Lord Gardiner of Kimble
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Lord Gardiner of Kimble Excerpts
Lord Cameron of Dillington
I thank the noble Lord, Lord Deben, for endorsing my point. I was going to say that, unfortunately, China’s ravenous need for more and more power means that it has found it difficult to produce that power without building more and more coal-fired power stations in the short term. China will be a really big marketplace for CCS if we can pull it off.
As I understand it, one of the future supplies of gas, underground coal gas, could be the cheapest way of removing the carbon dioxide—although, again, as the noble Lord, Lord Kerr, said, these techniques have yet to be proven on a large scale. Before the fuel is burnt, it becomes a largely hydrogen mix, which, as noble Lords will know, produces an effluent made up mostly of water. UCG—underground coal gas—could be a fuel of the future. If we can get CCS involved in UCG, it would be an economically beneficial project for the UK to carry off. We must support CCS to the best of our ability in terms not only of adequate funding but of latitude in the regulations to allow it to overcome its teething problems.
Lord Gardiner of Kimble
My Lords, I thank the noble Baroness, Lady Worthington, for introducing this chapter of the Bill. I hope that noble Lords will understand that when I first studied the Bill and saw that Clause 47 opens with a formula, I was rather bothered. Providing that we can all keep to layman’s language, I will try my best, but if we go into formulae, I may need more advice.
I thank the noble Baroness also for tabling this amendment, which seeks to provide carbon capture and storage projects with an exemption from the emissions performance standard during their commissioning and proving period, with any exemption limited to a maximum period of three years. I am grateful, too, to all noble Lords for their contributions to this interesting debate at the beginning of this part of the Bill. I continue to learn a great deal.
The Government believe that CCS will have a critical role to play in reducing emissions in our country, allowing coal and gas, including that produced from indigenous sources, to continue to be part of our future low-carbon energy mix. The Government share the noble Baroness’s enthusiasm for CCS and want to see it deployed at scale in the 2020s, competing on cost with other low-carbon technologies. Our CCS programme is designed to drive forward the rapid commercialisation of CCS and includes £1 billion of capital funding for the first projects under the CCS competition. I note that we have two preferred bidders, Peterhead and White Rose; obviously, we will need to consider their progress.
My noble friend Lord Jenkin talked about CCS working abroad. It is advancing particularly in America and Canada. Those projects are combined with enhanced oil recovery, which improves the economics of the projects. Some of the circumstances of Europe and this country may be different, but those examples suggest that progress is being made around the world.
The noble Baroness will no doubt be aware that the original draft Bill contained provision for giving CCS projects supported under our CCS competition an exemption from the EPS. The purpose was to provide CCS projects with some flexibility in relation to the limits imposed on the operation of a plant by the EPS in order to help manage the inherent risks associated with trials of a first-of-a-kind technology. However, during pre-legislative scrutiny of the Bill, concerns were raised around the scope of the exemption provisions, in that the use of broad exemptions could undermine the purpose of the EPS. The Government looked at this again and decided, on balance, that these concerns could be addressed by managing any EPS-related risk through the CCS project-funding contract issued to a project under our CCS competition.
However, there have been a number of developments since last year with our CCS competition, which has stimulated industry to bring a number of proposals for CCS projects. The Government are therefore keen to encourage the development and deployment of CCS, irrespective of whether it is part of the CCS competition, so we have already been considering options for how we might provide CCS projects with some flexibility under the EPS during the early commissioning phase.
The noble Baroness’s amendment is tightly prescribed and would limit the duration of the exemption so that it was explicitly consistent with the overall purpose of the EPS. Undoubtedly there are positive advantages to the approach reflected in the amendment. As I understand the way of things, therefore, I would like to give much further consideration to the amendment ahead of Report. I repeat my thanks to the noble Baroness and ask her if she will consider withdrawing her amendment.
Baroness Worthington
I thank the Minister for his encouraging response and for saying that he will take the amendment away. Today’s contributions have underlined the importance of CCS. Here we stand a chance of the UK really capitalising on our natural assets, in terms of both the storage capability that we have in the North Sea and our engineering prowess and experience in offshore matters. I am hopeful that we will see CCS projects coming forward in the UK very soon.
