Baroness Verma
Main Page: Baroness Verma (Conservative - Life peer)
Baroness Verma
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, I speak to the government amendments in this group, which I hope noble Lords will welcome. The amendments extend the decarbonisation provisions in Part 1 across the UK so that they cover the Northern Ireland electricity sector. The provisions currently extend only to Great Britain.
As set out in the other place, it has always been the Government’s ambition to extend this policy to Northern Ireland. However, since energy is a transferred matter with respect to Northern Ireland, it was appropriate that we first go through the formal process of seeking agreement from the Northern Ireland Executive. I am pleased to say that we now have this agreement and that they will bring forward a legislative consent Motion in due course.
I will briefly set out the effect of these government amendments and their benefits. Their primary effect is to extend the provisions in Part 1 to the whole of the UK. If and when the power is exercised, there will be a legal requirement on the Secretary of State to ensure that the carbon intensity of electricity generation in the UK as a whole is no greater than the upper end of the decarbonisation target range. This duty is intended to be met through the existing powers of the Secretary of State or through negotiation with Northern Ireland Ministers.
The provisions in Part 1 include a number of ways to ensure that there will be proper and full consideration of the impacts of any decarbonisation target range on the single electricity market, which is the wholesale electricity market operating in Northern Ireland and the Republic of Ireland. For example, Clause 2(2)(f) and (g), with our amendments, require the Secretary of State when setting or amending a target range to consider the impact of any target range on the Northern Ireland energy market and take into account the difference in circumstances between Northern Ireland and the rest of Great Britain.
Furthermore, Clause 4, with our amendments, will require the Secretary of State to consult Northern Ireland Ministers before setting or amending any target range, and if and when making further provision about the definition of grid carbon intensity under the power in Clause 4(4).
These amendments will mean that a decarbonisation target range could be set across the whole of the UK and, as a result, could help to provide greater investor certainty on the long-term trajectory of the electricity sector across the UK as a whole. This would complement our efforts in meeting our legally binding carbon budgets, which are also set for the whole of the UK, and provide further investor certainty as part of the contracts for difference framework which will apply in Northern Ireland.
Alongside other policy measures, this UK-wide decarbonisation target range could help us to meet our existing UK targets cost-effectively, and any targets set by the devolved Administrations, including Northern Ireland’s target of 40% of electricity consumption from renewable sources by 2020.
In brief, these amendments improve the Bill by ensuring that the provisions on decarbonisation extend to the whole of the UK in a manner consistent with the approach taken in the Climate Change Act. On this basis, I beg to move.
Lord Empey
My Lords, I welcome these amendments but want to ask the Minister about a couple of matters. I had responsibility for this area for three years. Long-standing availability contracts signed many years ago constrain the flexibility of the Northern Ireland energy sector. That is one of the issues. We have set ourselves very challenging targets for renewable sources but still need, and will continue to need, large amounts of availability from more traditional generating sources. We have also been encouraging the development of interconnection with the Irish Republic. Not only will that be a positive thing from the point of view of reliability and reinforcement of supply, it will mean that the Irish Republic will have a proportionately larger renewable sector than we are likely to have in the foreseeable future.
There is one technical point on which I would like the Minister to advise the Committee, or perhaps write to us about at some stage, which has arisen in other areas where we have national issues but powers are devolved. Assuming that there will be a legislative consent Motion—which I sincerely hope there will be—there is the issue of the Sewel convention and the Government’s response to that. In recent correspondence with the NIO on other issues, there seems to be a tremendous adherence to it. That effectively means that this Parliament does not wish to overrule or supersede a devolved Administration. It would apply equally to Scotland. We need to bear in mind how that particular issue will be dealt with if we sign up to international obligations, which we may very well do, as we have provisions in the Northern Ireland Act 1988 which mean that Northern Ireland must comply with the international obligations of the United Kingdom. However, if it is not covered by an international obligation, the Secretary of State here may set targets which he or she believes are appropriate for the UK as a whole.
Given that electricity supplies are provided through the private sector, and that there are availability contracts, I want to be assured that the Government will not allow themselves to be hampered by a very narrow implementation of the Sewel convention. We have to have flexibility. This is a hugely important area for our activities. Given that the electricity market in both Scotland and Northern Ireland is comparatively small, one can easily see why people ignore it. However, everybody has to do their bit and we all have to make a contribution. Perhaps the Minister could offer those assurances in her winding up or could write to us at a later stage. I believe that these amendments are positive and I fully support them.
