Energy Bill
Debate between Baroness Liddell of Coatdyke and Lord Deben
Baroness Liddell of Coatdyke (Lab)
My Lords, in supporting Amendments 62, 64 and 65, I draw attention to my entry in the register of Members’ interests. I will be very brief because the noble Lord, Lord Jenkin, has very much encapsulated the nature of the debate around the offtaker of last resort and the issue of certainty.
I would perhaps be kinder than the noble Baroness’s noble friend as I think that the noble Baroness probably does get the issue that we are seeking to articulate here. It is about giving a degree of certainty to companies that are of necessity much smaller than the big six and have difficulty raising finance because in many cases they are involved in infant industries. In the front of my mind is the generation of renewable energy in the islands of Scotland; for example, in the Western Isles, Orkney and Shetland. I know there is to be a consultation on that, but there are opportunities throughout the United Kingdom to access the various kinds of renewable energy that will be available through the activities and investments of independent generators. However, independent generators need to go to the market to raise their funds and if there is not certainty that the Government are really committed to the offtaker of last resort—that it is not a programme for a situation that exists in extremis but is integral to the operation of the market for that 8% or perhaps even less that exists—not only will the market become unbalanced but we will fail to give support to industries and generating capacity that already have the potential to be world leaders.
The noble Baroness’s words at the Dispatch Box will be looked at very carefully by the industry and the funders. Those who have deep pockets and will be prepared to invest in the sector and allow it to move on to a harmonious future need certainty. I will not delay the House any longer but I urge the noble Baroness to think very carefully about what she says. The noble Lord, Lord Jenkin, is right. I suspect that the lawyers have had a lot to do with what her right honourable friend Michael Fallon has being saying and what she has been able to say. I have no doubt that she understands from her own business background that the issue of certainty for investors is what lies behind these amendments, which I support.
Lord Deben (Con)
My Lords, perhaps I might help my noble friend on this issue. There is a win-win solution, which is to recognise what has happened very recently in Germany. The big generators always start off being unhappy about the competition. However, RWE in Germany is expected to announce, after decisions made very recently, that it has concluded that it is no longer possible to take that attitude towards other generators in the German market. The Germans have been so tough about the provision for smaller generators. As I have said before in this House, it is remarkable that 50% of the very significant amount of renewable generation in Germany is done by municipalities, co-operatives and individuals.
Until recently, the big generators have fought that because they felt that their own business model was being undermined. It is quite clear from the latest evidence that RWE will take a different view, that it ought to become much more a facilitator of this rather than an opponent of it. If we get the way this is phrased in this Bill right, we will be able not only to help the independent generators but to help the bigger ones to move rather faster in understanding that this is going to be a multiple market in the future.
Therefore, I hope that the Minister will be able to discuss this again with her colleagues because it is a very fast-moving situation. This is not something that is the same today—literally—as a fortnight ago because we did not know the RWE movement then so we did not see, although we hoped, that that was what was going to happen elsewhere. If we can take advantage of learning from other people rapidly, this excellent Bill can be made that much better. I hope that she will find it possible to be a little stronger in what she says now and will take this away and discuss it with her colleagues, as my noble friend Lord Jenkin suggested, because there is now a new circumstance in which she will be able to be stronger in her support.
Energy Bill
Debate between Baroness Liddell of Coatdyke and Lord Deben
Baroness Liddell of Coatdyke
My Lords, I am delighted to have this opportunity to follow the noble Lords, Lord Roper and Lord Cameron, because I, too, lent my name to the amendment. I draw attention to my entry in the register of interests and apologise for my croakiness. It will have one advantage: I will be brief.
I am delighted that the Government have tabled broadly similar amendments but I am very concerned about their tentative nature. I started out by being concerned about the backstop and how it would operate because the reality is that at the point at which the backstop kicks in, you are already at the 11th hour. If I may mix my metaphors, it is like saying to someone who is standing on at the edge of a crumbling cliff, “Don’t worry if you fall off; the RAF has a very good search and rescue operation”. It is very troubling that there is no recognition of the stage at which a company or project would be when the backstop was applied. I am delighted that someone as eminent and knowledgeable as the noble Lord, Lord Roper, found the Baringa report a bit impenetrable; I found it totally impenetrable. One of our main problems is that no one is certain about how this will work.
I am slightly jealous of the Minister because this is a classic situation in which a Minister could bring common sense through the middle. The Bill has been about two years in gestation—it has the gestation of an elephant—and we are still at a stage where we do not have the kind of clarity that, frankly, the funding market really needs. There is a fantastic opportunity over the summer for the noble Baroness, with her officials, to go through some rigorous testing of what is proposed here. There is no doubt that we will come back to this on Report because when cold towels are wrapped around heads there will be recognition that we need to go beyond the theoretical and look at the practical. If there is one warning from how the market has operated so far, it is the current attitude of the financiers, the investors.
