Infrastructure Bill [HL]
Debate between Baroness Verma and Lord Teverson(9 years, 9 months ago)
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The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I beg to move that this House agrees with the House of Commons in its Amendment 20, as well as with Amendments 32 and 38. I shall also speak to the subsequent Amendments 20B and 20C, which the Government have tabled in this group. I restate this Government’s commitment to reducing carbon emissions by 80% by 2050. To meet our challenging climate targets we will need significant quantities of renewables, nuclear and gas in our energy mix, and we are committed to listening to the experts and their advice on how to reach those targets. The Committee on Climate Change said that for flexible power supply, the UK will,
“continue to use considerable, albeit declining, amounts of gas well into the 2030s”,
which will leave,
“a considerable gap between production of North Sea gas and our total demand”.
The committee argues that this demand,
“can either be met through imports or UK production of shale gas”,
and concludes that,
“if anything using well-regulated UK shale gas to fill this gap could lead to lower overall lifecycle greenhouse gas emissions than continuing to import LNG. It would also increase the proportion of energy produced within the UK, improving our energy sovereignty”.
Notwithstanding this, concerns have been raised in both this House and the other place about how the UK’s shale industry will affect our carbon budgets. We therefore tabled amendments in the other place that will place a duty on the Secretary of State to seek advice from the Committee on Climate Change as to the impact of petroleum produced onshore in England and Wales on our ability to meet the UK’s overall climate change objectives over time. The Secretary of State must consider the advice of the Committee on Climate Change and report on his conclusions at least every five years.
The Government now seek to further strengthen this commitment by specifying that if the Committee on Climate Change advises that shale gas may adversely impact climate change objectives, the Secretary of State must either make regulations providing that the right of use for petroleum and deep geothermal exploitation will no longer be available for future projects or report to Parliament on the reasons for not doing so. Amendment 20B and the consequential Amendment 20C seek to address this commitment. By introducing these amendments we are making it absolutely clear that shale development will remain compatible with our goal to cut greenhouse gas emissions.
Lord Teverson
My Lords, I welcome these amendments and very much welcome what my noble friend just said. I do not point at my noble friend in saying this, but I am always disappointed, given the truism about gas being the future, that we have not made more effort to make sure that, in the short term, gas is substituted for coal and that we have a far more rigorous gas industry than we have at the moment. That was the route forward, but we have been unable to put it to bed during the passage of the Energy Bill and now of the Infrastructure Bill. I hope that it is something that can at least be given greater attention after the election. However, I welcome these new clauses.
Oil Prices: Rural Consumers
Debate between Baroness Verma and Lord Teverson
Baroness Verma
I am grateful to the right reverend Prelate for his question, because this Government have, through many measures, not only tried to respond to people living in very inefficient homes in urban areas, but also looked at how to reach out to people who are often off grid and help support them through the renewable heat incentive and other measures. I am very happy to write to the right reverend Prelate about a number of measures undertaken by this Government.
Lord Teverson (LD)
My Lords, there is numerically less fuel poverty in rural areas than in urban ones, but it is a deeper and greater problem in rural areas because of solid walls and reliance on oil rather than gas. Does the Minister agree with me that we should once more consider, as part of our infrastructure, extending the gas grid into more of those rural towns and areas so that the gap between urban and rural fuel prices can be squeezed back down again?
Baroness Verma
Yes, and that is why this Government have undertaken a massive infrastructure programme to ensure that, where we can, and where companies are trying to ensure that all consumers benefit from on-grid electricity and gas, we can reach them. However, these are commercial decisions for companies and they need to be able to operate commercially to their own advantage, just as the Government have to create the environment in which those companies can operate. This Government have very much taken on board that 20% of our energy source is coming off by 2020 and we have done an awful lot to meet the gap that the previous Government failed to fill.
Electricity Generation
Debate between Baroness Verma and Lord Teverson
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.
Lord Teverson (LD)
My Lords, I congratulate the Minister and the Government on revitalising the interconnector debate. Given that this is a way to reduce the cost of a decarbonised electricity system in the UK, what is happening specifically about negotiations with the Government of Iceland, where a huge amount of geothermal and hydro power is available? I understand that there are difficulties with European regulations in allowing the interconnector market to go ahead. What are the Government doing to renegotiate some of those rather unhelpful single market rules?
Baroness Verma
My noble friend is absolutely right: Iceland has vast geothermal, hydro and wind resources. We stand ready to liaise further with the Icelandic Government to determine the potential for interconnection in future that will benefit both countries.
Climate Change: UN Conference
Debate between Baroness Verma and Lord Teverson(9 years, 10 months ago)
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Baroness Verma
My Lords, the noble Baroness is right that we need to ensure that ambition is always at the heart of what we do. However, we need to make sure that the rest of the world is coming with us so that we all remain competitive as well. Although the noble Baroness is right that we keep raising our ambitions, we need to make sure that others’ ambitions are raised as well.
Lord Teverson (LD)
My Lords, one of the interesting developments at Lima was the inclusion of a paragraph, in the document to go forward to Paris, saying that the use of fossil fuels should be ended globally by 2050. Do the Minister and the Government welcome that thought which was put forward and promoted very much by the Catholic Church? Is that not a good second bow to the very dry climate-change targets that we have at the moment, important as they are, and a really positive way to go forward?
Baroness Verma
I am extremely grateful to my noble friend for raising an important point. We are weighing up the position of developing and developed countries in trying to get on to the same trajectory, so we need to be sure about the impacts there will be on the developing nations as well as the developed ones. We need to encourage everyone to be less dependent on fossil fuels and to do much more on the renewables sector.
Wales: Fracking
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, I shall not comment on specific cases, but we have been very clear that the issue around hydraulic fracturing must take into account a number of issues—one, of course, is community engagement. As I said in my opening remarks, the Government are very closely involved in discussions with the Welsh Government on these matters.
Lord Teverson (LD)
My Lords, does my noble friend agree that the United Kingdom as a whole has an exemplary record in regard to hydrocarbons and environmental management both offshore and onshore? Does she also agree that when it comes to issues such as wastewater and particularly the integrity of wells, not just during exploration and production but afterwards when those wells are left, improved and clearer environmental regulations need to be enforced strongly through inspection?
Baroness Verma
My noble friend raises some very important points, and of course we have taken very seriously the issues around wastewater. As my noble friend rightly points out, after exploration has taken place, any wastewater will be stored in closed metal tanks before being treated in accordance with strict environmental regulation, which is used extensively across many industrial processes. During the drilling process, the Health and Safety Executive will scrutinise well design and the drilling companies themselves must appoint independent well examiners so that well testing may be routinely be checked.
Infrastructure Bill [HL]
Debate between Baroness Verma and Lord Teverson(10 years ago)
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The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, the UK stands to benefit enormously from the safe and effective development of the offshore shale gas and oil and geothermal industries. The Government have introduced provisions into the Infrastructure Bill which provide a right to use deep-level land 300 metres or more below the surface for the purposes of exploiting petroleum or deep geothermal energy.
I explained on Report that I had listened to the concerns expressed by stakeholders and by noble Lords that the right to use deep-level land could disadvantage landowners if claims were brought against them in connection with petroleum or deep geothermal operations. While the existing regulatory regime is robust, I agree that we can do more to reassure landowners. We need to be clear that these sorts of claims—brought by a third party against a landowner whose land is accessed through the right of use clauses—cannot be made against a landowner who has done nothing wrong. To this end, I committed to table an amendment to address this issue.
The amendment will provide protection for landowners against claims made by third parties for any loss or damage caused by the exercise of the right of use provision. It does, however, ensure that landowners—including persons with an interest in land, such as persons licensing the land—will not benefit from the exemption if they deliberately fail to act, or decide not to allow someone else to act. To make this fair to landowners, we also propose that a landowner would not have to do anything that would ultimately involve them in bearing any costs. This means, for example, that if a landowner prevented an operator from accessing his land to remediate any damage caused, despite the landowner not having to bear any costs, that landowner could be deemed liable. If, by contrast, the landowner allowed for the damage to be remediated, this amendment ensures that, as well as benefiting from existing protections, the landowner would not be liable to claims from any third parties for loss or damage.
This amendment will complement the existing comprehensive statutory and regulatory regime by protecting landowners, while allowing this source of home-grown energy to develop in a way that is fair to communities. I beg to move.
Lord Teverson (LD)
My Lords, I thank the Minister for having explained that amendment. I must admit that, when I went through it, I was not at all clear what it was trying to get at. I wondered whether this mystery person “L” would be listening to the debate or appearing in it. We have a number of such letters in this Bill.
My noble friend Lady Kramer has already thanked a number of people. I am not sure whether I am in the right area to do this but I want particularly to thank my noble friend Lady Verma for the work that she has done on this Bill. It has gone through everything from community energy to fracking to this whole area of oil. It has been a pleasure to work with her. We have our disagreements more in DCLG areas rather than here, but the Bill when enacted will make a number of things in the area of energy much better.
I also thank my noble friend Lady Kramer for guiding a Bill through the House when only about 10% included her departmental responsibilities. She has been present for a lot of our proceedings even when matters far from her department’s responsibilities were involved. Of course, I support the amendment.
Infrastructure Bill [HL]
Debate between Baroness Verma and Lord Teverson(10 years ago)
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Baroness Verma
My Lords, as noble Lords know, this Government are committed to ambitious action to reduce carbon emissions and increase renewable energy generation in the UK. To this end, the non-domestic renewable heat incentive was introduced in November 2011 and followed with a domestic scheme in April this year. These schemes are the world’s first long-term financial support programmes for renewable heat. Switching to renewable heat can in some circumstances bring significant bill savings to businesses and households and helps the Government meet their challenging targets on climate change.
The government amendment before the House responds to one tabled by the noble Baroness, Lady Eaton, in Grand Committee, on which I undertook to return to noble Lords on Report. The new clause proposes three changes to Section 100 of the Energy Act 2008, which provided for the creation of the schemes. I shall take each of the changes in turn. As noble Lords will be aware, administration of the schemes is currently limited to either Ofgem or the Secretary of State. While Ofgem is successfully administering both schemes, our inability to run a competitive process is a constraint on achieving best value for money. The Government, therefore, signalled their intention to seek the necessary legal powers to enable an alternative administrator to be appointed in their consultation on the domestic scheme in 2012.
Ofgem will continue to administer the scheme for the time being and in making this change the Government will retain the power to appoint Ofgem to administer the scheme in the future. The ability to appoint a new administrator means that the Government will require the flexibility to adapt the appeals processes to any new administrator and to ensure that these remain robust. The amendment therefore also allows the Government to make regulations covering dispute resolution through appeals processes.
The second change deals with payments. Payments under the scheme must currently be made to the owner of the renewable heat installation or to the producers of biomethane, biogas and biofuels for heating. The amendment will allow the schemes to be redesigned to mean that these parties can have the option to assign their payments to a third party. For the domestic scheme, this would mean that the upfront cost of renewable heating systems could be funded by third parties for households unable to afford them, with scheme payments then made directly to the third party, making this an attractive opportunity for investors. For the non-domestic scheme, assigning rights to payments may allow for simpler financial arrangements between parties, reducing the costs of, and barriers to, the installation of renewable heating. By incentivising new funding arrangements, this change could lead to an increase in both demand for and supply of renewable heat technologies and a mix of higher deployment and lower costs.
