Debates — Energy Act 2008

Committee stage in the Lords

25 Jun 2008110 speechesView in Hansard ↗

The Deputy Chairman of Committees (Lord Colwyn)I start with the usual announcement that if there is a Division in the Chamber while we are sitting, the Committee will…
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The Deputy Chairman of Committees (Lord Colwyn)Conservative
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I start with the usual announcement that if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
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Lord Redesdalemoved Amendment No. 55:
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Lord RedesdaleNon-affiliated
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moved Amendment No. 55:
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Lord Jenkin of RodingI have always had some doubt about trying to enforce this kind of minimum requirement in the use of biomass. One’s mind…
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Lord Jenkin of RodingConservative
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I have always had some doubt about trying to enforce this kind of minimum requirement in the use of biomass. One’s mind goes back to the most significant biomass demonstration plant in this country—the so-called ARBRE project—which failed, largely because the distance that one has to carry the biomass source in order to reach the place where it is to be burnt outweighs any possible advantage, certainly of cost, of having a biomass plant. That is often neglected in this argument. We have had a lot of argument about whether it competes with food products and so on. That argument has reached the point where there is good biomass and bad biomass, and anything that competes with food in the present world is properly regarded as bad biomass. If you take the other costs into account, one must realise what the results can be. I saw a figure a few years ago, which I do not think has ever been doubted. I quoted it in public. It was suggested that instead of having nuclear power stations we should have far more biomass sources, but I was told that if you were going to replace just one nuclear power station—the example was Dungeness B in Kent—you would have to plant with willow coppicing, or whatever you were going to use, the entire undeveloped area of Kent that was not already towns and cities. That is wholly ludicrous. One would never dream of doing anything like that. It would be absolutely nonsensical. I therefore have doubts about the practicality of the noble Lord’s amendment, although I understand his objective. Clearly biomass should be used where it can be used economically and properly, because it is a rotating source; as you burn and emit carbon, the carbon can be soaked up again through the successive planting of the biomass. I understand that, and I think it has a part to play, but I would be very cautious about trying to impose the sort of obligation suggested in the proposed new clause.
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The Lord Bishop of ChesterWhen Drax made its announcement—
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The Lord Bishop of ChesterBishops
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When Drax made its announcement—
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The Deputy Chairman of CommitteesWould the right reverend Prelate care to stand to speak?
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The Deputy Chairman of CommitteesConservative
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Would the right reverend Prelate care to stand to speak?
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The Lord Bishop of ChesterWhen Drax said that it was intending to use 10 per cent of biomass, it accompanied that with an announcement that most…
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The Lord Bishop of ChesterBishops
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When Drax said that it was intending to use 10 per cent of biomass, it accompanied that with an announcement that most of it would have to come from Scandinavia or somewhere like that. That raises severe practical questions, of not only the economic cost but the CO2 cost of transporting biomass over a large area. My question about the amendment is not with the spirit in which it was moved—I am all in favour of biomass, and my house in Scotland has been heated by a wood-burning stove cheaply, effectively and successfully for many years—but there are practicalities which putting a precise figure on does not take account of.
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Lord Davies of OldhamI am grateful to the Members of the Committee who have contributed to this short debate. As has been indicated, we are…
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Lord Davies of OldhamLabour
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I am grateful to the Members of the Committee who have contributed to this short debate. As has been indicated, we are all in agreement with the amendment’s broad objective of seeking to increase the use of biomass. However, the amendment is not necessary, and it may even be detrimental to our objective of increasing the amount of biomass burned by coal-fired power stations. The amendment proposes that any new-build, coal-fired power-generation plant should have the capability for a minimum of 10 per cent of its output to come from the co-firing of biomass. The use of biomass as a renewable energy source can be beneficial to the environment, of course, and can make a real contribution to the UK Government’s renewable energy and carbon emission targets and obligations. Therefore, we share the noble Lord’s ambitions to see a greater use of biomass, which is why we already have a number of support mechanisms in place to incentivise its use, including the support offered by the renewables obligation, which we discussed on earlier amendments to the Bill. The amendment would not enhance the existing incentivisation framework, partially for the reasons identified by the noble Lord, Lord Jenkin. Let me make the obvious point. All existing coal-fired plants in the UK are already capable of carrying out co-firing, and most are in fact doing so on either a trial or a commercial basis. There is no technical barrier to generating 10 per cent of power from co-firing of biomass in existing or any conceivable future coal plants, so the amendment is not necessary. The capability to carry out co-firing does not necessarily mean that it will be undertaken. If we put a target in legislation, albeit a minimum one, it could send a signal to the marketplace that the Government’s preferred level of co-firing is 10 per cent. However, higher levels of co-firing may be achieved both economically and sustainably. Having what looked like a target in the legislation could hinder higher levels of co-firing that could be achieved by the economic incentives already available. The renewables obligation, the climate change levy exemption certificates and the EU ETS already provide, and will continue to provide, an effective incentivisation regime for co-firing with biomass. Those incentives are already having effect. Therefore, I hope that the Committee will appreciate that there are no technical obstacles to the co-firing of biomass in existing or any future coal-fired plants, that the economic incentives are already available to promote the use of this technology, that the Government are four-square with the noble Lord in wishing to see the use of biomass and that the amendment would not add anything to what we already have. It might be mistaken by its 10 per cent figure for some kind of limiting target, when that is not the long-term view that the Government are taking about developing the use of biomass. I hope that he will take delight in the assurance that I seek to give from this Dispatch Box about our commitment to his objectives. This is a disagreement about means.
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Lord RedesdaleI am not sure about delight. It is certainly not euphoria. I am slightly disappointed with the Minister’s reply because…
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Lord RedesdaleNon-affiliated
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I am not sure about delight. It is certainly not euphoria. I am slightly disappointed with the Minister’s reply because we are talking about only a capability. I take on board the point that the market might see it as a 10 per cent target. However, we are missing an opportunity if we do not discuss this with the planners to ensure that the capability is in place for a small target of biomass, considering a number of options that would have to be considered if biomass were introduced at a later date. If the ability for dealing with biomass was included in the planning process and thought out beforehand, stations would not have to be redesigned. That would be more acceptable than if the Government—as they probably will—introduce biomass targets in the future. I take on board the Minister’s point that all coal-fired power stations have the ability to fire biomass. The issue that I have is that, as with carbon storage and capture, we have to have the ability and the space to handle this type of fuel source. I am slightly disappointed, but, on that basis, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
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Baroness Wilcoxmoved Amendment No. 56:
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Baroness WilcoxConservative
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moved Amendment No. 56:
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Lord RedesdaleI commend the efforts of the noble Baroness to bring in energy efficiency. It was one of the issues discussed at Second…
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Lord RedesdaleNon-affiliated
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I commend the efforts of the noble Baroness to bring in energy efficiency. It was one of the issues discussed at Second Reading, and it is one of the great disappointments of the Bill that there is not a great deal more about it. This is perhaps an opportunity lost. The Bill is extremely technical and hardly controversial. It seems that all the elements that have excited the Opposition and those outside are those being introduced in amendments at this stage. Therefore, I very much doubt that the Minister will accept this amendment, but it is worth raising the issue.
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Lord PalmerI, too, support this amendment. Part of this is a matter of education. This morning, all the blinds in your Lordships’…
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Lord PalmerCrossbench
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I, too, support this amendment. Part of this is a matter of education. This morning, all the blinds in your Lordships’ Library were drawn down and every light was burning brightly. If we learn from our own doorstep, we could do an enormous amount to educate other people.
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Baroness Carnegy of LourI support this amendment. It is the other side of what we have been discussing. We have got to change our habits. I am…
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Baroness Carnegy of LourConservative
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I support this amendment. It is the other side of what we have been discussing. We have got to change our habits. I am not sure that I mind too much that there is not legislation about what we do about switching off the lights, but we have to change habits and fashion. The high cost of fuel will change our habits a bit. People are beginning to think about it. The noble Lord, Lord Palmer, spoke about the Library, which reminded me of a point I want to make. In advocating fuel efficiency, I hope the Government will not go too far on the type of electric light bulbs we use. Those of us who are a bit older, whose sight is suffering from years of use, need a bright light to read. Our Library now has low-efficiency light bulbs. I cannot read in the evening. I have nothing wrong with my sight, except Anno Domini, but I cannot read in the Library unless I am near the window and, of course, as the evening goes on, it gets dark. As we have a great many older people in our population, it is important not to force them to read with too low a level of light. I hope the Government are not going to go in that direction. One European country has made it compulsory—I think it is Germany—and I was sorry to see that. It is a mistake. However, we must alter our habits. We must improve on only 40 per cent of houses being insulated. The further north in the country, the more important that is. There is no question that if one lives further north, or over the border, as I do, there is a difference in temperature and the amount of fuel one uses throughout the winter compared with down here. Insulation in northern parts is even more crucial, and people should be made aware of it.
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Lord O'Neill of ClackmannanIt is important that any legislation on energy should be tested for energy efficiency, but the Long Title does not sugg…
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Lord O'Neill of ClackmannanLabour
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It is important that any legislation on energy should be tested for energy efficiency, but the Long Title does not suggest that there is much scope for that. The amendments tabled by my noble friend Lord Whitty require some explanation in so far as Clause 80 makes a number of references to reports, and it would be useful if we could get a lay person’s guide to that clause in the Minister’s response. I think it is fair to say that pretty well from the word go in this Committee noble Lords have been asking for reports and have been redirected to other reports. If they had done a wee bit of work they would probably have found that out, or the Library would have guided them. Without wishing to be unduly if not characteristically churlish, I shall move on from that point. The purpose of the legislation is clear: to pave the way for nuclear, provide better facilities in relation to gas storage, and tie up one or two loose ends. We will be experiencing for months and probably years ever increasing energy bills, so it is incumbent on the Government that greater attention is paid to energy efficiency. The cuts in Defra’s budget, which I know are not the responsibility of my noble friend, mean that the finance for other shortcomings—the warm zones budget, for example—will be cut in real terms next year. That is one of the most effective ways of securing energy efficiency in poorer areas where houses are not so well insulated and people are less able to pay or take better care of their electricity consumption. It is important to touch on this issue. I know that it is not wholly relevant. My experience in the other place was that the Clerks and Chairs used to be rather more savage in their reluctance to accept such amendments, or to allow debate. I do not want to stray too far from what I consider to be in order as the purpose of the Bill is not to deal with energy efficiency in the way in which the amendments suggest, but I would like to think that the message could go to those who make these decisions in government. With all due respect to my noble friend, I realise that it is not always within his say-so, but it would be useful to have comprehensive legislation to deal with energy efficiency and fuel-poverty matters before too long. Technical, structural amendments to existing legislation would facilitate better consideration of these matters than they are currently receiving in the legislative programme of this Government.
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Lord Jenkin of RodingI take up the point of the noble Lord, Lord O’Neill. It is all very well for the Government to say, as they did frequen…
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Lord Jenkin of RodingConservative
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I take up the point of the noble Lord, Lord O’Neill. It is all very well for the Government to say, as they did frequently in the other place when amendments were tabled, “This is not in the Bill”. If we look at the list of new clauses that appear either after Clause 79 or before Clause 80, we can see that there is a whole range of issues that Parliament would like to be dealt with in an energy Bill. I agree with the noble Lord, Lord O’Neill, that the Bill has important points. It is about facilitating nuclear energy, dealing with gas and CO2 storage, and all the other measures that we have been debating, but it is naive of the Government to imagine that they can introduce a Bill and not recognise that the concerns of Parliament and increasing numbers of the public go rather wider. This Energy Bill is before us and we should be entitled to debate such things. I hope that if one makes a sufficient case, eventually the House may be persuaded, as it has been on previous energy Bills, to insert amendments dealing with matters that were not originally in the Bill. All those who have spoken have referred to the extraordinary difficulty of persuading millions of ordinary citizens to change how they do things; we are creatures of habit. It is difficult when one is faced with a new overriding need—fighting climate change, a new development in this context—to recognise that people must change their way of living to contribute to dealing with these threats. By far the single most important stimulus to change in this area is price. Some people have argued, for instance, that transport prices are almost inelastic. Well, one only has to study the recent figures in this country, Europe and the United States to see the swift response to the soaring price of petrol at the pumps. People are driving less and more slowly. They are buying more energy-efficient cars and trucks. That is happening much more quickly than one might anticipate if one merely looks at the economists’ arguments. The same is true of household expenditure. People now feel that they have a duty to switch off lights. I wholly agree with those who say that the public sector is not very good at that. One drives around Whitehall, and the lights seem to be on all night. Why? The public notice these things. I have heard, as have others, the argument, “Why should we take this seriously if the authorities obviously don’t?”. It is a question of setting an example, which is a perfectly good way of bringing this before the public. However, trying to get ordinary members of the public, who do not read lengthy reports on company websites, to recognise that there must be a change is important. I do not want to anticipate my later arguments on the new clause on targeting groups, which I indicated that I would raise on the Bill; we will deal with that when we come to it. However, there must be increasing awareness of what households and businesses can and should do to curb their energy consumption and contribute to reducing carbon emissions, and that should be a continuing programme. It is as much for the energy industries themselves to do this; they send their bills with leaflets and everything into everybody’s houses. These must be carefully pitched so that ordinary citizens who do not normally read the guff that comes with their bill can be persuaded to do so, and see what they can do. It must now become much easier to get a wide variety of efficient, energy-saving light bulbs. The supermarket that my wife and I shop at has a selection, but it does not cover everything we need. I entirely sympathise with my noble friend Lady Carnegy that many of these lights are rather dim. My mind goes back to the wise words of the German Chancellor Angela Merkel when this was all introduced at the Copenhagen conference. She said that it was all very well, but if you dropped something on a patterned carpet you could not see it. We have all had experience of that, and it becomes more difficult as one gets older. One must have more readily available and efficient low-energy light bulbs. Some of them that I have been able to buy were very expensive. The noble Lord, Lord Rooker, has constantly assured the House of Lords that prices are coming down as this becomes increasingly apparent. However, anything that contributes to availability would have my support, and the amendment could be a useful contribution.
