21
Examination of witnesses
Michael Shanks and Emily Bourne.
Q101 The Chair: Good morning, this is the Industry and Regulators Committee of the House of Lords. This is a public session on our inquiry into grid connections and some of the issues that have arisen there. Our witnesses this morning are Michael Shanks, who is the Minister in the Department for Energy Security and Net Zero, and Emily Bourne, who is the director of energy systems and networks in the department. Good morning to you both.
Obviously, the whole area of energy is very topical, and it is very important to the Government’s overall programme. We have tried to contain our inquiry to issues concerning the grid and connections, but obviously the targets that the Government have set—the green clean power targets—are very significant and tight, and we have heard evidence that they might be too tight. Could you start by saying how important the energy network infrastructure will be in delivering those targets, because we have heard that they are very challenging indeed, and there is some concern about whether it is realistic to think that those targets can be met?
Michael Shanks: Good morning. First, thank you very much for having me along this morning, but also for the work you do in this inquiry and in others. The detail of your scrutiny is very important, so thank you.
The question is a very important one. There is no doubt that we have set out a very ambitious mission, one of the Prime Minister’s five missions is clean power by 2030. We have been very clear that we think that this is a stretch goal that is achievable, and NESO has said that it is very much achievable, but it will of course be difficult, and we are under no illusions about just how challenging it is. We need a whole variety of things to move at the same time and at the pace that we need them to move at, and for the whole of Government to work together. That is partly why we have set up the clean power unit within DESNZ to really drive this forward at pace.
We are looking at all the relevant things in the round. Networks are a very key part of that, as are connections reform, infrastructure, planning and MoD issues. All these things are important for the deployment of clean energy, driven by one part of Government, which is a new way of delivering this mission-driven Government.
On the particular point around network infrastructure, it clearly has an absolutely vital role to play in us delivering the clean power mission, but frankly, it is an important, essential thing for us to be doing even if we were not doing that, because the network build-out that we have clearly needed for a long time has been put off by previous governments. It is critical that we now move that forward, that we build new grid and also upgrade some of the grid that is there at the moment. It is a key part of how we deliver on this mission.
As a Government, from the Prime Minister down, we have set out that building infrastructure is something that we are going to crack on with and not hold back from. The Planning and Infrastructure Bill that has just entered the Commons is a key driver for that.
The Chair: Do you want to add anything, Emily?
Emily Bourne: All I would add on the network side is that there is a huge amount of build that is needed at pace. NESO identified around 80 transmission projects that are needed by 2030. We have got quite an advanced programme of work on network acceleration, which was begun following the advice from Nick Winser as the networks commissioner under the last Government. We have obviously intensified that, and we have the actions set out in the Clean Power Action Plan that we are taking forward. We are also looking at data from those 80 individual projects and monitoring delivery of those projects individually, where action might be needed to help accelerate.
The Chair: In terms of overseeing the delivery and monitoring what is going on, who exactly is the key group responsible? Is it the department or is it NESO? Can you clarify who is actually tracking what is happening?
Michael Shanks: It is a really important question. It is a combination of people, but the clean power unit within DESNZ has a really critical role in pulling all of that together. Part of the reason why its role is so important is because it is not, like a lot of government projects, looking at the broad delivery of government policy, but it is actually looking at specific parts of the generation capacity that we need, the network build-out that is needed and the challenges that those projects are facing, such as the timescale and whether they are on track. It is a new way of us looking at how we actually deliver this.
NESO has a really critical role as well. Of course, the individual transmission owners have the most important role in terms of actually building the infrastructure and having a key role in driving it forward. I have been having regular meetings with them to try and understand the challenges that they are facing, to look at things like procurement and supply chains and to make sure that all of that is moving.
The critical thing underpinning this mission is that it is achievable, but only if we get every single part of the system moving at the pace that we need it to. What I have found really comforting since we started this is that this has not just been Government driving a mission on their own, it has driven a momentum in the wider industry to follow us at the pace that we want to move at. That is the thing that gives me real confidence that we will be able to deliver on this.
The Chair: We heard the phrase “delay haunts me” as what could be the real stumbling block here. Anything could cause delay—you mentioned the supply chain—but we have also had concerns about skills and whether they are adequate.
Michael Shanks: I think it is a concern. We have been really clear as a Government that skills are a huge issue right across the economy, which is partly why we want to reform the apprenticeship levy and partly why we have set up the Office for Clean Energy Jobs to drive skills in the renewables jobs of the future.
There is no doubt that we have inherited a skills landscape that could be significantly stronger. When I speak to a lot of the network operators—to anyone in the energy sector, frankly—there is real demand for jobs but a real challenge in finding qualified people to fill some of those jobs. So we are doing everything we can to improve the skills pipeline. There is a really exciting opportunity for the next generation of people to come into this sector, and there are jobs available for them.
The network companies themselves are also doing a huge amount of work to support the development of skills. Individual companies have really impressive skills and training programmes that are driving forward the skilled workers they need, but there is no doubt that it is a concern that we are very aware of. The clean power action plan that we published before Christmas recognised that as a dependency. We are working across Government with colleagues in the Department for Education to drive this forward.
The Chair: So does delay haunt you, in terms of any one of these things going wrong?
Michael Shanks: I do not know. “Haunt” is a very strong word, but you are probably right. I am acutely aware that every single part of this needs to move at pace. That has a real driving force from the centre of Government. The fact that this is one of the Prime Minister’s key missions has genuinely helped unlock a lot of momentum here. He does regular stocktakes with the department on the detail of this, which is really important. So all of that is moving forward.