In response to the question from the noble Lord, Lord Kerr, about whether or not CCS has been demonstrated anywhere, I refer him to the helpful report that the Government produced on CCS. Every three years the Government are legally bound to report on CCS developments. This Bill will actually repeal that but my noble friend Lord Grantchester is suggesting that the report should stay. In that helpful report we learn that investment is indeed going on today in CCS in the UK, and it details two plants that are very close to being commissioned in the US, due to come on stream in 2014. I am hopeful that then, at least, we will be able to put the lie to the idea to that CCS cannot be commercialised. If the US shows the way, I am sure that many others will quickly follow, including China, which, as we know, is investing in a number of CCS projects and, I am sure, is racing to get there too.
We need to up our game and get on with it, and this amendment is designed to ensure that there are no unnecessary hurdles in the way. I am encouraged by the Minister’s response so I am happy to withdraw.
Lord Teverson
Before the noble Baroness does so, the Minister mentioned 2020 in terms of commercialisation. Given the current stage of the tendering process, when might we perhaps predict that the first full-scale CCS demonstration project will be operating? Do we have a date for that now? I think we are all concerned. We all want this technology to win. We are aware, as the noble Baroness, Lady Worthington, has said, that it has taken a huge amount of time to get momentum, despite all the good will that there is for it.
Lord Gardiner of Kimble
I thank my noble friend. My understanding is that we may be working on this as early as 2015.
Lord Teverson
Indeed, although we have the situation, as I understand it—my noble friend will be closer to this—whereby the Government have to agree carbon budgets as they go along, this is contradictory to that same thing. I agree with him completely on that. I hope we can find a way to follow this amendment or to take out this very late date for a fixed emissions limit as high as that. In any other area of machinery or equipment, we would not accept this level of longevity for an emissions target.
Lord Gardiner of Kimble
My Lords, I am grateful to the noble Baroness for tabling this amendment, which has prompted a further debate on this additional aspect of EPS. During our debate so far, there has been a good deal of consensus among noble Lords on ensuring that the UK remains an attractive option for those looking to invest in a low-carbon electricity sector, and on the importance of gas generation. Noble Lords have also noted that the key to meeting that objective is providing investors with certainty about the regulatory environment that will govern their assets.
The Government’s gas generation strategy, published in December, set out our view that, along with low-carbon generation, we expect gas generation to continue to play a major role in our electricity mix over the coming decades as we decarbonise our electricity system, providing flexible back-up to increasing levels of intermittent generation. It also said that we are likely to need significant investment in new gas plants, in part to replace older coal, gas and nuclear plants as they are retired from the system, with much of that investment likely to be in the 2020s. It is therefore vital that we provide investors in new gas plants with the degree of certainty needed to ensure investment comes forward. Certainty over the EPS is part of that, and grandfathering the EPS limit until the end of 2044 will—
Lord Cameron of Dillington
A gas power station produces emissions of 300 grams per kilowatt hour, coal 600 grams. Hence we have the target of 450 grams. So, if we are trying to encourage more gas, why must we have an emissions target of 150 grams per kilowatt hour more than the 300 that gas emits?
Lord Teverson
Perhaps there is something I misunderstand here in the argument. This is not just about grandfathering, as I read it, it is about new plants in 2044. It will still only be 450. To get investor certainty, yes, we need the grandfathering, because once you have built the plants, as with cars, you are stuck with that. I would accept that once you have built them you would expect them to go through their normal life before any major refurbishment; you would expect that to stay at the emissions limit applying when that plant was first operated. However, this includes new plants, as I understand it, right up to 2044. That is not related to investor certainty, because plants at the moment would have grandfathering rights, but if we moved this date later on we could have different rules, and that would not affect investor certainty.
Lord Gardiner of Kimble
I thank noble Lords for their interventions. I think all will be revealed in due course.
I want to return to the matter of investors and business, because certainty over the EPS is part of that. The grandfathering of the EPS limit until the end of 2044 will, we believe, give investors in new gas plants certainty that the operation of their assets will not be constrained by the EPS for a period considered sufficient to make a return on their investment.
I am particularly mindful of what my noble friend Lord Deben said about business. It is important to note that business has made it clear that these grandfathering provisions are essential if the EPS is not to deter or increase the cost of investment in new gas plants.
Lord Deben
On that point, will my noble friend give way? I still do not understand the difference of view. The Government refuse to have a carbon intensity target for 2030 in order to give confidence to business to invest in low-carbon generation, but they insist that we have the equivalent for 2049, or whenever it is, because otherwise we will not get investment in gas. At least one of those arguments must be untrue. I cannot understand this utter conflict. They are two different arguments; my noble friend gave the one on the one occasion and now gives the opposite on this. We cannot really accept this argument on the basis of logic.