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Lord Campbell-SavoursDuring recent months, while recognising that we operate within a free market, I have been trying to devise a tariff sys…
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Lord Campbell-SavoursLabour
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During recent months, while recognising that we operate within a free market, I have been trying to devise a tariff system to incentivise conservation in the price structures of the utilities. It is obvious that there is not a lot of information available to help one fully understand the profile of consumption in individual households in the United Kingdom. This morning, as a part of that work and not particularly on this amendment, I talked to British Gas, which has had a dual supply system, to work out what information it held on the profile when it does the annual consumption calculator assessment of the number of units of gas or electricity each household might need. I tried to find out what estimates it makes, but its information is very general. We discussed one, two, three and four-bedroomed houses, because, ultimately, this discussion is about house sizes and footages, and the amount of energy calculated to be required in each household. I support this amendment because it might give the Government the opportunity to acquire from the utilities information to help those involved in energy conservation to draw up new rules and new measures which would help in that general programme.
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Lord BachI thank Members of the Committee who have taken part in this debate. The noble Baroness, not for the first time, raises…
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Lord BachLabour
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I thank Members of the Committee who have taken part in this debate. The noble Baroness, not for the first time, raises an important issue; namely, energy consumption. A similar amendment was tabled in the other place. Let me reiterate some of the points that were made. Saving energy, or energy efficiency, is a key part of our strategy to tackle climate change and to help ensure secure supplies of energy. Reducing energy consumption can help towards our goal of reducing carbon emissions as well as helping with security of energy supply by reducing the need for energy imports and reducing the new investment needed in large-scale electricity generation. Fully implemented, the measures set out in the 2007 White Paper are projected to deliver an additional 7 million to 12 million tonnes of carbon savings. As the Committee will know, our policies include helping consumers make more informed decisions about the energy they use through improved awareness, information and services, raising standards for the products we buy, and increasing the energy performance of new homes and buildings. We have also increased the obligation on energy suppliers to deliver carbon savings and energy-efficiency measures in existing domestic homes, including through loft and cavity wall insulation. For the largest industrial users of energy, the EU Emissions Trading Scheme, which we talked about yesterday, together with the climate change levy and climate change agreements, incentivise companies to improve their energy efficiency and to save energy. We have also recently announced the carbon reduction commitment, which I believe Members of the Committee have already considered. That commitment will drive energy and carbon savings in the large non-energy intensive sector which includes companies such as banks and supermarkets. Obviously, communicating information and advice on energy-efficiency measures and benefits to householders is a key plank of our strategy for reducing energy efficiency. We have provided £100 million funding for the Green Homes service with the Energy Saving Trust to provide a single point of contact for advice. In addition, as part of the wider Act on CO2 campaign, we have launched the carbon calculator, which allows householders to calculate their carbon emissions and provides suggestions on how to reduce them through improved energy efficiency. In other words, I want to stress that this is an issue the Government take very seriously. The point has been made that it does not play a part in this legislation, but we do not believe that new primary legislation is necessary to help us drive our energy-efficiency strategy. However, I listened with care, as I always do, to what my noble friend Lord O’Neill said on that and would be grateful if later, outside the Committee, he would give some examples of where he thinks that it will be useful for future legislation to deal with energy efficiency. We should beware Bills that put in everything covered by a topic. We have all seen Bills that are top-heavy and have too much about too much in them. This Bill has a specific purpose and primary legislation on the subject is not necessary. I hope that I have an ally in the noble Baroness, Lady Carnegy, on this at least. Of course, the issue is a crucial part of our strategy for tackling climate change and will remain so. The question therefore is about whether we should produce the type of document or information that the noble Baroness, Lady Wilcox, asked for in the amendment. We already produce reports which compile such information and as a result I hope to persuade the Committee, particularly the noble Baroness, that the amendment is unnecessary. Information on energy consumption in the UK is contained in the department’s Digest of UK Energy Statistics, updated and published annually. That includes, among other things, information on total energy consumption in the domestic sector and by business. Noble Lords who took part in debates on the Climate Change Bill will not need me to remind them that—if it becomes an Act; I am fairly confident that it will—the Secretary of State will have a duty to prepare and lay before Parliament an annual statement of emissions, which will set out qualitative information on net UK emissions, including energy consumption. There is information, so the question is about whether it is necessary to have more than at present and, if so, whether the amendment is the right way to go about it. We do not think it is necessary, so we cannot accept it. I want to make a point about the light bulbs that the noble Baroness, Lady Carnegy, spoke about. She raises an important issue of just the kind that we try to consider when working with industry in our efforts to increase standards of major energy-using products, such as motors, electronics and air conditioning, as well as lighting. We welcome the European Commission’s intention, at least, which is to work towards regulating against inefficient bulbs. We will ensure that, in the consideration of proposals, such issues are given due consideration before any final decisions are made. Nothing could be more absurd than to have energy-conscious light bulbs, if I can call them that, which people cannot read by. I take her point. I have been asked by my noble friend Lord O’Neill to say something about my noble friend Lord Whitty’s amendments. Let me do my best to do that as briefly as I can. There is what is described as a Keeling schedule on Clause 80, which we are more than happy to share with Members of the Committee and my noble friend in particular; what the amendments would do to Clause 80 is slightly confusing. The amendments relate to our proposals to rationalise reporting requirements in Clause 80. Clause 80 is in the Bill for a number of reasons. First, it was to introduce flexibility around the timing of our annual energy report, and secondly, it was to remove statutory requirements that were either replicated elsewhere or overly prescriptive. We believe it right that we streamline our reporting requirements to ensure that our report is both topical and meaningful. As part of that, we need reporting to be sufficiently flexible to allow us to exclude less relevant technologies and include more relevant ones as developments dictate. Our proposed changes to Clause 80 facilitate that and, as such, we should retain the proposals as part of the Bill. In view of the current range of statutory and non-statutory reports and national statistics that are already published, if my noble friend noble Lord Whitty had been here to move his amendments, I would have asked him to withdraw them. That does not apply to Amendment No. 64. There was considerable debate on this issue in the other place. A number of concerns were raised that our proposal to introduce flexibility around the reporting and publication periods could raise the spectre of the Government being tempted to use that flexibility to somehow delay the publication of our report to obscure bad news. I am sure that the Committee does not need persuading that that was never our intention. The Government take the issue of reporting progress very seriously. We agreed on Report in the other place to reflect on these concerns, and we have been considering whether there is a way to allow the Government to produce a more relevant and up-to-date report, while meeting the concerns about flexibility. As such, officials have been working on a proposal that allows the Government to establish a reporting period that aligns with the calendar year, 1 January to 31 December. That would not only ensure that we are reporting over a continuous period but would avoid a situation whereby one report could cover an excessively long period and the next an excessively short one. Our intention is for each reporting period to cover a full year cycle. Rather than the current 12-month reporting period ending with 23 February, which was arbitrarily based on the publication date of the White Paper in 2003, we want to replace this—perhaps using common sense—with a reporting period of January to December. We are persuaded that it would be helpful to retain a specific period during which the report would need to be published. The current publication period runs from 24 February to 31 December. However, there are real benefits in establishing a new requirement for the report for a particular calendar year to be published no later than October the following year. There are two reasons. First, it would commit the Government to report by a certain time in the year but would still allow the appropriate analysis to be completed shortly after all the latest data become available, which is usually between April and July. Secondly, it would align our reporting with the carbon budget reporting cycle that will be established through the Climate Change Bill. We recognise that this may appear to provide the department with the scope to choose a publication date that suits its own objectives. However, I remind the Committee that such scope already exists under Section 1 of the Sustainable Energy Act 2003. I am sorry to have gone on at some length about that, but we want to consider that amendment and perhaps come back with something akin to it on Report.
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Lord O'Neill of ClackmannanI thank my noble friend for his reasoned response. I have two points. First, when we talk about reports, we are still l…
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Lord O'Neill of ClackmannanLabour
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I thank my noble friend for his reasoned response. I have two points. First, when we talk about reports, we are still living in the pre-computer age. While it is not in the amendment, given the plethora of information available it would be helpful if the website of the department, where it related to energy matters, was a proper one with links, so that things could be added at an appropriate time. For example, I will take one small case. I am not making a debating point; I am trying to be helpful. It is now abundantly clear that instead of just having in September and October the auction for gas, which determines in large measure the next quarter’s electricity and gas prices to the consumer—industrial or domestic—we now know that those auctions often take place in April and May as well, so a number of the statistics on their own seem largely meaningless if they are not linked with other sets. Our preoccupation with paper sometimes requires us to think in terms of publication dates and reports, whereas the updating of a website and appropriate links would provide a running commentary, not to trip the Government up but to make the debate better informed. At the moment, we are often dependent on highly coloured and often misleading press reporting of some of these transactions and market situations. Therefore, I would like to think that when we get to Report and Third Reading, we could think more flexibly. I happen to be almost computer illiterate so I am not in any position to lecture, but I know the fundamentals of how to get round Google-world. A lot of other people also do and would benefit if the Government were prepared to release information rather more regularly than the requirements of a 12-month calendar cycle.
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Lord BachI am grateful to my noble friend. He says that he is not computer literate, but I would be grateful if he would give me…
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Lord BachLabour
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I am grateful to my noble friend. He says that he is not computer literate, but I would be grateful if he would give me some lessons about how to get round Google-world. I will reply to him seriously in a moment, but he should not assume that departments in Whitehall have not heard of computers or websites because they have. BERR has a specific area on its website focused on energy statistics. Whether that could be improved is the issue that he is raising. I will take that point away—without any promises of course—for further consideration. I have gone on a long time in answering this amendment and even the amendments that have not been moved and I will not make a habit of doing that, I assure the Committee. However, I am grateful to the noble Baroness.
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Baroness Carnegy of LourMy noble friend will reply to her amendment in a moment, but she is trying to find a way to help the public to change t…
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Baroness Carnegy of LourConservative
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My noble friend will reply to her amendment in a moment, but she is trying to find a way to help the public to change their habits. People would see these two figures annually—the total amount of energy used in domestic housing and the total amount used by businesses. That is a very good way of assisting people in what will be a growing interest—seeing the amount of energy that they use. This is a simple point. Sometimes when we are talking about the big things in this area we forget the simple rather important points. My noble friend Lord Jenkin made an important point when he noted how quickly people are picking up the need to save money on motoring. It is quite extraordinary what has happened. It has happened to me and I think it has happened to most people where I live; I notice it very much. This would help people to see how we are getting on in this area and I am sorry that the Minister thinks it is unnecessary. I actually think that it is a jolly good idea, but my noble friend will doubtless say everything that has to be said about that.
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Lord BachI say again that the proposal is unnecessary because the Digest of UK Energy Statistics is updated and published annual…
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Lord BachLabour
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I say again that the proposal is unnecessary because the Digest of UK Energy Statistics is updated and published annually. Among other things, it includes information on total energy consumption in exactly the fashion that the noble Baroness has just asked for—in the domestic sector and consumption by business. Those facts are already there. I have just been advised that those facts are also on the website. That information is in the public arena. Frankly, there is a danger that overduplication and confusion can arise from too much publication in this field. Let us get the publication right and let us get it through. I that hope the noble Lord, Lord Jenkin, will be with me on this. We think that publishing figures is not enough to change people's attitudes and minds. I fear that that is slightly too optimistic.
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Lord Campbell-SavoursI wonder if I might—
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Lord Campbell-SavoursLabour
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I wonder if I might—
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Lord BachI will just finish this point. The noble Lord, Lord Jenkin, made it quite clear that he thought price was the most effe…
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Lord BachLabour
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I will just finish this point. The noble Lord, Lord Jenkin, made it quite clear that he thought price was the most effective way of changing people's minds and cited the example that no one would disagree with concerning recent price increases in fuel. This is one very important way—do not misunderstand me—but it is important to get it right and we should think of other ways to influence people. I was going to reply to my noble friend, so perhaps he will let me do that, and then I shall give way. He and the noble Lord, Lord Jenkin, were concerned about help for householders, and wanted to know what help and information was available. The Energy Saving Trust remains the cornerstone of how we communicate the benefits of energy efficiency and provide information and advice to householders. I repeat that the provision of the Green Homes service with £100 million funding will provide a single point of contact for a home energy audit, plus advice on how to save water, reduce waste, make travelling more green, and how to connect to grants and offers from energy companies. As part of the Green Homes service, from 1 April Energy Saving Trust advice centres in England, Wales and Northern Ireland not only advise on energy but provide tips to householders on waste and water efficiency in the home, and can signpost individuals to specialist organisations to ensure that they receive the highest standard of advice on household waste and water efficiency. It is important for the Committee to realise what that money will be spent on.
