Baroness Worthington
Main Page: Baroness Worthington (Crossbench - Life peer)Energy Bill
Baroness Worthington Excerpts
Lord O'Neill of Clackmannan (Lab)
My Lords, when an amendment of this character came up in Committee, I pointed out that we were talking about an amendment that would take us back to some of the original ideas that were circulating at the time of energy privatisation—you might say at the time just before liberalisation, because the two did not happen with quite the speed that one would have wished. I do not think much attention was paid to that point, but initially, we had a system in the UK where we had massive generators responsible for nuclear and the Central Electricity Generating Board. We also had regional electricity companies which could generate no more than 15% of their requirements.
Due to the attractiveness of the liberalisation process to some foreign energy companies, many of them in North America, we saw the acquisition of a number of the regional electricity companies by American companies. Thereafter, we began to see the merging of some of these regional electricity companies, and we boiled it down to what you might call the “big four”. Two of the companies had always been vertically integrated—that is to say, the two Scottish companies which at that time were Scottish Hydro and ScottishPower. By a process of merger acquisition, we had the vertical integration of the companies.
This was not what was intended by some of the ideologues who were the original authors of the liberalisation and privatisation programme. They wanted a system which would be akin, in generating terms, to something along the constitutional arrangements of pre-Cavour Italy. It would have had a catastrophic effect if it had been allowed to happen; a number of city states generating electricity in bits and pieces over the country, much as we had with gas and electricity prior to the Labour nationalisation in the 1940s.
It is fortunate that we did not have that, but what concerns me is that if we are going to have generators of a relatively small kind coming in—windmills attached to the national grid and water mills here and there—they are not going to change the character of the market to any great extent. We could have a situation similar to that in North America, where there are companies still considering the construction of nuclear power stations. In some instances, those stations cost twice the capitalised value of the companies that want to build them, so they have to look for partners across the world.
While these two amendments are well intentioned, I do not think that they will do very much in terms of promoting competition. My feeling is that if we are going to have the promotion of competition and the protection of the consumer from oligopolistic malpractice, we have to have a system of regulation which is capable of addressing that. These amendments go no real way to doing that. Quite frankly, I think they are something for another Bill. That is one of the reasons why I am supporting my party’s proposition that we spend 20 months after the next Labour victory putting through effective legislation which will change the regulatory framework, and may well result in a degree of reduction in the vertical integration process.
It is a problem; I do not deny that. However, we have to recognise that if we simply try to create opportunities for small players to become involved, we are not necessarily going to challenge the oligopolistic power of the big players. To challenge the purchasing power of the big four, big six or big seven if you were to include First Utility which, as I understand it, do not presently do any generating, we need far more in the way of regulatory conditions that would work. At the moment, I am not confident that these amendments can do that.
It is useful that, even at this late stage, we have probing amendments, but I find it very difficult and rather embarrassing that colleagues on my side of the House are supporting some of the random writings of the Austrian school of discredited economics that landed us with a great many of the problems that we are now confronting. I would like to think that my noble friend will withdraw his amendment. At the same time, something needs to be done but I do not think that the terms of the Bill and what we are trying to do at present makes the amendment appropriate. It is one thing for us to try to change the electricity market; it is quite another, at this stage, to try to change the structure of electricity generating and the integrated nature of our electricity industry.
Therefore, this is not the time for an amendment of this character. It needs to be better thought out and a lot more care and attention needs to be paid to the significant point which was the undoing of the Austrians in the recent past—that through a process of merger and acquisition you can easily change the nature of the industry. It could be argued that the Major and early Blair Governments did nothing about that process of acquisition and merging. However, unless we had changes on that side of the legislation as well, we could simply encourage the end of vertical integration and then see a process of merger and acquisition. That would take us back to where we are at present, which I do not think anyone would find a particularly satisfactory situation.
Baroness Worthington (Lab)
My Lords, I am grateful to my noble friend for tabling these amendments but, although we are sympathetic to their intent, it is fair to say that we would take a different approach.
