Infrastructure Bill [HL]
Debate between Lord Deben and Lord Cameron of Dillington
Lord Cameron of Dillington
I thank the noble Lord for that explanation, which certainly underlines the point I am trying to make. As I have said, I hope that lots of new housing estates are built over the next few years, so DECC and DCLG ought to look very carefully at this issue and consider how community heating schemes might be improved. The advantages are huge. For a start, they are much more efficient and thus would justify proper investment either in the new type of boiler that is required or in the overall management of the heat. In rural areas, for instance, it is often hard to justify piping gas into villages, which is obviously the cheapest form of heat, but it could be much more worth while in cases where there is a major community heating unit so that gas can be brought in to provide fuel for that one particular source of heat. That is certainly better for climate change than putting oil boilers into each and every house because that involves a huge waste of oil and energy.
Lord Deben
Does the noble Lord also agree that the ideal use of pumps, both air and earth pumps, is in new build? And yet, as my noble friend has pointed out, that is precisely the area which is not covered by the present arrangements. It would make a huge difference if that were to happen and it would certainly help towards achieving really eco-friendly new homes.
Energy Bill
Debate between Lord Deben and Lord Cameron of Dillington
Lord Deben (Con)
My Lords, perhaps I might help my noble friend on this issue. There is a win-win solution, which is to recognise what has happened very recently in Germany. The big generators always start off being unhappy about the competition. However, RWE in Germany is expected to announce, after decisions made very recently, that it has concluded that it is no longer possible to take that attitude towards other generators in the German market. The Germans have been so tough about the provision for smaller generators. As I have said before in this House, it is remarkable that 50% of the very significant amount of renewable generation in Germany is done by municipalities, co-operatives and individuals.
Until recently, the big generators have fought that because they felt that their own business model was being undermined. It is quite clear from the latest evidence that RWE will take a different view, that it ought to become much more a facilitator of this rather than an opponent of it. If we get the way this is phrased in this Bill right, we will be able not only to help the independent generators but to help the bigger ones to move rather faster in understanding that this is going to be a multiple market in the future.
Therefore, I hope that the Minister will be able to discuss this again with her colleagues because it is a very fast-moving situation. This is not something that is the same today—literally—as a fortnight ago because we did not know the RWE movement then so we did not see, although we hoped, that that was what was going to happen elsewhere. If we can take advantage of learning from other people rapidly, this excellent Bill can be made that much better. I hope that she will find it possible to be a little stronger in what she says now and will take this away and discuss it with her colleagues, as my noble friend Lord Jenkin suggested, because there is now a new circumstance in which she will be able to be stronger in her support.
Lord Cameron of Dillington (CB)
My Lords, I support all the amendments in this group, as well as the amendments to which I have put my name. Last week we had our debate on the need to open up all sectors of the electricity industry to more competition. We on our side of the amendment were surprised at the reluctance of the Government to acquiesce enthusiastically to what we were proposing. We were even more surprised when later in the week the Secretary of State for Energy and Climate Change went on the “Today” programme and also spoke in the other place about how greater competition was at the heart of the Government’s electricity market reform. I have to admit I had the surreal feeling that there seemed to be one Government at that end promoting competition and talking about its importance and a completely different Government at this end seemingly trying to ward off competition. I hope that this week we have one pro-competition Government in both Houses.
In my short remarks in the debate last week, I linked the need for competition with the need for investment and spoke about how the two are closely intertwined. The UK’s aging energy infrastructure needs some £75 billion invested in new, largely renewable, generation facilities by 2020, and the Government are relying on independent generators, or at least their investors and financial backers, to produce some 35% to 50% of this—that is, £27 billion to £38 billion—before 2020, so this is not a marginal problem. Only by solving it will we ensure that we get the investment we need along with the much needed competition.
Of course, there is a problem. In an ideal world, an independent generator would want a backer for 15 years, because that is the normal length of any form of mortgage agreement for such a scheme, but no supplier is going to gamble on a 15-year PPA because the demand for electricity could reduce over 15 years and a supplier could find itself having bought more power than it could sell. Indeed, already four out of the big six suppliers are not buying power at all from independent generators, while the other two are charging up to 15% or 20% commission on even short-term contracts, which for the independent generator makes for an unviable PPA.