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Lord TeversonPerhaps I could make one final comment. As my noble friend Lord Redesdale said, energy efficiency and saving and energy…
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Lord TeversonLiberal Democrat
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Perhaps I could make one final comment. As my noble friend Lord Redesdale said, energy efficiency and saving and energy poverty are not areas mentioned in the Bill, and this is the first time that we have started to talk about them. I remember praising the speech on Second Reading by the noble Lord, Lord O’Neill. That speech followed a stinging attack on the Front Benches of the Conservatives and Liberal Democrats for not coming up with ideas. I note that our Benches have managed to slip in amendments around energy efficiency and fuel poverty, but I do not notice any from the noble Lord.
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Lord O'Neill of ClackmannanI shall reply to that, if I may, and say simply that there are still many opportunities for appropriate amendments to b…
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Lord O'Neill of ClackmannanLabour
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I shall reply to that, if I may, and say simply that there are still many opportunities for appropriate amendments to be dealt with in a rather less self-indulgent way than they are being addressed today.
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Baroness WilcoxI thank everyone who has taken part in this exchange. I do not think that I have been selfish in holding it to myself;…
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Baroness WilcoxConservative
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I thank everyone who has taken part in this exchange. I do not think that I have been selfish in holding it to myself; there is a list a mile long from all sides. The noble Lord, Lord Bach, makes a good case for what the Government have done so far; nobody is criticising that. The whole idea of having a Bill is to try to change our habits, improve life and make cause for the common good. The noble Lord, Lord O’Neill, rapped my knuckles by saying that the Bill with its Long Title means that we are paving the way and tying up loose ends. I have two points to make about that. First, the amendments were laid before the Clerks of the House and were passed by them, so there is no reason why I should not talk to them. Secondly, the noble Lord, Lord O’Neill, then went on to make a better case for all of this than I did. He spoke extremely well, and I like the idea of updating reports rather than just bringing out yet another one. The Minister went on to reply to amendments tabled by the noble Lord, Lord Whitty, who is not here. I have checked with the Clerk, who says that it was okay for the Minister to respond to them.
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Lord BachI—
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Lord BachLabour
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I—
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Baroness WilcoxPlease let me finish. That is fine; the Minister did respond to them. But if the noble Lord, Lord Whitty, had been here…
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Baroness WilcoxConservative
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Please let me finish. That is fine; the Minister did respond to them. But if the noble Lord, Lord Whitty, had been here speaking on behalf of the National Consumer Council he would have been able to repeat its mantra—I know because I chaired it before him—that there may be many, many reports and many, many things written, but so often for consumers they are process-driven rather than product-led. It is not the information that people want or can use; it is not given to them in a way in which they can use it. That is why the suggestion of the noble Lord, Lord O’Neill, was certainly new. I am grateful to all Members of the Committee who spoke; the debate has widened considerably. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
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Baroness Wilcoxmoved Amendment No. 57:
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Baroness WilcoxConservative
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moved Amendment No. 57:
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Lord TeversonI welcome the amendment, partly because of some of the other aspects that it could represent. From these Benches, we en…
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Lord TeversonLiberal Democrat
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I welcome the amendment, partly because of some of the other aspects that it could represent. From these Benches, we entirely agree with transparency and with taxpayers paying their taxes indirectly, for whatever reason, being a good principle. Almost going back to an amendment tabled previously by the noble Baroness, I say that, if this amendment is accepted, we should clearly have until at least 2012 a declaration on the bill of how much consumers are charged extra for the windfall profits made from the free allocation of their EU ETS carbon units. I would be interested to hear the Minister’s present estimate of the windfall profit rate for energy companies under the EU ETS. Once we move towards a full auctioning process for them, the need would clearly disappear, but there needs to be transparency both ways in the area. We look forward to the list also including the feed-in tariff that we fully hope will be a part of the Bill when it becomes an Act. The only thing that slightly worries me here is that, when there is a differentiation between actual cost and the taxes above and when one is looking at comparative tables, one could always be in the Ryanair position of companies declaring their costs and taxes separately and switching to the other figure in their marketing. Maybe that is just a malaise of the cheap airline industry. In general, we welcome this, but windfall profits by energy companies need to be part of this equation.
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Lord Jenkin of RodingI have put my name to this amendment as I sought to move similar amendments during the passage of the Utilities Act 200…
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Lord Jenkin of RodingConservative
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I have put my name to this amendment as I sought to move similar amendments during the passage of the Utilities Act 2000 and the Energy Act 2004. The central point made by my noble friend is that this is an example of transparency. If extra charges are being laid at the doors of consumers for broadly public sector objectives—climate change and so on—it is right that the consumer should know how much he or she is paying for that. The argument put to me on the previous occasions was about how that can be apportioned to individual consumers. I see the Minister nodding and looking up the page from which he will repeat the argument. I do not accept that argument. We now have elaborate computer programs, and all major energy suppliers produce their accounts through sophisticated consumer programmes. At Second Reading, I quoted the figure that I got from Ofgem for the typical contribution of an average householder: it was £79 a year. That is not an insignificant figure against an average householder’s fuel budget of approaching £1,000. It is a little less than 10 per cent, but it is still a substantial figure. My guess is that very few householders have any idea that they are paying this with their gas and electricity bills. The Government have always talked about subsidising renewable energy, but how many householders realise that that is not coming out of taxation or being paid by the Government but is being paid by the consumer? The cost of ROCs goes on to the industries that have to buy them; it is included in their costs and they put them on their bills. The same is true with the Emissions Trading Scheme: the costs of that are borne not by the Government but by consumers. The average figure given by Ofgem for 2008 is £79. That is for the average consumer and assumes a certain consumption of gas and electricity. No doubt Ofgem could supply the details. It does not seem to be beyond the wit of man or woman to say that if you consume less, you are contributing less to these other climate change objectives. If you are consuming more, you are contributing more. I do not accept for one moment that it is impossible to link that to the individual consumer’s invoice and show on the bill: “This is what you are paying towards the measures to fight climate change”. That would have a considerable impact on the public’s appreciation and understanding of what is happening. At the back of my mind, I fear that the Government’s real objection to this is that they do not want consumers to know, so that they think that they are getting all these climate change things without having to pay for them, or that it is all being subsidised by a generous government. If you were to ask the average consumer, I suspect that is what he would say. If we are going for transparency, it is important that the Government come clean on this and make it clear so that companies can include in their invoices the amounts that individual consumers are paying towards these charges. For the life of me, I cannot see a valid objection to that. I can see that the Government’s objection is that they do not want consumers to know. I can see the possible objection that it would be too difficult to apportion amounts to the many millions of consumers, although I do not accept it. So what is the real reason? Transparency is called for. I argued for it eight years ago, I argued for it four years ago, and I argue for it again. Perhaps this time it will be third time lucky.
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Lord Campbell-SavoursTwo separate discussions are going on, although perhaps I have misunderstood. The noble Lord, Lord Jenkin of Roding, is…
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Lord Campbell-SavoursLabour
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Two separate discussions are going on, although perhaps I have misunderstood. The noble Lord, Lord Jenkin of Roding, is arguing that there should be transparency and that individuals should know what they are paying in these green taxes. However, the argument of the noble Lord, Lord Teverson, was slightly different. He referred to uSwitch. I understood him to say that it would be a consideration in the mind of the consumer when they were purchasing gas or electricity or deciding on the supplier. I cannot see how that kind of taxation, identified on, say, an electricity bill or a gas bill, could somehow be different between one supplier and another. Perhaps it could be explained to us whether it influences choice or is simply an issue of transparency.
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Baroness Carnegy of LourThis is probably one of the most important amendments, and I hope that the Government will take it seriously. Many year…
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Baroness Carnegy of LourConservative
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This is probably one of the most important amendments, and I hope that the Government will take it seriously. Many years ago, I well remember local government thinking that it would be absolutely disastrous if the ratepayers, as they were then, knew too much about how their rates were made up. Some legislation happened. Since then, more detail has appeared on council tax notices. Noble Lords will have seen this on their own council tax notices. They vary from council to council. Mine in London is quite different from the one in Scotland. The one in London was so good that I took it to show my councillor in Scotland to demonstrate how the council could do it better, like us. There is now great enthusiasm among the public for knowing how their council tax is made up. They are very interested. They discuss it a lot. This is a similar issue. The Government should not be afraid of this. I think I see how it might vary from supplier to supplier, although I may be wrong about that. The Minister will tell us if I am. Being clear about these green taxes will help people to change their minds about how they behave. We have to take everyone with us, and it would be a great pity to oppose it. It is extremely sensible and should happen. I hope that the Government will be a little flexible on this, if not now then before Report.
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Lord BachAgain, I thank noble Lords who have spoken to the amendment. This issue was indeed discussed in the other place, and I…
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Lord BachLabour
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Again, I thank noble Lords who have spoken to the amendment. This issue was indeed discussed in the other place, and I echo what my honourable friend the Energy Minister said in that debate. We are naturally sympathetic to the motivations behind the amendment, but we wonder whether there is not a more cost-effective way in which to achieve a similar outcome in terms of greater transparency of energy costs for consumers, without frankly creating the additional burdens and bureaucracy for energy suppliers of requiring this information to be included on consumer bills. Far from being scared, or concerned, about the figures, as the noble Lord, Lord Jenkin, suggests that the Government may be, one of the reasons why we do not agree with the amendment is that we do not want to create additional burdens and bureaucracy for energy suppliers. First, I shall explain what the Government are doing to empower individuals and to help them to make informed choices about their own use of energy. I will then deal with the amendment. Of course, helping consumers to make those choices is a key part of our strategy to drive energy efficiency in the home—the central theme of the “Saving energy” chapter in the 2007 energy White Paper. In that White Paper, the Government pledged to help consumers monitor and reduce their energy consumption through the inclusion of historic information on their energy bills or statements, so that they could compare what they had paid in the past with what they are paying now. As announced in the recent government response to the 2007 consultation on metering and billing, we are implementing this by a statutory requirement on suppliers to provide historic information on domestic bills and statements from January 2009. It is intended that this will help consumers to better understand their bills and the energy that they use and encourage them to take a more active approach in managing their energy use. The amendment proposes that energy suppliers should be required to report on the proportion of the bill that contributes towards environmental taxes, highlighting the renewables obligation, the EU Emissions Trading Scheme and the carbon emissions reductions targets in particular. In short, while we support the principle of improved transparency of costs to consumers, we cannot support a requirement on energy suppliers to set out information about environmental taxes on individual bills of domestic consumers as some sort of route to delivering it. Members of the Committee will appreciate that each of the environmental support measures mentioned in the amendment is not a tax in the traditionally understood form. Companies have a number of different ways that they can meet their obligations under the schemes I have referred to, including making energy efficiency savings in the home, generating renewable electricity, paying a buy-out penalty, and/or trading variable-priced instruments. As a result, to require energy suppliers to specifically break down the proportion of every consumer’s bill attributed to each of those mechanisms could impose additional, potentially significant, administrative and cost burdens, especially given the complexity involved and the range of different routes to compliance. In a competitive energy market, any such administrative burden will clearly end up with the consumer in the form of increased bills. It would also be difficult for any requirement to achieve standardisation across suppliers because they all handle these environmental measures in different ways, with different associated costs. Some of the information sought would be commercially confidential, in the same way as was the information in the amendment we debated last evening. Moreover, in asking specifically about the detail of consumers’ bills during last year’s billing and metering consultation, the responses frankly did not indicate a strong appetite for including any additional information, beyond the better, more accurate historic information on energy use on domestic consumer bills that we set out as a requirement in our government response. We are therefore not convinced that requiring energy suppliers to drill down to the necessary level of detail to produce this information on a consumer-by-consumer basis would provide additional benefits outweighing the potential administrative and cost burdens that such a requirement would impose on the energy suppliers. Any such decision to increase such a requirement would have to be based on a careful and full assessment of the costs and the benefits of providing the proposed additional information on bills. My noble friend Lord Campbell-Savours made a point about costs and the competitive advantage between suppliers. There is unlikely to be a competitive advantage issue, because the taxes would apply to all suppliers. There may be small differences from supplier to supplier, but they will not be a big driver of choice for consumers. The noble Lord, Lord Teverson, asked how much the windfall profits had been under the first phase of the scheme. The broad, global figure is about £800 million per year; but we must recognise that we are taking action to prevent such a scenario occurring again. I remind the Committee, as I mentioned yesterday, that our commitment is to 100 per cent auctioning for the power sector in phase 3. As far as information that is already supplied is concerned, for an average £1,000 consumer bill, the contribution of the RO, the EU ETS and the CERT is published on Ofgem’s fact-sheet on its website. That is for an average £1,000 consumer bill.
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Lord Jenkin of RodingThat is where I got it from. I rang it up to check, and it said that that was the best figure it had for 2008.
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Lord Jenkin of RodingConservative
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That is where I got it from. I rang it up to check, and it said that that was the best figure it had for 2008.
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Lord BachI am absolutely delighted—
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Lord BachLabour
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I am absolutely delighted—
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Lord Jenkin of RodingHow many other consumers would think of going there to find that information?
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Lord Jenkin of RodingConservative
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How many other consumers would think of going there to find that information?
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Lord BachRather more than the noble Lord might think, perhaps.
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Lord BachLabour
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Rather more than the noble Lord might think, perhaps.
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Lord Jenkin of RodingI just wonder.
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Lord Jenkin of RodingConservative
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I just wonder.
