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Lord Mandelson: My Lords, I accept that suggestion; it is a good idea. Indeed, one aspect of access to EIB funding was whether the EIB would be able to extend funding not just to the main lenders, the main banks, but to smaller financial institutions, in which I include

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venture capital companies. Obviously, I cannot commit them; it is not my job to do that, but I think we can have a discussion with them because I am aware from time back of the important role of venture capital companies. If they can be used as vehicles for lending more extensively to SMEs, we should certainly look at that.

Lord O'Neill of Clackmannan: My Lords, I congratulate my noble friend on the Statement. I declare an interest as president of the Specialist Engineering Contractors Group, which represents the high-tech, high-quality end of the construction industry. We welcome what has been said about prompt payment, but I think there is another aspect of it which the Government should look at, and that is the policy of retentions whereby major contractors hold on to a proportion of the funds until the whole of a job is completed, regardless of the relevance of a sub-contractor’s role. As a major customer of the construction industry, the Government could do a lot to help that industry if they ended the policy of retentions, certainly for public sector contracts, and put it on the same footing as the prompt-payment promise of 10 days. That would facilitate the construction industry’s supply-chain cash flow in a way that few other things could at this time.

Lord Mandelson: My Lords, my noble friend has made a very important point, which I will seek to amplify at every opportunity.

Lord Elton: My Lords, I declare an interest as a Deputy Speaker. Does the noble Lord accept that the sensitivity of this House about the timing of Statements relates not to the dignity of this House but to the role of Parliament? As long as statements of government policy are made for the first time outside Parliament, that is where the reporters will be and that is where the news will come from, and the public will know nothing about what is going on in Parliament. If a Government were always to make their Statements in Parliament, the country would very soon become aware of what Parliament was about and what its views were, which would be very welcome indeed.

Lord Mandelson: My Lords, I appreciate the sentiment expressed by the noble Lord, but in this case no statement was made outside Parliament. By my choice, the Statement was not made on the “Today” programme, as some others have been. It was made in the other House, not outside Parliament, and that is the point that I was making.

Lord Foulkes of Cumnock: My Lords, I reassure my noble friend that many on this side warmly welcome the Statement and all the measures in it and the prompt action by the Government to help small and medium-sized enterprises. I ask him to ignore the churlishness from Members opposite. In relation to prompt payment, will my noble friend ensure that the devolved Executives in Scotland, Wales and Northern Ireland follow suit? What action will he take to make sure that they, particularly the First Minister of Scotland, who is pretty long on rhetoric and short on action, take action in the way that the UK Government are doing?

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Lord Mandelson: My Lords, I can only join my noble friend in hoping that the lead that we have given down here is followed up there, and I will be communicating that.

It is not a question of ignoring anyone’s churlishness. If I went through my political life ignoring people’s churlishness, I would be left with very little to say. I shall end on a constructive and friendly note. I say to the House, the noble Lord, Lord Hunt, and the noble Baroness that they will be pleased to learn that the £350 million for training is additional training money for small businesses. It is existing money, but it was not previously available to small companies. In that spirit, I acknowledge that we were both right.

Energy Bill

5.23 pm

Consideration of amendments on Report resumed.

Lord Teverson moved Amendment No. 4:

4: After Clause 37, insert the following new Clause—

“Heat from deep geothermal sources

(1) The Secretary of State may make regulations putting into place for the United Kingdom a licensing system for the exploitation of heat from deep geothermal sources for both the direct use of that heat and for the generation of electricity.

(2) The licensing regime shall be determined after a period of consultation by the Secretary of State with industry, geological experts, local authorities, energy producers and other interested parties.

(3) The licences shall relate to—

(a) those areas of the United Kingdom deemed by the Secretary of State to have potential for the exploitation of deep geothermal heat, and

(b) individual geographically delineated areas of land, to be known as “tenements”.”

The noble Lord said: My Lords, I should like to make it clear, following the amendment proposed by my noble friend Lord Wallace of Tankerness, which was about ROCs, that when I mention rocks they are hot dry rocks, spelt in the normal way in which people in the street would understand it.

