to happen, we still do not have a clear handle on what those procedures will look like or the money that might be involved. I do not know whether the Minister will respond to this speech, but I think that he should be able at least to write to us about the procedure and the arrangements. Ideally, that would include further and better particulars on the range of compensation, while not giving away anything commercially sensitive. Alternatively, he could take His Majesty’s loyal Opposition into a position of trust and get around a table with us to talk these things through, so that, between us, we are clear about how they might proceed.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Let me briefly answer those points. As I have set out, this is an ongoing commercial discussion between parties. The Bill provides multiple steps for agreement on the value of compensation, which has yet to be determined, and I do not think that it would be good governance to insert a ballpark figure into the Bill. I cannot underline enough that the creation of the ESO will not have any adverse effect on consumers’ bills. In fact, as a result of it, we will see bills reduce in time. I am happy to write to the hon. Gentleman with more information.

Schedule 7 - Independent System Operator and Planner: transfers

Clause 136 - Principal objective and general duties of Secretary of State and GEMA under Part 4

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following:

Clause 137 stand part.

That schedule 9 be the Ninth schedule to the Bill.

Clause 138 stand part.

Government amendment 18.

Clause 139 stand part.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Clause 136 ensures that when carrying out various functions in relation to the ISOP under the Bill, the Secretary of State and Ofgem must have regard to their principal objective and general duties as defined in the Electricity Act 1989 and the Gas Act 1986. The principal objective of the Secretary of State and Ofgem can be characterised as protecting the interests of existing and future electricity and gas consumers. General duties include promoting effective competition in the energy sector, having regard to security of supply and securing a healthy energy market.

It is relatively common to extend the application of those principles where a new Act gives new, freestanding functions to the Secretary of State or Ofgem. The clause states that the Secretary of State must have regard to the principal objective and general duties when carrying out new functions relating to designation under clause 120 or when making an order that an existing transmission licence becomes the ISOP’s electricity system operator licence.

Clause 137 introduces schedule 9, which contains necessary consequential amendments to the Gas Act and Electricity Act to enable the ISOP and its licensable activities to be integrated into the existing framework of the energy system regulated by Ofgem.

Clause 138 contains provisions on the interpretation of terms used in part 4 of the Bill. I draw hon. Members’ attention in particular to subsection (3), which is intended to make it clear that whenever part 4 includes a proposition about the ISOP’s functions, that is to be understood as applying to any and all of the ISOP’s functions, whether provided by the Bill, by other legislation, or as functions ancillary to them.

Clause 139 concerns the limited regulation-making powers in part 4. Government amendment 18 is consequential on Government amendment 20, which we have already discussed. It ensures that regulations made by the Treasury under schedule 7(9) are not subject to the negative procedure. As these are financial regulations, the intention is for them to be laid before the House of Commons only and approved by the House of Commons alone.

Alan Whitehead (Labour, Southampton, Test)

These measures are essentially consequential on those we have already discussed. I have no particular comment to make on them other than to say hooray; I am happy to let them go through undiscussed.

Clause 139 - Regulations under Part 4

New Clause 8 - Key definitions

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I beg to move, That the clause be read a Second time.

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following:

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

New clause 8 provides the key definitions for the purposes of this new chapter, enabling the effective understanding of all carbon storage information and samples provisions. The powers provided by this chapter specifically support the Oil and Gas Authority, the business name of which is the North Sea Transition Authority, in its role as a regulator of carbon storage.

New clause 9 provides the Secretary of State with the power to make regulations on the retention of information and samples acquired by carbon storage licensees acting under the authority of the NSTA. The provisions will align carbon storage information requirements with existing petroleum licensing provisions, as established in the Energy Act 2016.

The specific type of information and samples that licensees will be required to retain will be set out in regulations. That will be alongside the form and manner in which they are to be retained, the period of retention and the events that trigger the commencement of such requirements. The various exploration, appraisal and monitoring activities that will be carried out on and under the seabed by carbon storage licence holders will yield important information, supporting the NSTA to carry out its regulatory functions.

New clauses 10 and 11 establish requirements for the preparation and agreement of information and samples plans. These are agreements between the NSTA and a carbon storage licence holder that set out what should happen to carbon storage information and samples held by the licence holder before the occurrence of certain carbon storage licence events. Provisions involving information and samples plans were introduced for petroleum licences in the Energy Act 2016. We therefore expect them to provide the same benefits for carbon storage licence events.

New clause 12 establishes provisions for the designation of information and samples co-ordinators, which will monitor compliance with obligations imposed under the new chapter, uphold the requirements of any information and samples plans, and help to protect against the risks of data loss during a licence event. Information and samples co-ordinators are expected to prove a valuable aid in respect of data reporting compliance. That is evident in the instrumental role they currently play in relation to petroleum licensees under the Energy Act 2016.

New clause 13 establishes powers for the NSTA to obtain information and samples collected through carbon storage activities to support its regulatory functions. This includes information and samples held by persons in accordance with regulations made under new clauses 9 and 10.

New clause 14 prohibits the NSTA from disclosing any information and samples it holds in accordance with the powers in this chapter, subject to the provisions of new schedule 1 and the power of the Secretary of State to obtain information from the NSTA in new clause 15. This will provide carbon storage licensees with the reassurance that any information and samples provided to the NSTA in support of their regulatory functions will not be allowed to be disclosed, except in specified circumstances.

New schedule 1 sets out the circumstances in which, to whom, and for what purposes the NSTA can disclose information. This includes providing for disclosure in accordance with regulations made by the Secretary of State that may permit protected material to be published, or made available to the public, after a specified period. The public disclosure of this information after a suitable period of confidentiality will support effective regulation by the NSTA.

New clause 15 provides powers to the Secretary of State to require information and samples held by, or on behalf of, the NSTA. It will align powers for carbon storage information and samples with the equivalent powers established for petroleum information and samples under the Energy Act 2016. This power will be used to enable the Secretary of State to carry out statutory functions, to monitor the performance of the NSTA, or to provide information for the purposes of parliamentary proceedings. Carbon storage licences return to the Government once storage sites have been closed for a designated period, and the Government are liable for any potential future leakage.

I turn now to new clauses 16 to 25. New clause 16 provides the NSTA with powers to issue sanction notices to persons who fail to comply with the requirements imposed on them under this chapter of the Bill. Such sanction notices can be in the form of an enforcement, a financial penalty, a revocation or operator removal notices. New clauses 17 to 20 make the necessary provisions for each of those types of notice. Importantly, new clause 21 places a requirement on the NSTA to issue a sanction warning notice ahead of any sanction notice that it proposes to issue under the powers established in new clause 16.

New clause 22 establishes that the NSTA may publish details of any sanction notices issued under new clause 16, including details of any sanction notice that is cancelled or withdrawn. New clause 22 also provides that the NSTA may not publish information that it considers to be commercially sensitive, not in the public interest or otherwise inappropriate to publish. New clause 23 places a restriction on the NSTA issuing more than one sanction notice in respect of the same contravention. New clause 24 provides the NSTA with the power to withdraw any sanction notices issued. Finally, new clause 25 enables the NSTA to require specified documents or information to support an investigation into whether a sanction notice ought to be provided under new clause 16.