As the noble Baroness said, when we were discussing Amendment 53BB, no one is blessed with perfect foresight and energy markets are wonderful at knocking people sideways. Things happen off stage that disrupt the functioning of energy markets. That makes it all the more essential to have a degree of flexibility. I can understand why the department has relied so heavily on the big six because they are the big operators in the field, but they are not entrepreneurs. We had an interesting side debate the other day about capitalism. What we are talking about here is entrepreneurialism on the part of the independent generators.
If noble Lords cast their minds back, it was interesting to hear what the noble Lord, Lord Deighton, said at the Dispatch Box during Question Time on Tuesday about infrastructure development. He referred to how important renewable energy, particularly offshore renewable energy, would be in helping our investment in infrastructure to move ahead. Yet these independent generators are the very people who are coming along and saying, “Hold on a minute; we don’t have the certainty to invest”. I get the impression that some people, when they are looking at the scale of these investments, think that we are talking about something that will cost £200,000 or even £2 million. There is a project in Edinburgh that could supply sufficient energy for all of Edinburgh and Fife. Its cost is somewhere in the region of £1.3 billion—not small fry. You could buy a very big part of an aircraft carrier for that; you might even be able to buy some planes to fly on it. That project, Neart Na Gaoithe—I am glad that the noble Earl, Lord Caithness, is not here, because I suspect that he is a native Gaelic speaker, which I am not—is in the market at present. This is not a model that we are looking at here; this is men and women out knocking on investors’ doors now and having difficulty in raising money. I ask the Minister, during the summer, when she has had the opportunity to have a good break, to take the chance to jump over the lobbyists and talk to the companies that are investing and experiencing considerable difficulties.
Amendment 55AC refers to the green power auction market. Like the noble Lord, Lord Cameron, I am more attracted to that than I am to the idea of the backstop. It is strange for someone sitting on this side of the Committee to be saying, “I am in favour of a fully operating marketplace”, as distinct from those on the other side, where they are talking about market manipulation. I think GPAM would be a clearer way in which to operate but, frankly, I would settle for anything that gives us the certainty in the marketplace that those involved in these investments very much desire.
There is no doubt that we will come back to this. I very much look forward to hearing the Minister say, on returning to us in the coolness of the autumn, “We’ve worked out how this is going to work—this is how we’re going to change it”. The downside is that we have about three months to go and there are investors out there having difficulty raising money. That is the thin end of the wedge and that is what we should be thinking about.
Lord Deben
My Lords, we may have noticed that there is a good deal of support on both sides for what the Government are trying to do. I hope that my noble friend the Minister has noticed the tone in which these discussions have been carried through. We would like to be convinced, and we are unconvinced only because these measures are quite difficult to understand. The document that I have here is not for bedtime reading, unless you wish to give up on the Mogadon, because it is very complex.
One thing in the Climate Change Act that the climate change committee is supposed to do is to ensure that the public understands what it is doing. I do not think that that is a bad thing to have at the back of one’s mind. I just hope that I do not have to stand on a platform at this moment and explain in simple terms what is in here. I suspect that my noble friend the Minister would agree that that is not the most comfortable place in government just at this moment. It is not because there are things that are necessarily wrong with it, but there are extremely complicated things in it, and we want to make sure that it is as good as it can be. That is my first point.
On the amendments, I remind noble Lords that this is no small matter. Electricity from renewables increased last year by 19%, which is pretty remarkable; it is 11.3% of the total. We are not talking about some tiny little thing, which is what the climate change dismissers are always saying. This is no longer a gleam in the eye of Greenpeace; it is a central part of what we are seeking to do. Therefore, we have to recognise that enabling the elbow room for the renewables sector is very important. The Government have recognised that and, on all sides, people have said that the government amendments do extremely well.
I want to put three simple propositions to my noble friend. First, it is instinctively difficult for free marketeers such as me to be entirely keen on a system where the Government are fixing almost every element of the process. I recognise that it may be necessary—and, indeed, if it is necessary, I shall be the first to defend it. But I think that she understands why one starts by being a little concerned about that.
Secondly, we need a convincing explanation of why some kind of auction is not part of the set up. It has been shown around the world that the one way in which you get lower prices is through a descending auction. There is no doubt about that. The advantage of that is that it does have that effect. From what happened in Brazil it is clear—it is not that it has not been tried and found wanting; it has been tried and it works—that you can bring prices down if you operate in that way.
It gives huge confidence to the public because, instead of the Government having to explain in the context of a document such as this why they have delivered this, that or the other, they are able to say to the market, “Look, the price has been fixed at the lowest figure we can see working”. There is a real issue of communication here and a need to explain why—apart from the unconvincing pushing aside in the other place when Ministers said it would be very expensive and complicated. I was a Minister for 16 years and I knew that any civil servant who said we could not do something because it was expensive and complicated had not worked it out. That mechanism is always used; it is the technique. I look with care at those behind my noble friend. An issue may be complicated but you might be able to make it simple, but the idea that it is expensive I have never seen proved in any independent area. I would like to be 100% on the side of the Government on this but the whole concept of a competitive system based upon some kind of auction is so valuable that we should not lose it.