Implementing changes would require secondary legislation, on which we intend to engage with stakeholders. In making any changes, we will also work with the scheme administrator and other parties to ensure appropriate design of the consumer protection framework and to integrate the assignment of rights into the scheme’s existing cost control mechanism.
The amendment would also allow some changes to the schemes to be made by the negative resolution procedure. At present, all changes must be made by the affirmative procedure, regardless of their complexity or materiality. In practice this is much slower than the negative procedure. The Government have found that their inability to make changes to the schemes quickly, in response to market changes and other factors, may risk undermining confidence in them. For example, we cannot update regulations quickly to allow them to reference updated technical industry standards.
The amendment tabled by the noble Baroness, Lady Eaton, proposed that all secondary legislation in relation to the schemes be made by the negative procedure. I have considered the comments made in Grand Committee in response to that proposal. The amendment now before us aims to achieve greater flexibility while still ensuring appropriate parliamentary scrutiny. It stipulates that some uses of the powers in important areas remain subject to the affirmative resolution procedure. For example, this would include making provision covering sanctions, enforcement and appeals, establishing requirements on fossil fuel suppliers to fund the renewable heat incentive, or amending Section 100 of the Energy Act to change the general type of heat-generating methods that can be funded through the scheme.
For other powers, the amendment stipulates that the first use of the power should be via the affirmative procedure, but allows for use of the negative resolution procedure for subsequent uses of the power in relation to the same scheme. This will allow for appropriate scrutiny where powers are first used, such as to provide for assignment of payments in the schemes, but means that minor subsequent changes can be made by negative resolution.
The Government expect that future changes to the existing schemes are likely to be straightforward and uncontroversial—for example, measures to reduce red tape, or technical changes to allow the schemes to keep pace with market innovation. I do not consider use of the affirmative procedure necessary in these circumstances. The negative procedure, while still allowing for adequate parliamentary scrutiny, provides flexibility to address issues as they arise, rather than delaying matters while suitable legislative opportunities are sought.
Together, these changes will allow significant improvement in the efficiency and cost-effectiveness of renewable heat incentive schemes, allowing the UK to meet its carbon reduction and renewables targets, while also making efficient use of taxpayers’ money. I beg to move.
Lord Teverson
My Lords, I welcome these moves, which will make financing much more flexible, and mean that money really can flow into the RHI. I therefore congratulate the Minister on the amendments, and on moving this matter forward.
Green Climate Fund
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, the UK is committed to scaling up climate finance, and we have already committed £3.87 billion from our International Climate Fund between 2011 and 2016. The first £1.76 billion of this has already been committed from the International Climate Fund, and is expected to achieve the following lifetime results. However, the right reverend Prelate is right that we need to encourage all member states to come up to the mark and ensure that they are all contributing. This is a very important area. The UK is absolutely committed, and the Prime Minister has made that very clear. He will announce his pledge in November.
Lord Teverson (LD)
My Lords, regarding recent international climate negotiations, does my noble friend agree with me that we should congratulate the DECC team and the Secretary of State on the climate energy deal done at the European Council over the past couple of days? Does she agree that that illustrates that, by leadership from Britain, by persuasive argument and by building up a team of other member states around us, we can succeed in European negotiations and win for Britain?
Baroness Verma
My noble friend is absolutely right, and I could not have put it better than he has.
Energy: Winter Supplies
Debate between Baroness Verma and Lord Teverson
Baroness Verma
As ever, I am grateful for my noble friend’s interventions because they enable me to highlight that, of course, we do have to look at the costs of any policy. However, we also need to look at the commitments we have made to reducing carbon emissions both in our global targets and in our national targets. I remind noble Lords that having a lower-carbon energy sector has brought in more than £45 billion worth of investment in electricity generation. That is a clear signal that we need a diverse range of energy supplies. I have not looked at my right honourable friend’s lecture notes but I will do so.
Lord Teverson (LD)
The Minister mentioned interconnectors, so does she agree that we have a meagre four gigawatts of interconnector supply internationally with the Netherlands and France? Should we not concentrate in terms of balance on increasing that supply, and in that way get a much greater single market in electricity within the European Union?
Baroness Verma
Again, my noble friend raises a very important point. Of course we are working very closely with our partners and we are looking at developing ways of enhancing interconnector supply. I agree with my noble friend that we have work to do, but work is in progress and it is progressing in the right direction.
Infrastructure Bill [HL]
Debate between Baroness Verma and Lord Teverson
Lord Teverson
My Lords, perhaps I may respond to the noble Lord, Lord Cameron, who raised some valid points, but they were over individual shareholdings, which is a separate issue, as opposed to a total collective shareholding. Further regulations could be made around maximum individual shareholdings or defining the control of those shareholdings. That is a fairly regular way in which to do this—aggregating some of these things if they are, for example, vexatious. I accept fully that there is a risk of individual shareholder activism but that is a separate issue to the community being able to have a significant or noticeable stake, as opposed to one that is, in smaller schemes, almost token.
Baroness Verma
My Lords, I again thank all noble Lords for their interventions. I should like to respond to the amendments that relate to Schedule 5, in particular the concern over the maximum size of stake that can be mandated through regulations, which is currently set at 5% of the total capital costs of the renewable electricity facility. I tried carefully to follow my noble friend Lord Teverson’s first intervention. I got slightly lost, so I will go back and read it in Hansard tomorrow.
Baroness Verma
If I do not respond to him today, perhaps I may respond after reading Hansard.
I should like to take this opportunity to explain—and I hope address the noble Lord’s concerns—why we have set the 5% cap and why I am resisting the approaches proposed by both amendments. I am also grateful to the noble Lord, Lord Cameron, for his intervention, which—although the noble Lord, Lord Teverson, suggested an alternative—shows the serious possibility for communities, if so minded, to be able to stop a renewable project by trying to obtain a stake bigger than 5%. Let me develop my argument a little further.
The key reason why a 5% cap has been set in the Bill is to provide certainty to developers now on the maximum size of offer that can be legislated for in the future. While the Government wholeheartedly support community investment in renewable electricity and want to see a substantial increase in shared ownership, it cannot be at the expense of investment in renewables. The 5% cap provides absolute clarity to industry on the upper limit on the size of stake it may be required to offer to communities. Although of course we would welcome developers voluntarily offering more, by contrast the approach taken by my noble friend Lord Teverson who proposed a wide range of between 5% and 25% of the total capital costs of development does not provide any meaningful degree of certainty for industry. As such it could risk deterring future investors in the renewables industry. The alternative approach proposed by the noble Baroness, Lady Worthington, similarly does not provide certainty to industry on the maximum size of stake that could be legislated for in the future, since it leaves this to be defined in secondary legislation.
This takes me on to my second point which is about retaining flexibility. I recognise that the key benefit of providing a range, as proposed by my noble friend Lord Teverson, is to retain future flexibility on the maximum size of offer that can be legislated for in the future. However, the approach that we have taken also provides a sufficient degree of flexibility. The 5% cap represents the maximum that could be required, and the actual amount set in secondary legislation could vary by technology. This is important. We need to bear in mind that the scope of the powers covers a greater than 10-fold range in project size. So a 5% mandatory offer to communities might be appropriate for smaller schemes that have a lower capital cost. However, for schemes with a higher capital cost it might be more realistic to set a lower limit, for example at 1% of total project capital costs.
That takes me on to the size of the stake. It is important, when setting the cap on what may be legislated for, that the amount of investment which may be raised by the community is taken into consideration. Based on this, we consider it likely that if a multi-million pound community stake were mandated, there could be insufficient demand for this within the community even if the geographical area were quite large. That is why we have enabled a cap that would allow the offer of a mandatory stake to be set anywhere up to 5%. This approach ensures that the maximum size of stake required can be broadly aligned with the amount of investment that may be raised by the community. By contrast, the approach proposed by my noble friend Lord Teverson implies that a mandatory stake could not be set any lower than 5%. This would mean that developers could be required to offer a larger amount to the community than could plausibly be financed, particularly for larger schemes with a very high capital cost. In addition, raising the threshold to 25% may have a similar effect. Furthermore, under the Companies Act 2006 a level of 25% of shareholder equity ownership has the potential to block a special resolution. The purpose of these provisions is not to mandate that the community has a controlling stake.
That is not to say that we should not encourage developers to offer a stake greater than 5%. I would like to emphasise that this Government would fully support developers choosing to offer more in circumstances where that is appropriate. However, we do not feel that it is right to mandate this size of offer to communities since it could have such fundamental implications for project financing. The position on a 5% cap is supported by RenewableUK, the trade association for wind, which described it as an “ambitious objective”. In respect of setting a higher limit it states that this, “would simply delay a developer’s ability to secure investment from institutional and other investors”.
My noble friend Lord Teverson asked about the rules set by the Financial Conduct Authority. While developers will be required to comply with all Financial Conduct Authority rules as they are set, it would be inappropriate to change or relax those rules as they provide important safeguards for individual investors. Having introduced some clarity in this area, I hope that the noble Baroness will feel able to withdraw her amendment.
Fuel Poverty
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, the noble Lord is right, which is why the Government have referred the market to the CMA to look at how the energy markets are operating. We will await the outcome of its work, and in the mean time, Ofgem has the powers, as the noble Lord is aware, to take action against any supplier if it has any supported evidence that shows that they have behaved inappropriately.
Lord Teverson (LD)
My Lords, one of the great barriers to eliminating fuel poverty is that many people in that situation live in private rented accommodation and there is no incentive on landlords to make better the conditions and the cost of energy for their tenants. Can the Minister tell us what the Government are doing to remove that particular barrier and help those people, who suffer from some of the worst fuel poverty?
Baroness Verma
Of course, my noble friend raises another very important point. That is why we are looking at the private rented sector very carefully and trying to make it a priority that we ensure that we raise standards within that sector. We are working very closely with our colleagues at DCLG to ensure that we have the right approach. We are working towards a strategy that we hope will see some much more positive results from this sector. However, my noble friend is right to raise the issue, which we take very seriously.
Climate Change
Debate between Baroness Verma and Lord Teverson
Baroness Verma
I thank the noble Lord, and I do not think I could have put it much better myself.
Lord Teverson (LD)
Does my noble friend the Minister agree with me that President Obama’s announcement that there will be strong emission controls on major energy plants in the United States was significant? Therefore, in the spirit of the Question, will the UK work closely with America to make sure that there really is a global agreement in 2015?
Baroness Verma
I agree completely with my noble friend, but I am also pleased that China and India have also made sure that in their own domestic plans they are looking at ways and means of reducing carbon emissions.
Russian Gas
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, my noble friend is right in all those points. Of course, the key to ensuring less dependency on a particular source is having greater diversity. That is what we are trying to do. We are encouraging member states to promote and explore other options for other sources. As my noble friend said, there are a number of areas we are sourcing from, which makes us less dependent on imports from other countries. We are having this discussion and my noble friend was right in saying that the Secretary of State was very firm in putting forward his points of view.
Lord Teverson (LD)
My Lords, I very much welcome the Secretary of State’s strong statements to energy Ministers at the Rome G7. However, we had a lot of similar statements in the 2008-09 Ukraine gas crisis and very little has been done since then. Why does my noble friend think that we will be more successful in making sure that this major change in European gas supply happens this time?