New clause 26 introduces new schedule 2 to the Bill. Alongside new schedule 22, new clause 26 provides for an appeal to be made to the first-tier tribunal against any decision made by the NSTA. This is in relation to the NSTA exercising its new power to require carbon storage information samples. As I am sure Committee members will agree, the right of appeal for licence holders is a necessary and important part of conferring new regulatory powers on the NSTA.

New clause 27 will require the NSTA to determine and publish the procedure it proposes to follow in its decision making when issuing a sanction notice under new clause 16, which ensures public transparency in how the NSTA will enforce the sanctionable requirements and provides clarity for licence holders in respect of the NSTA’s procedures.

Finally, new clause 28 provides definitions to aid the interpretation of the provisions relating to carbon storage information samples detailed in this chapter. The definitions cross-reference the relevant existing legislation where appropriate.

Alan Whitehead (Labour, Southampton, Test)

This group consists primarily of new clauses that the Government introduced. A substantial number of new clauses relate to the very sensible business of securing samples and various other things that can be of use in the regulation of the process and quality control, and in various other things relating to carbon capture and storage activity. So far, so good. These are certainly sensible clauses that establish arrangements for disputes and various other things, such as sanctions for when samples are not properly provided and so on—all good stuff.

However, there is an important point about the collection and retention of samples, as set out in the factsheet, which was subsequently published, that the Minister kindly provided me with when he said he intended to produce these new clauses. By the way, the factsheet refers to the NSTA, but the legislation refers to the OGA—again, maybe that is something we can discuss later. The Government say:

“We are legislating to provide the NSTA with appropriate powers to require carbon storage licensees to retain and report information and samples gathered as part of activities associated with the geological storage of carbon dioxide, and to enable the NSTA to publicly disclose this information after a suitable confidentiality period.”

I understand and appreciate the need for a suitable confidentiality period, but it is really important that the samples and data collections are available publicly for the greater benefit of the sector as a whole, in terms of its future development of carbon capture and storage. Government new clause 14 has a fairly fierce title: “Prohibition on disclosure of information or samples by OGA”. It effectively prohibits disclosure except under slightly unclear circumstances set out in new schedule 1, which states that the material may nevertheless be published and put into the public domain, but there is no real definition of how that may be done.

The factsheet states:

“after a suitable confidentiality period”;

how limited might that period be? If the OGA, having properly stored and sorted out samples, retains them for a considerable period, and they remain confidential throughout a considerable period of the development of carbon capture and storage in the North sea, the general development of carbon capture and storage may be materially slowed, whereas if the Government propose to apply the minimum confidentiality period that accords with the immediate issues relating to confidentiality, that is a much better position.

There is also, in the new schedule, the issue of consent and agreement to the release of samples by the people who gave the samples to the OGA. There is no definition, as far as I can see, of unreasonably withholding consent. Conceivably, a company could provide samples that are subject to a confidentiality period but then state, “We will not give our consent to publication for a while.” The Minister’s powers to override that are rather uncertain. I am not really clear about how the procedure can best ensure publication, as the factsheet says it should, and how it will work towards the speedy development of carbon capture and storage.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

As ever, I do not have all the information the hon. Gentleman is asking for at my fingertips, but I am happy to write to him with more detail on exactly how we will proceed.

On information samples being stored, and how they are publicly disclosed, as in the petroleum industry, the reporting of information to the North Sea Transition Authority will allow it to be securely stored in the NSTA controlled online data systems, such as the national data repository, or as open data in the NSTA data centre, which are both accessible via any internet browser.

Information in the national data repository becomes publicly accessible, online, upon disclosure. All information in the NSTA open data centre is disclosed information and is publicly accessible online. Reported samples are held by the British Geological Survey on behalf of NSTA. Disclosed geological samples are physically accessible by the public at the British Geological Survey geological sample storage facility in Nottinghamshire.

The hon. Gentleman asks why we are not fully changing the name of the OGA to the NSTA. We understand that the name change is important. We are considering legislative options for amending the statutory name of the Oil and Gas Authority. However, as was outlined in the other place, if we legislatively changed the OGA’s name to the NSTA, we would need to address all the instances in which the OGA is mentioned in primary and secondary legislation, and any partial name change could undermine or change the North Sea Transition Authority’s statutory functions, powers and objectives. I promise that I will write to the hon. Gentleman will more information on the other points he raised.

New Clause 9 - Retention of information and samples

New Clause 10 - Preparation and agreement of information and samples plans

New Clause 11 - Information and samples plans: supplementary

New Clause 12 - Information and samples coordinators

New Clause 13 - Power of OGA to require information and samples

New Clause 14 - Prohibition on disclosure of information or samples by OGA

New Clause 15 - Power of Secretary of State to require information and samples

New Clause 16 - Power of OGA to give sanction notices

New Clause 17 - Enforcement notices

New Clause 18 - Financial penalty notices

New Clause 19 - Revocation notices

New Clause 20 - Operator removal notices

New Clause 21 - Duty of OGA to give sanction warning notices

New Clause 22 - Publication of details of sanctions

New Clause 23 - Subsequent sanction notices

New Clause 24 - Withdrawal of sanction notices

New Clause 25 - Sanctions: information powers

New Clause 26 - Appeals in connection with Chapter

New Clause 27 - Procedure for enforcement decisions

New Clause 28 - Interpretation of Chapter

New Clause 29 - Designation of hydrogen transport counterparty

New Clause 30 - Direction to offer to contract with eligible hydrogen transport provider

New Clause 31 - Designation of hydrogen storage counterparty

New Clause 32 - Direction to offer to contract with eligible hydrogen storage provider

New Clause 52 - Principal objectives of Secretary of State and GEMA

New Clause 53 - Electricity support payments for energy-intensive industries

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I beg to move, That the clause be read a Second time.

Rupa Huq (Labour, Ealing Central and Acton)

With this it will be convenient to discuss Government new clause 54—Levy to fund electricity support payments.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Government new clauses 53 and 54 relate to support for energy-intensive industries. The Government recognise that in recent years EIIs in Great Britain have faced the steepest industrial electricity prices in Europe, even with existing Government support schemes applied. That has been due primarily to the long-term disparity in network and policy costs. It has a particular impact on the competitiveness of UK industry and, in particular, EIIs such as steel and chemicals manufacturing. Internationally higher electricity prices for these sectors put the UK at risk of significant job losses and disinvestment—a position that is growing only more acute against the backdrop of volatility in wholesale energy markets. Consequently, the UK is also missing out on inward investment, as the most energy-intensive industries in comparable neighbouring countries are exempted from similar costs.

