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23 Feb 2010 : Column GC247

Grand Committee

Tuesday, 23 February 2010.

3.30 pm

The Deputy Chairman of Committees (Baroness Gibson of Market Rasen): My Lords, I remind noble Lords that the Motion before the Committee will be that the Committee do consider rather than approve the draft national policy statement. If there is a Division in the House, the Committee will adjourn for 10 minutes.

Energy: National Policy Statements

Draft Policy Statement (pdf)

Considered in Grand Committee

3.31 pm

Moved By Lord Hunt of Kings Heath

The Minister of State, Department of Energy and Climate Change (Lord Hunt of Kings Heath): My Lords, I am pleased to open this debate on the draft overarching national policy statement for energy infrastructure. This is rather a unique debate, which sets the pattern for consideration of all future national policy statements in your Lordships' House. National policy statements are a key part of the planning reforms introduced by the Planning Act 2008. They are the policy statements against which the Infrastructure Planning Commission will determine applications for development consents by those wishing to build major energy infrastructure. Parliamentary scrutiny of the statements is an essential step towards getting them right. Under the scrutiny arrangements for national policy statements agreed by the Procedure Committee and approved by the House, the Government have undertaken to arrange debates on national policy statements in Grand Committee for up to four hours.

To give each of the six energy infrastructure NPSs the detailed consideration it deserves, we are having three separate sittings in Grand Committee. The first, today, will look at the overarching energy NPS, which sets out policy and will be the primary document for energy development consents. The second sitting, in a couple of weeks' time, will consider in detail the nuclear NPS. The final sitting will be on the other technology-specific energy NPSs. At the end of these sittings, the Grand Committee will report to the House on the NPSs. The House of course retains the right to adopt a resolution in respect of a specific national policy statement if it so wishes. My noble friend the Leader, whom I am glad to see in Committee today, has indicated that in the event of a Motion for resolution being tabled, the usual channels would undertake to provide time for a debate in the Chamber. In the first instance, we hope to address concerns and questions raised by noble Lords in today's debate and the two other debates that we will have in a fortnight's time.

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The other place is giving the NPSs similar scrutiny through a Select Committee, to which I have given evidence. My understanding from the hearing at which I was present is that the committee is expected to report at the end of March.

The NPSs set out the Government's policy on energy infrastructure and the need for new energy infrastructure. They do not, however, set out new policy. An NPS is a guidance document for the IPC. The purpose of today's debate is not to reopen discussions on government policy, although no doubt some noble Lords will be tempted down that route, but to consider whether the NPSs provide a framework that the IPC can use in determining applications for development consents for new energy infrastructure. We are here to consider whether the drafts before us do that job.

The Infrastructure Planning Commission development consents process will be faster and more transparent than the current planning regimes. It introduces a single consents regime for major infrastructure projects to replace what can sometimes seem to be a bewildering number of regimes. It will provide for public consultation and engagement in the consents process, and it will reduce the delays in development consent for major projects that often happen at the moment. By setting out clearly government policy on energy and the high and urgent need for new infrastructure, the energy national policy statements will help to avoid time-consuming discussions on government policy during hearings on applications. The commission will be able to consider the important issues for each application: what the local impacts might be; how they can be mitigated or avoided; and how the impacts are balanced against local and national benefits. The six energy NPSs have been carefully structured to achieve this.

The overarching NPS sets the framework on environmental, social and economic objectives and the need for infrastructure in four parts. Part 1 explains how the NPS fits into the development consents regime and how it should be considered by the IPC. It states what infrastructure is covered by the energy NPSs and the geographical extent. It explains that there are special arrangements for consideration of infrastructure in Wales and that, apart from pipelines and power cables running across the border, it does not apply in Scotland, although it may be a material consideration for Scottish planning consents.

Part 2 of the overarching NPS is the statement of government policy on energy. It sets out how new energy infrastructure will contribute to our low-carbon targets and to energy security. This part looks in detail at the implications for power generation and carbon emissions and states our belief that a diverse energy mix is essential for security of supply as we move to a low-carbon economy.