This part of the Bill, which introduces measures to try to protect independent generators, is a clear indication that there is something very wrong with our electricity market. It is another layer of complexity that the Bill introduces to the market, and it is needed because we have probably all had considerable representation from independent generators saying that they are simply not able to gain access to the market on fair terms. That is very regrettable and a clear sign that something major needs to take place in the shake-up of the electricity market. Unfortunately, the Bill does not do that and was never intended to, and I am inclined to agree with my noble friend Lord O’Neill that another Bill would be needed to sort this out.
As I said, this is an extra complexity, and my general rule of thumb is that increased complexity equals decreased efficiency. I am sorry that we have had to enter into this market with new provisions to enable independent generators to gain access. All electricity ought to be sold into an open and transparent pool or market so that everyone has a fair crack at the whip and ultimately everybody can gain fair access to customers through supply companies. I fear that these amendments, although welcome, are something of a sticking plaster and would not really get to the root of the problem.
The Labour Party has made it very clear that our solution to this is to split up the vertical integration of the big six and to introduce a new regulator with real teeth, focusing squarely on the consumer and delivering better competition in all aspects of the electricity market. The amendments go some way towards achieving that but I do not think that they do enough, so I am afraid that, although we are sympathetic, we are not able to support them.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I thank noble Lords for the debate on the amendments and I shall speak to them after I have spoken to my own amendments in this group. The amendments standing in my name pertain to powers that enable the establishment of a power purchase agreement scheme, which could provide generators with access to an offtaker of last resort. The offtaker of last resort mechanism will benefit both independent renewable generators and investors by providing a guaranteed backstop route to market through which generators can sell their power. This will enable generators to use new and different routes to market, ending their dependency on established players and stimulating new entry and innovation in the PPA market.
The amendments I am speaking to today address specific concerns raised in Committee that the price at which electricity is purchased in PPAs under the scheme should be determined by reference to the current market price. Amendment 61 clarifies that a PPA under the scheme is an arrangement under which a supplier agrees to purchase electricity,
“at a discount to a prevailing market price”.
This amendment confirms our policy intent that the offtaker of last resort mechanism is exactly that: a last resort. Electricity purchased through the PPAs under the scheme must be purchased at a discount to a market price. This will give confidence to suppliers that they will not be required to purchase electricity at above-market prices. I assure the House that it is the Government’s intention that the level of discount should also represent a sufficient level of revenue to enable generators to raise finance. The discount level will form a key part of our consultation in early 2014.
Amendment 63 enables the Secretary of State to make provision in licence or code modifications to determine the appropriate discount and market price for PPAs under the scheme. I believe that these amendments clarify our policy intentions.
Amendment 61A, tabled by the noble Lord, Lord Berkeley, and the noble Viscount, Lord Hanworth, would mean that a PPA under the scheme is an arrangement under which a supplier agrees to purchase electricity at a discount to the market price and that the discount is no more than 5%. It is important that the discount is large enough to ensure that PPAs under the scheme are a last resort. The requirement for the discount to be no larger than 5% is not compatible with that; given that open-market PPAs typically have larger discounts, the scheme would quickly become a first, rather than last, resort. This would undermine new entrants to the PPA market and mean that anticipated benefits of the scheme in terms of facilitating a more dynamic and competitive PPA market would not materialise.
On Amendment 59A, I begin by stating my strong, and, I believe, shared desire to see ambitious action to improve wholesale market liquidity, which is crucial to allow independent generators and suppliers to compete without restriction. That is what Ofgem is doing through its ambitious package of reforms to address low levels of liquidity in the market, and what this Government will do should Ofgem’s reforms be delayed or frustrated. If it proves necessary for the Government to act, they should consider all options to achieve their objectives, including those listed in Clause 43. However, it would not be prudent to tie our hands to a particular course of action at this stage.
I hope that noble Lords have found my explanations reassuring and that the noble Lord will agree to withdraw his amendment.
