Public Parks: Funding

Debate between Lord Bourne of Aberystwyth and Baroness Jones of Whitchurch

Monday 30th October 2017 Lords Chamber

[Baroness Jones of Whitchurch]

To ask Her Majesty’s Government what assessment they have made of the availability of resources for the support and maintenance of public parks in the United Kingdom.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Northern Ireland Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, the Government recognise the value of parks in providing vibrant and inclusive locations for local communities to enjoy. We welcome the Select Committee’s inquiry on parks and have established a parks action group across Whitehall departments and with experts from across the parks sector. We have also committed £500,000 to support the group’s work on building the sustainability of parks.

[Baroness Jones of Whitchurch (Lab)]

I thank the Minister for that reply. Going right back to the Victorians, it was recognised that public parks benefit our physical and mental health as well as the environment and biodiversity. Is the Minister therefore concerned by the deterioration of our parks? There have been reports of huge cuts to the maintenance budgets with the loss of trees, shrubs and flowers, which are often replaced with bare soil, and, along with that, increased graffiti and vandalism. Does he agree that the rise of privatised open space in our cities is not the answer to that? What we need is green open space available to everyone. Therefore, I urge the Government to take a lead on reinstating our parks as the national pride that they once were, rather than passing the problem down to local authorities and voluntary organisations, which are doing their bit but simply do not have the resources available to reverse that decline.

[Lord Bourne of Aberystwyth]

My Lords, I am afraid I do not recognise that picture of doom and gloom painted by the noble Baroness opposite. Indeed, the Select Committee report recognised the valuable work done by local authorities over time. In addition, there are the royal parks, supported by DCMS, and national parks. The noble Baroness is right about these having thrived since Victorian times, but they are still thriving. An immense amount of good work is going on. We have established a parks action group, which is looking at this, and have accepted the majority of the Select Committee’s recommendations, as the noble Baroness will know.

Petroleum (Transfer of Functions) Regulations 2016

Debate between Lord Bourne of Aberystwyth and Baroness Jones of Whitchurch

Tuesday 12th July 2016 Grand Committee

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, these regulations transfer certain functions relating to the licensing and taxation of oil and gas from the Secretary of State for Energy and Climate Change to the Oil and Gas Authority. With the recent debates on the Energy Bill—now the Energy Act 2016—no doubt still fresh in our minds, I am sure that most noble Lords will be familiar with the background to the establishment of the Oil and Gas Authority and Sir Ian Wood’s review of maximising the economic recovery of petroleum from the United Kingdom continental shelf. However, for the sake of clarity I will outline briefly where we have got to.

The benefit our oil and gas industry has brought to the United Kingdom is not in doubt, with around 43 billion barrels of oil extracted, over £330 billion of taxes paid and many thousands of jobs supported. However, as one of the most mature regions in this global industry, it is now facing new challenges, with remaining reserves increasingly dispersed and more difficult and expensive to exploit. Notwithstanding this and the additional pressures resulting from low prices, there is still great value to be extracted from the North Sea and the continental shelf. The Wood review recommended that delivering on this required a new approach, and the focused attention of a new independent regulator and asset steward.

In response to this, the Government legislated to establish the principle of maximising economic recovery —MER UK—and has set out a strategy to deliver this. Industry and the Oil and Gas Authority are now required to act in accordance with this strategy when going about their business. The authority has also been established as an executive agency of the Department of Energy and Climate Change, and has made great progress. The successful passage of the Energy Bill—now Act—enables it to be set up as a government company and empowered with a broader range of tools to meet the challenge of MER UK, as envisaged by the Wood review.

A central part of the establishment of the Oil and Gas Authority is the transfer to it of essential functions currently exercised by the Secretary of State. Noble Lords may recall that Schedule 1 to the Energy Act provides for the transfer of the majority of these functions, including some relating to offshore oil and gas infrastructure, as well as the licensing of carbon dioxide and gas storage. However, it was decided that certain core functions in relation to petroleum licensing and taxation would not be transferred in that Act, due to the interdependencies with the new devolution settlements for Scotland and Wales, as outlined in the Scotland Act and the Wales Bill currently passing through another place.

