Energy Bill [HL]

Lord Deben Excerpts

Monday 14th September 2015 Lords Chamber

[Lord Deben (Con)]

My Lords, it is not for the chairman of the Committee on Climate Change to comment much on the means whereby we reach the targets which have been set by the committee. That is not its role. The committee’s role is to set the targets and to insist that they are met. That is one of the difficulties of being the chairman because my instinct is to comment on all these things with enthusiasm and some pretty clear views, but that is not what I am statutorily allowed to do.

However, it might help the Minister if I say this. This may be a formulation that works; I am not sure. There are complications in it which might lead the Government not to want to do it. I want to say a word about a decarbonisation target, which the Committee on Climate Change has recommended. It has done so because a decarbonisation target would give security to those who are investing in low carbon technology, and above all in low carbon generation. One of the problems that all Governments have to face is that the timetable of private industry is very tight. First there is the timetable for how long a particular managing director will be in place and what is going to happen over the next two or three years—I am told that it is generally about three years. The second timetable is an important one, covering the length of time major investment takes between thinking about something and actually delivering it.

One difficulty—it is one which the Committee on Climate Change emphasised in its report to Parliament this year—is that most of the measures we have in place will fall off the cliff in 2020. We are now talking about “tomorrow” in the investment cycle because people often have an investment cycle which lasts certainly for five years and very often for seven or eight years. The committee sought to ask the Government to ensure that we knew where we were going to be in a progressive way after 2020. The Government have made it clear that certain things will continue, but not how much and how long. That security is important for investment.

The second point is that it is occasionally the belief of all politicians that if they promise something in 2050, everyone will believe it and proceed to get there. But I remember an embarrassing debate in this House when I pointed out that the previous Labour Government had an energy Bill from which they had removed every date except 2050, and I worked out that there was not a Member of the Government who was likely to be alive when the one promise that had been made would be delivered. That is a dangerous position because if we are to be taken seriously, we ought to make promises that will be delivered at least in our likely lifetimes.

What I want to put to the Minister is simply this: we need to have some sort of interim point between 2020 and 2050 towards which people can work with some confidence, and we have suggested a carbon intensity target for 2030 entirely on that basis. I hope that the party opposite will not be upset by this, but one of the reasons I want the target is because I am a capitalist and I do not want to judge what is going to be the best way of achieving it by 2030; in other words, I want to be as unrestrictive as I can. I just want to deliver the ends, and that is why I always talk about targets, not means. I do not know what mixture of means will enable us to reach the target, and that is why I am less enthusiastic about those who insist upon this proportion from renewables, that proportion from other low carbon technologies and this proportion from nuclear. I have always felt that a portfolio is what we want, and if possible I want an unprescriptive target because we do not know the ways in which we are going to achieve it. But we must give people the confidence that if they pursue those ways, there will be a proper return from the market on the investment that they have carried through. That is why a carbon intensity target is a valuable thing. I hope that the Government will wish to do that in 2016, for reasons we all now know. A carbon intensity target would be unprescriptive, but it would give real confidence.

This amendment, on the other hand, is much more precise. It gives a role to the Committee on Climate Change, for which I thank the noble Lord, and I am sure that if we were asked to carry through this role, we would do it to the best of our ability. But I wonder whether this particular mechanism is the best one. There are complications which the Government might want to think about, but I hope that in discussing it, the Government will not cast aside the need—I think it is that—for a decarbonisation target for 2030 to give people the confidence to plan. It is no good saying that they know that our emissions must be cut by 80% by 2050. Frankly, it is true and statutorily based, and we all think it is important, but it is not going to drive investment. That is why a decarbonisation target for 2030 is important. I doubt whether this is the right way forward, but I am pleased that it has been tabled as an amendment, not least in order to ask the Government to think hard about the needs of investment and confidence.

[Baroness Worthington]

My Lords, I am grateful to my noble friend Lord Whitty for introducing this amendment and to the other noble Lords who have spoken in favour of it—or if not directly in favour, at least in favour of us having a debate about decarbonisation. I recall that a similar amendment was tabled by my noble friend Lord O’Neill of Clackmannan during the Committee stage of the Energy Bill in 2013. We had a good debate at the time, and the arguments which were put forward were important then and are even more important now. I say that because we all engaged with the Energy Bill in good faith. We raised our concerns and we went forward on the basis that we hoped that we had a system that may be a transition to something more market-based and slightly less interventionist in order to encourage us to decarbonise our electricity system.

