Contracts for Difference (Miscellaneous Amendments) (No. 2) Regulations 2025
Debate between Lord Kerr of Kinlochard and Lord Wilson of Sedgefield
Lord Kerr of Kinlochard (CB)
The alleged saving is compared with the current price, which is astonishingly high. It is a saving because the wholesale price of electricity all over is going down. The contracts for difference for wind power are now being set at a level about two-thirds of where they were a couple of years ago. This minor saving compared with the previous exorbitant level of subsidy should not be exaggerated.
Lord Wilson of Sedgefield (Lab)
I thank the noble Lord for that intervention. We were not trying to exaggerate anything. We are comparing that with the fact that, if we do not do this, we will end up with the price of gas at £170 million per year compared with some saving to households. We have to bear that in mind as well.
There was talk about the outcome of Ofgem’s investigation into Drax. The recent comprehensive Ofgem investigation into Drax compliance entered its report in August 2024. It found no evidence that Drax had incorrectly received subsidy payments, and no subsidies were issued for unsustainable biomass. However, Drax accepted the findings of the investigation and made a redress payment of £25 million. Ofgem’s investigation was very comprehensive and included a careful review of the KPMG report, as well as a wider review of more than 3,000 other documents. Both the Government and Ofgem are confident in this conclusion. Moreover, Ofgem has required Drax to undertake a full international audit of the profiling data from its supply chain. I hope that answers the concerns that noble Lords may have.
To address the other points on the Ember report on Drax being Britain’s largest CO2 emitter in 2023—this also answers the question about trees, and not all trees take four decades to grow—the carbon in biomass is emitted as carbon dioxide from the chimney of the power plant when the biomass is burned. However, the carbon dioxide emissions from sustainable biomass are part of the biogenic carbon cycle. Unlike fossil carbon, which was turned into gas or coal millions of years ago, the carbon released was recently absorbed from the atmosphere and is reabsorbed continuously through regrowth.
Woody feedstocks for bioenergy are typically low-value forestry—sawmill residue from trees that would have been felled regardless for higher-value usage. Therefore, in contrast with fossil emissions, we can consider sustainable biomass systems to be carbon neutral at the stack when taking forest growth, harvest and product use into account.
What you also have to realise with this SI is that one of the parts of it is about sustainability. Part of the contract is that biomass comes from 100% renewable sources, not 70%, so that is a massive increase. We will appoint someone to examine and look into the sustainability of the whole process.
We can have criticisms, and I think we all agree that we do not see this as the long-term answer to the energy problems that we have, but it is fair to say that we have to be realistic. We cannot be ideological purists. We could have an energy gap of 5%, and biomass provides 5% of our energy needs. We should not be blind to that fact. We are making improvements. It is about the regulations and not just about Drax; Lynemouth is talking about taking part in this process as well. It does not matter about the size of the biomass facility; they can all be part of this.
I finish by saying that the draft regulations in front of the House today will enable the Government to continue to deliver security of supply at the lowest cost for consumers, while protecting and enhancing vital sustainability measures. I commend the draft regulations to the House.