Lord Whitty
My Lords, from these Benches, I, too, support the amendments and much of what the noble Lord, Lord Empey, has said. However, I have some serious queries. I have an amendment in this group—I will not press it because I think it is superseded by the Minister’s amendments—as it seemed to me that the requirement to consult Northern Ireland Ministers was not sufficiently reflected throughout the Bill.
I had better declare a past interest, in that last year I wrote a report on the Northern Ireland energy sector for the Consumer Council over there. It was a very good report and I recommend it to everyone—unfortunately the successor to the noble Lord, Lord Empey, did not entirely agree with it, but there we go. In the course of that, I saw that there were some very different features in the energy situation in Northern Ireland compared to over here. I therefore wonder whether the position is quite as simple as this amendment indicates. It is right that the decarbonisation target should apply to the UK—if the Northern Ireland Ministers and Executive are happy with it, Northern Ireland’s contribution to that can clearly be worked out. At present, as the noble Lord, Lord Empey, said, there is a very ambitious target for renewables in Northern Ireland—40% by 2020, which is far in advance of what we are likely to achieve in GB. On the other hand, there is still oil-fired generating capacity in Northern Ireland, at least partially, so it is a different situation. It is also a very different situation at the consumer end, which is presumably why the consumer regulations in here do not apply to Northern Ireland. Therefore, in relation to Part 1, I am fully in favour of adopting this amendment.
However, I am not entirely clear how the extent provisions in Clause 140, to which the Minister has referred, as regards particularly Part 2, and Part 3, will cover Northern Ireland. Because there is a different structure of electricity supply, it is difficult to see a clear read-across for the contracts for difference, or for that matter the investment contract provisions, with the situation in Northern Ireland. As the noble Lord, Lord Empey, and the Minister have said, there is a wholesale, all-Ireland electricity market for a start, which complicates issues. In relation to the capacity mechanism, it is also true that availability contracts are still outstanding and have been running for years in Northern Ireland and the Republic. In my judgment, consumers in Northern Ireland have probably paid too much for that capacity over the years and are continuing to do so.
It is difficult to see how the contracts for difference mechanism will apply there if we have an all-Ireland market and capacity which is differentially based in terms of existing capacity and ability to roll on existing capacity. Obviously, future new capacity would be available on an all-Ireland basis. Therefore, I find it difficult to understand quite how the mechanisms for contracts for difference would operate in Northern Ireland. I should be grateful if the Minister could get her officials, with the agreement of her Northern Ireland counterparts, to set out how she sees that working. For example, we are now talking about one counterparty but we have a different regulatory system in Ireland. I cannot really see how one counterparty can operate in the Northern Ireland context.
There are issues in relation to interconnection and contracts for difference can be for capacity which is not in GB. You could have wind farms in the Irish midlands or French nuclear power stations involved in the contracts for difference. But I do not think that that is what is meant in terms of using Part 2 to cover the Northern Ireland electricity market. I am not against trying to apply the same principles and I am very much in favour of the precise amendment which relates to the decarbonisation target. However, I feel that the totality of the position in Northern Ireland is much more complicated than simply writing in the Bill that Part 2 extends to Northern Ireland.
No doubt these things are still under discussion between London and Belfast. I suspect that quite a lot of details have to be sorted out and a number of legislative moves have to be made in the Assembly and here. But, given that this is early on in the debate and that we have the opportunity to register it, I register it now and will not repeat it as we go through the rest of the Bill. Perhaps the Minister and her officials could set this out clearly so that by the time we come to Report we understand the totality of the position.
Baroness Verma
My Lords, I am grateful for the noble Lord’s warm welcome of this amendment. I am very keen to make sure that we lay out clearly that this is work in progress. We are working very closely with the Northern Ireland Executive on these provisions to ensure that we cover the differences associated with their single electricity market and that we take account of that. We will continue to work with Ministers in Northern Ireland to ensure that those decisions applying to strike prices in Northern Ireland are on a coherent basis with what we are trying to deliver in the rest of Great Britain.
On the whole, the amendment in the name of the noble Lord, Lord Whitty, is very similar to mine and I am pleased to take on board that he broadly welcomes what we are trying to do. Of course, there will be intense discussions but, in putting these amendments forward, we have a wider picture to fulfil, which is to make sure that what we are doing is UK-based. On that note, I hope that the noble Lord will not move his amendment.
