Electricity Market Review
Debate between Ed Miliband and Caroline Nokes(3 days, 21 hours ago)
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The Secretary of State for Energy Security and Net Zero (Ed Miliband)
With permission, Madam Deputy Speaker, I shall make a statement about the review of electricity market arrangements.
The central challenge that we face is the urgent need to get off expensive, insecure fossil fuels and to deliver an energy system that meets at least double the level of current electricity demand by 2050. In doing so, we need to design the electricity network to ensure that infrastructure is built in the right places, so that we can effectively provide power where it is required. As a result of previous failures to do so, power now goes to waste, costing consumers in higher bills. That is one reason why reform is needed.
The task of this review is to help deliver a fair, affordable, secure, and efficient clean power system. The key question has been whether to proceed with zonal pricing or a reformed national system. Under zonal pricing, we would split the country into different zones relying on price differentials to guide investment decisions. Under a reformed national price system, we would rely on more deliberate strategic co-ordination in advance of investment—planning our network and areas of intended generation more closely and then delivering.
I have applied three tests to this choice in the time since the Government took office: first, what is the fairest approach for families and businesses, both now and in the long term; secondly, which reform can deliver energy security and will best protect consumers and ensure bills savings as soon as possible; and, thirdly, what will do most to ensure the investment, jobs, and growth that we need across the economy? On the basis of these tests, I have concluded that the right approach is reformed national pricing. Let me set out why.
On the fairness test, under reformed national pricing, there would be one national wholesale price, as now. As I have said, under zonal pricing there would be different wholesale prices in different zones. Lower prices will tend to occur in zones with more renewable energy and a smaller population, and higher prices in those with less power and more people.
This would be a significant departure from the current system, which, while it has some differences in network costs, means that wherever a person lives, they pay the same wholesale price for each unit of electricity. The challenge will be obvious to the House. People and businesses could find themselves disadvantaged through no fault of their own and many would see that as unfair. Such a postcode lottery is, in my view, difficult to defend.
The Government have considered whether it would be possible to mitigate these effects under zonal pricing. We have concluded that, while it might, it would be a very complex and uncertain process. And it would be even more challenging to do so for large businesses, given the way that they purchase electricity. Therefore, firms in higher priced zones, such as the midlands, Wales, and the south of England, would therefore face damage to their competitiveness. That is why we have seen so many business groups express such concern about zonal pricing. Indeed, today’s decision has already been welcomed by UK Steel, Make UK, the British chambers of commerce, Ceramics UK and others.
The next test that I applied is which system can best help deliver energy security, protect consumers and ease the cost of living crisis as soon as possible. Long-term reform is essential to cut costs and save money for consumers compared with the status quo, but there is a key question as to what happens in the meantime. The clear advice of my Department is that moving towards zonal pricing would take around seven years to complete in full—assuming no delays. Over that seven-year period, the costs of financing essential investment in our energy system would be likely to rise to accommodate investor uncertainty, at a moment when we urgently need to replace retiring assets and build a clean energy system to boost our energy security. This risk premium would be paid for by consumers in higher bills in the coming years. There is also a danger that it would leave us stuck on fossil fuels for longer by deterring investors from bringing forward the investment that we need for our energy security.
By contrast, reformed national pricing could be delivered more quickly and at lower risk. Indeed, some elements of a reformed national pricing system are already under way, including building network infrastructure, and we intend to proceed with other measures, such as reform of transmission charges, as soon as possible in this Parliament. Having studied this in detail over months, I see real risks that zonal pricing would deter the investment we need and that bills would rise in the transitional period.
The third test is the investment and growth we need as a country. Many businesses make decisions to invest based on the energy costs that they face. The industrial strategy took a crucial step forward in lowering the costs faced by businesses, and clean power will help get us off the fossil fuel rollercoaster, which has so damaged our country’s businesses.
