09:25 Sarah Jones (Labour)

The draft regulations were laid before the House on 30 October 2024. The Government believe that the answers to the challenges of energy security, affordability and sustainability point not in different directions but in the same direction: towards clean power. Investing in clean power at speed and scale can help to tackle the climate crisis and create good jobs. It is the only route to protect bill payers and ensure energy security. That is why making Britain a clean energy superpower by 2030 is one of this Government’s five central missions.

Although renewable energy is at the heart of our plan to deliver clean power, we also know that we must bring forward low-carbon generation sources, providing added security for when the sun does not shine and the wind does not blow. This includes flexible supply sources that can scale up or down instantaneously to meet peak demand. Some flexibility can be provided by short-duration technologies such as batteries, which can help to balance the system within each day, but we will also need long-duration technologies, which can run for extended periods of low renewable production.

Gas is expected to be used less in our future energy system, taking a backseat, and only to maintain security of supply. Although gas will continue to play an important role in the system, it is only right that we should expect any new or substantially refurbished combustion plants to be built net zero-ready. This is why we are updating the existing regime and introducing the new decarbonisation readiness requirements.

Before I turn in detail to the decarbonisation requirements, let me set out the current regime. Since 2009, all new-build combustion power plants in Great Britain with capacity over 300 MW have been subject to the carbon capture readiness requirements. Those regulations require plant operators to demonstrate that it is technically and economically feasible to retrofit carbon capture and storage technology. Due to the 300 MW threshold, the policy has seen limited application since 2009. It has also contributed to a costly market distortion by incentivising the building of smaller, less efficient plants, and inadvertently creating an unacceptable loophole that has resulted in a significant number being built at 299 MW to avoid the carbon capture readiness requirements.

The policy landscape has changed significantly since the carbon capture readiness requirements were introduced. Plant operators now have an alternative pathway to decarbonise through hydrogen-fired generation, and there has been the introduction of the UK’s legal obligation to meet carbon budgets and to reach net zero by 2050.

In March 2023, the previous Government published a final consultation on the decarbonisation readiness proposals, alongside the publication of two technical studies for hydrogen and for carbon capture and storage. The consultation received positive feedback from industry and we published a response in mid-October, giving the go-ahead to proposals set out in the consultation.

Let me turn to the detail of the regulations. This statutory instrument will amend the Environmental Permitting (England and Wales) Regulations 2016 by inserting new schedule 25C. This will remove the 300 MW minimum capacity threshold, removing any existing market distortion and supporting rapid decarbonisation by setting out that nearly all new and substantially refurbished combustion power plants must have a credible plan to decarbonise.

The regulations will also move the requirements from the planning consent process, where they currently sit for carbon capture readiness, to environmental permitting. This will ensure that the responsibility for regulating the requirements falls to the Environment Agency rather than to local planning authorities and the Department for Energy Security and Net Zero. Unlike local planning authorities, the Environment Agency is already involved in the assessment of carbon capture readiness and has the technical expertise to assess the requirements. As I mentioned a moment ago, this will also include hydrogen readiness.

The new requirements will now enable combustion plants to demonstrate decarbonisation readiness through conversion to hydrogen firing as well as carbon capture. In doing so, the instrument introduces hydrogen conversion readiness and carbon capture readiness assessments, which are proportionate to the developing nature of hydrogen to power and of carbon capture and storage. It will also expand the generation technologies in scope of the requirements to include biomass, energy from waste, and combined heat and power plants, ensuring that a higher number of carbon-intensive plants are now captured.

The updated requirements are intended to strike a balance, ensuring that new-build plants are ready to take full advantage of future decarbonisation opportunities —and that the refurbishment of old sites is conducted to take advantage of those opportunities too—while acknowledging the emerging state of hydrogen and carbon capture technologies and their enabling infrastructure. We expect that the requirements will be strengthened over time as the generation technology improves and clarity on enabling infrastructure availability increases.

In summary, the regulations will ensure that the gas capacity that we need for the security of supply is future-proofed and that there is a credible plan to transition to low-carbon operation. In doing so, they will help towards our aim to become a clean energy superpower and deliver net zero by 2050. I commend the draft regulations to the Committee.

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09:31 Andrew Bowie (Conservative)

As the Minister has set out, the instrument introduces requirements for new combustion plants and for those being refurbished, including regulatory requirements for a new decarbonisation readiness report as a prerequisite for environmental permitting approval. It also requires new combustion plants be built with regard to how they could be decarbonised in the future—for example, by converting to hydrogen firing or retrofit carbon capture technology, under environmental permitting regulations.

As I said, we are very supportive of the regulations. In fact, I think we are all supportive of the growth of new technologies like carbon capture, usage and storage, and their potential to cut carbon emissions. For combustion plants, where it is economically and technically viable, the implementation of such technology should be considered. I note that no impact assessment has been produced as the regulations are not expected to impose significant costs to businesses. However, it is noted in the explanatory memorandum today that they are expected to have an economic impact on small and micro businesses affected by the change to the 300 MW threshold. We all want a future where small businesses can thrive—the Chancellor herself has said that growth is her No. 1 priority —so will the Minister provide more detail of what support might be made available to the small and micro businesses that feel this new burden on them as they seek to decarbonise along with the rest of the country?

This instrument is a sensible move, although we worry and have some reservations about its impact on small and micro businesses, and would be keen to see more detail about what engagement the Department has had with the Scottish and Welsh Governments. As it says in the explanatory memorandum, this is a devolved area—but decarbonisation is a UK-wide effort.

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