Baroness Worthington
Main Page: Baroness Worthington (Crossbench - Life peer)Energy Bill
Baroness Worthington Excerpts
Baroness Worthington
“(c) further actions the Secretary of State will take to reduce carbon intensity if it has increased since the last statement.”
Baroness Worthington
My Lords, first, I should like to thank the Minister for her very timely and quick turn-around of the letter that we have just received. It was incredibly helpful and I hope we can carry on in that spirit; it was very much appreciated.
Amendment 27 creates an additional duty in respect of the statement on the carbon intensity of electricity generation that is required under Clause 3(3). Currently, the Bill requires that an annual statement must be made once an order has been made and that that should include a summary of the means by which the carbon intensity was calculated for that year and a declaration of whether the carbon intensity has decreased or increased since the previous statement. Amendment 27 adds an additional requirement to the statement, requiring that it contains details of the actions the Secretary of State will take if intensity has increased since the previous statement.
As I have previously mentioned, carbon intensity of electricity fell dramatically in the 1990s but has since levelled off and in 2012 sharply increased. This was due to a change in the merit order thanks to high gas prices and low coal prices. On Tuesday in Committee, I stated that coal was a common enemy. What I meant to say was that inefficient, unabated coal stations are the common enemy. I apologise for not being clearer about that. Of course, coal can play a significant role in a low-carbon electricity system if it is coupled with carbon capture and storage, which is a very important technology. However, the longer these old unabated stations stay on the system, the longer we will have to wait for investment in low-carbon alternatives, since they are very profitable and can crowd out new entrants to the market.
The Bill must seek to create a legal framework for electricity market reform that provides clarity of purpose and accountability. The Bill contains significant and wide-ranging powers, but there is currently insufficient accountability. Given the implications of the measures in the Bill, it is only right that the Government should be held to account over its performance against its stated objectives. One objective is clearly to increase investment in low-carbon infrastructure and a clear measurement of success is the carbon intensity of our electricity. The requirement to deliver an annual report under Clause 3 is therefore extremely welcome. However, it does not go far enough. If progress is not being made, a statement ought to be made about what will be done to address the reasons for lack of progress.
Of course, increases in carbon intensity in any one year can come about for a number of reasons—the relative price of fuels and the carbon price are important elements that the Government are seeking to correct using the carbon floor price policy. However, there are other reasons why intensity may rise in a given year, such as weather fluctuations, which may lead to an increased demand for electricity, or low hydropower output. They may also be unplanned outages in our nuclear fleet. There are therefore circumstances outside the control of policy and government, which can affect intensity. In these circumstances, any requirement to report on actions to be taken should not commit the Secretary of State to having to act, but there should remain the option to state the reasons for the increase and then to make a case for not taking action. I want to be clear that we do not wish to ask for the impossible, but we do seek slightly more accountability.
If intensity is increasing because of policy failure—for example, if the carbon price is failing to dissuade coal burn or the number of CFDs being signed is too low to deliver sufficient investments in the infrastructure—it is right that the Secretary of State should be required to report this and to detail actions he or she intends to take to correct these failings. Another potential issue is that the UK could seek to delay the closure of coal plants planned as a result of the introduction of tighter clean air regulations. I hope that the Government will not seek a derogation of this kind, because it would have serious implications for the carbon intensity of electricity, and corrective action would then need to be taken to compensate.
The intent behind this amendment is similar to that behind Amendment 22, which was not moved, which sought to require that the duty to a lay a report before Parliament setting out policies and proposals for how the decarbonisation target would be met included a requirement that that report should be modified if it appeared that policies were not going to achieve the target. Amendment 27 has a similar sentiment but offers a much simpler way of achieving that goal. In the event that carbon intensity is not heading in the right direction, there is simply a requirement on the Government to tell Parliament what they intend to do to correct it.
This is a simpler way of achieving the aim that was set out in Amendment 22 and I hope that the Minister will give it serious consideration. The wording may not be perfect, but I think that the sentiment is correct and I wonder if the Minister might propose a workable suggestion of her own.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, as the noble Baroness, Lady Worthington, has said, Amendment 27 proposes that if carbon intensity has increased from the previous year, the Secretary of State will report additional actions he or she will take to reduce carbon intensity. I agree with the noble Baroness that it is sensible that, in addition to setting up plans for meeting the target range and the progress made towards it, the Secretary of State should also explain the action he or she will take to stay on track towards the target over time. However, I do not feel that the amendment as it currently stands achieves that.