In the absence of UK domestic production, we would need to place much greater reliance on import markets in regions with lower emissions standards and less stringent climate policies. That would constitute carbon leakage, which is a risk to both our economic security and our aim to achieve net zero by 2050. In response to this challenge, the Government announced in February the British industry supercharger—a decisive set of measures to make Britain’s strategic EIIs more competitive and to tackle the risk of carbon leakage. That will be achieved by addressing three areas of the domestic energy system, which together contribute to higher electricity costs for EIIs here than is the case in comparable countries.

The new clauses will provide us with the powers to implement one of the three measures in the British industry supercharger package by providing a means to offer relief on network charging costs. New clause 53 provides the Government with the powers to implement the network charging compensation scheme to compensate EIIs for a portion of their network charging costs. It also provides the Government with the powers, if required, to appoint an administrator for said scheme.

New clause 54 provides the Government with the powers to establish the mechanism to fund the NCC scheme through a levy on all licensed electricity suppliers in the form of the EII support levy. It also provides the powers to appoint an administrator for the proposed levy. This measure, in conjunction with the others listed in the British industry supercharger package, will help to reduce electricity costs for EIIs that struggle to remain competitive because of the high cost of electricity.

Failure to tackle high electricity prices would risk the UK losing these critical sectors for good, resulting in missed investment, job losses and a need for us to place much greater reliance on import markets with lower emissions standards. I therefore commend new clauses 53 and 54 to the Committee.

Alan Whitehead (Labour, Southampton, Test)

It is a pleasure to serve under your chairmanship once again, Dr Huq. The Government tabled the new clauses at a reasonably late stage. We knew they were coming, because the Minister was kind enough to discuss them beforehand, but, having arrived, they do not quite say what I thought they might about the matter in hand, and it would be useful to have a little clarification from him—in addition to what he said a moment ago—about what exactly the new clauses consist of.

The major element of the so-called supercharger package as it relates to the new clauses is, as I understand it, the proposition that energy-intensive industries should be subject no longer to green and similar levies but should have a complete exemption from those levies. For quite a long time they have had an 85% exemption from levies, and I think part of the proposal in the supercharger arrangements is to reduce that to zero.

The Minister will know from our previous discussions that there is an extant list of what are and are not energy-intensive industries. There is some discussion about whether that list might be refined to more accurately define what energy-intensive industries are. Indeed, I recall that the Minister and I had exchanges in a Westminster Hall debate about what would be defined as an energy-intensive industry for these purposes. There are anomalies in the definition of “energy-intensive industries”—for example, certain things relating to plants or plant culture are included as energy-intensive industries because of the energy they use, but agriculture in general is not—so there are questions about what will be defined as such and whether there is any intention to clarify or change the definition.

For industries that are categorised as energy intensive, the changes that can be made to levy obligations through the operation of the new clauses could be fairly considerable. I imagine the Minister may well be inundated with letters and various other communications from people in industries that they think should be classified as energy intensive but are not presently included in the definition. They will wonder whether the Department is going to have any proactive discussion about that, or whether it is content to leave the list as it is for the purpose of the new clauses. I do not know, and it would be helpful to have some sort of guidance as to whether that will be the case.

The position hitherto has been that energy-intensive industries have had an 85% exemption from the levy, and the difference in liability has been recovered from other industries in general—that is, smeared across those other industries’ liabilities for levies, so that their levy requirement goes up a little and energy-intensive levies go down. Given that the levies across industry are broadly defined, that amounts to a pretty small addition to levy requirements for most industries, but a fairly substantial reduction in the levy requirement for energy-intensive industries. Going from the 85% exemption down to 0% would, at least in principle, require a further smearing of the difference across industry as a whole so that the difference would be marginally greater than before, but, again, it would perhaps not be an enormous imposition on industries that are energy intensive. I think the Minister can see, however, that people who are on the wrong side of the cliff edge may see it slightly differently.

The new clauses seem to provide for a slightly different mechanism. New clause 54 sets up a levy to fund electricity support payments. We are familiar with how that might be set up, given our discussions about the hydrogen levy earlier in Committee, and it is a similar sort of arrangement. The difference is that nothing in the new clause says how that levy might be raised. As I say, we currently have methods that do not use this mechanism but effectively raise money by socialising the cost across the rest of industry. However, the levy arrangements set out in the new clause suggest that raising the difference could be a wider activity. For example, just as we have found with the hydrogen levy, the new levy could be raised from suppliers. The new clause suggests that suppliers are supposed to make information available to the regulator, so there is at least a suggestion that that is how this levy will be established.

Of course, we cannot say for certain, because the provisions for the levy to be introduced are currently pretty broad; I assume that the relevant matters will be undertaken by regulation. I am pleased to see at least that the relevant regulations will be subject to the affirmative procedure, so we will hopefully be able to discuss them further, in a room similar to this one, at some stage in the future.

At this stage, it would be good to have further clarification on Government thinking as to how the levy will proceed, what it is intended to encompass, how it will be raised and, indeed, whether there will be a sort of counterparty arrangement similar to that for the Low Carbon Contracts Company—although that may not be necessary if the proposition, particularly in terms of exemption from other levies in general, is that costs will be socialised across industry in the same way that previous levy exemptions were. It might, though, be necessary if other procedures are supposed to be put in place to assist energy-intensive industries.

I would like to hear from the Minister about those matters, but I do not have any particular disputes on the question of whether we set up general measures to provide assistance to energy-intensive industries, other than to ask how they are going to work in practice.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I thank the hon. Gentleman for his questions. In my opening speech, I set out in some detail exactly how we expect the levy to function. For clarity’s sake, new clause 54 provides the Government with the powers to establish the mechanism to fund the NCC scheme. It will be a levy on all electricity suppliers in the form of the EII support levy. The new clause also provides the powers to appoint an administrator of the levy.

We believe this is a critical step to ensure that energy costs for key UK industries are in line with those in other major economies. The exact workings of the mechanism and how it will work in practice are still being worked through. Obviously, we will update the House when information comes forward and, as the hon. Gentleman said, there will be opportunities to debate these matters further in the future.

As for expanding the number of companies and sectors that are eligible for support through the scheme, a review of the analysis will be carried out in 2026 to ensure that it is supported by stable post-covid and post-EU data, to give us an up-to-date view of the market and to allow us to target those sectors that are most at risk from carbon leakage. The list of eligible sectors will be refreshed accordingly at the point at which we conduct the review of the analysis in 2026.

What do the new clauses do? I already covered that in my speech. The reason why we are making these changes now is, as the hon. Gentleman said, because the question of how we support these industries moving forward is concentrating the minds of many in this country, given the high electricity prices and the cost of decarbonising those industries. We believe that the supported sector will be approximately 300 firms that are the most at risk of carbon leakage due to the high industrial electricity prices.

