EU: Energy Governance (EUC Report)

Baroness Scott of Needham Market Excerpts

Monday 13th June 2016 Lords Chamber

Moved by

[Baroness Scott of Needham Market]

That this House takes note of the Report from the European Union Committee EU energy governance (6th Report, Session 2015–16, HL Paper 71).

[Baroness Scott of Needham Market (LD)]

My Lords, I am grateful to have the opportunity this evening to debate the sub-committee’s report on energy union governance. It is some six months since our report was published, although having just heard that the Digital Skills Committee has waited some 16 months for its debate, perhaps I should not grumble as much as I thought I would. However, I make the general point that Members of this House put a huge amount of effort into Select Committee reports, the staff work extremely hard, and outside witnesses and organisations take a great interest in the work we do, so it is a great pity when the House does not find time to debate these closer to publication. Nevertheless, I am pleased to be able to present the report this evening.

For any Government, nothing is more important than keeping the lights on, but we are trying to maintain a supply which is not only secure but affordable for consumers, whether they are individuals or businesses, and which is environmentally sustainable. That challenge—that trilemma—has focused minds on the benefits of co-operation as a means of achieving those goals, and the EU energy union is one vehicle for that co-operation.

I have had the privilege of chairing the EU Energy and Environment Sub-Committee for three years, and I can honestly say that it has been the most rewarding and fulfilling experience I have had in my 16 years in this House. But now I have, sadly, been rotated off. It is a painless but not entirely pleasant experience, and I shall miss the work a good deal. The members of the committee have always been immensely supportive, and one of the great joys of the work is that we have never been hampered by discussions or debates of a political nature. Our debates are robust at times but have always focused on the issues, and are all the better for that. I therefore extend my sincere thanks to each current member of the committee and to those who, like me, have been rotated off.

I also place on record my thanks to the noble Lord, Lord Boswell of Aynho, the chairman of the European Union Committee. His leadership, encouragement and personal support have been a great help to me. My noble friend Lord Teverson, who I see in his place, has now taken up the position of chairman of the committee and I have no doubt that he will enjoy the experience as much as I have and bring to it his great knowledge of the wide range of subject areas covered by the sub-committee. He served in the European Parliament and previously chaired an EU sub-committee. I wish him well. He, like all of us in this House, will be supported by efficient, knowledgeable and highly-skilled staff, whose commitment to our work, and indeed to the House, is absolute.

As your Lordships may know, the remit of the sub-committee includes agriculture, fisheries, environment, energy and climate change. The subject of the short report for debate this evening is firmly within the realm of energy. It is clear to most of us that energy policy in the 21st century cannot be formed from an isolationist perspective. The European Commission’s energy union strategy recognises this reality and attempts to ensure that Europe has a secure, affordable and low-carbon supply of energy. It aims to deliver energy security, reduce emissions and provide a better deal for consumers, and uses energy efficiency measures, the completion of the internal energy market and research and innovation to deliver this. An agreed EU energy governance framework will be essential to underpin the relationships between the EU institutions on the one hand and member states on the other. Such a framework will seek to meet the energy policy objectives of both the EU and member states but also to respect member states’ national sovereignty.

Before I go on to speak about the report itself I will make one or two comments about the background to it. The committee’s report was published in December and was the result of a short inquiry following a stakeholder seminar and a ministerial evidence session, as well as written submissions. The inquiry was timely; the European Commission published the first state of the energy union report last November and is expected to bring forward legislative proposals on energy governance later this year. Our report offers some thoughts and recommendations ahead of those legislative proposals. I extend my thanks to the specialist adviser to the inquiry, Antony Froggatt, whose comments and guidance on complex and rather technical matters were invaluable.

Our report called on the European Commission to ensure that the proposals for a future energy governance framework include legal clarity, a respect for member state sovereignty, a strong focus on security of supply, a commitment to the consumer, real ambition for decarbonisation, and increased regional co-operation. Indeed, we argue that the EU-wide binding 2030 renewables target will not be delivered unless it is backed up by a monitoring and enforcement mechanism which acts as a guarantor for the agreement and ensures that member states share the effort equitably.

The European Commission response was received on 3 March and was largely supportive. The UK Government’s response to the report was received on 29 February and was accompanied by a covering letter from Andrea Leadsom. It would be fair to say that the response has focused on current UK Government policy and the domestic measures which are already in place. In many cases the response simply avoids commenting on specific EU-level conclusions and recommendations. Overall, it lacks detail and comprehensive engagement with the arguments put forward by the report. I fear that this is due to current circumstances and that the Government are nervous about saying much at all because of the way things stand now. Nevertheless, I will make four points and I will be grateful if the Minister could reply to them at the end of the debate.