We know that the biggest enemy of business investment is uncertainty, and the risk of zonal pricing is that it would create very significant uncertainty. Imagine a business seeking to invest not knowing for a number of years what zone it would be in and what price it would pay. This would harm investment not just in the energy sector but well beyond it, and it would inevitably risk reducing investment in our country precisely when we need it and undermining the tens of thousands of good jobs in constituencies across the country that our clean energy mission will support.
On the basis of those three tests, I believe that the best choice is to proceed with reformed national pricing. The key elements will include: effective planning through the strategic spatial energy plan to be published next year; national pricing reforms, such as making transmission charges more effective and predictable and taking relevant powers through Parliament to do so; and making changes working with the National Energy System Operator and Ofgem to improve the operation of flexibility and the balancing of markets.
Under reformed national pricing, we will build the transmission network we need to the benefit of all consumers, and we will be more directive and co-ordinated in how we plan our energy system. Each upgrade that we deliver will reduce constraint costs and ensure that consumers benefit from clean power. My Department will set out a reformed national pricing delivery plan later this year. Taken together, I believe that these steps can help to deliver a more affordable, fair, secure and efficient energy system and will address the problems that the REMA process set out to solve without the unacceptable risks I have outlined.
These steps build on what we have done over the past year to turbocharge our drive to home-grown clean power. We have consented three times more solar in 12 months than in the previous 14 years. We have lifted the onshore wind ban and consented enough offshore wind to power the equivalent of 2 million homes. We have backed the biggest expansion of new nuclear in half a century. We are kick-starting new industries in carbon capture and hydrogen. We are giving nearly 3 million extra families £150 off their energy bills next winter and upgrading up to 5 million homes to help cut bills.
Every energy decision that this Government make is in pursuit of protecting the British people from fossil fuel markets controlled by petrostates and dictators by delivering clean, home-grown power that we control. It is in that spirit that we have chosen reformed national pricing. We are doing everything we can to ensure energy security, protect consumers and get bills down, and to ensure that businesses can invest for the future. This is underpinned by a commitment to fairness across the country. I commend this statement to the House.
Madam Deputy Speaker (Caroline Nokes)
I call the shadow Secretary of State.
Ed Miliband
This is the first time I am at the Dispatch Box opposite the shadow Secretary of State; I congratulate her on her new baby boy and welcome her back to the House of Commons. I know from my own personal experience that crying at night is challenging, but who is surprised, given the state of the Conservative party?
I think the shadow Secretary of State and I have a number of differences. The fundamental difference is this: she wants to gamble in the fossil fuel casino—she wants to gamble on fossil fuel prices. That is what the Conservatives did when they were in office, and it led to the worst cost of living crisis in generations. [Interruption.] The shadow Secretary of State says from a sedentary position that it is not true. It absolutely is true, and I think she needs to get out there more and hear what people have to say to her. It ruined family finances, it ruined business finances and it ruined the public finances. And what do they do? Do the Conservatives come along, after their worst election defeat in 200 years, and think, “Well, maybe we got it a bit wrong. Maybe we should think again”? No, they double down on a failed strategy. That is the first point.
The second point is this. The shadow Secretary of State says that we have a problem of constraint costs—that it is really a problem that we do not have the infrastructure that the country needs. She is absolutely right, but who was in charge for 14 years? Don’t just take my word for it, by the way. I notice that her colleague the shadow Energy Minister, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), is not in his place, but he said that it is absurd that, after 14 years of Conservative Government, we are now in a situation where it is more difficult to build critical national infrastructure than it was before they came into power and that it costs more. That is what we have got: the grid system was massively backed up, the planning system was in disrepute, and the network and transmission infrastructure was not built.
The third point is that the shadow Secretary of State now says, “Okay, well let’s forget about the past. Ignore my record—airbrush it out. Let’s build the grid.” Too right we should build the grid, but she is opposing new clean energy infrastructure all around the country. She is going around saying, “Oh, it’s terrible. We shouldn’t be having this happening.” So at the level of strategy and what is the right thing for the country, at the level of her record and why we are in this position, and at the level of what she is doing now, I am afraid she is in the wrong place.