Baroness Verma
My Lords, my noble friend is absolutely right. It is about concentrating our minds. This issue has focused everybody’s minds. He is right that we need to do much more to press our partners. The G7 energy Ministers are meeting again in June to commit to immediate actions. Among those will be emergency plans for the winter of this year and we will be looking at how we can offer assistance to those countries that want to have greater dependency on their own natural sources.
Climate Change: Extreme Weather
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, we have been consistent on this side of the House that we need to address mitigation and adaptation.
Lord Teverson (LD)
My Lords, the Minister has mentioned mitigation several times. So far as mitigation and the United Kingdom are concerned, is it not true that one of the most important things—and one of the most important pieces of legislation undertaken in recent years—is this Government’s Energy Act, which the Minister guided and pushed through this House? Is that not an example of how the Government have made sure that mitigation and the future problems of flooding and climate change are being tackled directly by the Government?
Baroness Verma
I am extremely grateful for my noble friend’s intervention and I agree with every word that he has said.
Ukraine: Gas Supplies
Debate between Baroness Verma and Lord Teverson
Baroness Verma
As the noble Baroness is aware, the Government are encouraging a diversity of supply. I am sure that she will join me in congratulating Siemens on investing in offshore wind in Hull, generating 1,000 jobs.
Lord Teverson (LD)
My Lords, although Britain may not be reliant on Russian gas, that is not true for much of central and eastern Europe. There is a real issue here: since the problems we had between 2005 and 2009 over Ukraine, the EU and European states have been very unfocused on diversifying and getting alternative supplies of gas to that part of Europe. What is happening in terms of getting political will behind the Nabucco pipeline, or something else like it, which would bypass Russia and make the whole of Europe less dependent on a very unreliable state and partner?
Baroness Verma
My noble friend is absolutely right to raise that issue. The southern corridor project is a key pillar of EU and UK energy security and will bring gas from Azerbaijan directly to Europe. The choice of the most viable route is a commercial decision for those investing in the production and transport infrastructure. The UK Government support the southern corridor project but we cannot involve ourselves in the commercial decisions.
Energy: Green Deal
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, more than 500,000 measures have taken place. The noble Lord, Lord O’Neill, expects a 20-year programme to produce an overnight success. This Government have decided to adopt long-term plans. Unlike the party opposite, which for 13 years refused to invest in the energy sector, this Government have a plan and have introduced the Energy Act, which has put renewables and low-carbon fuels on an equal footing alongside fossil fuels.
Lord Teverson (LD)
My Lords, does my noble friend agree that energy efficiency, particularly in households, is the best and most cost-effective way forward for reducing carbon emissions and lowering energy bills in the longer term, and that it is therefore important that the Government stick with the Green Deal, make it work, learn and make it happen?
Baroness Verma
Absolutely. My noble friend is right to raise that issue. Energy efficiency measures are there to ensure that we reduce costs to the consumers. I come back to the point that this Government have taken some major steps to ensure that there is investment within the sector and in energy efficiency measures. I would like to know what the party opposite would do. Would it put back the £50 that this Government have taken off?
Nuclear Management Partners
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, I reassure the noble Lord that we did not dodge the decision. We have taken advice through the work done by the NDA, and my officials were involved in the review throughout the process. The decision made by the NDA was to see this contract go for a further five years to build on the work that has already been done. I remind noble Lords that 90% targets have been reached by NMP in the past five years. It is an incredibly difficult site, as the noble Lord is aware. Of course, there are extremely difficult challenges facing it, and a lot of it has been due to long-term neglect.
Lord Teverson (LD)
My Lords, Nuclear Management Partners spends £1.6 billion of taxpayers’ money each year on the decommissioning process, yet it is in an area that is still one of the most deprived in the United Kingdom. What pressure are the Government putting on that organisation to make sure that it builds up local skills and supply chains to the benefit of the people of Cumbria?
Baroness Verma
My Lords, I absolutely agree with my noble friend. I assure him that the Energy Act 2004 requires the NDA to consider those very impacts on communities that live nearby. On the example of Sellafield raised by my noble friend, more than 10,000 local people are employed by Sellafield Ltd and there is more than £1 billion of spend. According to the 2011 figures, one-third of that was on local businesses and the supply chain in west Cumbria.
Electricity and Gas (Energy Companies Obligation) (Amendment) Order 2014
Debate between Baroness Verma and Lord Teverson
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
The energy company obligation, commonly referred to as ECO, has a number of important policy objectives. These are designed to reduce the UK’s carbon emissions, which is essential to meeting the UK’s statutory domestic carbon budgets and helping to tackle fuel poverty, by requiring suppliers to install energy efficiency and insulation measures in fuel-poor households.
Energy bills and the cost impacts to customers as a result of ECO have been the subject of great debate in the past few months. As noble Lords are aware, my department launched a consultation on the future delivery of the scheme earlier this month. This included proposals announced by the Secretary of State. The proposed changes to ECO are designed to reduce the cost of the scheme and therefore bill savings to customers.
Before I go on to explain the technical changes, I would like quickly to illustrate the progress of the scheme in its first year. We have seen more than 500,000 households already benefiting from ECO support. In total, we have helped more than 200,000 low-income households through the affordable warmth obligation. We have helped 88,000 households under the carbon saving communities obligation, which focuses on low-income areas. That is more than 335,000 measures in total over ECO’s first year. These numbers are a testament to the success of the scheme in driving home energy efficiency. The scheme’s successful delivery is because of huge effort from a variety of stakeholders—including local authorities, industry and local government elsewhere—who all played a vital role. It is important that that success continues. However, it is also important to recognise that where improvements need to be made, we must make them. The information stakeholders told us that some technical areas need some change. That is the primary reason we consulted last year.
Going on to the range of technical amendments and updates, I will highlight two amendments to noble Lords. First, the provision to ensure that ECO measures can be installed in a period when a property is not occupied, commonly referred to as a void period, will enable ECO measures to be installed in a property when it is empty. We made this change because the existing rules constrained the ability to install more complex measures, such as large-scale retrofits. The amendment will remove the constraints and enable these measures to be installed. Feedback from stakeholders revealed that it is often best to carry out more complex work, such as solid wall insulation and whole-house retrofits, when a property is empty. The order clarifies the position on empty properties.
Secondly, there is provision for certain people in receipt of universal credit to be eligible for support under the affordable warmth obligation. Universal credit is the Government’s new benefit system, and it is important that the policy includes it so that people who should be eligible to receive help are not missed out. The order will allow recipients of universal credit to receive affordable warmth support in circumstances that reflect as closely as practicable the existing affordable warmth group criteria for recipients of other benefits. In addition to the amendments on void periods and the inclusion of universal credit, the order makes some more minor technical amendments, such as amending the scoring rules that apply to glazing measures so that suppliers can be credited with the full carbon savings from the installation of glazing measures.
We are harmonising ECO regulations as they relate to solid wall insulation with the latest requirements of building regulations. The order removes the requirement for solid wall insulation installed under ECO to reduce the U-value of a treated wall to a specified amount. The U-value measures the transmission of heat through the wall. As a result of this amendment, suppliers will simply need to meet standards required under building regulations.
We are making it easier to deliver district heating systems by removing the six-month rule to allow more time. Under the carbon emissions reduction obligation, a connection to a district heating system is eligible only if it is installed at the same property as hard-to-treat cavity wall insulation and solid wall insulation. Under the current rules, it must also be installed within six months of the wall insulation. This order removes that six-month rule for district heating systems. That is in response to concerns that the six-month limit could limit opportunities to deliver large district heating system projects. The change will help to facilitate the delivery of district heating systems.
We have also increased the flexibility for suppliers to receive credit for excess actions. That is because they have already been paid for by suppliers and consumers, and would otherwise be lost investment. With regard to the transfer of excess actions between obligated suppliers, Article 7 of the order inserts new Article 21A into the ECO order, which will allow suppliers to apply to the ECO administrator—that is, Ofgem—to transfer excess actions to another licence holder. The term “excess actions” is used in the legislation to describe work completed under energy efficiency schemes prior to ECO which were not needed to fulfil those schemes’ targets and have since been approved by Ofgem to be carried forward to ECO.
We are making some minor amendments to the definitions relating to parental responsibility to bring them in line with the legislation governing tax and credits. These amendments align the ECO order more closely with legislation governing benefits and tax credits, and will therefore make it easier for suppliers to check whether a person is eligible for affordable warmth support.
In conclusion, I believe that these amendments to the ECO order, while modest overall, will none the less be vital in ensuring that the scheme continues to progress as smoothly as possible, and I am supported in this view by the overwhelming number of positive consultation responses we received. I commend the order to the Committee.
Lord Teverson (LD)
I thank the Minister for that explanation. It is obvious that detailed regulations such as these need to be changed as a result of the experience of contractors and consumers. As the Minister said, when you want to make major changes to houses, it makes complete sense that they should be done during a period when they are unoccupied. It is common sense. If I were in that situation, whether I was the future owner or the contractor, that is exactly what I would want to do.
I also welcome the fact that district heating systems appear in the order. We do not have enough of them in the United Kingdom. We do not have sufficient infrastructure. I welcome anything that makes them easier, even if it is just changing the limits.
On getting distortions out of the market, the Explanatory Memorandum refers to contractors changing window panes instead of whole windows because the regulations state that you can do one and not the other. It is clearly ridiculous. It is the sort of distortion that we need to put right.
I have one question about excess works. I could not understand from the Explanatory Memorandum or from what my noble friend said why, given that this is public money, we want to pay energy suppliers—we might feel they are hard done by generally but, on the whole, we do not—for work that they have not budgeted properly for so there is an excess. I do not understand that. I understand that there may be some effect on the public purse through this, but I would be interested in an explanation of why this is so important. It is up to them to manage their works programme in conjunction with the Government’s programme which, on the whole, is pretty clear.
Baroness Worthington (Lab)
My Lords, I thank the Minister for her introduction to this order. Like the noble Lord, Lord Teverson, we welcome many things here. The order helps to clarify, simplify and tidy up a number of issues about the way the ECO order is currently implemented. I shall say a word about the broader picture, to which the Minister referred. Changes to ECO have been much talked about and were introduced as the Government’s attempt to reduce costs for bill payers.
It strikes me as odd that this is where the Government are choosing to focus. After all, measures to increase the energy efficiency of homes are one of the clearest measures we have for reducing bills. They may add to the incremental unit cost very marginally but, overall, people who have measures undertaken will see their bills fall, yet the Government have chosen to reduce the level of activity under ECO by extending it over a longer period—that is, for measures that do not relate to fuel poverty. We understand that the fuel poverty measures remain in place and are being extended to 2017, which is sensible. However, it seems that overall the effect of the Government’s policy on ECO has been to see a reduction in activity. We have certainly had representations from the insulation industry which is very concerned that the level of activity has dropped off precipitously.
I am sure we have an afternoon ahead of us in which we will discuss many issues, including gas pricing and fracking. All that will relate to this key topic of trying to keep bills affordable and making sure that we are decarbonising at least cost. In that sense, making ECO work more effectively is obviously a good thing.
I have a question on the excess actions credit. Perhaps I was unable to devote enough time to it, but I am not sure whether it is a kind of trading mechanism that enables suppliers to transfer overachievement to another supplier, whether it is a financial action between suppliers or whether it is something involving Ofgem and the Government. Perhaps the Minister can say a few more words about how it will work. I imagine the provision is there because some suppliers were expecting to be required to comply in full, and it was only when the Government rather hastily decided to extend ECO without increasing the level of activity that they perhaps found themselves with an overabundance of credit and are trying to find out what they can do with it. It would be helpful to hear a bit more about that.
