Ironically, I am also going to talk about some of the responsibilities for Ofgem in among other issues. If noble Lords look at the Explanatory Statement, they will see that we are talking about how to put in place a setting within which Ofgem can better justify and evidence decisions enabling strategic anticipatory investment.
I make the point that I am the honorary president of the Carbon Capture and Storage Association. The CCSA has grown considerably in the past two years, because of all the interest in carbon capture. We have been marched up to the top of the hill more than once, but this time we hope that we will be able to deliver.
Amendment 2 talks about the importance of enabling rapid network expansion. For us to meet the emissions reduction targets, carbon capture and storage will need to be rolled out rapidly across the UK during the rest of the decade. One role of the CCSA that I find extremely interesting is its interchange with the industry. There are some big companies in it but there are also small, cutting-edge companies involved in the development of how we cope with carbon capture, storage and utilisation.
I ask the Minister to bear in mind that it is not just Ofgem that needs to understands its remit; we need to look further and ensure that, throughout the industry, there is confidence, consistency and certainty, because the amount of money that will have to be invested in this is very considerable. To capture and store 30 million tonnes a year by 2030, as per the net-zero strategy, we will need to go from absolutely nothing to building significant CO2 infrastructure in a very short space of time, connecting capture projects continually throughout the 2020s. The industry wholeheartedly welcomes the Government’s recent commitment of £20 billion to build the industry up from scratch. It is therefore vital that Ofgem has updated duties that enable it to justify investment to allow for the rapid network expansion to connect more carbon sites to a growing suite of storage sites.
A lot of this is being done elsewhere. We have an opportunity to be leaders in carbon capture, utilisation and storage, but we need help from the Government, and signals need to be given out. Twenty billion pounds is a very large sum of money but it is not enough; it is estimated that around £50 billion will be needed. Some of that can come from private investment—indeed, it is important that it does—but there needs to be the degree of certainty that I spoke about a couple of seconds ago.
In Committee we debated Ofgem’s powers and whether its role in delivering net zero while protecting current and future users of the network is sufficiently clear. My noble friend Lord Foulkes, who is also a signatory to this amendment, stressed this time and again during those debates. The point was also made much more dramatically by the noble Baroness, Lady Hayman. How is it that so many people out there do not think that Ofgem has the right environment, role or powers to deal with the complexity of these issues?
Ofgem’s current set of duties makes it difficult to justify strategic investment in networks, as this would increase costs to current users in the short term. This is the dilemma that has to be got across. This has been an ongoing issue of concern, as raised in the National Infrastructure Commission’s 2019 regulation review, Strategic Investment and Public Confidence, which recommended that economic regulators’ duties be updated to facilitate long-term investment in networks, and, more recently—referred to by the noble Lord, Lord Teverson —in the Skidmore review.
While the Government should be commended—and I do commend them—for proposing that the duties of the economic regulator should include consideration of the needs of existing and future users, a principal duty to deliver net zero by 2050 would help the regulator to effectively balance these two equally important factors. However, it should be noted that, outside of the regulator’s core duties, the Bill includes a further requirement for the regulator to support the Secretary of State in having regard to the Climate Change Act 2008 and the new CCUS strategy and policy statement. That should go some way to addressing this.
However, it is not enough that these mechanisms are not as strong as the regulator’s own duties. This amendment is essential to give the regulator the necessary powers to make decisions that enable the required
strategic anticipatory investment on the network. Ofgem will need to be empowered to make well-justified decisions, balancing the interests of current and future transport and storage network users with delivering net zero.
5.30 pm
I move on to Amendment 3, which would add to the licensing regime to make it fit for the future. There is a global race on CCUS, with the US and Europe making significant progress in the past 12 months. This is not something that happened years ago; it is happening now. Ever since we submitted the first amendments to this Bill, other countries have got ahead of us. If we are to stay at the front, the industry will need to grow and develop at pace. This amendment will ensure it can do that.
Members may have noticed that the Danish Government made fast work of getting their first injection of CO2 to the Greensand field recently. That was launched to much fanfare. Norway is planning infrastructure to connect its CO2 stores to mainland Europe. I have always been in awe of the speed with which Norway can move on these issues. Like Norway, the UK has significant geological assets—many of them, I should say with my accent, are in Scotland—with a third of Europe’s entire offshore CO2 storage potential at 7,000 million tonnes. That is a dramatic figure and equal to all the EU states combined. Only Norway, with 8,000 million tonnes, has more in Europe.
While the economic regulated model is essential for the initial monopoly networks that will enable domestic industrial decarbonisation, we need to future-proof the regulatory system by enabling private operators to develop merchant models to transport and store carbon dioxide in the longer term. That would be the kind of expenditure within that £50 billion I spoke about a couple of minutes ago. This amendment will enable cross-border transport and geological storage of carbon dioxide to develop over time without having to rely on exemptions being granted to allow private networks to develop.
The enormous potential to offer CO2 storage services to European and other countries presents a terrific opportunity for the UK to become a global leader in CCUS and to accelerate global efforts to prevent CO2 emissions. The legislative framework should avoid any future barriers to cross-border transportation of CO2.
The Government want a growth agenda—the Chancellor has repeatedly referred to it—but for us to develop that agenda we really need to make sure that we have the structures in place that would allow it to grow.
This amendment would ensure necessary consistency —which I mentioned at the beginning of my remarks—with the existing regulatory regime for the granting of geological storage licences by the Oil and Gas Authority, now the North Sea Transition Authority, under the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010. The Secretary of State is having regard to the Climate Change Act 2008, and the new CCUS strategy and policy statement should go some way to addressing this.
However, in practice these mechanisms are not as strong as the regulator’s own duties. This amendment is necessary to give the regulator the necessary powers
to make decisions that enable the required strategic anticipatory investment on the network. Ofgem will need to be empowered to make well-justified decisions, balancing the interests of current and future transport and storage network users with delivering net zero.
I hope the Minister will take this seriously. If I have not convinced him, will he sit down and talk to the industry itself?