Now, what are we doing? We are actually changing all of this. In the period that the shadow Secretary of State has been away, we have seen a whole set of decisions made that the Conservatives talked about but never delivered. On nuclear power, they talked a lot about Sizewell and small modular reactors and all that, but they did not actually deliver it. We are—with over £40 billion of private investment in clean power unblocked and a record-breaking renewables auction.
By the way, the shadow Secretary of State says that I am somehow on the side of the wind developers. No, Madam Deputy Speaker; I am on the side of UK Steel, Make UK, the British Chambers of Commerce, Ceramics UK and businesses across the country who have said that this is the right decision for the country. [Interruption.] She mentions bills. Let me address that directly. My strategy and my belief is that a clean power system can bring down bills for good, because that is that way that we lower wholesale prices and get off the rollercoaster. Home-grown clean power is the answer for Britain, and I suggest that, now she is back in her post, she does some hard thinking about the past, about strategy and about what is right for Britain.
Bill Esterson (Sefton Central) (Lab)
I am sure the Secretary of State will not be surprised to hear me say that I very much welcome what he has announced. He set out three priorities: fairness, lower bills—including and especially in industry and business, where my Committee heard as recently as yesterday that energy bills are causing real concerns and something of a crisis in certain industries—and attracting investment, not least ahead of auction round 7.
I was saddened that the shadow Secretary of State was so critical of wind generation. I have her letter of 12 March 2024 to my predecessor as the Chair of the Select Committee setting out her terms of reference for the consultation that the Secretary of State has responded to. She placed great emphasis on the importance of investing in renewables, so it is a great shame to see her change of heart.
Under the reformed national system, does the Secretary of State envisage increasing opportunities to use demand flexibility, and to use it as fast as possible, as a key way of bringing down energy costs for domestic and industrial consumers?
Ed Miliband
My hon. Friend speaks with great expertise on these matters. I will come to his question, but let me say first that I like to talk about issues on which both parties have been enthusiastic. We have the second largest offshore wind generation in the world. It was started when I was Secretary of State with Gordon Brown as Prime Minister, and it was continued under the last Government. It is extraordinary that the shadow Secretary of State is now abandoning that and saying that offshore wind is somehow the problem. It is not the problem; it is the solution.
My hon. Friend is right about consumer-led flexibility. The key point about that is that it is voluntary, and it is a way for consumers to save money. The shadow Secretary of State mentioned Octopus Energy, which is one of the pioneers of this. We are in the foothills of what we can achieve here, whereby consumers are empowered, through things like batteries, solar panels, heat pumps and smart meters, to control when they use energy much more easily, to their benefit and the benefit of the system.
Pippa Heylings (South Cambridgeshire) (LD)
I thank the Secretary of State for sharing his statement in advance. He is right: making the UK a clean energy superpower is the smartest and most strategic way to free ourselves from our dependence on expensive, volatile fossil fuels. However, as we have heard, accelerating the transition to renewables alone is not enough. The Government have to ensure that the clean power mission ultimately brings down customers’ bills and creates a fairer system for households and businesses.
Energy bills in the UK are among the highest in Europe. Our high costs exacerbate cost of living pressures and increase fuel poverty. They also undermine our international competitiveness for industrial and commercial consumers and risk driving some businesses overseas. The Liberal Democrats have long called for electricity prices to be decoupled from the wholesale price of gas so that families in the UK are not left paying over the odds for clean, British-generated electricity just because of volatile global gas prices. We will be looking closely at the details of the Government’s plan following the review of electricity market arrangements.
