Michael Shanks MP: speeches

Speeches

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  My hon. Friend’s point about investor confidence is important. Investors lost all confidence in this country under the previous Government; not quite knowing who was going to be in No. 10 or No. 11 at any given moment certainly did not help investor confidence. We are building back that confidence, and have already seen tens of billions of pounds in investment since we came to power, and 70,000 new jobs. It matters that this country takes a leadership role on climate, because the transition that we want to deliver here is also being delivered right across the world. The country with the fastest transition to clean power last year was China. In some cases, Members of this Parliament are trying to row back on our net zero commitments. We are determined to double down on those commitments, because that is the best way to deliver stability and energy security, bring down bills and create the industrial future and jobs that this country needs.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  The hon. Gentleman has rightly raised those questions with me on a number of occasions in different debates, and they are incredibly important. Indeed, in a Westminster Hall debate, he educated me on how many off-grid households there are in Northern Ireland—it is a surprisingly high number. The issue of where our oil and gas comes from is also relevant, because they are traded on an international market, and the prices that his constituents and others pay are based on what the fossil fuel market does across the world. Given all the geopolitical uncertainty, we want to get away from fossil fuels as fast as possible and on to renewables, and the hon. Gentleman’s constituents will benefit from that as well.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  On 20 June last year, the Supreme Court ruled that regulators must consider the impact of burning extracted oil and gas in the environmental impact assessment for new projects. Of course, we were already in an election cycle by that point. I do not know what the previous Government would have done, but a Supreme Court judgment gave a very clear steer that regulators must consider that impact, so I find it very hard to believe that they would have continued to defend a case that the Supreme Court clearly stated could not continue. This Government took the view that it would be wrong to put more public money into the case, when the two applicants themselves accepted the judgment of the Supreme Court. If the Opposition are saying that they would have continued to pour public money into such a case, I would be very surprised—or perhaps disappointed, but not surprised.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  On the right hon. Gentleman’s final point, we are moving as quickly as possible. Having built on what needed to be done about the scope 3 emissions, we introduced the consultation as quickly as possible. We sped up that consultation, and engaged with the industry to make sure that we still got a substantial number of responses. We now have those—it closed two weeks ago, I think—and we are considering them. We will issue information about the process as quickly as possible. I cannot give him an exact date, because we have to analyse the consultation responses; it would be pointless to seek consultation responses and not look at them. More broadly, the right hon. Gentleman is right to raise the question of Grangemouth. It is, of course, extremely disappointing that Petroineos has decided to cease refining there. For the benefit of the House, I will say that when I arrived in the Department seven months ago, the first thing in my in-tray was Grangemouth’s closure. Of course, that did not arrive in July with the Labour Government’s election—it had been known about for many, many years—but not a single plan had been put in place by the Conservative Government, or the SNP Government in Edinburgh. We moved as quickly as possible to invest in the future, and to give funding to Project Willow to make sure that there was a viable economic future for that site. I wish that I was in power five years ago to start that work, but the Opposition and the SNP failed to do anything about Grangemouth for at least 10 years in which we knew that its situation was precarious. The right hon. Gentleman will have to answer for that.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  I am happy to provide clarification based on the advice that I have, which is that this is a matter for the applicants in the court case, who are entitled to appeal the judgment, should they wish to do so. If they wish to make a further application in this matter, my Department will be responsible for making that judgment, and I seek not to prejudice an application by giving an opinion one way or the other on these matters. I hope that that sits well with you, Mr Speaker.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  The whole House will have heard the hon. Gentleman repeat the point that the £8.3 billion investment in Great British Energy is not welcomed by the Conservative party, but it will create jobs—including, I am sure, in his constituency—through supply chains. We never said that all the jobs would be in the head office. There will be an important head office in Aberdeen, in recognition of the skills there, but the investment made will create tens of thousands of jobs, which is important. In the past 10 years, a third of jobs in this industry have already been lost. Either we accept that a transition is under way, and we put in place a plan and processes to build the industry of the future, or we bury our head in the sand and continue to see thousands more jobs go. I am determined not to do that.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  The reason we are in this situation is that the Court ruled that the previous Government made an unlawful decision by not taking into account the judgment of the Supreme Court. That is not me saying that from a policy perspective; it is the Court saying that, and we are now moving as quickly as possible to put in place a process that gives confidence to industry and allows applications to come forward. We have said that oil and gas will continue to play an important role for many years to come. We will not revoke existing licences, and therefore it is open for applications for projects to come forward, which will be considered on their individual merits. However, the right hon. Gentleman and I will always disagree on the fundamental point that tackling climate change is in all our interests. Right around the world, we see the impact of not tackling climate change. It is a clear and present danger to our country and our national security, and we will tackle it.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  In terms of the tone of the debate, the Government and the Opposition will of course disagree on many things—by the sounds of it, we increasingly disagree on the importance of tackling climate change and net zero—but generally we all want to see a transition in the North sea that is fair and prosperous, particularly for the workers in that industry, to ensure that they have confidence that they will have well-paid jobs to go into. I spend every day in this job taking that incredibly seriously, and whatever disagreements we might have across the Dispatch Box, I hope that is understood. We want to build a transition that recognises that it is already under way, that thousands of jobs have been lost and that it is our duty and responsibility as a Government to ensure that we put in place the industry and jobs that come next. That is what I will spend every day doing while I am privileged to have this job.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  We have outlined in the seven months we have been in government our determination to deliver the energy security that this country has lacked in the past 14 years. The previous Government displayed a lack of preparedness not just for our energy security in future, but for the bills—higher than ever before—that all our constituents paid and that led to the cost of living crisis. That was because the Conservatives were happy to have us at the casino of fossil fuel prices. We are determined that that will not be our future and that we will no longer be in thrall to petrostates and dictators. Even though very little of our gas comes from those countries, we remain vulnerable to the prices set by international markets. We are determined that that will not happen, and we are building the clean power system that will take us away from it.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  The Chancellor was very clear in her speech that there is no conflict between our net zero commitments and the industrialisation that we want to see. Economic growth projects such as the runway at Heathrow will be important but, as the Chancellor said, they will have to be in line with our climate obligations. Importantly, as my hon. Friend the Member for Na h-Eileanan an Iar (Torcuil Crichton) said, this is not an either/or. Oil and gas will continue to play an important role in our economy for many years to come, but we have to plan for what comes next and take cognisance of our legal and climate obligations.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  I agree with my hon. Friend—

