Energy Bill
Debate between Lord Grantchester and Lord Roper
Lord Roper
My Lords, I welcome the response that the Government have made to the report of the Delegated Powers and Regulatory Reform Committee. This and other recommendations were raised in Grand Committee. In virtually every case the Government have been able to come back and accept those recommendations.
Lord Grantchester (Lab)
My Lords, the House is rightly wary of allowing wide discretionary powers without being able to suitably assess their application later. Your Lordships’ Delegated Powers and Regulatory Reform Committee expressed concern about the powers in the Bill. In Committee, on 9 July, along with the noble Lord, Lord Roper, we highlighted these concerns. At the time the Government agreed to bring forward amendments to ensure that the Bill and the secondary legislation would be complicit. While it has taken several iterations between the Minister’s department and the Select Committee to get it right, I am pleased to see that the Government finally listened to the recommendations that were made and tabled these amendments. Parliament must be able to scrutinise the Secretary of State’s complicated power to make orders about domestic supply contracts. After all, the power under Clause 130 would in effect enable the Secretary of State to categorise the terms of domestic supply contracts as “discretionary terms” or “principal terms”, which is a significant power. We welcome the government amendments because they will ensure that any such order is given appropriate parliamentary scrutiny under the negative resolution procedure. There will be a 40-day window during which Parliament can review the draft of the proposed modifications.
Energy Bill
Debate between Lord Grantchester and Lord Roper
Lord Roper
My Lords, the noble Lord, Lord Jenkin, and I have Amendment 48 in this group. The group also includes Amendment 51, tabled by the right reverend Prelate the Bishop of London, which would insert a new clause.
When the draft Energy Bill was published in May 2012, a number of people were concerned that there was not sufficient indication of measures to reduce electricity demand, which is obviously the most satisfactory way of avoiding having to build further power stations. Both in the pre-legislative scrutiny in another place and in the informal committee chaired by the noble Lord, Lord Oxburgh, the question of demand-side measures was discussed. As a result of that, the Government launched a consultation in November last year and suggested a number of options for electricity demand reduction. Interestingly enough, out of the options on offer, a majority of the respondents favoured a system of electricity efficiency premium payments, which would provide electricity users with a payment on top of the savings that result from reduced use of electricity.
However, when DECC published its consultation response in May this year, it suggested that its preferred route to delivering permanent reductions in electricity demand was via a capacity market. That was of course contrary to the majority of the views expressed in the consultation. Similarly, the response dismissed the idea of introducing a premium payment without adequate explanation. None the less, on Report in another place, the Government introduced Clause 37, allowing the Government to run a pilot scheme for electricity demand reduction. The clause does not explicitly limit the Government to a single pilot or specify the mechanism that they might use. However, given what the Government said in their response to the consultation, there is a pretty clear indication that they wish to look at the capacity market only.
There are a number of uncertainties about the appropriateness of the capacity market, particularly for small and even medium-sized consumers. I am not sure what the right reverend Prelate might say about churches which are considering reducing their electricity demand and whether they would be large enough consumers to go into such a capacity market. None the less, there was a discussion in Grand Committee on an amendment that I tabled suggesting that there should be more than one pilot so that various methods could be explored as ways of dealing with this question of electricity demand reduction. Amendment 48, which I and the noble Lord, Lord Jenkin, have tabled, requires the Government to bring forward multiple pilot schemes so that not just the capacity market but premium payments and perhaps some other form of incentive could be considered. That would demonstrate which scheme or schemes might be most effective in delivering permanent demand reductions and scale.
I very much hope that the Government will give serious consideration to this proposal because I believe it will give us rather more information as a result of the pilot in order to make decisions as to what can be done. I should say that I have a good deal of sympathy with the new clause tabled by the right reverend Prelate which calls on the Government to prepare and implement a strategy for delivering further reductions in demand which the Government themselves say is achievable.
Lord Grantchester (Lab)
My Lords, I rise to speak to Amendment 50 in this group. In our Committee proceedings, we looked at the demand side response clauses introduced at the late stage of Report in the other place. We noticed that they were late additions to the Bill, yet they cannot be underestimated as there can be no simpler way to reduce the pressures on the capacity market, increase resilience, improve decarbonisation, and enhance efficiency and security of supply. Reducing energy demand is much cheaper than building new generating capacity. It is also the cheapest way to protect households from rising bills and cut carbon emissions.
Clause 37 introduced a spending power to authorise the spending of money to fund a pilot or pilots, yet concern was expressed about whether sufficient funds were being made available. Anxiety was also expressed that pilot schemes were proposed to take place in the capacity market, as the response to the consultation in May this year made clear that this was the Government’s preferred way forward.