The part that I take confidence from is that this is not just a government ambition in isolation: we are seeing it also from industry. That is the part that is critical for delivering this because, as important as the Government’s role is, we are not going to build this infrastructure directly; we need others to do that. So all of us moving in tandem is really critical.
Q102 Viscount Thurso: Good morning. We have had quite a lot of evidence from Ofgem. In that, it has been very clear that it would really appreciate some more clarity and guidance from the Government around prioritisation when they are making political and distributional trade-offs—that is, between net zero, clean energy, security of supply, and, of course, price. Will the Government provide clearer guidance on what the priorities should be in the event of a conflict coming through, either in their review of Ofgem or possibly through an updated strategy and policy statement?
Michael Shanks: You are right to touch on the multiple responsibilities that Ofgem has as a regulator. I have met the people there on a number of occasions, as you would expect, and I have been really impressed by their grasp of what the challenges are. They are very aware of capacity issues and the pace with which they can move forward on things, but they are really concentrated on what our aims and ambitions are—partly to deliver the clean power system, but with a recognition that its regulatory view for consumers is also a key element of that. The Ofgem review is partly about how we can bring all the expectations that we have for it into a coherent future strategy; there is no doubt that the strategy and the policy statement will be part of that.
The other element of it is that the Prime Minister has asked all the regulators to have a clear view on economic growth. Ofgem is already quite forward-leading on some of this, I think, but there is more that it could do. What that brings together is a cross-government coherence as to what we expect regulators to do. It is not for me—it is quite important that I say this—to set the specific priorities that Ofgem, as an independent regulator, takes forward; I do not want to do that. But clearly the Ofgem review is around us making sure that it operates within a framework of what we think its focus should be in a general sense, but, day to day, it is important that Ofgem operates independently of Government.
Viscount Thurso: Can you flesh that out a bit? Nearly all the regulators that I know have been set up with some pretty clear guidance in the legislation; it sets them up and says what they should be doing. If we look at energy from when these regulators were set up, it is not a matter of contention, I think, that they were there primarily to try to keep prices down. They are there to regulate price.
Now, we are in a situation where we would probably all agree that getting to net zero and security of supply are more important, or are at least of equal importance, but the legislation does not necessarily say that. So how does the Government, and you as a Minister, properly give some direction to a regulator whose legislative competence is regulating in a different direction? It is about accepting that problem. Personally, I believe that Ministers are there to take accountability and to deal with those things, and that it is proper that political decisions should be made by people who are elected, but we do not necessarily have that at the moment.
Michael Shanks: On balance, I would not hugely disagree with you. What I am very keen to ensure is that Ofgem has very good credibility in terms of being an independent regulator. I want to make sure that that operational independence is maintained, because that is where it takes its strength from, but you are right that, overall, the whole energy landscape has changed remarkably quickly in terms of the type of generation that we are looking at across the country and the role that the regulator plays. Actually, the role that the Government play in the energy space has increased significantly as we have changed the make-up of the energy system. So there is a need for it to be reviewed, which is why the Ofgem review that we have commenced will look at what the SPS is.
Obviously, it is a five-year strategy document. We have a view that there are certain areas where Ofgem could maybe go further than it currently does, but we want to do that in a proper review process where we bring all the different strands of it together. The Government also have twin aims. It is about how we can build a clean power system that gets us to net zero and delivers energy security, which is really critical at the current time, but the Prime Minister has also given all his Ministers a very clear steer that bringing down bills is critical because, if we build a new power system but the public do not see any benefit from that, we will not have succeeded on both of those aims. It is not wrong to say that Ofgem will have a continuation of a number of different roles and outcomes, but focusing some of that on where it can have the greatest impact is what the Ofgem review will be about.
Viscount Thurso: The heart of my question is that obviously Ofgem is operationally independent, but it will operate within the strategic guidelines that you give it. We are talking about those strategic guidelines. Everybody is looking for clarity on that from whoever is in Government to get us to where we all want to go.
Michael Shanks: That is fair. That is what the Ofgem review is setting out to do. We have looked at specific things. For example, I had a lot of conversations with Ofgem around the long-duration energy storage scheme that it is going to administer; that is a very particular project that we have asked Ofgem to take forward. We can look at individual things, but the review is around the function of Ofgem on the whole. Should it have increased powers in certain areas, or are its powers focused in the wrong place? I do not want to prejudge the review but the outcome is exactly what you point to: giving it a really clear steer as a regulator.
Q103 Viscount Chandos: You have already acknowledged the growth objective. In his book, Growth: A Reckoning, Daniel Susskind writes about the challenge of balancing the trade-offs around the growth objective; Viscount Thurso has already talked about that. What are those trade-offs for you and how you are going to manage them?
Could I just throw in something else? In its work over the past couple of years, this Committee has identified how difficult it is for regulators when there are competing objectives. How do you make sure that Ofgem finds its way through that maze?
Michael Shanks: I have read some of the reports from the Committee. You make some very strong points on that question. What we want is to try to find a balance. The regulator is concerned with protecting consumers, first and foremost—that is important—as well as designing the energy system and making sure that it is regulated in a way that protects consumers. However, through that lens, the Government are clear that economic growth can help bring down bills. So the focus of Ofgem is on the question of pace in particular—how do we move faster to regulate some of the aspects of its work so that we can deliver the renewables system that we know will bring down the system costs in the long term and will, indeed, protect consumers? The trade-off is that there is always a balance to be struck here, but Ofgem has a very clear objective; for example, to look at the future of the standing charge. That is an example of where there is a real consumer lens focused on the bills that people actually pay.