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  My hon. Friend is right to make the point that climate change is not a future threat but a present reality. This year alone there have been a number of examples around the world of that present reality already having a huge and devastating impact on people’s lives. On the balance that we want to strike, yes, the oil and gas industry is important to our economy and to our energy mix, but the long-term future requires us to move towards clean power. Even if gas is extracted from the North sea, it does not help with consumer bills in this country, because it is traded on an open market to the highest bidder and sold by private companies. This is not a nationalised industry—it is owned by private companies, and gas is extracted by private companies and sold by private companies—and consumers in this country do not benefit from their gas coming from abroad or from the North sea.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  For the reason I outlined in previous answers, I will not comment specifically on these two projects. In answer to the hon. Lady’s broader point, any future applications for the North sea have to recognise the Supreme Court’s ruling that the end-use emissions, the scope 3 emissions, must be taken into account in any application. We are now working through the significant number of responses to our consultation at the start of this year, on how people who wish to apply for consent to extract hydrocarbons from the continental shelf can comply with the Supreme Court’s judgment. An environmental assessment will be absolutely necessary. That is not a decision we have made from a political point of view; it was required by the Supreme Court. We will follow the law of this land, as I would expect any Government to do, although apparently not a Conservative Government. We will put in place a robust system to ensure that any applications that come before us are judged fairly on their merits.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  I give credit to the hon. Lady for the ingenious way she got that important question into the urgent question. She makes the good point that, as well as ensuring we have built the clean power system for the needs of the future, we want to reduce as much as possible the need for households to heat their homes by making them much warmer in the first place. We are doing that by improving the standard of homes through the work being done by the Under-Secretary of State for Energy Security and Net Zero, my hon. Friend the Member for Peckham (Miatta Fahnbulleh) on the warm homes plan. We know that some of the poorest people in our country live in substandard homes that are cold and that take far too much of their monthly budgets to heat. We are determined to do something about that, as well as working across the piece on energy-efficiency measures that reduce demand in the years ahead.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  My hon. Friend outlines again the importance of tackling the climate crisis that is with us now. That is why the Government have been determined to move faster, through our clean power action plan and through the Department’s wider work to decarbonise across our economy. That is incredibly important and we do not have a moment to waste. A fair transition is key to ensuring that we move away from a carbon-based economy. We have already closed the last of our coal power stations, which was an important moment, and my visit to Ratcliffe on Soar was an important moment for me to recognise how a transition can be done well— [ Interruption. ] I hear the shadow Minister, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), chuntering that that was done under a Conservative Government. It was an example of where the Conservative Government recognised that the coal industry was declining and that a transition was necessary, but he seems not to recognise that the same is true of the oil and gas industry, which is declining. If we do not start planning for that future now, we will leave those workers with nothing.

