Energy Bill

Debate between Lord Davies of Stamford and Lord Jenkin of Roding

Tuesday 2nd July 2013 Grand Committee

[Lord Jenkin of Roding]

I can only reply that if the noble Lord thinks that that is all that is necessary, I cannot think why he has moved the amendment. He is quite right. The committee of my noble friend Lord Deben recommends but does not decide. It is the Government who decide. As I said a moment ago, I want to leave the Government with the flexibility to make decisions in the light of the latest circumstances. However, at the moment the customer is bearing all the risk, and this is unsustainable.

[Lord Davies of Stamford]

I regret that I was not able to follow very clearly the logic of the remarks of the noble Lord, Lord Jenkin. He seemed at times to be saying that he was in favour of the decarbonisation target and at other moments that the target placed intolerable burdens on the economy. Of course a balance has to be struck, but he did not produce any arguments at all to suggest that, if a decision is simply postponed, we will be better able to get the balance right.

I was particularly surprised that the noble Lord said that of course it is important to give investors certainty but that that argument had been overused. However, he did not deny the validity of the argument. He then said that there was a contradiction between the need to provide investor certainty, the need to provide security of supply and the need to protect consumers’ interests. There is no contradiction at all. It is very much the opposite way around. If one reduces the uncertainty to investors, one reduces the cost of capital and one will see more investment projects approved. One will therefore have greater capacity and greater security of supply.

Equally, if we have greater capacity because there is less uncertainty and because the cost of capital is lower, we will have lower prices. Therefore, consumer interests will be better preserved. Far from there being a contradiction between these considerations, it is extremely important for consumer interests and security of supply that we provide the maximum degree of investor certainty.

Here, I am mystified by what game the Government are playing. The purpose of the Bill, as presented in public up to now, is to provide a framework for investors, and the maximum degree of investor certainty. If they want to do that—it is of course a very sensible purpose to have in mind—why did they introduce into the Bill elements of gratuitous uncertainty that are being addressed by the amendments before us? Why say in one subsection that the Secretary of State must ensure that any decarbonisation target is respected, and in the very next subsection place doubt on whether or not there even will be a decarbonisation target, saying that,

“the Secretary of State may by order”,

instead of “must”? Why are the Government resisting “must”? It is not clear to me at all.

Equally, with regard to the dates, why say that a decarbonisation target may not be set for 2030, leaving open the possibility that there would not be a decarbonisation target even as late as that? Under this Bill, a decarbonisation target cannot be set before 2030 but it does not have to be set by 2030. Again, that is a deficiency that is remedied by the amendments before us. What is the purpose of this Bill if it is not to maximise, within the range of all reasonable practicality, clarity and certainty for investors? If the Government are intending to do that, why in the name of heaven have they gratuitously introduced these elements of uncertainty? It is completely unclear to me what they are doing.

The issue of whether the decarbonisation target should be set for 2014 or 2016 is not quite so important. If that amendment is pressed, I shall probably vote for it, but there could be arguments for waiting until 2016, partly to get the benefit of the advice of the Committee on Climate Change but more especially because there may be a chance of getting EU agreement on a decarbonisation target by that point. It would not be sensible to legislate for a precise figure before we knew whether or not there was a real prospect of getting such agreement, which would be highly desirable.

However, by the same token, anything that contributes to investor certainty contributes to the achievement of those two other objectives: greater security of supply and, ultimately, lower prices for the consumer. The Government really ought to look again at these amendments and I hope that here in the Lords they will accept them.