Specifically, both those settlements include provision to devolve these functions in the onshore area. This all requires amending the same part of the Petroleum Act 1998. Due to the complexities caused by the sequencing of these pieces of legislation, it was decided that we would transfer these specific functions via regulation under the Energy Act to allow greater flexibility. The regulations before the Committee seek to give effect to this. The rationale for transferring these functions to the Oil and Gas Authority remains the same as for those transferred in the Energy Act; namely, the effective establishment and operation of the Oil and Gas Authority as a regulator and asset steward of the United Kingdom continental shelf. The only difference in this case is the legislative vehicle by which these functions are formally transferred.

It is worth noting that, as with the functions transferred in the Energy Act, these functions are all currently being exercised by the Oil and Gas Authority in its capacity as an executive agency of the Department of Energy and Climate Change. However, once the authority is established as a government company, it will be legally distinct from the department and, in order to continue to carry out its functions, they will need to be formally transferred to it.

In conclusion, these regulations make relatively minor amendments to legislation governing petroleum licensing and taxation, to enable the Oil and Gas Authority to continue the important work it is doing to regulate the oil and gas sector, and to ensure a smooth transfer of functions to Scottish and Welsh Ministers in due course. I beg to move.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank the Minister for his introduction of the order before the Committee today. As he reminded us, this follows the Wood review into maximising the recovery of oil and gas from the UK continental shelf. The Oil and Gas Authority is already established under the Companies Act 2006; its functions have now been extended under the Energy Act 2016, subject to the provision introduced under the Scotland Act 2016 to devolve onshore oil and gas licensing in Scotland. As the Minister reminded us, debate on extending the powers to the OGA was extensively undertaken during the passage of the Energy Bill. At that time, we fully supported the creation of the OGA, with powers to co-ordinate the industry and secure the best outcomes for the next phases of North Sea development. I am sure the noble Lord will also recall the debates on our amendments to the Bill to extend its environmental functions and to give the OGA powers on strategic decommissioning of infrastructure, particularly in relation to the development of carbon capture and storage.

We are happy to agree the order but we would have liked the powers to have gone further. Therefore, I have just one aspect to follow up with the Minister. At the time, all sides of the House appreciated the advantages that would result from the development of carbon capture and storage. However, this technology is largely untested. So does the Minister agree that the OGA’s planned licensing role could include research into CCS to develop the technology in the field so that we could benefit from it in the future? Is there a role for the OGA in that capacity?

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Baroness for her contribution. She correctly described the structure of the OGA and the fact that it is incorporated under the Companies Act 2006. She is right that the Official Opposition fully supported this aspect of the Bill. She is also right about the importance of carbon capture and storage. We did accept some amendments on CCS, some of which are now in the Energy Act.

The noble Baroness will recall that I suggested the establishment of an advisory committee chaired by the noble Lord, Lord Oxburgh. That is just about at the end of its work. I am seeing the noble Lord, Lord Oxburgh, next week to discuss its findings, of which I have had sight of some of the most important. We will be looking very closely at that advice. We accept the importance of CCS. Indeed, I have been discussing with colleagues in other countries the possibility of collaboration because many countries are further forward than we are on carbon capture and storage; for example, Canada has a very successful CCS plant run on a commercial basis at Boundary Dam, which I believe is in Alberta. Other states are happy to collaborate as well, at least on research and data. I assure the noble Baroness that we see the importance of CCS and are keen to take it forward.

I am very happy to update the House on developments as and when they happen but the important point to watch for is the publication of the advisory committee’s report, which I think will be forthcoming, certainly within the next two weeks. I am sure that that will be widely circulated. I thank the noble Baroness for her support.

Nuclear Industries Security (Amendment) Regulations 2016

Debate between Lord Bourne of Aberystwyth and Baroness Jones of Whitchurch

Tuesday 12th July 2016 Grand Committee

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I will give some background and explain why we are seeking to make these amendments, which will be an important addition to the nuclear security framework, both while we remain a member of the EU and as our relationship with Europe changes and evolves.

The United Kingdom is highly regarded by the International Atomic Energy Agency and other key international partners in civil nuclear security, and we take our international role in this field very seriously, including with regard to regulation. The draft regulations before the Committee would update the Nuclear Industries Security Regulations 2003. Specifically, they would remove sub-paragraph (i) from the definition of transport in Regulation 2(1), and add references to air transport to Regulation 3(5)(b).