Alan Whitehead (Labour, Southampton, Test)

I am listening carefully to the Minister, but I am still not clear about the role of the levy. Are the Government suggesting—I think the Minister is—that the levy arrangement would have a levy-raising body that could raise fresh levies for direct support to energy-intensive industry from suppliers? Or is that body restricted to the forgiveness of existing levies, which currently, or at least residually, are a 15% liability for energy-intensive industries? If it is the latter, is the Minister not perhaps setting out a few hostages to fortune by suggesting that there may be other levies that this levy board, or whatever it is, could raise separately from suppliers? If that is the case—I do not think it is—what is the role of the levy in doing anything separate from what has already happened in terms of the socialisation of levy forgiveness across the rest of the industry? Why is it necessary to set up a levy-raising body separately from that mechanism?

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

At the risk of repeating myself for a third time, I set out in my speech exactly what we expect the levy to do, precisely why we are introducing the powers through the Bill and exactly why it is important that we support these industries, because of the high electricity cost, fluctuating market prices and cost to decarbonise.

On the hon. Gentleman’s specific question, I cannot quite remember which way round he presented it, but I reassure him that there will be no powers for this levy-raising body to introduce further levies on separate sectors, or whatever it was he was suggesting. It was the former argument—it is specifically for the industries and sectors that we have identified in this Bill, and that is it. That is what the levy is designed to do.

Alan Whitehead (Labour, Southampton, Test)

Forgiveness of the existing levy.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Yes.

New Clause 54 - Levy to fund electricity support payments

New Clause 55 - Convention on Supplementary Compensation for Nuclear Damage: implementation power

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I beg to move, That the clause be read a Second time.

The new clause will provide the Secretary of State with the power to make changes to the UK’s domestic implementing legislation regarding the convention on supplementary compensation for nuclear damage—the CSC—if required in future. That power would be implemented through regulations made through the affirmative procedure.

The UK will be the first country in the world to accede to both the Paris convention on third party liability and the CSC. That is inevitably a complex process, and we envisage four different circumstances in which amendments might be needed to our domestic legislation in the future. First, it is crucial that we deliver CSC accession. Certain implementation matters are still to be worked through with the convention countries and industry, and further changes may be needed to the Nuclear Installations Act 1965 after the Bill receives Royal Assent. Secondly, we must enable the UK to accept future amendments to the CSC.

The third circumstance is the exercise of an option under the CSC where there are optional provisions—for example, paragraph 1(a)(i) of article III, which enables a different national compensation amount to be specified to the depository. We would want the ability to make any necessary changes to the Nuclear Installations Act and any other relevant legislation to implement that option.

The final circumstance is dealing with any other matters arising out of, or related to, the CSC. As the first Paris convention country to seek CSC accession, bespoke approaches to implementation may be required. There is precedent for that approach, as the powers are in line with existing powers in section 76 of the Energy Act 2004, which enabled changes to be made for the Paris and Brussels conventions. In short, it would be prudent to ensure that mechanisms are in place to enable effective delivery in the future.

Alan Whitehead (Labour, Southampton, Test)

I do not have anything to add to what the Minister said. We have discussed similar issues earlier in our debates and I do not think that anything I would say would add to that.

New Clause 59 - Key definitions for Part

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I beg to move, That the clause be read a Second time.

Rupa Huq (Labour, Ealing Central and Acton)

With this it will be convenient to discuss the following:

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I rise to speak to the Government new clauses to introduce provisions for the hydrogen transport business model. The development of hydrogen transport infrastructure, most notably pipelines, represents a critical step in the growth of the hydrogen economy. It is expected to be vital in helping the Government to achieve the ambition of up to 10 GW hydrogen production capacity by 2030. The infrastructure is needed not only to connect producers and users, providing a market for hydrogen production, but to support the resilience and security of the supply of hydrogen, thereby encouraging a move away from fossil fuels.

However, due to market barriers associated with that infrastructure, namely high up-front capital costs and uncertain financial returns, a business model is needed to encourage investment in hydrogen transport infrastructure. The new clauses are intended to enable the implementation, via gas transporter licence conditions, of a regulated asset base, or RAB, in respect of hydrogen pipeline projects as part of the business model. A RAB is aimed at giving investors long-term certainty to establish and scale up the development of hydrogen transport infrastructure, and can be used alongside an external subsidy mechanism to give further confidence to investors. Provisions for that external subsidy mechanism in the form of hydrogen transport revenue support contracts have already been discussed in Committee.

Government new clause 59 defines key terms to be used in this new part of the Bill, which is intended to be inserted after part 2. Government new clause 60 enables the Secretary of State to designate, by notice, a consenting person in relation to a hydrogen pipeline project. Designation triggers the ability of the Secretary of State to use other powers in this proposed new part to implement a RAB in respect of the designated person and project, such as powers to grant, extend and/or modify a gas transporter licence. Subsection 2 sets out the conditions that must be met before the Secretary of State can designate a person in relation to a hydrogen pipeline project. They include whether the Secretary of State is of the opinion that it is likely to be appropriate for the person and project to be subject to relevant licence conditions implementing a RAB, and that the project is likely to result in value for money.

Government new clause 61 sets out various procedural requirements that apply in respect of the exercise of the Secretary of State’s power to designate a consenting person in relation to a hydrogen pipeline project. The new clause requires the Secretary of State to publish a statement setting out both the procedure that they expect to follow in determining whether to exercise the power to designate, and how they expect to determine whether the conditions to designate are met. The provisions in the new clause are intended to help to ensure transparency in the designation process.

Government new clause 62 enables the Secretary of State to revoke, by notice, a person’s designation in relation to a hydrogen pipeline project in certain specified circumstances—for example, if conditions of the designation are not met, or if the person consents to the designation being revoked. Similar procedural requirements apply in relation to a revocation as they do in relation to a designation. The new clause is intended to help to ensure that the Secretary of State has the ability to revoke a designation in relation to a hydrogen pipeline project where it is no longer merited or required.

Government new clause 63 enables the Secretary of State, in specified circumstances, to exercise certain powers conferred on the Gas and Electricity Markets Authority—GEMA—by section 7 of the Gas Act 1986 to grant, extend or restrict gas transporter licences. It is intended, alongside other clauses, to provide the Secretary of State with powers to implement a RAB, via gas transporter licence conditions, in respect of hydrogen pipeline projects as part of the business model.

Government new clause 64 enables the Secretary of State to make regulations about the making, consideration and determination of relevant applications. It enables the Secretary of State to set out a specific process, separate from the existing Gas Act 1986 processes, for applications to be made for the grant, extension or restriction of gas transporter licences in relation to the implementation of a RAB in respect of hydrogen pipeline projects. Before making regulations under the new clause, the Secretary of State must consult with the Gas and Electricity Markets Authority.

Government new clause 65 enables the Secretary of State to modify the conditions or terms of a designated person’s gas transporter licence, as well as standard conditions and certain documents or agreements, such as industry codes. It is intended to provide the Secretary of State with powers to implement, via gas transporter licence conditions, a RAB, in respect of hydrogen pipeline projects as part of the business model.