• 10 Feb 2025 · Rosebank and Jackdaw Oilfields · Hansard source

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  I am not sure whether the hon. Gentleman is one of the Scottish National party cohort seeking to move to our other Parliament, but the SNP’s position in Holyrood is the same as ours, which is that we must be cognisant of climate change obligations with regard to any new licences. Perhaps he has a different position from his colleagues in Holyrood—I am not sure—but the SNP recognises, rightly, as we do, that the future requires investment in oil and gas for many years to come, to which we are committed, and that investment must match our climate obligations. The transition that is now under way must have Government at its heart, supporting the jobs and industries that come in the future. If the hon. Gentleman supported some of the investment that we propose, such as at Great British Energy in Aberdeen, instead of deriding it at every single turn— [ Interruption. ] Mr Speaker, I have again united all the Members of Parliament from north-east Scotland who oppose investment in their own constituencies. If the hon. Gentleman supported that investment, maybe he would see the jobs of the future coming.

• 10 Feb 2025 · Biomass Generation · Hansard source

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  “Under new management,” indeed! The tough thing about being the acting shadow Secretary of State is that it is not, of course, his script that the hon. Gentleman is reading out. This Government are fixing the mistakes left by the previous Government. I gently point out that eight previous Conservative Energy Ministers stood at this Dispatch Box and—deal after deal after deal—announced a worse deal than this for bill payers, energy security and sustainability. The hon. Gentleman seems to have forgotten that today. In fact, only a year ago—such is my love of his contributions in this House that I have read up on Hansard —he was saying that he had “absolute confidence” in the deal the previous Government made with Drax. Let me outline why this deal is so different from those his party made in the past. The hon. Gentleman first asked about subsidy and mentioned a figure, which is what it will cost to deliver the necessary dispatchable power. He missed the fact that it is, of course, half of what was paid under the previous Government—nearly £1 billion a year—to Drax. We have halved that amount to lower bills for consumers. Secondly, the hon. Gentleman spoke about sustainability. We agree on the importance of tightening up the sustainability, which is why we have moved from 70% to 100%. I would gently say, again, that he was quite happy to support public money going into unsustainable biomass year after year when he was in the Energy Department. We have said that we will not pay a penny of subsidy to Drax if there is unsustainable biomass in the mix. Thirdly, what the previous Government did not do, of course, was any sort of deal to control the runaway excess profits—record profits—that Drax was able to obtain as part of its deal. We have put in place a mechanism to claw back that excess profit so that the people of this country do not pay over the odds for their energy. Fourthly, I will address the important point about energy security. Year after year, the Conservatives exposed us to the lack of a plan for what the energy system would look like in the late 2020s and into the 2030s. This Government have had to take tough decisions quickly to secure that supply for the future, and that is what we have done. We have decided that running Drax when it was not necessary—when there were clean, cheaper alternatives in the system—will no longer happen. To the hon. Gentleman’s specific point on Drax running less, I say that limited generation times mean that it will run only when we need it for capacity to meet demand in the system. The alternative—he asked for the figure, which I set out in the statement—would be £170 million more every single year. Finally, on the future of BECCS, we are open-minded at this point on the role it will play. However, I agree that it is important that we come to a decision on that soon. The review we have outlined is about bringing together all the various bits of science that we know are there in different reports and trying to work out a credible pathway for whether power BECCS will play a role in the system. We will make that decision as soon as possible. I will finish by saying that this is an extremely different deal. It will deliver benefit for the hard-working people of this country, ensure that sustainability is at its heart and protect our energy security in the years ahead.

