Energy Prices
Debate between Alan Whitehead and Ed Davey(9 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
My hon. Friend is absolutely right. I shall come to that point and quote the chief executive, Tony Cocker, in a moment.
I was about to give the figures to show that competition had increased dramatically since 2010. Back then, there were just seven small energy suppliers, with a total market share of less than 1%. That is what we inherited from the right hon. Member for Doncaster North. Today, there are 20 energy independents taking on Labour’s big six. They have a market share of more than 10%, and that share is growing fast. In other words, millions of consumers have switched from Labour’s big six to the coalition’s small independents, and many have cut their energy bills as a result.
Dr Alan Whitehead (Southampton, Test) (Lab)
In the Secretary of State’s paean to the coalition’s activities to reduce prices and increase competition, he appears to have forgotten what he has just done in regard to capacity auctions. Will he confirm that the capacity auction that he has just carried out will give £1 billion a year mostly to the big six, and will raise prices to consumers by about 11p? Is he proud of that, in the light of the undertaking to reduce prices that he has given today?
Mr Davey
I am surprised by the hon. Gentleman’s question, because he is an real expert in this area. He sits on the Select Committee and he also served on the Bill that became the Energy Act 2013, so he will know that the capacity market that we created in that legislation had the support of the Opposition. It was needed because the objectives of energy policy are not confined to lowering prices; they also involve energy security. That is where the capacity market plays a role. He will also know that the results of the capacity auctions were far better than we had predicted. The closing price—the clearing price—was significantly lower than we predicted, so there will be a lower impact on consumer bills. That is good news for consumers, because it means that energy security has been achieved at a lower cost. He is wrong to say that all that money is going to the big six; a plethora of energy generators will benefit from it.
Let me be frank with the House. It has taken some time to turn around the mess in the energy markets that we inherited. We cannot switch competition on and off like a light bulb. We know that, until recently, energy bills have been rising over the course of this Parliament. The fact that they have risen more slowly during this Parliament, compared with the last Parliament, is frankly irrelevant to the consumer who still has to pay a higher bill. So, although we have increased competition and although that is working, I am determined to go further still. That is why, back in 2013, I commissioned the first annual competition assessment of our energy markets and why I strongly backed Ofgem’s referral last year of our gas and electricity markets to the Competition and Markets Authority.
The past 12 months have seen the first big test of the extra competition that we have introduced. Have consumers been able to benefit as wholesale prices have fallen? The answer is yes. Not all consumers have benefited, of course, but several million have switched to new suppliers and to new deals in which the fall in wholesale prices has been passed on. They have seen the benefit of our extra competition. Indeed, many people who have switched have seen savings far bigger than the fall in wholesale prices alone would produce. Our latest estimate suggests that many people could save about £300 a year by switching.
Nuclear Management Partners (Sellafield)
Debate between Alan Whitehead and Ed Davey(9 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
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Mr Davey
The hon. Lady is right that performance at Sellafield has been mixed—we would not have taken the decision if it had all been going terribly well—but I repeat what I have already told the House, which is that performance improved significantly last year. That is why the focus is on the model. She asked whether we believe that the model will improve performance, and we absolutely do: it will reduce costs and improve the effectiveness of management on that complex site.
Dr Alan Whitehead (Southampton, Test) (Lab)
What measures is the Secretary of State taking to ensure that the process, particularly for the selection of the strategic partner for Sellafield Ltd, will be proof against a repetition of elements of the fiasco we have heard about today?
Mr Davey
The different model will ensure that the involvement of the private sector is far more effective and, indeed, more cost-effective. The NDA is obviously responsible for the selection of the strategic partner. The model is now much simpler and is in line with best practice for procurement for such complex operations. That is why I made the analogy with Crossrail and with the Olympics in my answer to the hon. Member for Rutherglen and Hamilton West. The Olympics was a very complicated project, and Crossrail is a very complicated one, while Sellafield is the most complex industrial site in Europe. Given the complexity of the operations, it does not really make sense to have the complex model set up under the previous Government, and that is why we have taken this decision.
Oral Answers to Questions
Debate between Alan Whitehead and Ed Davey
Mr Davey
In fact, if one follows the details, one finds that we secured more than we expected to on going into the Lima summit. The reason is that there were some good negotiations, particularly on the information that countries will have to supply in what are known as—I am sure that the House will have followed this closely—their intended nationally determined contributions, which will be announced in the first quarter of next year. Nailing that down was the key issue in Lima and we did so.
