Energy Bill

Lord Sewel Excerpts

Monday 4th November 2013 Lords Chamber

[Lord Teverson (LD)]

My Lords, in moving Amendment 71, I will speak to my Amendments 73 and 74 as well. I understand that people who know better than I have described my Amendments 71 and 73 as clunky and I immediately put up my hand. I am trying to do the very simple thing of turning something that the Government described as a grandfathering clause into something that really is a grandfathering clause. It came as some surprise to us in Committee, when we perhaps read the Bill with greater care than we had done previously, that in terms of emissions performance standards, the Bill effectively fixes an EPS right up until the beginning of 2045. I refer not just to plants that already exist but to those that will be built well into the future. The emissions performance standard in this section of the Bill applies to plants built right up to 2044.

I seek to improve this position. I hope that I am offering greater investor certainty in terms of grandfather rights to those who might invest in new gas plant or plant in other power sectors covered by the EPS. Certain vehicles, for example, are approved when they are manufactured and first go on the road and keep the relevant grandfather rights until the end of their working life. That is what I propose in this amendment. As I say, it would provide investor certainty in terms of grandfather rights but, just as importantly, it would ensure that a regular review takes place.

Section 5 of the 2010 Act refers to three-yearly reviews, but those are non-statutory. I have been reminded that Clause 58, on page 56 of this Bill, contains a statutory mechanism to look at these things every five years. I suggest that this should be done every three years and that there should not be a need to change primary legislation—that is the difference—in order to change the EPS. It seems to me a very strong lock if the EPS is defined specifically in the Bill. I understand that the existing provision in the Bill seeks to provide investor certainty but I seek to give greater investor certainty by saying that once a plant is consented it keeps that EPS right the way through, at least until it has to be reconsented. I hope that the Government will think that that is an improvement.

Amendment 74 deals with a very important area. Coal plants are effectively excluded from the EPS under this legislation. However, unabated coal plants are one of the main sources of our nation’s overall emissions of CO₂. This is a major challenge in terms of our climate change targets and our desire to bring down carbon emissions in the United Kingdom. The amendment seeks to do a number of very positive things. It would help fulfil the Government’s intentions around carbon emissions and their energy policy. The Government have rightly made provision in the Bill that if certain major modifications are made to fossil fuel generating stations they have to be reconsented and the EPS becomes applicable, thereby making it impossible to run an unabated coal station. I seek to extend that provision to all major changes, including those plants attempting to reinvest to comply with the industrial emissions directive—the successor to the large combustion plant directive. We seek to do this because the Government’s trajectory for their carbon plan has always assumed that fossil fuel unabated coal stations will come out of UK generating capacity in an ordered manner after 2016. All that this amendment intends is to make sure that that actually happens.

Why is there a question mark now? It is because coal, primarily because of shale gas in the United States, has now become incredibly cheap. One of the outcomes has been that last year coal accounted for around 40% of total electricity generation and overtook gas which is now only about 28% of electricity generation—hence the UK’s carbon emissions went up last year quite significantly. The amendment would ensure that, although investment to prevent the output of mainly nitrous pollutants and thereby comply with the IED might now become economic and allow coal stations to carry on with this exemption from the EPS for many decades to come, the Government will actually keep to their trajectory in terms of taking carbon out of the system.

Let me first stress, perhaps paradoxically, what the amendment would not do. It would not take out coal immediately. As I said, it complies with the carbon plan which the Government have already published. Coal can continue to operate beyond 2016 under derogations and, in fact, can operate for some 17,500 hours, limited, right up to 2023. The importance of that is that coal-fired power stations can still operate during peak times and therefore make sure that we do not have blackouts. So the amendment does not get in the way of security of supply.

The other thing the amendment would not do is put up electricity prices. As we well know, electricity prices are primarily driven by the wholesale gas price and although coal prices have come down quite significantly, unfortunately, as we know, wholesale gas prices have not and so electricity prices have not either. It sometimes makes me ask what the generating companies have done with the extra margin from the coal production, but we will leave that argument for another day.

The amendment would ensure that there is no longer a baseload coal generation into and beyond the next decade. That is crucial for climate change and the Government’s wish to bring down carbon emissions. It would also meet those Government predictions. There are two other things that the amendment will make sure of: one is that there is a continued incentive for carbon capture and storage. Clearly and quite obviously, if unabated coal can continue exempt from the emissions performance standards, then CCS will go absolutely nowhere.

Crucially, the amendment would make sure that new gas investment can actually take place. It was interesting to read this morning in the Daily Telegraph, which has a great interest in energy, about a report that was, I think, released today by an organisation called EY. The article is headed:

“Gas and nuclear plants that could power all UK homes ‘on hold’”.

It goes on to say:

“Gas and nuclear power plant projects with sufficient capacity to supply electricity to every UK household are on hold … some 23GW of new gas plant has received planning permission but just 4pc is being built, with the rest suspended or on hold ‘with owners waiting to see if the economic and policy environment become more favourable’”.

One of the reasons it gives for that is the cheap coal influx from America which has made the situation worse.

As I often do, I endorse exactly what the Daily Telegraph says; this is a really important issue. We need new gas generation; the planning permissions are there and cheap coal is one of the reasons that investment is being held back. We need to move forward with it and the amendment is important because it helps fulfil the Government’s carbon plan and policy and makes sure that the investment that we need in new gas is actually able to move forward. I beg to move.

[The Chairman of Committees (Lord Sewel)]

I have to inform your Lordships that if Amendment 71 is agreed I cannot call Amendment 72, by reason of pre-emption.