• 10 Feb 2025 · Biomass Generation · Hansard source

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  My hon. Friend makes an important point. I think we should consider two aspects of the analysis of the importance of Drax to the system. First, in comparison with the counterfactual of building new gas-fired power stations, our analysis is that the deal we have agreed, which involves the use of gas on the system for 27% of the time, costs £170 million less. Secondly, on energy security, the assessment is that even if we wanted to go down that route, there would be risks about whether we could build that capacity in the time that we have. This is all about the decisions taken by the last Government, who did not look far enough ahead and did not have that capacity on the system. Even if we did want to proceed with new gas stations, there would be questions about whether we could build them in time. This deal is about protecting bill payers, halving the subsidy from £1 billion and ensuring that there is dispatchable power when we need it as we build the clean power system. As we move towards the 2030s, what comes next is long-term planning for a clean power mix, but also about the long-duration and short-duration storage mixes that will help us to make decisions that are different from the one we were forced to make this time.

• 10 Feb 2025 · Biomass Generation · Hansard source

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  The point of having an independent adviser is that, while the role of the Low Carbon Contracts Company as the counterparty to the contract for difference we have agreed and the role of Ofgem as a regulator are incredibly important, we think there is also a role for someone independent to make sure they are analysing the particular questions about biomass and sustainability, while also having an eye on the science as it moves forward. Part of the challenge is that, over the years, the sustainability information we have, and the types of forestry and where the biomass comes from, have changed. The adviser will play an important role in advising my Department, Ofgem and the Low Carbon Contracts Company on this deal in the years ahead. It is important to say that we want to make sure we also have an independent review of what the future looks like, so that in five years’ time we are not looking at the same decision as we are now.