Dr Alan Whitehead (Southampton, Test) (Lab)
As the Secretary of State will recall, the Prime Minister said recently that now that 10% of power is supplied by onshore wind, onshore wind should seek its passage through the planning process. I am sure he is aware that in terms of operational schemes and schemes that have planning permission, it makes up far more than 10% of the system already. Does he propose to put the Prime Minister right on this, or does he intend to rescind planning permissions so that the Prime Minister does not look silly?
Mr Davey
I am slightly confused by the hon. Gentleman’s question because he misquotes what the Prime Minister said on Tuesday. The fact is that onshore wind supplies just over 5% of our electricity today. By 2020, with the onshore wind farms that are in the planning stage and with the assumption that some will not get through, we expect to get to about 10%.
Oral Answers to Questions
Debate between Alan Whitehead and Ed Davey(10 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
Dr Whitehead
In the light of that deal, I am sure that the Secretary of State will now be anxious to make the UK’s contribution by laying down the order for the decarbonisation of the UK’s energy supply to 2030. Will he tell me when he intends to lay down that order and, when he has done so, what he has in mind for the decarbonisation range that will be in it?
Mr Davey
I am surprised that the hon. Gentleman asks that question because, having been an assiduous member of the Committee that considered the Energy Bill, which became the Energy Act 2013, he will know that we cannot lay down that order until the fifth carbon budget, which is due in 2015-16. He will also know that this Government have met the first carbon budget and are on track to meet the second and third carbon budgets, and that in the summer I confirmed the fourth carbon budget at the ambitious levels we have set. We are meeting our Climate Change Act 2008 obligations.
Dr Alan Whitehead (Southampton, Test) (Lab)
T6. What is the origin of the £128 million funding that the Secretary of State has committed, over 40 years, to communities affected by the Hinkley C development? Will it come from the developer, as is the case with other technologies, or will it come from his Department’s funds or another Department’s funds?
Oral Answers to Questions
Debate between Alan Whitehead and Ed Davey(10 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
I have had no personal discussions with Plymouth city council on that matter. I will ensure that those discussions are taken forward either by the Minister of State or myself. That idea is part of our long-term plan. My hon. Friend is right that my right hon. Friend the Member for Bexhill and Battle did a fantastic job on marine parks, not just in the south-west, but elsewhere. That is part of the way in which we want to take forward marine and tidal energy.
Dr Alan Whitehead (Southampton, Test) (Lab)
What progress has the Secretary of State made on the Iceland and Norway interconnectors? Will he produce a report for the House on the potential for securing the supply of substantial amounts of very low-carbon energy into the country through those interconnectors?
Mr Davey
The Norway project—the NSN project—is particularly exciting because there is a massive surplus of hydroelectric power that could come through a cable from Norway. Those talks have been really effective. The announcements that Ofgem and the Department have made—particularly that we will allow interconnector capacity to bid into the capacity market from 2015—have been well received in Oslo by the Norwegian authorities. I am confident about that interconnector project. The idea behind IceLink is that we could get a cable from Iceland to Scotland and supply geothermal energy through it. We are waiting to hear from the Icelandic authorities on how they want to take that project forward.
Dr Alan Whitehead (Southampton, Test) (Lab)
Will the Secretary of State reconsider his decision to exclude households that are renting less than a complete building from his proposals to require landlords to improve the energy efficiency of their properties to at least band E by 2018?
Mr Davey
First, let me say how delighted I am that we are consulting on new regulations to require private landlords to improve the energy efficiency of the homes they rent to tenants, which is an important move. I hope that Members of all parties will participate in that consultation. The hon. Gentleman raises an important and serious issue. I hope he will participate in the conversation, which is intended to give people the chance to consider the very issue he raises.
Oral Answers to Questions
Debate between Alan Whitehead and Ed Davey
Mr Davey
My hon. Friend and I may disagree about onshore wind, as I have visited many popular sites from which local communities see real benefits, but I agree that tidal and wave power has a big future. The Government, and especially the Minister for climate change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), have been active by allocating £20 million for tidal arrays and ensuring that the EU provides funding for other projects. Generous support has also been given through the renewables obligation certificate and contract for difference systems.
Dr Alan Whitehead (Southampton, Test) (Lab)
Given the almost complete lack of movement on investment for all the permissioned sites for gas-fired power stations, the Department’s estimates of spiralling costs for the capacity market mechanism, the state aid difficulties with proposals for that mechanism and the mothballing of existing power stations, will the Secretary of State review the case for a strategic reserve mechanism, which his Department suggested in 2011 would be a far less expensive and more secure method of supplying future capacity?