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Lord BachThe result of the consultation was that people are more concerned than anything else about knowing the historic cost of…
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Lord BachLabour
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The result of the consultation was that people are more concerned than anything else about knowing the historic cost of the fuel bills that they have to pay. One can of course see the attractions of the amendment in terms of increasing transparency for consumers in relation to the costs of so-called green taxes. I am happy to announce that the department will continue to work with suppliers and consumer groups, such as the new National Consumer Council, which succeeds Energywatch later this year, and other relevant organisations over the coming months, to investigate whether there are ways in which this type of information can be made more readily available to consumers. Some of this type of information is already in the public domain. I have mentioned the fact-sheet Household Energy Bills Explained, which Ofgem publishes, which includes, among other things, information about costs to consumers of the environmental taxes mentioned in the amendment in an easily understandable form. No doubt there are other examples. We want to build on what exists and ensure that those consumers who want this information can find it easily. That is what we want to achieve. The noble Baroness is right that the Energy Minister promised to take the issue away to see what more could be done, and that is what he is doing as we speak.
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The Duke of MontroseThe information is available on the Ofgem website. I ask my noble friend Lady Wilcox whether we are asking the company…
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The Duke of MontroseConservative
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The information is available on the Ofgem website. I ask my noble friend Lady Wilcox whether we are asking the company to provide an exact figure on each invoice, or could the companies not simply be required to restate the figure that is available on the Ofgem website, in which case it will not cost them that much?
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Lord BachI remind the noble Duke that it is not my amendment. I am not sure what the noble Baroness intends; she will answer for…
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Lord BachLabour
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I remind the noble Duke that it is not my amendment. I am not sure what the noble Baroness intends; she will answer for herself.
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Baroness WilcoxI thank the Minister; it looks as if things are going to be carried forward as we would like. I started by saying that…
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Baroness WilcoxConservative
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I thank the Minister; it looks as if things are going to be carried forward as we would like. I started by saying that invoices received from energy companies will outline for the consumer the amount of money spent on environmental taxes and emission reduction schemes. I went on to say that, although it was originally said that it could not be done, when Ofgem gave evidence it was able to break it down in broad terms. If I can pick up on what the noble Baroness, Lady Carnegy, said, we have now got very used to seeing all sorts of bills broken down in all sorts of ways for us, and anything that allows the consumer to better understand what is happening to them and to better understand the historical information—which will be how they have behaved with their consumption of energy over time so that we can compare what we did last year with what we are doing this year—is a good thing. Here, we are not asking for anything too complicated; it is a matter of identification. As we said on the last amendment, very often the information is out there but perhaps not always in a place easily accessible to people. It seems to me that the bill you are going to pay is the one you will scrutinise and look at most carefully. Therefore, that is a good place to put the information. I believe that the Minister has answered my question and has confirmed that the Minister in another place is looking at ways which would work under the Freedom of Information Act to take this forward. It really cannot be beyond the wit of an energy company to include that information. We get many bills which include a great deal of information and we are very used to looking at them. I thank the Minister for bringing this good news and I encourage him to take it forward. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
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Lord Redesdalemoved Amendment No. 58:
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Lord RedesdaleNon-affiliated
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moved Amendment No. 58:
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The Lord Bishop of ChesterI strongly support the amendment for the reason given, and another in the area of cultural change. In our debates on th…
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The Lord Bishop of ChesterBishops
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I strongly support the amendment for the reason given, and another in the area of cultural change. In our debates on these subjects, we often come back to the fact that, for all the rhetoric, people leave the lights on or do not understand the practical aspects of daily living that would lead to more efficient use of energy and other resources. My wife is from Denmark, where we have often travelled. That country has a good record for renewable energy, partly through banks of offshore wind turbines but also through ready grid access for microgeneration. It is usual to see a couple of windmills on a Danish farm; it is part of the culture. The same is true of environmental awareness in other areas of Scandinavian life, such as campaigns to reduce the average speed on roads. Ultimately, you must engineer a cultural change in the public awareness for the public to realise that a thing must happen. Anything we do to bring home the need to be sensitive to environmental issues is absolutely right. I keep a few hens in Chester because of distaste with some aspects of factory farming. A school trip was looking around Chester and had tea in the garden. I took some of the young children down to see the hens. One of them had recently laid an egg; there it was, warm. A young girl showed particular interest in it, and I said, “Take it home for your supper”. She said, “I couldn’t possibly eat that!”. To her a real egg came in a box from the supermarket; it was not laid by a real hen. That illustrates the reality of living in our society, and how we can get disconnected, as it were. There may be practical issues in the amendment that I have not picked up, but the real merit of it in principle is that it addresses the need for our communities at a local level to take these issues as seriously as possible.
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Lord Jenkin of RodingThere is a great deal to be said for such an amendment or something along these lines. I am not sure that the amendment…
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Lord Jenkin of RodingConservative
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There is a great deal to be said for such an amendment or something along these lines. I am not sure that the amendment moved by the noble Lord, Lord Redesdale, could be accepted in its present form. I have one overriding reason for saying that. I have discussed the matter with those who operate the grid in this country. To be fair to the noble Lord, he said that they would not find it difficult—and do not find it so—to accommodate small, genuine, local microgeneration sources because the amounts involved are very small. Applications to join the grid might come from community groups, or business groups, and as the amounts of electricity that the grid would have to accommodate become larger, it becomes more difficult for operators to sustain the viability of the grid. One has seen the other end of the scale. I was interested in what the right reverend Prelate said about the Danish experience of the larger offshore wind farms. It is now two years since the Danes reached the maximum amount that they can possibly generate by wind before finding that the grid they have to operate becomes unstable. That matches entirely with the report produced two or three years ago by E.ON about its experience in Nordrhein-Westphalia and Schleswig-Holstein. I have seen with my own eyes the large number of wind turbines operating in that very flat land, which is suitable for wind power, but the company found that once you went beyond about 18 per cent of total generating capacity coming from wind, the stability of the grid becomes very questionable. The reason for that is very simple. It is an intermittent source. If you go from full power to no wind power in a couple of hours as the wind falls away, you must have standby generation. Given the process of operating a grid in those circumstances with no doubt variable wind output having to be fed in, and then being offset as it goes down by standby operators, the company said that it could cope up to about 18 per cent. When you move to 20 per cent and beyond, the grid becomes so unstable that it is difficult to operate. I say with some hesitation to the right reverend Prelate who, through his wife, knows more about this than I do, but I saw the Danish wind farms when we went on a cruise up that way some years ago. The wind was blowing perfectly well but none of them was working as they had reached the point when it was not economic. The amount that the Danish power companies had to sell at rock-bottom prices to other grids in order to get some return was simply not worth their doing it. That was also the E.ON experience. The stability of the grid and its management are a vital factor. I recognise that the noble Lord has sought to take this into account in his amendment, which states in proposed Section 3B(1) that, “the Authority shall ensure that … (a) … operators guarantee the transmission and distribution of electricity produced … without prejudice to the maintenance of the reliability and safety of the grid”. It is there, but one then asks how that will operate. How will the microgeneration supplier be able to know when he can feed it into the grid and when he cannot?
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Lord RedesdaleThe noble Lord asks a number of questions, but the real issue is that we are so far from achieving even a proportion of…
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Lord RedesdaleNon-affiliated
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The noble Lord asks a number of questions, but the real issue is that we are so far from achieving even a proportion of the amount that affects the grid stability that he talks about—it is less than 5 per cent at the moment—that it would take us an extremely long time to get to that position. The second issue is that we are signed up to targets to get to 20 per cent, as the Government know, so his argument is slightly rhetorical.
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Lord Jenkin of RodingI may have confused the noble Lord when I referred to the 18 per cent figure. The same applies if there are fluctuating…
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Lord Jenkin of RodingConservative
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I may have confused the noble Lord when I referred to the 18 per cent figure. The same applies if there are fluctuating inputs into the grid at a local level or indeed into the local distribution network—in many cases, the microgeneration has to go to the local distribution network. I have been told by those who run the grid that they can cope with small inputs, but that if they become bigger it will be more difficult for them to cope. The noble Lord has sought to put protective words into his amendment. I quoted from proposed Section 3B(1)(a). He has also put, into proposed Section 3B(1)(c), “insofar as the security of the national electricity system permits”, and so on. He has acknowledged that the problem exists, but it is quite difficult to understand how this can be done other than on a micro scale. If we are to have more and more wind power, we will have to have standby generating power to cover the gap when the wind does not blow. Everyone recognises that. However, that does not happen with microgeneration. If it is very micro, I have no doubt that the distribution system can cope, but does it make sense to guarantee access? I question that. I am totally in favour of encouraging microgeneration. The noble Lord has laid great stress on costs, and knowing the costs in advance is an important element. One is very sympathetic to that, but I hesitate to support the amendment without knowing a great deal more about how it would work.
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Lord OxburghI support the general drift of the amendment, particularly the aspects that seek clarity about the charges. As some nob…
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Lord OxburghCrossbench
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I support the general drift of the amendment, particularly the aspects that seek clarity about the charges. As some noble Lords will be aware, Woking has been at the forefront of energy efficiency and local energy generation in this country. Having looked at the economics of the situation, it was obliged to put in its own local network to distribute to consumers the electricity that was generated by their intermittent sources. It would have been easier for them to feed into the grid at one place and to take it out again a mile away, but that was not acceptable. The prices need to be transparent.
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Lord Davies of OldhamI am grateful to the noble Lord, Lord Redesdale, for his amendment, which has prompted an interesting debate. The amend…
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Lord Davies of OldhamLabour
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I am grateful to the noble Lord, Lord Redesdale, for his amendment, which has prompted an interesting debate. The amendment seeks to provide priority of access both for electricity and gas transmission and for distribution systems for renewable energy sources. The text of the first part of the amendment comes from the current draft EU renewables directive, and many of the provisions referred to in the proposed new clause were in the 2001 renewables directive. That is why we recognise both the text and the significance of the issue. This is an important issue, on which I am grateful to have the opportunity to explain the Government’s position. The key difference between the amendment and the provisions already in place in Great Britain—through licence conditions and underlying industry codes—is that the amendment would mandate priority access to the grid for electricity from renewable sources. It is worth noting that currently, as those who followed the debate in the other place will recall, that is a discretionary matter for member states. Before I analyse the provisions further, I make clear that once the Commission’s proposals for priority access are finalised and the directive agreed, the directive will be implemented in the UK. We should not be implementing legislative proposals simply because we have a legislative opportunity in the Bill, particularly as there is a risk that the directive will change and we could be in the ludicrous position of having produced recent legislation that is an ill fit with the final European directive. As the noble Lord will recognise, as with any European directive the Government have the option, among others, of using Section 2(2) of the European Communities Act to implement it, if they so wish. In that sense, we do not need the legislation either. The eventual implementation route will depend to some extent on the form of the finalised directive, and we cannot pre-empt that at this stage. Those are relatively minor matters in relation to the amendment—although the appropriateness and accuracy of our legislation is important—which is about priority access from renewable resources. The noble Lord, Lord Jenkin, illustrated why the Government would find the amendment difficult. We must not create uncertainty for existing generators and those planning future investments. Uncertainty would discourage investment, which would have serious repercussions on meeting our energy needs and targets. We need certainty, because the crucial responsibility of government is security of provision from the grid. As the noble Lord, Lord Jenkin, indicated, the problem with certain dimensions of renewables—we are to foresee for the immediate future the largest contribution being from wind sources—is the element of uncertainty. I never thought, having struggled with the Schleswig-Holstein question many years ago as a historian, that I would be grateful for such a reference many years later, but I was grateful for his evidence on E.ON’s experience.
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Lord TeversonDoes the Minister know the answer to the Schleswig-Holstein question?
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Lord TeversonLiberal Democrat
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Does the Minister know the answer to the Schleswig-Holstein question?
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Lord Davies of OldhamI never got a specific mark for that question, but I struggled through the paper. I did not have any more of an answer…
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Lord Davies of OldhamLabour
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I never got a specific mark for that question, but I struggled through the paper. I did not have any more of an answer to it than the rest of the British or international community at that time, but I have an answer to this issue. I pray in aid the Schleswig-Holstein experience, as I do the Danish experience. We are concerned that the renewable provision could be intermittent. Therefore, we need to guarantee the necessary back-up from more secure resources. I respect greatly the enthusiasm with which the noble Lords, Lord Redesdale and Lord Teverson, have pursued the renewables agenda in Committee. I emphasise that we have to guarantee certainty of supply. We will address those issues later in Committee. It will be recognised that it is not something over which the Government dare take risks.
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Lord RedesdaleOn a point of clarity, I fail to understand what will change between now and the implementation of the directive in the…
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Lord RedesdaleNon-affiliated
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On a point of clarity, I fail to understand what will change between now and the implementation of the directive in the grid. Will there be a massive change in the make-up of the grid that we have not known about in the next five years? Obviously, energy storage would be the holy grail. If the Minster is saying, on the one hand, that we are going to implement the EU directive, but, on the other hand, that we cannot do so due to question marks over the grid, what will change in that intermediate period?
