Infrastructure Bill [HL]
Debate between Earl of Caithness and Lord Teverson(10 years, 2 months ago)
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Lord Teverson
My Lords, I very much agree with the amendment. I have backed similar amendments to other Bills. Unfortunately, we did not manage to get any further on it. It is Liberal Democrat policy that we should get unabated coal out of the energy generation system by 2025—to me that seems an eternity. One of the key things that would do, as this amendment would do, would be to stop long-term investment of any size in unabated coal generation and facilities. That seems to me an absolutely fundamental prerequisite, not only of meeting our carbon budgets, but of ensuring we meet our international obligations, such as on air quality. It will be very difficult to continue to lead on climate change—as we do and as we want to continue to do into the future—if we have a continued electricity generation industry based on coal for the long term.
There are all sorts of other ways to do stop that reinvestment. We have rehearsed these arguments many times before. It is the Chancellor’s and the Treasury’s wish that we should have gas investment at a reasonable level in this country over the next few years. Of course, the more we take the risk of encouraging coal to reinvest into the future—we do not know how much of that will happen but some of it already has—the more we will crowd out investment in other technologies. I suspect that the Minister will not accept the amendment, unfortunately, but I know that a number of Ministers and people in DECC understand the importance of taking coal out of generation. I hope that the Government will one day come to a single view that this needs to be done.
The Earl of Caithness
My Lords, we were treated yet again to an exposition by the noble Baroness on a matter that we debated at length and voted on last year on the Energy Bill. Here we are doing it again. If the noble Baroness and her party had really wanted to meet some of the targets then they should not have flapped around like wet hens in a thunderstorm when they were in power and got on with doing something about nuclear. As a result of this Government, the energy programme is taking off in a way that it should have done a long time ago. We all agree that we want to get coal out of the system. It is about getting the timing right for that, without creating extra costs for the consumer and without switching the lights off. The coal power stations have to meet the new directive on, I think, 1 January 2016. This subject has been debated long and often and we have voted often. We will obviously continue to do so, but thankfully we are now heading in the right direction. I hope that my noble friend on the Front Bench will not accept the amendment.
Energy Bill
Debate between Earl of Caithness and Lord Teverson
Lord Teverson
My Lords, I want to reinforce the comments of my noble friend Lady Parminter. One of the great challenges of the electricity supply industry is to de-peak its supply. One of those is demand side, but the other is very much around alternative sources of supply. Energy storage is not really where it needs to be at the minute, but interconnection is a technology that has been around for decades. It works and we should multiply it. I know that the Government have a number of schemes that they are looking at currently. I welcome those and congratulate them on being so proactive in this area. I hope that the Government and the Minister will be able to propel this even faster and further by taking notice of my noble friend’s amendment.
The Earl of Caithness (Con)
My Lords, while I support in principle what my noble friend Lady Parminter is trying to do, I am concerned about her wording. The idea that a Government should prepare a strategy, and then that is it, leaves a lot of questions begging. I suppose the Government would have to implement that strategy, but the amendment does not specify that.
My noble friend Lady Parminter will recall the evidence we heard when we were on Sub-Committee D together. Therefore, perhaps this is a good opportunity to ask my noble friend the Minister a couple of questions regarding what progress has been made with the energy infrastructure regulation, in particular the PCIs, so that that can be implemented. It is no good, we discovered, having one side that was keen to do an interconnection if the other side was not.
That leads me on to the seemingly constant battles between the regulators in each country. We had evidence from the Agency for the Cooperation of Energy Regulators and the European Network of Transmission System Operators for Electricity about that. Has there been any progress between the regulators? If there has, that would make future interconnection much easier.
Energy Bill
Debate between Earl of Caithness and Lord Teverson
The Earl of Caithness
My Lords, my noble friend Lord Jenkin has yet again put his finger on a hugely important issue, but it is a little bit of motherhood and apple pie. We all want competition and there is no disagreement about that. Indeed, the Bill is all about competition, and the Government’s policy that has already led to more competition. It is worth remembering that in 2000 there were 14 major energy suppliers, but by 2010, within 10 years, they had shrunk to six. In the past two years, seven more energy suppliers have joined the market. The mere fact of what the Government are doing has already started to improve the position with regard to competition. Therefore, the question is: how do we expand that without in any way damaging the Bill?
This part of the Bill covers the trilemma which I mentioned on the first amendment that we debated. It covers the core matters of decarbonisation, security of supply and least cost. It is a very difficult balance to get right. As such, I think that this part of the Bill was quite well framed. It seems to be the wrong place to bring in something about competition when the whole Bill is about competition. It could also open up opportunities for other amendments such as securing the efficiency of the rural economy by having cheap energy. There are many other things you could add to this list once you start to move away from the core principles.
That leads me back to the question of how we get more competition without damaging the Bill. I would ask my noble friend Lord Jenkin: what is the situation where there is little competition? I am particularly keen on tidal energy. Living beside the Pentland Firth for the part of my life when I am allowed out of this place, I think there is huge potential for energy generation there. However, if I set up an energy company to try to exploit that, and the noble Lord down in Sussex set up a company, would he be able to say that he did not get a fair crack of the whip because there was not enough competition? If that is the case, what happens if he goes to judicial review on the wording of this amendment? That will only delay matters. My real concern is that we might be introducing something here that could delay the much-needed investment about which the noble Lord, Lord Cameron, and I were given a lot of evidence when we sat on the sub-committee together and which he has expanded on tonight. I agree with him totally.
My concern is that this opens up the potential for a legal challenge. What about nuclear? As I said on Amendment 1, we were the world leaders, but now we have to go overseas. Can that be a possibility for a legal challenge? I would say to my noble friends Lord Jenkin and the Minister on the Front Bench that, since we all agree on this, can we somehow get it into the Bill? This is the wrong amendment in the wrong place, but the principle is absolutely right. Can we have a form of wording that gives effect to competition but which does not open loopholes that those who dislike a particular form of energy or want to delay a scheme could exploit to the disadvantage of all?