Baroness Verma
My Lords, I shall write to the noble Lord on that and make the letter available to Members of the Committee.
Lord Empey
My Lords, if the Minister is not in a position to address today my point on the Sewel convention, can she write to us on that and on any issues which it might create with regard to the Bill?
Baroness Verma
My Lords, energy policy is transferred in relation to Northern Ireland. Therefore, it is right that we should seek the agreement of the Northern Ireland Executive before making these amendments. We have sought their agreement in order to fulfil our obligations under the Sewel convention. I hope that that satisfies the noble Lord, Lord Empey.
Lord Empey
My Lords, I understand what the Minister says, but we have had a case recently where the National Crime Agency has been refused permission effectively to function in Northern Ireland. Ministers have said to me in correspondence that, because of the Sewel convention, they would not intervene. There is a fundamental contradiction in amending the territorial extent of a piece of legislation and then saying, “Well, if people aren’t prepared to do it, we’re not going to do anything about it”. Perhaps we could come back to this on Report, because there is a contradiction there which needs to be resolved.
Baroness Verma
My Lords, I am quite happy to take away the noble Lord’s concerns and, I hope, respond to him in writing.
Baroness Liddell of Coatdyke
Perhaps I may raise a tangential point that came to mind when my noble friend Lord Whitty was speaking about interconnectivity. There is a possibility of a large offshore wind farm being built in the Irish Sea. Would there be difference in the contracts related to where the energy was used; for example, whether it went to the Republic or Northern Ireland, then to be shipped to Great Britain, or operated in the other direction? I do not expect an answer just now—I have only just thought of the question—but I hope that when the Minister writes to Members of the Committee she might take a look at that issue.
Baroness Verma
Rather than give a brief response to that, I would prefer to give a more detailed one. On international eligibility, I refer noble Lords to the Government’s response of 27 June to the call for evidence on renewables trading. Final decisions will be made at the end of the year and will be set out in a public document.
Baroness Verma
My Lords, I echo the noble Baroness in saying that this has been an excellent debate and, given the strength of arguments on both sides, I really believe that with our reasonable and measured approach to the decarbonisation target range, the Government have got it right. I agree that a decarbonisation target range, set at the right time, could provide further certainty for developing low-carbon energy. That is why, having heard many strong views on the matter, the Government brought these new clauses forward in the other place, which now form Part 1 of the Bill. This will enable us to be the first country in the world to set a clean energy target.
Having said that—and as a number of noble Lords have highlighted and illustrated with great skill—changing the Bill as proposed by these amendments would not be the best way of achieving what I believe are shared goals. I shall expand on this and hope to respond to some of the issues that have been raised today. The issue of when we set a target comes down to what will provide the greatest certainty for investors. The noble Lord, Lord Browne of Madingley, made the point at Second Reading that in his experience as a businessman and an investor:
“The incentive structures contained in the Bill are far more important than targets or aspirations, because they are the mechanism for action”.—[Official Report, 18/6/13; col. 192.]
My noble friend Lord Howell raised that point clearly.
We have recognised that investors need more details. That is why last week we set out additional details about our reforms. We have published some information about contract terms, which go to costs and thus value. We also published strike prices for renewable technologies to encourage investment in wind, tidal wave, biomass and large solar projects. We also confirmed the trajectory of funding for tripling support for low-carbon electricity up to 2020.
Those recent announcements have been welcomed by industry. For example, the CBI’s chief policy director said:
“The energy plans are a big step forward and should unlock the private investment we need to keep the lights on and costs down. The renewables strike price and capacity mechanism will enable investors to take their plans off the drawing board and on to building sites.”
Some of the arguments I have heard about not giving investors certainty are covered by this point: industry itself says that it recognises that it is now being given certainty. Looking beyond 2020, there are already legal targets in place that clarify the future of electricity in this country. There is the 2050 target, which is likely to require electricity to be virtually decarbonised, and there is the fourth carbon budget, which runs up to 2027 and requires the UK to halve emissions in the whole economy.
Baroness Verma
In order to make progress, if the noble Baroness has a question, perhaps I could take it after I finish. To provide further clarity out to 2030, the Government have committed to issuing guidance to National Grid on an indicative range of decarbonisation scenarios for the power sector to 2030, consistent with the least-cost pathway to 2050. Just last month the Government set out an ambitious position for 2030 at a European level, to urge Europe to set a binding emissions reductions target of 50% by 2030 as part of the ambitious global deal—and 40% even if we move unilaterally. Finally on this point, Amendment 4 has an unintended consequence, in that it would prevent targets being set for years beyond 2030.
