Electricity Market Reform

Duncan Hames Excerpts

Thursday 16th December 2010 Commons Chamber

[Chris Huhne]

Clearly we want to have low carbon sources of supply, but I have made it clear that we are intending one of the three remaining demonstration projects on carbon capture and storage to be a gas project. Given the development of unconventional gas, there is a possibility that gas will provide a much more sustainable long-term source of supply than people had thought until recently. In those circumstances—carbon capture and storage applied to gas—gas may have a very important role in the long term, not just in the short term. Otherwise, I entirely agree. Capacity payments will be made on the basis of encouraging peaking plant, to deal with the ad break in “Coronation Street” when we all turn on our kettles, and to offset the intermittency problems that occasionally arise—the nightmare of the four or five cold still days in February when the wind turbines are not going and we need back-up capacity. The capacity payments will inevitably be made by consumers from their payments, but they will provide us with the assurance of supply that we have been proud to have in this country for a long time.

[Duncan Hames (Chippenham) (LD)]

There is, unfortunately, something of an uncertainty paradox, in that measures that seek to create some certainty in the market necessitate of themselves a period of uncertainty. That being the case, will the Secretary of State tell us how long energy investors will have certainty once his reforms have been implemented?

[Chris Huhne]

I am grateful to my hon. Friend for that question. When he reads the documentation we have tabled, he will see that we are at great pains to ensure that investors have the very clear message—not least because of recent experience in some other member states of the European Union—that the incentives that have been in place will be grandfathered. They can continue to rely on that. We shall minimise the amount of uncertainty, which is important not only to honour our past obligations but also if we want investors to believe in our future obligations. We have to be prepared to stand behind what we have said in the past, and we intend that to be the case. We will minimise the amount of uncertainty in joining up the two regimes, but we are of the view that we have to reform the electricity market to bring forward the low-carbon and secure supplies that we need.