Difficulties were expressed that the capacity market is designed primarily to ensure capacity during potential shortages or troughs in supply. In these circumstances, it will only reward demand reduction projects that reduce the amount of generating capacity needed at such times, and not reward projects that reduce demand more generally. The capacity market, therefore, only rewards energy efficiency for its security benefits and not its much larger benefits such as emissions reductions and affordability, as well as behavioural change policies.
Many submissions that we received wished to see multiple pilot schemes to include premium payments as well as capacity markets and other innovative incentive schemes. This was proposed to enable small businesses and generators to be able to access payments and to press the Government that demand reduction is not simply an afterthought to bolt onto the capacity market, designed around the provision of supply by large-scale plant prioritised through the workings of the capacity auction.
There is also the question of determining what capacity is required once demand has been reduced. These thoughts led us to consider that the Government need to set a coherent strategy about delivering permanent demand reduction and is the purpose of Amendment 50. The amendment adds to the Government’s own Amendment 47 and the amendment in the name of the noble Lord, Lord Jenkin. These only refer to pilot schemes and the Government’s Amendment 47 is eminently sensible. However, my amendment proposes that the Government must think further and more deeply and place demand reduction in a wider strategic context.
I also tabled it as an alternative to Amendment 51, proposed by the right reverend Prelate the Bishop of London, that seeks to place a numerical target for demand reduction. The difficulty here is that I have seen three different figures from three different methodologies. First, in November 2012, the McKinsey final report identified 92 terawatt hours of potential savings not covered by existing policy by 2030. Alternatively, the energy efficiency strategy, also in November 2012, used a different method and identified 69 terawatt hours of savings by 2020, based on existing and future policy. Yet in May this year, the Government used yet another method in response to the electricity demand reduction consultation where the figure of 32 terawatt hours saving was identified.
Will the Minister clarify which method and which figures her department recognise as correct and the most appropriate? My amendment avoids this difficulty being placed on the face of the Bill and seems an eminently sensible concession that the Government should agree to.
Energy Bill
Debate between Lord Grantchester and Lord Roper
Lord Grantchester
My Lords, Amendment 55ALE would implement the recommendations of your Lordships’ Delegated Powers Committee. Noble Lords will forgive the slight sense of déjà vu with which we return to this subject but, as the Delegated Powers Committee highlighted, the scale and nature of the extensive powers this Bill affords to the Secretary of State are vast. That these powers are subject to annulment only and could require no parliamentary approval seems completely inappropriate in the most part. This amendment also extends the provision for parliamentary approval to the CFD counterparty as well as enforcement provisions and the oversight of consultations. When commenting on this section of the Bill, the Delegated Powers Committee notes that much of the provision for investment contracts mirror those that will implement the CFDs in Schedule 2. Therefore its recommendation is the same.
Paragraph 14 of the sixth report states:
“We re-iterate in the context of Schedule 2 the view we expressed in the final two sentences of paragraph 4 above about the importance of draft regulations being made available to the House in sufficient time before it embarks on the report stage of the Bill”.
Paragraph 15 states:
“We also consider that any regulations made under Part 2 of Schedule 2 should require the affirmative procedure, with the exception of those which make provision falling within paragraph 10 or 11, which should require the affirmative procedure on first exercise”.
Without repeating remarks made in Committee previously, it is clear that this is not an appropriate way to legislate. We are now on the final day in Committee on this Bill, which has already been passed in another place, and we still lack most of the detail to enable us to understand how the new landscape will work in practice. Parliament is being asked to approve little more than a framework for legislation that should guide investment in the energy market for many decades to come. I sense that the Government are keen to heed the advice of the Committee, and therefore ask the Minister to ensure that draft regulations, in particular for Part 2, are published in good time for this House to analyse them ahead of Report when we return after the Recess. I beg to move.
Lord Roper
My Lords, I support the noble Lord, Lord Grantchester, on this amendment. I believe that we have a responsibility on behalf of the House to follow the report of our Delegated Powers Committee. Although I was in some ways disappointed, in other ways I was relieved when I saw in the Forthcoming Business published this morning that we will not be reaching Report stage in the first three weeks after the Recess. That will give the Government time to have these regulations published and for the House to examine them carefully. I was worried that we would get them just before we came back without a proper opportunity for discussion. I would be very grateful to have reassurance from the Minister that the regulations will be available in good time for Report.
Baroness Verma
My Lords, I thank the noble Lord, Lord Grantchester, for his amendment which would implement the recommendations of the Delegated Powers and Regulatory Reform Committee. It would require that all regulations made using the powers in Schedule 2 should be made using the affirmative procedure, apart from regulations made under paragraphs 10 and 11 on the provision of information and advice. These would need to be made using the affirmative procedure the first time such regulations are made.
