Energy BILL [ Lords ] (Sixth sitting)

James Cartlidge Excerpts

Thursday 4th February 2016 Public Bill Committees

[Callum McCaig]

I thought that we were having another vote, so I was not quite ready. You have taken me by surprise, Mr Davies, but I shall soldier on valiantly.

Many of our discussions during the last few days of this Committee have been about subsidies for onshore wind and how they can best be dealt with. I am not sure that we have dealt with them in the best manner possible, but there we are. The Minister has said today, in debate between her and the hon. Member for Norwich South, that as the costs come down, so should the subsidies. The renewables obligation was not perfect in its operation. That is probably widely accepted and why it was replaced with a much better form of subsidy or price control or stabilisation mechanism—whatever one wishes to call it. I am referring to contracts for difference. That model has provided a competitive option whereby energy producers’ projects come forward and suggest a price that they can provide their electricity at. That has brought a greater sense of competition and a greater bearing down on costs. It is an important part of the development of the industries to enable us to meet our carbon commitments and, I would argue, to deal with our security of supply issues in a cost-effective manner.

New clause 5 suggests that there should be a CfD allocation every year in which the carbon intensity of electricity generation in the United Kingdom exceeds 100 grams per kWh. That figure comes from the policy recommendations from the Committee on Climate Change in “The Fifth Carbon Budget: The next step towards a low-carbon economy”. One of its recommendations was that the Government should develop policy approaches consistent with reducing the carbon intensity of the power sector to below 100 grams of CO₂ per kWh in 2030. That compares with 450 grams in 2014 and the projection for between 200 grams and 250 grams by 2020. That last point indicates that significant and welcome progress is being made on reducing the carbon intensity of the power sector in terms of electricity generation, but it suggests that there is still a long way to go.

Why is it important that we hold auctions annually, in terms of the CfDs? I think it comes back to what has been another key theme of this debate, the need for investor certainty and investor confidence. I believe that this would provide that. While there is a requirement to decarbonise the electricity sector, there must be a clear path for us to do so and a clear indication given to businesses that scale up their investment, if they put forward the proposals that are required—the research and development, the site appraisal work and all that is needed to bring forward whatever it is, whether it is a solar farm, a wind farm, offshore wind or other technologies, including tidal, perhaps, which is further from the market but I hope will play a considerable part in electricity generation, certainly by 2030, given the potential that we have to do it.

That potential is important. The certainty that this new clause would provide would enable the significant investment that needs to come from the sector following the Paris agreement and in terms of meeting our own climate change commitments. By providing the certainty that there will be a market, that there will be potential for projects to be deployed, provided they are cost-competitive, that will, in itself, drive down costs. So it is good for the Government, in terms of meeting their climate change commitments, but it will also ultimately be good for the consumer.

New clause 6 suggests the devolution of the contract for difference mechanism to Scottish Ministers. The operation of the renewables obligation had been dealt with by Scottish Ministers previously and in discussions I have had with many in the industry in Scotland they were very pleased with how the Scottish Government approached the renewables sector. There was the kind of clarity I have just discussed. We need to recognise that there are differing means and differing desires in the different nations of the United Kingdom about how we are to meet our electricity needs and our carbon-reduction targets. This Government legitimately wish to pursue nuclear, which is not something I advocate, largely on a cost basis. That is their right. I do not oppose the principle of their pursuing that, should they wish. I have issues around costs, which will be borne by GB consumers as a whole, but it needs to be recognised that if parts of the UK wish to pursue one form of energy policy, it is legitimate that other parts should be able to pursue a distinct process.

[James Cartlidge (South Suffolk) (Con)]

It is a national grid, is it not? I am not stating the obvious, but Scotland, for example, cannot cut itself off from the electricity generated by nuclear power in other parts of the country. So we still need a UK-wide policy on the fundamental supply. They may take a different view on onshore wind, but on the fundamentals it is a UK grid.

[Callum McCaig]

It is a GB grid—I do not mean to be pedantic and split hairs. At this moment, yes, I agree with that. What I am asking for is the replication of what happened previously with the renewables obligation. There was a process by which differing processes were put in to manage that form of support for renewables, and I think that could be replicated in the round. I think National Grid is comfortable with different forms of electricity generation in different parts of the country.

We have heard that National Grid views the concept of traditional base-load to be somewhat outdated: it is about balancing and managing the reserves, providing it knows what there is to be developed in different parts. It would require considerable engagement, should this happen, between both Governments and between each and National Grid in order to work out how it would be developed. I see the Minister champing at the bit to come in.

--- Later in debate ---

[Callum McCaig]

I think my hon. Friend was referring to the strike price for onshore rather than offshore wind. On transmission charging, that does not help how we in Scotland would wish to form our energy supply. We have limited control over that and the cost of producing a gas-powered plant in Scotland, as opposed to within the M25, is prohibitively expensive. I do not think that the process is working, because I do not see a whole new fleet of gas plants being built in close proximity to London and if we do operate a GB grid, that should be done on a level playing field.

[James Cartlidge]

I do not want to labour the point, but I would like to clarify why I asked that question and why I think the Minister is supportive. When we were discussing amendment 14 or 15, whereby the SNP wanted the power to operate the renewables obligation in Scotland, I asked the hon. Gentleman if his party would be prepared to pay for that and he said that it would not. However, on the nuclear price he said that that must be paid for and that balances it. The SNP seems to assume that Scotland can cut itself off from the nuclear-generated electricity coming into the GB grid, to which presumably Scotland wants access. With respect, it seems that the SNP wants to have its cake and eat it.

[Callum McCaig]

I have been trying to get on to funding for some minutes but I keep being intervened on. I would like to see developed at a much greater level better connections between not only Scotland and England, which are coming on in terms of the grid, but the British Isles and the continent. The way forward has to be much greater interconnection throughout Europe. That argument has been put forward by the Secretary of State, which is welcome, but it should not be seen as interconnection for the sake of getting energy from elsewhere.

We, as a nation, have issues in terms of the balance of trade, and relying more than we do now on imports of energy would be detrimental. If we can unlock the huge potential we have, particularly of renewables and particularly in Scotland, there is the potential to be a net exporter, though not at all times; the new clause would play a part in that. That should be the ambition, in my view. If we are going to have a European grid, we should not limit our ambitions to being an importer.

We need to respect the differing modes and choices of the people of these islands, if we are a family of nations that respects our divergent views. If England chooses to produce nuclear, that is fine. Whatever the relationship between the two countries, I see a point where there will be a need for nuclear from England, but likewise, there is a need for energy from Scotland at times. That is the level of co-operation.