On the other measures, I am pleased that the void period is being addressed, which seems entirely sensible. I want some reassurance from the noble Baroness that the provisions on giving credit to glazing and on changes to solid walls will not encourage less activity but that the right activity is being incentivised. I am sure that these orders are sensible.
Energy: Fracking
Debate between Baroness Verma and Lord Teverson(10 years, 8 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Verma
I apologise for misrepresenting what my noble friend said—absolutely. The Environment Agency is developing a single application form for permits. In 2014, the Environment Agency will aim to reduce the time for low-risk activity from 13 weeks to approximately two weeks. I hope that that addresses the point raised by my noble friend. Of course, it is not about reducing regulation; we do not want to see regulation reduced, but we also do not want to see barriers where they do not need to be in place.
My noble friend Lord Teverson mentioned CCS projects. As my noble friend is aware, we were able to go forward with two of them at Peterhead and White Rose—the Drax project. The Government have committed £1 billion to CCS—a commitment from this Government to make sure that we are not lacking in ambition for CCS. My noble friend also mentioned dependency on Russian gas. I reassure him that only a small percentage of our gas comes from Russia. By and large we are better connected, with 50% being our own gas and a larger proportion of what is left coming from Norway.
Lord Teverson
I entirely realise that and was talking about a broader European perspective. Actually, we import a lot of Russian coal.
Baroness Verma
I think my noble friend will agree that that is a different debate.
My noble friend Lord Caithness asked whether shale gas was more leniently regulated at European level. I reassure him that shale gas is regulated in the same way as any other energy sector. A recent proposal in the European Parliament to require environmental impact assessments in all shale projects did not proceed. We welcomed this because we do not want minor impact drilling such as taking core samples impeded.
The noble Baroness, Lady Jones, said that fracking would cause water contamination and that there was evidence to prove it. We have seen no evidence. The Environment Agency is one of the most respected regulators globally, as are many of our regulators, and we would be careful to consider the advice that we were given by our regulators before we proceeded to do anything that would allow any kind of contamination. Hydraulic fracturing will take place more than 1,000 metres below groundwater level, where there are impermeable layers of rock which will stop the gas and fracking fluids escaping into the water.
The noble Baroness also touched on tackling cold homes and fuel poverty. The Government have done a lot to respond to those challenges and measures are in place to address the issues that she has raised. There is much more to be done but this Government have been very proactive about addressing the issues where the people who need help most and quickest are getting that help.
The noble Baroness, Lady Worthington, said that shale gas cannot be seen as a panacea. The Government have never suggested that shale gas is a panacea. We have said that it is important that we explore the possibilities that shale gas will bring because we need energy security. If shale gas is explored and exploited, it will become an important part of the energy mix. We all know that gas and oil will still play a large part in our wider energy mix.
I am not quite sure from the noble Baroness’s remarks that she understood her own party’s position on fracking. However, it would be unhelpful to close down the debate on the real benefits that shale gas can bring. I recommend that we have further informed debates because this debate has explored a number of arguments in this critical policy area. I look forward to those debates, but let us bring them forward as debates on fact, not on ideology. We need to reduce our dependency on external energy sources and ensure that the people of the UK have affordable energy and energy security but understand that the sector is properly regulated, can deliver all those things and can contribute towards our economic growth.
This has been an interesting debate. I am grateful to my noble friend Lord Borwick for raising it. I suspect that we will have many more debates on the issue.
Renewables Obligation (Amendment) Order 2014
Debate between Baroness Verma and Lord Teverson
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, the renewables obligation is the Government’s main mechanism for supporting renewables electricity generation in the UK. The obligation has been the subject of previous change, the most significant being the introduction of banding of support for different technologies in 2009.
The changes that I put before the Committee today are less radical. They are about offering renewable electricity generators a choice between support under the renewables obligation and the contract for difference, while protecting consumers by ensuring that no generation can receive support from two schemes at once. They are about strengthening the sustainability reporting requirements for biomass used for electricity generation.
The order introduces changes in two main areas: the transition away from the renewables obligation to the new contract for difference, and the move to greater carbon savings and increased sustainability of the biomass used. As noble Lords will be aware, the Government expect the new contract for difference to open for applications this autumn, subject to parliamentary assent and state aid approval. The renewables obligation will remain open to applications until 31 March 2017 to allow for a period of transition in which eligible new renewable capacity will have a choice between the two support schemes. The renewables obligation will then run for a further 20 years to support the capacity already accredited within it.
The changes within this order set out a straightforward process for applications for the renewables obligation during the transition period, when both the renewables obligation and the contract for difference will be open for applications. Renewable generators will be required to choose which scheme to apply for, and will declare as part of their application that they are not also applying for the alternative scheme. This declaration will be subject to checks through data sharing between Ofgem and the National Grid as the contract for difference delivery body.
Once a generator has applied for a scheme for a particular generating station or generating capacity, they will then not be able to withdraw that application and apply for the other scheme instead. However, if the application fails for any reason, the generator will then be able to apply for the other scheme. This process involves minimal administrative burden on both the generator and the scheme administrators, while giving consumers and the Government assurance that no capacity will be supported through both schemes.
This choice of scheme is open not only to new renewable generating stations but to additional capacity at existing stations where that capacity is more than 5 megawatts. Generators will also be able to apply for a contract for difference for additional capacity of this sort after the renewables obligation closure date.
These provisions ensure that generating stations already within the renewables obligation which have the opportunity to expand are able to do so, making efficient use of existing generating resources. For similar reasons, biomass and offshore wind stations accredited within the renewables obligation will also have the opportunity to enter some capacity into a contract for difference under certain circumstances.
The dual scheme facilities which result, with some capacity supported by the renewables obligation and some by a contract for difference, will be required to meter electricity generation and measure fuel usage separately under each scheme. Again, Ofgem and the contract for difference counterparty will work closely together to ensure that only the generation from capacity within each scheme will receive support under that scheme.
The Government will lay further statutory instruments before noble Lords in coming months to take forward other aspects of transition policy. These include a renewables obligation closure order, which will set the date of closure of the renewables obligation to new capacity and implement grace periods for that closure date. These grace periods have been developed partly in response to concerns raised by noble Lords during Energy Bill debates last year and are key to investor confidence during the transition period.
In addition, the Government intend to lay a consolidated version of the renewables obligation order before the House later on in the year, implementing some final elements of transition policy relating to biomass conversions and to the capacity market.
The Government are committed to achieving sustainable, low-carbon bioenergy deployment. The use of effective sustainability criteria forms a key part of the Government’s approach and is essential for the public acceptability of biomass.
The order strengthens the reporting requirements and introduces audit requirements for solid biomass under the renewables obligation. This will enable generators to familiarise themselves with the sustainability criteria and put appropriate compliance systems in place ahead of the Government’s intended introduction of mandatory sustainability standards in 2015.
Those changes will encourage the use of biomass that delivers genuine greenhouse gas emissions savings compared with fossil fuel use and is sourced from land that is sustainably managed, not from land with a high biodiversity value or carbon stocks. The main changes to the biomass sustainability criteria introduced within the order include reporting against a tighter minimum greenhouse gas emissions savings target for new dedicated biomass generating stations and preventing larger generating stations making use of the various default values for greenhouse gas emissions from solid biomass. In future, stations producing more than 1 megawatt will have to report actual values, and we encourage the use of the greenhouse gas calculation tool made available by Ofgem.
The order also introduces new sustainable forest management criteria for virgin woodfuel based on Defra’s UK timber procurement policy, UK-TPP, for central government. The current land criteria were designed with sustainable agriculture in mind, rather than forests. The UK timber procurement policy draws on established sustainable forest certification schemes that cover a range of environmental and economic issues relating to forests.
The forest management criteria also provide for bespoke evidence to be provided by generators to demonstrate compliance where forests are not certified by a recognised scheme. The land criteria for biomass that is not wood will remain in line with the land criteria set out in the EU renewable energy directive.
The order introduces new reporting requirements to provide greater detail about any non-waste wood that is used and where it has come from. This includes the name of the forest, the species of wood and the forest or land management practices that were used. There are also new reporting requirements on the previous use of land in the case of energy crops and the standardisation of the units that are used to report the volume and mass of the biomass.
The order will bring in a new audit requirement for generating stations over 1 megawatt that use solid biomass or biogas. This is based on the audit requirement that already applies to generating stations using bioliquids. It provides for an independent assessment of these stations’ performances against the sustainability criteria. The audit requirements have been brought more closely in line with similar requirements applying to transport biofuels under the renewable transport fuels obligation to provide greater consistency across schemes.
There are a number of exceptions from the reporting requirements and from the sustainability criteria for biomass fuels such as municipal waste, landfill gas, sewage gas and manure. That reflects their lower sustainability risks. Our intention is that the contracts for difference awarded under the first delivery plan period for bioenergy will follow the same approach as the sustainability standards set under the renewables obligation. Our aim is to ensure that bioenergy offers a genuine reduction in greenhouse gas emissions, that this reduction is cost effective, and that the biomass is produced sustainably and contributes both to our renewables target and to ensuring energy security.
Our sustainability criteria have taken into consideration the European Commission’s recommendations in its 2010 report. However, our approach departs from the Commission’s report in areas where we recognise the need for more robust sustainability criteria to help us to deliver our UK policy priorities of maximising the carbon savings from bioenergy, minimising the environmental risks and making best use of the biomass resource available, both for energy and non-energy purposes. Being robust also means being mindful of the need to develop criteria which are realistic, measurable and deliverable.
I understand that an order has been laid before the Scottish Parliament which introduces similar changes to the renewables obligation in Scotland on both biomass sustainability and transition. I also understand that the Northern Ireland Executive will bring forward an order introducing changes on biomass sustainability later on, as the contracts for difference will not be introduced in Northern Ireland until 2016.
I am sure that all noble Lords will appreciate the value and importance of offering a choice of scheme to the renewables industry during this important period of transition towards the contract for difference, and I therefore commend this order to the House.
Lord Teverson (LD)
My Lords, I will be very brief. In general, I welcome this order and thank the Minister for presenting it to us so well.
I want to delve into the question of the sustainability aspect, and how that ties in with European regulations. I note that on page 7 of the impact assessment, at the bottom of paragraph 4, it says,
“The EU mandated the sustainability criteria to be used for bioliquids and transport biofuels under the Renewable Energy Directive. However, the EU left the introduction of sustainability criteria for solid biomass and biogas used for electricity and heat to the discretion of each member state, subject to compliance with EU Treaty rules, such as the internal market”.
I would be interested to hear from the Minister, in very general terms, what other EU states are doing on sustainability. I would be interested to understand in particular whether, when power stations with biomass want to import biomass from another EU member state, we can insist—under the single market, which is mentioned there—that those products comply with UK standards as opposed to the originating EU state requirement.
Energy: Prices
Debate between Baroness Verma and Lord Teverson
Lord Teverson (LD)
My Lords, as part of their localism agenda, the Government have removed many restrictions on local authorities, one of which is the ability to generate electricity from their own resources. Will my noble friend the Minister remind us what income this initiative has generated for the benefit of council tax payers?