This brings me to my second point: whether the Bill should provide a power or a duty to set a decarbonisation target range. Of course there is an attraction in saying in the Bill that the Secretary of State must set a target by a certain date, as both the noble Lord, Lord Oxburgh, and my noble friend Lord Stephen propose. However, my honourable friend, the Member for Wealden, Charles Hendry, pointed out in an article on this issue that it does nothing for any Government’s credibility to set out a target before they are in a position to say how they will achieve it. He stated:
“The challenge with a decarbonisation target set now for 2030 is that we cannot yet know how it can be met—or indeed, if it can be met”.
That is the argument that a number of noble Lords have raised today.
Baroness Worthington
My Lords, I would like to ask the Minister about her assertion that there are targets post-2020, citing the fourth carbon budget as one of them. I will just reiterate the point that those budgets are about emissions and take into account flows of emissions using trading. It is not true that they give any certainty at all about what will happen in the UK. What happens in the UK is governed by UK policies, which include the RO and other support mechanisms. After 2020, there is no visibility as to what will happen next. In moving towards the CFDs, we are creating a whole host of uncertainties, whereas under the RO there is a great deal of certainty. I would hope that she could concede that budgets are a completely different issue to the domestic policies that we are talking about today.
Baroness Verma
Of course, the point is that we have to make sure that this happens against the backdrop of what else is going on in the economy. We cannot set targets solely on one part of the economy. That is why we have been very clear that the investment in climate that we have made to 2020 through the levy control framework has already given certainty. We are putting £7.6 billion into low-carbon renewable energies to introduce that certainty to investors. We have already said that National Grid will be given an indicative range of decarbonisation scenarios for the power sector for 2030 consistent with the least-cost approach to the UK’s 2050 carbon budget. The fourth carbon budget will run up to 2027 and requires the UK to halve total emissions in the whole economy. We have set out in the carbon plan the likely implications for the electricity sector.
Lord Oxburgh
My Lords, I thank all those who have taken the time to give us a very interesting and rewarding debate this afternoon. I cannot possibly reply to all the comments that have been made and will refrain from discussing climate change, even though I would like to do so with certain noble Lords—perhaps we will do that in private.
Quite a number of noble Lords have made Second Reading points this afternoon rather than points which relate to this particular amendment. Be that as it may, it is worth commenting on shale gas, which has come up several times. It is worth pointing out that shale gas is about the most expensive gas to exploit that we know about on the face of the earth. You have to use a whole range of technologies which are mostly at the top of, or almost beyond, the range of conventional gas exploitation. The noble Lord, Lord Lawson, is absolutely right when he says—or implies—that gas is the least transportable of the fossil fuels. If you get your shale gas from abroad, you pay a premium of something close to $2 or $3. The real advantage of shale gas is to those who have it themselves and can put it straight into their national grid. If, in due course, we can do that, that will certainly be a help to the national economy. However, I do not see anything in this Bill that actually inhibits the future use of shale gas.
Baroness Verma
Baroness Worthington
My Lords, I do not wish to prolong this debate greatly although I am grateful to have this opportunity to speak to this amendment, which raises a different issue from the one we have just debated.
Almost in anticipation that the Government would use the setting of the carbon budgets as a reason not to agree to setting a decarbonisation target, I tabled this amendment to probe the logic of that. I have tried to explain, possibly in vain sadly, that carbon budgets and carbon intensity are not one and the same and should not be linked. However, I feared that I might not succeed in making that point, so tabled this amendment simply to show that the carbon intensity of electricity is a very clear indicator of progress in the implementation of the Bill. Carbon intensity is a value that is currently recorded and reported but, sadly, over the past decade has not fallen. It fell dramatically between 1990 and 2000 when we invested in CCGT gas plants which were more efficient and cleaner. The carbon intensity of power fell from around 950 to around 450 to 500. That was achieved in a decade.
Since then, I am sad to say that both the previous Government and this Government have utterly failed to deliver anything comparable and carbon intensities have been bouncing around pretty much at will, reflecting the global prices of the commodities involved—gas and coal. Last year, we saw almost a record high of 530 grams per kilowatt hour in the UK in 2012. This is just wasteful carbon emissions, I am afraid to say. Had we got a grip and introduced a proper energy policy that took into account the carbon intensity and managed it down, we would not have seen the high carbon burn that we saw last year, which is displacing gas.