When making any such modifications to the conditions or terms of a designated person’s gas transporter licence, the Secretary of State must have regard to various matters, including certain Government duties under the Climate Change Act 2008 and the interests of existing and future consumers of gas conveyed through pipes. The new clause also gives the Secretary of State the power to modify the conditions or terms of a gas transporter licence held by a person who is or was a designated person. That is in connection with the revocation of the person’s designation in relation to a hydrogen pipeline project.

Government new clause 66 sets out the scope of the modifications that the Secretary of State may make under new clause 65, such as the “allowed revenue” that the designated person may receive and how it is to be calculated.

Government new clause 67 sets out procedural requirements relating to modifications under new clause 65, including a requirement for the Secretary of State, before making a modification, to consult the holder of any licence being modified, the Gas and Electricity Markets Authority and any other persons that the Secretary of State considers appropriate.

Government new clause 68 ensures that requirements for the provision and publication of information and advice may be set out in regulations. The use of regulations should give the parties involved sufficient certainty on treatment of the information, while enabling the regime to be updated as refinements and improvements are needed. The information flows established relate to the Secretary of State, Ofgem, the designated person, the hydrogen transport counterparty and other specified persons, where relevant, as summarised in the new clause.

Government new clause 69 ensures that the Secretary of State may add particular conditions to licences that require the licence holder to share information with a third party, known as “the candidate”. The candidate can be an applicant, or potential applicant, for a gas transporter licence, or a person considering whether to apply for financial support for activities relating to the production, transportation, storage or use of hydrogen.

Turning to Government new clause 70, as I have already covered, the new RAB provisions are aimed at ensuring that initial RAB support can be facilitated in parallel with wider Government support. These measures, therefore, enable the Secretary of State to directly grant, extend, and/or modify gas transport licences to incorporate conditions so that that can happen. Ofgem will, however, remain the regulator of gas conveyed through pipes, so the decisions that it makes in respect of those conditions remain of paramount importance to the success of hydrogen networks.

This is a complex and technical area to operate in, and the approach is untested at scale for both Government and the regulator. As such, there is a risk that unforeseen issues may arise that compromise a project’s ability to achieve value for money. New clause 70 therefore allows the Secretary of State to give directions to the Gas and Electricity Markets Authority, in very specific circumstances, to help overcome those issues.

Turning to Government new clause 71, the provisions requested in these measures are intended to be time-limited, as the Secretary of State’s direct involvement in the RAB is not expected to be needed forever. Given the nascent policy landscape for hydrogen, its development is largely being driven by availability of Government support. The initial designated projects will be the first of their kind at that scale, and their strategic coherence will be tied to decisions on wider value-for-money considerations. However, beyond that initial period, when strategic Government intervention is no longer required, powers to allocate a RAB should sit with the regulator.

New clause 71 therefore facilitates the Secretary of State to be able to repeal the provisions in these measures. The new clause balances the uncertainty of this nascent industry with the need to show that Government intervention is not expected to last forever. It sets a clear timeline, with 31 December 2040 triggering a need for the Secretary of State to consider whether it is appropriate to repeal any provisions and, if satisfied that it is not, to publish an explanation. That duty repeats on a five-year cycle until no provisions are left in force.

Government amendment 169 is consequential on the new clauses associated with providing powers to the Secretary of State to designate and allocate a RAB, and sets out the extent of the new clauses—that extent being England, Wales and Scotland. The decision to designate a project for a RAB will sit with the Secretary of State but attaches to the gas transporter licensing regime set out in the Gas Act, which already applies to hydrogen and is Great Britain-wide.

Alan Whitehead (Labour, Southampton, Test)

Taken together, the new clauses provide a fairly comprehensive series of arrangements relating to hydrogen transportation. In particular, as the Minister has outlined, they introduce at least the concept of a RAB to finance the proceedings.

The Minister also said that the undertaking to which a RAB may be applied is potentially huge, and I am sure that he is aware of the complications and problems that can arise in putting a RAB together for something of this size. RABs have been tried for various schemes, but normally much smaller ones. One of the most recent was Thames Tideway, which was a pretty big undertaking, but there was at least an assurance about the purpose of the undertaking, what would happen at the end of it and so on.

The RAB that has been put in place for nuclear development—Sizewell C, to be precise—is an even more complicated beast, because it effectively makes customers liable well in advance of anything being delivered. Indeed, part of the purpose of the RAB is to ensure that funding is raised for the project before it starts. In the case of Sizewell C, there is a lengthy period between the project’s starting and its making any money, so the RAB provides, in that long period, a reasonably secure funding stream that can ensure that the project is completed and energy produced.

In relation to nuclear, one of the arguments for the RAB is that, although the customer will pay more money in the short to medium term, they will get the benefits of cheaper electricity from the operation of the nuclear plant in the long term. I am not entirely convinced by that argument. There is also the issue of the uncertain timeframe during which the RAB applies. If the timescale of a particular nuclear plant falls behind excessively, much greater obligations may be placed on the customer, over a longer period of time, before anything arises. As we discussed in relation to the Nuclear Energy (Financing) Act 2022, a project may not ever come to final maturity, and in the meantime the customer has paid a lot of money. Indeed, exactly that happened with a nuclear power plant in the United States—I think in Cleveland, Ohio—where the power plant never materialised yet customers had paid a lot of money up front for it.

I say that because the RAB that we need to introduce through these new clauses, which I do not oppose, must be carefully circumscribed. We must ensure that the time for which people are liable up front, and the result of the process, are closely monitored. I assume that those arrangements will proceed by secondary legislation and various other means, but it is worth laying down a few methods of procedure for bringing a RAB forward under these circumstances, the way it might work and how we might ensure that it creates value for money in its operation. It would be helpful if the Minister would say one or two things about that in his response.

My other question relates to Government new clause 71. The Minister says in the clause that it enables a sunset time of December 2040 to be specified as the “relevant date”. Actually, it does not attach that relevant date to the rather stark subsection (1) of the clause, which states—without further qualification or clarification—

“The Secretary of State may by regulations repeal any of the preceding provisions of this Part.”

As far as I can see, that means if at any stage—not 2040—the Secretary of State feels that he or she would like to repeal any or all of the preceding provisions in this part, he or she may do so, subject to the affirmative procedure in the House. However, we know how far statutory instruments go in holding anybody to account for anything, so the Secretary of State appears to have the ability to derail the whole process if he or she feels like it, at any stage during its operation. I would think that is a potential red flag to investors in these projects. They can go ahead with their projects and arrangements and put their investment funds in, but the Secretary of State can pull the plug at any time he or she feels like doing so: that is not a terribly reassuring thing to read in a piece of legislation when people are considering investing in hydrogen transportation, in this instance. It would be better to link that power of the Secretary of State more firmly to the sunset clause in subsection (3)—it is in the clause, but not associated with the first subsection of the clause. It may be that other provisions elsewhere that I have not seen link it in, but as it stands, it is a bit of a stark, free-standing thing to say in a piece of legislation.