The need for new energy infrastructure is urgent, as many reports have recently stated, so part 3 of the overarching NPS explains exactly what that means. The lead scenarios estimate that demand for electricity up to 2025 will remain at around 60 gigawatts. Our present generation capacity is 80 gigawatts, which provides a buffer to meet demand when, for example, a generating station is offline for maintenance. However, there will be a loss of capacity over the next decade as

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around 12 gigawatts of coal-fired capacity closes by 2015 in response to more stringent emission standards set by the large combustion plant directive and around 10 gigawatts of nuclear capacity reaches the end of its life. We also anticipate that some gas-fired generating stations built before 2002 will close in response to the industrial emissions directive. This capacity must be replaced.

However, the lights will not go out in 2015, as some commentators would have us believe. The recent cold spell demonstrated that our energy infrastructure has the capacity to cope, but we must build new infrastructure to meet future demands, infrastructure that helps achieve our target for the decarbonisation of electricity generation by 2050. Our policies set out in the low-carbon transition plan and the renewable energy strategy will do this.

We estimate that around 30 per cent of electricity generation should be from renewable sources, mostly wind, by 2020. Wind is, as we know, intermittent and other renewable energy sources are also intermittent. There must be sufficient alternative generation capacity to meet demand when the wind is not blowing. Fossil fuels provide a flexible capacity, but have high emissions. The national policy statements therefore set out how the IPC should implement our policy, set out in the framework for coal, that requires all new fossil fuel and biomass generating stations to be carbon-capture ready and all new coal-fired generating stations to have carbon capture and storage on at least 300 megawatt net generating capacity. The Government are providing funding for four CCS demonstration plants, although this does not preclude developers bringing forward more proposals for coal-fired generating stations with CCS if they consider it to be a commercial proposition.

It is necessary that we explain how our policies should be applied by the IPC. It is also important that we explain to developers, to the IPC and to any other interested party what considerations should apply to individual project applications. Any major infrastructure project will have impacts. Part 4 of the overarching NPS describes the range of factors, both commercial and regulatory, that developers will need to consider when bringing forward an application, and sets out principal generic impacts, with indications of what mitigation could be applied.

The technology-specific NPSs on fossil fuel generating stations, renewable energy infrastructure, gas and oil infrastructure, electricity networks-that is, power lines-and new nuclear power stations set out any additional locational criteria and impacts that the IPC should consider. In drafting the technology-specific NPSs, we have sought to avoid unnecessary duplication, so if an impact or locational criterion is set out in the overarching NPS, and there are no additional considerations, we do not repeat the information. We make it clear that they must be read in conjunction with the overarching NPS. We also make it clear that the locational criteria are not, and cannot be, exhaustive. Each project must be considered individually. It will be for the developer, after appropriate pre-application consultation, to describe the project's impacts and mitigation in an environmental statement that should accompany an application.

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The nuclear NPS is, of course, different from the other technology-specific ones. First and foremost, it is site-specific and identifies 10 sites that are considered potentially suitable for new nuclear power stations. The draft nuclear NPS also explains the Government's assessment of arrangements for the management and disposal of radioactive waste. We are satisfied that effective arrangements will exist based on safe and secure interim storage, followed by long-term storage in a geological disposal facility. The draft nuclear NPS sets out clearly that new nuclear power stations should be free to contribute as much as possible towards meeting the need for 25 gigawatts of new non-renewable capacity by 2025.

Alongside nuclear, we also need new gas and oil infrastructure. As domestic production reduces, a higher percentage of the UK's requirement for gas and oil will be met by imports. We will need new gas storage facilities; new LNG terminals through which to import gas; pipelines to take it to the storage facilities; and transmission networks to get it to customers. Similarly, we will need new oil infrastructure.

The NPSs set out the framework for the IPC to consider development consent applications. The Planning Act requires that each NPS is accompanied by an appraisal of sustainability. The appraisals of sustainability include analysis that meets the requirements of the strategic environmental assessment directive and additional appraisal of socio-economic effects. By that I mean employment and the broader benefits for the economy.

As the NPSs do not generally put forward new policies, these appraisals considered how an NPS would have an effect on consenting development applications compared with consenting development without an NPS. I know that it has been suggested that the appraisal should have assessed a wider range of options, and not just different ways of delivering current government policy, but I do not think that would have been appropriate. The NPSs largely codify existing policy so that the IPC can determine development consents. They do that because the Planning Act creates a new system to deliver the same results more effectively and efficiently for development proposals. It is not, in itself, intended to trigger a reappraisal of basic energy policy. To consider and evaluate in detail options that are not current government policy would surely require us to do just that.

