Energy Bill

Baroness Worthington Excerpts

Tuesday 18th June 2013 Lords Chamber

[Baroness Worthington]

My Lords, I thank the Minister for addressing us today and for introducing the Second Reading of the Energy Bill. I have been working in climate and energy policy for well over a decade—at UK and EU level. Energy is a fascinating subject. Much like the Mandelbrot set, its many layers of complexity seem completely endless. I keep uncovering whole new areas of mind-bending detail to get my head around, most recently in relation to nuclear fusion after an engrossing visit to Culham in Oxfordshire.

I have studied energy policy in a number of different roles: for an environmental NGO, for a power company, and as a civil servant. Over the years, I have come to the firm conclusion that energy policy is an area where we need the creativity and drive of markets governed by careful and well-designed regulation to guide market forces. What we do not want is for energy to become a political football, confusing and destabilising the market. We also do not want civil servants trying to second-guess what an economically optimised energy system should look like. Sadly, we begin this discussion of the Energy Bill with exactly those two sets of circumstances dominating—policy is becoming highly politicised and civil servants are set to start micromanaging almost every aspect.

There is a public spat going on between two different factions of the coalition Government, between those who believe that climate change is either not real, or that tackling it is too expensive to be bothered about, and those who believe that the vast majority of scientists are correct and that we have a moral duty to do something urgently to address the problem in ways that boost rather than damage the economy. The schism is so apparent that our new part-time Energy Minister, Michael Fallon, in an interview with The House magazine, refused to answer a simple question about his views on climate change, dismissing it as “theology”. There is a moral aspect to climate change and we will hear today from two eminent theologians. However, I have met many climate scientists, most recently the noted Oxford academic Myles Allen. Theirs is not a profession of faith or belief, but the careful study of facts and evidence and the articulation of future scenarios that accord with those facts.

Here are a few of them. The concentrations of carbon in the atmosphere, at around 400 parts per million, are higher than at any other time over the past 3 million years. Already our world has warmed on average by 0.8 degrees since the 1900s. A global average of this much equates to far higher levels of warming at the poles. The impacts of these levels, on, for example, the melting of the arctic sea ice, match the most pessimistic forecasts. They are happening at the fastest rate that has been predicted. Land-based temperature recordings, which some may cite today as evidence that we do not need to act, have levelled off for the best part of the past decade. However, ocean temperatures have not. The ocean is likely to dump part of its increased heat out on to land during the next large El Nino effect, which has occurred roughly once every decade and which could happen again at any time. Then land-based temperatures will once again rise. It would be reckless and arrogant for this Government—or indeed this Parliament—to ignore the scientific evidence and to try to change direction in terms of what is one of the over-ridingly important goals of energy policy today.

This is not a Bill solely about climate change; it is a Bill about our energy future. It is about how we maintain our energy security, now that North Sea oil and gas, just four decades after their discovery, are now rapidly declining. It is about the role nuclear power can play in the future and how confidence in the industry can be restored today. It should also be, first and foremost, about consumers and helping to ensure that they are protected through regulation that maximises competition and transparency in the market.

In addressing the trilemma of energy policy—how to keep the lights on without destroying our environment but making sure we can afford it—the Government could do one of two things. They could set clearly defined outcomes that the market must deliver or attempt to renationalise energy policy with almost every aspect dictated by government. Strange though it may sound coming from a Labour Front Bench, I strongly believe that it is the former we must do and that this Government are about to do the latter.

The Bill as it stands is a curious mixture of excessively wide enabling powers that enable the Secretary of State to do virtually anything he or she wants with anyone, at any price; or, if he or she so chooses, to do absolutely nothing. If this were not political enough, there are now some extra provisions to allow for even more finely grained politicisation. Targets can be set for particular technologies and for particular geographic locations. If you do not like wind farms, you can either ensure that the negotiations on the contracts are so protracted that they never get signed or, it seems, and to be on the safe side, set targets determining where they will or will not be accepted.

In terms of restrictive detail, when the powers to be taken are not enabling, they are disabling. The Secretary of State must not set a decarbonisation target until at least 2016, while the energy performance standard levels are fixed until at least 2044. The mix of sweeping generalisations with occasional restrictive detail results in an inelegant and potentially dangerous Bill, for which it is impossible to predict all the consequences, intended and unintended.

As the Government cannot agree on the overall purpose of this Bill, they have been incapable of presenting clear and concise legislation that can guide the market. They propose instead to take the reins of almost every aspect of investment decisions in the coming years. My great fear is that those seeking to take control are not up to the task. I imagine that the department is now realising, as I have, that the energy market is so complex that a single Secretary of State, overseeing a small department with a small number of civil servants, who are necessarily divorced from the real world, cannot and should not be deciding who builds what, when and on what terms—even if they enjoy the oversight of the great minds of the Treasury. The question I am sure that your Lordships are all formulating is: if this is the case, what would Labour do differently?

