Energy Bill

Baroness Parminter Excerpts

Monday 28th October 2013 Lords Chamber

Moved by

[Baroness Parminter]

59: After Clause 42, insert the following new Clause—
“Strategy on interconnection
Within 12 months of this Act coming into force, the Secretary of State shall bring forward a strategy for the UK to increase its interconnection links with other European countries, in order to support the continued development of a European internal electricity market.”

[Baroness Parminter (LD)]

My Lords, this is the same amendment I moved in Committee, where I spoke of the benefits of greater interconnection across Europe. Given the lateness of the hour and the unanimity around the Committee at that time, I do not intend to repeat those arguments, but it is important to remember that if we are to deliver that greater level of interconnection we are going to need more investment in infrastructure. That means that the Government need to make quite clear their commitment to prioritising interconnection in the same way that they have with the capacity market and demand side reduction measures in this Bill.

I was grateful for the warm words from the Minister about the Government’s commitment to interconnection when I moved this amendment in Committee, as I said at the time. Therefore, I hope this evening that over the summer, those warm words have translated into a rather firmer commitment to action.

[Lord Teverson]

My Lords, I want to reinforce the comments of my noble friend Lady Parminter. One of the great challenges of the electricity supply industry is to de-peak its supply. One of those is demand side, but the other is very much around alternative sources of supply. Energy storage is not really where it needs to be at the minute, but interconnection is a technology that has been around for decades. It works and we should multiply it. I know that the Government have a number of schemes that they are looking at currently. I welcome those and congratulate them on being so proactive in this area. I hope that the Government and the Minister will be able to propel this even faster and further by taking notice of my noble friend’s amendment.

--- Later in debate ---

[Baroness Verma]

My Lords, I am grateful to my noble friend Lady Parminter for raising the matter of electricity interconnection, which the Government agree is an important area given the range of potential benefits. Through my notes I will also be able to answer my noble friend Lord Caithness’s two questions.

We have previously considered the amendment in Committee. The Government considered the arguments made and, earlier this month, committed to publishing a policy statement on electricity interconnection by the end of 2013, well in advance of the date which my noble friend’s amendment would require. This will set out our support for increased interconnection that is appropriate and economic. My noble friend will be aware that the Government also recently supported a number of interconnection projects to become projects of common interest under the EU regulation on guidelines for trans-European energy infrastructure. The UK Government support that regulation and its intention to accelerate completion of the internal energy market by facilitating cross-border energy infrastructure. Five GB electricity interconnection projects have been selected as projects of common interest under the regulation, including with France, Belgium and Norway. They will enjoy streamlined planning procedures and, where appropriate, a mechanism to agree cross-border cost allocation. They will also be eligible to access financial instruments such as loan finance, grants for feasibility studies and, potentially, grants for work under the Connecting Europe Facility, which has a pot of €5.1 billion over seven years. Four renewable generation projects located in Ireland, with potential to develop into interconnection, were also selected as projects of common interest. This brings the combined capacity of all potential interconnection projects currently in the pipeline to more than 12 gigawatts. My noble friend will also have seen our proposals for how interconnected capacity may be able to participate in the capacity market from 2015. We are currently working proactively on the details of this proposal and we will welcome further engagement with stakeholders to try to make this possible.

I also highlight work being undertaken by Ofgem to develop a supportive approach to interconnection. Ofgem is developing a new cap and floor regulatory approach for interconnection for application to the proposed Project NEMO between GB and Belgium. The Government are confident that this approach, if extended, will promote investment in interconnection. However, as the cap and floor approach looks to consumers potentially to take on some risk, it is important that careful consideration is given to its application. We are working closely with Ofgem as it takes forward its wider Integrated Transmission Planning and Regulation project, considering the need for enhanced planning or strategic evaluation of future interconnection. Ofgem is also working to ensure that GB electricity prices reflect scarcity to a greater extent. As interconnection developers invest on the basis of price differentials on either side of the link, this is likely to make investment more attractive.

I hope noble Lords will appreciate that, following Committee, the Government have made a public commitment that will satisfy the intention behind this amendment, and do so sooner than the amendment itself would require. I therefore hope that my noble friend will be reassured and will feel content to withdraw her amendment.

[Baroness Parminter]

I thank my noble friend the Minister for that very fulsome reply, for the way in which she has outlined the Government’s commitment to interconnection and, in particular, for the policy statement—which is probably civil servant speak for “strategy”—or as near as we are going to get it. I thank all my colleagues around the House for their support. I think they have done a great job in actually persuading the Government to move a bit on an issue in this Bill. I am grateful to the Minister for having an open-door policy and for having listened to us on this important issue, which will make our approach to the Energy Bill and how we secure energy in the future better. On that basis, I beg leave to withdraw the amendment.

Amendment 59 withdrawn.