Lord Oates:

Moved by Lord Oates

50: After Clause 64, insert the following new Clause—“Designation of a long duration energy storage counterparty(1) The Secretary of State may by notice given to a person designate the person to be a counterparty for long duration energy storage revenue support contracts.(2) A “long duration energy storage revenue support contract” is a contract in relation to which both the following paragraphs apply—(a) the contract is between a long duration energy storage counterparty and the holder of a licence under section 7;(b) the contract was entered into by a long duration energy storage counterparty in pursuance of a direction given to it under section 60(1).(3) A person designated under subsection (1) is referred to in this Chapter as a “long duration energy storage counterparty”.(4) A designation may be made only with the consent of the person designated (except where that person is the Secretary of State).(5) The Secretary of State may exercise the power to designate so that more than one designation has effect under subsection (1), but only if the Secretary of State considers it necessary for the purposes of ensuring that—(a) liabilities under a long duration energy storage revenue support contract are met,(b) arrangements entered into for purposes connected to a long duration energy storage revenue support contract continue to operate, or(c) directions given to a long duration energy storage counterparty continue to have effect.(6) As soon as reasonably practicable after a designation ceases to have effect, the Secretary of State must make one or more transfer schemes under section 79 to ensure the transfer of all rights and liabilities under any transport and storage revenue support contract to which the person who has ceased to be a transport and storage counterparty was a party.”

My Lords, I will speak to Amendments 50 and 51. These are probing amendments to press the Government on their position on revenue support models for long-duration energy storage and the degree to which they recognise the urgency of determining this.

In Committee on Monday, the noble Lords, Lord Moylan and Lord Howell of Guildford, raised this issue of energy storage. Indeed, the noble Lord, Lord Howell, spoke of the Dinorwig pumped-storage plant in Wales, which I believe he opened—or at least he opened its increased capacity—when he was the relevant Minister. He made the point, quite rightly, that it not only provides support when the system needs it—rapidly bringing power on—but even when it is not operating it is saving money because it reduces the margin that is required to be kept on hand to be on call.

It is clear that long-duration energy storage will be critical to decarbonising the power sector by 2035. I think that is recognised by all who have been involved in this. We currently have long-duration storage capacity of about 26 gigawatt hours, which is principally in the existing four pumped storage plants that we have—two in Wales and two in Scotland—and about two gigawatt hours from long-duration battery storage. We need to increase that capacity significantly.

The Economic Affairs Committee report on energy published this summer quoted the estimates that that capacity needed to rise eightfold to meet those demands. It also called on the Government to

“develop a market model for long-duration energy storage” as rapidly as possible. The need for speed is underlined by the long lead times for projects such as this. Dinorwig took over 10 years from being given the go-ahead to coming into operation, and Ffestiniog pumped storage station began its planning in the early 1950s and did not come into operation until 1963.

As many noble Lords are aware, we currently have a pumped storage project ready to go at Coire Glas in Scotland. It received planning consent in 2020. That would be capable of providing 30 gigawatt hours of capacity; that is enough to power 3 million homes for 24 hours and would double our current long-duration storage capacity. At present, however, it cannot go ahead because the revenue support models have not been agreed. These projects have big upfront capital costs, although they have very long lifetimes, as we see from the continuing operation of projects from the 1960s and later.

There seems to be a lot of delay from the Government in coming to conclusions. Their own consultation on long-duration energy storage closed in September 2021. They promised a response to that in the first quarter of 2022. They finally responded in July and effectively said that, although the responses to the consultation had been pretty clear—indeed, the responses to the inquiry of the Economic Affairs Committee of this House pointed to the same cap and floor model—they wanted to think about it further. I suppose that we should recognise that this a very thoughtful Government, because they intend to think about it for the rest of this year, through the whole of 2023 and into 2024. That is completely inadequate for the urgency of this task, because there is no way of achieving our target to decarbonise the power sector by 2035 without bringing on a lot of long-duration storage.

I recognise that some potential long-duration storage solutions are innovative technologies, but pumped hydro storage is not: it is old and proven, in terms of both effectiveness and value over the long term. These amendments will not solve things, but we may come back more specifically on Report. What I want to get from the Government is some understanding of whether they feel they can come forward with at least a pathfinder solution, possibly for something like Coire Glas, because that will take a long time to build out. It needs to get going and the people developing it cannot just keep these things mothballed all the time; they need to know the revenue support model. I hope the Government will respond specifically on that issue. I also hope they will think about how to separate their support models for innovative technologies, which may need to be more flexible or different, from those for proven technology that we can get on with now. I beg to move.