I welcome the Committee’s scrutiny of the Energy Bill. As I have previously mentioned, the Government are carefully considering the recommendations of the Delegated Powers Committee’s reports and will respond in due course. I reassure the Committee that throughout the Summer Recess, Ministers and officials will be working very hard to try to provide as much information on the regulations as soon as we can. We intend to consult from October on the detailed implementation of the EMR, which will give noble Lords an opportunity to scrutinise the detail ahead of Report. Further details of our plans for secondary legislation can be found in the memorandum we recently sent to the Delegated Powers and Regulatory Reform Committee. I hope that with this reassurance that we will be working extremely hard to try to satisfy not only him but the Members of the Committee the noble Lord will withdraw his amendment.
Energy Bill
Debate between Lord Grantchester and Lord Roper
Lord Roper
My Lords, can I be the first to welcome the amendment? Those of us who have read the debates that took place in the other place in Committee and on Report are certainly very pleased that the move to assist communities to produce 10 rather than 5 megawatts has been agreed to. It will, however, be rather important that we watch carefully the secondary legislation which will define what is a “community activity”. Quite clearly, if it were to move into the commercial area, the increase to 10 megawatts would be resented by those who generate a little more than 10 megawatts. As it has been defined by the Minister today, however, it is an important step forward and will help a lot of micro-microgeneration in communities.
Lord Grantchester
My Lords, this is an important government amendment and we welcome the group, which replicates amendments tabled by Labour in Committee in the other place to increase the feed-in tariffs to at least 10 megawatts. This comes as a welcome acknowledgment of the gap that exists in the Bill on community energy. I also pay tribute to the personal enthusiasm of the Minister of State in the other place, Mr Greg Barker, both for these schemes and for the work that he has done since the debate in order to secure the amendment. We welcome the progress the Government have made in this respect.
On Report in the other place, we pushed the Government to introduce a minimum threshold for the fixed feed-in tariff of 10 megawatts. The Community Energy Coalition of NGOs, including the Centre for Sustainable Energy, the Forum for the Future, the National Trust, the Low Carbon Communities Network, Co-operatives UK and many more have called for the threshold to be raised even higher to 20 megawatts to allow community energy schemes a guaranteed income and enable them to participate effectively in the energy market in the future.
Already in the UK a number of community energy schemes exceed 5 megawatts, such as Westmill Wind Farm Co-operative in Oxfordshire of 6.5 megawatts, the Lochcarnan Community Wind Farm on South Uist of 7 megawatts and the Neilston Community Wind Farm near Glasgow of 10 megawatts. Community schemes are not necessarily small. The mid-size market can attract the participation of the wider population in renewable energy and the attainment of our 2020 targets. These schemes should also be given the signal that there is support to develop further.
The Energy and Climate Change Committee has argued that medium-sized projects of up to 50 megawatts are disadvantaged because they cannot access the feed-in tariff, yet often lack the financial capability to deal with the complexities of the renewables obligation and, in the future, contracts for difference. In the interim, until contracts for difference come into play, the gap remains. They may also struggle to obtain the reference price under the CFD regime, meaning that they would lose out financially. Why is the threshold fixed at 10 megawatts? What will the Government do to support mid-sized community energy schemes which are not eligible for the FITs but have difficulty accessing the contracts for difference? Community and co-operative energy schemes can be hugely beneficial in helping to meet our renewables targets that must be met by 2020.
Research reported by Co-operatives UK estimates that there is the potential for at least 3.5 gigawatts in UK community energy schemes by 2020—the equivalent of four conventional coal-fired power stations. Looking overseas, Germany, where 15% of renewables are community owned, is a good example of how community energy generation helps to diversify the market and increase its resilience. Locally owned and locally targeted strategies for energy generation and saving can be better tailored to local needs, such as helping to tackle fuel poverty, and can increase community awareness and engagement in a way that leads to lower bills and greater sustainability. We welcome the Government’s call for evidence on community energy launched last month. Indeed, the Secretary of State has said that he wants,
“nothing less than a community energy revolution”.
While it is disappointing that this proposed new clause is in many ways an afterthought to the Energy Bill, nevertheless it is welcome that it may become an integral part of the Government’s vision for the future electricity market.
FITs are a user friendly, bankable mechanism to encourage easy investment and engagement from people and organisations for whom energy is not their core business and who do not want the complexity of the renewables obligation. So far the mid-size market has failed due to excessively low FIT tariffs and unfair capacity constraints. However, the constraints on many applications of non-domestic solar are unfair. First, the FIT tariffs were set too low for many of the non-domestic FIT bands. Secondly, the degression mechanisms under budgetary constraint measures that come into play at relatively early stages are having the effect of leading to an imbalance between technologies.
