EU: Energy Governance (EUC Report)

Lord Grantchester Excerpts

Monday 13th June 2016 Lords Chamber

[Lord Grantchester (Lab)]

My Lords, this has been a very interesting report, reflecting the challenges of integrating a wider EU approach to energy policy, taking into account energy security and decarbonisation plans in response to climate change goals. I am grateful to the noble Baroness, Lady Scott of Needham Market, for her committee’s concise report and for her introduction.

The committee’s recommendations were very much accepted and taken on board in the Government’s response. The policy direction towards greater co-ordination and harmonisation of EU capacity markets, open to cross-border mechanisms such as interconnectors and greater regional integration, underlines the clear conclusion that the UK would certainly benefit from continued membership in the EU following next week’s referendum. I agree with the noble Lord, Lord Teverson, that energy policy is a clear candidate to be developed in a European context.

As the noble Lord, Lord Suri, said, working with Europe enables us to raise ambitions on climate change, not just in the UK and Europe, but throughout the world through our participation in the Paris agreement last year. This is an agreement signed up to by not just the western powers, but all the peoples of the world. From within the European Union we can influence events and set the pace towards a collective goal of building a carbon-neutral global economy in a generation, with all countries agreeing to raise their ambition on clean energy every five years. While the binding commitments made are not yet sufficient to limit temperature rises well below the 2-degree limit, this agreement should take us much closer to climate safety.

It is interesting to reflect that this report, published in December last year, provides an interesting critique of policy actions by the Government since. Several debates on the Energy Bill and renewable energy last Session highlighted the need for the Government to be aware of the effects of their lack of a clear and consistent plan. The recommendation at paragraph 62 reads:

“Rapid and unexpected changes in policies … create policy uncertainty and may undermine investor confidence”.

Paragraph 63 states:

“The UK Government should be clear about its own renewable energy strategy and target for 2030 as part of its decarbonisation and energy security objectives”.

The report continues with a call for the Government and member states,

“to meet the Commission’s deadline for the preparation of the first National Energy and Climate Plans by 2018”.

In their response, the Government give their commitment to meeting the Commission’s deadline and state that work is already under way. This is excellent. On this side, we consider this crucial to mitigate the damage done recently to investor confidence. Will the Minister give the House any further details on workstreams and reports for consideration coming over this winter?

The Paris agreement was secured through close working over several years, identifying that using cleaner and more efficient technologies can bring benefits when co-ordinated across Europe. In the referendum debate we would like to see the Minister and his colleagues in the department clearly promote these benefits. Recommendation 12 at paragraph 63 argues that the Government,

“should be clear about its own renewable energy strategy and target for 2030 as part of its decarbonisation and energy security objectives”.

Does the Minister agree with paragraph 69, which says:

“The UK Government should go to greater lengths to explain to consumers the financial and security benefits of a more integrated EU energy market”?

I am sure that he will endorse the fact that the UK has played a leading role in shaping an energy strategy for the EU and must continue to do so by voting to remain in the referendum.

We support the EU 2030 energy and climate change package, which includes the headline commitment of a 40% reduction in greenhouse gases against 1990 levels. On the EU-wide commitment to 27% of energy coming from renewables by 2030, we agree that there should be clarity to ensure how this is to be achieved. We agree with and welcome the flexibility offered to member states to develop their own plans to meet energy and climate objectives in ways most appropriate to their natural contexts. Consumer interests should not be segregated in energy policy. As the report states,

“the interests of industrial, business and domestic consumers should be considered in energy governance framework discussions”.

Will the Minister outline the Government’s plans to consult consumers and stakeholders during the development of the UK’s national energy and climate plan?

It should be noted that the UK does not have a clear plan ahead to meet the 2020 target, let alone the 2030 target. The UK should meet certain reduction commitments through a balanced mix of low-carbon options, including nuclear, CCS, renewables, storage and greater levels of interconnection and demand management, together with the very important aspect of increased investment in energy efficiency.

The UK could face a 25% shortfall in meeting the 2020 clean energy target. After setting the fifth carbon budget, to be published by the end of 2016—this year—the Government have to present an emissions reductions plan to cover our targets up to 2032. As yet it is unclear how transparent and inclusive this process of developing the plan will be. Following the Paris agreement, what consideration will the Government give in their energy and climate plan to meet the ambition and the timetable set out that member states raise their climate target every five years? What further implications to policies do this Government foresee? In the light of the report does the Minister have plans to integrate proposals in conjunction with other member states?

There are already clear economic benefits of interconnections to EU energy markets, one of the other main recommendations of the report, referred to by my noble friend Lord Hanworth and the noble Lord, Lord Howell. The E3G study concluded that greater interconnection to EU energy markets allows the UK to bring cheaper energy from the continent and balance variable renewable generation across a wider area, which could save the UK £500 million a year by 2020. A 2014 National Grid report estimates that doubling interconnection capacity would bring benefits to every consumer, amounting to £1 billion a year—a saving of £13 a year off household bills.

This report has brought general agreement about the pathway the EU should be taking. The Government have responded positively. All speakers have highlighted important aspects of the report and the noble Viscount, Lord Ullswater, made an interesting contribution with his thoughts on the technology mix of energy sources. This excellent report underlines to the House that there is much work for the Government to do to live up to its expectations and to the hopes of the noble Lord, Lord Howell. We will certainly work with the Government to bring coherence to their plans.