Draft Electricity Capacity (Amendment) Regulations 2023
(1 year, 5 months ago)
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The Chair
The Minister for Energy Security and Net Zero (Graham Stuart)
I beg to move,
That the Committee has considered the draft Electricity Capacity (Amendment) Regulations 2023.
It is a great pleasure to serve under your chairmanship, Mr Robertson. The regulations were laid before the House on 12 June. The draft instrument seeks to make technical changes to the capacity market scheme, the Government’s main tool for ensuring security of supply in Great Britain.
As set out in the “Powering Up Britain” paper, which was announced in the House on 30 March, we have bold new commitments to super-charge clean energy and accelerate renewable deployment. In the shorter term, while the future geopolitical context is still uncertain, we recognise that the world is likely to face continued challenges this winter around security of supply, considering Russia’s illegal invasion of Ukraine.
What does the draft instrument do? To ensure that the capacity market continues to function effectively, we regularly make adjustments to the implementing legislation, based on our day-to-day experience of operating the scheme. In that context, the draft instrument makes changes to three electricity capacity regulations to deliver technical improvements that support the functioning of the capacity market.
Graham Stuart
I will make a little more progress first. The capacity market is now well established, with capacity auctions held every year since its inception in 2014. The draft instrument aims to reduce the administrative burden associated with the process, as we believe that it is more appropriate instead to notify the market when the intention is for an auction not to be held, rather than having to announce each year that it will be. The change will not impact the nature of participation in the scheme or announcements regarding the targets for the capacity auction. It simply seeks to change the way in which the announcement is made that confirms whether auctions will be held.
We have also been made aware that the existing transfer route that enables capacity agreements to be terminated in order to participate in the contracts for difference scheme cannot be used in practice, due to interactions between the definitions used in the regulations and the delivery timeframes. The draft instrument seeks to amend the definition of the contracts for difference transfer notice to enable the transfer route to be used. The draft instrument seeks to improve administrative arrangements by extending the timescales associated with the settlement body’s calculation of penalties and issuing of associated invoices for non-delivery.
Alan Brown
I thank the Minister for giving way. Paragraph 7.1 of the explanatory memorandum states that nuclear can form part of the capacity market. Will he explain how nuclear can bid in? We keep getting told that the great thing about nuclear is that it provides baseloads. How does that work in the capacity market auction?
Graham Stuart
As happy as I would be to engage in a wider discussion about nuclear this morning, I think it might be best if I wrote to the hon. Gentleman to set out those specific concerns.
Turning to the Government consultation, the changes in the draft instrument were consulted on at the start of the year and were broadly supported by respondents. We also consulted on a wider range of changes, including to the capacity market rules that set out the detailed provisions for the delivery of the scheme.
As was signalled in the Government response to the consultation, we intend to follow a two-phased approach to reforms to the capacity market. First, we will proceed with technical changes to strengthen the security of supply and ensure better value for money. In the second phase, we intend to undertake further analysis and development before taking a final decision on implementation.
The capacity market continues to support low-carbon technologies, with growing participation of demand-side response and storage technologies. In line with the broad support for greater alignment of the capacity market with net zero, the Government remain committed to introducing an emissions limit reduction for new build and refurbishing plants into the capacity market and exploring options to address barriers to low-carbon technologies to help drive the transition to a net zero power system by 2035, subject to security of supply. Further analysis is required to understand the impact that the proposals will have on energy security.
Through developments to the capacity market and the review of the electricity market arrangements programme, we are confident that the right market signals will be in place to ensure that we meet our 2035 decarbonisation target, subject to security of supply. As has been highlighted, we have also made a number of technical amendments to the capacity market rules, which were laid before the House on 12 July. Rule changes will be introduced to reduce administrative burdens for prospective capacity providers and clarify how auctions are operated for the benefit of participants.
In conclusion, the draft instrument introduces a number of technical provisions necessary to enable the continued efficient operation of the capacity market, so that it can continue to deliver on its objectives. I commend the regulations to the Committee.
Kerry McCarthy (Bristol East) (Lab)
It is a pleasure to see you in the Chair, Mr Robertson. I say at the outset that we will not oppose the Government in bringing forward the amendments, but I am going to speak for about half an hour about why we will not—[Laughter.] No, I will not.