Lord Gardiner of Kimble
Let me quote the CBI, which is particularly supportive of the Bill’s proposals:
“The current EPS proposal should remain unchanged … It has been set at a level that will allow new gas plants to be built … and it contains strong grandfathering proposals out to 2045 which will give investors confidence”.
I say to my noble friend that this is what the CBI believes is necessary for business investment, which I think all noble Lords would agree we desperately need.
Lord Deben
Most of the members of the CBI have also asked for that on the question of carbon intensity in 2030, but there the Government have said, “It doesn’t matter what they say on this because we know best”. Yet when it comes to this issue, they quote the CBI and other industry bodies in favour of it. I come back to my point: we must have this approach either for both cases or for neither. If we are to have it for gas, surely we do not need it as far ahead as this. I come back to the point made by the noble Lord, Lord Cameron: we need it not at this level but only at 300 grams, as no one has suggested that gas will produce emissions of 450 grams. Where is that extra 150 grams coming from? What is it for?
Lord Gardiner of Kimble
As I say, I am quoting the CBI specifically on this matter, and it cites the year 2045. Although I understand what my noble friend is saying, I cannot renege on the fact that the CBI is specifically citing that particular year in the quote that I wanted to mention to the Committee.
There has also been a query, although we are going to discuss the 300 grams in further amendments, about the 450 grams. That figure represents a significant reduction in the emissions of a new coal plant. This level builds on and supports the planning requirement for any new coal plant to be equipped with CCS while being above the level of carbon emissions for a new gas plant. The 450-gram limit also provides some flexibility for CCS projects to help manage the uncertainties associated with first-of-kind technology. As I say, though, we will have a separate debate on this matter with the amendment of the noble Viscount, Lord Hanworth.
If I may continue, I say to noble Lords who may be concerned that we are locking in high levels of unabated gas generation well into the future, while grandfathering will give investor certainty over the regulatory regime under which their assets will operate in relation to EPS, it does not permit a right to emit. This is because as levels of low-carbon generation increase, with its use effectively prioritised due to its low generation cost, unabated gas generation will increasingly be displaced. The role of gas will therefore be to balance an energy system that includes greater amounts of inflexible and intermittent generation. Analysis for our gas generation strategy shows average overall load factors for gas plants at around 27% in 2030, based on achieving 100-grams-per-kilowatt-hour grid average emissions intensity.
The role of government is to strike a balance between the three objectives of energy policy: to decarbonise our electricity system, to maintain security of energy supply to the country and to keep costs to consumers to a minimum. I understand that the intention behind this amendment is to provide greater certainty for decarbonisation but, for the reasons I have set out, I believe that shortening the grandfathering period of the EPS would introduce uncertainty and risk to the new gas plants we will need to build up to 2030, and that the better way to balance these three objectives is through the approach that we are taking in the Bill.
I will study the references that have been made during this short debate, particularly my exchanges with my noble friend Lord Deben. As this is a technical matter, it would probably be better if I wrote to him and other noble Lords on this. I appreciate that the noble Baroness will be disappointed by my reply but I hope she understands that the Government cannot support her proposed approach because of the three objectives that we need to balance. On that basis, I hope that she will withdraw her amendment.
Lord Teverson
I know that I am stretching the patience of my noble friend but I want to get this clear in my mind. Does the legislation mean that in 2043 I can build a completely new gas plant as long as it emits under 450 grams per kilowatt hour, and operate it thereafter?
Lord Deben
Perhaps I might suggest to my noble friend that there is a way out of this, which is that we put into the Bill a statement that all this applies to plants built before 2025. The Government can then have all that they want but we do not have the ridiculous situation in which I can build a gas plant in 2043, seven years before we have to reduce our emissions by 80%, which would drive a wedge totally through that. Is my noble friend prepared to consult on whether the Government will accept an amendment put forward on that basis, which has been suggested to me by my noble friend Lord Dixon-Smith, who has made a very sensible proposal?
Lord Gardiner of Kimble
I have said that I will study everything that all noble Lords have said. The point is that you would not have certainty, building in 2043, that the EPS level would stay the same beyond 2044. I think that probably helps to clarify that. However, I will consider all the points that my noble friend has made.