I apologise for stating the obvious, but the reason electricity is so important is that once it is fully or substantively decarbonised, it can then be used to decarbonise transport and heat in an effective way. It is not the only way, but it is one way. It is the sector with possibly the most commercially available technologies and certainly the widest range of known technologies, certainly at this stage, to help us. That is why electricity is focused on and why we have a 30% target for renewable electricity as opposed to 10% or 12% in the heat and transport sectors. It is right to focus on electricity.

This idea is definitely worthy of merit and I do not disagree with the noble Lord, Lord Deben, when he says that we have in the past debated a broader definition of the decarbonisation obligation or decarbonisation target. In fact, that was rather exhaustively dealt with in the debates around the Energy Bill in 2013. The way it was left was that the Government may introduce a decarbonisation target for 2030 in line with the fifth carbon budget being set. I very much look forward to hearing some strong words from the Minister stating that that is still the Government’s intention: that a decarbonisation target will be set in 2016 once we have that fifth carbon budget in place.

For all the reasons given by the noble Lords, Lord Deben, Lord Teverson and Lord Whitty, we lack a moment of clarity to help shake people’s investment decisions beyond 2020. We have renewable targets to 2020, as part of the European renewables directive, but beyond 2020 there is big uncertainty as to what low-carbon technologies, if any, will be supported by the Government. Therefore, there needs to be a framework. Why I like the idea of a decarbonisation obligation on the Government and on suppliers is because it does exactly what the noble Lord, Lord Deben, said, which is to create a market-based system.

I often find myself wondering whether I am Alice who has stepped through the looking glass. Here we are in a world where the Government—a Conservative Government—are presiding over virtually the renationalisation of the energy system. There is no element of the energy system that is not now reliant on the Secretary of State to sign a contract of some sort or another, perhaps with the possible exception of some of the interconnectors, but even there it is quite highly regulated. Now any new clean capacity needs to be signed off by the Secretary of State with a contract for difference, and all the existing capacity receives capacity payments also through the Secretary of State’s gift. Here we are, very oddly, presiding over pretty much a state-run energy system, and here I am on the Labour Benches saying that we need a much more market-based system that allows more choice and for capital to flow to the most cost-effective ways.

It is an odd situation but that is where we are. So I press the Minister to help us to understand whether the Government share our objective, which is to move towards a slightly less interventionist system with more ability for a broader set of players to dictate how we meet our targets, which means the Government setting the framework, and being clear about our objectives, but allowing a wider pool of people to find those solutions for us at least cost.

Amendment 35A is an interesting idea which proposes that rather than the Government taking on the obligation and the target, they should be passed down to the supply companies. It has some merit. It is worth noting that suppliers have been obliged to report on the carbon intensity of their electricity supply for some years now. They have a fuel disclosure requirement and an infrastructure and reporting mechanism that enables them to do that with certificates of origin. That enables them to calculate the carbon intensity of their electricity annually and report to Ofgem. Those numbers then probably sit on a website or in a document. Very little attention is paid to them, which is a great shame because we are encouraging these data to be collected but doing very little with them. If we were to look at those numbers, sadly we would see that carbon intensity has remained stubbornly similar over the past decade. We did very well in decarbonising when we had the dash for gas and replaced a lot of our old coal, but since then carbon intensity has just moved around, largely dictated by commodity prices where gas prices are higher than coal or vice versa. So there has not really been a grip on carbon intensity.

An obligation such as this would address that problem and mean that the full range of decarbonisation options, including fuel switching and phasing out of coal, would be incentivised in the most logical way forward. I am very grateful to the noble Lord, Lord Teverson. He and I have worked previously on the phasing out of coal and the use of performance standards to make sure that our old coal, in particular, is phased out in an orderly and certain way so that we can make room for clean investment. A decarbonisation obligation would help us to ensure that that transition out of coal took place. It is not the only way it can be done, but it would be a market-friendly way to meet the obligation because there would be an incentive not to purchase the coal that would count against the target. It would help to make it harder to hit the targets. The other benefit is that it would help renewables to stand on their own two feet and compete alongside other technologies. We would genuinely see which are both affordable and able to be supported by the general public.