We accept that the changes should be made and they are of very minor significance to the scheme overall. To recap, the capacity market is currently the main system in place for securing a stable and reliable electricity system. Generally, the system works well in providing secure provision. It provides commitments by generators to supply guaranteed power into the system, allowing those balancing the system to know in advance what capacity they can rely on for each period. A system of fines is in place for generators that have committed themselves to supply but then do not deliver when required.
It is worth noting that suppliers have to agree to deliver power only if required. They still get paid for the capacity agreement if they are not required to deliver power. I can see why that might be the case—we do not want to disincentivise them—but there is an element of free money in the system, and that needs revisiting at some stage.
I will not repeat the Minister’s explanation of the three amendments that are being introduced, other than to comment that the second amendment, to regulation 34, simply gives effect to something that was for practical purposes always the case, as the low carbon contracts company was never in a position to know whether the capacity market holding generator would be successful in a CfD bid.
As I said, we do not have a problem with any of the amendments, so we will not seek to divide the Committee.
Alan Brown
It is a pleasure to serve under your chairmanship, Mr Robertson. I can say more if the Committee really wants, but I will raise just a couple of things, and we will not oppose the draft regulations.
On how the capacity market operates overall, I think we will get to a place pretty soon where we do not rely on diesel generators, for example. Demand-side response was mentioned and that is certainly a way forward. We have to do more work on that.
I also bring to the Minister’s attention that I think we can get to a place where it is much easier for projects to bid in for the CfD auction and also to combine storage with renewable generation, so the storage aspect can bid in to the capacity market. It is about a way to drive that combined project status and get away from fossil fuel. I ask the Minister to think about that.
Graham Stuart
I thank colleagues for their contributions. As has been said, these are technical and uncontroversial amendments. I will write to the hon. Member for Kilmarnock and Loudoun about his earlier questions. The capacity market is technology-neutral, and all capacity can bid to win agreements to make capacity available when needed. As I also set out, we are going through two phases of changes to improve the capacity market, exactly in line with what he described, in that we want to encourage demand-side response.
To go back to what the hon. Member for Bristol East said about funding, the point of the auction system is to get the capacity we need to be there when we need it, at the lowest possible cost. If we want to have back-up and we cannot guarantee when we will call on it, we need to use that kind of transparent system, which increasingly encourages—as we are seeking to do by changing the system—green and flexible technologies, rather than diesel generators and so on, at the lowest possible cost. That is the aim of the amendments we are making, and I am glad to see agreement across the Committee today.
Question put and agreed to.
Draft Official Statistics Order 2023
(1 year, 5 months ago)
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The Parliamentary Secretary, Cabinet Office (Alex Burghart)
I beg to move,
That the Committee has considered the draft Official Statistics Order 2023.
It is a pleasure to serve under your chairmanship, Mr Efford. The order updates the list of non-Crown organisations that produce official statistics as defined in the Statistics and Registration Service Act 2007. The Government and UK Statistics Authority want to see official statistics enabling sound policy decisions and providing a firm evidence base for decision making both inside and outside Government.
The code of practice for statistics plays an important role in ensuring that producers of official statistics inspire public confidence by demonstrating trustworthiness, quality and value in the statistics they produce. The order revokes and replaces the Official Statistics Order 2018, updating the list of UK non-Crown bodies that may produce official statistics. From December 2007, the Statistics and Registration Service Act has allowed the flexibility to add non-Crown bodies to and remove them from the authority’s remit by order.
The order provides an updated list of bodies whose statistical activities will be official statistics and so will be monitored by the authority. The authority will work with bodies designated as producers of official statistics to promote good practice in the production and publication of official statistics. It will monitor and report on the production and publication of official statistics, and assess the treatment of producers of official statistics against the code of practice, at their request, and publish the results of those assessments. If the statistics comply with the code, the authority will designate them as “national statistics”.
The changes are applied to UK-wide and English organisations. It is important to designate the bodies as producers of official statistics to bring them within the scope of the code of practice for statistics. That will help to provide assurance that the statistics they produce are trustworthy and of high quality, and have public value.
It is important to note that although the order covers a wide range of bodies listed in the schedule, the vast majority were already designated under the previous order, so this order makes a very minor adjustment. It adds five new bodies to the list in the 2018 order: the Commission for Equality and Human Rights, the Joint Information Systems Committee, the Regulator of Social Housing, Skills for Care Ltd and the Trade Remedies Authority. It removes five bodies that are no longer legal entities from the list in the 2018 order: the Health and Social Care Information Centre, the Higher Education Statistics Agency Ltd, Monitor, the National Health Service Trust Development Authority and the Natural Environment Research Council.