The effect of these amendments is to bring the transport of civil nuclear material by air within the same stringent regulatory framework for security that applies to the transport of such material by land or sea. This means that the independent Office for Nuclear Regulation will have the same oversight and approval function in relation to the security of civil nuclear material transported by air as it has in relation to the transport of such material by land or sea.

There are two main reasons to make this amendment to the regulations. The first is that the United Kingdom is a party to an international treaty, the Convention on the Physical Protection of Nuclear Material, which was signed in 1980, came into force in 1991 and was subsequently amended in 2005. The convention requires signatories to have in place a legislative and regulatory regime to ensure the security of civil nuclear materials stored or transported in that state. The Nuclear Industries Security Regulations 2003 are the primary means by which the United Kingdom has implemented this obligation under the convention.

When these regulations were first written, the transportation of nuclear material by air was not considered to be an option and so air transport was excluded from the scope of the regulations. As our work on decommissioning has gathered pace, we have revisited our legislative and regulatory regime for ensuring the security of civil nuclear materials and determined that the regime should apply to all potential forms of transport. Making these amendments to the regulations to extend the regulatory regime which exists in the 2003 regulations to cover the transport of nuclear materials by air will help to ensure that the United Kingdom gives full effect to the convention.

This brings me to the second reason for making these changes: our domestic considerations. Amending these regulations will allow us to consider all credible options when planning moves of nuclear material to ensure that we make the right operational decision with regard to both safety and security. Nuclear material can be safely and securely transported by air, and it is right that our regulatory framework facilitates this. Air transport of nuclear material is already an established method of transport internationally; these amendments simply mean that civil nuclear material transported by air from or within the United Kingdom will now be subject to the same regulatory regime with regard to security as transports of such material by land or sea within the United Kingdom.

These regulations will ensure that the independent Office for Nuclear Regulation will be involved with and would oversee the security arrangements for any air movements that take place. As such, they will make the transportation of civil nuclear materials more secure. In practice, this means that the Office for Nuclear Regulation will be responsible for approving transport security statements and transport security plans for all carriers of civil nuclear material by air, as they do for carriers involved in the movement of civil nuclear material by road, rail or sea, which currently take place. In drafting these regulations we have consulted the Office for Nuclear Regulation, which is content with these changes.

On a practical level, these regulations will allow us to better address the challenges we currently face. In late 2015, we began a programme of moves to remove nuclear material from the Dounreay nuclear site in northern Scotland. This programme is of great importance and will help to ensure the long-term safe and secure management and treatment of this nuclear material by storing it in the most appropriate place.

As part of this programme, the Prime Minister announced earlier this year that the United Kingdom Government had reached a landmark agreement with the United States and the European Union on a multilateral swap of nuclear material. Under the terms of this agreement, the United Kingdom will transfer almost 700 kilograms of excess highly enriched uranium from Dounreay to the United States, and in return the United States will send nuclear material to the European Atomic Energy Community, which will be used in the production of essential medical isotopes for use in Britain and European countries. This agreement is ground-breaking and will see nuclear material that we no longer need being exchanged for material that could potentially save many lives.

While we will have to work through the potential implications of Brexit in due course, the importance of nuclear security, as embodied by these amendments, will not be affected. In order to complete this operation in the safest and most secure way, we need to be able to consider all transport options seriously. Without an appropriate regulatory regime, air transport would not be a legitimate option. While we cannot disclose timings or methods of transport that will be used in any future moves of civil nuclear material, the amendments made by these regulations will allow us to consider all potential options.

I sincerely hope that these regulations will be approved, as they will help to ensure that any movement of nuclear material by air is regulated appropriately and carried out securely, and will facilitate the delivery to us of medical isotopes. I therefore commend the regulations to the Committee and beg to move.

[Baroness Jones of Whitchurch (Lab)]

I thank the Minister for his explanation of the order before the Committee. As he has said, the 2003 regulations are to be amended under the powers of the Energy Act 2013 in relation to the security of transporting nuclear material being subject to the oversight and approval of the Office for Nuclear Regulation. This amends the regulations to include transport by air.