Mr Davey
The hon. Gentleman is very knowledgeable about such matters, but our plans for the capacity market are on schedule, so the fears that he voices are not there. He talks about the benefits of a strategic reserve, which we debated during the passage of the Bill that became the Energy Act 2013, but what National Grid and Ofgem are doing in the short term has similarities with a strategic reserve, yet avoids the disadvantage of creating perverse incentives for the wider energy market.
Energy Price Freeze
Debate between Alan Whitehead and Ed Davey(10 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
There is a limit, of course. The right hon. Gentleman ought to follow this debate more closely. Indeed, we have reduced subsidies and our policy is to reduce them still further.
The truth is that, rather than helping consumers, Labour’s price freeze is a pro-big six policy. For all the bluster about taking on the big six, the right hon. Member for Don Valley is just playing into their hands. If Labour makes the smaller competitors go bankrupt, the people who will enjoy that are the big six, and the right hon. Lady knows that.
Dr Alan Whitehead (Southampton, Test) (Lab)
As part of the right hon. Gentlemen’s thought experiment, has he considered how far down the curve the very large energy companies purchase the bulk of their forward energy supplies and the relationship between that forward purchase and small energy companies purchasing on the back of larger purchases than necessary for the obligations of the large energy companies? How does that fit in with this thought experiment about small energy companies going bust if large energy companies are buying so far ahead of the curve?
Mr Davey
It fits in exactly, and I am delighted that the hon. Gentleman has raised that point. The larger companies can buy 18 months ahead, so if there is a rise in wholesale gas prices, they are hedged—they are protected. The smaller companies find it much harder to buy ahead, so if the wholesale prices go up, they get crushed. That is the truth about Labour’s policy. It may seem popular in Labour’s focus groups, but I am afraid it has not been thought through. As The Guardian said, it is “good politics”, but it is “bad policy”.
Energy Markets Competition Assessment
Debate between Alan Whitehead and Ed Davey(10 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
My hon. Friend is absolutely right, and that is one of the problems that many have with the official Opposition’s policy. Governments do not control wholesale prices. We have seen large increases in wholesale gas prices over a long period, primarily driven by the increase in energy demand from countries that are growing such as China and India. My hon. Friend is absolutely right to say that we cannot control that, but we can do everything in our power to help people, whether by promoting competition or helping people to save energy through energy efficiency.
Dr Alan Whitehead (Southampton, Test) (Lab)
Bearing in mind that the “State of the Market” competition report contains a number of different headings of concern about the market, has the Secretary of State done any work, or will he do any, on the relative urgency of those headings? If he is considering referring the headings in Ofgem’s report to the CMA inquiry, does he think the two-year time scale will give his Department sufficient urgency to deal with them all?
Mr Davey
First, for the avoidance of doubt, it will be Ofgem that makes the referral to the Competition and Markets Authority, not me. However, I want to make it clear to the House that we have been acting on competition issues in energy markets from day one in 2010 and will continue to do so. Where evidence is brought to our attention or Ofgem’s that more can be done, we will do it. As I said in my statement, consumers can look forward to our work with the industry to drive forward faster switching times, for example. We want to halve switching times, so that competition works for people and they can get the best deals in the market. We are not going to do nothing during the review; we are going to be very active. However, the review is critical to doing a deep dive and getting a deep analysis of what is going on.
Energy Bills
Debate between Alan Whitehead and Ed Davey
Mr Davey
My hon. Friend is absolutely right. When we came to power we found that there were far too few energy companies and that the big six had it all their own way. As a result of the measures we have taken, through deregulation and the retail market review, we are seeing independent suppliers come in and offer some really good deals. He mentioned making energy bills simpler, which will help people know their options and be able to choose to switch to lower prices and better deals.
Dr Alan Whitehead (Southampton, Test) (Lab)
Is there any part of his statement that the Secretary of State might wish to review in the light of what his own Minister of State, the right hon. Member for Bexhill and Battle (Gregory Barker), said yesterday, which was that the cuts in ECO will result in far less carbon being saved over the next period? Does he accept that ECO’s original intention, which was to cut bills by up to £400 for those who benefited from it permanently, is now seriously at risk as a result of what he has undertaken today?
Mr Davey
We approached the review with the intention of ensuring not only that we kept the support for the fuel-poor and the investment for green energy, but that it was carbon neutral. The package we have put together, not only with the energy efficiency investments we have announced today but with announcements that will be made in the autumn statement, will show that it is indeed carbon neutral.
Energy Price Freeze
Debate between Alan Whitehead and Ed Davey(11 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
No, I am not giving way.
