Energy Bill

Ed Davey Excerpts

Tuesday 4th June 2013 Commons Chamber

[The Secretary of State for Energy and Climate Change (Mr Edward Davey)]

I beg to move, That the Bill be now read the Third time.

Let me begin by thanking those from all parts of this House and outside who have helped to strengthen this crucial Bill and bring it to this point. I thank the Energy and Climate Change Committee and its Chair, my hon. Friend the Member for South Suffolk (Mr Yeo), and the informal scrutiny group in the other place for conducting invaluable pre-legislative scrutiny of the draft Bill. I also thank the individuals who gave oral evidence to the Committee, as well as the organisations that took the time to provide expert written evidence and recommendations.

In particular—I think you will agree with me, Mr Speaker—I could not allow the Bill to leave this place without thanking my right hon. Friend the Member for South Holland and The Deepings (Mr Hayes) for skilfully guiding the Bill through Committee. I am told that at one point in Committee he managed to compare himself to Henry VIII and Indiana Jones in the same breath—I am not sure whether he has told his wife. I for one salute his unique style in promoting renewables.

I also want to thank the Ministers of State, Department of Energy and Climate Change for their hard work. It would be remiss of me if I did not also mention my hon. Friend the Member for Wealden (Charles Hendry).

On the Opposition Benches, the hon. Members for Rutherglen and Hamilton West (Tom Greatrex) and for Liverpool, Wavertree (Luciana Berger) have been skilful and insightful. I am grateful that they have applied the principles of constructive opposition to the Bill’s scrutiny rather than the principles of destructive opportunism, which are all too often applied in politics generally—by people of all political colours—but which are all too often not in the national interest. Let me take this opportunity to remind the House why the passage of the Bill is so important and so firmly in the national interest.

[Caroline Lucas]

I am grateful to the Secretary of State for thanking everyone for contributing to making the Bill stronger, but I wonder how he thinks that it has been made stronger, given that, as far as I can see, not a single Opposition amendment has been accepted, either in Committee or on Report.

[Mr Davey]

The hon. Lady might not have noticed that the Government have responded to a lot of the debates and tabled a lot of amendments on everything from electricity demand reduction to decarbonisation. I will come to those amendments shortly.



Electricity market reform, which is at the centre of the Energy Bill, is the result of four imperatives: the need to power the country; the need to protect the planet; the need to insulate consumers from rising energy bills; and the need to get the economy moving. With demand for electricity set to increase, and around a fifth of our power plants set to close, we will need to attract £110 billion of new investment in electricity and grid infrastructure in this decade alone to ensure that we have enough reliable capacity to meet demand. The Energy Bill will do that.

The Climate Change Act 2008 commits the United Kingdom to an 80% reduction in greenhouse gas emissions by 2050, so we need specifically to encourage investment in low-carbon energy generation: renewables, carbon capture and storage, and nuclear. The Energy Bill will do that. With global demand driving wholesale prices higher, and with that in turn driving domestic energy bills higher, we need to create a more diverse and competitive energy market to help to cushion consumers from volatile fossil fuel prices. We also need to ensure that they are getting the best deal from suppliers. The Energy Bill will do that.

By facing up to the need to invest in low-carbon energy infrastructure, we will support economic recovery too. The trebling of support under the levy control framework will mean £7.6 billion a year by 2020 to support low-carbon technologies, including infrastructure projects that are ready to go now, supporting jobs, supporting communities and providing prosperity. Projects worth over £8 billion are already in the planning pipeline. Electricity market reform could support as many as 250,000 jobs in the energy sector. The Energy Bill will support green growth. That is why I am pleased that the Bill, as strengthened in Committee and on Report, benefits from a general level of cross-party support in the House.

I want to reflect on some of the ways in which the Bill has been further strengthened in this House. Let me start by dealing with the decarbonisation target head on. No party in this House—not the Liberal Democrats, not the Conservatives, not Labour, not the nationalists, not even the Greens—had a commitment in its 2010 manifesto to set a 2030 decarbonisation target during this Parliament. Nor has any other country yet set a power sector decarbonisation target for 2030.