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Lord Davies of OldhamWe are involved in substantial consultations on the process by which we adjust the arrangements for the grid and make c…
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Lord Davies of OldhamLabour
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We are involved in substantial consultations on the process by which we adjust the arrangements for the grid and make changes. I emphasise to Members of the Committee that we are seeking some positives from the probing that the noble Lord has made today. We have ended the requirement for planning consent for microgeneration from April 2008. I know that he will regard that as a minor concession in comparison to what he seeks, but it is the intent of the Government to give the support that they can. The Committee will have been saddened by the noble Lord’s personal experience of his microgenerator, and I understand the issues with regard to costs and the restrictions on access to the grid. However, there is no doubt that we are taking steps to improve the position as regards microgenerators and that the current system provides disadvantages for smaller players. The noble Lord gave his personal experience. That is why we have set out to level the playing field for the distribution of energy. The measures set out in our recent consultation will reduce a whole range of these burdens, as experienced by the noble Lord. A report setting out the measures, which responds to all these issues, was published only a few days ago. I want the noble Lord to be clear that we are taking the necessary steps to ease the problems of microgenerators and access to the grid. The rather global sweep of the amendment is not well timed and, at this stage, we are not in a position to accept it. We certainly are considering reforms to grid access, which would ensure that the regulatory framework remains fit for purpose in the medium and the long term. That will condition the way in which we are able to respond to the European directive. It is clear from this work that there are ways in which we could significantly improve the connection opportunities for renewable generation. We will set out this analysis when the final report of the review is published this week. The Government are well charged of the issues which the noble Lord raised on access of minor generation, but I also indicate to him, as did the noble Lord, Lord Jenkin, in his contribution, that there are strategic aspects to which we must have regard. It is certainly clear that the growth in intermittent renewable generation will require us to have a serious examination of access to the grid, which is why we are involved in these consultations. Grid capacity needs to be shared between different forms of generation, but no one in the Committee will underestimate the complexities of these matters against a background where the Government are bound to have as their priority security of provision. On the second part of the new clause proposed in the noble Lord’s amendment, I do not want to return to that intensive debate that we had on biomethane. I was grateful to the noble Lord for truncating his contribution on that today, and I will follow suit. Until we have reviewed the evidence about the costs and processes involved in upgrading biogas to biomethane and injecting into the gas system, we will not be able to assess the potential unintended or undesirable consequences, or the balance between costs and benefits that might flow from any proposed change to access rules. The kind of market enablement provided by the amendment is somewhat premature. We have said on many occasions that we will do what we can—and we are steadily making progress—on support for renewables. But I hope that the noble Lord will recognise that the Government have a clear priority with regard to the grid and electricity, and it would be somewhat jumping the gun to introduce part of a European directive, which is not finalised at this stage, into our legislation at this point. That is a premature initiative, although the Government share with the noble Lord the broad objectives. The Government have to hit those targets, which we have all identified will involve considerable change to access to the grid.
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The Lord Bishop of ChesterOn the question of possible limits in Scandinavia, there will obviously be limits to the level of generation from diffe…
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The Lord Bishop of ChesterBishops
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On the question of possible limits in Scandinavia, there will obviously be limits to the level of generation from different renewable sources that are consistent with security of supply. However, it would be helpful if estimates of the natural limits that would apply in the UK for wind power were more widely available. It would help people to estimate the different values to be given to the various issues around policy. Following on from that, is it not almost certainly the case that the more widely distributed the sources of renewable energy, the higher the natural limit? That seems to be an argument in favour of not simply having a small number of large-scale sources of any given renewable energy. There must be intrinsically an argument in favour of a fairly dispersed mixture of large and small, which I think is behind the amendment moved by the noble Lord.
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Lord Davies of OldhamIf everything were uniform, the right reverend Prelate would be absolutely right in his contention, but it will be appr…
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Lord Davies of OldhamLabour
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If everything were uniform, the right reverend Prelate would be absolutely right in his contention, but it will be appreciated that a whole range of new renewables initiatives are seeking access to the grid. In Scotland, there is a veritable queue of applications, which presents significant issues for the grid operation as far as Scotland is concerned. I hear what the right reverend Prelate says. Of course, there are desirable advantages to the dispersal of generation, but we also need to ensure that we have this framework right as far as the grid is concerned. I am not sure of the precise terms of the analysis that he is after, but the renewable energy strategy consultation that we will publish this week will include an analysis of the relative contributions. He will have time to digest that before we reach Report.
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Lord RedesdalePerhaps I should have continued my story. Due to the difficulty that I had, I introduced the Renewable Energy Bill to t…
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Lord RedesdaleNon-affiliated
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Perhaps I should have continued my story. Due to the difficulty that I had, I introduced the Renewable Energy Bill to this House, which then became the basis for the Climate Change Bill, a Private Member’s Bill that went through the other place. On the basis of that, the removal of the planning constraints on microgeneration came forward. I am well aware of all that, and I cannot give the Government credit for it. But on that basis, I realise how long these processes take. The Government are saying, “We need to review this and then we can go forward”. Anyone who has been involved in these processes realises that it takes for ever and that the bureaucracy is a nightmare. Therefore, of course I will take on board what is said by the review that is published this week, but I do not see why we could not act as a lead on this and why we could not go forward—we will adopt it anyway, because we have to try to meet our 2020 targets. The view of the noble Lord, Lord Jenkin, on renewable generation is somewhat different from the Government’s. Therefore, I hope that the Government will change their mind. I will bring this back at a later stage. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
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The Deputy Chairman of Committees (Baroness McIntosh of Hudnall)Perhaps this is a convenient moment for a brief adjournment. The Committee will adjourn for 10 minutes and resume at 5.…
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The Deputy Chairman of Committees (Baroness McIntosh of Hudnall)Labour
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Perhaps this is a convenient moment for a brief adjournment. The Committee will adjourn for 10 minutes and resume at 5.50 pm. [The Sitting was suspended from 5.40 to 5.50 pm.]
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Lord Redesdalemoved Amendment No. 59:
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Lord RedesdaleNon-affiliated
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moved Amendment No. 59:
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Lord OxburghI thank the noble Lord, Lord Redesdale, for his kind comments, and I am grateful for his support. It was with a certain…
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Lord OxburghCrossbench
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I thank the noble Lord, Lord Redesdale, for his kind comments, and I am grateful for his support. It was with a certain diffidence that I tabled the amendment. I did so because of the considerable concern in this House, the other place and the wider industrial community about its subject matter; namely, the way that Ofgem is able to discharge its responsibilities at present. If the Government had been doing as much listening as they say they do, they would have picked this up and put it in the Bill. They did not have to look much further than the report by their own Sustainable Development Commission, Lost in Transmission? which was published last year. I am not sure that I agree with everything in that report, but there was a great deal of compelling argument concerning the way the Ofgem role is discharged at present. I emphasise at the beginning that this is criticism not of Ofgem but of the terms of reference within which it has to work. I suggest that, although there are many details, we keep this discussion at a relatively high level today. It is matter of what we want Ofgem to do and whether it is properly equipped to do it. Ofgem discharges many aspects of its remit completely satisfactorily. Where it falls down is on infrastructure. The important thing about infrastructure is that it has to be there before the elements that it is to support are built. If you are building a housing development, the first thing you do is put in the roads and the drains and then the houses follow afterwards. If we are building wind farms around the country, unless we make proper provision to get the electricity to where it is needed, a lot of this comes apart. I do not need to remind the Committee that the wind is around the coast and in the north-west, and electricity demand is in the centre and the south. We shall have a need for massive interconnectors from north to south. I do not want to repeat what I said in my Second Reading speech, but the challenging question is how these interconnectors, which are not going to be cheap, are to be facilitated. To give the Committee an example, let us say that it made sense to lay a cable from north to south down the length of the North Sea, to connect the offshore wind farms and the near-shore generation into it and to use that cable effectively as a mains to take the electricity where it is needed. It might be needed on the other side of the country, or possibly on both. Doing this at sea would have considerable advantages, in that the multitude of planning consents that are needed on land would be avoided. The important thing is that this would be a massive investment, at least in part ahead of the elements of the wind farms and so on that it was intended to support. Given the way in which Ofgem operates at the moment, it would have enormous difficulty in approving that expenditure for the national grid, because it would be the responsibility of the national grid to design it, and presumably it would then go out to tender for construction. I briefly remind noble Lords that Ofgem was set up in the early 1990s in the days of the liberalisation of energy markets in this country to ensure that there was plenty of competition and that the consumer got the best possible deal. Its principal remit—I emphasise principal—is, “to protect the interests of consumers, present and future, wherever appropriate by promoting effective competition between persons engaged in, or in commercial activities connected with, the shipping, transportation or supply of gas conveyed through pipes and the generation, transmission, distribution or supply of electricity or the provisions or use of electricity interconnectors”. Over time, a variety of supplementary objectives has been added to that principal objective. In 2000, Ofgem was given social and environmental objectives. In 2004, sustainability was added. Today, Ofgem’s principal objective is as I quoted it. It also has 11 secondary objectives, and it can have guidance from Ministers. However, guidance is only guidance, and Ofgem has made it clear that it sticks to its principal objectives. I do not believe, and I believe that a lot of other people do not believe, that that original objective, even supplemented with those ancillaries, is appropriate for the situation in which we find ourselves today. Nor will the Government be able to achieve their climate change objectives unless we look much harder at this and provide Ofgem with a remit that gives it the freedom to make the investments that are necessary for the future. The amendment would not take away any of Ofgem’s powers, but it would fundamentally reshuffle its current responsibilities. It puts security of supply and sustainability at the top of the agenda. That is at the top of everyone’s agenda, frankly. We would all prefer our electricity to be a cheap as possible, but security of supply and sustainability need to be up top. The Government may reply that we cannot do anything about this yet because the regulation is being reviewed. The review may have finished now—I cannot quite remember—but there is one very important point to make that the Government might not have picked up on. I have spoken to a number of people in the industry and elsewhere who were invited to give their views as part of that review. More than half the number of people to whom I spoke said, “We have not replied”, or, “We have been very cautious”, because, “We do not want to upset the regulator”. That is very important. It emphasises not only the enormous power that Ofgem is seen to wield at present but that people are concerned about how they will fare if they rock the boat. The output of that consultation needs to be taken with a serious health warning. The other concern, I am told, is that Ofgem is very worried about a broadening of the sphere of action under its present terms of reference, because it might be subject to judicial review from consumer organisations that say that by investing in the future Ofgem is not providing electricity or gas at the most competitive prices. Whether or not that is true, I do not know, but I am told that it is a genuine concern. The purpose of the amendment is not revolutionary but evolutionary. It is to tweak the remit of Ofgem and to be helpful to Ofgem and, I would have thought, to the Government, in meeting the objectives in the Climate Change Bill.
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Lord Jenkin of RodingI add my gratitude to the noble Lord, Lord Redesdale, who said to me a few days ago that this amendment expressed our c…
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Lord Jenkin of RodingConservative
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I add my gratitude to the noble Lord, Lord Redesdale, who said to me a few days ago that this amendment expressed our common desire rather more clearly than the original. The way in which the noble Lord, Lord Oxburgh, spoke to it clearly indicates that. If I had been moving it, I would have gone through the same historical story as the noble Lord did. I was going to use the simile of a Christmas tree. It started off with a clear, bright fairy at the top, namely to promote competition, and over the years, in a series of different and often disjointed legislation, all sorts of baubles have been added on the way down. Like the noble Lord, Lord Oxburgh, I say that this is no criticism whatever of Ofgem’s work in this field; but it is in danger of breaking down. Part of the purpose of the amendment is, as the noble Lord said, to stop the Christmas tree collapsing under its own overdecorated weight. It has become opaque, which is not Ofgem’s fault but it is because of the rather disjointed way in which our piecemeal process of law-making has taken place. There is also a policy justification, which is that Ofgem’s existing remit, complicated as it is, with all the baubles that have been added to the Christmas tree, does not remain properly focused to deliver the policy outcomes that we now require. The key output from energy regulation must in future be the development of a secure and sustainable system of energy supply for the UK. Therefore, the overriding statutory objective of Ofgem must incorporate not simply the narrow consumer interest in a high-quality service at a reasonable cost, but the broader requirements on behalf of the whole of society of a fully secure and sustainable industry that is able to deliver gas and electricity supplies securely in the longer term. I agree with the noble Lord, Lord Oxburgh, that an opportunity was missed not to have this as part of the Bill. It is now so widely recognised that one would have thought that the Government might have been wise to have taken it. However, the amendment has been tabled, and similar amendments were debated in another place. We are trying to bring the remit into line with the overall objectives that the Community now has for the supply of energy. Almost every other clause is designed in one way or another to facilitate and support long-term investment in the wide range of energy infrastructure. We all know that there has got to be over the next 20 to 25 years a huge amount of investment, both in generation and in transmission, but they have got to deliver the national policy goals of combating climate change by reducing CO2 emissions, while also ensuring security of supply. I suggest that, against that backdrop, simply focusing on the narrow consumer interest is not going to produce the result that we want for the wider societal interest. No doubt the Minister will explain the Government’s view, but as I understand it, they believe that best way of ensuring that regulation is carried out with a view to delivering these longer term energy policy objectives is for them to provide more detailed guidance—explicit statutory guidance—on social and environmental issues. As I suggested briefly at Second Reading, that is a very indirect way of proceeding, which would probably be ineffective given the unprecedented challenges that the industries face over the next 20 years. So the amendment to which the noble Lord, Lord Oxburgh, has spoken and to which I put my name, starts from the premise that the priority of maintaining supply security on a fully sustainable basis requires an urgent recasting of Ofgem's objectives. The noble Lord was quite right to say that this is a process of evolution. We need to evolve the narrow concern for consumer protection into a broader concept that will encompass the collective interest of the whole community in the maintenance of securing sustainable energy supplies. Such an approach is more consistent with the almost incalculable social value of energy in today's world. It would also sit more comfortably with the emerging direction of European policy and perhaps eventually global policy. Of course, energy regulation is complex and difficult. It may not always be possible through legislation to resolve the tensions between market mechanisms, security of supply and the delivery of social and environmental goals, but that is what this amendment would achieve. I have it from Ofgem that it accepts entirely that the question of setting statutory duties is a matter for Parliament. The note from Ofgem states: “We recognise this is an important issue given the challenges ahead, including tackling climate change, securing Britain’s energy supplies and protecting consumers at a time of rising prices”. Ofgem recognises all those objectives, but they are not included in its existing statutory remit. The amendment would be a much better way of achieving this and it is one to which I attach a great deal of importance. The time has come to change things. Only the other day I was reading an interesting collection of essays entitled The World Crisis. The Way Forward After Iraq, which included pieces by Jimmy Carter, Henry Kissinger, George Schultz, my noble friend Lord Howell, my noble and learned friend Lord Howe of Aberavon, and others. I was interested to see that one of them was by someone of whom I am afraid that I have never heard—the honourable Branko Terzic, who is Global Regulatory Policy Leader for Energy and Resources for a firm of consultants, chairman of the United Nations ECE Ad Hoc Group of Experts on Cleaner Electricity Production from Coal and other Fossil Fuels, and a former director of the US grid. Mr Terzic is obviously extremely knowledgeable in this area and I would like to read the summary of his paper. He states: “The twentieth century demonstrated that markets in energy can work, that private capital is available and that progressive regulation based on correct national policies is a precondition to success in providing adequate energy at reasonable prices. The new potential for climate change catastrophe recognized in the twenty-first century adds an additional reason to support programmes and policies that support and enable efficiency in energy conversion, transmission and consumption. While no silver bullet exists to address the multiple issues of balancing supply and demand and mitigating greenhouse gas emissions, there is a combination of policies that can do the job or buy society time until better solutions come along. Prior experience demonstrates that progressive public policies which engage market forces, treat private capital fairly and provide incentives to efficiency all along the energy conversion and usage path can supply a set of solutions to the energy and climate change dilemma of the twenty-first century”. That is exactly what this amendment seeks to achieve and I give it my warmest support.
