Electricity Generation
Debate between Baroness Liddell of Coatdyke and Baroness Verma
Baroness Verma
My Lords, my noble friend is of course a great advocate of shale gas, which offers huge potential for adding to the UK’s energy source but we need a diverse mix of energy supply. As a Government, we have tried to remove many barriers that get in the way of exploration but we have to work very closely with local communities to ensure that they come on board.
Baroness Liddell of Coatdyke (Lab)
My Lords, further to that point about shale gas, one of the main reasons for the interconnector clicking into the UK direction is the rather dodgy state of our generation capacity at the moment. Given the glut of oil and the impact on oil prices, which knocks on to gas prices, what discussions have the Government had with the major generators about their long-term projections now and their choices for sources of generation? That impacts on shale gas and shale oil because the cost of exploration and production is not cheap.
Baroness Verma
My Lords, the noble Baroness’s point is well intended. As she rightly says, we need to look at the long term. While we have a drive-down of prices today, we need to see how the longer-term picture will encapsulate all energy supplies. That is why I am really pleased that this Government at least took the decision to make a greater diversity of energy supply available through the Energy Act 2013. That enabled the renewables sector to come and work on a par with traditional fuels. However, we have to make sure that whatever we do and whichever source we try to promote—in this case, shale offers huge potential—we support all supplies that make us less dependent on imported energy.
Grangemouth Refinery
Debate between Baroness Liddell of Coatdyke and Baroness Verma
Baroness Verma
My noble friend is absolutely right that it is an incredibly important issue. That is why my starting point is that we need to get both parties back around the table. We in the Government here are doing our level best to ensure that happens and are working very closely with the Scottish Government.
Baroness Liddell of Coatdyke (Lab)
My Lords, is the Minister aware that a further 141 jobs have been lost today at the BASF plant at Hawkhead Road in Paisley? It is hard to overestimate just how critical the situation now is in Scotland. I echo the request of the noble Lord, Lord Forsyth, for the engagement of the Prime Minister. We need a little more detail about the nature of the assistance that can be given to try to get these redundancy notices withdrawn with a view to saving these jobs, which are critical to the infrastructure of Scotland and to Scotland’s economic future.
Baroness Verma
The noble Baroness raises a very important point. This is not just about one area but affects the whole country. This debate will be watched very closely and I will of course take back the requests of my noble friend and the noble Baroness that this is taken to the highest levels to ensure that we get proper engagement. What we want to see of course, at the end of it all, is the two parties around the table to resolve their differences.
Energy Bill
Debate between Baroness Liddell of Coatdyke and Baroness Verma
Baroness Liddell of Coatdyke
My Lords, I have great sympathy with what my noble friend has said. The noble Lord, Lord Oxburgh, drew attention to the fact that we see in DECC no institutional memory. We should put alongside that the fact that Ministers rotate regularly. There needs to be somebody or some organisation in the middle that is the honest broker. When I was the Energy Minister, I had a panel of experts which was hugely valuable to me. It involved people such as Dieter Helm and had real gravitas. It was really useful to be able to bounce ideas off people, but this proposal takes it to another level. My noble friend said that people in the very enclosed world of energy policy have often had opportunities to work in the big six or for some of the significant players in the field. It is useful to know who is taking these decisions. To the noble Earl, Lord Caithness, I would say that sometimes you have to spend a penny to save a penny. If you spend your money on getting people who can stop you making mistakes, you will avoid spending not just millions but perhaps billions of pounds making mistakes just for the sake of a few ha’pennies to ensure that you have proper advice. My goodness, government spends enough on consultants. Why not put some of that money to good use getting some expert advice?
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, for his amendments. Amendments 55ZF and 55ZG would set up an expert panel to provide independent advice to the Secretary of State on setting strike prices, development of contract terms and whether to issue CFDs or investment contracts. These are extremely important matters and I am grateful to the noble Lord for the opportunity to debate them.
The Government wholly agree with the noble Lord that independence, expert scrutiny and engagement with a wide range of stakeholder views are important principles. For the purposes of setting strike prices for renewable technologies, we are ensuring that the process through which those strike prices are set is transparent, robust and informed by a full range of expert input and stakeholder consultation. On 17 July, we launched a consultation on the proposed strike prices to allow industry and all other stakeholders, including consumer groups, to scrutinise the evidence and analysis that informed them. We are asking for their feedback to inform the final strike prices.
Further, to ensure that the strike prices proposed by the Secretary of State in the draft delivery plan were informed by independent advice, we asked National Grid to conduct analysis to help to understand the potential impacts of strike prices on government objectives. We also commissioned an interim panel of technical experts to scrutinise that analysis impartially. Both those reports were published alongside the draft EMR delivery plan and copies deposited in the Libraries of this House and the other place.