The Secretary of State outlined his three tests. To ensure that British consumers are not exposed to an unknown level of risk, will he publish his cost-benefit analysis and set out what impact the changes will have on customers’ bills? We will also be looking keenly for the much-needed joined-up approach between planning for renewable energy infrastructure through the strategic spatial energy plan, and the land use framework and local area energy plans, which, worryingly, are a bit out of sync.
Renewable energy can be the cheapest, most secure source of power, but for many people, seeing—and feeling it in their pocket—is believing, and under the current system, many are struggling to see it. Alongside the changes announced today, I hope the Secretary of State will consider other Liberal Democrat proposals, just as they did when putting into practice our proposals for rooftop solar on all roofs. We would like to see free insulation and heat pumps for people on low incomes and the introduction of a social tariff for energy to protect the most vulnerable.
Oral Answers to Questions
Debate between Ed Miliband and Caroline Nokes(5 months, 1 week ago)
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Ed Miliband
As the Chancellor said last week, any aviation expansion has to take place within carbon budgets and environmental limits. I would also point out that this Government have achieved more in six months than the last Government did in 14 years. We have lifted the onshore wind ban, consented nearly 3 GW of solar, set up GB Energy and the national wealth fund and held the most successful renewables auction in history. This Government are delivering on clean power.
Ed Miliband
My hon. Friend asks a really important question. The whole point of our clean industry bonus is to incentivise British manufacturing. That is so important for the country, and it was not done by the last Government. We are determined that his constituents and constituents across the country will benefit.
Madam Deputy Speaker (Caroline Nokes)
I call the shadow Secretary of State.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
This Government’s ideological obsession with intermittent renewables at the expense of stable, clean, baseload nuclear power will, we think, be their greatest mistake. They have delayed the small modular reactor down-selection competition, and we have not heard a peep about the final investment decision on Sizewell C. However, none of that comes close to the monumental act of self-harm of deciding to throw away and bury—out of reach, underground—20 years of nuclear-grade plutonium, which could be used to drive forward a nuclear revolution in this country. How does the Secretary of State think this will play with the pro-growth, pro-nuclear MPs in his own party who are already worried about him being a drag on growth?
Ed Miliband
This is hard, partly because of the fiscal backdrop, but we are working on a comprehensive plan so that we can help not just the poorest—we want to help those in fuel poverty—but people across the income spectrum through a more universal offer. If we can get funding for up-front investments, there will be massive paybacks; that is the chance. We all know that. It is a hard nut to crack, but we are doing our best to do so.
Richard Tice (Boston and Skegness) (Reform)
Energy suppliers are now forecasting that the energy price cap will go up in April by another 5%, making for some 16% since last summer. Will the Secretary of State tell the House when bills will come down—or will net stupid zero mean that they will only ever go up?
COP29
Debate between Ed Miliband and Caroline Nokes(7 months, 2 weeks ago)
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Ed Miliband
There are indeed members of the UK Youth Climate Coalition who go to COPs. I do not want to interfere in UKYCC’s processes for picking those people, but my hon. Friend makes an important point about the voice of young people. They represent young people, but they also represent future generations, and hearing how those future generations will regard the actions that we do or do not take is incredibly important.
Llinos Medi (Ynys Môn) (PC)
Diolch, Madam Deputy Speaker. Despite today’s statement noting that it is in the UK’s interest to speed up clean energy, we still need urgent clarity on clean energy projects. Will the Secretary of State finally confirm the Government’s plan for nuclear at Wylfa in my constituency?
Carbon Capture, Usage and Storage
Debate between Ed Miliband and Caroline Nokes(9 months ago)
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Ed Miliband
I know that the right hon. Lady is in a difficult position, and it rather showed today. Let us be honest: the truth is quite painful for her. She failed, as Energy Secretary, to get carbon capture over the line, year after year—well, to be fair, she was only in the job for 10 months, but certainly month after month. The funding was never secured, because there was not the political will from the Chancellor or the Prime Minister. We have seen a long line of 20 Energy Secretaries and 14 years of failure. I must give the right hon. Lady her due: she did try, I am sure; but there was nothing but dither and delay. When we came to office, the funding had not been accounted for as part of a spending review; it simply was not there. There was just a vague promise. Now it is quite difficult for the right hon. Lady, and perhaps we should have a little sympathy for her, because she has had to come to the House and see what a Government actually delivering looks like.