At the same time, it is looking at what specific parts of the remit can help drive economic growth more quickly. Take connections reform, which I am sure we will come on to; yes, it is about clearing out the queue of projects waiting to connect to generate electricity, but that also helps us to unlock space for demand projects in the queue, which helps us to deliver economic growth. The balance is sometimes tricky to define exactly, but we want to get to a place where Ofgem has a clear steer from Government on its remit, but still has that flexibility to focus on how it delivers for consumers in the best possible way. As the Prime Minister has outlined, at the same time, it must help us drive towards economic growth.
Viscount Chandos: How is that clearer remit going to be established, communicated and agreed? Is that through a formal process or exhortation?
Michael Shanks: It will partly be through the Ofgem review, the outcomes of which will be published and shared. The detail of exactly what flows from that will still need be to be worked out, depending on the outcomes of the review. Correspondence between the Prime Minister and Ofgem has been widely and openly shared, in terms of his expectations of all the regulators. As much as it seems like I am trying not to answer the question, I think the review is critical because, if we do this in a piecemeal way, where we ask Ofgem to shift certain parts of its responsibilities without a coherent overall view of what its aim should be, we will miss the big prize of it having a coherent overall strategy, directed by the Government. That is the key outcome from the Ofgem review.
Emily Bourne: Just to add in process terms, we had a call for evidence on the Ofgem review, December to February. That has been gathering views from any interested parties on the whole gamut of what Ofgem does and what its duties should be.
Q104 Lord Gilbert of Panteg: Minister, do greater incentives need to be introduced to encourage generation and energy demand to locate more closely together? Would that significantly reduce the need for grid investment? If this is the right approach, what is the best way of delivering it—through zonal pricing or reforms to network charging? Have you done any analysis of the benefits and costs of these approaches?
Michael Shanks: We inherited a REMA (Review of Electricity Market Arrangements) process two and a half years down the line, with various consultations. We are very clear that there needs to be reform of the electricity market. Just before Christmas, we published a summary of our minded-to positions on either going to zonal pricing or reforming national pricing, and we ruled out some of the other aspects that we are consulting on. We made it very clear that, by the middle of this year, we will have made a final decision on the question of zonal or reformed national pricing.
The work going on currently is some modelling that we are trying to pull together as a department around the potential impact of zonal pricing. Clearly, the purpose of some reform to the electricity market is to give some operational and locational signals. The challenge with which we are trying to wrestle, and the reason why we do not have a fixed position and are taking a very pragmatic approach to making a decision, is that we want to try to ensure that there is a benefit for consumers wherever possible—to bring down bills—but that that is balanced against the investment risks that potentially increase the cost of capital, and the potential disruption to the system and the impact of that. We want to weigh those two things against each other.
My reflections on, apart from anything else, being Energy Minister and a Scottish MP, are that we need to look at how we can move demand closer to where, particularly in Scotland, we have a significant amount of onshore wind and some significant offshore projects. We have one of the biggest pipelines in the world floating offshore. The question of how to do that is quite difficult. There are ways that we can incentivise industry to move: we are working through pricing signals to see whether they will have the desired impact or will, potentially and inadvertently, not achieve a locational signal but increase costs. That is the balance that we are trying to strike, and we are collecting a whole series of evidence to try to make that decision.
Lord Gilbert of Panteg: Do you have any assessment at all of the potential impact on the need for investment and the scale of investment in the transmission network? Would there be a significant reduction in the requirement for investment? Could that be achieved?
Michael Shanks: I might ask Emily to come in on some of the specifics. The challenge with this is that, in theory, the answer is that it significantly reduces the need to build out network; but, in reality, that question is more complex, particularly if we look at the pipeline of locations for future renewables projects. The onshore wind ban in England puts us quite significantly behind in terms of onshore wind in England, which cannot be immediately replaced. The future projects that we think are likely to be built in offshore and onshore are largely in Scotland, as well.
I think the theory is right that, if you build the generation closer to population centres, you will reduce the network build, but we have to deal with the actual system that we have at the moment, not the theoretical one that we hope for. That is where some of the benefits are less clear.
Emily Bourne: Yes, I agree with that. We are looking at needing a significant investment in transmission, whatever happens with the decision on REMA. We have sources of generation that do not have a lot of choice about where they locate, for one thing, and a changing energy system. We are looking at how we improve the locational signals, whether through zonal pricing or other means, but there is a limit to how far that can go. You are still looking at needing a very significant build-up of the transmission network, and certainly over the next decade or so.
Michael Shanks: Briefly, on the REMA question, what we have ruled out is the status quo. We recognise that there has to be some reform so, even if we retain the national pricing structure that we have now, it will have to come with some reforms, particularly around transmission charging. We will have to look at how that works. Fundamentally, the challenge is that the system is built for a large generation station right next to a population centre, but we do not have that energy system any more. Whatever option we choose, there will be reform, but the fundamental question we are trying to answer is whether it will be zonal or a reform to national.
Lord Gilbert of Panteg: What is the timescale for this modelling?
Michael Shanks: We said that we will make a decision by the middle of this year. The very clear statement is that there will have to be a decision before the next contracts-for-difference auction round opens, because we have to give clarity to developers bidding in that auction on what the decision will be. The middle of this year is our aim.