In paragraph C of the response, the Government avoid commenting on the report’s headline recommendation that the Commission should be able to propose new measures to guarantee existing EU-level commitments. The response contains a broad statement that agrees with the streamlining of reporting requirements. However, we argue that given the political importance of the EU-wide binding renewables target of 27% by 2030, it is noteworthy that there is no elucidation of the Government’s position. While we know that the Government are sceptical of the sort of enforcement measures proposed by the Commission, we would have hoped for some real engagement with the recommendation, even if only to disagree with it and to suggest what an alternative might look like.

In paragraph B the Government are silent on the committee’s recommendation that they should be transparent, timely and comprehensive in reporting their own progress against each of the dimensions of the energy union. Can the Minister say what the Government’s policy on this is?

In paragraph D the Government comment on bringing forward new renewable support schemes to bring forward additional offshore wind generation. However, they seem to have confused ongoing industry support with the more important need to maintain investor confidence through long-term and consistent policies. This point about investor confidence was a major theme in the committee’s 2013 report No Country is an Energy Island, and its conclusions are as valid now as they were then.

Finally, the Government’s comments on capacity markets are at odds with the view of the sub-committee in a number of areas. The sub-committee recommended that there should be a common framework at EU level to assess the need for and the means of achieving adequacy standards which secure availability of supply without escalating prices to consumers. The Government appear to disagree, arguing that this is a political decision that cannot take place until the internal energy market is completed. In fact, in the sub-committee’s view this is a technical task and would contribute to the completion of the internal market. The Commission agrees with the sub-committee that a common framework within the EU should be developed. Therefore are the Government really opposed to common adequacy standards? On measuring generation adequacy, the Government seem to agree with a common methodology at EU level but also seem to want national assessments. There seems to be an inconsistency here. Finally, on energy storage and demand-side measures the report argues that they should be given equal access to domestic capacity markets. The Government point out that these are already eligible to participate in the capacity market but do not comment on the inequality which we have highlighted.

I have one final point about the UK Government’s overall approach to regional co-operation. The previous report authored by the sub-committee on regional marine co-operation, The North Sea Under Pressure, concluded that no existing body or mechanism has a sufficiently broad remit to facilitate the political co-operation required to make the necessary step change in management of the North Sea basin, and we argued for the re-establishment of a North Sea Ministers’ conference. This recommendation was rejected by government on the grounds that such co-operation was taking place elsewhere. I fear that our calls have fallen on deaf ears. Last week the Vice-President for Energy Union and the Commissioner for Climate Action, with Ministers from Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway and Sweden, signed a political declaration and action plan on North Sea co-operation. The declaration will facilitate the building of missing electricity links and allow more trading of energy and further integration of energy markets. Reinforcing regional co-operation will help reduce greenhouse gas emissions and improve security of supply.

The UK was, sadly, absent. The announcement, like much these days, was reported on Twitter and there were lots of comments asking, “Where’s the union jack?”. I fear I know the answer to that but, even if the UK felt that in the current circumstances it was not able to be highly visible, I would like to think that we are engaged in this process. After all, if that well-known maritime nation Luxembourg thought that it was worth while attending and co-operating, it would seem very odd for the UK not to be there. The benefits of co-operating and the savings that come from it are enormous, so it really makes sense to do so.

Energy is crucial for all of us and the objective of secure, affordable and low-carbon energy can be aided by co-operation across borders. The EU has a really important role to play in bringing member states together, whether in a legislative framework or in a spirit of voluntary co-operation. The UK Government need to do more to demonstrate that they are serious about leading in this endeavour, whatever the outcome of 23 June.

--- Later in debate ---

[Baroness Scott of Needham Market]

My Lords, I am very grateful to all noble Lords who have taken part in the debate this evening and particularly to those who said nice things about me. I have reached that age where my gratitude is much greater than my modesty, so I thank them for their comments.

I also tried very hard in my introduction not to mention the R word but of course the referendum is the backdrop against which all these debates take place. I thought it was interesting that there was consensus, certainly among this evening’s speakers, on the challenges we face in producing a supply of energy that is environmentally sustainable, secure and affordable for everyone—and consensus that these objectives can be met only by co-operation of a number of kinds between countries. The challenge is about how we create a governance framework that delivers the strategic objectives while allowing it to reflect member states’ very different traditions and preferences for an energy mix. If the European Union can get this one right, it will also be a very useful template for other areas of endeavour where there are advantages in working together but we still want to maintain some freedoms and flexibilities.

I was particularly struck by the point on innovation and making sure that such a framework does not stifle innovation, because I think we are on the cusp of an energy revolution. We are not very far away from that and would not want to stifle that sort of innovation and change. With that, I again thank all noble Lords, particularly the Minister, and I beg to move.

Motion agreed.