Baroness Verma
My Lords, my noble friend is absolutely right. This initiative is of great benefit to local communities and allows local authorities to look at how community-based renewable energy schemes can not just benefit local communities but help local consumers reduce their energy costs.
Energy: Action on Bills
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, when the noble Lord speaks about economic downturns, I have to remind him that it was his Government who were in charge of that. It was his Government who oversaw the worst economic problems that this country has ever faced in peacetime, so let me just put that on record. Since 2010, we have had to make some really difficult decisions, and those decisions have had, in part, to be taken because of the incompetence of the party opposite for 13 years when it was in charge.
On the impact assessment, I told the House that we will see something early next year. I really regret that the noble Lord keeps putting down the Green Deal, given that it gives so many jobs to small suppliers. I say to the noble Lord that we need to encourage the growth of the Green Deal, because it supports small and medium-sized enterprises across our great country.
Lord Teverson (LD)
My Lords, I was quite pessimistic when the negotiations started between the Treasury and the DECC on this matter but I congratulate the Minister on the outcome. It has not moved us backwards; it has actually moved the energy efficiency and carbon agenda forward. I very much like the fact that, for new home buyers or people moving, there will be that discount or a contribution towards energy efficiency. Certainly, there needs to be a deal for landlords; that is also good. The other thing that has not been mentioned so far is that we have had a reaction from distribution network operators, who seem to have been left out of this somehow and have some responsibility themselves. Perhaps from that small move on taxation, we will have a more progressive regime. On the existing regime, we have affordable warmth, the carbon-saving community obligation still in place and the low-carbon regime that comes out of the Energy Bill, which we hope will pass unchanged. Those are all items of good news.
Will the Minister tell us when the scheme to do with people moving houses and the landlord scheme are likely to come in? Many people will welcome those schemes very strongly. Will the new focus on distribution network operators continue and what will her department be doing in that area? We seem to be held captive by the mantra that energy prices relate entirely to wholesale gas prices. We have seen cheap coal becoming an increasingly important part of the energy mix. Where have the profits that the energy generating companies have made through that cheaper fuel gone? They certainly have not come through to consumer bills. Will my noble friend pursue that investigation?
Baroness Verma
My Lords, I thank my noble friend for his endorsement of the Statement and the work behind the scenes to ensure that we have not lost all the important elements and measures that will reduce carbon, provide energy efficiency and help the most vulnerable households that we need to make sure we are helping.
My noble friend asked when the new schemes will come in. They will come in around mid-2014. They have to follow the proper processes and consultations. Ofgem regulates the distribution network operators. It is for Ofgem to ensure that the costs the networks are proposing are viable. We must accept the package in the round. A lot of things need to be done. This Government are taking that on board.
My noble friend asked about competition and coal. We are taking both extremely seriously, and I hope to come back with a little more detail about how we propose to see Ofgem strengthen what it is doing to ensure that there is greater transparency on how energy companies use their profits.
Energy: Shale Gas
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, the noble Viscount raises an interesting point. Companies have pledged through their own charter that they will at exploration stage give £100,000 in community benefits, but also that 1% of the revenues generated from each well will go to local communities.
Lord Teverson (LD)
My Lords, in the United States the shale gas industry is fragmented and there are good and not-so-good operators in terms of environmental risks. What specific lessons have been learnt from the United States? It is estimated that some 10% of the total UK water supply could be demanded by shale gas if, as many of us hope, it were to be successful. What discussions are the Government having with the water industry to make sure that that area will be catered for if shale gas development takes place?
Baroness Verma
My noble friend again raises an important point. Water UK, which represents water companies, is working closely with the United Kingdom Onshore Operators Group—the representative body for onshore oil and gas—to make sure that any potential extra demand for water will be managed sensibly. However, water companies are already obligated to produce and update every five years a proper water plan. Water companies will therefore assess well in advance the amount of water that will be available to the operator before it is used.
Energy Bill
Debate between Baroness Verma and Lord Teverson
Lord Teverson (LD)
My Lords, this is a worthy amendment. However, Parliament is grown-up enough for those of us who are interested in these issues and see them as really important to notice what happens and seek answers from the Secretary of State and the Government about carbon intensity. The issue is important but the amendment adds little to the Bill.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I thank the noble Baroness, Lady Worthington, for tabling the amendment. The Government fully support the aim of clear and transparent reporting. However, like my noble friend Lord Teverson, I do not think it necessary to introduce an additional statutory reporting requirement to the Bill as the noble Baroness proposes. I shall set out quickly the reasons.
First, as the noble Baroness recognises, at Report I made a commitment to Parliament that the Government would undertake reporting measures once any decarbonisation target range had been set. This would supplement those reporting measures that are already included within Part 1 of the Bill. I repeat what I said on Report, which was that,
“where carbon intensity is reported to have increased year on year for three consecutive years, the Government will explain the reasons why, and, where appropriate, report additional actions to address it within the annual statement of grid carbon intensity”.—[Official Report, 28/10/13; col. 1366.]
Secondly, it is important to recognise that, under the Climate Change Act 2008, there are already high levels of scrutiny of the progress made to meet our economy-wide carbon targets. This includes coverage of the power sector within the context of our wider economy. For example: the Government currently report annually on emissions in the power sector through the UK’s greenhouse gas emissions inventory; the Committee on Climate Change publishes an independent and impartial report each year on our progress towards meeting our carbon budgets and the 2050 target; the Government provide annual responses to the committee’s recommendations, which include a dedicated chapter on the power sector; and the Government publish updated energy and emissions projections each year, setting out the future trajectory we anticipate the economy taking.
Lastly, the amendment proposes that these reporting measures start from the date of Royal Assent. The Government’s view is that it is logical for any additional reporting measures to be triggered by the setting of a decarbonisation target range rather than by the enactment of the Bill. That would ensure alignment with the existing reporting framework that is already included in Clause 3, and we should not forget that we already report on grid carbon intensity ahead of any decarbonisation target range being set. Section 5 of the Energy Act 2010 requires a three-yearly report to Parliament on progress in decarbonising electricity generation. That report sets out the policy framework and explains trends in grid carbon intensity over the reporting period.
In conclusion, the Government are already proposing a clear and robust target framework that includes regular reporting on progress in meeting any target range. That is in addition to the high levels of scrutiny that are already in place to meet our economy-wide carbon targets. For those reasons, it would be unnecessary to introduce another statutory reporting requirement. I hope that the noble Baroness will agree with me that the existing commitments are sufficient and will, on that basis, withdraw her amendment.
Lord Teverson
My Lords, I welcome the amendment because clarification is needed—and, indeed, I thought that the explanation given by the noble Baroness was very good. I would be very interested to hear the Government’s view on how this issue should be resolved, as it is clearly important for the way in which the industry moves forward.
Baroness Verma
My Lords, I am grateful to the noble Baroness, Lady Worthington, and I hope that I can add a little clarity on the matter she has raised. Under the existing provisions, and save for the circumstances provided for under Schedule 4, the EPS will apply to the entire generating capacity of any new fossil fuel power station consented after the EPS comes into force. For example, where planning consent is given for a new fossil fuel power station, the generating units that comprise the consented power station are, for the purposes of the EPS, the “generating station”.
A generating station will report its carbon emissions under the EU Emissions Trading Scheme and the intention is that those reports will be used to reconcile total carbon emissions in a year against the EPS limit for the generating station, which is calculated using the formula in the Bill—I hope that noble Lords are following me thus far.
In respect of the circumstances provided for under Schedule 4, paragraph 1(1) of Schedule 4 gives the Secretary of State a power to make regulations to apply the EPS to a generating station consented before the EPS came into effect where it replaces or installs an additional main boiler—so where it effectively adds to or renews its generating capacity.
Paragraph 1(1)(b)(iii) of Schedule 4, on which the Government were defeated on Report, would extend the scope of Schedule 4 to enable the Secretary of State to apply the EPS also to an existing generating station that fitted substantial pollution abatement equipment. The exercise of the power to make regulations under Schedule 4 is at the discretion of the Secretary of State, and it would be premature to comment on whether or how that power may be used.
Sub-paragraphs (1) and (2) of paragraph 1 of Schedule 4 together allow the EPS to be applied with or without modifications and to different parts of a generating station. For example, it could be applied to only those units that are new or have replacement boilers or to only those units that have fitted substantial pollution abatement equipment.
While I recognise that the proposed amendment may be one way of determining how the EPS will apply to fossil fuel plant, it does not cater for a wider range of circumstances in the way intended by Schedule 4. The regulation-making power in Schedule 4 provides for alternative approaches and, due to the potential complexities and impacts on existing assets were we minded in the future to exercise these powers, we would want to consult fully on possible options before making regulations. I believe that this would provide a more properly informed debate and I therefore ask the noble Baroness to take my reassurances at this stage and withdraw her amendment.
Energy Bill
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, I will repeat what I have said, which is: let us wait to see what the outcome of the appeal is.
Lord Teverson
My Lords, this was tabled as rather a probing amendment, given the situation that has arisen, and I am grateful to noble Lords for their contributions. I do not wish to detain the House on this for too long but I will say that this has nothing to do with retrospection; I absolutely disagree that someone who develops a wind farm or any other energy-generating station over 50 megawatts is necessarily going to be the operator. It is a fact in industry in Britain and worldwide that the developer is often not the operator, in whatever industry we may talk about—they are two entirely separate processes. If you took the view that they had to be the same legal person then you would probably have to go back to 17th-century economics, let alone 21st-century ones. It does not work that way any more. It would also bring the practicalities back into line with the English and Welsh situation. In no way does this amendment make any judgment about whether people should be able to judicially review such decisions; clearly they should be able to do so. I would hope that such actions would not be vexatious, and I am sure that this one was not. Indeed, there was a judgment parallel to the licensing one concerning the wildlife directives, on which I make no judgment at all. It might have been completely valid in terms of their application.
With this amendment I was simply trying to bring the situation back to some certainty and to the situation that was understood prior to this judgment. That is not in itself retrospective. However, I am persuaded by the Minister that perhaps the right course is for this to go through the appeal process—I certainly do not think that it is a good idea for Parliament to interfere with that—and then the situation should be looked at. I am highly persuaded by the argument put forward by my noble friend Lord Forsyth about the reaction of the Scottish Government, in that clearly the rule of law is the rule of law wherever we are within the United Kingdom, and I would never wish to pull the carpet from under that important principle in how we live our public life. I beg leave to withdraw the amendment.
Energy Bill
Debate between Baroness Verma and Lord Teverson
Lord Teverson
My Lords, I shall speak slightly out of order here, for which I apologise. I tabled a similar amendment in Committee, and I am very pleased that the noble Lord, Lord Judd, has brought this matter forward again.
This is not my noble friend the Minister’s area, or her department’s; it is very much a Defra area. Although I suspect that this Bill is not the best place to do this, I very much hope that Defra will take this area increasingly seriously and that the Government will find a way in which to move the agenda forward.
Baroness Verma
My Lords, I am grateful to the noble Lord, Lord Judd, for prompting further debate on the setting of targets for the landfilling of waste. Amendment 76 is designed to require the Secretary of State to set out a plan and timeframe, as soon as is practicable, for reducing and eventually eliminating the landfilling of organic waste. It would make it available for renewable energy generation and other appropriate uses, consistent with the waste hierarchy as defined in the Waste (England and Wales) Regulations 2011.