I was grateful to the Government for their interest in Committee in hot rocks technology and geothermal power. The noble Lord, Lord Bach, enabled a number of representatives from the industry and other people who were interested in this area to meet the department to discuss a number of the issues so that the department could understand this area more and we could start to put it on an active agenda. Those meetings were constructive and, since then, the Government have concluded their renewable energy strategic review consultation period. A number of businesses and interested parties from the geothermal energy sector have contributed to that. If nothing else, we have already started to achieve things there. I thank the noble Lord, Lord Oxburgh, for his support and for being at those meetings.

I do not want to go on at great length about the geothermal industry, because I went through that in Committee. However, I will point out that this is a genuine low-carbon or zero-carbon technology. Its unique aspect is that it provides a steady power source, unlike many other renewables. It is unobtrusive because its workings are underground, but the clever bits on the surface also tend to be low profile and hardly noticed by local residents. That is always good in

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terms of planning permission and the feelings of local people, which are always issues for renewable energy projects.

There has been extensive use of geothermal energy where there are near-to-surface sources of hot water. Those are mainly in volcanic areas, such as Iceland, New Zealand and Japan, where these technologies are proven to work and provide a large amount of electricity. That is not of much use in non-volcanic areas, where the possibility of drilling down five or 10 kilometres is increasingly being looked at, so that water can be pumped down to hot rocks and hot water can be pumped back up. Although such technologies exist as a result of the oil prospecting industry and the present geothermal industry, they have not been put together in a commercial way. A demonstration project has just started in the Alsatian region of France at Soultz. A study by the Massachusetts Institute of Technology in the United States, which is spending a lot on research in this area, estimated that some 10 per cent of US electricity generation could be supplied by hot rocks geothermal energy within 50 years—although that is quite a long timeframe—at competitive prices, provided that there is reasonable investment in research and development.

This amendment tries to address that area of research and development. My equivalent amendment in Committee was, I agree, prescriptive. It tried to move this issue forward by stating that the Secretary of State “should” consult and set up a system for producing a framework within which exploration and demonstration projects could take place. After listening to the Government and recognising their interest in the area and their positive response, in this amendment I want to give the Secretary of State powers to establish that system, although not to insist on it or give a timeframe. I am aware that it is unusual that someone from the Liberal Democrat Benches should push Secretaries of State to take powers to make regulations. However, given the urgent pace necessary in renewable energy, because of our timetables and targets, that sort of response is entirely necessary.

The amendment would empower the Secretary of State to set up a licensing system for what I have called “tenements”. That is a term used by the Australian industry, which is very much into research, development and technology exploration in this area and hopes to move forward to actual generation. The delineated areas of land are called tenements, for which there are licences, a little like those for North Sea oil and gas and, in renewable energy, wave hub areas. This is a standard model of permitting a monopoly to explore a particular area, after a tendering process.

Why is that necessary? It is for the same reason that applies anywhere else. Although geologists are fairly sure where these areas are—at the moment the best areas are known to be in the south-west granite peninsular—a company has to invest many millions of pounds in test bores. If it is to make that investment, a company has to be sure that another contractor, after the source has been proven, does not come along, drill a hole 500 yards nearby and undermine the original investment. Certainly, two of the Australian companies that have met with DBERR, which looks after energy,

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made it very clear that for them to start investing in the United Kingdom in this important energy source some security for their investment in exploration was needed.

The amendment would put into the Bill an important future renewables technology, one that is proven in most aspects of its operation but which still requires to be proven in terms of the specific technology. It would enable that exploration to take place within the legal framework and it would avoid putting unreasonable timescales on the Government as regards performance. On that basis and given the importance for the future, not just within the United Kingdom but beyond, for this technology and the way in which other economies are already developing in this area, I hope that the Government will be positive towards this approach. I beg to move.

5.30 pm

Baroness Wilcox: My Lords, I do not think for one moment that the Government will be able to allow this amendment, but I must speak in support of it on a personal basis. I live in the south-west granite peninsula, as does my noble friend. I am a governor of Imperial College, the noble Lord, Lord Oxburgh, is the previous rector of Imperial College and I think that the noble Lord, Lord Hunt, has a new interest in Imperial College. We all know the exciting work that is being done in all these areas. No one can suggest for one moment that everyone will throw money at this. Setting up a licensing system, like Australia’s tenement system, is possibly the only way to go forward at the moment, as far as we can see. It has been an education just to listen to this geothermal discussion. I am delighted to be able to support the amendment.