There may be a time and a place for such an exercise, but it is not in these appraisals of sustainability. We continually review policy to make sure that it delivers our objectives. If policy changes, there is provision to revise an NPS to reflect new policy. Depending on the context of any such new policy developments, it may be appropriate to review and evaluate a wider range of options in a new appraisal of sustainability as part of that process. In a small way, it can be seen that we have followed that approach now in the few areas where the NPSs set out for the first time-and in a systematic way-new policies, such as for clean coal and for nuclear, where the range of options assessed has gone somewhat wider.

We have just completed a comprehensive consultation on the national policy statements. It ran from 9 November 2009 until yesterday. The events were well attended

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and many important issues were raised which will be considered carefully and reflected appropriately in the final national policy statements.

The overarching energy national policy statement is a critical document to bring forward new energy infrastructure and to ensure that developers, the IPC and the general public understand the criteria that are used in considering development consents. I believe that it sets a framework that the IPC can use in deciding whether energy infrastructure projects should be given development consent. I commend the draft statement to the Committee for consideration.

3.46 pm

Lord Jenkin of Roding: My Lords, I am sure that all noble Lords are grateful for the careful and measured way in which the Minister set out the purpose of the documents. At the outset of his speech, he referred to our breaking new ground with this procedure. Indeed, I have not been able to find any precedent that matches exactly what the House decided in response to the report of the Procedure Committee. As I said to him colloquially before we started, we are to some extent in uncharted territory, but shall have to wait and see whether there are dragons lurking around.

Some points are clear. We are engaged in a process of scrutiny, not approval; I think that "scrutiny" is the word used in the Planning Act. We are having debates, unlike another place, which had a Select Committee inquiry. The parliamentary scrutiny-unlike the public scrutiny to which the Minister just referred, and which ended yesterday-does not end until 6 May. I have a feeling that we may be thinking about other things on 6 May; no doubt we will discover that.

We have moved some way since what I look back on as a rather ill tempered-for which I perhaps bore some responsibility-short debate before Christmas, on 15 December. I am glad that the noble Baroness, Lady Royall, is here; I say a warm thank you to her, because she responded extremely quickly to offer me a meeting, which we had immediately after the Recess. The result is that, instead of being faced with one debate, we are now able to have three separate ones. It is also clear that we can have more time if we need it. Finally, as the noble Lord said, if a resolution were to be tabled, there is a promise of time on the Floor of the House. I say how pleased I am that that has all been settled. We have been making the process up a bit as we go along, but that is the nature of any exploration-you take sight on the highest hill you see, and you go there, and then you decide where to go after that.

Anyway, here we are. As the Deputy Chairman pointed out, we are engaged in considering-scrutiny, not approval. I moved an amendment to the then Planning Bill that both Houses should approve the national policy statements, as they would be important statements of policy that should require parliamentary approval. It was not carried. It did not attract the Government's support, but I am happy to say that it has now attracted the support of my party and is the policy that we will introduce if and when we form a Government. I also suggested that we would need a Joint Committee of both Houses to consider this so that we do not have the business of witnesses going

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first to one House and then to the other. We can then scrutinise the national policy statements and recommend them to the House for approval.

The DECC Select Committee that sits at the other end has been interesting. As the Minister will be aware, one or two of us have spent some time among the public listening to what has been going on. The process started here after consideration at the other end, so perhaps some of the issues that we need to address will already have been exposed in the committee. However, I note what the Minister says about the date of its report, which is unlikely to be before the end of March-some way off.

Will the Minister tell us a little more, as he told the committee at the other end, about the future handling of these national policy statements? He has had, as he said, a huge volume of representations from all sources. There were more from this House, and there may be resolutions on the Floor of this House before the Government can finalise the national policy statements so that they can be issued publicly and made available to the Infrastructure Planning Commission. Will he spell out the timetable a little more, because, whatever the colour of the next Government, it will be for the next Government to carry forward most of the subsequent procedure?