The Government support the minimisation of organic waste going into landfill and are sympathetic to the aims of this amendment. When we debated this matter in Committee, I outlined the considerable progress made in minimising organic waste entering landfill by the reduction of food waste and the increase in the number of anaerobic digesters generating energy from food waste. We very much agree with the points that the noble Lord made during that debate about the value of avoiding emissions of greenhouse gases from landfill. Preventing food waste is the most effective approach in carbon-saving terms: compared to landfilling, each tonne of food waste prevented means 4.2 tonnes of CO2-equivalent emissions are avoided.
We have worked very successfully with industry to reduce supply chain food and packaging waste by nearly 10% over the past three years, while the Waste and Resources Action Programme’s “Love Food Hate Waste” campaign helps consumers to make informed choices on reducing food waste. Household food waste is down by 13% since 2006, and we expect a 20% reduction to be achieved during the three phases of the Courtauld commitment that all the major supermarkets have signed up to. These results show that the voluntary approach can deliver real reductions in waste while allowing businesses to be more efficient and competitive. We want to build on this work with businesses rather than impose targets or restrictions. When food waste cannot be avoided, anaerobic digestion is currently the best option that we have, because it produces renewable energy and a valuable fertiliser. Over the years, we have provided a range of support through WRAP for anaerobic digestion, including £11 million in grant funding.
The substantial increase in the number of anaerobic digesters generating energy from waste continues. We now have more than 100 megawatts of capacity for waste and, together with the long-standing use of anaerobic digestion in the sewage treatment sector, this gives us capacity to generate 1.5 terawatt hours annually. In the Government’s anaerobic digestion strategy to tackle barriers to anaerobic digestion, we estimated that there was a potential to generate 3 terawatt hours to 5 terawatt hours of electricity by 2020. With another 300 megawatts of capacity consented or being built, the industry is well on its way to delivering that potential.
Most of the actions in our anaerobic digestion strategy are now complete. The Government published a second progress report in August and it is now for industry to use the outputs to ensure that the barriers they identified are removed. I hope the noble Lord will be reassured that we can continue to reduce organic waste entering landfill by encouraging food waste prevention and supporting a growing anaerobic digestion industry without introducing further targets to those set out in the EU landfill directive. I also add that current evidence suggests that further statutory targets would have an impact on businesses and local authorities in compliance and monitoring, risking additional cost burdens on business. It is likely that these additional cost burdens faced by industry and local authorities would be passed on to the consumer, which means that consumers could risk facing higher costs if additional statutory landfill bans were introduced.
The noble Lord, Lord Grantchester, asked about reporting on a reduction of landfill. Landfill tax is the main form of reducing organic waste from landfill. Defra is encouraging food waste prevention and encouraging the use of anaerobic digestion; the Environment Agency monitors emissions under the industrial emissions directive. Under the permitting regulations, the Environment Agency also monitors the air quality.
We are mindful of the concerns expressed by the noble Lord, Lord Judd, around this sector, but I hope that I have been able to satisfy the noble Lord that the actions that we are taking and our encouragement of industries such as anaerobic digestive generators to make use of waste will help him to decide to withdraw his amendment.
Energy
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My noble friend is absolutely right. The purpose of the review is to enable the regulators, led by Ofgem, to see what needs to happen in order to strengthen competition. They should be able to look carefully at whether there is transparency or not and accountability or not. What we need to do is wait for the competition review to take place, conduct a consultation on the review, feed into the review and then comment on it. It would be wrong for the Government to comment at this moment in time. It is right to get the competition review under way by having all three regulators look at the position carefully. They have the expertise and they know what they are looking for. If they need extra powers, it is for the Government to ensure that we support them by ensuring that those extra powers are put in place.
Lord Teverson (LD)
My Lords, with this kind of Statement, we get rather infected with the way of doing things and the mood of the House of Commons. I welcome the fact that the Statement concentrates on competition. We have to keep it absolutely focused there. Is there an easy answer to this and is anybody offering one? No, there is not, but we need to keep working at it. I have a particular question for the Minister on that point, which I will ask in a minute, but first let me say that I welcome the security of supply report that came with this Statement. It is one of the clearest and most interesting documents that has come out of DECC for some time and includes things such as the electricity diversity diagram and report. I particularly welcome the move to make switching much easier and quicker; that is clearly important both for consumer power and for competition. I also particularly welcome the market manipulation pledges that have come from my right honourable friend the Secretary of State. We certainly expect that when it comes to other types of asset and other financial instruments, which is effectively what energy is nowadays, and we should have it now in this case.
My question was about the proportion of the wholesale supply that the Government intend should go through a market and be auctioned. Where is the government thinking on that? My own wish is that we start to expand the proportion of the market that has to go out there and is traded between the supply side and distribution to customers. One issue that came out in our consideration of the Energy Bill was the transparency of those actions. I know that that is a priority for the Government and would like to understand how that is moving forward.
My last point is about energy prices. We are told time and again that electricity prices very much rely on and follow wholesale gas prices, but we are questioning how much wholesale prices have gone up in reality over the past year. We are now engaged in greater questioning of the big six. Given that electricity generation is now dominated by much cheaper coal, can the Minister tell me where that extra margin from the cheaper fuel input has gone? It has certainly not gone to consumers. That is an area that the Minister would do well to pursue.
Baroness Verma
My noble friend is of course absolutely right. All the questions that he asks are poignant, as are the remarks that he made around switching and making sure that we have the security of supply that we require. As my noble friend is aware, in the short term we have measures in place. However, in the longer term we have to look at a range of measures and mechanisms. I know that my noble friend is very keen on demand-side reduction, which of course is part of that and another measure that we are seriously looking at piloting through the Energy Bill.
My noble friend also raised the issue of manipulation. The Secretary of State has said that we need to look at stronger measures. If we do not see action on greater transparency and accountability, we may have to look beyond just financial penalties at criminal sanctions. We are undertaking a range of measures. My noble friend is absolutely right that we are of course debating many of the questions that he has asked today in relation to the Energy Bill. There are further debates to be had and I hope that my noble friend will be reassured that we are undertaking very much the sort of action that he expects us to as a responsible Government.
Energy: Long-term Supply
Debate between Baroness Verma and Lord Teverson(11 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Teverson (LD)
My Lords, does the Minister agree that not enough determination has been shown by the official regulator, Ofgem, or by our competition authorities over the past decade to make sure that there is sufficient competition in the energy market, which would at last favour consumers? Would she nudge those organisations to grow some teeth and perhaps bare them, so that consumers get a fairer deal out of energy prices?
Baroness Verma
My Lords, my noble friend makes a very important point. We have seen the need for a robust regulator, which is why we have given Ofgem additional powers to investigate and penalise any market manipulation in the wholesale markets. We are also giving it extra powers to ensure that there is greater competition in the marketplace. I reassure my noble friend that under this Government there has been an increase in smaller generators being able to partake in the energy market, from three to seven. We want to see greater competition because we think that competition, not freezing energy prices, is the way to encourage lower prices.
Energy: Fracking
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, I take the noble and right reverend Lord’s points very seriously. However, the Health and Safety Executive scrutinises well design and monitors progress to ensure that the operator manages risk effectively throughout the life cycle of the well. The well design is also reviewed by independent examiners. The Health and Safety Executive assesses all well notifications before construction and monitors well operations based on weekly reports to well specialists. Release of substances into ground water is regulated also by the Environment Agency. We have a very strong regulatory framework in this country and we should leave it to the regulators to ensure that all that needs to be done is done thoroughly.
Lord Teverson
Does the Minister agree that the greater environmental threat at the moment from energy is the resurgence of coal being used for electricity generation? Coal has now overtaken gas and accounts for 40% of total generating capacity, with most of it coming from Russia. Will the Minister confirm that it is the Government’s intention that unabated coal generation should cease within the near term?
Baroness Verma
My Lords, my noble friend makes some very important points. He will be aware that the Government are doing exactly that through the measures that we have in our EMR package to make generation from low-carbon resources more attractive than generation from coal. All existing coal plants will be required to meet the requirements of the industrial emissions directive, which aims to reduce emissions of harmful oxides of sulphur and nitrogen, and in particular we will make sure that we work towards coming off coal in the long run.
Energy Bill
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, I am grateful to my noble friend Lord Teverson for prompting a very important debate on setting targets for the landfilling of waste.
The amendment is designed to require the Secretary of State to set out a plan and timeframe, as soon as practicable, for reducing and eventually eliminating the landfilling of organic waste to make it available for renewable energy generation and other appropriate uses consistent with the waste hierarchy, as defined in the Waste (England and Wales) Regulations 2011.
We support the minimisation of organic waste going into landfill and are sympathetic to the aims of this amendment. To date, we have made considerable progress. We have reduced the amount of food waste produced and encouraged separate food waste collections that are suitable for anaerobic digestion and composting. We have already seen a substantial increase in the number of anaerobic digesters generating energy from food waste and expect many more to come on stream in the next few years.
As noble Lords will be aware, there are currently targets, set out in the EU landfill directive, for reducing the amount of biodegradable municipal waste entering landfill. Those require the UK to reduce the amount of biodegradable municipal waste entering landfill in 2020 to 35% of the levels that entered landfill in 1995; the UK is currently on course to meet that. An EU review of those targets is under way as part of a wider review of EU waste policy and legislation. I must stress that the outcome of the EU review will not be known until mid-2014, but there is a possibility that the European Commission will propose setting new targets. Therefore it would not be appropriate to commit ourselves to targets in addition to those set by the EU, particularly at this point in time when the outcome of the review of the EU targets is still unknown.
The Government have worked very successfully with industry to reduce supply chain food waste by nearly 10% over the past three years. Household food waste is down by even more: 13% since 2006. As noble Lords have pointed out, we want to focus in particular on waste prevention, rather than landfill targets or restrictions. As noted in the 2011 waste strategy, preventing food waste is the most effective approach in carbon-saving terms, compared to landfilling. Each tonne of food waste prevented means that 4.2 tonnes of carbon dioxide equivalent emissions are avoided. We believe that there are more efficient options than targets or restrictions in this area, with companies themselves knowing best where to make changes for maximum impact.
The voluntary approach has been shown to work and allows businesses to reduce waste and make themselves more efficient and competitive. We want to build on that work with businesses rather than impose targets or restrictions. As well as the continuation of the Courtauld agreement to reduce food and packaging waste in the retail and manufacturing sector, the Government have also recently launched a further voluntary agreement, which takes the same approach with the hospitality and food service sector.
We are also making progress in the collection and recycling of food waste, which is used to generate electricity by means of anaerobic digestion. Local authorities in the UK collected and recycled approximately 250,000 tonnes of separately collected food waste from households in 2011, which is a 54% increase on 2010. We expect that to be nearer 300,000 tonnes in 2013, which could provide electricity for 30,000 homes.
We can continue to support a growing anaerobic digestion industry without targets. Current evidence suggests that introducing further statutory targets would impact on businesses and local authorities in terms of compliance and monitoring, which would risk additional cost burdens on business.
I will respond briefly to a couple of points made by my noble friend Lord Teverson on the sector’s need for a plan that will avoid landfill from food waste. My noble friend will agree with me that the measures we are taking on anaerobic digestion are a success story. The Government have achieved their ambition of increasing the energy produced from anaerobic digestion of waste. The number of plants has increased from the 54 that existed when we published our strategy and action plan to 110. There are many other plants with planning permission in development.