Let me deal with the right hon. Lady’s questions in turn. She had the brass neck to suggest that the problems at Grangemouth and Port Talbot were somehow due to the negligence of this Government. Let me tell the House about Grangemouth. I came to office with the closure of Grangemouth already announced and likely to happen. I have probably had more conversations with my counterpart in the Scottish Government than Tory Ministers had in 10 years, because they just were not interested. We should be extremely angry about that. So what did we do? We funded the Willow project, which the Tories did not fund. We added to the growth deal, which they did not do. We said that we would have a national wealth fund with the potential to fund Project Willow. We had none of that from the right hon. Lady. She just was not interested. She just did not care; that is the truth of the matter. Of course it is ideological, rather than accidental. [Interruption.] Yes, it is. A bit of honesty from the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie)! I noted that he was very honest about the right hon. Lady at the party conference. The truth is that the Tories did not have an industrial strategy because they do not believe in an industrial strategy.
Let me deal with the rest of the right hon. Lady’s nonsense. I am very pleased that she is interested in Gary Smith, because he has said:
“This is a serious step in the right direction and a welcome investment in jobs and industries after years of neglect under the previous administration.”
That is the reality. As for the other stuff that the right hon. Lady said, I think that she has a decision to make. She began her political career in the Conservative Environment Network, and she has ended up backing a net zero sceptic for the Tory leadership. I think it is a little bit sad. She should take some time to reflect on that, and on the utter contrast between her failure and this Government’s delivery.
Madam Deputy Speaker
I call the Chair of the Energy Security and Net Zero Committee.
Bill Esterson (Sefton Central) (Lab)
Unlike the shadow Secretary of State, I am very pleased that the Secretary of State has announced jobs in Teesside—jobs from which my constituents in the north-west of England will potentially benefit. I am also very pleased that we have a Government who are committed to an industrial strategy, and who believe in Government working in partnership with business.
The Secretary of State mentioned just how important it is that we have this technology if we are to decarbonise; he quoted James Richardson in making the case. It will be crucial for the abatement of heavy industries such as chemicals, glass—the Secretary of State went to visit a glass factory in the north-west on Friday—and cement, but it will also be crucial for hydrogen production, for the new gas-fired power stations and, indeed, for converting waste into energy. How long does he think we will need this technology for the abatement of heavy industry, and how long does he think we will need it for hydrogen production and production from gas?
Contracts for Difference
Debate between Ed Miliband and Caroline Nokes(10 months, 1 week ago)
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Ed Miliband
At a lower price. This floating offshore wind farm alone is double the size of all of Europe’s installed floating offshore wind capacity. In addition, on tidal, where Britain has huge leadership opportunities, we have secured six new tidal stream projects at the lowest ever price.
Fourthly, on fixed offshore wind, in contrast to the zero GW secured in last year’s round, we have secured 4.9 GW of offshore wind, enough to power the equivalent of 8 million homes. That includes securing both the largest and second largest offshore wind projects in Europe—Hornsea 3 and Hornsea 4 off the Yorkshire coast. An industry flat on its back because of the mistakes of the last Government is back on its feet thanks to this Government.
I can also report to the House that across the whole auction all these results were secured at prices well below the maximum price limit—prices that demonstrate that wind and solar are the cheapest sources of power to build and operate in our country. For the House’s benefit, that means a clearing price for offshore wind that is five to seven times lower than electricity prices driven by gas at the peak of the energy crisis.