Thirdly, the worst kind of debates in the other place, and even more so in your Lordships’ House, are about what it means rather than about what should be done. My worry in this area is that if we get to the Floor of the House and spend our time trying to work out what it means, we will probably get it entirely wrong. It would be valuable if the Government could clear that bit out.
The noble Baroness, Lady Liddell, and I have not always agreed on matters over the years but at least on this we can be at one. We want to arrive in October with a clear view of what is being proposed and what its ramifications are so that if we do not agree with it at least we are talking about the same thing. I fear that if we argued about it now we would be arguing about something that was different in the mind of every Member of the Committee. After all, we have chosen to try to understand these things rather more than the generality. I hope my noble friend will treat the amendment with that kind of approach, rather than saying, “It does not quite work in this way or that way”.
Energy Bill
Debate between Baroness Liddell of Coatdyke and Lord Deben
Baroness Liddell of Coatdyke
My Lords, I will be brief because a lot of what needed to be said in this debate has been said by the noble Baroness, Lady Maddock, and my noble friend Lord O’Neill. However, at some stage we need to focus on fuel poverty issues. I declare an interest as a non-executive director of the Offshore Renewable Energy Catapult. I am very conscious that the change in the structure of the market proposed in this legislation is complex. I echo the words of the noble Lord, Lord Oxburgh, who said that the model is complex and relatively expensive. With my commitment to renewal energy, I know that we are talking in many respects of infant industries and that there will be additional costs. I have no doubt that in the long run we will see energy prices come down, not least through the introduction of nuclear energy, but, frankly, in the long run we are all dead. We need to try to find something now to mitigate the impact on the fuel poor of the possible side effects of this legislation.
As regards change in the energy markets, as a policy-maker I have always felt that no change is a change for the better if it means that someone else is worse off—the old concept of Pareto optimality that some of us who are in our prime will remember. Under this legislation there is a real risk that the most vulnerable will be worse off. The Government’s own figures estimate that 4 million people in England are fuel poor. Many of those are particularly vulnerable and are also affected by, for example, the bedroom tax and stringency in local authority budgets. They are the people who can least afford to have these increased costs placed upon them.
The Bill is about market manipulation. I do not have a problem with that. If you are to change the nature of an industry, you need to manipulate the market. What I am pleading for—I will return to this at a later stage—is that, in manipulating the market, we seek to mitigate some of its worst effects on the most vulnerable. I seek to put another weapon in the armoury of the Secretary of State so that he or she will be in a position in the future to draw upon instruments that will mitigate the impact on the fuel poor.
There has always been a consensus in this Parliament, certainly in the years that I have been here and certainly since 2000, on the need to act to protect the fuel poor. In a building such as this which is well heated and where we are well fed and looked after, we may not realise the impact that the inability to turn on a heater has if your house is cold and damp. In Coatdyke, where I and my title come from, people are issued with hypothermia meters for their houses to make sure that they do not suffer from hypothermia. I acknowledge that this provision does not directly relate to that part of the country, but whether you come from the north of Scotland, the Yorkshire dales, Derbyshire or wherever, it is a damning indictment of our society that poor people have to choose between putting on their heating or feeding themselves. That is a choice none of us should have to make in a civilised society. In 2000, we set targets that should be reached by 2015. The most recent work by the NEA suggests that we are going backwards. That is not a good position in which to be.
I urge the Minister to bear in mind the significance of fuel poverty and to give us some indication of whether the Government are looking at mitigating factors. I take the point about the Green Deal. As I pointed out at Second Reading, you need money to get into it. If you do not have money, you cannot buy into the Green Deal and get assistance, for example, to protect or heat your home, or to ensure that it is properly insulated.
This is a probing amendment. I will not seek to engage the Committee much longer. However, if we come to the end of the Bill and we have not done something about the poorest in our society, we will have let them down.
Lord Deben
The climate change committee raised some very important issues about fuel poverty. We have a commitment to do that. My noble friend Lady Maddock pointed to it. Has the Minister had a chance to register our concerns? They are specific and bear on the way in which the Green Deal is operating. It is important for us to take that into account. I hope that she will be able to help me here.
I am always concerned about the expression, “fuel poverty”. When I was chairman of a statutory water company—I am still chairman of a water company that has interests in the industrial area—I was very concerned about the poverty that meant that people found it difficult to pay their water bills. There is an issue around these fundamental necessities of life. I do not like to put it all to one side. I have stopped myself having anything to do with one part of a business that connects electricity of any kind—it is agnostic about the sort of electricity—but I try to keep in touch with the same issue that we knew in the water industry as it relates to the supply of fuel. There is an issue about some forms of help that we thought would be more extensive: for example, solid-wall insulation, which is a real problem in some of the poorest parts of the country. I very much hope that my noble friend will be able to say when she will look again at the effects of government policy in the particular areas to which the climate change committee drew attention.