Baroness Worthington
My Lords, I support Amendment 60. I am grateful to all noble Lords for their contributions to this debate. I will not reiterate my earlier comments, which are that I consider this whole section of the Bill to be a sad necessity that need not have been there had the Government grasped the bigger picture of properly introducing competition during their energy market reforms. However, Amendment 60 seems to be eminently sensible. It is clear, from all the contributions we have heard today, that there is insufficient confidence among independent generators that the Government are serious about introducing something to assist them at this time. It is also quite clear that the clauses we are now debating are a last-minute addition to the Bill.
When the Government started out on this process they maintained that there was no problem and nothing to be worried about; I suspect that this was because they paid far too much attention to what the big six were telling them and insufficient attention to what the independent generators were saying. We therefore have these four clauses, which do not go far enough in providing the detail or the certainty that investors require. Ministers should at the very least be able to concede that these arrangements will be in place in time for the awarding of the first CFDs; that would be the absolute minimum.
On the other amendments, which are slightly more detailed—I agree with the noble Earl, Lord Caithness, that they may be too prescriptive for primary legislation—the regulations that flow from these clauses must be published before the Bill leaves this House, as we need to see the detail. I apologise if the draft regulations have in fact already been published; they may have been lost in the huge number of documents, for which we are grateful, that have been issued to us. However, if they have not been published, can the Minister tell us when they will be so that we can see how this policy will work and appreciate the detail? I hope that that will go some way to reassure the noble Lords who have spoken in this debate this afternoon.
Baroness Verma
My Lords, I thank my noble friends Lord Roper and Lord Jenkin, and the noble Baroness, Lady Liddell, for their amendments on the issue of route to market for independent renewable generators. Taken together, these amendments would place the Secretary of State under a duty to ensure that: a PPA scheme is in place by the time the first contracts for difference are allocated; the terms of PPAs under the scheme are demonstrably viable for eligible electricity generators and will enable them to borrow money on reasonable terms; eligible generators can obtain a PPA under the scheme within seven days; and that all generators eligible for a CFD are eligible for a PPA under the scheme.
I am grateful to noble Lords for the opportunity to clarify the Government’s intentions, which are very much in keeping with the spirit of these amendments. I assure the House that, as my right honourable friend Michael Fallon has said, the Government are committed to consulting on the introduction of an offtaker of last resort mechanism, and that they intend, subject to consultation, a scheme to be in place by the time the first CFDs are signed. That will give generators and investors the certainty that they need to make investment decisions. However, it would not be appropriate to place the Secretary of State under a duty to establish a scheme by a particular date before the final policy design has been completed and consulted upon.
The Government are also committed to ensuring that the mechanism is viable for eligible independent generators, which should enable generators to borrow money on reasonable terms. However, the Government cannot guarantee that, since access to finance and the viability of the scheme for individual generators are affected by a variety of factors that are out of our control. We also fully intend that those generators which need to access a PPA under the scheme will be able to do so quickly and simply via a transparent and fair process.
It is important that the scheme is targeted at those generators which genuinely need to access it. The scheme may not be suitable or necessary for all CFD-holding technologies, so we do not judge that it is appropriate for this to be required in primary legislation. I also assure the House that the Government intend to grandfather the terms of PPAs under the scheme, including the level of discount, from the date a generator signs its CFD.
I met with the Independent Renewable Energy Generators Group last week to reassure it on these points. It confirmed that it believes that the offtaker of last resort is a viable solution to its concerns, subject to the final decision—sorry; subject to the final design. The details of the offtaker of last resort mechanism will be specified in secondary legislation following consultation early next year, so it is not appropriate at this stage to set them out in the Bill. I reassure noble Lords that we aim to have secondary legislation in force by the time the first CFDs are signed. This is a challenging timetable. It is subject to consultation and parliamentary process. However, this should not have a material impact on generators since they will not need access to backstop PPAs until after projects have been commissioned, which is likely to be several months after signing the first CFD.
