Electricity Market Reform

Lord O'Neill of Clackmannan Excerpts

Tuesday 12th July 2011 Lords Chamber

[Lord Marland]

It is always a joy to hear my noble friend—as indeed he is. Let me quote him back a figure on prices. Is he not aware that electricity prices went up 18 per cent in one week? Forget 60 per cent in the time span he is talking about; they have gone up 18 per cent in one week. Why? Because we have been reliant on fossil fuels imported from other countries, with no control over security of supply.

With due deference to his great knowledge and to his great achievements as an Energy Minister and in the Treasury, he must be aware that there has been no investment in the energy infrastructure of this country in the past 20 years. The Government of which he was part and the previous Government were part of that. He must at least give credit for the fact that we are about to embark upon a massive investment and that, in order to establish an investment, you have to set out a pathway on which people have clarity for their investment.

My noble friend has quoted various institutions to me, and I would like to make him aware that we have consulted and discussed this with every energy supplier in the country and with a wide range of people. By and large, as much as one can possibly tell, this has been universally applauded by the industry and those who are seeking to invest. We may be proven wrong but, at the moment, it is all looking quite good.

[Lord O'Neill of Clackmannan]

The Minister has to take some credit for making another stab at market reform. It is not the first one for 20 years; there were two in the late 1990s—the NETA and BETTA reforms—so he is wrong to say that nothing has taken place in this matter. However, those reforms are now out of date. We need reassurance for investors and I think that, to an extent, we will get that from this document. However, I am not sure whether the social dimension and the cost to the consumer will necessarily be given equal weight.

The emission performance standards rely heavily on carbon capture and storage being realised—taken out of the laboratory, on to the factory floor, produced and then adapted for use in power stations with turbines in excess of 400 megawatts—but that seems to be a long way away. I worry that, come 2015 when we have the large plant directive, we will deny ourselves access to coal-fired power stations and will not have CCS available by that time. We could, therefore, well have a dash for gas on the scale that we had in the 1990s, with all the price implications that the Minister has already stated. When does the Minister expect carbon capture and storage to be available to British power generators, and particularly to the coal-fired industries? Unless we get that assurance, this will be, in large measure, a pipe-dream of the Government. I say that more in sorrow than in anger. We need to have a clearer indication of when we are likely to get carbon capture and storage. My inclination is that it will not come before 2020 at the earliest.

[Lord Marland]

The noble Lord, Lord O’Neill of Clackmannan, is an expert in his field. He also knows that I am responsible at the moment for leading the negotiation on carbon capture and storage. I am delighted to make the Statement in your Lordships’ House because it withdrew me from the negotiation process where we are in something called lock-in at the moment. I will not venture to suggest the outcome of the negotiations. They are extremely determined and it is a very complex programme. At the moment, we have three energy providers and me in one room at different times trying to bottom out where we can get to. I have been set the task of achieving this in operation by 2016. We may or may not get there. I am not going to predict one way or the other because it is a quantum leap. We must not underestimate the extent of that.

The noble Lord is quite right that a number of our energy policies are predicated on carbon capture and storage—but by no means all of it. The fact is that the EPS provides for gas. As my noble friend Lord Lawson would ask me to say, gas is fundamental to the future. I completely support his view on that. It is much less carbon intensive, will be fundamental to our electricity generation going forward and will be a large proportion of it.