My Lords, I have some sympathy with what the noble Lord, Lord Oates, has just said. My concern is perhaps even a little more profound than his because I do not understand what role the Government see for pumped storage in addressing the problem of intermittency of renewables. The noble Lord focused on the funding mechanism, but what role is it going to have? How large a part do the Government intend that it should play?

However, that is not my purpose in rising. My purpose is to speak to Amendment 225, which relates rather to gas, which is also there to be used to some extent to address the problem of intermittency. I am grateful for the support of the noble Lord, Lord West of Spithead, and my noble friends Lady McIntosh of Pickering and Lord Frost. The House had a Question on gas storage earlier today and the Minister made some helpful and informative comments in response, but it was largely a backwards-looking Question. It looked at decisions taken in the past, whereas this amendment is intended to look a little more forward. It would require the Government to provide gas storage onshore or under our waters equivalent to 25% of forecast annual demand. However, in a sense, the real purpose is to give the Government an opportunity and to elicit from them some sense of their plans for addressing this question. In the past few months, we have all seen on the television news and in the newspapers, and been gripped by it, that while Germany has been busily filling up its capacious gas storage facilities, we have none whatever, so I think the Committee and the public will be interested to know what the Government intend, if the Minister is capable of giving us an indication today.

I shall make just two points about the amendment. To those who say that we are phasing gas out, I say that the amendment is worded to require 25% of forecast demand, so if the demand comes down, the amendment still works and the amount stored can be adjusted. I think I am a correct in saying—this emerged at Second Reading—that nobody in the House believes that demand for gas is going to fall to zero, even if it is to fall to quite low or even miniscule levels, so the amendment still works and, planning over the long term and looking forward a number of years, it should be possible to make this workable.

Secondly, I put in 25% as a placeholder as much as anything else. I am very open to the Government making a case for why that number should be higher or lower and why government policy should not be 25% but more or less. I am even open to an argument that the number should be 0%. Indeed, reviewing what the Minister said today, he made the valid point that, unlike Germany, we already have a store, so to speak, of gas in our control; it just happens to be under the sea. I understand that there is a point there.

I think back to the United States in the 1970s, when the oil shock arrived. The United States decided that what it needed was a large oil reserve, so it started pumping oil into specially prepared caverns in the earth. Then I think it struck the US that it was pumping oil out of one bit of the earth and then pumping it into another, and that perhaps this was not as sensible as it might have been, so the policy was gradually abandoned.

The Minister may want to make a similar and parallel point in respect of our own gas reserves. He may say that zero is a perfectly reasonable amount for us to store. If the answer from the Government were zero, it would at least be a decision and a policy. We would be able to scrutinise it and understand the arguments for it. As I say, setting the number at 25 is very much a placeholder. I am not being in any sense dogmatic about what the number should be, but I do feel that the Government should have a number in mind, should be able to justify it—even if it is zero—and should be able, I hope, to tell us what it is.

My Lords, I fully support the amendments in the name of my noble friend Lord Oates and that in the name of the noble Lord, Lord Moylan, and others. They seek, in effect, to get more information from the Government about their plans in relation to energy storage.

My Amendment 240 is also about storage but, in this case, the storage of solar energy, the use of which is growing at an incredibly rapid pace. There are already something like a million domestic solar systems installed around the UK, and residential solar deployment is at a record subsidy-free level according to Solar Energy UK, which represents many of the UK’s solar firms. This is perhaps unsurprising given the benefits of generating your own electricity at home. This is also good news for the Government since, if we are to meet our net-zero target by 2050, we need as many of the 29 million homes in UK as possible to decarbonise. Solar is of course part of that solution.

At this point I should draw attention to my interests. I recently installed solar panels on the roof of my home, together with one battery; it is the battery element that is relevant to my amendment. It was great news when, in the Spring Statement delivered on 23 March, the then Chancellor, Rishi Sunak, made the very welcome announcement that certain energy-saving materials would be eligible for zero-rate VAT on both labour and parts. This change was effected through the Value Added Tax (Installation of Energy-Saving Materials) Order 2022, which added a list of energy-saving products eligible for the zero rate to Schedule 8 to the Value Added Tax Act 1994, which is relevant, as noble Lords will see in a second.

Solar panels are the only solar-related items specifically included in this list. Batteries that store the energy from solar panels when it is not needed, and which can be used at a time when it is needed or to supply energy back to the grid, are not listed. However, the energy-saving materials and heating equipment VAT notice 708/6, which relates to the earlier Act, states:

“The installation of certain specified energy-saving materials with ancillary supplies is zero-rated in Great Britain.”