As has already been explained, this situation scares the independent generators and, above all, their investors, so no truly independent generator is going to invest without some form of compromise in the long-term marketplace. Equally, no aggregator is going to enter the fray with the big six oligopoly holding all the cards. We desperately need these independent generators to invest and, as the Government—well, the Government at the other end—keep telling us, it is only by encouraging more competition that we will achieve that investment.
The department has gone for an offtake of last resort—an OLR—to solve this problem, which is fine, but as it stands, the solution in the Bill is completely useless, as Clause 44 is so hedged about with “may”s rather than “must”s that no self-respecting financier would put any trust in it at all. The Minister’s letter of 26 July, I think it was, does not give them any encouragement either. It is a political cop-out rather than a financial foundation on which to build a competitive electricity industry. The words “political cop-out” may be a bit harsh, but the clause is clearly written from a political perspective, rather than the drafters putting themselves in the minds of an investor or a mortgage company and thinking, “What can I put in this Bill that will really reassure these much needed investors that we the Government say we desperately want?”. They just have not done that.
I hope we all agree that this is not a marginal issue. That is why it is vital that these amendments are adopted. It is vital that OLRs are available from day 1 of CFDs. It is vital that they are operational the moment—well, within seven days—of a generator finding itself squeezed out of the marketplace without a commercial PPA. It is vital that the price on offer is evidently—I stress that word “evidently”—going to be enough to reassure a financial backer that lending money in this new and uncertain marketplace is not going to be a wasted investment. There is an enormous amount hanging on getting this right, so I hope that the Minister will be able to reassure us.
Energy Bill
Debate between Lord Deben and Lord Cameron of Dillington
Lord Cameron of Dillington
My Lords, I support the amendment. CCS is very important. While most of us here—I am happy to note that there have been some notable exceptions in previous Committee sessions—are in favour of decarbonisation and the UK becoming a leader of the world in renewable energy, I think we would all hope that we can become leaders in the world in CCS because, frankly, there are huge economic possibilities if we can pull it off. China is a very good example; contrary to the often-put theories of the noble Lord, Lord Lawson, China is deeply concerned about climate change. The Chinese actually produce a new nuclear power station every week but still have more energy produced by wind than nuclear energy, and they are concerned.
Lord Deben
Did the noble Lord notice today’s announcement by the Chinese that they were considerably upping their investment in photovoltaics in order to make sure that there would be a great deal more sun power? This runs entirely contrary to the claims made by the noble Lord, Lord Lawson, when he spoke to us on that particular issue.
Energy Bill
Debate between Lord Deben and Lord Cameron of Dillington
Lord Deben
I find that very difficult to follow. This is not a prescription for the means by which we will meet the requirement of a carbon-intensity target. It is an assurance that we are going to stick to that target so that everybody can use whatever mechanisms they have. This is a non-prescriptive concept, of which I approve. It does not say that we have to use this, that or the other. It is a portfolio approach. I still think that the parallel is very clear. If we had been able to stick to our proposition, we would be in a better place today and we would not have to do many of the things that we seek to do today. To ask us to repeat that mistake seems to me a great sadness.
I come back to my first point. The reason we believe that there should be an interim carbon-intensity target is that it is necessary if we are to reach our statutory requirement in 2050. It is necessary for the United Kingdom plc because it gives certainty to people about the parameters within which they will work. If we do not do it, all the noise around what the Government are doing, and the determination to put off to beyond the next election the carbon-intensity target that is now admitted by the Bill, will do a great deal of harm. It will mean that the supply chain that could come to this country will not come and that the jobs and prosperity that should come from our far-sighted decisions will not be gained and earned. We will do very much better to take the advice that will lead to a serious system in Britain that will make us competitive with the rest of the world.
Lord Cameron of Dillington
My Lords, like the noble Lord, Lord Deben, I support the amendments in the name of the noble Lord, Lord Oxburgh, in favour of setting a 2030 decarbonisation target in 2014 and not waiting until 2016. I declare my interest as a farmer and landowner with a very small interest in a renewable energy scheme on my farm.