Noble Lords also asked when the first CFD allocations will become available. We have already signalled that we intend to consult, possibly in the early new year, and aim to have secondary legislation in force by the time of the first CFD. I hope that I have reassured noble Lords that the Government’s intention is to ensure certainty for smaller generators. We want to see greater competition. We believe that the measures we are taking and the mechanisms we are using are the right ones. I hope that the noble Lord will find my explanations reassuring and will therefore agree to withdraw his amendment.
Baroness Worthington
My Lords, I am grateful to the Minister for explaining the amendments that she has tabled and spoken to today. I am particularly grateful for new Clause 66, which was something that we debated in Committee.
The issue that was under discussion was that we are, in this Bill, removing the renewables obligation—the policy that has supported renewables and has led to a significant increase in renewable energy and different forms of renewable electricity. The removal of the renewables obligation is significant because it contained an inbuilt incentive on the big six to keep investing in new clean technology. We are now removing that through this Bill. Unfortunately we have not been able to convince the Government to replace any form of obligation into this Bill on either the Government or the suppliers. We are now entering a period where we have to entice investors rather than oblige them. That is an issue that may come back to haunt us—a phrase that has been used before today.
I seek words of reassurance that, in the detailed arrangements that are set out in the regulations that close the RO, the Government will not prescribe a date until they are absolutely certain when the CFDs can come into operation. The issue here is that this Bill is going to be subject to state aid clearance; we need to be absolutely confident that we do not wind down the existing support mechanism before we are completely sure that we have a new support mechanism in its place.
There has been mention of the year 2017 in numerous government consultation documents and documents on this topic. At this stage we cannot be sure that 2017 is the right year. I urge the Minister to make sure that draft regulations are not overly prescriptive and that they give us the flexibility we need to ensure that there is a very good transition from one successful policy to a new untested policy which we hope will deliver but, as has been mentioned on a number of occasions, we still have concerns that it will not—especially for independent generators.
Baroness Verma
My Lords, I thank the noble Baroness and reassure her that we are of course mindful of all the concerns that she has raised. The RO closure date of 31 March 2017 was chosen in order to allow for that period of parallel running between the RO and the CFD. If we were to extend the RO, we might need to hold a further banding review for the post-2017 banding levels, and generators would not know the post-2017 banding levels until 2015-2016.
Any accreditation after 2017 would receive less than 20 years of RO support. The RO is subject to a 2037 end date. It would be wrong to extend this given that the CFDs are being put into place to provide better value for generators.
Baroness Worthington
I merely point out that these amendments remove the need for banding reviews, so I do not think it is true to say that we cannot have more flexibility over the end date because of banding reviews as these amendments remove the requirement on government to review the banding. I urge the Minister to reconsider that.
Lord Deben
My Lords, the noble Lord, Lord Jenkin has rightly pointed to the crucial problem, which is: how do we deal with that period in which there is fear that the lights will not stay on? That is a proper fear to have and should be the first fear of any Government, because there is a responsibility to keep the lights on. There ought to be a second fear, too: namely, that we keep the lights on in such a way that the next generation has an even worse position, because we have polluted the atmosphere further and made the fact of dangerous climate change even greater. We naturally have to look at this very carefully.
However, on this occasion it seems that those who are most concerned with keeping the lights on, and I certainly put myself in that category, and those who are also concerned with climate change, and I put myself in that category, too, are in fact pushing at the same door. If we do not have a mechanism whereby it is sensible to invest in gas, that bit of the transition will not take place. That would seem to most of us to make it more difficult to provide affordably for the energy that we need.
The noble Lord, Lord Oxburgh, as so often, put his finger on one of the other problems. When we talk about these things, let us not confuse the cost of production with the price at which it is sold. Those of us who, like me, have represented constituencies, know how many people are close to the edge when it comes to warming their homes. The whole question of affordability is utterly crucial. However, the idea that if we burnt coal we would get cheap power is not so. We need to have a mixture—a portfolio of means of generation—in which gas will play its part.