Lord Gilbert of Panteg: There is obviously quite a lot of technical work and modelling to do. Is that nearing completion? Presumably it is, as it informs that decision timetable.
Emily Bourne: Yes, exactly. A lot of work is being done within the department and has been done externally, but I believe that the work within the department is currently concluding.
Q105 Viscount Trenchard: I would like to ask you about the proposals for connections reform. Many of the witnesses we have heard from have welcomed them, but we have also heard some concerns about the proposed criteria. Some would like more stringent requirements for progressing in the queue, but others are concerned that necessary projects for the period after 2030 will lose out. Are you content that NESO has struck the right balance to provide a manageable queue without holding back valuable projects? How urgent is it to finalise the reforms to the connections queue?
Michael Shanks: Connections reform is incredibly important. I think I am right in saying that there are 746 gigawatts—that number might have changed since I last saw it, because it changes regularly—or certainly more than 700 gigawatts to connect to the queue. That is an absurd figure, which is clearly never achievable, so we have to deal with this.
The approach that we have taken is to prioritise on the basis of the strategic objectives of the Government. In the current period, that is the Clean Power Action Plan. That is about saying: here are the credible capacities we need of different technologies to achieve clean power by 2030, and here are the projects in the queue that will connect in order for us to achieve that—with some exceptions around projects that are already far developed in the planning system, for example, that will be exempted from any kind of queue reform so that there is no loss of investment there. The question of beyond 2030 is more open. We have clear projections of the technology mix we need to get to 2030 and a clear steer on the individual projects, because essentially they are already in the system somewhere at this point.
Beyond that, we published numbers in the Clean Power Action Plan that came from NESO that give a clear steer of what we would expect by 2035, but by that point the Strategic Spatial Energy Plan (SSEP) will also have been published, which will drive quite a lot of the work on defining what the technology mix is into the 2030s. So it is possible there will be some changes to that, and we said explicitly in the action plan that there were flexibilities built into that. However, the key point is that this is important because we have got no realistic chance of connecting the majority of these projects anyway. But inevitably, as a result of a reform like this, there will be projects that lose out. I have had a number of meetings with developers to try and give some assurances about some projects but, inevitably, the aim of this is for some projects to drop out of the queue, particularly battery technologies, for example, because we just have far too many and it does not make strategic sense in the system.
Viscount Trenchard: So you think NESO is broadly striking the right balance at present?
Michael Shanks: Yes, I think so. There are specific areas where we looked again at different numbers—solar, for example. Emily might want to come in on some specifics. Inevitably, as we move towards the 2030s, there will be different issues that arise with numbers. Any kind of projection that far in advance will be subject to some flexibilities. But broadly we agree with NESO’s mapping of the future energy needs, and the Strategic Spatial Energy Plan will give us a clear steer on a bit more detail, particularly on the regional breakdowns that have been set for each of the technologies.
Q106 Baroness Drake: Good morning. Could I move to strategic planning? NESO has been charged with providing greater strategic planning of the energy system through its production of the Strategic Spatial Energy Plan, the Centralised Strategic Network Plan (CSNP) and the Regional Energy Strategic Plans (RESPs). How will these plans be integrated into planning approval so that the projects required to meet these plans do not second guess but are fit for purpose?
Michael Shanks: It is a good question. You also remind me that we need to come up with some better acronyms for all these things. The energy system is full of acronyms. You are right. There is a combination of different plans here. I will be absolutely honest with the Committee: I am surprised that we have not got some of these strategic plans already. We built a complex system already, and it is going to become more complex in terms of the number of individual generating stations. The fact that we do not have a centralised plan for the network, or one for how we plan the energy system more broadly is a big oversight from the previous Government, but we are moving as fast as possible now to deliver it. The plans will connect together. They will be individual in the sense that the Strategic Spatial Energy Plan will set out across the country what we think the different energy mix will be, tied in with things like Defra’s work on the land-use framework, for example. But the network plan will then dovetail in with that to look at how the network build-out relates to what we want to see in the future strategic energy use of parts of the country as well. Within that, we also have Regional Energy Strategic Plans to provide a bit more granular detail on individual parts of the country.
We are also reforming the broader planning system, with the Planning and Infrastructure Bill going through Parliament at the moment. The aim of all this, though, is to try and create a slightly or significantly more coherent long-term plan for how we build energy, because the No. 1 complaint I have, which is entirely justified, from Members of Parliament and communities is not the infrastructure itself being built but the seeming incoherence in how it is built. If we can give communities confidence that there is a long-term plan of what is going to be built in their community, we will have much more acceptability for the infrastructure that we know we have to build. I do not know if Emily wants to come in on some of the technical bits of the SSEP.
Emily Bourne: Just to add the point about how it involves the planning system is important. The intention is for both the Strategic Spatial Energy Plan and the Centralised Strategic Network Plan to be referenced and endorsed in the relevant National Policy Statements. They will be part of that planning consideration. The RESPs will be at a more regional level. We expect that the strategic authorities and local government will be involved in the drawing up of the RESPs, so there will be quite a bit of local government involvement in that process.
Baroness Drake: You have slightly anticipated my second question, which is good in terms of following through on the coherence points. So you are confirming that all those plans need to be incorporated into the National Policy Statement and the National Planning Policy Framework. Is that going to move them more efficiently through the planning system because they are captured in those frameworks and statements?
Emily Bourne: That is the hope—that you would be able to make the process of looking at these sorts of projects easier by having that clear need and incorporation within a spatial plan that looked in a more strategic way at what we need for the system as a whole up front.