As I said at Second Reading, we desperately need to invest now in new sources of power to keep our lights on and our economy running efficiently. Of course, I am referring to the long term because it is probably already too late for the short term, although we are not going to be discussing that today; nor are we discussing incentives for the generators themselves. Their incentives are contained in the contracts for difference, which help them to overcome the problems and the risks of the huge upfront capital costs of renewable energy schemes, where, on the whole, the fuel or the power source is free—which, as the noble Lord, Lord Deben, says, makes them very cheap and good value to the consumer in the long run.
What we are discussing today is the need for supply chain investment, as the noble Lord, Lord Oxburgh, said. We are seeking to give a degree of certainty to the Gamesas, the Vattenfalls, the Siemenses and the Vestases of this world that, yes, they can invest billions in production plants to produce the turbines and blades for offshore wind—they can invest in the UK economy. These amendments are trying to give them the confidence that their plant will not produce up to the cliff-edge that is 2020 and then have to sit while the UK Government adopt one of the options in last December’s gas strategy that makes gas a central, core part of our energy policy. This amendment is about giving confidence to the supply chain for renewable energy.
Some people might ask—as the noble Lord, Lord Jenkin, did—who could doubt the UK’s commitment to a decarbonisation agenda? It is a rational certainty. After all, our Climate Change Act gives us the tightest emissions reduction target on the planet for 2050. After all, the Government’s own sponsored impact assessment shows that a 50 gram target could have the benefit, among other things, of reducing consumer bills between 2016 and 2030, depending on international gas prices. After all, the Government have virtually admitted that the whole point of this part of the Bill is to bring in a target in 2016, so all we are doing here is arguing about a two-year pause—what possible difference could that make?
A 2030 target is a rational certainty, yet 2016 brings us beyond the next election and who knows who will be in charge then? As has already been said, this Bill does not quite commit the Government to setting a target in 2016, only some time possibly after 2016. Therefore, Amendment 7, in the name of the noble Lord, Lord Stephen, is a possible fallback position.
In the light of all this rational certainty, what is preventing the Government committing themselves now? Is it the need for ongoing gas generation to provide the capacity reserve that everyone knows will still be around well into the 2040s, pumping out 300 grams of CO2 for every kilowatt hour produced? Or is it the possibility of more dramatic changes in the energy market? No one can deny that in the United States shale gas was a revolution in terms of the price of power there, and the rest of the world is looking to see whether it can join the club, as it were, including the United Kingdom. I think that a revolution from our shale gas is pretty unlikely and that the international price of gas will carry on going up.
If the Government cannot commit amid all this certainty, why on earth should business, its investors, its banks or backers commit? This is an investment landscape totally driven by the political agenda. Without government commitment, it is hard to see why industry should commit. This is such a golden opportunity for creating a whole new economy for jobs and growth in this country. As the Chief Secretary to the Treasury said,
“we just need to have a very, very clear position and a very, very clear plan”.—[Official Report, Commons, Energy Bill Committee, 5/2/13; col. 468.]
However, that is not apparent as yet.
Various noble Lords who attended a very interesting talk last night by Peter Atherton, an investment analyst, have made reference to it. I have heard similar talks before. When I sat on Sub-Committee D, we looked at the European power sector. We were informed, in much the same language, that it was going to be very hard to produce the power and the investment. Indeed, there has been such a lack of political leadership on the continent, which I think is fairly important, that the continental power companies’ shareholdings have sunk almost out of sight and very little investment is happening in that sector. It has not happened yet in this country but the question of political leadership is important here.
The essence of Peter Atherton’s message was that a 50 gram target by 2030 would cost far too much and be impossible to deliver in the current UK and EU financial markets. That is quite apart from the extreme difficulty of building the physical structures needed to deliver a 50 gram target on time. Clearly, the Government and the climate change committee should listen to him and others on the practical difficulties and expense for consumers of delivering a 50-gram-per-kilowatt-hour target by 2030. He convinced me that perhaps a 50-gram target by 2030 was a step too far but he did not convince me that we do not need a target at all. It could be that 75 grams or 100 grams would be enough to convince the investors that their investment in the supply chain would be safe. The point is that if we believe in climate change and the need to act sooner rather than later—it appears that all political parties in this country do—we have to commit ourselves sooner rather than later, which is why I support this amendment.