Members of the Committee who are fans of gas ought to note that we have a common enemy in coal, particularly coal treated in old stations built 30 or 40 years ago, some of which are now fitted with filtration equipment that knocks their efficiency down even further. There is probably no worse way of generating electricity in terms of carbon emissions, yet there they were base loading all the way through last year, pushing up the carbon intensity to record levels. As I have mentioned previously, that can be addressed. The merit order of existing plants, if it operates optimally, could take 200 grams off overnight without the need to sign any long, expensive and hard to negotiate contracts—if we simply introduce the right policy framework.
The amendment would require budgets to start to be set in 2020, when it would be possible to get emissions to around 200 grams per kilowatt hour with very little in the way of any extra investment. Simply using the investment that is already in the supply chain to meet our 2020 renewables targets, coupled with a change in the merit order, would take us there. Beyond that, we can look at a target in 2025 of around 150 grams per kilowatt hour. Again, there is no great need to invest in lots of new capacity to achieve that. It simply means continuing to invest in renewables on roughly the same scale as we are doing now, seeing the CCS demonstration projects get under way on gas and coal and seeing the biomass conversions. Essentially, this is not a hard trajectory. The point of putting down this amendment is to explain that the pathway from where we are today, with ridiculously high carbon intensity, to where we need to get to in 2030 to reach our legally binding targets cost-efficiently is not difficult. If you want to see the road map or the plan of how to get there, you need only refer to the CCC’s reports on the subject, which contain a huge amount of detail outlining this and explaining how existing kit and existing plant can be used to reach very much lower levels than we have today.
I also mentioned in my previous speech that we already have a carbon floor price. The Government should accept that targets need to be set that justify that policy. It is an incredibly distorting policy, with no environmental benefits. As I have said before, reductions that occur underneath the cap set in Europe are simply traded away. So it is not about carbon. It is meant to be about securing investment in UK plc. If that investment is not forthcoming—if, for whatever reason, the policies in this Energy Bill do not deliver—the public and Parliament have a right to be able to measure that. This is a significant piece of legislation, taking wide-ranging powers. It is matched in its size and significance by the existing carbon floor price. It is only right that we take it upon ourselves to deliver an outcome for these policies. That outcome must be a steady decline in carbon intensity.
Obviously, I would not recommend the setting of a series of targets starting in 2020 and going five years beyond that if I was not confident that we had the policies to deliver on that. If they work, CFDs are the mechanism which the Government hope will be used to achieve this. If the Government have confidence in their Bill and the measures contained in it, they ought to have the confidence to set these targets. Many people have made the point that flexibility is necessary, as we cannot predict the future and should not be technologically specific in our aspirations. I completely agree. I have said before, and will say again, that the market should decide how best to meet these targets. It will do it with much more efficiency than even the best minds in the Treasury can achieve.
I will stop there because I do not want to prolong this debate too much and I am grateful for being able to raise this separate issue. When we go through the Bill, I will speak to amendments concerning the energy performance standard because that is the mechanism within this Bill that could certainly deliver on these decarbonisation targets. Taken as a whole, these targets are actually very sensible: carbon budgets already exist and, knowing that, the Government can set them happily. There is nothing to stop the Government and it is something that should accompany this Bill. Consumers and wider society deserve some accountability for all these powers that we are giving to the Secretary of State.
Baroness Verma
My Lords, Amendment 8 raises questions about when a decarbonisation target range should be set. The noble Baroness has already said that the merit order in which generation is dispatched is a commercial decision, so the Government really should not interfere with that.
However, we are supporting decarbonisation, as the noble Baroness is aware, by making low carbon more attractive with the EMR provisions. When we come to the EMR part of the Bill, this issue will have a much fuller airing. Rather than fettering any future Government, this Government have taken the most important step of putting in place the legislative framework to allow a binding target range to be set in 2016. As I said earlier, it has to be set against a backdrop of a number of things and not taken in isolation. There are two issues that we must address: first, whether the Secretary of State should set future targets after the first target range is set; and, secondly, whether he should set a target range for a date earlier than 2030.
On the first of these issues, I agree with the noble Baroness that there is merit in the Secretary of State having the ability to set targets for years beyond the setting of the first target. After all, we are guided in this debate by the framework provided by the Climate Change Act, which looks out to 2050 and not 2030. I am pleased to say that the Bill already permits future target ranges to be set beyond 2030. On the second issue, I do not think that we should set a target as early as 2020 because we already have a suite of targets and measures that give very clear signals about the pace and trajectory of the power sector up to 2020. A further target at this stage would probably be very unhelpful and not very useful.