Baroness Drake: Is that a key area for mission control in the department?
Emily Bourne: They are certainly looking at this. It is being led within another part of the department but they are very closely involved.
Baroness Drake: On a more topical point, mitigating risk and building resistance is obviously a key part of strategic planning. Yet we saw the total closure of our major hub airport, Heathrow, through a power failure. I appreciate that the department is still looking at this. You are not going to have all the answers, but it exposed Heathrow’s resilience to power supply. Obviously, you will be looking at any weaknesses in risk management, contingency planning or crisis management. Can I invite you to comment about what the Heathrow incident in such a major hub airport and its importance to the UK economy reveals about resilience?
Michael Shanks: It is a hugely important question that we have been discussing at great length since Friday morning, obviously. The whole question of resilience is so important right across Government and to the energy system in particular. Part of my job is about looking at these questions. It is important to say that the situation at Heathrow was not caused by a single point of failure. In fact, on the electricity network, there were three connections to Heathrow, of which one obviously was brought down by a catastrophic fire. The review that the Secretary of State has commissioned NESO to now complete is around looking at whether there are lessons to learn for the wider electricity system. That will also link closely with the review that Ruth Kelly is undertaking on behalf of Heathrow as a company, looking at what the issues were within that airport. The challenge for us is that while we absolutely need to look at the resilience of the outside network connecting into Heathrow, the private network within Heathrow is what needs to be reviewed. There will be questions arising from those two reviews, which I do not want to prejudge.
What I would say more broadly is that in any moments like this, not just reactively but proactively, we should look at anything we can do to build more resilience into the network. But I should say that there is significant redundancy built into it. The fact that the local network operator and National Grid were able to work as quickly as possible to find a workaround and connect all households back within a matter of hours shows how resilient the network is. However, we should always be aware that catastrophic accidents and fires happen. As much as we need to prevent them, they happen. The question is how the network then responds and how we learn whatever lessons we can from it.
The wider point is that I have been trying to engage as much as possible in the last few months with the network operators around how we actively take forward resilience. The Chancellor of the Duchy of Lancaster is leading a general review of resilience of critical national infrastructure, because what we learned from the Covid inquiry is that having plans in place is not the same as actually being able to implement plans at the moment where they are needed.
There are lessons we can all learn regarding how you make resilience a key part of your day-to-day activities, not just something that you implement at the point of some significant event.
Baroness Drake: Criticality of national infrastructure is also critical to the growth programme.
Michael Shanks: Absolutely.
Q107 Lord Teverson: I will not pursue the Covid-19 inquiry side or what you were talking about. Minister, I apologise for not having been here at the very beginning of your remarks. I declare that I have a financial interest in battery storage and am a trustee of an organisation called Regen, a renewable energy advocate.
You mentioned the sort of alphabet spaghetti that has been produced, on Baroness Drake’s question. Perhaps I may widen it out a little. You mentioned areas of proposed strategic planning for land use. There is also the question of changing all the local government structures in terms of combined authorities, transport plans and housing. Witnesses to this inquiry over the past few weeks have been concerned that there needs to be clarity about how those macro national plans come together. As we all know as parliamentarians, let alone as Ministers, even departments have silos within them. Probably yours is one of the more slimline ones but work and co-ordination between departments is even more difficult. How can we give confidence to investors and operators that this is not all going to cause friction rather than enabling growth and everything moving forward as we would want to?
Michael Shanks: I will take slimline any time. Thank you for that; I will take it as a compliment. It is an important point, though, and I have reflected in the past eight months that the mission-driven approach to Government had all the dangers of being a soundbite, but it has actually unlocked a different way in which to do business across Government. The really interesting thing has been that the mission boards have brought the relevant Secretaries of State to the table to deal with what have been, in many cases, long-standing and difficult issues. No one is suggesting that it has been for political reasons or anything. It is actually just difficult to resolve issues. We have been clear as a Government that, with these long-term tricky issues, it is easy to lift up the rock, look underneath it and put the rock back down again. That is not going to be how we operate as a Government. Our approach has already led to us thinking about problems differently, sharing the responsibility instead of saying, “That is for your department and that is for your department”. So we are definitely driving forward that coherence across Government.
Lord Teverson: Can I interrupt? How is that practically happening? How is that working?
Michael Shanks: On a day-to-day basis, we have teams across Government. Officials are now working together with other departments. We have Ministers regularly meeting formally as a group—whether it is the Growth Board or the Clean Power Mission Board. The Prime Minister is a critical part. He is a key member of those boards and has regularly asked us for detailed breakdowns on how we are achieving particular things. That drives it forward as well, because when you have the Prime Minister telling you this is a priority, it becomes a priority. That really helps.
On the second part of your question, it is thinking more broadly than just Government. We tend to think of silos within Government as issues we need to resolve. We think we have cracked that, with work still to do. I do not for a second suggest that it is completely fixed. But the wider question is then: how do we involve local government and companies that are going to build a lot of this infrastructure—the transmission owners, all these different groups together? That has partly been from taking a different approach to how we look at individual parts of delivering this mission.
For example, I had all the transmission owners in my office, not to talk broadly about my aims for the network but specifically about how we are driving forward this action, that action and so on, and how we are taking forward Nick Winser’s review, by looking at every single recommendation on it and why they are still amber rather than green. It is a different approach to getting into the weeds of some of this and navigating the alphabet spaghetti that I think you are right to mention. Crucially, if we are going to drive this forward, we need everybody to be moving in the same direction. That needs Government to have an active interest in this, not a passive: “We will set the tone. We’ll publish the Clean Power Action Plan, then walk away and hope it all turns out okay.” That is not how we are delivering it.