The Government say that they are waiting for the fifth carbon budget before they commit, but I do not find that a very convincing excuse. Such a budget applies to the wider economy and is not set to specific. I realise that the power sector is responsible for some 27% of the nation’s carbon emissions. Therefore, it could not expect to escape totally untouched by such a carbon budget but there is unlikely to be the total clarity within these general targets to provide the certainty for investors in the power sector.
In conclusion, it would appear that over the past 200 years our society has developed a form of lock-in to fossil fuels and fossil-fuel power. We have got better and better at extracting these fuels, and better and better at using them. They have become cheap, convenient and reliable. But now we realise that we have to make a step change, which will not be easy—indeed, it is proving to be very difficult—as a nation or even as a species, to getting better and better at deploying and harnessing non-fossil technologies. I believe that over time we can learn to make renewable technologies also cheap, convenient and reliable. But for that to happen, and for us to create this whole new economy and these new jobs, we need commitment from our Government. These amendments give our Government the opportunity to take that lead.
Localism Bill
Debate between Lord Deben and Lord Cameron of Dillington(13 years ago)
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Lord Deben
I am attracted to the amendment, which has been so ably moved by my noble friend Lord Marlesford. As a campaigning environmentalist I am sometimes concerned that the one issue that unites everyone is not fighting climate change—which, of course, is the biggest issue of all—but litter. If you really want to cause a major row, then raise the issue of litter. The Government have to be careful about appearing not to recognise how, particularly in the countryside, as the noble Lord, Lord Reay, has said, this is an issue of considerable concern.
I find it one of the more depressing things that, in the beautiful part of England where I live, at most weekends the first part of the job is to pick up the various items that have been pushed into the hedge and down the drive of the house in which I live. It is a sad fact but it is one that needs to be taken seriously, and I hope noble Lords will agree that this elegant use of the Bill—to give opportunity for particular local authorities to make a particular choice—would be a sensible step. I am sure the Minister may have some really remarkable argument to show a better way forward, which I look forward to hearing.
In Suffolk we have a very successful campaign, which I have to speak of very carefully because it is headlined by the phrase, “Don’t be a tosser”. It is designed to make people stop throwing things out of car windows. This is a real issue. The local authorities in Suffolk might well like to take the opportunity, were they able to, to help the Government by trialling such a proposal. I hope the Government will take seriously what the noble Lord, Lord Marlesford, has suggested.
Lord Cameron of Dillington
My Lords, I strongly support this amendment, and in doing so I must declare an interest as a farmer. We are plagued by litter from cars down in Somerset where I come from. It does not tend to be what I would call black-bag-type litter, although that is sometimes worse because the bags are thrown out of cars and explode and the litter goes all over the field in a real mess and is very difficult to pick up.
The worst sort of litter that we have is old fridges, old cookers, old beds and old mattresses. They get poured out into little nooks and crannies by the road and then seem to breed. I feel that there is a book in here somewhere, although perhaps not the type of stuff the noble Lord, Lord Dobbs, writes. You get one cooker, and then two. Then they will have a daughter of a fridge and a mattress will arrive. It is a most extraordinary thing and no one seems to have the responsibility for picking it up. I know one or two local farmers who shovel the stuff back on to the road, so then it becomes the responsibility of the Highways Agency, which of course makes it responsible for littering the countryside.
It is obviously very difficult for the local council, because almost every night somewhere around my neighbourhood someone has dumped some particular object or other. Can the council do anything to prosecute the motorist? If you are worried that it might not be the motorist who has dumped it but someone in the car, do not tell me that a motorist is not responsible if his car is stopped and a fridge gets thrown out. A motorist is just as responsible as the person who might be in the back seat. I really endorse this amendment and think it is really very important that we support it.