We have heard a lot recently about the opportunities that shale gas will give us. I find both extremes unacceptable—from those who think it means the end of the world at one end to those at the other who feel that it will be a game-changing matter. They are both wrong, but there is a place for gas. If that gas were produced at home, that would contribute considerably, not to a lowering in cost because it would have little to do with that, but to greater energy sovereignty, which is worth while.
The question is how we move from a situation which we hardly imagined, because the bottom had not fallen out of the coal market, in which we have to provide for the transition from coal to gas to one in which we do provide for that transition. The difficulty is that I suspect both those who tabled the amendments and the Government are on the same side—both groups want to achieve this. The real question is that there is a kind of fear of letting go of nurse’s hand—that is, the coal—in case we do not get the gas. I would like to turn it around the other way: if we do not do this, I am not at all sure that we will get the gas. That is crucial. I hope very much that the Government will enable us to have a situation in which we provide for that transition.
I have been trying very hard during these debates to remain entirely independent because all I have spoken are the words that the Committee on Climate Change, which I chair, has put forward. The committee has made it clear that it feels that this kind of transition needs to be facilitated in this way. I do not want to make this a great division because I do not think it is one; it is a question of how we do this safely in the new circumstances to which the noble Lord, Lord Oxburgh, referred.
I very much hope that my noble friend will be able to give us confidence in the Government’s answering of this question if she is unable to accept the amendments that are put before her. If we do not do one or other, we will find ourselves unable to guarantee reasonable prices or the continuance of the lights being on because we have not made the transference that is essential in any case and which I thought everyone supported.
Baroness Worthington
My Lords, I was pleased to add my name to Amendment 74, and I support the other amendments in the group. At the start of this process way back in 2010, the Government said in a consultation document:
“The objective of the EPS is to ensure that while coal continues to make an important contribution to security of supply, it does so in a manner consistent with the UK’s decarbonisation objectives”.
The way that the EPS is drafted does not achieve that aim. The EPS was a response to the Kingsnorth protests against the building of a new, unabated coal plant. It was borrowed, but not fully, from similar regulations in California. The Minister, Greg Barker MP, can take credit for introducing this policy. However, in California they are clear that the limits that are placed on coal stations apply in the event of a coal station seeking a life extension. That is what this amendment is designed to do: to complete this process by adding that important missing element.
New coal was never the most carbon-intensive source of electricity; old coal is. The world has moved on since Kingsnorth. Low coal prices and high gas prices have caused higher operating levels at coal stations now than ever before. As a result, as the noble Lord, Lord Teverson, mentioned, we have seen UK emissions going up, not down, and our carbon intensity increasing last year, not decreasing. How are we going to hit decarbonisation targets if we do not have a tool in our armoury to do something about this issue? We could have a policy of carbon pricing, as the noble Lord, Lord Stern, has mentioned. However, carbon pricing policy has not addressed this issue, and will not. We need regulation.
Turning to the security of supply, 8 gigawatts of old coal capacity has recently shut. This has brought down our historically high overcapacity to a more modest level, yet our carbon intensity is stubbornly high, at around 500 grams per kilowatt hour. This is because the 12 coal stations that are still operating, representing 15 gigawatts of power, are base-loading. They are no longer providing back-up power in the winter peaks but are operating throughout the year and making their owners a considerable amount of money. The Committee on Climate Change has been clear that were we to get the merit order of existing plants right, we could shave almost 200 grams off that figure overnight without having to build a single brick or power station.
The 12 stations that I have mentioned have tightening air quality regulations in front of them, which will affect their operating post-2016. However, they have a range of options for what to do in the face of those tightening regulations. One is not to refurbish; they will then be required to close by 2023. Another option is to convert to biomass. The final option is to fit the filters that would enable them to comply with the air quality standards. They could then remain open indefinitely. In that situation, they would certainly wish to continue base-loading, since they would have made new capital investment on which they would want to seek a return.