Baroness Worthington
I thank the Minister for his comments. It is incorrect to say that this amendment would introduce more uncertainty. It would introduce certainty of a different kind, one that is compatible with our legally binding targets on climate change. It is not introducing uncertainty because it is still primary legislation that tells the investor the framework within which they need to operate.
Are investors living on a different planet? Do they not know about the climate change targets that have been set for us, the legally binding carbon budgets and the planning requirements on the very plants that they will be building—that they should be carbon capture and storage-ready? Do they think that we are simply going to give up on climate change and ignore all this and that they can be merrily emitting for ever? It beggars belief that investors are saying that this is an absolute necessity for them to invest. Twenty years is ample to get a return on investment.
As I pointed out, when this was first being mooted, a 20-year grandfathering was suggested. Where this 31-year grandfathering came from, who knows? But it is not good enough for the Government to be quoting the CBI as if it is somehow the world’s expert on this. We know that it is not the CBI that has demanded this; we know it is the Treasury, and it comes back to the very point that I have been making throughout these proceedings, that there are two strategies at play in government on energy. There is uncertainty and a lack of clarity because of that. To argue that this amendment somehow introduces more uncertainty is quite rich, frankly, and completely inaccurate.
As your Lordships can tell, I am very disappointed that the Government cannot see the logic of this. As the noble Lord, Lord Deben, has pointed out, these two factors are incompatible. You cannot have unabated gas being built right the way out to 2044 and then suddenly meet your carbon targets. It is simply not possible.
You are creating a legal framework which lacks credibility. There is nothing more uncertain than that; if you ask any investor they will say that. This will be challenged and changed. Investors know that because they are not stupid and live in the real world where climate change is increasingly an issue that we need to tackle and we have a legally binding framework that insists that we do so.
I suggest that this is taken away and looked at again. The suggestion that came in at the end of perhaps putting a clause in which stipulates that this applies to plant built before a certain date is potentially a good way. However, I would say that this amendment is a perfectly good way of doing it, too. I am very disappointed to be withdrawing the amendment, and it is almost certainly something that we will come back to on Report.
Baroness Worthington
My Lords, in speaking to the amendments tabled by the noble Viscount, Lord Hanworth, I will not go over what I have previously said. I feel strongly that this aspect of the Bill has not had the degree of scrutiny that it deserves. Our Committee has gone through it in far greater detail than was achieved in the Commons, where only a cursory debate was had. With the number of noble Lords who have spoken, we clearly have expressed concern that the Government have not quite got it right in their current formulation.
One of the problems is that this is primary legislation with an equation, numbers and dates written into it. That makes it an incredibly inflexible tool that would need more primary legislation to change. I do not believe that the levels here were the product of a great deal of consideration, analysis and thought; I believe that they came out of a hurried meeting between two departments with different views, and to have them enshrined in primary legislation seems reckless. I encourage the Government to think carefully before pushing for these matters to stay unamended in primary legislation. Perhaps it would be better for them to be dealt with in regulation.
Given the wide-ranging powers that the Government have given themselves on everything else with very little detail, it is odd that this rather unhelpful set of prescriptions is in primary legislation. There are lots of things here to be taken back and thought about. I will speak more on the coal issue when we come to those amendments as there are considerable issues about unabated coal in the future, but there is definitely merit in taking this away.
Lord Gardiner of Kimble
My Lords, I am grateful to the noble Viscount, Lord Hanworth, for his amendments, which have given us a further opportunity to consider these matters. As I have said, with my noble friend the Minister I will obviously consider what has been reported in Hansard. That is the important part of what we are doing in Committee.
The EPS focuses on helping us to meet our commitment to preventing new unabated coal-fired power stations being built by limiting the emissions of any new coal plant to around half of what they would otherwise be. The EPS supports the planning requirement that any new coal-fired power station must be equipped with CCS on at least 300 megawatts of its generating capacity, and will ensure that any new coal plant is constructed and operated in a way consistent with our decarbonisation objectives. Setting the limit at 450 grams per kilowatt hour will allow some flexibility to assist the economic optimisation of CCS demonstration projects and to manage the uncertainties associated with first-of-a-kind CCS projects.
We are concerned about going to a limit level of 300, which is below the emissions level of even the most efficient and cleanest new gas plant operating at base load, as proposed by this amendment, because of the major implications it may have for this country’s security of supply and impact on consumers’ bills. The 300 limit would restrict the running hours of new and cleaner gas plant that are needed to replace ageing capacity retiring over the next decade, impacting on the commercial viability of new gas plant and so deterring the much needed investment we need or increasing the costs of those investments.