My main concern is that the amendment would require the Secretary of State to set out additional action in response to an increase in a single year and this may not reflect, as the noble Baroness has rightly said, a number of variants under which the power sector operates in practice. There are many factors that can affect year-on-year measurements of carbon intensity and she has rightly said that cold years often require higher carbon intensities. Another factor could be power stations being offline for maintenance. This has been the case in recent years with some nuclear power stations, the emissions effect of which was reported in our annual statement of emissions. While bearing these points in mind, I support the aim of transparent reporting but it must be meaningful for the power sector to do that in the context of long-term trends rather than year-to-year variations. Therefore, while I support the aim of the amendment, I need to consider further how to address it, perhaps with a view to responding to it at a later stage. With that, I hope that the noble Baroness will withdraw her amendment.
Baroness Worthington
I thank the Minister for her comments. I am very pleased that she understood that the sentiment was what we were trying to press; the exact wording needs to be worked out. On that basis, I am very happy to withdraw the amendment.
Lord Deben
As the climate change committee is mentioned in this amendment, perhaps I could refer to some of the things that have just been said. I declare an interest as chairman of that committee. This is obviously a probing amendment and I am sure that the Minister will want to look carefully at how it falls. However, it seems to have two elements that the Minister might wish to look at rather carefully. My noble friend Lady Verma is right to be very careful about additional burdens and I am one of those who believe in that, because there is no doubt that any kind of burden will be magnified. There is today’s announcement from the Taxpayers’ Alliance, for example, which has produced a figure for the cost of energy to a normal taxpayer. Instead of the £100 in 2020 that it will be, it is suggesting six times that by using figures which just do not stand up. Whatever we do, we will have that kind of attack.
The first thing that the Minister may find to be of value in these suggestions is that this information is already required. There is no additional information that needs to be acquired. Secondly, we also have a mechanism in place—the climate change committee—to provide the additional information that the Minister might want. Thirdly, it is a way in which one could signify the great importance that we attend and attach to electricity decarbonisation. It cannot be said too often that this is the key to the future. If we cannot decarbonise electricity, we have no hope at all of meeting the obligations that are statutorily before us. It is important to say this again and again because people seem very reluctant to understand why that is. But it is obviously true that if you have decarbonised electricity, you can in fact provide many of the things that people have grown used to having without destroying the climate. If you look at the issue, it means that we can have electric vehicles, particularly with smart metering and smart grids. However, we can also have all the other electrical machines, like the ones we all use today, without feeling that we are contributing to climate change. Therefore, it is absolutely essential to what we need to do, which is why the climate change committee has recommended that we should be very tough in showing that we have to meet decarbonisation and carbon intensity targets by 2030, congruent with where we have to be in 2050.
I hope that my noble friend will look at these amendments, not in the normal way of being contrary but as a contribution to strengthening the Bill without adding extra burdens on anybody’s shoulders. They have to do this anyway—and we would not be able to do anything if they were not doing it. The Minister may find it a useful contribution.
Baroness Worthington
My Lords, I wanted to make a few comments about how such an obligation might work. Of course, I completely concur with noble Lords who have spoken already; this is clearly a probing amendment, and a lot of work will need to be done to think through how it might work in practice.
The one thing that I would like to illustrate is that, on the fuel disclosure requirements that we currently have, 12 suppliers are required to report and many of those report very low carbon intensities because they are specifically green suppliers. Of those that are mixed suppliers, there is a very great difference between them; at the top end of the scale, we have Scottish Power in 2011, whose CO2 intensity was 580 grams per kilowatt hour. At the bottom end of the scale you have EDF Energy, with 253 grams per kilowatt hour. Obviously, that is because the plant self-serves to those supply companies; they are both energy generators and energy suppliers, so they choose to use their own power. It would be hard to imagine giving one figure that they should all meet, but an obligation might be that they should demonstrate an improvement over time by percentage per annum on their current levels, as recorded over the past six years.