Although I am content to approve the order, I have a few questions for the Minister. First, the security of civil nuclear material in transit is a UK obligation under the Convention on the Physical Protection of Nuclear Material. However, as I understand it, the amendments which now apply to nuclear material transportation came into effect on 8 May. If this is the case, it appears that we have been in breach of the regulations for the last two months. Will the Minister clarify whether this is the case?

Secondly, it appears from the Explanatory Memorandum that the transport of civil nuclear material by air is uncommon elsewhere, and the memorandum says that the department is unaware of any private sector or civilian transport providers interested in or capable of securely transporting civil nuclear material by air. It is right that the ONR have proper oversight. I was going to ask if I am right in thinking that such occurrences would continue to be rare, but from what the Minister is saying, that is far from the case. Because of the multilateral agreement which he has outlined, there is potentially going to be quite a considerable amount of air transportation of nuclear material. I understand that he cannot give all the details, but perhaps he could at least give a sense of the scale and proportionality of the potential involvement of air transport.

I ask this question because if there are any concerns, they come about from a risk management perspective. In the quadrant of probability and impact, risks from transport by air would be placed in the low probability, high impact quadrant. As noble Lords will know, any air incident is newsworthy; air disruption and atrocities are the favoured target for terrorist groups and nuclear accidents are a major concern for the public. So, addressing the level of the risk, can the Minister say whether the transport of civil nuclear material by air takes place elsewhere in the world? Can he give the Committee any details? If transport by air is being regulated elsewhere, what regulations are applied and how do they compare with the regime here?

If there was an incident, any nuclear fallout from the air would clearly cover a far wider area than would be the case with other forms of transport. Is the Minister satisfied that any contingencies which would have to be implemented have been practised by the relevant authorities and organisations in advance of these changes? While I am on the subject of risk, the noble Lord will know that the issue of normal pension age has been raised by the Civil Nuclear Police Federation, which has argued that the physical and training demands made of its staff should lead to a normal retirement age of 60. I understand that this matter is subject to discussion at the moment and I would be grateful if the Minister could give some information about progress.

Thirdly, can the Minister say whether the transportation of nuclear material by air will be limited to low-grade material only? Will the planes be specifically marked or identifiable such that attention could be drawn to them? Fourthly, what requirements will be placed on the Office for Nuclear Regulation to report to the department on the risks and mitigations that are being taken? Will these regulations be kept under review?

Finally, the Minister will know that the Secondary Legislation Scrutiny Committee, in its 2nd Report of Session 2016-17, asked the department a few questions on the regulations which the committee felt had not been adequately answered. When asked for what purpose air transport would take place, the department merely said that the regulations,

“will allow air transportation to be considered as a credible option”.

This perhaps amounts to the answer, “Because we can”. Can the Minister shed more light on why and for what purpose air transportation is now being considered?

I hope that the department will talk to the ONR about the very limited circumstances in which this form of transport should take place, given the risks involved. I hope also that the Minister shares my concern about the need for a proper risk assessment.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Baroness for her contribution and for her support, qualified as it was by some quite legitimate questions.

Although the Civil Nuclear Constabulary pensions issue is perhaps a little off-piste in relation to these regulations, I am happy to say a bit about that situation. As the noble Baroness will know, we have sought to set the pensions arrangements for the Civil Nuclear Constabulary in the light of the Public Service Pensions Act 2013, which if I am not mistaken was based on the recommendations in the report of the noble Lord, Lord Hutton, who was formerly a distinguished Labour Cabinet Minister. I am unable to say much more than that because she is probably aware of the fact that the matter is currently sub judice while the unions are challenging the matter in the courts. As I understand it, that is the position.

On the regulations, first I can reassure the noble Baroness that the prime concern for the United Kingdom in these matters is, as always, security and safety. Our reputation for nuclear safety and security both in relation to nuclear plants and in relation to the transport of nuclear materials is, I think, unsurpassed. I can also reassure the noble Baroness—I hope that I did not give a contrary impression, but the trouble in bringing forward such regulations for a specific purpose is that the feeling develops that this must be happening an awful lot, whereas that is not the case at all—this will remain the rarest form of transfer of nuclear materials. Transportation by air will be rare and will certainly be rarer than other forms of transport. However, as she indicated, the regulations probably require us to do this. Therefore, it is anticipated that air transportation does occur. The noble Baroness asked whether other states fly nuclear material. The US certainly does and has appropriate regulations in place.

