Contribution
My Lords, I must begin by declaring that I do not have any relevant interests to declare. Noble Lords might think this is somewhat superfluous, but I do so because the BBC’s “Today” programme, on the rare occasions it reports my remarks on climate policy, prefaces them with a health warning that “Lord Lilley has interests in the oil and gas industry”—as it did after my recent debate on the costs of climate policy. I presume it does so to discredit my views. There is one small problem. Sadly, I have no interests in any energy company. I have had no financial interest in any energy company for over a decade. I have never had any interests in any energy company which would benefit from the policies I advocate in your Lordships’ House.
In the light of my experience, I was concerned that the noble Baroness, Lady Brown, who opened this debate, was asking for trouble in not recusing herself from chairing the committee during this report. I make it absolutely clear that I am not impugning the integrity of the noble Baroness. Her views on net zero are well known. I am certain she does not hold those views because of her financial interests. On the contrary, she holds those interests because they align with and inform her beliefs.
In my case, the BBC had to invent interests that I do not have. In the noble Baroness’s case, the newspapers have already pointed out the interests she properly declared. Ceres Power Holdings, which aims to become the world’s biggest source of green hydrogen, pays her £74,000 per year. Ørsted, which stands to benefit if its surplus wind is used to generate hydrogen, pays her £40,000 per year. I have no problem with that. The House benefits from noble Lords who have active interests in business and industry—not least the very distinguished record of the noble Baroness, Lady Brown of Cambridge.
However, I wonder how the House would treat a critic of climate policy who declared that they received over £100,000 from fossil fuel companies when they chaired a report advocating policies which would benefit fossil fuel companies. All I ask is that those on both sides of the debate accept the good faith of their critics and, in particular, do not traduce the motives of those such as me who want to apply a cost-benefit analysis to these issues as being paid shills or climate deniers.
Let us get on to the report itself. It can be described as an almost priceless report in the sense that there are almost no prices attached to any of its recommendations. My only objective in this and the other debates on net-zero policy is to establish the costs and benefits of the options being presented to us. If the option proposed is cheaper than relying on fossil fuels, that is great; the sooner the better. If it is more expensive, let us compare that extra cost with the social cost of the carbon emitted before we decide to go ahead. I get very suspicious when we are told that we must, as the title of the report puts it, “get on with it”, when we do not know what “it” will cost. Dieter Helm, in his report for the previous Government on their climate policy, said that premature investment in immature technologies has wasted up to £100 billion of British taxpayers’ money. Let us not repeat that folly.
I said that the report was almost priceless. But hidden in box 3 on page 17, it quotes the Royal Society report, which claims that, if we rely on renewables and hydrogen storage, the price of electricity in 2050 will be £60 per megawatt hour, which it says is “comparable to the average” price over the decade from 2010 to 2019. Normally we are told that it is going to be cheaper, but this time it is only comparable—so presumably it will be a bit more expensive. That is rather hard to explain because the most recent auction price for offshore wind was £82 per megawatt hour, indexed against future inflation. That does not include the cost of tackling intermittency and, for example, the cost of hydrogen storage.
The same box says that hydrogen storage will add an extra cost of £100 billion. Strengthening and enlarging the grid will cost another £100 billion. This almost equals the £210 billion the Royal Society says will be required to invest directly in wind and solar generation. Given that the main cost of wind is capital investment, how can almost doubling the capital costs required for a system that is driven purely by intermittent energy and therefore has to have so much expensive back-up result in a fall in the price?
I understand that the Royal Society and the committee are relying on barely credible reductions in costs in all aspects of the process. Sadly, the committee did not consider the benefit of relying for a bit longer on natural gas as a back-up while these cost reductions materialise. The cost of energy is crucial. We cannot overstate the impact high costs have on economic performance. We should not rush ahead and get on with something—the cost of which we do not know—when for a bit longer, and with comparatively minor extra emissions of natural gas, we can avoid those problems.