Lord Oxburgh: My Lords, I welcome the intent of the amendment. Whether it is precisely right, I do not know, but we should do something along these lines. In the whole renewable energy area, there are no silver bullets. Although 10 years ago geothermal energy would not have been at the top of one’s priority list for exploitation in this country, technology moves on and commercial firms are now seriously interested in looking at and investing in it.

I regard this kind of enabling legislation effectively as good housekeeping. We do not know what will come but, certainly, as the noble Lord, Lord Teverson, pointed out, geothermal exploration is expensive; it involves drilling deep holes and it almost certainly involves conditioning the rocks underground with hydrofracturing techniques so that cool water from the surface can be pumped down, circulated through the warm rocks and brought back to the surface. That is very expensive. As the noble Lord, Lord Teverson, pointed out, we do not want people to feel that, after they have made this investment, it can effectively be hijacked by someone else. We need some way of encouraging these people and protecting their investments, probably using the same kind of legislative framework that has been used in other countries.

Lord Walton of Detchant: My Lords, this is not an area in which I have any particular knowledge or expertise, but recently I was fascinated to find that in

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the north-east of England, where I live, the newly refurbished Grace Darling Museum in Bamburgh is now being heated totally by geothermal means. We were so interested in that development that, in exploring the possibility of changing the heating system in a house belonging to my family, we found that two firms in the north-east of England are now embarking on geothermal heating in a number of domestic premises. Of course, the required borehole and other costs would, in certain domestic circumstances, make it prohibitively expensive. However, as my noble friend Lord Oxburgh said, the technology is moving on. This seems an attractively permissive amendment, putting forward something that ought, in principle, to be supported.

I was somewhat puzzled by the use of the word “tenements”. When I was a young medical officer just after the war and was stationed temporarily in Glasgow, I sometimes used to be called out to see patients in what they called “single ends” in huge, decrepit, tall buildings called tenements. It struck me that it is a rather odd term to be included in an amendment referring to areas of land. Subject to that caveat, this amendment, in principle, well deserves support.

Lord Campbell-Savours: My Lords, I am married to an Icelander, so the House will recognise that I have enjoyed the heating system in Iceland extensively over the years and I have had the opportunity of looking at a lot of the plant involving geothermal sources. The noble Baroness, Lady Wilcox, said that she thinks it unlikely that the Government will accept the amendment. I cannot see why they would not want to accept it, if only because it will cost them nothing. They will charge out the cost of licences to organisations that seek them and by doing so they will facilitate developments in this area at no cost to the taxpayer. I hope that my noble friend will accept the amendment.

Lord Palmer: My Lords, I strongly support this amendment and echo everything that has been said. I agree with the noble Lord, Lord Campbell-Savours: I see no reason why the Government cannot accept this amendment. Recently, I was extremely tempted to install a geothermal system at home, but it was prohibitively expensive. Along with this amendment, the Government must channel a little more money into research and development, because this is an exciting and important long-term aspect of renewable energy. It is my pleasure thoroughly to support this amendment.

The Minister of State, Department of Energy and Climate Change & Department for Environment, Food and Rural Affairs (Lord Hunt of Kings Heath): My Lords, this has been a short but fascinating debate. I am sure that we are eager for the answer to the question raised by the noble Lord, Lord Walton, about the definition of “tenements” in the amendment.

I am sorry to have to disappoint the noble Lord. It might be regarded as churlish for me to stand at this Dispatch Box and suggest that your Lordships do not proceed to give the Secretary of State extensive powers and discretion in the way in which the noble Lord suggests. Seeing the noble Lord, Lord Thomas of

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Gresford, in his place, I recall debates in which he has argued, sometimes successfully, that the Secretary of State should not be given such wide discretion.

I do not want noble Lords to misunderstand. I must confess that two weeks ago I did not know much about geothermal energy, but since then I have met the noble Lord, Lord Teverson, on a couple of occasions and now feel that I know quite a lot about the issue. I understand why noble Lords feel that this technology has potential and that we ought to legislate in advance of that potential being turned into practice. Without underestimating the potential, one has to point out, as the noble Lord, Lord Oxburgh, did, albeit in supporting the amendment, that cost remains a significant barrier to geothermal energy. My understanding is that, notwithstanding the example given by the noble Lord, Lord Walton, the sources of hot rocks at a suitable depth in the UK are limited and that hot dry rock technology must overcome many technical barriers. Noble Lords have made the point that technology is advancing at a fast pace, but we do not think that it has moved far enough to justify legislating at this stage.