The right hon. Lady talked about the pool and the exchange on which the electricity will be traded, but she has not noticed that the day-ahead market in Great Britain has boomed under this Government. In 2011, just 5% of final Great Britain demand for power was traded on the day-ahead exchange. In the past six months, more than 50% was traded. We have seen a big increase, but she did not even bother to mention it.
Mr Davey
No, I am not giving way.
Ofgem has looked at whether or not it should mandate 100%. It will ensure that there are new reporting requirements so it can check what is happening. It will say that, if the number does not improve and stays as it is, it will intervene. It is not intervening now—the right hon. Lady will not know this because she has not read the document—because the independent generators have not asked for it to do so. The independent generators say that the day-ahead market is not the problem for competition and that the day-ahead market is not the market in which there is room to drive down prices. They say that the problem is the forward markets—the month-ahead, six months-ahead, year-ahead and the two years-ahead markets.
Mr Davey
Let me finish answering the hon. Member for Denton and Reddish (Andrew Gwynne). I am not satisfied with the energy markets that we inherited from the last Government. We want to make sure that competition is working. That is why we have already had the retail market review with Ofgem, which is now improving competition in the retail markets. It is why we have Ofgem’s latest proposals in “Secure and Promote”, which the Opposition have not read, to improve competition in the wholesale market. I am not satisfied with the markets at the moment, but our policies—with Ofgem’s help—are coming into place now.
We have had to run to make sure we turn round the markets we inherited, but I can tell the hon. Gentleman how quickly our policies are now coming in. The retail market review comes into effect, in terms of people’s bills, next month. Ofgem is still consulting with the industry, but expects to give a final response to its consultation this year. Then its proposals for a market maker, which will ensure transparency so there are none of the secret deals that the right hon. Lady keeps on about, will start happening in the first half of next year. We are producing the competition proposals and they are coming into force. People have not seen the benefits of them yet—I accept that—because we have been trying to turn round the rigged market that we inherited. We are now turning it round and people will begin to see the benefits over the years ahead.
Dr Whitehead
The Secretary of State has been waving a document around. Can he turn to the page in that document that discusses netting off between companies in the long-term market? Can he turn to the page in that document that discusses the question of creating trades at time of closure by companies? If he cannot do so, will he accept that the document is not quite the panacea for all the transparency issues that he thinks it is? Will he go away and review the things that the document does not say as well as what it does say about the transparency of the market?
Annual Energy Statement
Debate between Alan Whitehead and Ed Davey(11 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
My hon. Friend makes an important point. As we review the levies, and indeed the whole market, we must ensure that they work for the fuel-poor and the less well-off. I am particularly concerned, whether in the levy review or elsewhere, to ensure that we make competitive markets work for the poorest and most vulnerable in our society.
Dr Alan Whitehead (Southampton, Test) (Lab)
The Secretary of State will know that yesterday one of his Ministers said that all green and energy efficiency levies would be included in the review and another Minister said that the renewables obligation, contracts for difference and feed-in tariffs would not be included. Which of his Ministers was right, and will he be writing to the Prime Minister to warn him of the perils of making up policy on the spot?
UK Nuclear Energy Programme
Debate between Alan Whitehead and Ed Davey(11 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
I am grateful for my hon. Friend’s remarks, but I say to him gently that I hope everyone on the Conservative Benches will also understand why I have changed my mind: it is because of the threat of climate change. I hope that all Conservative Members will look at the Intergovernmental Panel on Climate Change report—its fifth annual assessment—and accept the scientific consensus of 269 experts from 39 countries. The evidence that climate change is happening and that man is responsible for it is overwhelming and we need to take action on climate change. If I am prepared to change my views on nuclear, I hope that some on the Conservative Benches are prepared to accept that climate change is something we have to face up to.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Secretary of State intend to present to the House the arrangements he has arrived at in the form of the varied investment contract, as set out in the Energy Bill? If so, will he set out the terms under which the strike price can be varied upwards under the varied investment contract, as well as the terms of the forfeiture of such a contract should the subject to it not deliver within the window set out by the contract when it is signed?
Energy Prices and Profits
Debate between Alan Whitehead and Ed Davey(11 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
Actually, when we talk about profit levels, we need to talk about competition. One of the core points of our policy is to increase competition, which the previous Government failed to do. Yes, regulation has a role, and I will discuss that, but competition has a much greater role.
Dr Alan Whitehead (Southampton, Test) (Lab)
What proportion of the total investment that the departmental estimates claim will be needed for plants, transmission, grids and connections will come from the big six energy companies? Will it be most, some or a small proportion of it? Does the Secretary of State think that the big six may not be the only game in town as far as investment in our future energy supplies is concerned?