Whether we have been in breach of the convention is perhaps an open point. The convention is perhaps not totally clear on whether we have to cover air, but certainly as we are envisaging that we might want to transport material by air, obviously we would need to. That is the full consideration behind these regulations: it is to ensure that we have the same very strong security regime for the transportation of civil nuclear material by air as we currently have for transportation by land and by sea. Other states do this, as I have indicated. Are there risks? I suppose the honest answer is yes, but the security and safety regime seeks to minimise those. That is why these regulations are important. Obviously, we study very carefully what the Office for Nuclear Regulation advises us.

The noble Baroness asked for specific examples. I think that I have already given some rather specific examples. She will understand that I do not want to give too many, but I mentioned that we are exchanging nuclear material with the US, which will in return provide us with material for medical isotopes, which are, as the noble Baroness knows, quite vital for life and medical research. I am sure that she welcomed that. I would not want to give too many specific examples, but that is certainly one.

I am not sure whether the planes are readily identifiable. I can only imagine that they are not; I am being reassured that that is the case. She will understand, and indeed she indicated as much, that I cannot go into the operational details of precisely how this is all organised. However, just to reassure her, as under successive Governments, nuclear safety and security both at the plants and in the transfer of materials is very much foremost in our minds. I beg to move the regulations.

Contracts for Difference (Miscellaneous Amendments) Regulations 2016

Debate between Lord Bourne of Aberystwyth and Baroness Jones of Whitchurch

Tuesday 5th July 2016 Grand Committee

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, before turning to the detail of these regulations I would like to make clear that this Government’s commitment to delivering the secure, affordable and low-carbon energy supply that this country needs, and which the Secretary of State set out in her reset speech in November of last year, remains constant. The vote to leave the European Union does not change this Government’s approach to these challenges, and we remain fully committed to delivering on our priorities, including encouraging the development of offshore wind where we see great potential—and where good progress is already being made—to get costs down and to deploy at scale. In fact, I met with representatives of the offshore wind industry this morning to discuss the opportunities that exist. The ability to provide good-quality jobs and apprenticeships and to support industrialisation of the whole supply chain, including United Kingdom companies, is just one of the elements that makes the industry attractive. We are proceeding with plans to hold a competitive allocation round for “less established” technologies later this year and hope to announce the details of this as soon as practicable.

The regulations that are the subject of this debate will amend regulations concerning the contracts for difference scheme. The contracts for difference scheme is designed to incentivise the significant investment required in our electricity infrastructure, to keep our energy supply secure, to keep costs affordable for consumers and to help meet our decarbonisation targets. Contracts for difference, or CFDs, give eligible generators increased price certainty through a long-term contract of 15 years. This allows investment to come forward at a lower cost of capital and therefore at a lower cost to consumers. Participants in the scheme bid for support via a competitive allocation, which ensures costs to consumers are minimised. We plan to run the next allocation round in late 2016—details, although not yet published, will be brought forward shortly.

As noble Lords will be aware, the first CFD allocation round was held in October 2014, leading to contracts being signed with 25 large-scale renewable generation projects, at significantly lower cost than those projects would have cost under the renewables obligation scheme. While this scheme is operating successfully, the Government are looking to make a number of minor amendments: first, to ensure that an application for a CFD cannot be made where there is a pending application for a capacity agreement in respect of the same unit, which would potentially distort the allocation for both processes; and, secondly, to improve the efficacy of the allocation process, including by making available non-price bid information to enable evaluation of the allocation rounds—information that would be held by National Grid and would be made available to the Secretary of State.

In order to implement our proposed amendments, four sets of regulations will need to be amended by this instrument: the Contracts for Difference (Definition of Eligible Generator) Regulations 2014; the Contracts for Difference (Allocation) Regulations 2014; the Contracts for Difference (Standard Terms) Regulations 2014; and the Electricity Market Reform (General) Regulations 2014. The instrument under consideration—that is, the Contracts for Difference (Miscellaneous Amendments) Regulations 2016—makes a number of minor and technical amendments to the current regulations. I will aim to run through these technical amendments briefly.

