Draft Contracts for Difference (Miscellaneous Amendments) Regulations 2022

Debate between Lee Rowley and Alan Whitehead

Monday 23rd May 2022 General Committees

[Lee Rowley]

I am grateful for the hon. Gentleman’s question. My understanding is that we are allowing BECCS to be eligible in general, but the specifics and the detail—recognising that there are two different elements of both generation and capture through the energy value chain and how they interact—will need to be dealt with on a case-by-case basis and looked at in the round when we launch a process to move on as part of this process of changing the statute book.

My hon. Friend the Member for Windsor asked about the reference price and the strike price. I do not think there is anything more apparent here than simply adding an additional layer of flexibility. We are not saying that we are definitely doing something else, or that we definitely want to move away from reference prices and strike prices; to the point raised by the hon. Member for Kilmarnock and Loudoun, this is just about ensuring that we do not have to come back again if we determine in the future that a different model is appropriate—one that does not mention reference prices and strike prices but potentially mentions some other element.

[Dr Whitehead]

I wonder how that ties in with what is in the carbon capture and storage business plan about the articulation of strike price and reference price-type arrangements in capex and opex as the system progresses. That suggests that the system is more of an RAB system than a CfD system. In the Minister’s mind, how do the two interact?

[Lee Rowley]

I am grateful for the hon. Gentleman’s question. The narrow assessment that we are doing today is to try to ensure that the statute book is as flexible as it can be in the event that alternative models emerge. The technicalities of those alternative models would need to be debated and discussed with experts. For the moment, we are trying to ensure that the legislative framework allows for that variation, should it be necessary. Whether it will ultimately be necessary is a broader question, which will be addressed in due course.

The hon. Member for Kilmarnock and Loudoun raised some important questions about timelines for power plants, the number of power plants and where they will be located. I am sure he expects me to say this, but I am not in a position to outline the precise process by which the system will be operationalised, I am not in a position to confirm whether it is one or n, and I am certainly not in a position to confirm where those locations—singular or plural—will be. This is about getting the legislative and statutory framework ready to be able to make those decisions, which will be made in due course through the appropriate processes.

I make a similar point about bespoke versus auction processes, and about some of the technical questions that the hon. Gentleman asked about comparisons between new and older. He also asked about the broad true cost of transportation, whether it is pipeline or non-pipeline. He makes an important point, and that will all need to be considered in the round when we come to operationalise the changes in due course.

I hope that I have addressed many of the key questions relating to the SI. There is obviously a broader debate about energy policy and some of its elements, but I hope that the Committee is minded to support these technical changes to the rules and regulations that govern these areas, so that we have the flexibility to ensure that we can develop this technology and operationalise it successfully. I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Contracts for Difference (Miscellaneous Amendments) Regulations 2022.