Mr Davey
The hon. Gentleman makes a fair point in his usual informed way. The big six will be a big part of that investment profile, but as he will know, their balance sheets are weaker than they were in the past as a result of the recession, and there will be other investors. That means we will have to work harder to get that investment, but some of it will come from the big six.
Mr Davey
The hon. Gentleman asked that question when I appeared before the Energy and Climate Change Committee, and I told him then that I would examine the matter. I am afraid that we have not come to any conclusions—he only asked me a month or two ago—but I am happy to look at that. The Minister of State, my right hon. Friend the Member for Sevenoaks (Michael Fallon), is extremely concerned about the high prices paid by consumers who are off the gas grid, as I am. When we examine the research on fuel poverty, we see that some of the worst is among those customers, so this Government will do something about it where the last Government did not.
Dr Whitehead
Is the Secretary of State aware that at least one of the big six energy companies forward-trades for only one week in this country? Trading beyond one week ahead is taken out of this country. Will he explain the impact that his proposals will have on that trading arrangement, so that it is made wholly transparent?
Mr Davey
Let me be clear that we have an independent regulator, which the Labour party tends to forget. I should say to my colleagues that under the EU third package on energy, we have to have an independent regulator. The proposals that have been made are Ofgem’s, but I am on the record as supporting them strongly. As I have explained, Ofgem has proposed a market maker system, whereby the six vertically integrated companies will be mandated to sell power in the forward markets in the UK.
What about the third element of Labour’s package? It is a bit vague, talking about tackling the big six. The House should know from what I have said that we are already doing that through competition. What did Labour do in office? In 1998, there were 14 firms in the electricity supply market retailing electricity to customers. By 2010 there were just six, as my hon. Friend the Member for Peterborough (Mr Jackson) said. Rather than promote competition to help consumers, Labour did the reverse, and it now promises to undo what it did. What a shambles the Opposition policy is, and what a shambles the last Labour Government were.
If Labour’s energy policy would really help consumers, will the right hon. Member for Don Valley tell the House by how much the average energy bill would fall under her party? She tells us that she is proposing radical changes, so what would the impact be for consumers? We published detailed analysis of the impact on people’s bills of our energy and climate change policies, and it showed our policies helping people by keeping their bills lower than they would have been. We need to know what the impact of her policies would be.
As I have made clear, we have policies to help hard-pressed consumers and to help improve competition in the retail electricity market, including policies with Ofgem to help consumers. On the supply side, we have deregulated to make it easier for smaller suppliers to enter the market. We now have our “offtake of last resort” mechanism through an amendment that I introduced into the Energy Bill in the other place, and we are supporting Ofgem’s reforms to the retail market to deliver tariff simplification and get a better deal for more consumers. Labour failed to do that even when pushed to do so in the House. The confusing array of tariffs—there were a huge number—got to such a point that it was hindering competition and hurting consumers, not helping them and driving competition. We are right to back Ofgem with more reserve powers so that we can ensure that vulnerable people are not left being fleeced on so-called dead tariffs, and so that people find it easier to choose and switch.
Oral Answers to Questions
Debate between Alan Whitehead and Ed Davey
Mr Davey
Obviously, I shall not prejudge our response to the Select Committee, which, as the right hon. Gentleman will know, was not very positive about the Severn barrage scheme, not least because of the costs involved, but if he studies our announcements on draft strike prices for contracts for difference for renewables, he will see in there strike prices for tidal projects as well. It is absolutely clear that we will proceed only if we get value for money for the economy, the consumer and business.
Dr Alan Whitehead (Southampton, Test) (Lab)
Has the Secretary of State made any assessment of the value of extending the National Grid proposals for a short-term strategic reserve on mothballed plants coming back into operation over a much longer term than is currently envisaged? Does he consider that doing that for only two years, rather than adopting a longer-term proposition, represents poor value?
Mr Davey
The hon. Gentleman always makes very informed contributions to our debates. He is proposing that we adopt the policy of strategic reserve, which is a long-term approach, using the powers that National Grid already has. We have looked at that and rejected it, because it is not the right approach to get best value for money and it would create perverse incentives for investment in the wholesale market. We believe that a combination of Ofgem and National Grid measures, using those existing powers, and the capacity market is the best way to meet the security supply requirements, not to impact negatively on the wholesale market and to get good value for the consumer.
