Energy Prices Bill

Baroness Hayman Excerpts

2nd reading
Wednesday 19th October 2022 Lords Chamber

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. Like the noble Lord, Lord Redesdale, I hope that I can be brief, because many of the points that I wanted to make have been made very eloquently by the noble Baronesses, Lady Worthington and Lady Young of Old Scone, and the noble Lord, Lord Foster. Nevertheless, I endorse and emphasise three particular areas that have been spoken about. The first relates to the length and breadth of powers given to the Executive in the Bill. The noble Baroness, Lady Young of Old Scone, said—although she did not use this phrase—that it was something of an unholy alliance between the Delegated Powers Committee and the energy companies. There is a reason for that: all of us as parliamentarians, whether we are interested in energy or not, ought to be worried about this Bill because it goes against the advice of the Delegated Powers Committee in general about these sorts of clauses, and it does so in fine form. So, on principle, we ought to be concerned about those clauses. We ought also to be concerned about the effect that they have, and the uncertainty that they create, on the stability of markets in the energy sector.

The concerns that the energy companies—Energy UK, RenewableUK, National Grid, and businesses such as E.ON and SSE—have all stated come partly from the proposals that we will come to in a moment. I cannot remember the acronym—I am back to, “If it quacks like a duck, and walks like a duck, it is a windfall tax.” I am mixing my metaphors horribly. But they are also concerned about the effect that the lack of certainty that comes with those ill-defined powers for government will have on their ability to function in future and on their investment plans.

I come to the second point that has been made, which I want to support, about the very real risk in this Bill of disincentivising new low-carbon investment because of the way in which the scheme operates—for reasons that we all understand—for those producers that are not under contracts for difference, and the disparity between costs and prices that has occurred. The uncertainties and unfairnesses of the scheme being put forward will disincentivise new, low-carbon investment. Under the energy profits levy, oil and gas extractors are able to offset new investments against the levy. Under the proposed payments for electricity generators, no such provision is made.

Ministers in the other place simply asserted that this would not happen, when it was raised by members of the governing party there. The industry does not think that this would not happen. We absolutely need to encourage new investment in low-carbon technology, including energy storage and carbon renewals. I declare an interest as someone who has old solar panels. I absolutely agree with the point made by the noble Lord, Lord Foster, about issues such as VAT on batteries being retrofitted on those homes. We need investment, and not simply in onshore wind, although, as the Minister knows, I am very keen on investment in new onshore wind. We need to look at new technologies—at batteries, energy storage and carbon renewals and removals—and get ahead of the game, as we have been on renewable energy, on the technologies that will support that and end the problems of intermittency.

Parity could be achieved to ensure a level playing field between fossil fuel investment and investment in renewables by making amendments so that the payments are determined not just by reference to the quantity of the electricity generated but by the new investments made by the firm over the same period. I know that the Minister hopes that this problem could be solved by everyone going over to the contracts for difference and that it would be a power to keep in reserve, but that is not clear in the Bill. The Bill gives very wide-ranging and long-standing powers to the Secretary of State to change this. The oil and gas levy has a sunset clause of December 2023 so, if it is a reserve power, perhaps the Government could clarify a timeframe for the scheme and use the contracts for difference scheme and a shorter sunset clause.

Finally, I reiterate some of the points that the noble Lord, Lord Foster, made on energy efficiency. The Chancellor said that, when he looked at what would come after six months of the current subsidy support scheme, he would look at targeting it on those who need it most and at energy efficiency. I hope that he will do that, and urgently. We need a clear national strategy for energy efficiency that encompasses raising the energy efficiency of existing homes and how they will move to low-carbon heat, supported by a skills pipeline and a single source of advice, with interim targets and secure funding. Setting a clear pathway by the Government showing leadership would not only help to reduce energy demand but reduce bills for customers—and the taxpayer—now, as well as contributing to achieving our net-zero targets.

As the noble Lord, Lord Foster, said, the Government agreed last night to consult on a plan for achieving this for our 1.4 million social housing properties that are below EPC band C. The House felt strongly enough to make the Government put that commitment in the Social Housing (Regulation) Bill. I hope that the Government will consider setting out corresponding plans for the private rented sector and for owner-occupiers.