I can understand the argument that an early decarbonisation target could provide extra certainty for large, long-term projects in the UK power sector, particularly in the supply chain. However, there is also logic in the consistency of setting the decarbonisation target for 2030 at the same time as the fifth carbon budget, which is scheduled for 2016—still 14 years ahead of the target date. By comparison, the 2020 renewables target was set in 2008, just 12 years from its target date.

If anyone still doubts my commitment, or that of this Government, to decarbonisation, they should consider the decision that we have just made on the UK’s position for the EU’s 2030 greenhouse gas target. In the context of winning an ambitious global climate change treaty, we will be arguing for a 50% reduction target in the EU. That is the most ambitious position of any member state, and I am proud that this Government are leading the way on climate change action.

Let me turn to other areas of the Bill—first, to contracts for difference. Long-term electricity price stability will be provided through CFDs and will be a key part of the new low-carbon electricity market. As such, the Commons Committee quite rightly looked at the nature of the CFD counterparty body and made a number of recommendations. In response, the Government have clarified the Bill’s drafting to make the policy intention more explicit.

[Mr Weir]

I am listening closely to the Secretary of State, but does he not share my slight concern about the CFDs that, as the Bill presumably leaves this House tonight to go to the other place, we still do not know basic details such as the strike price? Although that information has been promised on several occasions, we are now told that the delivery document may be published next month. We do not seem to be getting any nearer to getting this information.

[Mr Davey]

We always said we would publish the document in July 2013, and we are on track to publish it in July 2013.

Accompanying the CFDs, the capacity market will ensure that sufficient reliable generating capacity is available to meet electricity demand as it increases over the next decade, but we are also looking at reining in demand. We have added measures on electricity demand reduction that for the first time can allow energy-saving projects to be able to compete with power stations for new investment—negawatts. Delivering through the capacity market can incentivise permanent reductions in demand at times when electricity is most expensive, allowing for a more direct trade-off between generation capacity and demand reduction. This is a radical approach that has been shown to work in international examples such as in forward capacity markets in the United States, and it is a major advance for the UK.

We acknowledge that many consumers are “feeling the pinch”, and we remain committed to doing everything we can to help. Let me be clear, however, that the main reason for rising energy bills is rising wholesale gas prices, which make up around half a typical household dual fuel bill. These prices are set on global markets and changes are driven by global events. This Bill paves the way for increased UK production of energy, which will help to reduce price rises from global markets.

As well as providing a more stable pricing environment and helping consumers to reduce their electricity demand, we introduced in Committee new provisions on domestic tariffs to ensure that all households will be able to get the best deal for their gas and electricity. These provisions will ensure that energy companies provide consumers with clear information about their tariffs and put them on the cheapest tariff that meets their preferences. These provisions will also ensure that there are fewer and simpler tariffs so that it is easier for consumers to shop around for the best deals across the market. Last year, Ofgem estimated that there were approximately 900 open tariffs. Under these proposals, each supplier will be allowed to offer a customer a maximum of four core tariffs for each fuel and meter type. We want to see a competitive retail market, where suppliers have to work hard to retain their existing customers and attract new customers.

These measures complement the new consumer redress measures already in the Bill, which ensure fairer outcomes for consumers by giving a new enforcement power to Ofgem. This power will enable Ofgem to require energy companies that have breached regulatory requirements directly to compensate consumers where they might otherwise not have done so. This is another step forward for energy consumers.

We have listened to the concerns raised throughout the passage of the Bill. Opposition Members have raised questions about transparency and accountability, and we have responded by amending the Bill further to ensure that it aligns with the Government’s principles in this area.

We remain committed to encouraging a more diverse and competitive energy market, and there are a number of related areas within the Bill that we will hope to consider further in the other place. As indicated in Committee, we will continue actively to consider raising the threshold for the small-scale feed-in tariff scheme from 5 MW to 10 MW, and the Government hope to respond to this issue in the other place. We are taking backstop powers in the Bill to enable the Government to intervene in the generating market, if needed, to improve liquidity and competition.

I am grateful to the House for taking the time to scrutinise and contribute to this Bill. The wide cross-party consensus we have achieved sends a strong signal to investors in the UK and investors globally. The UK is the place in the world to invest in low-carbon energy. We now have the opportunity to deliver a lasting framework for investment in the country’s energy infrastructure: delivering green jobs and green growth, securing a low-carbon energy future, and ensuring that consumers get a fair deal. I commend the Bill to the House.