Energy Bill
Debate between Alan Whitehead and Ed Davey
Mr Davey
My hon. Friend has campaigned on the issue and he initiated a recent Adjournment debate on it. Whether it is new nuclear, onshore wind or other energy infrastructure, we need to consider how local communities can benefit, and we will do that. I give him that assurance again today.
Dr Alan Whitehead (Southampton, Test) (Lab)
Is the Secretary of State aware that according to his impact assessment, a market-wide capacity payment system would cost the customer 11 times more on their fuel bill than a strategic reserve system of capacity arrangements? Does he intend to take that into account as the Bill progresses?
Oral Answers to Questions
Debate between Alan Whitehead and Ed Davey
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
Helping people with energy bills is a top priority for us, so we have a range of initiatives including tariff reforms, energy-saving policies and direct help to cut the bills of those on the lowest incomes. From our consultation on proposals to help to get consumers on the cheapest tariffs to the green deal, and from the warm home discount to our promotion of collective switching, this Government will do whatever we can to help people and businesses to combat the effects of rising energy prices.
Dr Whitehead
Has the Secretary of State had a chance to peruse the report just produced by the Committee on Climate Change on the customer price differential between a renewable-rich strategy and a gas-rich strategy? Does he agree that that could represent a sixfold difference in long-term price increases for customers? Does he agree with the committee’s view, and will he be sharing his views with the Chancellor shortly?
Mr Davey
The hon. Gentleman got a lot of questions in there. I have looked at the headlines but I cannot say that I have read the full report, although I certainly intend to do so. I agree that it poses some challenges to those who debate energy policy, because it suggests that with a high gas price prediction, we could see energy bills going up by, I think, £600, whereas under a renewables strategy it would be only £100. The Government are adopting a mixed-energy approach, so that we are not dependent on any single energy source and can therefore manage the risks, because we cannot know the future of gas prices or predict how the cost of renewables will go down. I believe that our approach is the best one for the British economy.
Dr Alan Whitehead (Southampton, Test) (Lab)
Will the Secretary of State explain why he proposes in the Energy Bill to include contracts for difference that are raised from levies in the levy control mechanism, but to exclude capacity payments that are raised by levies from the same mechanism?
Energy Policy
Debate between Alan Whitehead and Ed Davey
Mr Davey
I pay tribute to my hon. Friend for the work he has done. He is absolutely right: we must stand up against people who prevent us from pursuing the consumer interest. It was ignored for far too long, but we are not going to ignore it. One of our reasons for arranging the consultation was that, although Ofgem could proceed with its own work and change licence conditions relating to bills and what is on them, we wanted to provide a statutory underpinning—a back-stop—to ensure that the process took place as quickly and smoothly as possible. I think that that is sending a very strong signal.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Secretary of State share my regret that, despite the 18-month gestation of the Energy Bill, a consultation paper on the possibility of its including provisions on energy efficiency and demand-side management was not published until today? Will he undertake to rectify that omission by ensuring that the consultation proceeds as speedily as possible, and that amendments are tabled as early as possible, so that the House can debate the matter during the Bill’s passage rather than its being tacked on at the end when the debate is over?
Mr Davey
I am very proud that we have arranged a consultation on electricity demand reduction. Other Governments have continually ducked the issue, but our Government will not, because this could make a major difference to the way in which our energy policy works. There could be great savings for the economy, for businesses and for consumers if we get it right. I urge the hon. Gentleman to engage in the consultation. We do not have a firm proposal, but we have a set of options on which people can comment, and if legislation is required as a result, we will legislate.
Energy Market Reform
Debate between Alan Whitehead and Ed Davey(12 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
No, I will not.
I have spent some time on competition in the retail energy markets, but the right hon. Lady spoke a lot about competition in the generating markets, to which I should like to turn. She made a great deal of wanting to reintroduce a pool to the UK and said it was in the Labour party’s manifesto. She did not really explain why, having abolished the pool in the UK in 2001, Labour wanted to re-introduce it. The Labour Energy and Competitiveness in Europe Minister at the time of pool abolition—she is now the noble Baroness Liddell—told the House:
“There is no question but that the electricity pool has distorted the market”.—[Official Report, 15 June 2000; Vol. 351, c. 1102.]
When the NAO reported on the old pool in 2003, it said that the
“the centralised arrangements of the pool carried with them a risk that some generators could manipulate the market and Ofgem consider that this risk materialised through much of the period of the Pool’s operation to the detriment of consumer interests.”
Indeed, many at the time believed that the pool was leading to higher and not lower energy bills. That is why the Government are not convinced by the Opposition’s policy.