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Lord PuttnamI was delighted to add my name to the amendment tabled by the noble Lord, Lord Oxburgh, and I share all his aims and ob…
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Lord PuttnamLabour
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I was delighted to add my name to the amendment tabled by the noble Lord, Lord Oxburgh, and I share all his aims and objectives. I do not share his diffidence because I think this is a fundamental amendment. Regulation is a rapidly developing and evolving process, and the very idea that after 15 years a regulator set up in one energy world is going to have a remit that fully equips it for a different energy world is slightly absurd. There is no question but that we are moving into a very different energy environment. My experience of working with regulators is that primary responsibilities and objectives are treated very seriously and dealt with and that secondary responsibilities are nowhere. They are not on the map, and to pretend that a secondary objective is given any serious consideration is fatuous. I strongly support this amendment and its purpose. I have nothing much to add to what I said at Second Reading, but I have a question that I would like to attach to this amendment. It comes from something I read in the Business and Enterprise Committee brief that came out last week: “The Chemical Industries Association (CIA) told us that after the new storage comes on-stream in three or four years, the UK will have 19 days of storage, as opposed to 13 days now. That compares to 99 days in Germany, 122 days in France, and similar sorts of levels in the States. Until recently, North Sea supplies have negated the need for large-scale storage facilities in the UK”. I have no idea whether BERR or Ofgem is responsible for monitoring and reporting on what supplies are available at any one time, but I am sure that that is a fundamental piece of information. It is not to do with capacity. A lot of the figures that drift around are about our capacity, but that is not the issue. In the end, the issue is how much oil, fuel and gas is available to this country at any given moment. If there is any confusion about who is responsible for reporting and monitoring capacity and resource levels, it should be dealt with, perhaps in this amendment or possibly in a Statement by the Minister from the Dispatch Box.
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Lord De MauleyI am aware that the regulator receives a blizzard of suggestions from all directions about how to do its job better, bu…
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Lord De MauleyConservative
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I am aware that the regulator receives a blizzard of suggestions from all directions about how to do its job better, but this amendment, tabled by the distinguished noble Lord, Lord Oxburgh, and supported by experts such as my noble friend Lord Jenkin and the noble Lord, Lord Puttnam, shows that this is very serious matter. We always seek to guard the independence of regulators because they must have a free hand to do their important work. The noble Lord, Lord Oxburgh, spoke so eloquently today and at Second Reading about the need for fundamental change in this country’s approach to energy policy that we support this amendment as a serious attempt to empower those who can lead that change. It is a shame that the noble Lord, Lord Whitty, is not in his place because he echoed these concerns at Second Reading. The noble Lord, Lord Redesdale, tabled an alternative amendment tackling the same issue, but he has thrown his weight behind this amendment with good grace. It is clear that there is consensus on all sides of the Committee that something is needed in this area.
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Lord RedesdaleOne of the issues that I get lobbied on regularly by the power companies is generating capacity, an issue that has been…
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Lord RedesdaleNon-affiliated
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One of the issues that I get lobbied on regularly by the power companies is generating capacity, an issue that has been raised by the noble Lord, Lord Jenkin. The problem is how to invest and deal with the risk of new generating capacity when carbon, which is one of the elements of sustainability, is not active within the regulator, which sees it as outside its remit. That is a major issue that will prevent people building power stations in future and fundamentally undermines many of the purposes of the Bill.
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Lord BachI thank the noble Lord, Lord Oxburgh, for speaking to his amendment. It is a serious amendment and has serious people s…
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Lord BachLabour
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I thank the noble Lord, Lord Oxburgh, for speaking to his amendment. It is a serious amendment and has serious people supporting it. I appreciate that he may not be in a position to come back on this amendment this evening. I have a feeling we may return to it on another occasion, although I may be wrong about that. The Committee will completely understand why that is so, and he has been courteous enough to explain to me in detail why that is so.
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Lord OxburghI apologise for not waiting until the end of the Minister’s interesting reply. I would have liked to have had the oppor…
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Lord OxburghCrossbench
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I apologise for not waiting until the end of the Minister’s interesting reply. I would have liked to have had the opportunity to do so, because he has left so many coat-tails trailing that it would have been a splendid opportunity. I point out, from the Minister’s remark at the beginning of his speech, that competition is the means, not the end; it is not an end in itself, but a way of doing something. I am afraid that his reply seemed to reflect the reverse. However, I thank him for his courteous and detailed reply, and I am sure that we will return to these matters.
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Baroness Carnegy of LourSurely the noble Lord, Lord Oxburgh, can say anything that he likes in Committee. The fact that he did not move the ame…
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Baroness Carnegy of LourConservative
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Surely the noble Lord, Lord Oxburgh, can say anything that he likes in Committee. The fact that he did not move the amendment does not mean that he cannot say anything after the Minister’s speech.
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Lord OxburghI thank the noble Baroness for her concern. I had to return from the Far East for these two days of Committee, and must…
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Lord OxburghCrossbench
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I thank the noble Baroness for her concern. I had to return from the Far East for these two days of Committee, and must now catch a plane back in two and a half hours’ time. That is why I cannot stay.
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Lord PuttnamI—
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Lord PuttnamLabour
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I—
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Lord BachPerhaps I can finish off what I have to say and then my noble friend can speak. Is that satisfactory, or does he want t…
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Lord BachLabour
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Perhaps I can finish off what I have to say and then my noble friend can speak. Is that satisfactory, or does he want to come in at this stage?
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Lord PuttnamI would like a moment to correct the record. The noble Lord, Lord De Mauley, can defend himself, but it is wrong of the…
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Lord PuttnamLabour
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I would like a moment to correct the record. The noble Lord, Lord De Mauley, can defend himself, but it is wrong of the Minister to claim from the Dispatch Box that we are reversing the order of the principal objectives and responsibilities of Ofgem. That was not the intention of the noble Lord, Lord Oxburgh, nor do I believe for one moment that it is the intention of the Conservative Front Bench. This is to do with co-equal principal objectives. There is no reason why there should not be more than one principal objective. I spent a great deal of time on the Bill relating to Ofcom, which has a number of principal objectives. The idea that somehow you have to swap one for another is quite wrong, and it did not do justice to the Conservative Front Bench.
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Lord BachI am grateful to my noble friend, as I am sure is the noble Lord, Lord De Mauley. Our reading of the amendment, if it w…
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Lord BachLabour
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I am grateful to my noble friend, as I am sure is the noble Lord, Lord De Mauley. Our reading of the amendment, if it were carried, is that far from just being a tweaking, which was one of the expressions used, it would be a fundamental change to Ofgem’s obligations. That is why I made my comments to the noble Lord opposite, as it is very important that the public understand where he stands on this issue.
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Lord RedesdaleThe Minister says that it will be a fundamental change, but I do not understand why that is a problem in this context.…
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Lord RedesdaleNon-affiliated
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The Minister says that it will be a fundamental change, but I do not understand why that is a problem in this context. By signing up to a target for 2020 of 20 per cent, the Government have already fundamentally changed the nature and cost of how we generate electricity. To say that we have to stick to the original objectives of cost and price at the same time as we are fundamentally altering the way which we generate that electricity seems to completely miss the reality. The agreement that consumers should not have to bear the cost in any way that will adversely affect them should have been thought of before signing up to the renewable obligation. What is being expected of Ofgem has changed. It has for many years run on a pantheon of two gods: reliability and cost. We are seeking to add a third equal god: carbon. That is a fundamental issue that we must deal with.
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Lord BachI am interested that the noble Lord says that it is a fundamental change and defends it as such. He has already express…
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Lord BachLabour
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I am interested that the noble Lord says that it is a fundamental change and defends it as such. He has already expressed another view: that it is not a fundamental change but a sort of tweaking. Both those views come from people who support the amendment. Our argument is that the noble Lord, Lord Redesdale, is right. It is a fundamental change for Ofgem that places secure and sustainable energy as its principal objective. It must only have regard to other areas, including competition and consumer interest.
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Lord RedesdalePerhaps the Minister misunderstood. I thought that it was a fundamental objective of government policy that we have dis…
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Lord RedesdaleNon-affiliated
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Perhaps the Minister misunderstood. I thought that it was a fundamental objective of government policy that we have discussed on so many Bills and what all the consultation processes have been about.
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Lord BachWe are talking now about the role of the regulator. We believe that the best way to get the result we want—the achievem…
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Lord BachLabour
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We are talking now about the role of the regulator. We believe that the best way to get the result we want—the achievement of renewable targets and a secure and sustainable energy policy—is by having an economic regulator whose primary function is to make sure that this industry remains competitive and looks after the interests of the consumer. That is our view. The noble Lord would like to see a fundamental change. I do not apologise for pressing the noble Lord, Lord De Mauley, and his Front Bench on whether they see this as a fundamental change and, if so, whether they support it. We think that it would be a dangerous step to take in terms of the confidence of the very people who we want to invest in this industry, which will be vital in the years ahead. That is why we take the view that we do.
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Lord Jenkin of RodingWould it alter the Minister’s view if I told him that the adviser with whom I have been working closely on this issue,…
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Lord Jenkin of RodingConservative
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Would it alter the Minister’s view if I told him that the adviser with whom I have been working closely on this issue, and who helped me with the drafting of my earlier remarks, comes from one of the very largest probable investors in new generating capacity in this country?
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Lord BachI am afraid that it would not make me change my view because how could one individual from however excellent a company…
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Lord BachLabour
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I am afraid that it would not make me change my view because how could one individual from however excellent a company make me change my view?
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Lord Jenkin of RodingI want to be quite clear about this. I do not want to mislead anyone. I asked the gentleman who has been advising me wh…
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Lord Jenkin of RodingConservative
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I want to be quite clear about this. I do not want to mislead anyone. I asked the gentleman who has been advising me whether this represented the view of the company for which he works. The answer was yes.
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Lord BachGiven what I understand to be the name of the company, I am not the slightest bit surprised that the noble Lord got the…
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Lord BachLabour
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Given what I understand to be the name of the company, I am not the slightest bit surprised that the noble Lord got the response that he did. If I may, I will tell him afterwards why I say that.
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Lord Jenkin of RodingIf it is any help, it was not the company that I was referring to when I spoke to an earlier amendment.
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Lord Jenkin of RodingConservative
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If it is any help, it was not the company that I was referring to when I spoke to an earlier amendment.
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Lord BachOf course not. I understand that. It was a potential major supplier. I was talking about what investors are looking for…
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Lord BachLabour
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Of course not. I understand that. It was a potential major supplier. I was talking about what investors are looking for. We intend to consult on the new guidance, which will set out the Government’s expectation of the contribution that Ofgem should make. It will, as industry has requested, provide Ofgem with a clear steer on priorities such as facilitating the faster deployment of new generation such as renewables, both onshore and offshore, and the development of distributed energy. I have already said what we expect on the social side. There are strong arguments for retaining Ofgem’s primary focus on consumers and competition. Our Select Committee concluded that there is a clear case for economic regulators. Their role should be economic, not political, and they should have clarity of focus. We have no evidence to suggest that changing Ofgem’s duties will increase the deployment of renewables. Investors tell us that the key to hitting our renewables targets lies not in reforming Ofgem but in reforming the planning regime—we are tackling that through the Planning Bill, which we hope will have the support of all parties in this House, too—and in timely access to the grid, which, as I have said, we are addressing with Ofgem through the transmission access review. The consultation over the summer will also help us to clarify and develop solutions to some of the other practical problems that the renewables sector is facing. Rather than overhauling Ofgem’s duties, investors want to see us tackling the issues that they have identified, including updating Ofgem’s guidance to reflect the latest government policy. I have a paper here that states what Ofgem is doing on sustainability. There is no need for me to quote from it now. As I say, we are extremely grateful to the noble Lord, Lord Oxburgh, and very much respect his independence of mind, his expertise and his courtesy in letting me know before I got to my feet that he would have to go before the end of the Committee. I am sure that we will return to this issue in due course. If noble Lords want to add anything, I ask them to do so before I sit down.
