Assistance schemes: further provision

Question proposed, That the clause stand part of the Bill.

I hope that we can now make more rapid progress as we go through some of the next clauses. The elements included in clause 2 are generally sensible, but there are a few aspects of internal clarification for which I would be grateful.

Some concern has been expressed to us about the powers for revocation of a licence and support. It is not clear from the Bill or the explanatory notes whether the operators of a CCS project would be required to be consulted in the process. Clause 2(7) suggests that they would, although paragraph 20 of the explanatory notes suggests that there are circumstances in which that would not be necessary. It would be helpful if the Minister could give greater clarification on that and show us how those issues will be addressed.

I would also be grateful if the Minister would tell us something about the support for transportation of CO2, as that does not appear to be covered here. It is clear that the generation side, the separation side and the sequestration side will be covered. The Minister indicated earlier that transportation would be included. That is clearly one of the most complicated and technologically difficult parts of the CO2 management process, so I would be grateful for specific confirmation that transportation will be included. I would also be grateful if she would comment on the issue of support for the extra operating costs of a plant. My understanding is that if a CCS facility is attached to a coal-fired plant, it will increase the operating costs by about a third or a quarter, because an enormous amount of the electricity produced will itself be required to run the CCS facility. That is a rough ball-park figure; there might be some discussion around it. A very significant proportion of the output is used for that. Do the Government intend this support to help cover those extra running costs, in addition to the capital and the costs involved in setting up the plant in the first place?

First, the clause clearly makes further provision about assistance schemes that can be made by the Secretary of State under the power contained in clause 1. Assistance schemes provide a framework within which Ofgem can carry out the role of administering the financial incentives for CCS projects. Ofgem is a statutory body and, as I said earlier, legislation is therefore necessary to confer new duties and functions on it, in this case for the purposes of providing financial assistance to CCS projects. The clause sets out a detailed but non-exhaustive list of the matters that we expect will typically need to be covered in any arrangement under which financial support is provided to CCS demonstration projects. For example, under subsection (2)(a), schemes can specify the type of CCS activities that must be carried out and, under subsection (2)(b), provision can be made about the level of financial support provided.

Where particular arrangements are of a detailed nature and can be considered special to an individual project, they will be set out in the scheme. Much of the detail contained in a scheme will be able to be finalised only once a project has been selected to receive support. We expect that the regulations for schemes will contain those provisions that might be considered generic to all projects, such as any process for reviews and appeals. Similarly to a typical contractual arrangement, subsection (7) provides that schemes can be made only with the consent of the participants, who will be the developers of the CCS project.

As with any arrangement of this type, the provisions provide the flexibility for a scheme to be amended or revoked, which brings me to the point that the hon.  Gentleman raised. The participant will have been aware of the provision that could revoke a scheme without their consent when they agreed to be a party to that scheme. We envisage—this relates to what the hon. Gentleman saw in the explanatory notes—that there could be circumstances in which there was a dispute when the company was not carrying out what had been agreed under the scheme and did not agree with the Secretary of State that the scheme should be revoked accordingly. In other words, there could be circumstances in which it could not be agreed that the scheme, for whatever reason, should come to an end, and in which it would be deemed by the Secretary of State that the company had not carried out its agreements with Ofgem or, if it was in a contractual position, with the Government.

The regulations will make clear that that could happen, and will outline the relevant circumstances and how any appeal could be undertaken. Nothing could be sprung upon a company without it having known from the outset that that was a possibility. Such circumstances might include when a project has failed or could not continue to meet its obligations under a scheme to the extent that there was no reasonable alternative but to revoke the scheme. I think that “reasonable alternative” is the appropriate wording there.

It is important to say that I will not be able to go into great detail on this aspect of the Bill. We will develop the detailed provisions over the coming months, and I stress that we will be working closely with stakeholders and that we will formally consult on the provisions in the summer. It would not be reasonable at this stage for me to set out more detail. I simply give the assurances that we will be working properly with stakeholders and we will be consulting. I was also asked about transportation, and I can confirm that transport of CO2 will be covered by the schemes and that running costs are covered where they relate to a CCS project.

As I was saying, as with any arrangement of this type, the provisions provide the flexibility for a scheme to be amended or revoked. That can be with the consent of the participant in a scheme or, where provided for in the regulations or scheme itself, the amendment or revocation can be carried out unilaterally by the Secretary of State, as I said. That flexibility is particularly important given that demonstration projects may be supported for up to 15 years.

Where a scheme is made, amended or revoked, the Secretary of State must consult the administrator, Scottish Ministers, when assisted activities are in Scotland, and any other person whom he thinks it appropriate to consult. Any new or amended scheme, or a memorandum of the revocation of a scheme, will be laid before Parliament so that it is kept informed of the use of these powers.

The provisions in the clause are required to enable the detailed arrangements to be put in place for administering the CCS incentive, and are therefore critical to delivery of the demonstration programme.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.