Energy Bill

Lord Cameron of Dillington Excerpts

Tuesday 2nd July 2013 Grand Committee

[Lord Deben]

I find that very difficult to follow. This is not a prescription for the means by which we will meet the requirement of a carbon-intensity target. It is an assurance that we are going to stick to that target so that everybody can use whatever mechanisms they have. This is a non-prescriptive concept, of which I approve. It does not say that we have to use this, that or the other. It is a portfolio approach. I still think that the parallel is very clear. If we had been able to stick to our proposition, we would be in a better place today and we would not have to do many of the things that we seek to do today. To ask us to repeat that mistake seems to me a great sadness.

I come back to my first point. The reason we believe that there should be an interim carbon-intensity target is that it is necessary if we are to reach our statutory requirement in 2050. It is necessary for the United Kingdom plc because it gives certainty to people about the parameters within which they will work. If we do not do it, all the noise around what the Government are doing, and the determination to put off to beyond the next election the carbon-intensity target that is now admitted by the Bill, will do a great deal of harm. It will mean that the supply chain that could come to this country will not come and that the jobs and prosperity that should come from our far-sighted decisions will not be gained and earned. We will do very much better to take the advice that will lead to a serious system in Britain that will make us competitive with the rest of the world.

[Lord Cameron of Dillington]

My Lords, like the noble Lord, Lord Deben, I support the amendments in the name of the noble Lord, Lord Oxburgh, in favour of setting a 2030 decarbonisation target in 2014 and not waiting until 2016. I declare my interest as a farmer and landowner with a very small interest in a renewable energy scheme on my farm.

As I said at Second Reading, we desperately need to invest now in new sources of power to keep our lights on and our economy running efficiently. Of course, I am referring to the long term because it is probably already too late for the short term, although we are not going to be discussing that today; nor are we discussing incentives for the generators themselves. Their incentives are contained in the contracts for difference, which help them to overcome the problems and the risks of the huge upfront capital costs of renewable energy schemes, where, on the whole, the fuel or the power source is free—which, as the noble Lord, Lord Deben, says, makes them very cheap and good value to the consumer in the long run.

What we are discussing today is the need for supply chain investment, as the noble Lord, Lord Oxburgh, said. We are seeking to give a degree of certainty to the Gamesas, the Vattenfalls, the Siemenses and the Vestases of this world that, yes, they can invest billions in production plants to produce the turbines and blades for offshore wind—they can invest in the UK economy. These amendments are trying to give them the confidence that their plant will not produce up to the cliff-edge that is 2020 and then have to sit while the UK Government adopt one of the options in last December’s gas strategy that makes gas a central, core part of our energy policy. This amendment is about giving confidence to the supply chain for renewable energy.

Some people might ask—as the noble Lord, Lord Jenkin, did—who could doubt the UK’s commitment to a decarbonisation agenda? It is a rational certainty. After all, our Climate Change Act gives us the tightest emissions reduction target on the planet for 2050. After all, the Government’s own sponsored impact assessment shows that a 50 gram target could have the benefit, among other things, of reducing consumer bills between 2016 and 2030, depending on international gas prices. After all, the Government have virtually admitted that the whole point of this part of the Bill is to bring in a target in 2016, so all we are doing here is arguing about a two-year pause—what possible difference could that make?

A 2030 target is a rational certainty, yet 2016 brings us beyond the next election and who knows who will be in charge then? As has already been said, this Bill does not quite commit the Government to setting a target in 2016, only some time possibly after 2016. Therefore, Amendment 7, in the name of the noble Lord, Lord Stephen, is a possible fallback position.

In the light of all this rational certainty, what is preventing the Government committing themselves now? Is it the need for ongoing gas generation to provide the capacity reserve that everyone knows will still be around well into the 2040s, pumping out 300 grams of CO₂ for every kilowatt hour produced? Or is it the possibility of more dramatic changes in the energy market? No one can deny that in the United States shale gas was a revolution in terms of the price of power there, and the rest of the world is looking to see whether it can join the club, as it were, including the United Kingdom. I think that a revolution from our shale gas is pretty unlikely and that the international price of gas will carry on going up.

If the Government cannot commit amid all this certainty, why on earth should business, its investors, its banks or backers commit? This is an investment landscape totally driven by the political agenda. Without government commitment, it is hard to see why industry should commit. This is such a golden opportunity for creating a whole new economy for jobs and growth in this country. As the Chief Secretary to the Treasury said,

“we just need to have a very, very clear position and a very, very clear plan”.—[Official Report, Commons, Energy Bill Committee, 5/2/13; col. 468.]

However, that is not apparent as yet.

Various noble Lords who attended a very interesting talk last night by Peter Atherton, an investment analyst, have made reference to it. I have heard similar talks before. When I sat on Sub-Committee D, we looked at the European power sector. We were informed, in much the same language, that it was going to be very hard to produce the power and the investment. Indeed, there has been such a lack of political leadership on the continent, which I think is fairly important, that the continental power companies’ shareholdings have sunk almost out of sight and very little investment is happening in that sector. It has not happened yet in this country but the question of political leadership is important here.

The essence of Peter Atherton’s message was that a 50 gram target by 2030 would cost far too much and be impossible to deliver in the current UK and EU financial markets. That is quite apart from the extreme difficulty of building the physical structures needed to deliver a 50 gram target on time. Clearly, the Government and the climate change committee should listen to him and others on the practical difficulties and expense for consumers of delivering a 50-gram-per-kilowatt-hour target by 2030. He convinced me that perhaps a 50-gram target by 2030 was a step too far but he did not convince me that we do not need a target at all. It could be that 75 grams or 100 grams would be enough to convince the investors that their investment in the supply chain would be safe. The point is that if we believe in climate change and the need to act sooner rather than later—it appears that all political parties in this country do—we have to commit ourselves sooner rather than later, which is why I support this amendment.

The Government say that they are waiting for the fifth carbon budget before they commit, but I do not find that a very convincing excuse. Such a budget applies to the wider economy and is not set to specific. I realise that the power sector is responsible for some 27% of the nation’s carbon emissions. Therefore, it could not expect to escape totally untouched by such a carbon budget but there is unlikely to be the total clarity within these general targets to provide the certainty for investors in the power sector.

In conclusion, it would appear that over the past 200 years our society has developed a form of lock-in to fossil fuels and fossil-fuel power. We have got better and better at extracting these fuels, and better and better at using them. They have become cheap, convenient and reliable. But now we realise that we have to make a step change, which will not be easy—indeed, it is proving to be very difficult—as a nation or even as a species, to getting better and better at deploying and harnessing non-fossil technologies. I believe that over time we can learn to make renewable technologies also cheap, convenient and reliable. But for that to happen, and for us to create this whole new economy and these new jobs, we need commitment from our Government. These amendments give our Government the opportunity to take that lead.