I do, however, have some words of comfort. Noble Lords will know that we have had the renewable energy strategy consultation. Indeed, the noble Lord, Lord Teverson, and a number of companies interested in geothermals have submitted comments to the consultation about this technology, which we will consider when we publish the strategy next spring.

The amendment would allow the Secretary of State to make regulations to create a licensing system for companies exploiting the heat from deep geothermal sources for the direct use of heat and for the use of that heat to generate electricity. I understand the issue that the noble Lord raises; my officials, who have had the opportunity to discuss it with him, are much more aware of the problems with exploration and land ownership. It is a substantive point. However, given the current state of technology, it would be premature to create a regime of the sort that he has suggested. Geothermal projects could be given consent under the existing legal framework, although I understand why a licensing regime might be appropriate in due course, particularly if the technology develops and looks promising. I understand the noble Lord’s enthusiasm for wanting to drive this forward, but there are risks in trying to create an enabling framework in primary legislation at a very early stage. In general, your Lordships’ House does not favour such an approach. I also wonder what the Delegated Powers and Regulatory Reform Committee might have to say about it.

Lord Campbell-Savours: My Lords, will my noble friend explain what defence there is for an organisation that bores a hole in the ground and finds that it can exploit it, when 100 yards away it sees someone else take advantage of the work that it has done and loses its investment? If officials are aware of that, as he says they are, what is their solution to that problem?

Lord Hunt of Kings Heath: My Lords, my noble friend is quite right to raise that matter. I have already said that I understand why a licensing system might be

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an option in that direction. All I am saying is that, given the current state of the industry and the technology, we are not there yet.

Lord Oxburgh: My Lords, I apologise for interrupting the Minister, but it is important to draw attention to a point made by the noble Lord, Lord Teverson, in his introduction. Both he and I have attended meetings with overseas investors who are willing at this moment to invest this way. What the Government are doing is quite serious; they are putting their own technological judgment ahead of that of the industry.

It is also worth mentioning that a little confusion may have come into the debate, because we are talking about two quite different sets of geothermal activity in the same breath. My noble friend Lord Walton was referring to ground-source heat pumps, which involve shallow holes. It is currently just about economical to put them into new-build domestic houses. The technology for that exists and is improving. The noble Lord, Lord Teverson, was referring to a much deeper geothermal resource, which offers the possibility of bringing up hot water either for district heating systems or, ideally, for power generation. There are two quite distinct elements here.

Lord Hunt of Kings Heath: My Lords, I am grateful for the intervention because the noble Lord has explained eloquently and expertly a point that I was going to come to. I realise that I am going to disappoint the House, but the fact remains that we do not think that we are in a position as of today to commit ourselves to the kind of licensing regime put forward by the noble Lord. I will ensure that the sentiments of noble Lords are considered as part of the renewable energy strategy and I would not rule out action by the Government in the future if we think that this is a realistic option. However, we do not think that we have enough knowledge from the work that has been done to accept the kind of licensing regime proposed here.

Lord Teverson: My Lords, I have thanked the Government many times for their interest in this area. The point about the amendment is that it would be in place precisely because the Government may not feel that they are in the right position to act now, even though a number of British companies of some size as well as international companies are looking at investment in this area. The amendment would ensure that, when the Government concluded that they needed to use it, they would be able to move ahead. One of the most important lessons that we have learnt about energy generation and a low-carbon economy is that we need fingers in many pies and to have a number of options open to us. This amendment would allow the door to be opened in due time.

I thank the noble Lord, Lord Oxburgh, for explaining the difference between heat pumps and deep geothermal sources. I believe that this is a technology waiting to be realised, even if we do not know the precise timing. Through this reasonable amendment, the Secretary of State would be able to choose to act. On that basis, I would like to test the opinion of the House.

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5.47 pm

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 73; Not-Contents, 144.

Division No. 1


Addington, L.
Alton of Liverpool, L.
Avebury, L.
Baker of Dorking, L.
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