As we saw recently with the Energy Prices Act 2022, which included similar arrangements for the Secretary of State to do exactly what he or she thought he or she might do at any stage, industry was very upset about those clauses. Indeed, it raised representations about what would happen to its investments and various other things were those clauses to be invoked. I hope we are not looking at a repeat of that, and have rather better arrangements to ensure that in normal circumstances under these provisions, things would be able to run their course and do what we want them to do as far as hydrogen transportation is concerned.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I thank the hon. Member for his questions. He is right to draw attention to subsection (1) of new clause 71, which states:

“The Secretary of State may by regulations repeal any of the preceding provisions of this Part.”

But of course we then need to read the second subsection, which states:

“So far as any of those provisions is still in force on a relevant date, the Secretary of State must—

(a) consider whether it is appropriate to repeal that provision, and

(b) if satisfied that it is not appropriate to do so, publish a statement no later than 3 months after that date explaining why not.”

Then subsection (3) states that “relevant date” in subsection (2)

“means 31 December 2040 and each five-year anniversary of that date”—

quite a way to celebrate Hogmanay. Subsection (4) then states:

“Regulations under this section are subject to the affirmative procedure.”

I hope that the hon. Member accepts that although subsection (1) may seem as though it enables the Secretary of State to, in his words, “pull the plug”, the other provisions give relevant security to the industry and, indeed, to any MPs who may be concerned that the Secretary of State might be willing to do so without going through a process that is clear and transparent and that has options. The intention is to enable long-term investment in hydrogen pipelines, supporting it and providing investor confidence that investments in such projects will have a fair return. We intend to maintain clear and open communication with projects, as appropriate, recognising the benefits of certainty and predictability for the industry.

However, to be able to react to unforeseen issues relating to licence conditions and the operation of the RAB, the Secretary of State must retain the ability to modify the licence conditions of a designated person’s gas transporter licence while a designation remains in place. Ofgem, as the independent regulator, retains its overarching ability to change licence conditions within the existing regime.

Alan Whitehead (Labour, Southampton, Test)

I appreciate what the Minister says about subsection (2) of new clause 71. Indeed, I paid attention to it in my remarks. But I hoped that he would agree—hon. Members might like to look at this new clause again to see whether they do—that subsection (1) does not necessarily attach itself to subsection (2). Subsection (2) states:

“So far as any of those provisions is still in force on a relevant date, the Secretary of State must”

do various things, as the Minister said. It does not necessarily relate to subjection (1). It might do, it might not. Subsection (1) just baldly says:

“The Secretary of State may by regulations repeal any of the preceding provisions of this Part.”

On the question of the provisions that are still in force on a relevant date, that could be after the Secretary of State has taken action to repeal those preceding provisions, so the subsections are not connected in the way the Minister seems to suggest.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I dispute that and argue that they are connected. Yes, subsection (1) states:

“The Secretary of State may by regulations repeal any of the preceding provisions of this Part.”

But directly following is subsection (2), which states:

“So far as any of those provisions is still in force on a relevant date, the Secretary of State must”,

and so on—I am not going to repeat that. I think it is quite clear, in the way this has been drafted, that it relates to “repeal…of this Part” in subsection (1) of the new clause.

I can understand that it might be open to interpretation. I am sure that legislators and lawyers years from now will be able to have great fun arguing over exactly what is meant, but to my mind, the Government’s mind and, I think, the mind of right hon. and hon. Members in this room, subsections (2), (3) and (4) relate exactly to what is in subsection (1).

Alan Whitehead (Labour, Southampton, Test)

We just need to add the word “and” at the end of subsection (1)—a sensible suggestion—then we might be in a much better position.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I thank the hon. Member for his suggestion. I do not think that is required, but I do thank him for the suggestion.

New Clause 60 - Designation

New Clause 61 - Designation: procedure

New Clause 62 - Revocation of designation

New Clause 63 - Grant, extension or restriction of gas transporter licence by Secretary of State

New Clause 64 - Applications for grant etc of gas transporter licence

New Clause 65 - Modification of gas transporter licence by Secretary of State

New Clause 66 - Scope of modification powers under section (Modification of gas transporter licences by Secretary of State)

New Clause 67 - Procedure etc relating to modifications under section (Modification of gas transporter licences by Secretary of State)

New Clause 68 - Information and advice

New Clause 69 - Conditions of gas transporter licences for conveyance of hydrogen

New Clause 70 - Secretary of State directions to the GEMA

New Clause 71 - Repeal of Part

New Clause 72 - Power to modify Gas Act 1986 in relation to hydrogen

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I beg to move, That the clause be read a Second time.

Rupa Huq (Labour, Ealing Central and Acton)

With this it will be convenient to discuss Government amendments 168 and 170.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

We are racing through it this afternoon, Dr Huq.

The power in new clause 72 is specific to the unique role of hydrogen. The Gas Act 1986 regime was primarily designed around natural gas, and was established nearly 40 years ago. The possibility of using hydrogen as part of a major utility is recent by comparison. Although the Government consider it appropriate to use the Gas Act regime for hydrogen, there is inherent uncertainty in the use of a regime designed in a different era for a different type of gas. Given the highly technical and granular approach to regulation set out in the Gas Act, the issue of whether all of its relevant provisions should apply to hydrogen at scale cannot be fully tested without large-scale projects being operationalised. Therefore, any changes that may be needed cannot be put on the face of the Bill. If a problem is identified at the implementation stage, it will need to be addressed swiftly to ensure that projects are not adversely affected and that hydrogen’s role as a key technology for the UK’s net zero ambitions is not put in jeopardy.

This power, therefore, allows the Secretary of State, after consultation with the Gas and Electricity Markets Authority, to modify the Gas Act to remove unforeseen issues in relation to hydrogen production, storage, transport or use. The power is necessary to ensure that the Gas Act, initially designed for the natural gas markets, does not inadvertently prevent the hydrogen economy from being established. The Government consider it necessary to ensure that the deployment of, and significant investment in, hydrogen projects is not wasted as a result of unforeseen technicalities under the Gas Act.

This power is extremely important and is drafted with a very specific purpose and scope. It enables the Secretary of State to make regulations that provide for any provision of the Gas Act not to apply, or apply with modifications, only in relation to the production, transportation, storage or use of hydrogen. It may be used only for the purpose of facilitating or promoting the production, transportation, storage or use of hydrogen.

The new clause ensures appropriate procedural safeguards for a power of this type. There is a consultation duty under subsection (4), and all regulations are subject to the affirmative procedure to ensure that Parliament has appropriate oversight over any disapplication or modification deemed necessary.

Government amendments 168 and 170 are consequential on new clause 72, which provides powers to the Secretary of State to modify the Gas Act 1986 for a specific purpose and scope, as I have just set out. They clarify that the extent is England, Scotland and Wales because the territorial scope of the relevant provisions of the Gas Act is Great Britain.