I can find no reference to “ancillary supplies” in the Value Added Tax Act 1994, which the Chancellor’s Spring Statement amended. However, HMRC has said that, in certain circumstances, batteries are in fact included. It has said that, when batteries are sold as part of the installation of a solar array, they are to be treated as an ancillary supply and so also qualify for zero-rate VAT. However—this is the crucial point—they would not qualify if installed separately at a later date.

A neighbour of mine, Mr Geoff Makepeace, installed a solar array with batteries a while ago; it was before the Spring Statement, so he did not benefit from the zero rate of VAT announced in it. However, keen to get increased benefit from his solar system, he sought advice: should he increase the number of solar panels or the number of batteries? The advice was to install another battery. He followed that advice but was subsequently surprised that his bill included £567 for VAT at 20%.

When he queried this with the supplier, he was told that Solar Energy UK had done some research, discussed this with HMRC and been informed that the Government were clear that retrofit or stand-alone batteries will still be subject to VAT at 20%. This does not really make sense. There should not be a fiscal incentive to install a battery at one time but not at another. The law at present penalises those who do not have the money to install solar technologies and a battery at the same time, which is detrimental to what should be the policy objective of maximising our energy self-sufficiency.

The reason for this is that installing a battery improves the self-consumption ratio of a solar system. This refers to the energy generated which is used on site. For a typical home, installing a battery will at least double the amount of electricity generated by a solar system installed on a roof. This maximises the benefit to the home owner as it means they pay less for their energy bills, and maximises the benefit to the country by allowing electricity generated in the day to be used at night—incidentally, easing the pressure on the national grid in the early evening, which is a peak time.

We should not penalise home owners and occupiers looking to protect themselves from the energy price crisis by adding batteries to their existing home solar systems as a stand-alone item to improve the benefits. Nor should we penalise those who could not afford to do both at the same time. My amendment, which removes VAT from stand-alone batteries, will help people cope with the energy crisis, help generate more energy and help us achieve our zero-carbon goal. I beg to move.

I must counsel the noble Lord, Lord Foster, that he cannot move his amendment at this stage but only when the Committee comes to it sequentially.

My Lords, I support the amendment in the name of the noble Lord, Lord Moylan, which relates to resilience. We are very bad at spending money on resilience. The Treasury hates to spend money on resilience, as I know from my time as a Minister.

It hates to spend money full stop.

Well, yes, it hates to spend money full stop, but especially on resilience. Whether it is the loss of our GPS system and how we would counter that or PNT, there is a whole raft of areas where it is really unwilling to move and spend money even though these things are crucial. In this case, it is extremely important that we have the ability to store gas as we move into the future. I agree totally with the noble Lord, Lord Moylan, that the amount we have to store may vary quite dramatically.

Earlier, the Minister spoke about how we have infrastructure built to bring LNG into this country. We certainly do—I was heavily involved in ensuring that we got the right ships from the North Dome in Qatar to Milford Haven and setting up the infrastructure there. It was meant to provide 15% to 30% of our LNG. That was fine when people were not outbidding us for that LNG. That is the problem now; we cannot guarantee that that LNG will come to us, so we need some form of resilience. I believe that resilience should be our having some gas storage capability.

I have to get a naval thing in. It is interesting that, between the two wars, we forced the Treasury to ensure that our then 850-ship Navy—it is a bit smaller now—had sufficient fuel stored in this country to fight at war rates for six months. Someone in government had calculated it. We have to have a calculation; 25% might be wrong, but there is a requirement for some storage. We need to think very hard and the Government need to come up with a view from their experts on how much that should be. It may dwindle in time, but we certainly need it in the near term as quickly as possible. I very strongly support Amendment 225.

I join the noble Lord in his support for my noble friend Lord Moylan’s Amendment 225. I have been minded to table something similar, so I was delighted when my noble friend was able to fill the gap. I believe that the amendment seeks to address not just resilience but security of supply, and I am delighted that it is in the form of a probing amendment and that we leave open the amount of storage that we seek.

My concern, which we touched on in Oral Questions, is the woeful shortage of gas storage at this time. I understand the reasons why Centrica closed its gas storage, which I understand was in Yorkshire, in 2017. But, as my noble friend Lord Callanan said in response to the Question today, the circumstances then were very different from today. I understand that, currently, the facility could possibly store between 10 and 12 days at full capacity. I understand that talks are ongoing in this regard; what status are they at? If they are successful and Centrica, or indeed another operator, was minded to open or reopen these facilities, what is the optimum number of days of storage? I prefer to talk about this in days of storage rather domestic consumption, but I will leave that to those more expert than me. What is the current capacity for gas storage? Back in March, I understood that Germany had something like 120 days’ storage and we had only a possible maximum of 30, which may even have been an overestimate of the capacity.

