Energy Insight

Energy Act 2016 – Roundup

24/05/2016

Nearly 11 months from its initial introduction in the House of Lords to Royal Assent, the Energy Bill elicited strong opinions throughout, notably on government plans for the early closure of the Renewables Obligation (RO) for onshore wind farms. There were also changes to renewable subsidies, localising planning control for onshore wind projects and the formation of the Oil and Gas Authority (OGA) to support the sectors in the North Sea.

The Bill finally received Royal Assent on 12th May 2016 following a month of Ping-pong, which saw a near finalised version of the Bill sent back and forth from the Lords to Commons five times. The government finally managed to win support for controversial grace periods changes, despite concerns the bill would be running close to the prorogation deadline, signalling the subsequent passing of the Bill.

We have detailed a step-by-step breakdown of the process below, outlining the journey from first reading to Royal Assent.

 

The Journey of a Bill

First Reading – The introduction of a bill. It is usually a formality and takes place without debate.

Second Reading – The first opportunity for members to debate the key principles and main purpose of a bill and to flag up any concerns or specific areas where they think amendments (changes) are needed.

Committee Stage – Involves detailed line by line examination of the separate parts (clauses and schedules) of a bill.

Report Stage – Gives all members a further opportunity to examine and make amendments (changes) to a bill.

Third Reading – The chance for members to ‘tidy up’ a bill, concentrating on making sure the eventual law is effective and workable – without loopholes.

Consideration of Amendments – When a bill has passed through third reading in both Houses it is returned to the first House (where it started) for any amendments made by the second House to be considered.

Royal Assent – Once a bill has completed all the parliamentary stages in both Houses, it is ready to receive royal assent. This is when the Queen formally agrees to make the bill into an Act of Parliament (law).

 

Energy Act 2016

First Reading [HL] – Introduced by Lord Bourne of Aberystwyth on 9th July 2015

‘A Bill to make provision about the Oil and Gas Authority and its functions; to make provision about fees in respect of activities relating to oil, gas, carbon dioxide and pipelines; to make provision about wind power; and for connected purposes.’

Second Reading – Lord Bourne announced the Bill would support North Sea oil and gas, formally establishing the Oil and Gas Authority (OGA), reform onshore wind subsidies and give local people the final say on projects applications. Labour’s Lord Granchester welcomed the provisions on the North Sea, but warned that the Bill’s provision on onshore wind would spread alarm and fear throughout the energy market.

Committee Stage – Day One – Dominated by debate on the OGA, the opposition calls for impact assessments, and a report on powers, and moved certain amendments.

Day Three – Sitting focused on onshore wind and the role of the Renewables Obligation (RO), the Levy Control Framework (LCF), Contracts for Difference (CfD), and debate on localising planning control of wind farms.

Report Stage – Day One – A number of government amendments were agreed to regarding the North Sea oil and gas sector. An Opposition amendment providing for an immediate review of the functions of a new industry regulator was also agreed to.

Day Two – The government moved amendments seeking to address Peer’s concerns over grace periods for wind projects seeking accreditation under the RO. The Opposition successfully added an amendment removed the principal clause providing for these changes.

Third Reading – The Government added some minor technical amendments to the Bill. Crossbench peer Lord Oxburgh moved and then withdrew a probing amendment that would have added a new clause requiring the Government to create a comprehensive strategy for carbon capture and storage (CCS).

 

Bill sent from Lords to the Commons.

 

Second Reading [HC] – Energy Secretary Amber Rudd declared that the Bill would support investment in energy sources including in the North Sea by implementing the recommendations of the Wood Review, and contribute to the deployment of new renewables with a view of producing 30% of UK electricity demand from renewables by 2020. The government promised to reintroduce promises on the early end of the RO for onshore wind, predicting that new onshore wind projects were unlikely.

Committee Stage (1st and 2nd sittings) – Discussion centred on the new Oil and Gas Authority (OGA), and debate over Clause 8 (which sought to include new aspects on decommissioning and CCS). The Clause was removed, following Energy Minister Andrea Leadsom describing it as attempting to rewrite the OGA’s principle objective.

Committee Stage (3rd sitting) – Debate focused on Clause 73 (Abandonment of offshore installations). Emphasising the importance of conducting an effective decommissioning process for the North Sea, Labour’s Alan Whitehead highlighted the job and supply chain opportunities it could create. Energy Minister Andrea Leadsom agreed that decommissioning could become an industry in itself, but only in time.

 Committee Stage (4th and 5th sittings) – The debate around Clause 80, which sought to alter basis of calculating the 5th Carbon Budget, commenced with Energy Minister Andrea Leadsom setting out the Government’s opposition, explaining it was designed to exclude the EU Emissions Trading Scheme (EU-ETS). For the Opposition, Shadow Minister Clive Lewis defended the clause for helping increase investor confidence in British renewables. The Clause was defeated following division.