• 10 Feb 2025 · Biomass Generation · Hansard source

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  With permission, Madam Deputy Speaker, I would like to make a statement about support for biomass electricity generation. My apologies to the House for it having to put up with even more of me. In January 2024 the previous Government launched a consultation on supporting large-scale biomass generators when existing support ends in 2027. That consultation outlined their proposals to continue to support biomass as a “valuable...form of dispatchable power”. Since this Government came to office, we have carefully considered responses to that consultation and assessed the case for a new support mechanism. Biomass currently plays an important role in our energy system, but we are conscious of concerns about sustainability and the level of subsidy that biomass plants have received in the past. With that in mind, I want to report to the House on our conclusions about the role of Drax power station in Yorkshire in the years 2027 to 2031. In coming to the view I will express today, we have taken advice from the National Energy System Operator on questions of security of supply, analysed the effect on consumers of support for biomass versus the alternatives, looked at issues around subsidy and sustainability in the existing arrangements, and considered longer term issues around decarbonisation. First, on security of supply, we inherited a situation from the previous Government where there was no long-term planning for our energy system and its resilience. In the system we have inherited, large-scale biomass provides around 5% of our annual electricity generation, serving a specific role as a source of firm power. To meet our needs between 2027 and 2031, we could seek to replace Drax with new gas-fired power stations, but in the timescale we have there would be significant risks to relying on that approach. In that context, NESO has advised us that Drax plays an important role in delivering security of supply between 2027 and 2031. Secondly, on price, we have undertaken comprehensive analysis of the costs of biomass against alternatives. Our central projections show that, on the right terms and in a much more limited role than today, biomass generation at Drax is the lowest cost option, including when compared with gas-fired power stations, for bill payers during this period. Thirdly, we have looked at previous arrangements for subsidy and sustainability. This Government’s view is that they simply did not deliver a good enough deal for bill payers and enabled Drax to make unacceptably large profits. At the same time, they demanded levels of sustainability that are not now in line with the latest scientific evidence or global best practice, including supply chain emissions well above the European standard. We have concluded that if Drax is to continue to play a role in our power system, these arrangements must urgently be improved going forward. Fourthly, we have looked at issues with decarbonisation. Our finding is that there is a potential role for bioenergy with carbon capture and storage—or power BECCS—but realistically this will take time to implement and therefore cannot form the primary basis of this decision. On the basis of that assessment, and given the circumstances that we inherited, the clear evidence is that Drax is important for delivering a secure, value-for-money power system in the period 2027-31. But we have also concluded that we cannot allow Drax to operate in the way in which it has before, or with the level of subsidy that it received in the past. On that basis, we have secured heads of terms that will form the basis of a very different agreement with Drax for support during the period 2027 to 2031. Let me set out the terms of the agreement. First, it will ensure that Drax plays a much more limited role in the system, providing low-carbon dispatchable power only when it is really needed. Drax currently operates as a baseload plant, running around two thirds of the time. That means that it provides power even when other renewable sources are abundant. That must not continue. Under the new arrangement, Drax will be supported to operate only at a maximum load factor of just 27%. In other words, it will operate less than half as often as it does currently. That will be guaranteed by the design of the dispatchable contract for difference that we have agreed. When renewable power is abundant, Drax will not generate, and consumers will benefit from cheaper wind and solar instead. Secondly, reflecting that change, the contract will deliver much better value for consumers. It will significantly reduce the amount paid in subsidies compared with the previous support mechanism. The new deal halves the subsidies for Drax—equivalent to a saving of nearly £6 per household per year. Furthermore, our analysis shows that the deal will save consumers £170 million in subsidy in each year of the agreement compared with the alternative of procuring gas in the capacity market. I can also inform the House that the deal limits the expected rate of return for Drax to a level below that of monopolies regulated by Ofgem, but while that is our central estimate, unlike the last Government we are not prepared to take the risk of prices soaring in response to volatile fossil fuel markets, so the agreement includes a built-in windfall mechanism, with rates of 30% and 60% that would claw back excess profits made by Drax, guaranteeing a much fairer deal for consumers than in the past. Thirdly, we will introduce tough new measures on sustainability. We will increase the proportion of woody biomass that must come from sustainable sources from 70% to 100%. We will significantly cut the allowable supply chain emissions to a level in line with the much stricter regulations currently operating in the rest of Europe, and we will exclude material sourced from primary forests and old-growth forests from receiving support payments. There will be substantial penalties on Drax if those criteria are not met, and we will go further to ensure greater confidence that the standards will be met. I can inform the House that we will also appoint an independent sustainability adviser to work with my Department, the Low Carbon Contracts Company and Ofgem to ensure that our monitoring and enforcement measures are robust and keep pace with the science. To be clear to the House, taken together the measures represent a profound shift from the past on both sustainability and value for money. In that context, this is the right deal for security of supply and price in the period 2027 to 2031, given the circumstances that we inherited from the previous Government. Nevertheless, we recognise the strength of concerns in this House and across the country about the use of unabated biomass. It is not a long-term solution. We are determined that the next time such decisions are made, the Government are not left in the circumstances we have been. We will do the work that was not done by the previous Administration on strong and credible low-carbon alternatives, so that in four years’ time we will have proper options. To help that process, we are setting up an independent review to consider how options for greenhouse gas removal, including large-scale power BECCS and direct air carbon capture and storage, can assist the UK in meeting our net zero targets and ensure security of supply out to 2050. The review will take representations widely on the issues and report back in due course. The steps that I have set out are about fulfilling our duty to ensure security of supply and the best deal for bill payers. We have come into office, faced up to the circumstances left by the previous Government, and delivered a step change in value for money and sustainability. The Government will do whatever it takes to deliver energy security, to protect bill payers now and into the future. I commend this statement to the House.