What percentage of gas is currently being supplied to this country by interconnectors from Norway and perhaps other suppliers? Also, what is the percentage being delivered by tankers? For the reasons of resilience and security of supply, and given that there are European countries that are more dependent on Russian sources of gas than we are, can we be absolutely sure about the threat that the current supplies to this country through interconnectors and tankers might be diverted to other European countries if the situation in Russia were to deteriorate further? I understand that this is a source of some concern. Germany is one of the countries most dependent on Russia for current gas supply. I understand that it reached its target for days of gas storage ahead of schedule. It has also stored underground just over a fifth of the gas used in the whole of last year, 2021.

Finally, the flip side of gas storage and the potential cap on spending, which we might learn of tomorrow, is trying to encourage all of us to use less of the finite resource of electricity and energy. Could my noble friend shed some light on that? Will we hear more tomorrow?

My Lords, I support Amendment 225 in the names of my noble friend Lord Moylan and others. The noble Lord, Lord Oates, raised some good questions in this area. Gas storage is not only important; it can also be a thing of beauty, as I know from my days watching cricket at the Oval, with its famous gas-holder backdrop. Perhaps it can be revived—I say rather fancifully.

This year’s crisis has shown how vulnerable we are with gas. When I was Energy Minister, I often emphasised the importance of energy security, which was very unfashionable then, as energy was plentiful and prices were low. I used to say that, if I or anyone else in that role became the Minister of Blackouts, it would be terminal in career terms. I would like to understand how much of a risk there is with gas now, and indeed how quickly top-ups could be accessed from the North Sea, if that is another possibility. In any event, I urge my noble friend Lord Callanan to make our gas supply less volatile, increase physical storage if possible and/or encourage allies like the Norwegians to do so as well.

My Lords, I strongly support Amendment 225, which seeks to introduce a requirement to construct gas storage facilities to hold 25% of forecast consumption by 2025. I understand that past Governments have not believed that the country has any particular need for gas storage facilities, given that we have extracted large amounts of gas from the North Sea. I am sceptical that we will find it possible, or indeed necessary, to reduce our reliance on gas as quickly as the Government’s net-zero policy currently requires.

However, the extreme volatility in the price of natural gas on the international markets means that British consumers are much more exposed to massive and rapid price increases than consumers in countries that maintain much more significant gas storage facilities, such as Germany. Even if the Government accelerate the development and commercial deployment of more new nuclear reactors than they have planned so far, we will still need large amounts of reliable energy that is not subject to intermittency. Increasing gas storage facilities as an urgent priority will mitigate the risks we face today, and I hope that the Minister will support this.

My noble friend Lord Moylan explained why he selected 25% as the proportion of forecast demand each year beyond 2025. My noble friend Lady McIntosh suggested that this should be defined in days—I think it would be 91 days at 25%, as an average, but surely we use much more gas in winter than summer. I doubt that our consumption of gas will steadily decline in the years beyond 2025 but, so far as it does, I am not saying that it is not a good thing. If the Government are correct and reduced demand in 2028 or 2030 is realised, storage facilities holding 25% of forecast demand may hold 30% or 35%. I look forward to hearing the Minister’s thoughts on this very useful amendment.

My Lords, I will briefly speak to this group of amendments. It is clear that the resilience of our energy system is absolutely crucial. As recent events have shown, a non-resilient system poses great threats, in both rising costs and vulnerable people suffering.

I will ask about the best approach to delivering the enhancement of gas storage that I think we all agree on. It seems clear to me that, in Clause 10, the Government are considering making an intervention into energy markets to guarantee a certain volume of fuel supply, because of the perceived worry that investment into these sectors is slowing—quite rightly in my view, because they have a limited lifespan. The fossil fuel industry will have to quickly adapt to a rapidly electrifying energy system in which its product will be less needed. So, in time, we will see a diminishing market, in part because of government policy—and that is completely correct, as we move away from polluting forms of energy. But this opens up the risk that there will be a gap between private sector investment and our needs, as we will still rely on these fuels during the transition. It seems to me that the Government have convinced themselves that an intervention on core fuels for transport is necessary for this reason—the fear that a gap will open.