The process allows us to be confident that the strike prices are informed by robust evidence in an appropriately transparent way. We have been able to use existing powers to appoint the interim panel of technical experts, so they are already performing their scrutiny role. Following Royal Assent, we intend to establish an ad hoc advisory group, with Clause 139(2)(c) providing the spending authorisation to support this work. This, with the steps described above, will ensure that the Secretary of State makes an informed decision having considered a full range of views before setting the level of support in the final delivery plan. However, I do not agree that these principles need to be delivered by creating a new public body; we are already delivering them.
On setting strike prices for investment contracts, as we set out in our update on Final Investment Decision Enabling for Renewables, published on 27 June 2013, strike prices for renewables generation will use the strike prices published in the final delivery plan. The Government have appointed external specialist advisers to help to ensure that any investment represents value for money. We will publish summaries of reports from these advisers alongside the contract, in the event that agreement is reached, when it is laid before Parliament. In addition, the Government made commitments and amendments in the Bill in the other place to ensure that investment contracts are transparent. For all these reasons, we do not think it is necessary that there is separate scrutiny of whether an investment contract should be offered by the counterparty.
Finally, the noble Lord raised concerns that the contract terms should be subject to scrutiny and that there should be independent scrutiny before the counterparty offered a contract. I strongly agree that the terms on which the CFD or investment contracts are set need to be scrutinised. However, I consider that this should be done not by a separate expert panel but by the industry and consumer groups at large. This is why, over the past year, we have been working with an expert group consisting of industry and consumer group representatives in the development of key terms, something that I am sure the noble Lord, Lord Whitty, will welcome.
We have also had extensive discussions with industry, consumer groups and others with regard to how contracts will be allocated. The allocation process will be run by National Grid which will act within rules set out in secondary legislation to allocate CFDs to eligible applicants. The intention is that the allocation process will be rules-based and relatively mechanistic to allow investors and developers to make an informed decision about their chance of being allocated a contract. If an applicant is successful, National Grid will direct the counterparty to offer it a contract. Therefore, we do not think it appropriate to include another process which would add considerable complexity to the system.
We will shortly be publishing the CFD contract spine and further detail of the allocation process, which builds on the draft contract terms and operational framework published in November 2012. This will allow industry and other stakeholders to examine the terms of the contract and the allocation process and to discuss them further with my officials. Renewables investment contracts will be based on the final standard form CFD and therefore will be subject to the same scrutiny as aforementioned.
Before I ask the noble Lord, Lord Whitty, to withdraw his amendment I shall give some further information. He asked about the structures advising the Secretary of State and the counterparty beyond Ofgem and National Grid. For the first panel, we used a procurement process but, following Royal Assent, we intend to establish an ad hoc advisory group. We have not only made a policy commitment to establish a panel of technical experts but already appointed an interim panel to ensure they are operating in a timely and effective manner.
On reviewing strike prices, we have the opportunity to revise them through the annual updates to the delivery plan, and we intend to do that to set strike prices at an appropriate level.
My noble friend Lord Jenkin asked whether there would be enough accountability. We recognise that there is a need for robust accountability and transparency with such powers, which is why we introduced a duty on the Secretary of State to report on the Government’s activities in relation to all EMR functions provided for under Part 2. There is also a five-year review in Clause 55.
The noble Lord, Lord Berkeley, asked who made up the panel. I have a list of the members and their résumés. I think it would be helpful to the Committee if I do not spend time going through them but write to members of the Committee on the make up of the panel. I hope the noble Lord, Lord Whitty, will withdraw his amendment.
Energy Bill
Debate between Baroness Liddell of Coatdyke and Baroness Verma
Baroness Verma
My Lords, I am quite happy to take away the noble Lord’s concerns and, I hope, respond to him in writing.
Baroness Liddell of Coatdyke
Perhaps I may raise a tangential point that came to mind when my noble friend Lord Whitty was speaking about interconnectivity. There is a possibility of a large offshore wind farm being built in the Irish Sea. Would there be difference in the contracts related to where the energy was used; for example, whether it went to the Republic or Northern Ireland, then to be shipped to Great Britain, or operated in the other direction? I do not expect an answer just now—I have only just thought of the question—but I hope that when the Minister writes to Members of the Committee she might take a look at that issue.
Baroness Verma
Rather than give a brief response to that, I would prefer to give a more detailed one. On international eligibility, I refer noble Lords to the Government’s response of 27 June to the call for evidence on renewables trading. Final decisions will be made at the end of the year and will be set out in a public document.