Electricity Market Reform

Lord Maclennan of Rogart Excerpts

Thursday 16th December 2010 Lords Chamber

[Lord Marland]

I thank my noble friend for her excellent point. I do not want anyone to go away thinking that electricity prices are going to go down in the foreseeable future. The whole point about this programme is that they will go up less if we do not have to rely on the unpredictable price of gas, which went up by some 80 per cent in four years and which is very volatile at the moment. The department predicts that by 2020 electricity prices will have gone up 33 per cent. This is of course very unsatisfactory, but results from the fact that as a nation we have underinvested in our electricity generation infrastructure for years. We have sat back and relied on North Sea oil and that is now no longer available in the same quantity. However, I assure my noble friend that if electricity prices do go down, they must be passed on to the consumer. This is fundamental to Ofgem’s monitoring of it. Ofgem will be subject to a review, and during that process we will ensure that we take on board her very valuable comments.

[Lord Maclennan of Rogart]

My Lords, I declare an interest as the chairman of a company that is endeavouring to promote renewable marine energy. What limits are there on the additional payments to help to construct reserve plants to cushion the capacity of intermittent providers of electricity—presumably principally wind power—and what calculations have been made as to the possible cost of that to the Exchequer, bearing in mind that many wind farms are in remote areas that do not require energy in the vicinity and that the National Grid indicated in May that it was not prepared to improve the grid in such areas? This problem could be exacerbated by the development of offshore wind. What economic projections have been made by the Government in offering to make these additional payments?

[Lord Marland]

On the last point, the Energy Bill clears the way for offshore wind to link into the grid and to facilitate that. I shall comment on that further when we discuss the Energy Bill. The noble Lord is right that it is fundamental that we have the reserve capacity to cope with peaks, such as the well-known “Coronation Street” kettle peak, or with very cold periods. Therefore, we are developing a capacity payment to encourage people to create facilities for providing capacity at peak storage times. The development of storage technology for wind farms is also fundamental. We will drive forward very hard to ensure that that technology advances quickly.