Committee Stage (6th and 7th sittings) – Three Government clauses were added to the Bill, designed to restore provisions for an early closure of the Renewables Obligation for onshore wind, which was controversially removed by opponents earlier in the Lords.

The SNP sought to secure an allocation round for Contracts for Difference (CfDs) each year that carbon intensity of UK generation exceeded 100g per kw/h, on the basis that it could secure much-needed investment to help the UK meet its emissions targets.

Third Reading – Secretary of State for Energy and Climate Change Amber Rudd stated that the Bill put in place manifesto commitments to achieve government objectives for long-term, secure, clean and affordable energy supplies, meeting commitments to support the development of oil and gas in the North Sea, further commitments to ending new public subsidies for onshore wind and giving local people the final say on wind farms.

Report Stage – MPs discussed a New Clause 2, proposed by the SNP, which sought to give Scottish Ministers sole power over closing a Renewables Obligation closure order concerning onshore wind power in the country. The Clause was withdrawn following a response from Andrea Leadsom stressing the importance of a uniform application of the early RO closure.

Lords Consideration of Commons Amendments [HL] – In addition to approving a series of Commons changes to the Bill, the Government also amended Commons Amendments 6 to 8 in order to clarify that the Renewable Obligation for onshore wind would close on the date at which the Bill achieved Royal Assent. Lord Grantchester successfully added Amendment 7AB to Commons Amendment 7, designed to propose an extension to exceptions to the early closure of the RO agreed by the Government.

Commons consideration of Lords Amendments [HC] – All Lords amendments were accepted except for Lords Amendment 7T, which Energy Minister Andrea Leadsom moved a motion to disagree with. She suggested that Peers should respect the government’s manifesto commitment, and that concerns around the early closure had been responded to. MPs voted 293 to 224 in favour of rejecting the Lords amendment.

Lords Consideration of Commons Amendments [HL] – Lord Bourne moved a motion that the House should not insist on its Amendment 7T, which had sought to alter the terms of grace period cessation for the RO, but was unsuccessful in convincing the House, with Peers dividing following a counter-motion by Lord Granchester. The House voted 270 to 220 in favour of a motion by Lord Grantchester’s to insert new amendment 7TD, sending the Bill back to the Commons for further consideration.

Commons consideration of Lords Amendments [HC] – MPs rejected Lords Amendment 7TB, which had been inserted by peers as a means of altering the terms of the grace period and the early closure of the RO for onshore wind. The Government’s motion to disagree with Lords Amendment 7TB was agreed at division, with 286 votes for and 260 against.

Lords Consideration of Commons Amendments [HL] – Peers voted to support the Government’s motion 109 votes for and 204 against that the House not insist on its Amendment 7TB, designed to alter provisions surrounding the grace period for the closure of the RO.

At this point the Bill concluded its passage through parliament, and awaited Royal Assent to become Law.

Royal Assent – Royal Assent was given to the Energy Act 2016 on Thursday 12th May 2016.

NB. For purposes of clarity, amendments are renamed each time they are re-added, even if of the same substance of a previous amendment. All amends numbered ‘7’ above relate to grace periods relating to the early closure of the Renewables Obligation.

The Energy Act 2016 can be found here in full – Energy Act 2016

 

Reaction

RenewableUK – RenewableUK says energy policy has reached a significant moment, as the Energy Bill has concluded its passage through Parliament and will now become law.

RenewableUK’s Chief Executive, Hugh McNeal, said: ‘The Government has said that in the future the UK’s electricity will be generated by gas, nuclear and renewables and not from coal. Onshore wind is now the cheapest of these options. With the pain of the Energy Bill finally behind us, we need to look forward and find sensible ways to take advantage of wind power to ensure consumers’ electricity bills are as low as possible’.

Analysis by Bloomberg New Energy Finance shows that the overall cost of onshore wind is continuing to fall, with new onshore wind cheaper than new gas – even at a time of low gas prices. This shift has also been reported by Policy Exchange, Bright Blue and the Committee on Climate Change, which all confirm the low cost of onshore wind.

Amber Rudd MP – @amberrudd_MP ‘Energy Bill means secure, affordable, clean energy for families/businesses & support for oil/gas industry. Glad it’s going to Royal Assent.’ (10th May 2016)

“The Energy Act is a vital part of our plan to ensure our families and businesses have access to secure, affordable and clean energy supplies they can rely on, while keeping bills down.” (12th May 2016)

“By strengthening the Oil and Gas Authority and giving it powers to drive greater collaboration and efficiency in the industry, this Act shows that the broad shoulders of the UK are committed to helping our oil and gas industry attract investment, support jobs and remain competitive for the future.” (12th May 2016)

Lisa Nandy MP – @lisanandy ‘Tonight the Tories passed a law to block all wind farms even if they have strong local support & offer good value for money.’ (10th May 2016)

@lisanandy ‘It defies belief that Ministers are so ideologically opposed to wind farms they were prepared to risk our North Sea industries #energybill’ (10th May 2016)

 

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