There are a couple of reasons why that idea might be a good one to explore. We know that there is an issue among independent generators, which fear that they will not be able to gain access to the market because of self-serving—the tendency to use your own plant and be vertically integrated. If they were required to shift to a low-carbon footprint and intensity, they would have an incentive to find those independent generators that can generate low-carbon electricity and reduce their footprint. That could knock off quite a few issues in one, if we looked at it in detail.
Another thing to commend that idea is that the measures in the Bill are designed to bring forward investment, but nothing is there to compel anybody to come forward. You can set up a CFD strike price and offer these contracts, but if no one wants to bother getting them they can simply carry on with business as usual. If they had this obligation, it would create a great incentive to find those CFDs, apply for them and come forward. The alternative is simply to keep offering higher and higher strike prices until the carrot becomes so attractive that they have to come forward. So it is a good insurance policy for the Bill, providing a way for the Government to link those targets that they propose to set in 2016 with an actual mechanism for delivery. Let us be honest: a target set by the Government to deliver carbon intensity of any value will be delivered only if you find a way for the commercial operators in the market to deliver it. This is one way, and it has potential supplementary benefits in giving independents confidence that their products will have a market.
I hope that we can look at this issue. As my noble friend has mentioned, this is a probing amendment and lots of the details have to be worked out, but it would be encouraging to hear some positive signals from the Government that we might be able to continue the discussion.
Lord Oxburgh
My Lords, I simply add my support for this amendment and urge the Minister to give it careful consideration to meet its objectives, if not the words. Previous speakers have shot all the relevant foxes, so I will not pursue any of those, but simply comment that if we had been considering this Bill two years ago I would have urged the Government to use this as their main means of regulating emissions. We could have done away with acres of complexity in the rest of the Bill. However, that is, unfortunately, water under the bridge. I hope that the Minister will give this careful consideration.
Lord O'Neill of Clackmannan
I am merely quoting what the Minister said. As a consequence of, for example, the large plant directives, our dependence on coal-fired generation will contract to a great extent. The Germans have created a number of problems for themselves and, in some respects, hell mend them. They have turned their back on nuclear power in a petulant and immature manner and they are now trying to resolve problems of generation in a situation where they have the wind in the north, the demand in the south and nothing in between.
Coal may well be an issue but I do not think that they will satisfy the regulations without CCS, which is still a pipe dream in many respects. It is one that we wish to pursue and, I hope, achieve, but for the next 10 years it will be a gleam in the eye of a few technologists and nothing else.
We are not asking the Government to do anything that they do not already do. It begs the question whether, were it not for a European directive, they would be collecting this information in the first place. They do not seem to be doing anything with it. It is there gathering dust and I do not understand the point of collecting it. It might be better to try to rescind the directive and say, “Let’s get this burden away from the companies. We do not need the information, we do not do anything with it and we are not going to use it to encourage them to reduce their emissions”.
Baroness Worthington
I am sorry to prolong the debate but I think this is really important. I stress that, in addition to providing a solution for how vertically integrated companies can meet their carbon intensity targets, by requiring them steadily to divest and move into low carbon, you solve one of the other problems that the Bill does not currently adequately address. I am getting e-mails daily from independent generators saying, “Fine, we can get CFD but who is going to buy our power?”. We are removing the obligation from the suppliers to buy low-carbon power. One of the features of the RO until recently was that there was an obligation on suppliers to increase their renewable percentage and that gave them access to the market. There is nothing to replace that in the CFDs. So, if you are an independent generator of renewable energy, you know that you have a good product but if no one wants to buy it you are really stuck.
On that basis, this issue deserves more attention, not merely because it helps us meet the carbon intensity targets but because it helps to solve the problem that the Bill currently faces of what we are going to do about access for independent generators.
Baroness Verma
My Lords, perhaps I may quickly respond to that. It was made very clear on Report in the Commons that we would consider the concern raised by the noble Baroness on access to markets of independent generators. I am sure we will debate that when we get to that part of the Bill.