Lord Teverson: That is certainly encouraging. Sorry, that sounds like faint praise. I do not mean it that way. I was at a meeting with my own local authority—a unitary council—last week. They were talking about local energy plans. I was trying to think, being on this project at the moment, about how that tied up with Regional Energy Strategic Plans, the local government reorganisation, combined authorities and huge changes that are going on at the moment—and how that is going to work out, particularly regarding regional energy and regional strategic plans. How are they going to be judged or when will they be ready? Who is going to be responsible for them? I am not clear on all that.
Michael Shanks: That is a really good question. Regarding two points, I will ask Emily to come in, particularly on how the regional plans will be engaged. The local energy angle is hugely exciting. We have said as a Government that we really want to commit to community-owned energy—municipal energy—in a much greater way than we have done. We have set the ambitious target of 8 gigawatts by 2030. The question of ownership matters to this Government, with communities owning rather than just having the benefits. That transforms the social and economic advantage that communities have. It gives them a real stake and hugely helps with the acceptability point as well if they actually own the infrastructure rather than just having a benefit from it.
So we want to drive that forward but it also is key to how we resolve some of the issues around connecting to the grid, because if we have much more localised energy, it can connect on to the distribution grid in a different way. Those projects do not go through the queue in quite the same way because they are significantly smaller. The other aspect is that we have set up Great British Energy to help fund communities to take stakes in projects as well. I represent an urban constituency. For example, I am a couple of miles from Europe’s biggest onshore wind farm but we are not going to build another wind farm in my constituency. There physically is no space, but I would like my constituents to have a stake in a local energy scheme there as well. That is something we are looking at through Great British Energy. In terms of how that fits within the regional plans, I expect there to be a crossover with some of those projects, but Emily might want to come in.
Emily Bourne: It is a good question. The Local Area Energy Plans will be important inputs into the development of the RESPs. One of the things that Ofgem is doing is looking across different local authorities. Some are quite far ahead in thinking about this sort of thing, learning from what they are doing and how they develop the whole RESPs system, whereas others will perhaps be further behind and will not have as much already existing to input into that RESP development. Ofgem is setting out more info on how the RESPs are going to develop and things like what governance there will be over them. That will be coming soon, probably this spring. Then there is a licence consultation for NESO over the summer.
Lord Teverson: You are absolutely right on local energy plans. They are things that people can feel and touch, and can get quite excited about locally. Keeping those in mind is important.
Michael Shanks: Emily’s point on capacity is critical. We announced funding last week for the combined mayoralties in England and for Scotland, Wales and Northern Ireland. But we know that funding is only part of the picture because, after a significant period of cuts in local government, a lot of the key people who would have delivered local energy schemes have left because councils have had to focus on their statutory responsibilities. So we know that there is a capacity-building issue as well, and the Government are seized of the opportunity we have for this because we need to bring communities with us on this transition, and their ability to own and drive forward projects that are relevant in their community is a key part of how we do that.
Q108 Lord Best: Staying with the problems at the local level and with an increase in applications for energy projects coming down the line, I wondered, thinking about the Planning and Infrastructure Bill, with the emphasis in that Bill on the 1.5 million new homes, whether your side of the equation might miss out, rather. Local planning authorities are very hard pressed. If they have got to prioritise the housing agenda and it becomes absolutely No. 1, are we going to get the attention that your energy projects deserve?
Michael Shanks: We absolutely will. There are two parts of the answer to your question. First of all, the streamlining of the planning system that we have outlined in the Planning and Infrastructure Bill is critical. We want communities to have a voice in this process. At the moment, these applications can take years, which does not benefit the investors and developers or the communities that have these projects hanging over their heads. We want the whole process to be more efficient.
We have also announced a significant increase in funding—£46 million into the planning system to enhance capacity—because we recognise that capacity is a particular issue. Also, it goes back to the question about skills. There is a real crisis in the availability of planners, as a skill set, across the country at the moment, so we know we need to work to invest much more in graduate and apprentice planners.
The other side of the capacity issue that has been reflected to me a lot is the actual expertise on some of this infrastructure. Housing is the bread and butter of a lot of local planning committees. With the wider things—particularly energy, infrastructure, and other technologies such as data centres—that are coming through, it is a slightly new type of planning for planning committees to deal with. Whether it is planning committees or the statutory consultees, there is a piece of work to do around improving the understanding of those projects and the questions that are asked.
The Planning and Infrastructure Bill will be critical. A lot of what we need to deliver by 2030 is already in the system. We are also now taking actions at operational level to try to increase the efficiency of the system now, where possible, until the legislative levers come in. It is important not to look at one particular type of infrastructure, although I completely accept your point around the ambition that we have in housebuilding as well as energy. They are both critical and we will drive them both forward.
Lord Best: Are there a couple of ways in which those local planning authorities can be better resourced? The fees have gone up, which is helpful. They are going to be allowed, I think, as the Government have not finally pronounced on this, to get full cost recovery—to charge fees that really will cover all their costs, so that they are not out of pocket.
Also, there is the thought that the additional funding local authorities receive for the planning departments should be ring-fenced. We know how hard-pressed local authorities are at the moment. It is a little bit too easy for the money to leak out into other priorities at the local level. Do you think a bit more attention might be given to the ring-fencing option?