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Lord Jenkin of RodingThis is a slightly strange procedure because the amendment that has been moved will have to be withdrawn by the noble L…
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Lord Jenkin of RodingConservative
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This is a slightly strange procedure because the amendment that has been moved will have to be withdrawn by the noble Lord, Lord Redesdale. In the mean time, at the express request of the noble Lord, Lord Oxburgh, I shall fulfil the summing-up role. I will do so very briefly. There is some puzzlement about whether what is being proposed is a fundamental change or not. I saw it, as did the noble Lord, Lord Oxburgh, as an evolutionary change. I was therefore intrigued to hear the Minister say in reply that one of the things that the Government are doing is bringing forward proposals shortly about how the regulatory regime might evolve. One is tempted to ask whether we are going to have an evolved regime only if the Government have thought about it because they are not prepared to take it from anyone else. That would figure on the basis of experience. I will not cite some of the examples, but we have certainly had them. The noble Lord, Lord Oxburgh, was absolutely right to say that once again the Government are confusing ends and means. If we have, as we now do, climate change legislation on the statute book, is it really so fundamental and revolutionary to ask, as we do in the amendment, that the third principle be that, “the reference to a sustainable system of electricity supply is a reference to the delivery of that system in a manner that, taken as a whole … in particular by contributing to the reduction of greenhouse gas emissions within the meaning of the Climate Change Act 2008”? Is it not therefore unreal to suggest that Ofgem should pay it no regard, or should only “have to regard to” it, or be subject to guidance? If one is to evolve, to use the Minister’s word, how the regulatory regime may develop, and if we are shortly to see proposals, I do not see any difference in this. The Minister has erected a dragon for us to tilt at: there is no way that we can achieve it. On one thing, however, the Minister is absolutely right: this issue will come back. It remains to be seen whether the amendment will be supported on all sides of the House, but I suspect that the Government may find themselves with an amendment that has happened twice in the past, with amendments I tabled during the passage of the Utilities Act 2000 and the Energy Act 2004, which I moved, which were resisted, were passed by the House of Lords and were ultimately accepted in the other place. This may be a third example. On the basis of the Minister’s arguments, however, I remain completely unconvinced. What we propose is attuned to public and parliamentary expectations. There are certainly those in the industry who fully recognise that this must be done. Ofgem has said, as I quoted, that statutory duties are a matter for Parliament. Parliament now has an opportunity to achieve this aim and, when we come to debate this at a later stage, we will find that that is what Parliament wishes to do.
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Lord PuttnamPurely to help the Minister—and I am certain that this will come back—I am afraid that he puts up a poor argument. The…
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Lord PuttnamLabour
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Purely to help the Minister—and I am certain that this will come back—I am afraid that he puts up a poor argument. The notion that you can somehow conveniently subdivide the political, economic and social concerns of a regulator has been blown away in the past few years. I ask the Minister and his officials to look carefully at the legislation under which Ofcom was formed. It was fought over extremely bitterly in both Houses. As the noble Lord, Lord Jenkin, will remember, it was forced upon the Government. It has been an enormous success. It was held that we were creating an impossible problem for Ofcom by bringing citizen and consumer interests together. It has worked perfectly well. The noble Lord spoke of tensions; any self-respecting regulator in the 21st century must look at the inevitable tensions between the social, the economic and the political. To describe that as an inappropriate job for a regulator would be quite wrong. Sooner or later, it will happen. I suspect that the noble Lord, Lord Jenkin, is correct: something like this will find its way in on Report. The Government will be forced to deal with it in a Division, and do themselves no favours by hiding behind the notion that, somehow, a banner saying “Invest with confidence” is sufficient to blow every other consideration and every debate we have had in Grand Committee out of the water. There are enormous considerations, and the regulator should be apprised and made responsible for, at least, advising the Government on getting through some difficult times. Finally, Members of the Committee have spoken about regulatory and investor uncertainty. Nothing can create more investor uncertainty than the possibility of a new Government coming in with a new energy policy. The notion of an empowered regulator with a settled set of views would promote investor confidence far more than anything else I can think of.
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Lord RedesdaleI thank the Minister for his spirited defence of the Government’s position. He has obviously been told to resist, and h…
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Lord RedesdaleNon-affiliated
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I thank the Minister for his spirited defence of the Government’s position. He has obviously been told to resist, and he did so with great gusto. Before I withdraw the amendment, I would like to recount that in order to discuss this and many other issues, I went to Ofgem and said that one of the issues that we might raise is the powers of the regulator. The person I was talking to said, quite rightly, that that is a job for Parliament. It is a job for Parliament. It is a job for this Committee to look at this again. The Minister should not take lightly the implied—well, it was not so implied—
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Lord BachThreat.
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Lord BachLabour
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Threat.
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Lord RedesdaleHe should not take lightly the direct threat that this will be taken to a vote at the next stage. Therefore, I hope he…
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Lord RedesdaleNon-affiliated
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He should not take lightly the direct threat that this will be taken to a vote at the next stage. Therefore, I hope he takes that on board, consults widely and comes back with a different view because otherwise this will be going to the Commons. As this is Grand Committee, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
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Lord Redesdalemoved Amendment No. 60:
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Lord RedesdaleNon-affiliated
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moved Amendment No. 60:
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Baroness WilcoxI support a greenhouse gas emissions performance standard. This side of the Committee has often said that there needs t…
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Baroness WilcoxConservative
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I support a greenhouse gas emissions performance standard. This side of the Committee has often said that there needs to be a transformation of the way we use and generate energy in this country. That change requires a fundamental shift in our long-term investment in energy and serious encouragement of new green technologies. We strongly feel that a performance emissions standard will do both those things. The next 10 years will be crucial. The UK’s energy landscape must be overhauled if we are to meet our target of reducing emissions by 26 per cent by 2020. The way we produce energy is one of the largest contributors to our emissions. Unabated coal-powered generation, the most polluting technology, accounts for almost 40 per cent of the UK’s current electricity capacity, and much of it is due to be decommissioned. Similarly, a significant majority of the UK’s nuclear supply is also due for retirement, and this is all happening at a time when energy demand is expected to rise. It is therefore necessary for transformative steps to be taken if we are to ensure a secure supply of energy. Now is our opportunity. We support a legally binding UK emissions performance standard that would mean that there would be a maximum level of emissions allowed per megawatt hour, more or less benchmarked on modern combined-cycle gas turbine plants. The implication would be that new coal-fired power stations in the UK would have to incorporate carbon capture and storage technology from the outset, limiting their emissions to the level achieved by modern gas stations. This proposal has worked well in California. Governor Schwarzenegger describes EPS as operating in a similar fashion to the standard set for household appliances, such as refrigerators, where there are minimum performance standards beyond which it is up to the market to compete as products meet or exceed the minimum standard. This proposal would require the Government to fund a variety of CCS demonstration projects over the next five to 10 years. We on these Benches would be prepared to give such funding and would pay for it out of receipts from the third and subsequent stages of the European Emissions Trading Scheme. An emissions performance standard would revolutionise the development of carbon capture and storage. It would send clear market signals regarding the direction of the industry, letting developers know that the energy that they produce must be as clean as the highest efficiency plants currently in operation. That would open up the market. It would let suppliers choose which way they pursue this level of green commitment—through carbon capture, renewables or different types of gasification. The emissions performance standard would prevent plants such as Kingsnorth from being built without technologies that abate its impact on the environment. We would assist the industry in making these changes. This help would ensure a diversified, clean energy mix for the UK and develop the industry in a way that prepares it for the decades ahead. The long-term benefit extends beyond our borders. The UK would be seen as a test bed for CCS technology. It would be the birth of an industry that is not only exportable, but likely to be essential around the world in the coming years. If problems could be worked out here and the intellectual property rights established in this country, the UK would be able to lead a worldwide energy revolution, with British workers leading the way. The amendment seems to be a general enabling amendment. I am sure that the Minister will be quick to point out some problems with the drafting, if he can hear me. I am prepared to repeat that.
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Lord BachI am also listening to the noble Baroness.
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Lord BachLabour
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I am also listening to the noble Baroness.
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Baroness WilcoxI am sure the Minister will be quick to point out some problems with the drafting, but we hope that he will consider th…
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Baroness WilcoxConservative
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I am sure the Minister will be quick to point out some problems with the drafting, but we hope that he will consider the principle behind the amendment. It is a principle that we fundamentally support from these Benches. We look forward to the Minister's response.
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Lord BachI am grateful to the noble Baroness and the noble Lord for speaking to this amendment. I note that the noble Lord wants…
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Lord BachLabour
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I am grateful to the noble Baroness and the noble Lord for speaking to this amendment. I note that the noble Lord wants to hear where the Government stand in general, broad terms on this issue, so he will forgive me if I take a little time. We sympathise with the broad objective, but we do not believe that the amendment would serve to increase the effectiveness of the Government’s actions to reduce carbon dioxide emissions. We believe that, as currently formulated, the amendment could be counterproductive. However, I do not want any unnecessary polarisation of this debate, because as much as anything this is a probing amendment. The amendment is very important and I do not believe that the overall respective positions are very far apart on this matter. In particular, we agree—as does the noble Baroness—with the concept of a cap on carbon dioxide emissions. We differ on how this cap should be set. We are convinced that the most appropriate level for any carbon dioxide cap on electricity generation is that it should be part of a broader overall cap on such emissions within the economy and not at individual power station level. This gives the market freedom to deliver carbon reductions in the parts of the economy where they are most cost effective. Moreover, because climate change is not a battle just for us in the UK, the effectiveness and credibility of any such carbon dioxide cap is strengthened if the cap is set at multinational not just national level. That is why we believe that the right strategy is to deliver a cap and the resultant carbon emission reductions through the EU Emissions Trading Scheme. I will first explain our emissions reduction strategy. We are committed to meeting our greenhouse gas reduction target. The Climate Change Bill, the first of its kind anywhere in the world, will set out a framework for achieving that through legally binding targets and “carbon budgets”, and will help to provide the certainty and confidence that business and individuals need to encourage them to make the necessary long-term investments in low-carbon technologies. Within the strategic context, our approach is that set out in the White Paper. It is intended to secure the twin objectives of achieving emissions reductions, but at the same time maintaining reliable energy supplies. The key to delivering these objectives is the trading scheme. The EU ETS sets an overall cap on EU-wide greenhouse gas emissions, but allows companies to decide the most cost-effective way of delivering them. The cap is an ambitious one: in the Commission’s proposed draft directive, for example, emissions covered by the scheme will be 21 per cent below 2005 levels by 2020, which is a very challenging target indeed. Furthermore, the cap includes emissions from all the EU’s power stations that exceed the 20 megawatt threshold, and will continue to decrease annually after 2020 in keeping with the EU’s emission reduction targets. Importantly, the cap cannot be expanded. Therefore, any new power stations will have to fit within the existing emissions limits set at the EU-wide level. This means that any limit on emissions from a particular power station or group of power stations would not lead to additional carbon savings overall. The EU ETS is at the heart of our global effort to tackle climate change, and we have been working closely with the Commission and other member states to ensure that in phase 3 and beyond, the EU ETS is strengthened and consolidated with increased transparency and improved stability. We have seen the scheme already develop with forward contracts for EU emission allowances currently trading at around €25 per tonne of carbon dioxide. Companies will have to take that real and substantive financial cost into account when making their investment decisions. We are confident that the strengthened EU ETS will play a pivotal role in cutting the power sector’s emissions in the UK and Europe. It will do so in a way that is consistent with the market principles which help to make carbon savings in the most cost-effective manner possible. I do not know whether the Committee is with me or not. Because of this existing framework, the amendment proposed by the noble Lord, Lord Redesdale, would not have the effect of further reducing the carbon emissions from power stations. Amendment No. 60 would give the Secretary of State the power to make regulations prescribing a greenhouse gases emissions performance standard for new generating stations and would prohibit the consenting of new stations under Section 36 of the Electricity Act 1989 unless they are compliant with that standard. It would have the effect of constraining the possibilities for delivering the diverse energy mix that the UK requires for ensuring the security of supply, while also impinging on the effectiveness of the EU ETS. The amendment is clearly targeted at energy generated from fossil fuels, particularly coal. We believe, and we hope to explain, the important role that fossil fuels play—and should play—going forward in the UK energy mix. I return briefly to why the Government believe that the existing framework for tackling carbon emissions is right and how new fossil fuel power stations can be compatible with an overall drive to reduce emissions. As the Committee knows well, the UK potentially faces a growing energy generation gap, with about a third of our existing capacity closing by 2020. Nine fossil fuel power plants, comprising around 12 gigawatts of capacity—about 20 per cent of peak demand this year—are scheduled to close by the end of 2015 as a result of EU environmental legislation. Seven nuclear power plants with a combined capacity of more than 6.5 gigawatts are also scheduled to close by 2020, with another 4 gigawatts in later years. The Government have made it clear that they want to see a step change in the use of renewable generation by 2020, but because most of that renewable energy will come from wind, which is an intermittent form of energy, we still need significant conventional capacity to provide back-up. In the shorter term, where the build rates of new renewables and nuclear will be constrained, we will have to continue to rely on fossil fuels for base load electricity generation. This view of the future is not confined to the UK. The International Energy Agency predicts, under its most positive scenario, that fossil fuels will still provide approximately 38 per cent of total worldwide electricity generation by 2030.
