Electricity Capacity (Amendment etc.) (Coronavirus) Regulations 2020

Lord Oates Excerpts

Thursday 2nd July 2020 Lords Chamber

[Lord Oates (LD)]

My Lords, I am grateful to the noble Lord for introducing these regulations and, as my noble friends have indicated, we recognise the need for them in addressing the unique issues that have arisen as a result of the coronavirus pandemic. However, this is a slightly curious statutory instrument in that it combines the urgent measures needed for the electricity capacity market arising from coronavirus with measures to address issues arising from a judgment by the Court of Justice of the European Union and the later decisions of the European Commission. These are two related matters, but they are definitely different. It is hoped that one will be temporary in terms of the adverse impact of coronavirus on capacity providers to meet their obligations, while the other is, if I understand it correctly, a permanent change to the way in which the market works.

With respect to the former, while we recognise that these measures are urgent and necessary, the Explanatory Memorandum tells us that the relaxation and removal of obligations and deadlines on providers will be temporary. Given that the pandemic is likely to continue to impose constraints on those providers, albeit in a less dramatic way than during the initial phase of the crisis, can the Minister set out how the Government will approach what may well be an ongoing problem and not simply a short-term blip?

The second part of the regulations tackles the commitments made to the European Commission to adjust the mechanism in light of the adverse judgment of the Court of Justice of the European Union on state aid rules. This has caused me a little puzzlement. I am unsure about why that judgment has caused the UK to enter into these commitments, given that my understanding is that the CJEU judgment was against the Commission for the way in which it had investigated whether we were in breach of state aid rules, and that the reinvestigation by the Commission found that we were not. So can the Minister explain to the House how that has led to us entering into further commitments?

The changes that the instrument proposes to the current system to implement those commitments are significant. My noble friend Lord Purvis raised the important question of whether it is the Government’s intention that those changes and their decision to ensure that the market is in compliance with the European Commission’s desires on state aid rules is going to continue after transition. Does the Minister not recognise that the integration of our capacity mechanism via the interconnectors with the European energy market really underlines the hollowness of those who believe that we can somehow separate ourselves entirely from European Union markets or indeed from the EU’s regulatory systems?

I hope that the Minister will be able to give us a little more detail about the impact of some of these changes. In particular, can he explain the exclusion of stand-alone batteries from the mechanism? How will that impact on the expansion of storage within our electricity system which, as my noble friend Lady Sheehan pointed out in the previous debate, is critical if we are to restructure our energy infrastructure so that we can underpin the increased use of renewables within the system?

My noble friend also made the important point that the best way to maintain adequate capacity is to reduce consumption. She raised in particular the issue of new homes, which was also raised by the noble Baroness, Lady Jones. In that context, will the Minister answer the question that I put to him yesterday, but which I fear he chose to sidestep, and tell the House definitively, one way or the other, whether the new homes that were announced this week by the Prime Minister under the new homes programmes, will be built to net zero standards? It is a simple question and I hope that on this occasion he can give me a simple answer.

Finally, I welcome the reduction in the minimum capacity threshold that is set out in these regulations. As the Minister suggested, it is hoped that this will allow more providers to compete in the market, and in particular that it will allow smaller and more innovative providers to take part. With that, as I have said, we recognise the need for these regulations, but we would be grateful if the Minister could answer the questions that I have put to him.