Alan Whitehead (Labour, Southampton, Test)

I congratulate you, Dr Huq, on your reading of the previous new clauses. You made their moving and agreeing sound much more interesting than certain other people have done in this Committee. It is rather like reading the football results and finding a surprise result now and again—it always changes slightly. We have further new clauses this afternoon, and I am sure that high standard will be maintained for the rest of our proceedings.

I have nothing further to add to what the Minister said. New clause 72 is a sensible provision and ought to be added to the Bill.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I echo the comments of the hon. Gentleman in congratulating you, Dr Huq, on your reading of the new clauses, and welcome his welcoming of this part of the Bill.

Rupa Huq (Labour, Ealing Central and Acton)

Any more for any more?

Kerry McCarthy (Labour, Bristol East)

I thought you were great.

New Clause 73 - Great British Nuclear

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I beg to move, That the clause be read a Second time.

Rupa Huq (Labour, Ealing Central and Acton)

With this it will be convenient to discuss the following:

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I now come to the part of the Bill that I am most interested in—all of the Bill is interesting, but this is a very exciting moment, because I am now turning to a group of new clauses relating to the establishment of Great British Nuclear. The invasion of Ukraine and the subsequent rise in global energy prices have demonstrated the paramount importance of accelerating home-grown power. In response, we published the British energy security strategy in April last year, which committed to establish a civil nuclear projects delivery vehicle that will be known as Great British Nuclear, or GBN.

In March, we went further and published “Powering Up Britain”, which announced the launch of GBN and fired the starting gun on the technology selection process for small modular reactors here in the UK. While that work is progressing at speed, with GBN currently operating within an existing legislative framework, these new clauses will ensure that GBN has the long-term operational mandate needed to carry out the role that the Government intend for it.

Government new clause 73 allows the Secretary of State to designate a company as Great British Nuclear, provided that that company is limited by shares and wholly owned by the Crown. GBN will exist as a Government company with the powers and flexibility given to it under the Companies Act 2006, ensuring that it can operate in the flexible manner that is reasonably required. As per the process involved with the designation, a notice must be published by the Secretary of State at the earliest practical opportunity detailing the time that the designation will have effect. If circumstances should arise where the GBN company ceases to be wholly owned by the Crown, the designation of such a company terminates.

Government new clause 74 confirms that a company designated as Great British Nuclear will not have Crown status. It also confirms that GBN’s property will not be regarded as owned on behalf of the Crown. Government new clause 75 sets out the objectives of GBN:

“to facilitate the design, construction, commissioning and operation of nuclear energy generation projects for the purpose of furthering any policies published by His Majesty’s government.”

GBN will be a Government-owned company, and as such its general powers will be derived from the Companies Act 2006. The clause sets out how its general powers will be used and specifies that GBN’s role is to help deliver Government policy for nuclear energy generation projects. In doing so, the clause makes it clear that GBN will always act in furtherance of Government policy.

Government new clause 76 allows the Secretary of State to give financial assistance to GBN to deliver its objectives. Funding can be provided to GBN in any form, including grant in aid, to fund GBN’s operating costs. Financial assistance may also cover the acquisition of shares and other types of interest in bodies corporate, as well as in partnerships and other joint ventures. Funding will always be provided subject to conditions agreed by the Secretary of State. The exact level of funding provided for investment in new nuclear projects will be subject to future spending review decisions.

Government new clause 77 provides a power for the Secretary of State to issue guidance and directions to GBN, which may be specific or general in nature and that GBN is obligated to comply with. The power of direction and guidance will allow the Secretary of State to ensure that GBN is operating in line with the latest Government policy for nuclear. To ensure that the power does not compromise GBN’s operational independence and respects its status as an expert body, the clause includes a requirement for the Secretary of State to consult with GBN and any other person they consider appropriate before issuing such direction and guidance. Those directions and guidance must be published, and any directions must be laid before Parliament.

Government new clause 78 requires that GBN provide an annual report to the Secretary of State after the end of each financial year. The Secretary of State must lay this report before Parliament alongside any relevant comments they consider appropriate. Government new clause 79 places a requirement on GBN to send copies of its annual report and accounts to the Secretary of State before the end of the filing period. As with new clause 78, the Secretary of State is required to lay those documents before Parliament.

Government new clauses 80 to 85 help to facilitate any transfers that may be needed when designating a new company as Great British Nuclear and as its activities evolve over time. Turning first to Government new clause 80, the clause will empower the Secretary of State to make transfer schemes in connection with GBN. It sets out a set of principles, procedures and expectations for the transfer scheme that will help provide clarity to affected parties.

Government new clause 81 would provide a power for the Secretary of State to provide for compensation to a transferor when making a transfer scheme. The compensation value will be agreed between the Secretary of State and the transferor, or by an independent valuer in the absence of any agreement. In the absence of an agreement the Secretary of State can appoint a valuer on behalf of both parties.

Government new clause 82 allows the Treasury to vary the way tax has effect in relation to transfers made under the transfer scheme. Government new clause 83 allows the Secretary of State to direct a person to provide specified information or assistance that they may reasonably require in connection with making a transfer scheme. Persons affected include those whose property, rights or liabilities are likely to be transferred, or a body corporate that is likely to be transferred under such a scheme. This information and assistance must be provided within the period and in the form and manner specified in the direction. The Secretary of State must reimburse a person for the costs incurred in complying with such a direction.

Finally, I turn to Government new clauses 84 and 85, and Government amendment 174. Government new clause 84 allows the Secretary of State to reimburse a person in respect of expenditure reasonably incurred in preparation for, or in connection with, the designation of a company as GBN.

Government new clause 85 allows the Secretary of State by regulations to make provision about pension arrangements in relation to GBN. The designation of a company as GBN and GBN’s anticipated long-term role are likely to result in transfers of employees who are currently active members of a defined benefit scheme, some of whom will have special pension protections. Before the power is exercised, the relevant pension scheme trustees and principal employers must be consulted. Finally, Government amendment 174 establishes that the new clauses relating to Great British Nuclear extend to England, Wales and Scotland—that is to say, Great Britain.

Alan Whitehead (Labour, Southampton, Test)

The Minister is slightly unwisely saying that this is the most exciting part of the Bill. We know that the provisions are exactly bang in the middle of the Minister’s brief as part of the team at DESNZ, as we now call the Department—although I understand that there are instructions not to call it DESNZ. Quite how we pronounce it, I am unsure; for the sake of the Minister, I will undertake not to sneak DESNZ into Hansard.

The provisions relate to the establishment of Great British Nuclear. As a suite of new clauses, they are unexceptionable and the right thing to do in terms of getting Great British Nuclear off the ground—although, in a sense, Great British Nuclear is already off the ground, as it was launched in March. The provisions therefore underpin the activities of an existing body, rather than a created one. It might be useful to briefly consider what GBN is tasked to do in the first instance.