In addition, neither the Committee on Climate Change nor industry leaders have been calling for a decarbonisation target earlier than 2030. Their support is for a target that clarifies the long-term trajectory of the electricity sector. I think the noble Baroness accepts that that is a far better forward-looking view than shortening the timescale and adding uncertainty to industry by adding further targets to which it would have to adjust. Industry already has certainty until 2020. The issue about what more is needed, and when, beyond that date was aired fully in the previous debate.
This view was echoed at Second Reading by a number of noble Lords who argued that a decarbonisation target would be a way to provide certainty to investors. I think that I made the point clearly in the previous debate that we need to be able to set it with the fifth carbon budget and while looking at a whole range of other scenarios and mechanisms rather than setting it in isolation. We also need to look at what other countries are doing so that we do not put ourselves at a disadvantage competitively, ensuring that we are among the world leaders in the competitive race. I think it would start hampering industry if we keep adding targets to those it is already meeting. The noble Baroness’s colleague, the noble Lord, Lord Whitty, said:
“Most of the investment decisions that will be contemplated in the next two or three years will relate to a period beyond the current target of 2020”.—[Official Report, 18/6/13; col. 232.]
That provides a brief explanation of the Government’s view that the framework in the Bill is the right one and that it would be inappropriate either to set a target range for as early as 2020 or to set the range for 2030 before the setting of the fifth carbon budget in 2016. On that basis, I hope that the noble Baroness will withdraw her amendment.
Baroness Worthington
My Lords, I thank the noble Baroness for her response. I have to point out that at the moment we have a policy introduced by a Treasury, which is trying to achieve exactly what she said that the Government should not do; namely, to affect the merit order. She said that the merit order is subject to the market and that therefore we cannot do anything about it. Why then have the Government introduced a carbon floor price, if not to influence that merit order? That is exactly what it is designed to do and trying to encourage. Generators will internalise the price of carbon and therefore run their cleanest plant first. Let us be honest, the cheapest way in which we can hit our carbon targets is simply by supply companies switching to a cleaner station rather than a dirtier one. That is the lowest hanging fruit possible, which is why the carbon floor price has been introduced.
I do not think that the carbon floor price is a very good policy. It is not bankable. I know no one who is able to invest on the back of it. In fact, I have heard from suppliers that they are now no longer able to get PPAs for their thermal plant more than two years in advance because of the uncertainty of the carbon floor price. It is a suboptimal policy and it does make me wonder whether the Treasury is happy to throw its fine logic about not going further than Europe and always keeping with the pack out of the window the minute that the revenue starts to flow in. That is clearly what that mechanism is designed for.
It is scandalous that the Chancellor thought that it was insufficiently interesting even to mention it in his Budget, yet it will be raising billions—I repeat, billions—in revenue in the coming years. It has started already. There is a total illogicality here in the Government’s position. On the one hand, we are happy to introduce carbon floor prices and are trying to interfere with the merit order but, on the other hand, we are not prepared to give the consumer—the citizen—the reassurance that this is being done with the purpose of reducing the carbon intensity. That is the simplest, cheapest and most cost-effective way of reducing our carbon and meeting our targets.
I take the point about the 2020 target being quite soon. I put it at 2020 simply to point out that there is this 200 grams of carbon intensity that can be got at overnight. The Government should be spending every effort to try to make sure that that is achieved. I am afraid that the carbon floor price does not achieve that. It simply is not bankable and people do not feel confident to invest on the back of it.
I think that the 2025 target is necessary, partly because the fourth carbon budget which parallels it is subject to a complete lack of clarity. The Secretary of State’s report on setting the fourth carbon budget states quite clearly that the Government intend to make full use of flexibility and that if Europe does not change its targets in the ETS, we will revise that budget upwards. Where is the certainty there? There is none. A decarbonisation target would absolutely provide that certainty for 2025. We would then be in a much stronger position to meet our 2030 targets.
I will, of course, withdraw the amendment but I wonder whether the Minister would indulge me and perhaps ask her officials to consider a 2025 target and the advantages that might deliver. On that basis, I am happy to withdraw the amendment.
