Draft Electricity Capacity (Amendment) Regulations 2016

Callum McCaig Excerpts

Monday 27th June 2016 General Committees

[Andrea Leadsom]

I will have to write to the hon. Gentleman on that point. I am not sure I completely understand his concern. The impact assessment is clear that our best guess is that the bill impact will be in the region of £11 to £20. I have just been informed that that is net. I will write to him if he wants a fuller answer, but I hope that clarifies things.

The average dual fuel bill is £200 lower than a year ago as a result of lower wholesale prices, which make it more difficult for wholesale generators to cover their costs. Bringing forward the supplementary capacity auction will therefore ensure that there is security of supply. The best estimate is that that will cost £11 to £20 per bill, which is very good value for consumers.

The hon. Gentleman also questioned the £8 billion counterfactual. That £8 billion counterfactual assumes that we do not bring forward the supplementary capacity auction. There would therefore be nothing available for wholesale generators, and they would have to deal with the consequences of the poor economics of low wholesale prices. He asked about the contingency balancing reserve. Our estimates show that it would be more expensive than the supplementary capacity auction. That is why we are doing this. The SCA is more cost-effective and provides energy security. I hope that that answers his questions.

The hon. Member for Coatbridge, Chryston and Bellshill asked about interconnector links. I can tell him that they will go ahead. I confirm for all Members that my view is that energy policy will not be impacted at all by the public’s decision to leave the European Union, because we will continue to have our energy trilemma and our commitments to decarbonisation at the lowest possible price, to energy security and to interconnectors, which after all are all commercial decisions made between businesses. Our policy for more interconnectors will endure, provided that Ofgem finds on a case-by-case basis that they offer good value to consumers.

[Callum McCaig (Aberdeen South) (SNP)]

That is interesting. May I ask whether the Minister envisages the emissions trading scheme continuing?

[Andrea Leadsom]

Obviously, the emissions trading scheme is an EU-wide scheme, and the UK’s participation will be subject to the negotiation of the terms of our leaving the European Union. There has been a lot of discussion in this very room about the ETS, the amendments the UK would ideally like to make and whether it should count towards our decarbonisation goals at all. I say to the hon. Gentleman that those discussions are not for today, but will of course be part of the negotiation.

The hon. Member for Coatbridge, Chryston and Bellshill raised the question of storage and, as I have said to him before, we remain completely committed to that. The Department believes that storage presents a huge opportunity to provide the certainty that intermittent technologies cannot provide for energy security. We are big supporters of it. Work is going on in the Department to look at what we can do to facilitate storage and to remove any barriers, whether regulatory or structural, to allowing storage to deploy. I hope he will appreciate that nothing has changed and that that enthusiasm will continue. I think I have mentioned to him before that I have met all the trade bodies and developers for storage to hear their views, and we are completely supportive.

[Callum McCaig]

I am interested in that answer. Is there any indication of the timescales for that review and of what any forthcoming changes may be?

[Andrea Leadsom]

I am so sorry, but I have to say to the hon. Gentleman that we will announce that as soon as possible. He will be aware that there are a number of announcements that we are keen to make as soon as we can. Some of this work is very complicated and we are keen to get the right answers. During the passage of the Energy Bill, we had a good discussion about storage. We are all on the same side; we all want to see progress. The key thing is to make sure that we get solutions that benefit the deployment of storage and that there are no unintended consequences of the solutions that we choose; it is important that they do not have the opposite effect. We have had that discussion before, so I will leave it there.

The final point made by the hon. Member for Coatbridge, Chryston and Bellshill was on transmission charges for Scotland. As he knows, the transmission charging regime is a matter for Ofgem. As he also knows, it is designed to be cost reflective to ensure the economic and efficient use of the network across Great Britain and, importantly, to keep costs down for consumers. It is true that there are higher charges for generators in Scotland as a result, but that reflects the actual cost that those generators impose on the transmission network. He will also be aware that the greater part is paid by the electricity supply companies, also on a cost-reflective basis. That means that the majority of transmission charges are in fact recovered through consumers in areas of highest demand—namely in England and Wales. Although generators pay more in Scotland, consumers pay less. Ofgem has concluded, having done a recent study on transmission charges, that there would be winners and losers from any change away from cost-reflective charging, and it does not feel as if there is a case for that.

I hope that the responses I have given have been helpful. As I said at the start of the debate, I am confident that with the changes we have discussed today, the capacity market will ensure the security of our electricity supplies in a way that provides the best value for money for consumers. I therefore commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Electricity Capacity (Amendment) Regulations 2016.