Electricity Market Reform

Alan Whitehead Excerpts

Thursday 16th December 2010 Commons Chamber

[Chris Huhne]

I absolutely agree that we require long-term regulatory stability. That is one reason why we have been at pains to say that we will not change the terms on which investors relied when they made past investments. We want them to believe that when we put this framework in place they will be able to rely on a similar assurance of stability.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I strongly welcome the content of the statement on the future construction of energy markets and how they will underpin the move towards a low-carbon energy economy. The Secretary of State has said that there is currently a bias towards low-cost, low-risk fossil fuel generation, but it is more than a bias. The present build and planning permissions suggest that there is more gas in the pipeline than would cover the gap for reserve generation over the next period. The third of the four pillars he has mentioned involves capacity payments: how does he intend to fund those payments, and will he be able to direct them to ensure that reserve capacity is not overwhelmingly gas, as appears to be the case currently?

[Chris Huhne]

Clearly we want to have low carbon sources of supply, but I have made it clear that we are intending one of the three remaining demonstration projects on carbon capture and storage to be a gas project. Given the development of unconventional gas, there is a possibility that gas will provide a much more sustainable long-term source of supply than people had thought until recently. In those circumstances—carbon capture and storage applied to gas—gas may have a very important role in the long term, not just in the short term. Otherwise, I entirely agree. Capacity payments will be made on the basis of encouraging peaking plant, to deal with the ad break in “Coronation Street” when we all turn on our kettles, and to offset the intermittency problems that occasionally arise—the nightmare of the four or five cold still days in February when the wind turbines are not going and we need back-up capacity. The capacity payments will inevitably be made by consumers from their payments, but they will provide us with the assurance of supply that we have been proud to have in this country for a long time.