I draw the Minister's attention to a paper that came out with EN-1 and which I have found quite extraordinarily valuable. It is called Consultation on Draft National Policy Statements for Energy Infrastructure, and does not have a number like the EN papers. It is a sort of overarching overarching paper, if I may so describe it. It has a very useful introduction and, perhaps most valuable of all, it sets out the list of questions to be asked. Some of these will appear in the papers EN-1 to EN-6 as part of the new planning process for nationally significant infrastructure projects, or NSIPs-I shall use that abbreviation in future.

It is clear that the EN papers are not policy documents, and I accept the Minister's point that policy is for the Government and that the IPC's job is to deal with the planning aspects of individual applications. I was very pleased to hear him say that each project must be considered individually on its own merits. That is a very important point that we need to hang on to. However, where does this lead us?

What is the third question that has been posed in the Consultation on Draft National Policy Statements for Energy Infrastructure? It strikes me that it is significant. It asks:

"Does the draft Overarching Energy National Policy Statement provide suitable information to the Infrastructure Planning Commission on the Government's energy and climate policy?".

I have no doubt that when that was drawn up and the national policy statements were issued, a number of those concerned could have given some sort of answer. It is also repeated in paragraph 2.1 of EN-1, which sums up the Government's energy and climate change strategy and ends with a rather interesting statement:

"The Government believes these objectives are best delivered by a dynamic energy market operating within an effective regulatory framework with strategic Government interventions".

Since those words were published, we have had the Times interview with the Secretary of State on 1 February, followed rather remarkably two days later

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by the Ofgem report Project Discovery, which is a very substantial document. In his interview, the Secretary of State said-and the Minister agreed that his words were properly reported-that the present system is failing to deliver and that we,

He said that we need further reforms of Ofgem and an overhaul of the national electricity trading arrangement-NETA. He also outlined the possibility of a return to capacity payments, which used to be in the system. Finally, he promised that Roadmap to 2050 would be published with the Budget next month. I am delighted to know that there will be a road map to 2050. Far too much of these reports is far more short term, and the concentration on 2025 is very misleading, so we look forward to seeing the road map.

Then we have Project Discovery. Ofgem issued a press release on it headlined:

"Action needed to ensure Britain's energy supplies remain secure".

It has three bullet points. The first is:

"Ofgem recommends far reaching energy market reforms to consumers, industry and government".

Later it states:

"Prompt action will reduce risk to energy supplies, help lower costs to consumers and help progress towards climate change targets".

The chief executive of Ofgem, Alistair Buchanan, is quoted as saying:

"The overwhelming majority of responses to Ofgem's October consultation show that there is an increasing consensus that leaving the present system of market arrangements and other incentives unchanged is not an option. Ofgem has therefore put forward a range of possible options to unlock the up to £200 billion of investment Britain may need".

Where does that leave us? The report identifies five key issues, but its message is pretty clear. Contrary to what the Minister suggested a little while ago, Ofgem is telling us that there is a real risk that the lights may go out in the course of the next decade, and that is how the report has been interpreted by many well informed commentators.

The Minister will recollect that when I raised this matter at Question Time, my noble friend on the Front Bench said that it is rather strange that we have all these proposals coming from the regulator, not the Government. I thought the Minister would have found that mildly embarrassing. This brings me back to question 3, which I will read again:

"Does the draft Overarching Energy National Policy Statement provide suitable information to the Infrastructure Planning Commission on the Government's energy and climate policy?".

In the light of the Secretary of State's interview and of the Ofgem report, I do not see how anybody can now answer that question. Indeed, I am told that some companies are even now revising their responses to the inquiry. The director of the Association of Electricity Producers, David Porter, said that,

I would not have got that from the Minister's speech. That is the view of the trade association that represents all the generators in this country, and it should be taken seriously.

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The Minister, in his reply to my Question, rather coolly, said that,

Before he gave that answer, the young lady from the department who was advising him rang me up and asked me what I was after. I referred her to the overarching report to which I have drawn the noble Lord's attention. But I do not think she got the message.

We are left, are we not, with the extraordinary position that, since these documents were introduced, the Government-not just Ofgem-have indicated very substantial major changes of policy? I do not see how people now can answer that question 3. I find the whole position deeply confusing and, of itself, very confused.

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