Dr Whitehead
Is the Secretary of State aware of how many generators there were at the time of the abolition of the pool compared with the number of retailers, and does he think those circumstances have been replicated today? It would help the debate, if he could provide some numbers.
Mr Davey
I have already. I explained how the number of companies fell under Labour. [Hon. Members: “How many?”] There were two: PowerGen and National Power. Yes, I do know. And there are more generators now, so going back to the pool, when there were fewer generators, would be a bit odd.
Oral Answers to Questions
Debate between Alan Whitehead and Ed Davey
Mr Davey
We are keen to hear from any LEP across the country. I know that my right hon. Friend the Secretary of State for Business, Innovation and Skills and his ministerial team work closely with LEPs. Across Government we want to support their work in promoting the green economy.
Dr Alan Whitehead (Southampton, Test) (Lab)
Has the Minister spoken with the developers of large-scale wind farms who have difficulties because their development periods straddle the end of the renewables obligation and the start of—if they come to pass—contracts for difference? Does he consider that the end of the RO, if that is necessary, should be in 2020, rather than 2017, in order to accommodate those problems?
Cost of Living
Debate between Alan Whitehead and Ed Davey(12 years, 7 months ago)
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Mr Davey
Since becoming Secretary of State, I have spoken to Professor John Hills, given all the work he did analysing fuel poverty, and I have made changes to the energy company obligations as originally designed. The Deputy Prime Minister talked about this issue recently. We will be laying regulations before the House for debate this summer which will contain all the details that the right hon. Lady seeks. I say to her in the nicest possible way that she needs to wait a little bit, but those regulations will be laid before this House.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Secretary of State accept that unless action is taken on the interest rates charged by those providing the loans for the green deal, the green deal is unlikely to deliver what he says its likely benefit is? What action has he taken to get that right, and why is he doing nothing further to ensure that the interest rate is compatible with an effective green deal for the future?
Mr Davey
I have been looking at the financial arrangements of the green deal. When we are able to announce even more details than we have already, I believe that people will see that it is a very attractive offer. I also believe that there are many low-income households that will actually welcome the rate of credit that will be asked through the green deal, compared with some of the rates of credit that they have to pay other lenders.
Mr Davey
The hon. Gentleman is right to say that there are people predicting that wholesale gas prices will go up later this year. We had the announcement from Centrica last week, and we also had the announcement from E.ON. I am sure that other providers will be competing on price. However, I have already laid out some of the measures that we have been taking, whether it is the discussions that we had with the energy providers on gas and electricity bills, the collective switching or the work that Ofgem is doing on tariff simplification. All those measures make up quite a strong package to try to help the constituents he has just mentioned.
Returning to the energy Bill, there are four parts to our reforms: new long-term supply contracts to provide stable incentives to invest in low-carbon electricity generation; a capacity mechanism to ensure that we can keep the lights on; an emissions performance standard to keep carbon emissions from new fossil fuel plants down; and a carbon price floor to give investors certainty to commit capital to low-carbon projects. These reforms will attract the investment that we need to secure our electricity supplies. The investment will bring real rewards: up to 250,000 jobs in the construction and operation of new power plants, 19 GW of new electricity capacity, and an energy system that is fit for the future.
This is one of the biggest delivery programmes that this Government will oversee. It will stimulate growth, support new skilled jobs, upgrade our ageing energy infrastructure and bring down consumer energy bills. Our latest analysis shows that over the next two decades the average household energy bill will be 4% lower than if we did nothing. If we do not act now, we face a higher risk of blackouts and more exposure to price spikes, and higher consumer bills for both homes and businesses. That is not a future that this Government are willing to consider, so we will take the right decisions for the long term. The provisions in the forthcoming energy Bill will keep the lights on and our carbon emissions down, at the lowest cost to the consumer.
Dr Whitehead
As the right hon. Gentleman has made specific mention of the consumer benefit that will arise from electricity market reform, would he care to place on the record this afternoon how many consumer-based levies are in his energy market reform proposals, and what price effect their implementation will have on consumer bills?
Mr Davey
When we publish the draft Bill for pre-legislative scrutiny, I will set out a range of details, with a lot of technical documents. What I can say to the hon. Gentleman ahead of that is that there will be fewer levies than Labour planned. Labour planned a levy on bills for carbon capture and storage, which I believe would have cost consumers £9 billion. We are not going ahead with that.