The success of this round does not just offer greater energy security for the British people; it also offers the possibility of good jobs throughout Britain. But that will not happen without action by Government, because we know that too often in the past renewable energy produced in Britain has not created enough good jobs in Britain. With Great British Energy and our national wealth fund, we will invest to make sure our clean power mission produces jobs in every corner of the United Kingdom.
This Government have been in office for less than two months. In that time, we have lifted the onshore wind ban, consented more nationally significant solar capacity in one week than the last Government did in 14 years, and now delivered the most successful renewables auction in the history of the country. And on Thursday we will debate the Second Reading of the Great British Energy Bill. This is a Government in a hurry to deliver our mission: energy security, lower bills, good jobs and tackling the climate crisis. I commend this statement to the House.
Ed Miliband
My hon. Friend makes a typically eloquent point. This is about a partnership with private industry. The truth is that much of the investment that we need for the clean power mission will come from the private sector, and I suspect that there is cross-party agreement on that. We on the Government Benches have a difference with the Opposition, though, because we believe that a lot of that comes from breaking down the barriers to planning and grid infrastructure, which is a massive challenge for supply chains and skills. There is also a role for what we call catalytic public investment, levering in extra private investment.
The other point that my hon. Friend makes is absolutely right. There is huge enthusiasm in the private sector and industry more generally for this sense of mission for the country. We want this mission to involve every business that has an interest in this area, and I believe that we can achieve that.
Madam Deputy Speaker (Caroline Nokes)
I call the Liberal Democrat spokesperson.
Wera Hobhouse (Bath) (LD)
We Liberal Democrats very much welcome the results of this round. It is a significant improvement on last year, when the previous Conservative Government completely failed, with zero bids from the onshore wind developers.
The results show that the CfD programme is back on track. They demonstrate the power of industry and Government working together to identify a fixed problem, so that we can widen the level of private sector investment we bring in, which is required for a clean power system transition.
Britain’s unique geography, with its abundance of natural resources, is an asset. We must harness the wind and the world’s largest tides. It is hugely encouraging that a record-breaking amount of solar capacity has been procured. Whatever the Conservatives are saying now about their record in government, solar targets were repeatedly missed, and this round is a welcome change. Unlike the Conservative Government, who, as has been pointed out, left us at the whim of the global oil and gas market, this Government are making choices that will increase our energy independence and lower energy bills for our consumers.
Future allocation rounds, especially in the next few years, must continue to deliver increasing quantities of renewables. That can be achieved by setting ambitious budgets and bringing forward incremental reforms of the CfD regime. Can the Secretary of State assure me that this round is not just a one-off and that we will increase the pace of the CfD allocation rounds?
Ed Miliband
I agree 100%. The notion that our exposure to fossil fuels as a country gives us security is belied by what has happened over the last few years; as the Prime Minister often says, it means that Putin’s boot is on our throat. My hon. Friend talks about this patriotic mission, and he is completely right. Other parties in this House have a decision to make on Thursday: will they support the Great British Energy Bill? We have public ownership of our energy system in Britain—foreign public ownership, by state-owned companies from abroad. We welcome that investment, but we also want British public ownership. I very much hope that other parties will learn the lessons of their election defeat and support our Bill on Thursday.
Madam Deputy Speaker (Caroline Nokes)
To be helpful to Members, I gently point out that it is important that they be here for the start of a statement if they wish to be called to ask a question. I will be very kind today. I call Claire Young.
Claire Young (Thornbury and Yate) (LD)
Thank you, Madam Deputy Speaker. I thank the Secretary of State for his statement. The latest allocation round is good news and should be welcomed, especially after the fiasco of the last round. It is vital that Britain invests in our sustainable green energy production, so that we can guarantee our energy security and lead the world as a green powerhouse. However, the only way that we can achieve that is if we also push ahead with energy storage and ensure that we boost our capacity to retain the energy that is generated, so what steps is the Department taking to accelerate the roll-out of new storage solutions, including green hydrogen?