The amendments are designed to improve the effectiveness of the CFD scheme. The most significant of these amendments are: first, to ensure that an application for a CFD cannot be made where there is a pending application for a capacity agreement in respect of the same unit. This will ensure that an applicant cannot apply to participate in the CFD and capacity market auction at the same time and then make a choice of scheme, potentially distorting the allocation for both processes.

Secondly, the regulations set out the connection requirements applicable to generators who connect to the national transmission or distribution system, or to a private network, to align with the allocation framework. These are key qualification requirements for applicants who connect to the grid in this way, and having the detail in regulations will provide greater certainty to generators in advance of a future allocation round.

Thirdly, the regulations refine the procedures that apply when there is a need to delay or rerun the auction or allocation round, leading to greater clarity for investors.

Fourthly, they make a distinction between confidential price information and non-price information in a sealed-bid submission, which will ensure that the Secretary of State is able to obtain information relating to non-price sealed-bid data to evaluate the efficacy of the allocation round—non-price information could, for example, include the ratio of successful to unsuccessful projects or the number of bids in each delivery year.

Fifthly, they enable unincorporated joint ventures to participate in the CFD regime.

Sixthly, they ensure that only those bank holidays observed in England and Wales are considered within the definition of a “working day”. The proposal to focus on a single jurisdiction to define a “working day” allows for consistency of time periods and deadlines throughout the CFD regime.

Finally—seventhly—they allow for the Secretary of State to issue a direction to the CFD counterparty to amend signed CFD contracts where the sustainability criteria have been altered in subsequently published versions of the CFD.

All of the proposals being implemented by this instrument were publicly consulted on and received a largely favourable response. Some concern was expressed about the proposal to split non-price data from confidential price information in a sealed-bid submission. We are confident that the non-price data can be effectively disaggregated from confidential price information and anonymised in such a way that individual projects cannot be identified. This will enable us to evaluate the efficacy of the allocation round.

As a final point, I would like to take the opportunity to assure noble Lords that the Government will continue to evaluate and monitor the reforms following implementation, making sure that the measures put in place remain effective and continue to represent value for money to the consumer. I beg to move.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I am grateful to the Minister for his explanation this afternoon. We accept that most of these changes appear to tidy up minor issues which have cropped up after the initial allocation rounds. Arguably, some of those problems might have been anticipated, but I will not make an issue of that this afternoon.

The most important amendment is to Regulation 14, seeking to extend the exclusion from possible conflict between CFDs and capacity agreements to cases where an application has been made for a capacity agreement but has not been determined. Therefore, as the noble Lord said, the new rules would stop duplicate applications to both allocations at the same time. I understand that this type of gaming is not desirable, although I also understand that the Minister in the other place admitted this had not ever happened in practice. In the meantime, can I clarify whether, under the new regulations, this prohibition works equally for both schemes, so that you cannot apply for either one while the other application is being processed?

Also, while we understand that the Government would not want to reward one company applying under both schemes, is there not some scope for companies to make some sort of initial application, on the basis that the applications take time to go through the several stages and be considered, before that company works out for itself which is the most right and appropriate application to pursue? I just wonder whether we are being rather too stringent on this and whether there ought to be some more flexibility for an initial application to be made before the final application is followed through. I think companies may find that that process makes it easier for them to decide what is in their best interests in the longer term.

Perhaps the noble Lord could give some clarification on these points, but I would make it clear that, in principle, we support the amended regulations.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Baroness, Lady Jones, for her contribution and her general support for this instrument. As she rightly said, and as was stated in another place, there have not been any overlapping applications for CFDs and capacity market agreements so far. This is therefore a pre-emptory move to ensure that such overlaps do not happen. She is right to suggest that the prohibition would work equally for both schemes and in both directions.

On the noble Baroness’s point about flexibility being desirable, so that a company might choose, it is our view that the details of the schemes are available and, obviously if they do not overlap, it is possible to apply for one and subsequently for another if the first application was unsuccessful. However, it appears to us—although we will keep it under review—that it is absolutely right that people make that choice. After all, the CFD and the capacity market are for different purposes. We believe that this is the right approach, but I assure the noble Baroness that we will keep her point under review and thank her for raising it.

With that, I commend the regulations to the Committee.