We provide incentives for anaerobic digestion through the renewables obligation feed-in tariffs and the renewable heat incentive, which the noble Lord, Lord Grantchester, asked about. We have also provided a £10 million anaerobic digestion loan fund through the Green Investment Bank, whose fund managers have already invested in AD plants. The action plan has also delivered a driving innovation anaerobic digestion fund that is helping to challenge costs in the industry and a range of other measures, including reducing red tape for businesses in the sector. All these measures are helping the sector to grow and achieve its potential. Like my noble friend Lord Teverson, I am a keen supporter of composting, but I suspect he is probably much better at it than I am.
The noble Lord, Lord Grantchester, asked what the Government are doing to try to reduce the amount of food waste going to landfill. I referred to that in my speaking notes. We are working with business, and the voluntary approach has been successful. I hope that my noble friend finds my explanation reassuring and will withdraw his amendment.
Lord Teverson
My Lords, I thank the Minister for going through that. The momentum has been growing in this area, helped very much by the Government’s support measures. In the spirit of subsidiarity, I am not sure that the fact that European regulations might be coming along in the middle of next year should get in our way. I do not think that European directives stop member states having tougher environmental targets. That would be something. I would be strongly behind the Eurosceptics in resisting that. I am very pleased that the Minister mentioned the investment by the Green Investment Bank because a very large plant in Dagenham has been put forward for use by London boroughs. It is an excellent investment, and I do not think it would have happened without the Green Investment Bank. That is an example of how that has worked well.
I fundamentally believe that on certain occasions you use markets to a certain degree. When it comes to households rather than larger organisations, it is very difficult to make these processes commercial. I would never say that through legislation we should stop certain levels. This is not pollution, but it leads to pollution in terms of greater emissions. I understand there is momentum there. I shall think about this further. The momentum is good, so I beg leave to withdraw the amendment.
Energy Bill
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, as I have said, I read Hansard with great care to see what responses I can give to noble Lords, but I consider every amendment very carefully and, of course, pay great consideration to each and every point that is raised.
Lord Teverson
Perhaps I may thank the noble Lord, Lord O’Neill, for the consideration he has given to this side and for his suggestions. That was an excellent analysis of how things should work.
Energy Bill
Debate between Baroness Verma and Lord Teverson
Lord Teverson
My Lords, I welcome any amendment that emphasises the demand side of this issue. I particularly like the fact that we have started to bring in the factor of energy storage. Whenever you talk about energy storage, the technologies are always just about going to be there but they never get down to the commercial level by quite a way. But I hope that that will not be the case in the long term. This is an important point that needs to be taken into consideration.
The really important point is around capacity auctions and the ability of the demand side to compete equally with that. I would be interested to hear from the Minister whether she is confident that the demand side will be able to compete or bring forward sensible bids at the early four-year period. While I understand entirely that there is a fallback to the previous year, a lot of the market has already gone. Clearly, the best solution, the nirvana solution, is that all capacity payment is filled with demand-side reduction. That is the best outcome that there could be. I am sure that that will never be the case but it is how we make sure that we do not restrict it. I am interested in the Minister’s views on how the Government feel that the demand side can effectively come forward four years in advance. It would be very useful to understand the Government’s thinking on that.
Baroness Verma
My Lords, I thank the noble Lord, Lord Grantchester, for his detailed explanation of his amendments. The Government have already made it clear that the demand-side response and electricity storage will be eligible to participate in the capacity market. We have announced that these technologies will be supported by transitional arrangements to help develop their capability and enable them to compete on a level playing field against generation. However, while we agree that these are two important aspects of providing capacity, the subsection already allows Secretary of State to make further provision for the meaning of “providing capacity”.
The definition in this subsection is not intended to be exhaustive, nor would it be if these amendments were accepted. There are other existing technologies, such as interconnectors, which may, at some point, play a part in the capacity market, along with other new technologies in the future. This clause seeks to maintain the flexibility to include this full range of technologies, including demand-side reduction and storage in the capacity market, while leaving it open to incorporate novel technologies, should they emerge in the future.
Amendment 53B is intended to ensure that demand-reduction providers are given priority over other providers in the awarding of capacity agreements through capacity auctions. There are a number of reasons why the Government do not see this approach as desirable. First, the capacity market seeks to encourage genuine competition by placing all forms of capacity provision on a level playing field. This is the best way to ensure value for money for consumers, and the reason why no capacity quantity will be ring-fenced for any particular technology type.
None the less, we recognise that certain technologies, such as demand-side response and storage, have different characteristics from generation. That is why we have announced the transitional arrangements. In addition, we have designed the enduring capacity market to ensure that demand reduction and storage can participate effectively by running capacity auctions both four years ahead and one year ahead of when capacity is expected to be required.
As we have already debated, the Government are also proposing an electricity demand-reduction pilot to inform the future entry of EDR into the capacity market. Holding an auction four years out ensures that there is sufficient time to build and commission new generation plants as necessary. However, demand-reduction providers have told us that opting into capacity agreements so far in advance of the delivery year would not be possible for most of their projects. This is why we are giving demand-side response and storage the option of participating either in the auction held four years out or in a further auction held one year ahead of delivery.
It is currently risky for demand-side response providers to predict the amount of demand reduction they will be able to provide four years ahead of a delivery year. This risk is significantly reduced in a one-year auction and we would expect them to be awarded capacity agreements at this stage. This is because we envisage them being able to provide cheaper capacity than generating plants.
In summary, this amendment would not be compatible with a technology-neutral approach. Furthermore, it risks either forcing demand-side response providers into taking on unacceptably large risks to align with the timescales required for building new generating plants or negating the possibility of new plants participating in the capacity market, risking a significant shortfall in electricity supply and the very real possibility of regular blackouts.
Amendment 53C would require the Secretary of State to modify the Electricity Act 1989, adding an additional licence condition authorising a person to store electricity. Storage of electricity is not presently an activity that requires a separate licence, although some storage providers may be generation licence holders. I therefore reassure the noble Lord that electricity storage would be able to participate in the capacity market without this amendment. The Government have already confirmed its eligibility and this is irrespective of its licence status. This is because Clause 22 does not restrict participation in the capacity market only to licence holders. It also allows the Secretary of State to define further who may be a capacity provider in regulations.
The noble Lord, Lord Grantchester, also mentioned electricity storage. We agree that storage technologies are still developing and further innovation is needed to bring down costs and find ways of scaling up. We are supporting two innovation competitions, the first winners of which were announced in May. In the large-scale storage competition, 12 winning projects were given £17 million of funding for the first feasibility phase. Decisions on which projects will proceed to the demonstration phase are expected in September. The component research and feasibility study competition has four projects so far.
The noble Lord, Lord Grantchester, asked about a separate set of rules for DSR within the capacity market. We do not envisage a separate set of rules. We envisage that the rules and regulations will cover all technologies eligible to participate in the capacity market, although the transitional arrangements for DSR will be incorporated. He also asked about baselining for on-site capacity. This will be covered in the detailed capacity market regulations and will be the responsibility of the national system operator.
The noble Lord asked what I visualised as success, given his previous question on the Green Deal. I view success in the long term as a programme that will last many decades. In reference to the Green Deal, I am already witnessing success. We had more than 44,000 assessments up to the end of June and 115,720 installations under ECO. That is what I would call successful.
Turning to Amendment 53AA, tabled by the noble Viscount, Lord Hanworth, which proposes a definition of demand-side response to be added to Clause 21, the Government have already made it clear that demand-side response and electricity storage will be eligible to participate in the capacity market. As I made clear in response to the questions of the noble Lord, Lord Grantchester, we have announced that those technologies will be supported by transitional arrangements to help them to develop their capability and enable them to compete on a level playing field against generation.
I hope that the noble Lord, Lord Grantchester, and the noble Viscount, Lord Hanworth, have found my explanations reassuring, and I hope that the noble Lord will withdraw his amendment.
Energy Bill
Debate between Baroness Verma and Lord Teverson
Baroness Verma
It is up to suppliers whether they charge: they may or may not. Government cannot dictate that to suppliers. It is in the interest of suppliers to offer the best possible deal out there, knowing that they compete for that work. We need to leave it to the people offering the Green Deals as to whether they charge, do not charge or give the costs back if they have a Green Deal accepted.
The energy-saving advice service will ensure that both consumers and businesses have access to impartial advice on the range of measures and services available to them. The Government are also currently operating a cashback scheme to consumers as further encouragement to install energy efficiency measures. The steps we are taking in the area of energy efficiency form part of a whole coherent strategy. As noble Lords mentioned, alongside the Green Deal we are also rolling out smart meters. The introduction of smart meters will provide consumers with real-time information on their energy consumption to help them control their energy use. As part of the smart meter installation visit, suppliers must also provide energy efficiency advice.
I will also say a few words on energy labelling and product standards. Already, measures like the ECO design and the energy labelling directive have played a key role in enhancing energy efficiency, securing above-average savings from electrical appliances. The UK continues to work with partners in Europe and is currently pushing the European Commission to increase the level of ambition on this issue. We are not just doing it nationally here but trying to encourage our partners in Europe to do the same. I hope my noble friend Lord Teverson and the noble Lord, Lord Hunt, see that the Government are taking every step possible to reassure and inform consumers. On that basis, I hope my noble friend will withdraw his amendment.
Lord Teverson
My Lords, I thank the Minister for that. I am greatly reassured, particularly that, as the data are held for at least two years on the smart meter on the premises and are also being checked by GCHQ, if I lose the data I can be sure that the National Security Agency over in Washington has got it and I contact them to get them back. What could be better than that? I have every pleasure in withdrawing my amendment.
Energy Bill
Debate between Baroness Verma and Lord Teverson(11 years, 4 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Teverson
Do we know which 50%? That is the question.
My noble friend Lady Maddock is being too modest. When we went through the Green Energy Bill we encountered some really strange language. We asked why it was written in that way, and it turned out it was supposed to be written in plain English—in a way that people would understand. Actually, this amendment is perfect for what it should be. The draftsman has written it in a clear and easily understood format. That is exactly what it should say, and I hope that the Secretary of State, the Minister and the Government will see a way to bring it in.
Energy Bill
Debate between Baroness Verma and Lord Teverson
Lord Teverson
This is a useful probing amendment. One of the other areas that has not been mentioned is the interest that the Government have had in geothermal energy from Iceland, which has started to be explored. I would like to think that we could have geothermal from Cornwall that we would be absolutely certain was within this regime—maybe I will come to that later in the Bill. It is useful to start to understand this and develop these arguments, because, in terms of dedicated sources of renewable energy that we work with other nations to bring to these shores, it would be regrettable if we were not able to take the full credit for that work within the decarbonisation targets. I would be interested to hear the Government’s thinking in this area.
Baroness Verma
Amendment 36 proposes that the Secretary of State makes further provision about the meaning of “electricity generation”. Clause 4 defines carbon intensity as a measure of the amount of carbon emissions generated in grams per unit. Before I go further, I will write to the noble Baroness on SF6, because my notes do not cover that detail. I will make sure that next time they are here at hand.