Baroness Worthington
Baroness Worthington
In moving Amendment 36, I shall speak also to Amendment 37. Again, these are simply probing amendments to elicit more detail. I have a genuine question about definitions of electricity generation. We believe it would be helpful to have more information about what would be included under that descriptor. It is important that electricity is generated in a power station and is then transmitted long distances along transmission lines and through distribution networks. Quite significant losses accrue through that process. One of the advantages of distributed energy is that by locating the source close to the demand you get a potentially more efficient system. I would be interested to hear from the Minister about how far electricity generation will stretch. Does it take us through the plant into transmission and then to distribution? Where do we draw the line?
On what might seem a technical point, within that transmission network, there are sources of significant greenhouse gases other than CO2. SF6 is a very powerful source of greenhouse gas. In fact, it is the most powerful greenhouse gas. One kilogram of SF6 is equivalent to the emissions of 22,200 kilograms of CO2. It is significantly used in electricity substations. There are requirements to report losses of SF6 because it is such a significant pollutant. What policies do we have in place to reduce the emissions of SF6? Mechanisms can be used to reduce it. There are obvious leak detection and repair processes that companies should carry out. It is possible to recycle equipment. Employee education and training is a very important aspect.
I am sorry to spring this on the Minister. It is quite a technical issue and I would be surprised if her notes cover it. I use it only as an illustration of the fact that “electricity generation” is quite broad terminology. It would be helpful to know what is included. Anything that the noble Baroness can say about SF6 in a letter or in another way would be helpful.
As regards Amendment 37, I reiterate my thanks for the letter we received, which addresses the concern about how we are to marry up the fact that through the CFD process we may well fund generation outside the UK. I happen to think that is probably quite a good idea. Certainly, if Ireland is happy to have onshore wind that can be directly piped to Wales in a direct cable, that would be fantastic for us. I would prefer it if onshore wind were in the UK, where we would get the benefit of the jobs but there are problems associated with our being a very densely populated country. This is not to challenge the principle that CFDs can be assigned in places other than within the UK but merely to ask how we will account for that within the carbon intensity targets. Will those plants receiving CFDs count towards it? Will the noble Baroness say more about that?
Lord Teverson
This is a useful probing amendment. One of the other areas that has not been mentioned is the interest that the Government have had in geothermal energy from Iceland, which has started to be explored. I would like to think that we could have geothermal from Cornwall that we would be absolutely certain was within this regime—maybe I will come to that later in the Bill. It is useful to start to understand this and develop these arguments, because, in terms of dedicated sources of renewable energy that we work with other nations to bring to these shores, it would be regrettable if we were not able to take the full credit for that work within the decarbonisation targets. I would be interested to hear the Government’s thinking in this area.
Lord Teverson
Before the noble Baroness withdraws it, may I make one further comment? I am not getting in the way of progress and I do not expect a response from the Minister, but there is a qualitative difference. I accept the point exactly about general interconnectors but there is a difference between the specific inter- connectors dedicated to wind energy and which are for those sources of power, whether it is around Iceland or Ireland, and general interconnectors. It may be useful for the Government to remember that, but I thank the noble Baroness and the Government for their continued attention to geothermal and I very much welcome her comments.
Baroness Worthington
I thank the Minister for her response and I look forward to receiving the letter. On Amendment 37 it is important to say, as the noble Lord, Lord Teverson, has just stated, that I was not necessarily probing in regard to interconnectors. However, in the fuel disclosure that we just described, suppliers are able to use electricity that they have purchased through the interconnector to count towards their fuel disclosure. They use an averaged amount that is worked out, in fact, so it is possible to account for interconnection. I am not asking for that, but I wanted to make sure that that was clear.
I was referring to a specific project, which I think is called Greenwire. That project may be called onshore-offshore, being built on the land of Ireland but connected by a direct cable to the UK. It is not an interconnector but a direct transmission line. If that goes ahead, it would potentially be a good and significant source of low-carbon electricity. It would be a shame if that were then not to count towards our carbon intensity target. After all, it would be UK suppliers and consumers who were paying for it. It really is important that when we think about these definitional issues, we get it correctly understood. The letter refers to the difference between direct connection and interconnection, so we are probably on the right track. I wanted to make sure and get it on the record that those projects will count towards our carbon intensity targets. On that basis, I am pleased to withdraw the amendment.