The new air quality standards start in 2016. I am sad to say that Defra, the lead department, is in danger of not complying with those regulations because it is failing to provide enough detailed information about what these power stations are planning to do. This can be only because it is intent on giving the maximum flexibility while the details of the Bill are worked out, because the Bill contains another very important element that changes the fortunes of coal: the capacity mechanism payments. The capacity mechanism will give existing coal plants an up-front cash injection just at the time they need it to make those refurbishment decisions. Plants will be eligible for three-year contracts. We cannot be certain how much those contracts will be worth, but it will certainly be in the range of £80 million to £100 million or more over the three years. The cost of fitting the filters is a surprisingly similar number of around £100 million for a 1 gigawatt plant.
If they decide to make these capital investments and tip into this compliant state, this will reduce their thermal efficiency even further. Are the department and the Minister aware of how inefficient these stations are and quite how much of the heat is escaping as lost energy into the atmosphere? That is quite apart from the carbon load that is also being added. Fitting these filters would also increase the operating costs of these plants. The chemical plants necessary do not operate for free.
The Government’s policy is not to support the application of an EPS to coal seeking life extensions, and no doubt we shall hear some of the reasons from the Minister. Other noble Lords have touched on the security of supply issue. As long as this question over 15 gigawatts of coal is allowed to remain unanswered, how can any investor in replacement capacity move forward? If you are not sure how many plants will be operating and whether they will be base-loading, you will find it very difficult indeed to make the case for investment in new capacity and to bring mothballed capacity back on. I will not go into too much detail on this but we have all had representations from gas investors saying that they support this amendment. We should just remember that, in a carbon-constrained world and under a carbon-budgeting system, every coal station that remains on the system displaces two gas stations because gas can operate with half the emissions of coal
Baroness Verma
My Lords, I will speak to the amendments in my name. I am grateful to my noble friend Lord Teverson and the noble Lord, Lord Whitty, for their amendments and to all those who have contributed to this debate. I remind the House of the policy intent behind the EPS. It is to ensure that no new coal-fired power station is built without CCS, and that it is done in a way that does not undermine the investment we will need in gas generation to keep the lights on at a reasonable cost to consumers.
Amendment 72 seeks to shorten the grandfathering period of the EPS from the end of 2044 to 2029. This shortening by some 15 years will increase uncertainty for gas investors. Without this certainty, we risk deterring or increasing the cost of new gas investments, with the obvious potential consequences for security of supply and costs to consumers. I recognise that 2044 is a long way off but this date is derived from what investors tell us is required. Under the current provisions, new gas plants consented in the later part of this decade and built in the early 2020s would have a little over 20 years of certainty in respect of how the EPS will apply to those assets. That is the amount of time that investors tell us is required to pay back all debt and see a return on equity in the project. In other words, with grandfathering, the EPS is not a barrier to financing new gas generation plants.
Noble Lords may be concerned that we may be locking in high levels of unabated gas generation well into the future that could risk achieving our legally binding 2050 carbon emissions target. I reassure noble Lords that the other measures under our market reforms will ensure that this is not the case and, therefore, that the EPS is consistent with our 2050 decarbonisation target. This is because unabated gas generation will be increasingly displaced by low-carbon generation over time. The Government set out clearly in our gas generation strategy how we expect gas plants’ load factors to decline as low carbon comes on to the system, and how in the very long term we expect it to be economically attractive for gas plants to retrofit carbon capture and storage equipment. Grandfathering the EPS until 2044 will not prevent this from happening. Grandfathering to just 2029 would risk deterring or increasing the cost of the investment in the new gas plants that we need to be built up to 2030.
I turn to Amendments 71 and 73. The approach proposed by my noble friend is very close to the one that we have already adopted. The Government have already committed to a regular three-yearly review of the EPS. The EPS will also be reviewed as part of the statutory review of EMR under Clause 58 of the Bill. The amendments would enable the statutory rate of emissions and the period for which it will apply to be revised very quickly following a review by way of an order. This is an approach that the Government have considered but have concerns about. The ability to revise the EPS very quickly could result in a specific investment hiatus in the run up to a review, due to the uncertainty that the review process introduces. Pre-development costs for power projects can run into tens of millions of pounds, so investors will be very aware of the risk that a quickly implemented decision to revise the EPS could render a project economically unviable, with the financial loss that could result.