Lord Teverson
My Lords, I do not want to speak specifically in favour of the spirit of the amendment proposed by the noble Lord, Lord Berkeley, about the vertical integration of this industry. It has seemed to me over the past 12 months in particular that there has been, if I may say, a growing corporate arrogance in the energy industry. Power seems to have gone to the heads of many of those six organisations. They feel that they can do what they like to their own customer base and that they do not have to pay much regard to democratically elected Governments or Parliaments, let alone your Lordships’ Chamber.
I was particularly struck by this one evening when I visited my 94 year-old mother. She had just had a letter from British Gas which said that she would have to pay an increase of 10% on her bills for the year. Then it kindly went through—in very small type, which was not easy for a 94 year-old—all the reasons for the rise. It gave as the top reason, the first on the list of bullet points explaining why energy prices had gone up, not one of the reasons that we know are actually the reasons for the price increase; instead, it blamed the Government. It is a dual fuel tariff, so the charges are affected by the various bits of government legislation. I think that reflects a real arrogance. It is very difficult indeed to fix this competitive area, as noble Lords are trying to do. It is time to think what has previously been the unthinkable and say, although perhaps not tonight, “Yes, it is credible that we split supply from production”. That should be seen as a real way forward.
However, we have another problem, which leads to the arrogance that we are seeing within the industry. The companies know that we know that some £100 billion needs to be invested to keep the power lines going to make sure that we keep the lights on in terms of capacity. That is a dilemma for any Government. Nevertheless, we should start thinking what has previously been the unthinkable: that this arrogance is not acceptable. We expect them to be more responsive, not necessarily to us but certainly to their customer base and to the nation in terms of their pricing strategies. They should know that if we cannot solve the competitive issues, that split could indeed happen.
Energy Bill
Debate between Earl of Caithness and Lord Teverson
The Earl of Caithness
My Lords, I support in principle what my noble friend Lady Parminter is proposing in this amendment. The evidence that we got in Sub-Committee D was that interconnection throughout Europe needed a great deal more money spent on it, as the noble Lord, Lord Cameron, has told us. It needs to be improved, but that is a two-way process. The noble Lord, Lord Cameron, referred to some of the difficulties and I recall those being adduced to the committee.
My concern with this is therefore: what is the point of the UK producing a strategy when nobody else is producing one? We can produce a strategy and the Government can be questioned in the House about it, but if the French are not altering their system so that we are compatible and one can move the electricity to and fro, or if the problems have not been resolved with Norway—as was highlighted, there was a problem getting a connection with Norway or with the Danes—it seems a little pointless us having a strategy. Surely this ought to be done within the EU context. However, my noble friend Lady Parminter and the noble Lords, Lord Cameron and Lord Whitty, have the advantage that since I have left Sub-Committee D, they interviewed the Secretary of State. Although I have read the transcript, I would hope that they can enlighten us on what the Secretary of State had to say on our report, which we will discuss in more detail on Monday.
In some ways, I support the principle of great interconnection, although there will be problems from time to time. I know that the noble Lord, Lord O’Neill of Clackmannan, is more secure about the vote in September next year than I am. I wonder whether there is a way of preventing nuclear energy getting into Scotland because Scotland will not want nuclear energy from England. Can we adapt the grid so that one cannot get nuclear energy; it would only upset the Scots?
Lord Teverson
I rise to speak to my Amendments 55AA and 55AD, as part of this group, but perhaps I can come to the interconnection amendment of my noble friend Lady Parminter first. It seems to me to be blindingly obvious that this is something that we should do. I note the comments of the noble Lord, Lord O’Neill, who may be asking the right questions but he is being slightly too negative. A strategy does not cost billions; implementing it costs billions. When talking about investment in electricity generation, network costs, and so on of potentially £200 billion, looking sensibly at a major part of the jigsaw of interconnection is very important. We should remember that this amendment refers to the capacity payment part of the Bill, so this bit is not saying that we should run UK base load and rely all the time on interconnection. It is a common-sense look at the fact that European energy markets and individual national markets operate at different times, have their own characteristics and different peaks. Therefore, it makes a huge amount of sense to try to benefit from the synergies of capacity, weave them together and make the system work better. There are all sorts of problems with the energy market, but it does not stop the UK trying to make the best out of it, and then fit that within a broader EU strategy. I, too, look forward to the debate on Monday evening.
I move on to my own amendments and apologise to the Grand Committee for using a double negative. It is a probing amendment, trying to find out the Government’s thinking. I am trying to determine what is known as an eligible supplier in terms of the CFD market—someone who has a generating capacity outside the United Kingdom. I am not at all clear about this. I know that the Government have had discussions. We have mentioned Iceland and Ireland before but it would be useful to understand generating plants outside the United Kingdom. I am especially thinking about those that are dedicated to the UK, but there is a broader issue, which is maybe more difficult, on whether they can enter into contracts for difference.
I was struck by the Minister’s comments on the importance of price to the consumer. If we looked at it on that basis, clearly we should be buying internationally as much as we could in terms of bringing extra competition into the market and trying to bring prices down. Clearly we would not entertain CFD contracts that were more than that. Of course, there is the strike price. I would hope that with that extra competition there would be pressure on bringing the strike price down over time.
My second amendment, Amendment 55AD, would put a timeframe on the Government for making arrangements for such extraterritorial generation in order for CFDs to come on board. We often talk about offshore wind generation. This is perhaps the ultimate in offshore wind generation and other forms of low-carbon electricity. I look forward to the Minister’s response.