First, we would be unequivocal about the fact that, in keeping with the advice of the Committee on Climate Change, we would seek to decarbonise the electricity generation sector within the next two decades. We would set clear targets to achieve that outcome—targets that we know have the support of industry and civil society. Such targets need not dictate precisely how this outcome is achieved but give the market confidence that this is the path we are on and that we intend to stick to it. Secondly, to keep prices affordable, we would legislate to require greater liquidity and competition in electricity generation and create a new energy regulator with real teeth. Thirdly, to keep the lights on, we would focus on providing incentives to encourage more active participation in the management of demand, reducing peak demand and helping to soak up excess electricity in times of high supply. If necessary, we would also take powers to enable interventions that support National Grid in managing supply and demand.

That is what we would have done; it is not what the Government are doing. This is primarily because the impetus for this Bill was not to solve the energy trilemma. It was to provide EDF Energy with what it believed it needed in order to build Hinkley Point power station. Having decided on that outcome, the department has now had to concoct ever more complex layers of interventions to try to square the reality of the privatised market and state aid rules. A new reactor at Hinkley, if it can be delivered at reasonable cost, is a good idea. I am not disputing that. I am, however, deeply concerned about the contortions and complexities we are now having to add to an already complicated market in order to lure one company into building one project—a project that will not be ready until the middle of the next decade and that cannot help to address any security of supply concerns in the interim.

In an ideal world we would not be starting from here, but here we are and we must make the best of it. During the Commons stages we raised other important issues that we will continue to press in this House, such as the need to ensure adequate competition in the generation market so that independent generators can gain access. I was encouraged to hear the words of the noble Baroness today in that respect. We need to encourage community ownership of energy projects, which I am again very grateful for having received mention today. We also need much clearer regulation of existing fossil fuel stations, giving clarity about their closure schedule to spur investment in carbon capture and storage.

The irony is that this Energy Bill has helped to exacerbate the investment hiatus that the Government have created and that they should have been seeking to address. If, in the future, the Government will be paying everyone to build or operate plant then no company can risk moving ahead with plans until the details of these payments are clear. As a result, investment in our energy infrastructure has plummeted under this Government. This cannot be allowed to continue and Royal Assent must be achieved by the end of this year.

Let us aspire to signing into law something that creates stability in the market, so that we can stop the almost yearly cycle of energy Bills appearing before us and investors can get on with the job of addressing the challenges now inherent in providing us with energy. As we come to consider this Bill in Committee, some of the much sought-after detail should emerge from the department and we will be in a much better place to try to assess the impact of its many provisions in totality. The draft delivery plan, for instance, which is due to be published in mid-July, will include more details of strike prices for renewables, though regrettably not for nuclear or CCS, and much needed information about the Treasury’s levy control framework which will interact with provisions in the Bill in a very important way. It may sound like a lot of money but unless anyone wants to invest it will merely be a promissory note that actually may restrict investment in certain sectors and technologies.

I hope the Minister will agree that the more detail we have in front of us the better placed we will be to provide proper input. Can she give us an assurance that the department will release further information in good time so that it will inform our discussions? I am hopeful that we might be able to agree to consider relevant clauses in the Bill at the end of Committee stage rather than at the beginning. This will enable us to consider those clauses with the information in the draft delivery plan in front of us. This puts a lot of emphasis on to the department issuing its information before the Commons rises on 18 July. I hope that that will be in the public domain before 18 July.

There are things we do not like in the Bill, things we would have done differently, and things we would like to have seen given a higher priority; but we are not opposed to the broad objectives. Although lots of the detail is still missing, we are committed to restarting and increasing investment in low-carbon generation and, on those grounds, we do not seek to oppose the Bill.

We will have an excellent debate today. I am greatly looking forward to the contributions of noble Lords from whom we will have the pleasure of hearing. The number of speakers and the breadth and depth of their knowledge and experience is testament to the central importance of this issue. I am honoured to be a Member of this House and to be leading for the Opposition as we embark on the process of doing what we do best—scrutinising legislation in an environment at one remove from the cut and thrust of daily politics. In this House, we are able to take a long view and to take the necessary time to prevent poorly thought-through plans being pushed through and that is what we will do. We will seek to work constructively to improve the Bill. I very much look forward to the weeks and months ahead as we turn our attentions to this most important of subjects.