Charlotte Nichols (Labour, Warrington North)

My hon. Friend has hit on an important point. As chair of the all-party parliamentary group on nuclear energy, one of my concerns is the fact that Great British Nuclear is going to be in DESNZ at all. Does my hon. Friend agree that the Cabinet Office might be a more suitable Department, given that the two biggest issues in the delivery of new nuclear are planning and people, neither of which are under DESNZ’s ministerial purview?

Alan Whitehead (Labour, Southampton, Test)

My hon. Friend makes an interesting point; were I to cede to it entirely it would lead to great distress on the part of the Minister. Nevertheless, she makes the valid point that the exact placing of Great British Nuclear is one for further consideration. For now, it is starting off in DESNZ.

Let me read again from the factsheet that was given to me when the new clauses were being mooted. Under the heading “What will GBN do?” it says:

“GBN is tasked with facilitating delivery of government’s nuclear programme. Its focus will be to de-risk new nuclear development by co-funding projects at the critical early development stage and acting as an expert adviser throughout the process.

Having launched within the auspices of the current legal framework in March 2023, the first priority for GBN is to lead a competitive process to select the best Small Modular Reactor (SMR) technologies for investment. This commenced in April 2023, with market engagement as the first phase. The second phase—the down-selection process—will be launched in the summer, with an aim to assess and select the leading technologies by autumn. GBN will deploy government funding to support the development of these selected technologies.”

That sounds like a good idea but, as the Minister will be aware, a number of companies are actively engaged in small modular nuclear technology, and some of them are far more advanced than others and only one of them is fully British. Not only are they at various stages of advancement in their processes, but they are pursuing processes in small modular nuclear development that are very different in their size and application.

At one end, we have Rolls-Royce’s proposals for a not very small, not very modular reactor at about 440 MW —that is, about the size of a medium to large gas-fired power station. Then we go down through the sizes of a number of other companies engaged in the process, and not just through sizes but from pressurised water through to molten salt through to thorium. Then, at what we could say is the bottom end, and with probably an entirely different function, there are the proposals by Last Energy. My hon. Friend the Member for Warrington North has had considerable discussion with that company. Last Energy has made quite a lot of advancement at an early stage in procuring potential contracts for its plants, should they be built. It considers that its proposals do not need to go through the generic consenting process because they are small versions of existing pressurised water arrangements, so they could get going quickly and early. Indeed, in the United States, Last Energy has already constructed a number of the modular reactors that will go forward. Most significantly, it says it does not require any Government assistance or funding for its purposes.

As far as I can see, though, all those different companies and technologies of different sizes and applications are being placed, through Great British Nuclear, into a competition to find the best technology. The best technology will win, and the winner will then have Government funding to support the development of the selected technologies. I wonder whether, in the context of some of those companies saying that their technology does not need to be selected for Government funding—they can actually go ahead and do it—the development of the competition in that way might be seen as a brake on the development of small modular nuclear in the UK, rather than an assistance.

We must be careful with the competitive process. If it puts the stoppers on development in certain places because the competition has not yet been realised, the people developing the proposals may well say to themselves, “Actually, this is not a very fast process after all.” They are ready to go and can get themselves developing pretty quickly, but meanwhile they have to jump through the hoops of a competitive process that they do not want to enter, and they may or may not come out as the winner in the end.

I am sure the Minister has a good answer to my concerns. If I were very unworthy, I might suggest that the competition was launched to, among other things, ensure that the Rolls-Royce proposals get a good looking at, bearing in mind that they are not as well advanced as some other small modular nuclear developers’ proposals, and putting them all on the same level means that Rolls-Royce gets to the starting point in a better order than it might have done otherwise. However, I am sure that is a very unworthy thing to say and that that is far from the Minister’s mind.

I would like to know whether the competition will include all technologies or exclude some of them. Or will it be a mixed bag of arrangements whereby those that are able to make progress at an earlier stage than the competition suggests are basically left alone, and the competition does not impede that progress? That does not particularly affect the way GBN is set up as far as the new clauses are concerned. As my hon. Friend the Member for Warrington North said, we have a question about the final placement of GBN, but I do not have any objections or particular concerns about the way it is set up. I have more concerns about what it is going to do in the first instance, and whether that will push small modular nuclear forward or not, depending on how the arrangements are carried out.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I thank the hon. Gentleman for his overall warm comments on the establishment of Great British Nuclear to drive forward this Government’s plans, and those of subsequent Governments, for the development of nuclear technology and our civil nuclear fleet in the United Kingdom.

Given that the drawdown selection process is ongoing, I cannot make reference to any specific company or technology involved in it. I do not want to get drawn into that. However, I reassure the hon. Gentleman that on 13 July, when we formally launch Great British Nuclear, much more information will be forthcoming about the competition and everything else.

The Government have decided to invest money in technologies to further develop small modular reactors in the United Kingdom. To enable us to do that and get best value for the British taxpayer and, indeed, to ensure that taxpayers’ money is invested in the best technologies, the decision has been made that we will run a competitive down-selection process. As I have said, that process will be formally launched on 13 July. There will be an interim announcement in, we hope, the early autumn, proceeding to a final announcement of technologies early next year. By the way, we are moving three times faster than any comparable jurisdiction in the world, including countries such as Canada that have gone through this process before.

The process absolutely will not preclude, disincentivise nor stand in the way of any company that says, “We can develop SMR in the United Kingdom and we don’t need the Government’s money to proceed.” The process is to determine where the UK Government will spend the investment that we are seeking to make in the future of SMR in this country, but we are not saying to other companies that want to come in and do not need Government support that we are closing the door to them. We are open and willing to accept applications for development on sites around the UK.

The hon. Gentleman is absolutely right that the new technologies that are being developed in this sphere are absolutely fascinating, incredibly exciting and moving at great speed. Developments in micro-modular reactors could be transformative to British industry throughout the country. This process will be just the first part of what Great British Nuclear is looking to do. Post the drawdown selection process, we will look at further gigawatt-scale projects so that we can meet our stated ambition of having 24 GW of nuclear power on the grid by 2050.

I am pleased that the hon. Gentleman warmly welcomes Great British Nuclear and hope that I have allayed his fears regarding the drawdown selection process. As I have said, much more information on the competition will be forthcoming on 13 July, when the Secretary of State and I, alongside Simon Bowen and Gwen Parry-Jones—respectively the chair and chief executive officer of Great British Nuclear—will launch it formally here in London.

New Clause 74 - Crown status

New Clause 75 - Great British Nuclear’s objects

New Clause 76 - Financial assistance

New Clause 77 - Secretary of State directions and guidance

New Clause 78 - Annual report

New Clause 79 - Annual accounts

New Clause 80 - Transfer schemes

New Clause 81 - Transfer schemes: compensation

New Clause 82 - Transfer schemes: taxation

New Clause 83 - Transfer schemes: provision of information or assistance

New Clause 84 - Reimbursement and compensation in connection with designation

New Clause 85 - Pension arrangements in connection with Great British Nuclear

Written evidence reported to the House