Lord Oxburgh
My Lords, I will not take up much time. The noble Lord, Lord Deben, may be right that this level of reporting may be a little excessive at this stage. However, it is important that the Government should recognise, if they take seriously the 2050 decarbonisation target, that it is almost certainly unachievable without CCS. That is a crucial technology if the target is to be achieved.
Baroness Verma
My Lords, on Amendment 12, Clause 1(8) gives the Government the power to repeal the reporting requirements in Section 5 of the Energy Act 2010 only if and when the power to set a target range is exercised. If the power is exercised, Section 5 in its entirety could be repealed. Section 5(1)(b) of the 2010 Act requires the Secretary of State to report on the development and use of carbon capture and storage technology. If it was decided to repeal Section 5, we would expect any progress on carbon capture and storage to be included in the annual statement on the decarbonisation of the electricity sector as a whole. This would occur under the requirements of Clause 3.
The power to repeal Section 5 of the 2010 Act has intentionally been framed as a power. It reflects the need to leave open any decision in this respect, as we will be better placed to take the view at the time of making a decarbonisation order because of the greater level of information that will be available. For example, we could expect good progress to be made between now and the making the first decarbonisation order, which will further develop our understanding of carbon capture and storage, and of its future prospects for deployment. If in due course there are reasons to believe that retaining the duty in Section 5(1)(b) of the 2010 Act is appropriate, of course those reasons will be borne in mind when we consider whether to exercise the power to repeal Section 5.
Amendment 25 proposes that the reporting of grid carbon intensity should commence following enactment. The Government’s view is that it is logical for the annual reporting of grid carbon intensity to be triggered by the setting of a decarbonisation target range. Until such point as this is set in a decarbonisation order, the three-yearly reporting requirement under Section 5 of the Energy Act 2010 will remain, meaning that the Government will continue to report on grid intensity, even ahead of a decarbonisation target range being set.
The noble Lord touched on consumers getting real-time information on energy usage. He will, of course, be aware that the Government are working on the smart meter mass rollout, which will be completed by 2020. Consumers will have an opportunity to have real-time information on their energy consumption, helping them to control energy use, save money and reduce emissions.
Baroness Verma
The Earl of Caithness
May I check with my noble friend that the inclusion of the words “the Department of Enterprise, Trade and Investment” is solely because of the connection with Northern Ireland? It looks a little odd to have two devolved Ministers of Scotland and Wales and a government department.
Baroness Verma
My noble friend has raised the point about Northern Ireland. The relevant department in Northern Ireland responsible for energy policy is the Department of Enterprise, Trade and Investment. I cannot read the rest of that note, I am afraid.
Baroness Verma
My Lords, I agree that fuel poverty is a real and serious problem faced by many households today. It is one that this Government are determined to address. The intention of Amendments 15 and 23 is to require the Government to consider the impact on the fuel poor of setting a decarbonisation target and provide for mitigating action to offset any consequential impact. We have already taken significant action and I disagree with the noble Lord, Lord Whitty, when he says that ECO is not working. It is early days. ECO works alongside the Green Deal and ensures that help goes to low-income and vulnerable households to enable them to heat their homes more affordably. Energy efficiency measures have already helped 75,000 households this year. It is a long-term programme and, as with all programmes that are implemented over a long period of time, the results are going to be a lot slower than perhaps one anticipates. However, that is because there are a number of processes that people have to go through.
As part of the spending round, last week’s government spending review announced an increased budget of £320 million for the warm home discount in 2015-16, which I hope makes clear our commitment to continuing action to tackle fuel poverty. The warm home discount reaches 2 million households a year, including more than 1 million of the poorest pensioners. It offers direct support when and where it is needed the most. So we are already taking considerable action.
Fuel poverty is already covered, in part, by Clause 2(2)(e), which requires the likely impact on fuel poverty to be taken into account. However, I am sympathetic to the concern expressed by my noble friend Lady Maddock and the noble Baroness, Lady Liddell, that we must not lose sight of the impact on the fuel poor as we seek to ensure we have a safe, secure, low-carbon future. There are issues with the suggested amendments as drafted which mean I cannot accept them. However, I undertake to consider this issue further and hope, on that basis, that my noble friend Lady Maddock will agree to withdraw her amendment and that the noble Baroness, Lady Liddell, will not press hers when the time comes.