Has a similar analysis been done on the gas market in light of recent events? Would it not therefore make sense to consider some kind of holistic intervention into the market for energy security purposes, rather than a piecemeal, fuel-by-fuel approach? Does that complement, or supplement, the approach of the noble Lord, Lord Moylan, providing some way through this that we can perhaps discuss during Committee and then come back to on Report?

I support Amendment 240, but would the VAT exemption apply to larger systems, like schools and other buildings, or is it just for personal home use? It seems to be sensible to try to level this up so that people can make use of it.

To be absolutely clear, it would apply to all batteries that receive their supply from solar panels.

In which case, I am even more supportive, because it is absolutely clear that installing solar panels is a fast way to reduce demand for fossil fuels and to increase resilience. If it can then be stored, even more resilience will be added to the system. So this would seem to be a very sensible amendment, and I thank the noble Lord for his meticulous detail in spotting this.

My Lords, I rise with my European Affairs Committee hat on. I see these as enabling amendments for the storage of energy. The first Parliamentary Partnership Assembly, which took place in May, had a specific session on energy security. The mood was clear: the 70 politicians—35 from Westminster and 35 from the European Parliament—felt that, in a difficult security environment, energy was a European-level matter and that we should think about it as such. Interestingly, I was at a European security conference on Monday and the exact same theme came through. Yesterday, we were settling the agenda for the second Parliamentary Partnership Assembly, and this theme will be on the agenda again.

Many of the speeches and thinking this evening have been from the United Kingdom view of the world. However, we should be enabling ourselves to consider this from a European perspective. As we might be storing gas for others, such as the Germans, anything in these amendments which would allow a future Secretary of State the flexibility to do that would be a good thing from a European context. Therefore, they would be good from a European affairs point of view.

My Lords, in the interests of time, I will comment only on Amendment 240, in the name of the noble Lord, Lord Foster of Bath, and offer strong support for it—alongside some potential improvements or broadening-out suggestions at this stage.

It is interesting that, in 2015, Steve Holliday, the then CEO of National Grid, said that the idea of baseload relying on coal-fired or nuclear power stations was “outdated”:

“From a consumer’s point of view, the solar on the rooftop is going to be the baseload.”

This would obviously need to rely on batteries for it to work 24/7. Mostly since that time, 3.3% of British homes have installed solar panels, but many of them were installed before batteries were a viable option. Those home owners should not pay the high levels of VAT to enhance the system for the benefit of both themselves and the whole of society.

I have later amendments talking about community energy schemes. I can think of numerous ones that I have visited over the years where solar panels were put on cricket pavilions, community halls et cetera. We have been talking mostly about domestic settings, but there are also many community settings in which the addition of batteries may now be a practical option.

We will be talking a lot in later groups about the issue of energy efficiency and improving energy security by reducing our demand. My understanding of the information from the Consumer Protection Association —and I stand to be corrected if I am wrong—is that double, triple and secondary glazing are not currently covered by the VAT concession. It seems to me that this could possibly be included in this amendment; perhaps it is something we can work on.

My Lords, I begin by making it quite clear that my energy storage interests are not around long-term storage or retail storage.

I absolutely support the amendments put forward by my noble friends, but I will not talk about them. Instead, I will follow up on the amendment tabled by the noble Lord, Lord Moylan, and relate it to some of the discussion that took place earlier today in the House around storage, because gas storage is really important at this present time, and it will continue to be in future. I like the way—through a percentage or whatever we use—that we can see a relevant ratchet downwards, as we would expect. However, what alarmed me earlier today was that, in terms of current storage, we appear to be in the hands of independent directors of independent companies that have responsibility to their shareholders under the law, but not to the energy security of the country. That was very clearly stated by the Minister in terms of the decision to turn off the Rough facility in 2017. As I said at the time, if that was the case then, I see no reason why that is not also the case in future; there seemed to be no proposal by the Government to change that situation. I am interested to hear the Minister’s response to that part of my original question.

I will also go back to what the noble Baroness, Lady McIntosh of Pickering, said, because part of the Minster’s earlier answer was that our storage is the gas we have in the North Sea. But we all know that that store is going down, and I certainly would not, from these Benches, resist trying to increase that in the short term during the energy crisis to ensure that our energy is there—the situation would be different in the medium and long terms. That flow is going down and our imports are going up. I do not know if these two years were particularly representative, but the last figures from the Minister’s department said that, in 2020, we imported £5 billion-worth of gas. A year later, that went up to £20 billion-worth of imports of gas—a quadrupling. That was not all because of a price increase at that time, most of which has happened in 2022.