This is a difficult time for many households. I am sure that Members on both sides of the House have heard from constituents who are struggling to pay their bills or keep their businesses afloat. Promises from politicians will not make the end of the month come any sooner, but the Government are doing what they can to help. We are making it easier for people to get a better deal from their energy suppliers; we are bringing energy efficiency to the mass market, making homes in every corner of the country cheaper to heat; and we are reforming our electricity system, to protect consumers from a more unstable and more expensive energy future. These three objectives share a common cause: not only will they insulate our consumers from energy price rises, but they will deliver a cleaner, more secure and more affordable energy system for generations to come. This is government for the long term, and that is what this coalition stands for. We are taking action where the last Government delivered inaction.
Oral Answers to Questions
Debate between Alan Whitehead and Ed Davey
Dr Alan Whitehead (Southampton, Test) (Lab)
The Secretary of State has today informed us where the headquarters of the Green investment bank will be, but has he also broken the news to Edinburgh that it will host not a bank but a cash-limited fund until at least 2017? Does he intend to go to the Treasury on behalf of Edinburgh to seek permission for the green investment fund to become a bank substantially before that date?
Jobs and Growth in a Low-carbon Economy
Debate between Alan Whitehead and Ed Davey
Mr Davey
When I used to attend Business, Innovation and Skills questions, as a Minister in that Department, I noted that there were more questions on the location of the bank than on any other subject. I thought I might not get so many in my new position, but I see that I am already getting them. I refer my hon. Friend to my right hon. Friend the Secretary of State for Business, Innovation and Skills.
Subject to state aid approval, the bank will be operational by the end of the year. But from next month, we will pave the way for the establishment of the bank with a programme of direct coalition investment in green infrastructure: we have made £100 million available to invest in smaller waste infrastructure projects on a fully commercial basis; a further £100 million has been made available for investment in the non-domestic energy efficiency sector; and the coalition is ready to co-invest in offshore wind projects. The bank is on course to begin investing its £3 billion of initial capital by the end of the year.
Dr Alan Whitehead (Southampton, Test) (Lab)
Has the Secretary of State read the small print from the Chancellor on the future of the green investment fund? He has said that it will not be a bank until the target for debt to be falling as a percentage of GDP has been met —2015 at the earliest but probably now 2017. It is not a bank, and, on that formula, will not be so for a very long time. Will he ask the Chancellor to change that formula so that the green investment fund can become a green investment bank, which he suggests it already is?
Mr Davey
My right hon. Friend the Chancellor would not have had to make that statement had Labour left the economy in a decent state. The fact is that we are having to clear up Labour’s deficit. Nevertheless, at the same time, we have established the green investment bank—something that it was unable to do even in the good times. That we are doing it in the difficult times shows our commitment to the environment.
That investment is already yielding real benefits. According to one survey, four out of five wind and marine energy companies are planning to hire more staff by this time next year. Many of those companies are small or medium-sized businesses, while many operate in areas that have otherwise struggled to attract investment. All are helping to rebalance and rebuild our economy, and hasten the low-carbon transition. For example, Evance Wind Turbines in Loughborough has doubled the size of its UK manufacturing facility and has expanded its work force by 25%. Sales have grown by over 200% since last January. Samsung announced plans last month for a new wind turbine plant in Fife—a £100 million investment that is expected to create more than 500 new jobs. Let us also consider Rolls-Royce, whose £400 million nuclear deal with Areva will support hundreds of highly skilled jobs, including in Rotherham. Even closer to the constituency of the right hon. Member for Don Valley, is the Don valley power project at Stainforth. It is one of the most advanced carbon capture and storage projects in Europe, and is looking to break ground in 2013, employing 2,000 people at the peak of construction and creating 200 jobs for normal operation. Those companies and many, many more are building the clean-energy infrastructure that will power Britain’s future, not just in generations to come, and not in some far off world, but in the weeks and months ahead. Some 4 GW of renewable electricity is expected to come online in the coming year—a doubling of capacity since May 2011. That is a real achievement.
A common thread running through some of the Opposition’s rhetoric concerns stability for investors. I would like to address that, because there is a difference between the parties on this issue, and it is plain for all to see. Let us take nuclear power. I am the first to admit that pushing ahead with new nuclear was not an easy decision for my party, but we have taken it, and we will do it. Let us contrast that with how Labour dithered over new nuclear, so that for the best part of a decade not a single new nuclear plant was authorised. It was the coalition that took forward the national policy statement on new nuclear, paving the way for the first new power station since 1995. However, I was grateful for what the right hon. Member for Don Valley said about nuclear power. Her strong support from the Opposition Front Bench for our new nuclear programme is welcome. It is important that we take politics out of such decisions, so I am grateful that we are making some progress.