The order also alters the name of two bodies that were contained in the 2018 order: the National Health Service Commissioning Board is now recorded as NHS England, and Her Majesty’s Inspectors of Constabulary is now recorded as His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services. The UK Statistics Authority was consulted in preparing this order in accordance with the Act and is content for it to be laid. My Department laid the order on behalf of other Departments in preference to each Department laying an order for the bodies for which it is responsible. That is intended to make the best use of parliamentary time.
Florence Eshalomi (Vauxhall) (Lab/Co-op)
It is a pleasure to serve under your chairship, Mr Efford. I thank the Minister for his very brief opening speech. Since the start of the year we are just 15 short of 1,000 references to statistics in Hansard—I hope that our debate today will make it 1,000.
The frequency with which statistics are used in our debates shows the tremendous power and influence that they have over our politics and political system. They provide a vital pulse on the education of the nation, helping us to determine the success and failures of policies and concentrate minds on the areas of concern.
The statistics referenced in the Commons come from a variety of sources, from charities and lobbying groups to data collected by the Government and many arm’s length bodies. That is perfectly healthy. Statistics should not be excluded from the official sources that we are discussing today. Statistics from unofficial sources allow for a variety of opinions, novel methods and original research beyond the purpose and scope of official statistics, but it is also useful to highlight when statistics are from official sources, as they come with certain guarantees of methodology and central authority that are rooted in the public good. This measure allows us to have a certain understanding about the country, and forms the basis of the commissioning of statistics by the Government and Ministers.
I am pleased to say that we do not oppose the specification of “official statistics” as continued under this instrument, and we understand the need to update what counts as statistics as and when public bodies transform in structure, or where there is a need for or redundancy of statistics in certain areas. As the Minister pointed out and the explanatory memorandum outlines, the vast majority of the changes in this order are simply organisational, representing names, mergers and similar changes in structure.
I would just like the Minister to respond to one question. The only outlier on the list is the Natural Environment Research Council, which the Minister briefly touched on. NERC has been merged into UK Research and Innovation without UKRI being granted the official statistics change. It seems strange to drop an official statistics status for an environmental research body without replacing it, but I understand that NERC did not produce much in the way of statistics. I also understand why it may not be appropriate for UKRI as a whole to be included at the moment and that there are no great calls to change that. However, will the Minister confirm that sufficient statistics will be produced in the environmental field through bodies such as the Environment Agency?
More widely, although we do not disagree with the concept of official statistics, it is important to highlight that they still have limitations with consequences that we should be aware of in policy development. Statistics can reveal a great deal of information about the state of the nation but, if we are honest, they can also leave out a lot of nuance and things that are hard to measure or quantify. It can be easy to fall into the trap of finding the easier-to-quantify measures in a subject area and then work to simply reduce that number, while failing to address the root cause of the problem or help those who fall through the cracks. We do not need to get into specifics today, but it is important that we treat all statistics with caution and study the methodologies and gaps as much as we study the headlines. I will leave it there, but I would be grateful if the Minister could briefly address the omission with respect to the NERC.
Nigel Mills (Amber Valley) (Con)
May I ask the Minister one question? He said that the UK Statistics Authority’s role is to check the quality of the statistics produced by bodies, but does it also require them to produce statistics on certain issues that are not currently being covered? For example, a year ago the Pensions Regulator was not collecting statistics on how many pension schemes had invested in leveraged liability-driven investments, which nearly crashed the economy last autumn. We are a year on and still do not know how many pension schemes lost out by having invested in such instruments. Is there a way that the authority can use its powers to require the bodies in this orbit to collect statistics that we need to monitor the health of the economy?
Alex Burghart
We have had a wide-ranging and engaging debate. In answer to the question from the hon. Member for Vauxhall about the Natural Environment Research Council, as I said in my remarks, NERC became part of UKRI in 2022, so it is no longer a legal entity and therefore ought to be removed from the order. Its removal was approved by the former Department for Business, Energy and Industrial Strategy and by UKRI itself. The Department confirmed that the Natural Environment Research Council does not produce official statistics, and engagement with UKRI confirmed that that organisation should not be included in the order.
I am happy to write to my hon. Friend the Member for Amber Valley on his point about pensions, and I will ask the authority what the position is.
Question put and agreed to.