Another statistic reveals that, while we think we have multiple sources, 75% of imports came from one country, which is Norway. Norway is a dependable friend of the United Kingdom; we would not argue otherwise. But we must be clear that Norway’s bigger customer is Germany. Germany and the other European countries which import gas from Norway are probably more desperate—this is likely not the right phrase to use—for that resource than we are. As I said, I very much support the outline of the amendment tabled by the noble Lord, Lord Moylan, and ask the Minister what security we actually have, and for how long, over our supplies—that is, the 75% of imports that we have from Norway. What is our legal entitlement to that flow into the future?

My Lords, the amendments from the noble Lord, Lord Oates, are very welcome and they plug a gap in the Energy Bill. Amendment 50 facilitates the changes proposed by allowing the Secretary of State to

“designate the person to be a counterparty for long duration energy storage revenue support contracts.”

Amendment 51 introduces a new clause which allows the Secretary of State to

“direct a long duration energy storage counterparty to offer to contract with an eligible person”.

Clauses 59, 61 and 63 already allow designation of counterparties for transport and storage, hydrogen production and carbon capture revenue support contracts, and Amendment 50 simply replicates this for long duration energy storage. Similarly, Clauses 60, 62 and 64 already allow the Secretary of State to direct counterparties to offer to contract, and Amendment 51 replicates this for long duration energy storage.

The amendments define long-duration energy storage revenue support contracts as being

“between a long duration energy storage counterparty and the holder of a licence under section 7” and, as ones

“entered into by a long duration energy storage counterparty in pursuance of a direction given to it under section 60(1).”

This fills a big gap for long-duration energy storage. According to the Government, longer-duration storage—access across days, weeks and months—could help to reduce the cost of meeting net zero by storing excess low-carbon generation for longer periods of time, thereby helping to manage variation in generation, such as extended periods of low wind. This in turn could reduce the amount of fossil-fuel and low-carbon generation that would otherwise be needed to optimise the energy output from renewables.

Long-duration energy storage includes pumped storage as well as a range of innovative new technologies that can store electricity for four hours to supply firm, flexible and fast energy that is valuable for managing high-renewables systems. Introducing long-duration energy storage in large quantities in Britain by 2035 can reduce carbon emissions by 10 megatonnes of CO2 per annum, reduce systems costs by £1.13 billion per annum and reduce reliance on gas by 50 TWh per annum. That seems to me worth consideration in this Bill.

Amendment 225 in the name of the noble Lord, Lord Moylan, which has general support around the House, requires the Government to produce a strategy for the storage of gas for domestic consumption. This would see the construction and operation of gas storage facilities capable of holding 25%, although it could be more—it could be 100%—of forecast domestic consumption each year beyond 2025. While agreeing that UK gas storage is currently small, which may have left us exposed to higher prices and shortages thus far, is it the solution to the long-term energy supply problems that we may face? It may well be that we need an immediate expansion of gas, but whether it is the long-term solution to our energy supply is open to some question. The UK currently stores enough gas to meet demand over four or five winter days, which is clearly not enough. But the new Chancellor said, when he was the Business Secretary, that the answer to mitigating a quadrupling of the gas price in four months was to get more diverse sources of supply, and more diverse sources of electricity, through non-carbon sources. So there is some doubt about the long-term viability of increasing gas storage.

Amendment 240 from the noble Lord, Lord Foster, would establish a new clause to store energy generated by solar panels in the list of energy-saving materials that are subject to zero-rate VAT. He had the example of his friend in the south-west. Modelling from Cornwall Insight’s view of the GB power market out to 2030 has shown that between 2025 and 2030 the Government must spend almost one-fifth of their total energy technologies investment, which includes solar, wind, nuclear and carbon capture and storage, on energy storage batteries, if we are to meet renewable targets and stabilise the energy market. Latest data estimates that almost 10% of grid capacity will be provided by battery storage by 2030, at an estimated cost of £20 billion. So, considering both the need and the cost of this, the amendment seems a sensible proposal to encourage the market to take up some of the burden.

I thank all noble Lords for participating in what has been a fascinating debate on an important subject, very much building on the discussion that we had earlier this afternoon. I shall come on to the issue of gas storage—a popular topic of the day—a bit later.

I start with Amendments 50 and 51, tabled by the noble Lord, Lord Oates. Long-duration energy storage covers a wide range of technologies, and the Government are looking at the need for revenue support for these separately, as they all face different challenges and solve different problems. While I commend the noble Lord’s intentions, I put it to him that these amendments are premature at this stage.