Michael Shanks: I want to be cautious about saying anything, not least because it is very much not in my remit, but I am also acutely aware from colleagues in local government that ring-fencing comes with its own challenges as well. I am aware that councils have their own democratic mandate. If central government ring-fences too much, that would remove that mandate.
There is certainly an importance around the focus the Government want to bring to the efficiency of the planning system—we want to see that right across the system. We have put in the £46 million to recognise that if we do not increase capacity, we should not expect the speed of things to increase just because central government has decided that it should.
We are also looking at the system itself to see where there are efficiencies. I have colleagues in DESNZ who have impressed me hugely with the actual, exact pipeline of an application through the planning system and all the individual blockages. It is not one particular piece of the system, it is a whole series of things that just take a few weeks to a few months longer than they should. Over the totality of the period, we are waiting for years for outcomes from applications, so it is about efficiencies across the whole system.
Lord Best: Yes. Would it help to adopt the National Infrastructure Commission’s recommendation that Ministers, as well as everyone else, had measurable targets for reducing consenting times? Should your feet be held rather more firmly to the flames here?
Michael Shanks: I always welcome my feet being held more firmly to the flames by committees and others. I am always slightly cautious of saying yes to targets, because the approach we are trying to take is, “Yes, I understand the argument that some accountability measures might be useful”. We are just trying to change the way we drive this forward at our operational level. I would rather the focus was always on, “How can we increase efficiency?”, rather than, “How can we meet an arbitrary target at any period in time?” I am happy to reflect a bit more on that recommendation and write to the committee because I have not fully considered that.
Q109 Baroness Harding of Winscombe: Distribution networks have suggested to us that small projects to expand existing capacity on overhead lines or at substations can be held up by the need to secure planning permission, even when those projects have no additional visual impact at all. Will the Government ensure that any network upgrades of existing assets that do not have additional visual impact do not have to go through further rounds of planning consent? It could be conducted through permitted development rights, for example, or planning exemptions.
Michael Shanks: I might ask Emily to come in on the detail, but it is a really important point that we are certainly looking at. The challenge, from the conversation I have had so far, is around some of the detail of how you would make that work in practice—coming up with a framework that judges the visual impact in what is, to an extent, a subjective view. Certainly, we are really clear that there needs to be some improvement in how we look at upgrades particularly—where you are not fundamentally building new infrastructure, you are replacing like for like. Clearly, there is short-term disruption to communities and building some of that. At the end of it you end up with exactly the same thing you had at the beginning. We definitely are minded to look at that. I ask Emily to come in on some of the detail.
Emily Bourne: We have been looking at this for a while. We had a call for evidence, and we have a working group, which involves both developers and landowner groups, which has been looking at a whole raft of potential options to speed up land rights and consent processes for networks—both at transmission and distribution level, but a lot of the wins are, as you say, at distribution level. We are currently reviewing the very helpful report from the National Infrastructure Commission, which had some specific suggestions in this area.
Our plan is to produce a consultation which sets out proposed changes across the whole raft of land rights and consents for networks, and that will be soon—possibly this summer. There are a lot of suggestions that people have come forward with and they are very detailed. As the Minister said, we need to be careful that we are properly understanding the potential impacts of those different changes. Where a change has a relatively small impact or no impacts but is still having to go through the planning system, that is not just delaying that change, it is distracting from the ability to deal with more complex projects.
Baroness Harding of Winscombe: In that process, will you also be looking at strengthening statutory processes—such as compulsory purchase orders—by making them clearer, simpler and quicker? Will you also look at how you clarify the ability of electricity networks to access private land to maintain and upgrade assets? I appreciate that all of these are detailed, but, Minister, to your point, it is in these micro details that you will speed up processes. Are you looking at those specifics as well?
Emily Bourne: We are, yes.
Michael Shanks: Absolutely. There is certainly reform to compulsory purchase in the Planning and Infrastructure Bill. We are looking at the exact issues around access to land wayleaves and all these kind of things in specific detail. You are right.
To the point I was making earlier, it is not one key change that will speed up the planning system, it is hundreds of little changes along the way that make it more efficient. We are looking at that. There has been a range of options from the land access and consents working group—I think it is called—that we are prioritising. Some will be more deliverable than others and some we will not be able to proceed with at all. There are some really sensible suggestions in there that we are looking at just now.
Baroness Harding of Winscombe: How would you convince us—because this is not a new problem—that this time around, this Government is actually going to be able to not just look at these issues but get to resolution and speed the planning processes up?
Michael Shanks: It is a very fair challenge. There are two things that give me confidence in it. The first is that we have set ourselves these really ambitious missions in Government. The clean power mission by 2030 is hugely ambitious and we will be judged on whether we achieve that mission or not. We have articulated it very clearly, so there is no wiggle room on that. That is really important. That is driving the whole of Government forward.
To my point around connecting bits of Government, DESNZ is obviously leading on this through mission control. On the work that we have done with Ministry of Housing, Communities and Local Government on the Planning and Infrastructure Bill, I will be jointly supporting the Bill in Parliament, because it is so important to our mission as well.
The second thing that gives me confidence is that the Prime Minister has been very clear that we are going to build stuff in this country. Although there is always going to be opposition to any infrastructure that is built anywhere in the country—and we want to hear that opposition and communities should have a voice—we are determined to get on and build the critical infrastructure that we have put off for far too long. That gives me hope that the system will work for us to follow through on that commitment.