The Bill covers emissions from all electricity generated within the territorial boundaries of the UK, both from power stations and auto generators, and includes the emissions from electricity before any transmission losses. This approach is consistent with our international reporting system, which the noble Baroness will know about. I should also like to reassure noble Lords that the power in Clause 4(4) enables the Secretary of State to make further provision for the meaning of carbon intensity of electricity generation and this includes any changes to the definition of electricity generation. I think this goes a little way to responding to the concerns of the noble Baroness.
Turning to Amendment 37, Clause 4 currently states that carbon intensity of the power sector includes emissions generated in Great Britain only. Although, as I said, this will apply to the UK power sector following the Government’s amendments to extend the decarbonisation provisions, this does not include emissions from interconnection or non-UK low-carbon generation. The Government considered this very seriously when we were designing these clauses. While interconnection is important, the Secretary of State cannot realistically be responsible for, and would have great difficulty in measuring, the carbon intensity of electricity generated outside the UK. Fundamentally, what is coming down the wires is simply electricity, and we could not say for certain in most cases whether it is low-carbon or not. If anything, my concern is that we would find ourselves overclaiming, when in fact the electricity being imported was from a wide range of generation sources. However, as I previously mentioned, these provisions retain flexibility so that this approach can be reviewed at a later date and changed if we feel it is necessary to do so.
I reassure noble Lords that if it becomes necessary to alter the definition of carbon intensity of electricity generation, for example to include emissions from interconnection and non-UK low-carbon sources, further provisions can be made and will be made by the power in Clause 4(4).
I hope that I am able to reassure noble Lords that the Government’s provisions already have a purpose and a sensible and logical approach for measuring the carbon intensity of electricity generation, and that a further power to amend the default definition is available should the definition need to be modified.
My noble friend Lord Teverson raised a point on thermal support. The Government announced draft strike prices last week for geothermal energy sourcing to support the development of that technology. I know that my noble friend will be extremely pleased to see that.
The noble Baroness mentioned offshore wind turbines off the coast of Ireland. As yet, we have not said anything about limiting support to specific technologies. A memorandum of understanding was signed by the Irish and UK Governments earlier this year which covers renewable technologies, and we are working closely with the Irish Government to develop further dialogue on that. On that note, I hope that the noble Baroness will withdraw her amendment.
Atmospheric Carbon
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, I reassure the noble Lord that it is not just because of the recession. We are, through the Energy Bill, putting in place a number of measures to ensure that we will be working towards reducing carbon emissions.
Lord Teverson
My Lords, to reduce carbon emissions we need a strong carbon price. Can my noble friend the Minister tell us what the Government are doing to boost the price of carbon in Europe, despite the fact that the European Parliament has recently voted against the backloading of current emission targets?
Baroness Verma
I agree with my noble friend. We continue to support the Commission’s proposal to backload and we hope for a more positive outcome in the forthcoming votes in the European Parliament at the next voting session. The Government are pushing for the adoption of a unilateral EU target for 2030 of a 40% reduction on 1990 levels, and, in the context of a more ambitious climate agreement for the period beyond 2020, the EU’s target should increase up to a 50% reduction on 1990 levels.
Renewables Obligation (Amendment) Order 2013
Debate between Baroness Verma and Lord Teverson(11 years, 8 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Teverson
Before my noble colleague sits down, I would like to say something important about co-ordination between Scotland and the south: we definitely need a ROC concert.
Baroness Verma
My Lords, I was trying to recover from that helpful contribution that we have just had from my noble friend. I begin by thanking all noble Lords for their support for this order and very much welcome what they have said in recognising the great benefits that it will provide.
I was slightly disappointed that the noble Lord, Lord Grantchester, does not recognise that it brings greater certainty for investors, simply through what we are trying to achieve. The expected benefits initially will be £20 billion to £25 billion in 2013-17. That gives greater certainty to investors, given that they will know that they are working towards the contracts for difference in the Energy Bill.
I will answer some of the questions that the noble Lord has put down, as have my noble friends, but if I fail to answer any questions I will write to noble Lords and make sure that there is a copy in the Library. The noble Lord, Lord Grantchester, asked about the Green Deal. It is on track and doing very well. However, because I was not expecting a question on the Green Deal, I do not have the specific figures here with me. If he will allow me, I will also write to him on those figures and give him an update on where we are.
The noble Lord asked whether the target is safe. I can assure the noble Lord that it is. The target is unchanged and there are no plans to change it. He also asked if I am confident that the shortfall of 29 terawatt hours will be met. Through the contracts for difference, we expect that target to be met and, through our capacity mechanisms, to have some capacity in lieu in case there is ever a shortfall. Of course, we will have greater discussions on this when the Energy Bill arrives in our House.
The noble Lord also asked if the RO would be extended to allow a smooth transition to CFDs. We have no plans to extend the RO. The EMR and the CFDs are on track and we are working very closely with industry to ensure that the transition is as smooth and secure as possible.
The noble Lord also asked if coal would continue as a back-up supply. I have just mentioned the new-capacity mechanism and this will be a matter for that mechanism, rather than the renewables obligation, but renewables, particularly biomass, will have an important role to play in keeping our old coal-powered stations open in a much more sustainable way.
Energy: Prices
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, the noble Lord will be pleased to know that today the oil and gas industry report sets out some very positive figures, showing that investment is increasing in the UK and that we are able to provide security and supply of energy in our own country. Of course, we are going through a difficult time, but that should come as no surprise to the party opposite because they were the instigators of it.
Lord Teverson
My Lords, when my noble friend the Minister talks to energy companies, will she also take into consideration people who are not the normal suspects? People who live in rural areas have to pay a lot of money for bottled gas and heating oil, which come from a limited range of local suppliers. They are the people with the highest energy costs. Will she talk to those sectors to make sure that rural residents get a much better deal as well?
Baroness Verma
My noble friend raises a very important point. Though the Green Deal and through collective purchasing we are trying to help those areas where it would be far more beneficial to be able to buy collectively. Economies of scale and greater purchasing power will give them a better choice of where they can buy and what they can buy.
Energy: Oil Price Projections
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, while I agree that prices in the US have come down, worldwide there is still great demand, given the emerging economies. For the foreseeable future, globally there will be a great need for oil and, by and large, prices will be seen to go up.
Lord Teverson
My Lords, the Government have been very successful in bringing electricity consumers together to use their collective muscle to switch to better tariffs. Will the Minister undertake that her department will look at similar collective switching for heating oil, as these prices will go up even more? In rural areas in particular we do not have gas supplies and dual fuel is not available to us, so we have very high tariffs. Would she promote that switching for heating oil?
Energy: Wind Farms
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, that was what I hoped and tried to get across; obviously I failed. I would like to reiterate that this Government want to be the greenest Government ever, and in doing that are of course looking at all renewable energies. Onshore wind is only a small part of the renewable energy sector, but it is an important one, one that is very cost effective, and one that will hopefully be part of our energy security for the future.
Lord Teverson
My Lords, one of the issues about onshore wind is that we pay generators to stop generating, so the wind turbines actually stop operating. That costs us money. Would it be a much better solution if we used that energy: if we kept on generating electricity, and we topped up the storage heaters and the hot water tanks of the fuel poor? Instead of paying generators not to generate, we could use that electricity to help fuel poverty. I understand that the technology is already there; why do we not use it?
Baroness Verma
My Lords, my noble friend raises a number of very important points. The Government recognise that smart electric heating may in future provide a low-carbon solution to a range of energy challenges, including balancing the supply of electricity. DECC’s heat strategy team have had constructive discussions with utilities and manufacturers to discuss this potential further. The Government will publish a document on the strategic framework for heat in the coming months.
Energy: Draft Energy Bill
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, the noble Lord has tried very hard to deviate from the Question on the Order Paper. Therefore, it is not worthy of a response.
Lord Teverson
My Lords, I strongly welcome the Government’s recent strategy on energy efficiency, which the Secretary of State hopes will save some 22 power stations. How do the Government intend to bring some of these demand-side issues into the new energy Bill, which we need quickly to establish international investor confidence?
Baroness Verma
I thank my noble friend for bringing the House back to the Question. Of course, I agree wholeheartedly that we need to consider seriously how we reduce electricity demand and that this should complement our work on electricity market reform. I paid tribute to my noble friend Lord Lawson and the work of the committee of which he was a member. We are consulting on potential policy approaches to reducing electricity demand. That must be one of the options open to us, and I am sure that the noble Lord will be part of that consultation.
Electricity Generation
Debate between Baroness Verma and Lord Teverson
Lord Teverson
My Lords, the Government’s national policy statement for energy says that there is currently 85 gigawatts of total generating capacity in the UK, while the average demand across the year is only half that, so there is a 50% margin. Will the Minister tell us how the Government intend to reduce the peaks in demand, which could save us billions of pounds on investment, and how this might be brought into new energy legislation to ensure that we reduce the demand side as well as put up the supply side?
Baroness Verma
My noble friend is absolutely right. Of course the Government recognise that we need to make sure that we are reducing demand. We are also making sure, through our energy Bill, that our capacity mechanism will be able to bring down prices, which is something that we all want to see.
Energy: Costs
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My Lords, this Government do stand up for hard-working families, the grafters and the strivers. What we cannot do, of course, is tell big energy companies what prices they should set. Artificially reducing retail prices to levels below competitive levels would be unsustainable and discourage investment in new infrastructure. We need to make sure that energy companies are doing more by making them make their bills easier for consumers to understand and, where they can, by directing consumers to cheaper tariffs.
Lord Teverson
My Lords, between 2003 and 2011 the retail price index went up 30 per cent but the index relating to the energy price per household went up 120 per cent—four times more. Over that time, from 2003 to 2010, the number of households in poverty went up from 2 million to 5 million. Can the Minister explain how this Government are tackling that blemish on our society, inherited by us from the previous Government?
Baroness Verma
I thank my noble friend for affording me the opportunity to show our commitment in helping low-income and vulnerable households to keep their homes warm at an affordable cost. We have in place a strong package of measures to help the most vulnerable through the Warm Home discount scheme, which I have mentioned, which will help 2 million households receive support during 2012-13. This will include more than 1 million of the poorest pensioners, who will receive an automatic discount of £130 off their electricity bills by December this year.
Energy: Self-sufficiency
Debate between Baroness Verma and Lord Teverson
Baroness Verma
My noble friend is absolutely right that we need to try to maximise the economic recovery of oil and gas from the UK continental shelf, and our most recent licensing round has been the most successful ever. We are committed to working with industry to create a new world-leading, cost-effective UK carbon capture and storage industry, and policies such as the Green Deal and the introduction of smart meters will reduce our energy demand and ensure more efficient use of the fuel that we use. Our ongoing work is to achieve renewable targets which significantly increase the proportion of clean domestic energy in the mix. Ofgem’s recent report provides a comprehensive analysis of the security of supply. We are looking at it very carefully and will respond formally by the end of the year.
Lord Teverson
My Lords, does my noble friend agree that, by making the most of the wide variety of renewables that our islands are blessed with, we will move further towards self-sufficiency in energy and will effectively then disconnect ourselves from the threat of ever-accelerating fossil fuel prices?
Baroness Verma
My noble friend raises a very important point. We are trying to make sure that we have greater self-sufficiency through our renewables but this means only that we reduce our reliance on fossil fuels and, although it is helpful to say that that is what we want to do, we are not currently at that stage. However plausible our scenarios of future energy, I think that there will still be a place for some fossil fuels.