Electricity Capacity (Amendment) Regulations 2016

Debate between Lord Bourne of Aberystwyth and Baroness Jones of Whitchurch

Tuesday 5th July 2016 Grand Committee

[Baroness Jones of Whitchurch (Lab)]

My Lords, I am grateful to the Minister for setting out the intentions behind the amended regulations today. I have to say at the outset that the strategy for maintaining energy supply consistency does not seem to be working out quite as well as the Minister would have had us believe in his comments earlier and just now. We seem to be moving to a place where what was once a vibrant independent energy market is increasingly making investment decisions based on the government subsidy that is available. The more that the Government intervene, the more their interventions skew the overall energy capacity available.

Of course these latest proposals have to be seen against the backdrop of government policy shifts that have created huge uncertainty and risks for investors, deterred investment and put up costs. The Minister will have debated with my colleagues on numerous occasions the negative investment impact that has arisen from pulling the plug on schemes such as feed-in tariffs and the renewables obligation. I do not expect him to agree with me but we would contend that some of the problems with which he is now trying to grapple are essentially of the Government’s own making.

The original intention of the capacity market scheme was to attract new investment, encouraging gas-fired power stations in particular, but it seems to have completely failed in that objective. Instead, the subsidies seem increasingly to be used to reward existing profitable suppliers, including nuclear power stations. For example, nuclear power plants have so far received payments amounting to £153 million for 2018 and £136 million for 2019, despite the fact that they were almost certain to remain open during those years without receiving those subsidies.

Incidentally, I could use this opportunity to raise again with the Minister the question marks over Hinkley Point, given the outcome of the referendum, which has fuelled further concerns about the commitment of the French Government to that investment, but I realise that he will feel obliged to repeat the mantra that all is well in that investment until eventually there is overwhelming evidence that that is not the case and the deal finally falls through. So I understand that he is limited in what he can say on that.

There is also a question mark over whether the capacity market interventions will run counter to the Government’s other binding commitments to reduce pollution, given that some of the beneficiaries are coal and diesel generators. Indeed, my colleague in the other place, Lisa Nandy, made a telling point that there is a danger that consumers will be paying twice for policies pulling in opposite directions: they will pay once to drive coal out of the system via the carbon price floor, and once to keep it in the system via the capacity market. We are now reaping the effects of ill- thought-through market interventions, with consumers bearing the ultimate cost.

The Minister may be aware of the recent report from the IPPR think tank into the workings of the capacity market. It underlines the argument that these measures work against decarbonisation. They have provided a lifeline for several old coal-fired power stations, which received a total of £373 million from the first auctions. They have also heavily incentivised the proliferation of new diesel generators, which are even more polluting than coal. The report also makes the point that the capacity market is designed around the requirements of large power stations rather than smart energy technologies, such as demand response and electricity storage.

Has any consideration been given to introducing an emissions performance standard, which could be applied to all those in receipt of the capacity payments? Is the department giving any thought to how the capacity payments could be used to incentivise gas power plants using carbon capture and storage if they are to stay open in the longer term? Is the department prepared to consider variable subsidies so that the new technologies, which could provide a longer-term solution, do not have to compete with traditional power station generators for support?

Having said all that, the specific proposals in the amended regulations to increase the penalty for non-performance clearly make sense. It cannot be right for suppliers to accept subsidies and then walk away from the contract anyway. It is also right that there should be a robust system of checks on new-build and existing plant to ensure that agreements are honoured.

Finally, does the Minister feel that the financial assessment of the cost benefits of the new auctions, in what is clearly a volatile market, can be relied on, and is there a mechanism for revising such calculations in the light of changing market responses? Does he feel that enough stress-testing has been done to interrogate the market effects of introducing one-year auctions when we are trying to encourage longer-term planning and investment? I look forward to his response.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Baroness, Lady Jones of Whitchurch, for her qualified support—I think she gave some support to the basic thrust of what we are seeking to do—and I will endeavour to respond to the points she has raised.

It is ironic that the Official Opposition have put forward a more market-based approach than the Government on this occasion. I feel that intervention is necessary, and the regulations have been brought forward on that basis. As I have said, the No. 1 priority for this Government, as I would think for any Government—I have yet to hear otherwise—is to ensure that we have security of supply and that the lights are kept on. In the broader sense, we need to ensure that our hospitals can carry out operations in a timely way; at the most basic level, we can see why that is so important.