I pay tribute to my civil servants in the department, as the level of detail and knowledge that they are bringing to all these individual issues is remarkable. We have left no stone unturned in looking at individual policy areas that we can shift the dial on. Collectively, that gives me real confidence that this will be a different way that the planning system will operate.
The Chair: Just going back to what you were saying about deemed consent and those projects that have little or no impact—you said that there is going to be a consultation, but it sounded as if an awful lot of work, and indeed consultation, had gone on already. Given the need for speed on all these things, is that going to delay things?
Michael Shanks: We are pulling together a series of proposals from all the various ideas that have been fed through that group. We will then have to consult in terms of policy development processes. Some we may not have to consult on and could be implemented. Some, I imagine, particularly if there are any that require any primary or secondary legislative change, we will have to consult on. Since we have come into Government, we have been trying to make all the consultations as quick and efficient as possible—while still giving everyone the opportunity to contribute but compressing the timescales and the analysis of the responses, crucially, to the shortest timescales possible.
Q110 Viscount Thurso: Some of the businesses that have been giving us evidence have complained about the delays in being connected to the grid, and that that has led to the UK losing out on investment to other countries. In the past the Government suggested that they would prioritise connections for strategically important projects—through a triage service, for example—although industry witnesses have said to us that they do not see a lot of evidence of that happening. Does the Government plan to prioritise grid connections for strategic industries and, if so, how?
Michael Shanks: This is the second part of the connections reform work that we have been wrestling with. The generation side of it was critical for us to deal with, just because of the sheer number of projects in the queue, and it was holding back demand projects in some cases. We have wrestled with that first, but also because, to a certain extent, it is easier to define what our strategic aims are in that, because we set what our capacities are for different technologies based on deliverability and system coherence. You then look at the individual projects and you manage the queue.
The demand side is obviously slightly more difficult because you do not have an objective analysis of which demand projects are more valuable than others. That is the next phase of work we will be looking at. Within that, there is work that is going on—and has been going on for some time—on individual projects that are strategically important to connect, where it is not necessarily about having a different sort of prioritisation, but we work with the individual project across Government and with relevant agencies and network companies to try to push through the process as quickly as possible. That work is ongoing, and it is a process that DESNZ and the Office for Investment take forward on particular strategic projects.
You touched on the really important part now—“How do we look at designing a system that prioritises certain projects that help us deliver economic growth?”—while making sure and being mindful that if you have a project that does not get prioritised in that queue, you quite rightly would want to know that that process was as transparent as possible. It is a slightly more complicated process that we are working through at the moment.
Viscount Thurso: One of the things within that, which goes back to an earlier question, is that there are certain industries you are never going to move. Therefore, you have to get the energy to them, and that is very straightforward. There are other modern industries that we could be siting where the energy is.
Living in Caithness, as I do—which I am sure you know is in the far north—we will have 3 gigawatts coming from west of Orkney and the new airfield. We have already got close to a gigawatt on land as well. So Caithness will have 4 gigawatts of energy and it seems an awful waste to be shipping that all away. If we could connect people who need energy, like data centres up there, it would seem to be a huge success. Therefore, in the queuing, are you able in your role to help promote that kind of agenda of logically placing energy where it is needed as much as is possible? It is a slight repetition of a previous question.
Michael Shanks: It is an incredibly important question that gets to the heart of the matter. If we design the system properly, that is exactly the aim we should have. Partly on the question of industries that can move, until I sort of started in this job, I probably would have taken exactly the same view that data centres are a good example of where you do not have customers coming in and out of them, and therefore they should be sited next to generation. I then had a series of round tables with tech companies on this question, and there is a mixed view about that—it is not universal. Latency and the internet, for example, are critical to data centres, and many of them want to be based in the south-east, where a lot of their customers are. There is a mixed view in the tech sector on some of these questions.
Undoubtedly, even if we build the network infrastructure that we need, we have a wider challenge around how we reduce curtailment on wind, for example, so that we are utilising it in industry. I cannot be more specific on whether the process will allow us to make some of those decisions but the strategic planning of the network will assist in that. Planning is not just about where generation should be but where we think the key demand possibilities are. To Lord Gilbert’s point from earlier, REMA is critical in how we give an operational signal and a locational signal around some of this. Obviously, that is particularly acute if we were to go for a zonal system, whereby Scotland in particular would have a reduction in electricity prices. But even under the reform to national pricing, a key driver is: how do we give a clearer signal so that we build a more coherent electricity system across the country?
Viscount Thurso: It always seemed to me, when I used to represent that constituency all those years ago, that we paid more to get our electricity. That was in the days of the old hydro board. We were net zero since the 1950s or whatever but we paid more in transmission charges to get our electricity because the whole thing was skewed to the south. So a good strategic look could be had on that. Can I ask the last question on whether the Government will, when they announce their strategy on this, set out all the strategic points about that? When will businesses know the decisions about how they can connect to the grid?
Michael Shanks: It is an important question that I cannot give a clear answer to at the moment because it is such a complex piece of work. We are still dealing with the legislation on reforming the connections queue for the generation side. The demand side is a piece of work that we are looking at currently. Have we got specifics?
Emily Bourne: We are hoping to be able to say a bit more as part of the Industrial Strategy in the summer and, as the Minister said, this is the next phase of work on connections. Obviously, the work on generation connections is very much ongoing.
The Chair: You have reinforced our view that there are many moving parts in this, which is extremely challenging. We thank you for your evidence and wish you good luck in terms of keeping everything moving in the right direction with a challenging timetable. Thank you both very much indeed, and I will close this part of our meeting.