In addition to introducing a significant risk to investors, the 300 limit could, under certain scenarios, lead to increased emissions and costs. For example, if new gas plants were restricted in their operating hours by the 300 limit, that could lead to the need to use less efficient coal or gas plants to make up the shortfall in operating hours in order to provide power for the country. This is a scenario that I am sure the noble Viscount does not intend to create through his amendment, but I think that there is a danger of that. Setting the EPS at 300 would also increase performance risk for CCS projects and, as a result, would increase the costs of projects that are currently coming forward now under the Government’s £1 billion CCS competition.
The noble Viscount’s Amendment 51KA would insert a provision into Clause 47 that would place a duty on the Secretary of State to publish and lay before Parliament a strategy for the phase-out of unabated coal generation within six months of Royal Assent. The measures in the Bill form part of a suite of policies designed to deliver the Government’s strategy for reducing carbon emissions, as set out in the Government’s carbon plan published in December 2011.
The Government have also published a number of low-carbon technology-specific plans, including road maps for carbon capture and storage and renewables. A reduction in unabated coal generation is therefore strongly implicit in these plans and policies, so I remain to be convinced that a strategy of the type proposed by the amendment is required.
Lord Grantchester
Like the noble Lord, Lord Teverson, we agree that biomass could make a significant and important contribution to the UK’s renewable energy thorough the use of sustainable feed stocks from waste. Again like the noble Lord, we agree that biomass should be sustainable.
The current plans would result in a rapid expansion of large-scale biomass electricity generation, principally through the full or part-conversion of existing coal-fired power stations. The EPS establishes a maximum level of emissions for electricity generated by a power station over a year. However, the only emissions that it recognises are those from fossil fuels, while biomass emissions are counted as zero.
As other noble Lords have argued, emissions from biomass can be interpreted as being quite substantial, as they should include emissions associated with the planting, growing, harvesting, processing and transport of biomass. This is in addition to the increase in emissions as a result of carbon debt—that is, the time it takes for tree regrowth and recovery of carbon stocks. Indeed, the sources of the stocks are also to be taken into account in sustainability requirements.
Many coal-powered plants are planned to be converted partially or entirely to biomass to extend their operating lifetimes and to benefit from the substantial subsidies available under the renewable obligations. A conversion to biomass under these amendments would trigger the EPS to cover the whole power station, including the life-cycle emissions from biomass. The amendments would complement the Government’s own proposals for sustainability standards for biomass generators, which include a life-cycle greenhouse gas emissions standard for emissions from harvesting and processing. We entirely support the intention that the EPS is triggered should any generation from biomass take place. If that is not to be the case, there is a danger that a plant close to breaching its limit might convert to a small amount of biomass in an attempt to remain under the threshold.
Lord Gardiner of Kimble
My Lords, first, I thank my noble friend for tabling the amendment, and all noble Lords who have contributed to this debate. Whether it is for energy or, more particularly, their beauty, this country has a strong bond with trees. Although this is going off the subject, the tree diseases we have are particularly alarming and we need to do something about them.
I appreciate entirely the intention behind my noble friend’s amendments. They raise the issue of biomass for power generation and the need for appropriate measures to ensure that the sourcing and use of biomass are environmentally sustainable. The Government share my noble friend’s wishes in this respect and are taking steps to ensure that biomass can continue to play a sustainable role in a low-carbon energy mix.
Sustainability reporting is already applied to biomass plants under the renewables obligation. Generators using solid biomass and biogas feedstocks are asked to report on their performance against sustainability criteria, including a greenhouse gas life cycle target of 285 grams per kilowatt hour. The sustainability reports are published by Ofgem. However, under the current regime, if a generator does not meet the target, the consequence is solely one of reputational risk.
The Government have therefore consulted on proposals to enhance the existing sustainability criteria under the renewables obligation. The consultation includes proposals to: bring in a tightening trajectory so that the current target of a 60% greenhouse emissions saving compared to fossil fuel gets tougher over time in a series of steps; bring in new sustainable forest management criteria that consider a range of forestry issues, including biodiversity, land use rights, and sustainable harvesting rates; require generators to provide an independent audit of their sustainability report; and link eligibility for financial support with demonstrating meeting the improved criteria. We are planning to publish the Government’s response to the consultation later this month.