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Lord RedesdaleI thank the Minister for his fulsome reply, and the noble Baroness, Lady Wilcox, for her erudite exposition of the amen…
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Lord RedesdaleNon-affiliated
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I thank the Minister for his fulsome reply, and the noble Baroness, Lady Wilcox, for her erudite exposition of the amendment itself. I am probably one of the few complete sceptics on the value of the EU ETS in Parliament—but that is personal opinion, not the view of my party. We are reliant on this unproven mechanism producing enormous amounts of carbon reduction, so a degree of scepticism towards a system that has had faults in the past is reasonable. However, the Minister has been careful in his response, for which I thank him. The amendment looks at testing power stations as we test emissions of cars. I do not see why we should not look at power stations operating on that basis. The amendment looks at reducing the amount of coal, which will be part of the mix for the foreseeable future. However, reducing the amount of carbon dioxide from coal-fired power stations through co-firing and other new technologies should not be limited by capping the released CO2; in fact, it would be veritably encouraged by it. However, the Minister has given a good reply and, on that basis, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. [Amendments Nos. 61 and 62 not moved.]
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Lord Redesdalemoved Amendment No. 63:
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Lord RedesdaleNon-affiliated
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moved Amendment No. 63:
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Baroness WilcoxFollowing our further discussions on microgeneration and renewable energy tariffs, we knew that the Government would co…
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Baroness WilcoxConservative
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Following our further discussions on microgeneration and renewable energy tariffs, we knew that the Government would conduct a broad consultation this summer. Part of this will focus on the viability of feed-in tariffs, for which we had such wide support when we debated that amendment last week. We would be happy to address these issues on Report after the consultation, provided that the Government allow time for discussions of the results of their assessment before that stage.
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Lord BachI am most grateful to the noble Baroness, whose remarks have taken me completely by surprise. As it happens, I have a p…
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Lord BachLabour
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I am most grateful to the noble Baroness, whose remarks have taken me completely by surprise. As it happens, I have a piece of paper in my hand that deals with that issue. We have always said that feed-in tariffs for microgeneration would be considered alongside other options as part of the consultation that we are running over the summer, which in turn will feed into our renewable energy strategy. By October, with the consultation closed and the responses in, we will be able to give an initial assessment of the responses on microgeneration and can have a more informed discussion of the issues concerning a feed-in tariff for microgeneration. We will be happy to discuss the issue, and our initial view of those consultation responses received, with interested Peers before Report. I hope that that satisfies the Committee and that it will generally be supported. I shall now respond to the noble Lord’s very interesting amendment. He wishes in his amendment to encourage the deployment of hydro-microgeneration and talks about a number of issues that have been raised by the British Hydropower Association.
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Baroness Carnegy of LourThe noble Lord is probably talking about England and Wales because he mentioned the Environment Agency. Are there probl…
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Baroness Carnegy of LourConservative
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The noble Lord is probably talking about England and Wales because he mentioned the Environment Agency. Are there problems in getting the same arrangements for Scotland where there are a lot of rivers and possibilities for water? I wonder how that is working out.
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Lord BachThe Scottish equivalent of the Environment Agency is producing a report later this year, dealing with issues as they ar…
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Lord BachLabour
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The Scottish equivalent of the Environment Agency is producing a report later this year, dealing with issues as they arise in Scotland. I should imagine that the issues are pretty much the same, except, as the noble Baroness says, Scotland is full of water, some of which is used for very good purposes, I understand.
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Lord RedesdaleI thank the Minister for his reply in which he talked about feed-in tariffs, which is of great interest. We shall want…
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Lord RedesdaleNon-affiliated
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I thank the Minister for his reply in which he talked about feed-in tariffs, which is of great interest. We shall want to deal with that issue after the summer, and obviously a great deal of work will be done between now and then, so I will leave that issue, especially as the Minister gave the noble Baroness, Lady Wilcox, such an eloquent reply. I very much hope that he will arrange a meeting between his officials and the British Hydropower Association so that it will have concluded before the next stage of the Bill and we can discuss the outcome of such deliberations. If they are favourable, it is doubtful whether we would need to come back to this amendment. However, it would be helpful to be copied into the results of those deliberations, which would inform us.
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Lord BachThe meeting is due to be held in late July.
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Lord BachLabour
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The meeting is due to be held in late July.
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Lord RedesdaleI thank the Minister. I hope that his department will write so that we can digest the information over the summer and d…
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Lord RedesdaleNon-affiliated
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I thank the Minister. I hope that his department will write so that we can digest the information over the summer and decide whether to bring the matter back. On that basis, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
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Lord Teversonmoved Amendment No. 63A:
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Lord TeversonLiberal Democrat
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moved Amendment No. 63A:
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Lord Jenkin of RodingI have been tabling Questions for Written Answer on what will happen to the proceeds of these auctions. There has been…
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Lord Jenkin of RodingConservative
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I have been tabling Questions for Written Answer on what will happen to the proceeds of these auctions. There has been some pressure to suggest that, when the money is raised through the auctions, it should be earmarked for energy and environmental purposes. However, the Answers I have received from the Minister in Defra said that the usual Treasury rules will apply and that it would not be earmarked or ring-fenced in any way, but that it would simply go into the general pot to be part of the revenue that will finance the Government’s total expenditure. I wonder whether that is right. I do not want to insist that one way or the other is right, but it seems that these have a rather special origin and, perhaps, might deserve some special treatment. It would be very helpful if the Minister could say anything about that.
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Lord BachI am delighted that the noble Lord, Lord Teverson, is in favour of the EU ETS scheme, which I am sure represents his pa…
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Lord BachLabour
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I am delighted that the noble Lord, Lord Teverson, is in favour of the EU ETS scheme, which I am sure represents his party’s views. Having spent the past three or four weeks on the European Union Bill, I would have been extremely surprised if it did not. I am grateful to the noble Lord for moving his amendment. With a motivation similar to that of Amendment No. 54, which was brought forward yesterday, we believe that this proposed new clause is drafted with the aim of eliminating the windfall profits of the companies participating in the trading scheme by auctioning 100 per cent of allowances to the large electricity producers. I hope that the noble Lord will forgive me if I do not go back to that discussion and the background I gave at some length—well, not at that great a length—of the EU ETS. As I said in my response, the Government announced in this year’s Budget that they would auction 100 per cent of allowances to the large electricity producers beyond 2012 in phase 3 addressing the issue of windfall profits. This is our negotiating line in Brussels. The noble Lord will be pleased to hear that we are pressing hard for the directive to accommodate this domestic policy. Given our commitment to 100 per cent auctioning in the UK, we would adopt the maximum permissible level of auctioning in the third phase. However, the Emissions Trading Scheme directive is EU policy and the details of phase 3 are yet to be negotiated, so we would not want to pre-empt it with domestic legislation on this issue now. Moreover, we believe the proposed amendment would add perhaps unnecessary legislation on top of the EU directive, which would not be very good in the practice of better regulation. Members of the Committee will recall that avoiding pre-empting EU legislation and legislative duplication are consistent themes. We have already spoken of the dangers in relation to priority access for renewables, and during last week’s proceedings we discussed an amendment that sought to duplicate an EU principle of law on non-discrimination in the chapter of the Bill on the renewables obligation. Furthermore, while we are pushing for 100 per cent auctioning for electricity producers in phase 3, we should not be seeking to act unilaterally on this. I hope that the noble Lord would agree with that. As such, we would want to retain flexibility for future phases. I repeat that we remain committed to the principle of auctioning and to pushing for 100 per cent auctioning for the power sector in Europe. However, we also believe strongly that in the multilateral and long-term arena of climate change and in the EU ETS the principle of climate change in one country is a difficult issue in a global environment, and success depends on multinational agreements. It is prudent to retain some flexibility in policy terms at a national level, which is something that the proposed amendment, which I believe to be a probing amendment, would not allow. I hope that I have given the noble Lord some reassurance that the Government are committed to achieving the goal that he believes in. We do not think that the amendment is needed, and so I ask him to withdraw it. I am afraid that I cannot help the noble Lord, Lord Jenkin, as much as he would like me to. The note that I have in front of me states that the issue he raises—a good issue, of course—is a matter for the Treasury. It may well be that in his long and distinguished career, he has seen, or even had to use, such an argument himself.
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Lord Jenkin of RodingI am sure that when I was Chief Secretary that is precisely what I did.
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Lord Jenkin of RodingConservative
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I am sure that when I was Chief Secretary that is precisely what I did.
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Lord TeversonI thank the Minister for his reply. As he probably realises, this amendment is drafted so that it does not in any way p…
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Lord TeversonLiberal Democrat
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I thank the Minister for his reply. As he probably realises, this amendment is drafted so that it does not in any way pre-empt EU legislation. It states that the maximum permissible under the directive should be auctioned, not that we should auction 100 per cent ourselves. It would fall within that. The Minister is right that it is particularly around windfall profits, but it is not just that. It is important in terms of energy policy and climate change policy that once we introduce significant auctioning we immediately realise a realistic level of carbon pricing that has a much greater effect throughout the economy and means that the market mechanism on carbon, which we all want to work, starts to operate effectively. I thank the noble Lord, Lord Jenkin, for his intervention. I tried to table an amendment broadly about the EU ETS and the allocation of that money, but it was not allowed. Having read the proposal to the Commission and considering where the negotiations are, I understood that it was specifically a European proposal as part of the directive that 25 per cent of the proceeds of auctioning under the EU ETS would go towards energy saving schemes and renewables to meet the other targets that are part of the European Commission’s climate change package. I may be wrong on that. It is slightly more complicated post-2012, because it is proposed that there will be no national allocation plans, and I do not know how the Commission proposes to allocate on a sector rather than national basis. It would be interesting to know how those allocations, which are supposed to be auctioned nationally, are to be made if there are no national allocation plans. However, that is another issue. I welcome the Government’s commitment in the negotiations, which are important, towards a high degree of auctioning in this sector where there is not really international competition. That is why the competitiveness issues do not really come in. In other sectors of industry, the argument is more complicated, but that is outside the ambit of the Bill. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
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Lord Teversonmoved Amendment No. 63B:
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Lord TeversonLiberal Democrat
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moved Amendment No. 63B:
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Lord BachAs the noble Lord said, we have already had a good debate on some aspects of geothermal energy earlier in the Committee…
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Lord BachLabour
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As the noble Lord said, we have already had a good debate on some aspects of geothermal energy earlier in the Committee process. I am delighted to agree with the noble Lord that both sides have been quick off the mark, and the meeting is arranged, as I understand it, for 24 July. During that debate, I explained that, although the energy sector had not brought forward any proposed new developments for electricity and heat generation from geothermal energy, in the context of the very challenging EU renewables targets the Government would be interested in finding out more about the prospects of that technology. I am sure that the Committee wishes the meeting in late July well. The amendment proposes the creation of a licensing system for companies exploiting the heat from deep geothermal sources for the direct use of heat and for the use of that heat to generate electricity. It raises an interesting issue. On balance, we think that it would be premature to create such a regime, and therefore I will resist the amendment. I do not propose to revisit in detail all the points that I made previously about the issue, but I will remind the Committee of the points that I made last week. Since the prospects for the deployment of geothermal power were explored in the late 1970s and 1980s, in the face of technical issues there has been no further work undertaken in the UK. However, there has been work at a European level. To date, the Government have not been approached by developers who are keen to explore the potential for geothermal projects, but we are keen to meet developers and that will now take place. The lack of geothermal developments in the UK in no way represents any government antipathy towards the technology, but merely a lack of proposals from the market. The issue about licensing is not straightforward. Our initial legal analysis—I stress that it is initial—suggests that geothermal projects could be consented under the existing legislative framework; although we accept that, should there be a large expansion in the industry, there could be a case for streamlining legislation in this area. However, given that there are no live proposals, and we are not even aware of any in the pipeline, we consider the amendment to be a little premature. By contrast, other licensing regimes, such as those being created in the Bill, are a result of specific needs to cater for imminent projects and consultations with interested parties. If and when deep geothermal energy reaches a stage where the regulatory requirements are better known and we are getting a clear message that the absence of a bespoke licensing regime is stifling private sector investment, we would look to legislate for such requirements at the earliest opportunity. I do not think that the noble Lord could expect me to go further than that today. On that basis, I ask him to withdraw the amendment.
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Lord TeversonThat was even more positive than I had expected, so I thank the Minister for that. It will be an interesting meeting in…
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Lord TeversonLiberal Democrat
Quote
That was even more positive than I had expected, so I thank the Minister for that. It will be an interesting meeting in July. An Australian company that is very interested will be there. I welcome the comment that he thinks that a licensing regime may not be necessary at the beginning. If that were the case, I think we would all say hurrah to that, but that will be no doubt be discussed with his department and determined as we go along. I very much welcome the Minister's statement and, at this point, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.
Time
19:30
Source
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Lord BachThis may be a convenient moment—almost the exact moment—for the Committee to adjourn until Tuesday at 3:30 pm.
Speaker
Lord BachLabour
Quote
This may be a convenient moment—almost the exact moment—for the Committee to adjourn until Tuesday at 3:30 pm.
Time
19:30
Source
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The Deputy Chairman of Committees (Lord Faulkner of Worcester)The Committee stands adjourned until Tuesday at 3.30 pm. The Committee adjourned at 7.46 pm.
Speaker
The Deputy Chairman of Committees (Lord Faulkner of Worcester)Labour
Quote
The Committee stands adjourned until Tuesday at 3.30 pm. The Committee adjourned at 7.46 pm.
Time
19:30
Source
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EnactedEnergy Act 2008