• 10 Feb 2025 · Biomass Generation · Hansard source

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  My hon. Friend makes the point for me. He forgets, of course, that the Conservatives are under new management, so it is all fine—we just forget everything that happened in the last 14 years and move on. Of course, we have had to pick up the pieces from the last 14 years, and while the Conservatives will not take responsibility for those decisions, we have grasped the challenges and are moving forward as quickly as possible. The truth is that not only did we inherit an energy system without the long-term planning it should have, but Drax did not have a deal that was good for the climate, good for energy security or good for the hard-working people of this country, who paid year after year for the subsidies that the previous Government negotiated. We have halved the subsidy every year, putting money back into people’s pockets and, of course, making sure that any excess profits come back to the Exchequer.

• 10 Feb 2025 · Biomass Generation · Hansard source

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  I was not aware that it is the Reform party’s policy to reopen the coalmines—

• 10 Feb 2025 · Biomass Generation · Hansard source

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  First, let me say that I have spent the last hour answering questions from Members on both sides of the House. I have not lectured anyone. I have, however, stated the facts—for instance, that if oil and gas are extracted from the North sea, they are sold on the open market for whatever price the international markets have at any given moment. That delivers neither energy security nor confidence to bill payers. While Opposition Members may want us to go back to the fossil fuel casino and hope we can play a better hand this time round, I think we should be building a secure power system that delivers both energy security and confidence that we will not be exposed to the price spikes we have been exposed to in the past. If the right hon. Gentleman wants to take that as a lecture, he can take it as such. On the role that Drax will play, of course we looked at all the assessments around Drax to date. Frankly, we have put in such a robust process on sustainability, and independent assessments of some of that, because of the questions that the right hon. Gentleman raises: we know that there have been questions in the past, and we want to make sure that there are tough penalties if Drax does not comply. Raising sustainability from the level under the previous Government—70%—to 100% means that we will not pay a penny of subsidy if Drax fails the sustainability tests that we have set out for it. That protects consumers right across this country and delivers the dispatchable power that we need.

• 10 Feb 2025 · Biomass Generation · Hansard source

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  Transparency is important, so I am very happy to publish what we can. Elements of that analysis, such as details of how Drax runs its power station, will be commercially sensitive, so I will have to look at exactly what can be published. I know that NESO has today published a summary of its advice, to give clarity on its view on the security of supply questions. I am happy to take the hon. Gentleman’s point away and write to him.

• 10 Feb 2025 · Biomass Generation · Hansard source

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  On the start of my hon. Friend’s question, I agree. This Government were deeply concerned about sustainability practices at Drax and, frankly, about the level of subsidy that was part of the deal negotiated by the previous Government. We inherited a dire situation in terms of long-term planning for our energy security. What we have sought to do with this deal is answer all those questions—on sustainability, on security of supply, on excess profits and on the role of Drax in the system for dispatchable power, which is important. On the role of Ofgem, I know that the audit of some of Drax’s practices is still under way. I am rightly not privy to the details of that, because it is Ofgem’s review, but we have a wider review of the role and remit of Ofgem under way at the moment, and I think that would be an opportunity for my hon. Friend to feed in his thoughts on the future of Ofgem.