The solar industry especially feels that it is subject to unnecessarily harsh measures. The consequences of these low capacity triggers is that any significant national deployment of solar power in schemes over 50 kilowatts in size—about the size of a school roof—will result in major cuts to the tariff that will make developing further schemes uneconomical. The solar industry contends that between 50 kilowatts and 5 megawatts it is cheaper than other renewables supported under the renewables obligation. I ask the Minister: why does it feel that it is subject to constraints beyond those that utility-scale renewables are subject to under the renewables obligation? Can the Minister clarify whether this Energy Bill could be used to correct the situation or could this be achieved through secondary legislation? Would there be any repercussions to correcting her department’s imbalance in the energy mix between technologies? Would there be an increase in the total budget before degression or would it result in reducing payments to some other technologies?
Energy Bill
Debate between Lord Grantchester and Lord Roper(11 years, 4 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Roper
My Lords, Amendment 50G is tabled in my name and that of my noble friend Lord Teverson. This amendment is parallel to some discussions that we had during our previous day in Committee when we were considering a nuclear regulatory organisation and taking up references in the report of your Lordships’ Delegated Powers and Regulatory Reform Committee. Two paragraphs of the report discussed the possibilities of modifying licences under Clause 127(1) and orders about domestic supply contracts in Clause 127(10).
As the noble Lord, Lord Whitty, has made clear, this gives power to the Secretary of State to intervene in an area that until now has been the responsibility of the regulator. The argument put forward by the department in the memorandum that it sent to the Delegated Powers Committee was that there was no need for any form of parliamentary scrutiny because all that we are giving the Secretary of State power to do is something that could already be done by Ofgem. That needs to be examined rather more carefully, which was also the view of the Delegated Powers Committee. This is the single instance in the Bill when the Secretary of State is given power to modify the licences without parliamentary scrutiny; in each of the other six cases, the negative procedure is indicated. We have already seen the discussions. This is an area of considerable public and political interest. Therefore, if the Secretary of State is to intervene and in some sense override the position of the regulator, it appears to the Delegated Powers Committee that he ought to be answerable to Parliament and that, as in other cases under powers conferred elsewhere in the Bill, it should require the draft negative procedure. As on the previous occasion, we have not seen the reply from the department to the Delegated Powers Committee so we would like an assurance from the Minister about how she is going to reply to the report.
Clause 127(10) is a very complicated power to make orders about domestic supply contracts. Similarly, it seems surprising that this order-making power is subject to no parliamentary control. Although paragraph 358 of the memorandum that the department submitted to the Delegated Powers Committee explained why the definitions could not appropriately be included in the Bill, it did not really explain why there is no provision for parliamentary scrutiny. This amendment is put forward by my noble friend and me in order to give the Minister an opportunity to explain what the reaction of the department to the report of the Delegated Powers Committee is likely to be.
I tabled a request for a debate on clause stand part before I had had a chance to see the amendments tabled by the noble Lord, Lord Whitty. In view of the long discussions that we have had on them and on the amendments tabled by my noble friend Lady Maddock and me, I have no intention of pursuing that debate. I beg to move.
Lord Grantchester
My Lords, Amendment 50G would require the Secretary of State to present proposals to Parliament before making any changes to the terms of licence conditions under powers in Clause 127. However, while the Secretary of State is obliged to consult suppliers and Ofgem as well as any other person he thinks relevant, he is not obliged to present the proposals to Parliament for scrutiny. The Delegated Powers and Regulatory Reform Committee questioned the appropriateness of this in its report on the Bill, and drew attention to Clause 127(10). It stated:
“As is candidly acknowledged in paragraph 358 of the memorandum, the distinction between discretionary and principal terms ‘is central to the function of the clause’. It therefore seems to us surprising that the order-making power is subject to no Parliamentary control, and that paragraph 358 -while explaining why full definitions could not appropriately be included in the Bill - does not explain why there is no provision for Parliamentary scrutiny”.
Why do the Government deem it necessary to consult the industry and Ofgem but not Parliament or consumers?
Throughout the Committee’s scrutiny of the Bill, several noble Lords have highlighted the extensive enabling powers given to the Secretary of State. This fifth report of the Delegated Powers and Regulatory Reform Committee is also highly critical, rather uniquely for that committee, in stating that there is little provision in many chapters in the Bill,
“that does not involve the delegation of legislative powers”.
We offer our support to this amendment in order to ensure that any such order is given appropriate scrutiny by Parliament by the negative resolution procedure, as recommended by your Lordships’ Delegated Powers and Regulatory Reform Committee.