In the case of electricity storage, I reassure the noble Lord that we are committed to developing policy enabling investment for large-scale, long-duration electricity storage by 2024, as we have set out in our response to the call for evidence. As noted by the noble Lord, Lord Oates, we recognise that these technologies face significant barriers to deployment under the current market framework, due to their long build times, the high upfront costs, and the lack of forecastable revenue streams. Similarly, in the case of hydrogen storage, the 2021 UK hydrogen strategy set out our ambitions in this area.

More recently, and in recognition of the important role that hydrogen storage is expected to play in the hydrogen economy, we committed in the 2022 British energy security strategy to design hydrogen transport and storage business models by 2025. Indeed, we published a consultation on these matters in August. It is my contention that adding these clauses to the Bill now would prejudge the outcomes of the policy development which, as I hope noble Lords recognise, is already well under way.

I move on to Amendment 225 from my noble friend Lord Moylan. The intention of this amendment is to expand on the discussion that we had at Oral Questions earlier and to increase gas storage capacity in addition to the 1.5 billion cubic metres of current gas storage capacity that we have in Great Britain, as I informed the House. To this end, my noble friend proposes that the Secretary of State for BEIS produces a strategy within six months of the day the Act is passed.

As my noble friend recognised, it is thanks to our indigenous supply source from the UK continental shelf, currently supplying about 45% of our gas demand, and a number of diverse international supply sources, that the UK is, thankfully, not reliant on gas storage as a source of supply. If I may put it like this, it would be a mistake to conflate greater storage capacity and greater energy security. To respond to the point made by my noble friend Lady McIntosh—I do not know whether she was in the House for Oral Questions earlier—the interconnectors have been helping the continent this year. We have 20% of the entire EU gasification facilities at LNG ports, and we have been using them to help Germany, Italy and others to refill their storage capacity during the winter months. So the interconnectors have been operating as much as they possibly can in the other direction, because the Germans failed to provide enough LNG capacity for themselves. So, given that we co-operate with them on this, we would hope that that co-operation would be reciprocated in response to any peak demand over the winter.

However, as the noble Lord, Lord Teverson, intimated without saying it directly, desperate situations sometimes cause desperate measures, as we saw during the vaccine crisis and the pandemic. We have legal and robust contracts with Norway, which is a trusted and valued supporter of ours, but we are not complacent about any potential risks. We keep these matters under careful consideration. I would say that at least a good proportion of the Norwegian output is portrayed directly via British infrastructure, and there is no option to go anywhere else. It does not apply to all Norway’s sales, but a good proportion come directly to the UK, and there are no connecting pipelines back to the continent except through the United Kingdom. I hope that that reassures the noble Lord slightly—but he is right to raise these matters and we do keep them under constant review.

Our current approach is agile and offers flexibility to the gas market when other sources are more expensive or not available. It can help to balance the effect of price volatility, allowing shippers—gas traders—to utilise market opportunities throughout the year. So the Government recognise the need to have some natural gas storage facilities in place as a source of balancing system flexibility when demand for gas is high—and also, of course, and crucially, allowing potentially for the future storage of hydrogen. Given the current situation in the international gas market, it is sensible that all possible options are considered to maintain security of gas supply, which includes the future of gas storage if required.

I understand that the Committee wants to push me further on the issue of the rough storage facility. Centrica has taken a decision and has applied for the consents to enable it to at least partially reopen the site for this winter. It has submitted a proposal for our consideration, which we are looking at. I can go no further than that at the moment, but I assure the Committee that when we have further news on this, I shall make sure that noble Lords are informed at the earliest possible moment.

That is moving back from what I understood. I understood there had been an agreement, or is it just that the facility has been licensed? Is that how far it has got, and so a commercial agreement has still to be made? Is that where we are?

As I said at OQs this afternoon, licences have been granted by Ofgem, by the regulatory bodies, because the safety and security of the facility is important. Centrica has taken a commercial decision to open part of the storage facility for this winter, and it has submitted other plans for our consideration, which we are doing. I apologise to the noble Lord, but I can go no further than that at the moment. As soon I have further information, and we expect progress in the near future, I will inform the noble Lord and the rest of the Committee.

I thank the Minister for that information, but it sounds to me like Centrica is conducting a very hard negotiation with the Government, maybe at the security expense of the country—I do not know.

I will leave that as a comment; there is nothing I can reply to on it. When I have further information, I will update the Committee.