Baroness Maddock
My Lords, I thank the Minister for her reply and thank all noble Lords who joined in this short debate. I tried to keep my remarks fairly brief to begin with because I was conscious of the time but was very grateful that noble Lords who joined in all brought in really important points to make the case that I was trying to make. I am also grateful to the noble Baroness for indicating that, as we go through the Bill, we may be able to have something a little more definite.
What really concerned me was that we have all sorts of legislation around the area of energy and energy efficiency and I wanted to make sure that we are joining things up. That is why I mentioned the Warm Homes and Energy Conservation Act. The Government have obligations under that to do certain things, and those obligations will be affected by what is in this Bill. We need to be quite clear on how we are going to deal with it. As I and other noble Lords have indicated, some of the schemes that brought quite a bit of help to those with homes that were not energy efficient have changed.
In the light of where we are going in the future and in the light of this Bill, we need to be conscious of joined-up government, with particular regard to vulnerable people. In this case, of course, I am concerned with those who are vulnerable—one Member said they were not comfortable with the expression “fuel poverty”—in the sense that they cannot afford to keep their homes warm. As I said at Second Reading, it is something I have campaigned on for 40 years, and I am always disappointed. The NEA, the charity that champions the cause of the fuel poor, hoped when it was set up that it would not still be going 25 years later and that we could have done something about it. I hope that, at least in this legislation, we can recognise that we have not done too well and that we have to have regard to it. I look forward to what the Minister may come forward with at a later stage but, in the mean time, beg leave to withdraw the amendment.
Baroness Verma
Baroness Verma
My Lords, the concern behind Amendment 18, proposed by the noble Viscount, Lord Ridley, and the noble Lord, Lord Turnbull, is a familiar one: that, if we move too fast and too aggressively in reducing UK emissions, we will leave ourselves open to competitive distortions in the market or drive carbon-intensive industries offshore.
It is a valid concern to which the Government have given great thought. It was in response to it that we announced that £250 million would be made available to help energy-intensive industries to manage the cost of complying with emission-reduction legislation and to avoid competitive distortion.
Amendment 18 is concerned with the provisions in the Bill relating to a decarbonisation target range. I reassure noble Lords that it is the Government’s clear view that, while it is vital that we meet our legally binding goals on reducing emissions, we should do so at least cost to the economy, the taxpayer and the energy bills of households and businesses. We will continue to provide clear and public analysis of this in all our considerations of the pathway towards 2050.
Amendment 19 draws our attention to the need to ensure that we really are getting the emissions reductions that we expect from the deployment of low-carbon electricity generation technologies. The emissions associated with generating electricity are a function not only of what type of technology is being used but of how efficiently that technology is operating, the load factor at which it operates and other factors. That is precisely why the Bill is drafted as it is. Rather than being predicated on the emissions of a particular technology at a particular point in time, the Bill defines the decarbonisation target range in terms of carbon intensity of the sector as a whole, as defined in Clause 4(1).
I hope this will reassure noble Lords that it is not necessary to require additional research on the emissions of specific technologies. The Bill already requires the Secretary of State to consider the actual emissions intensity of the power sector as a whole. This requirement applies both when setting the target and in determining progress towards it.
I turn to Amendment 21 in the name of my noble friend Lord Flight. I recognise his concern to ensure that we make the best use of sustainable bioenergy as a resource. The Government share this ambition and bioenergy certainly has a vital role in achieving our legally binding targets on both renewable energy and greenhouse gas emissions. Getting the balance of support for bioenergy under different mechanisms is important and my noble friend is correct that at present the level of support in the heat and power sectors is relatively higher than with regard to transport. This recognises that the barriers and costs to deployment are different across the economy. We need to maximise renewable energy in all sectors in order to meet our legally binding target of sourcing 15% of our energy from renewables by 2020. We will continue to work across government in implementing the renewable energy directive to consider the best deployment of renewables.
Amendment 19 would require the Secretary of State to lay a report before Parliament on all factors listed in Clause 2(2) prior to making a decarbonisation order. It is certainly right that the Secretary of State’s reasoning and the Government’s approach to decarbonising electricity in the UK should be transparent. However, I hope I can persuade my noble friend that there is already sufficient transparency in the Bill. Due to time, I do not want to list all the measures laid out in the Bill but if noble Lords require a list, I am happy to make that available in the Library or in a letter.
All that is included in the Bill with a view to ensuring that there is ample opportunity for public transparency and parliamentary scrutiny before and after a target range is set. On that basis, I hope noble Lords can agree that the Bill offers sufficient opportunity for scrutiny and will not press their amendments.