That is why we have taken the approach that any future changes to the EPS should be by way of primary legislation. Combined with the three-year period between reviews, this will help to ensure that projects that are already in the planning system—by that stage having already had significant financial commitment—are able to complete that process before any changes to the EPS that would affect their project come into force. However, I recognise the spirit in which my noble friend has brought this amendment and the helpful intent to bring greater certainty to the review process and the process for making any future changes to the EPS. I will reflect on his suggestions with a view to how we might underpin his concerns without creating any unnecessary investment hiatus.
Turning to Amendment 74, the Government’s goal is an orderly transition away from coal to lower-carbon fuels over time in a way which does not create unnecessary costs for consumers. While we do not expect large numbers of coal plants to invest in clean-up equipment, a very small number of our more efficient plant may wish to do so. This amendment is very likely to deter that investment. In this scenario, more coal stations would have their operation constrained, and there could be more stations closing around the end of the decade than might otherwise be the case. This could require more gas plant to be built earlier to fill the gap at greater cost—ultimately, to consumers. Why should we close down our options in this way now when it could put our security of supply at risk and significantly increase costs to consumers? A small number of cleaned-up coal plants could provide greater diversity and bring additional resilience to the electricity system in the coming years, helping to ride any bumps in the road, given the significant investment challenge that we face.
I have also considered carefully the argument that by taking action to drive the closure of all of our coal power stations, we would be giving certainty to investors in new gas generation. While this may be conceptually true, it could also be true to say that you would give certainty to investors in electric cars if you banned all petrol vehicles, but that does not mean it would be a prudent or cost-effective thing to do.
Baroness Worthington
Is the Minister aware that the setting of the EPS on these refurbished plants would not cause them to close but would simply prevent them baseloading? They would still be available for the rest of the decade and the decade beyond to act as backup plant.
Baroness Verma
If the noble Baroness will allow me to continue, I may be able to illustrate further and more clearly the Government’s intentions.
The Bill is about creating the conditions for investment. Intervening in this way and targeting the EPS on a particular set of generators and their assets risks damaging the confidence of investors in the UK as a place to invest in the energy sector. This is precisely the opposite of what the Bill is designed to achieve.
The amendment would also create a direct interplay between the EPS and what is a complex European directive, and I question whether the proposed amendment would be compliant with the UK’s European obligations, especially those under the industrial emissions directive. The way in which European law interacts with our domestic law in this area is complex, and the Government are not in a position to reassure the House today that the amendment would be compliant.
In summary, to accept this amendment would not be consistent with the purpose of the EPS. It is unnecessary and could potentially have negative impacts. Our position is supported by the CBI which said in its Report stage briefing,
“the current EPS proposal should remain unchanged”.
Do not be mistaken, the Government do not want old coal hanging around for ever. We want, through the combined effect of all the measures in this Bill, to create the conditions for an orderly, cost-effective transition away from high-carbon coal through investment in lower carbon alternatives. We want this to be achieved in the way that best protects the consumer.
I turn now to the amendments that stand in my name. They seek to assist the development and commercialisation of carbon capture and storage by providing that a time-limited exemption to the emissions performance standard will apply to carbon capture and storage projects during their commissioning phase. While this has always been the Government’s policy intention, these amendments seek to provide certainty in the Bill. Amendment 73B provides for a three-year exemption period for fossil fuel plant that use a complete CCS system. It also provides that the exemption period may only begin once the complete CCS system is ready for use and is physically in place. The exemption is time-limited and available until the end of 2027. This reflects our view that the exemption is a temporary measure designed to assist the development of CCS and we expect learning from the first projects and those expected quickly to follow to remove the need for an enduring exemption.
Baroness Worthington
“(iii) substantial pollution abatement equipment dealing with oxides of sulphur, oxides of nitrogen, heavy metal emissions or particles is fitted to the generating station.”