The commitment proposed by my noble friend Lord Moylan to have in storage gas equivalent to 25% of forecast domestic consumption by 2025 is extremely ambitious. It is also horrendously expensive to do and, I submit to the Committee, unnecessary. The Government fully recognise the importance of gas storage, as I said, and officials continue to work on the future role that it can play in the clean energy landscape, particularly as gas production, as a number of noble Lords have said, can start to decline. But, of course, the fact that we get 45% of our production from our own continental shelf is, in effect, a giant gas storage facility and that is why we have traditionally had much less than continental countries which do not have those advantages. There is an integrated market—that is correct—and both sides benefit from it. As I said, the interconnectors over this year have been operating massively in the direction of the rest of continental Europe from the UK.

I think I have answered all the questions that were raised about gas storage facilities.

I am sure it is on the departmental website, but do we know how much gas is supplied by interconnectors from Norway, and how much is supplied by tankers from Dubai and other countries in the overall scheme of things?

When my noble friend says “tankers”, I take it she means LNG tankers. I forget the exact figure, but we get 45% from our own domestic capacity and about 3% to 4% through interconnectors, so I guess the rest will be made up from LNG shipments. We have three LNG gasification terminals in the UK. Those figures are off the top of my head; I will correct them if they are not right.

Turning to the amendment in the name of the noble Lord, Lord Foster, I am sure he expects the reply that he is going to get. As he will be well aware, changes to tax policy are considered as part of the Budget process. As Treasury officials are always very keen to tell me whenever I put forward such proposals, they have lots of proposals from people for exemptions from various taxes but not many proposals for how to make up the revenue that would be lost from them. I am sure that the Chancellor will want to take that fully into consideration in the context of the Government’s wider fiscal position. I fully take on board the points that the noble Lord made. The Government keep all taxes under review and always, the Treasury tells me, welcome representations to help inform future decisions on tax policy.

In case there are any Treasury officials listening or, indeed, reading Hansard, I suggest that one form of new tax would be on the trading of fossil fuel commodities. This is a huge source of revenue to the suppliers of fossil fuels into the market, and the commodity trading markets is a very good place to look for taxation revenue.

I thank the noble Baroness for her suggestion. The Treasury is not normally shy in coming forward with proposals for extra taxes if it thinks it can get away with it. Of course, we have already imposed the excess profits levy on a number of producers in the UK; indeed, those producers already pay increased rates of corporation tax. We must be careful that we do not disincentivise investment. Putting aside the wider politics of it, which we all understand, I am sure that everybody is aware that we need tens of billions of pounds of investment into existing oil and gas facilities. I welcome the support of the noble Lord, Lord Teverson, for the continued production of UK gas; it is an important transition fuel and I hope he will manage to convince some of his Liberal Democrat colleagues to support us in this. We do need gas in the short term, but many of those same companies are investing many billions of pounds also in offshore wind and other renewable energy infrastructure, so we want to be careful not to disincentive them too much from that. I am sure the Treasury will want to take into account all these helpful considerations as to how it can increase its tax base.

In conclusion, I am grateful to noble Lords for their amendments on these topics. I hope I have been able to provide at least some reassurance to some people on their amendments and that they will therefore feel able not to press them.

I thank the Minister for his reply. On the tax treatment of batteries for solar power, I heard the Prime Minister at Prime Minister’s Questions today say on a number of occasions, “What I am about is cutting tax”, so perhaps he could suggest to her that this is one of the first tax cuts she could make.

On long-duration storage, the Minister made the point that there is a wide range of technologies, some of which are innovative, and the Government need to consider them. As I said in moving my amendment, that is acknowledged, but there are some that are not innovative: they are proven and effective and we need to get on with them. I hope the Minister can find a way of addressing this, because we will come back to it. The Government need to find a way, whether it is through specific pathfinder pilots or whatever it is, to get on with some of the things that need to happen now. The Minister said that it was premature at this stage to come forward with this stuff. If he talked to the project managers of Coire Glas, I think they would tell him it is not premature at all; in fact, it is desperately needed. They have a project ready to go, but they have no revenue model. We know we need it, the Government acknowledge in their consultation on long-duration storage that we need to massively ramp this up, so we really need to get on with it. I am afraid the Minister did not really address that.

I have one final question for the Minister. He said we will have the solution “by 2024”. Can he confirm that that means we will have the revenue models by 1 January 2024? There is a big difference between “by 2024” and during 2024. The industry is very worried that, when it has pressed the department on this, it has been given no assurance that it actually means “by 2024” and that it could be by the end of 2024. Can the Minister clarify that, in writing perhaps, to me and other Members of the Committee? These are critical things. We just have to get on with doing the things that we know how to do. There are lots of things that we do not know how to do. I beg leave to withdraw my amendment.

Amendment 50 withdrawn.

Amendment 51 not moved.

Clause 65 agreed.

Clause 66: Obligations of relevant market participants