Such interventions are necessary. As I have said, the changes that have occurred in the market since 2014, with the massive drop in commodity prices, have made many of the regulations necessary. Some power stations have closed. The noble Baroness will know that the Government are totally committed to the closure of coal-fired stations. That is something that only this Government have brought forward. We have said that unabated coal-fired power stations will end by 2025—that will be put out for consultation—subject to ensuring we have security of supply. We are the first developed country in the world to indicate that we will do so, ahead of all our European colleagues, the US and so on. As a country, we can be proud of that, and I hope that the Official Opposition support it.

The noble Baroness talked about the importance of underpinning renewables. That is certainly true, but we cannot rely totally on renewables. We need baseload to support renewables, which is what the regulations are about. She said she would refrain from mentioning Hinkley Point C, and then she did so. Having heard her dismal litany, I am obliged to say that the mantra she expected in response is indeed what we believe to be the case. Last week, I discussed this with a Chinese Minister, who is fully committed to the project, and we understand that the French Government are as well. It remains central to our energy policy, and I hope we can avoid talking down this area of activity, because the supply of nuclear is essential for us.

The noble Baroness mentioned diesel generators. I share some of her concerns, so I can understand where she is coming from on this point. As she will appreciate, this area cuts across government departments. Some of it rests with Defra, which we expect will announce consultation proposals in the autumn, ahead of both the next round of auctions and, indeed, the supplementary capacity auction that we are dealing with. We therefore expect bidders to be aware of likely future restrictions on their generation, and their bidding behaviour will adjust accordingly. We cannot anticipate precisely how that will go, but the consultation is being held with a view to ensuring that we can restrict diesel. I share the concerns she has expressed on that point, so I hope that that offers her some comfort.

In general, the noble Baroness will know that the auctions operate in relation not just to providing additional capacity but to the demand-side response of reducing capacity. That is central: we are looking not just to build in more generation but to restrict existing generation and to shift it. I hope that that will again provide some comfort to her. I should also say with regard to diesel that Ofgem will consult on proposals to tackle embedded benefits in due course, so action is going on elsewhere in government to deal with the diesel generation issue, which I recognise; I previously indicated in the House that we would look at it, as indeed we are.

Once again, I thank the noble Baroness for the qualified enthusiasm for the regulations she was clearly demonstrating, although she managed largely to restrain herself, and I commend the statutory instrument to the Committee.

[Baroness Jones of Whitchurch]

Lest the Official Opposition, as he describes me, are totally misrepresented, I would say on intervention and regulation that our position is that when you do it, it should be smart intervention. There is always a danger in any regulation that you encourage perverse outcomes if you do not think through its consequences. I was just warning against some of those perverse outcomes which can occur, particularly when you deal with large sums of money, as we are here. However, I do not want to go back over the Minister’s clarification of other points but simply wished to say that on that basis we are happy to support the regulations.

[Lord Bourne of Aberystwyth]

My Lords, that is a perfectly fair point, and I thank the noble Baroness.

Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2016

Debate between Lord Bourne of Aberystwyth and Baroness Jones of Whitchurch

Thursday 5th May 2016 Lords Chamber

[Baroness Jones of Whitchurch]

I am grateful for what the Minister has said, but he did not answer the critical question of why the Government did not foresee this. They created regulations that were predicated on the Green Deal, in the knowledge that they were already questioning the future of the Green Deal. It would have made sense to anticipate that when the original regulations were drawn up in 2015. We would not be in this situation now, had the Government had a little more foresight. Will the Minister respond to that?

[Lord Bourne of Aberystwyth]

Indeed, my Lords; I apologise for the lack of foresight. With 20:20 hindsight vision, it is possible to say that this should have been foreseen. However, the best thing to do when you can see that a scheme is not working, which Green Deal finance was not, is to end it. We are now seeking a replacement, without any delay in implementing the legislation the noble Baroness referred to. She mentioned lack of ambition but the ambition remains absolutely constant. These changes are necessary for us to deliver on the aim of dealing with the scourge of fuel poverty, to ensure that we are energy efficient and to deal with security of supply.