My noble friend also mentioned what the EU is doing in terms of sustainability under the renewables target. The European Commission expects to publish an updated report on sustainability criteria for solid biomass and biogas later this year. The current approach is voluntary and the Commission is considering if a mandatory approach is needed for solid biomass and biogas, and for biofuels and bioliquid. Some progress is being made there.
Given the incentive created by linking financial support to sustainability criteria, we believe that the renewables obligation is the most appropriate mechanism for delivering these improvements. Biomass projects supported under a contract for difference are also intended to be subjected to sustainability controls, and Clauses 6 and 10 of the Bill provide the necessary powers. Although no final decision has been taken on the details of these controls under contracts for difference, it would seem sensible for consistency and clarity that these will be consistent with those under the renewables obligation.
Given that the Government are already proposing to strengthen the renewables obligation, and that powers exist for CFDs to include terms relating to sustainability, I hope that my noble friend will understand the concern that the thrust of these amendments to the EPS is covered elsewhere and may risk creating undue complexity and uncertainty for investors. The purpose of the EPS is to place a limit on the carbon emissions from fossil fuel power plants. In addition to the reasons I have set out, installations which use biomass exclusively as their fuel are specifically excluded from the EU Emissions Trading Scheme. Consequently, choosing not to cover biomass under the EPS treats it in a manner consistent with the EU Emissions Trading Scheme.
While I am wholly sympathetic to the intent behind my noble friend’s amendments, I hope that he will be sufficiently reassured that the Government are taking appropriate steps to strengthen further existing sustainability requirements in respect of the use of biomass. On that basis, I hope he might withdraw his amendment.
Lord Gardiner of Kimble
I hope the noble Baroness knows that I do not like anyone being disappointed, bur it is the realities. I want to acknowledge straight away the concerns that my noble friend and the noble Baroness seek to address through the amendment, and the need for future levels of carbon emissions from coal generation to be consistent with our decarbonisation objectives. However, to plan the EPS in the way proposed by the amendment has certain difficulties.
The amendment would extend the EPS to existing coal plants, which currently—I emphasise “currently”—make up a significant and reliable proportion of our generation capacity, and are needed to play a continuing and important role in the transition to a low-carbon electricity system, which we all wish for. However, the role of coal over the coming years needs to be consistent not only with our decarbonisation objectives but with ensuring that our electricity supplies are secure and affordable. That is why I am happy to repeat for my noble friend that we have a policy of no new coal without CCS, which the EPS reaffirms.
The measures under our electricity market reforms are designed to achieve these objectives. The introduction of contracts for difference will bring forward investment in increasing amounts of low-carbon capacity, with the carbon price floor improving the economics of gas generation relative to coal. The effect of this will be that we see a gradual decline in generation from unabated coal as it is displaced by lower-carbon forms of generation, including renewables and new gas.
The noble Baroness mentioned the 12 existing coal plants. Our gas generation strategy analysis has shown that no more than two of the existing coal power stations will operate beyond 2025, and none by 2030. It also shows that total generation from coal will be 3% by 2025. That indicates what our direction of travel needs to be.
However, by linking the EPS directly to operators’ decisions in respect of the industrial emissions directive, we risk deterring investment in equipment to reduce harmful pollution and undermining the purpose behind the directive; that is, the reduction in harmful emissions.
Baroness Worthington
I tried to cut that off in my comments to stop the Minister using it. It is illogical to say that you want plants to fit filters to get lower emissions. If the plant closes, those emissions go to zero. If it fits filters, some of the units might be down at 100; others will be at 300. You will have more emissions if you allow old coal to continue operating, so I am afraid that the Minister cannot pray in aid the air quality excuse. It is clear in the IED that member states are at liberty to go further than the directive in pursuit of lower emissions and, specifically, low carbon emissions. Therefore, you would be in compliance and you would have better air quality.
Lord Gardiner of Kimble
Surely, even if a few coal plants carried on until 2025 or 2030, would it not be a good idea to reduce their emissions from existing levels so that we could improve air quality while those coal stations were in being? Whether one likes it or not, they will be in being for a little longer.
There is also the question of investor confidence—I know that the noble Baroness has mentioned this as well and we may have to take differing views. Imposing the EPS on existing plants in a way which is detrimental to those assets is likely to have negative consequences for wider investor perceptions of the UK. I know that that will not please the noble Baroness, but I think that those are points that other people think are important.
Furthermore, under the national policy statements for planning, a “significant extension” to an existing coal-fired power station triggers a requirement that the station be equipped with CCS. That prevents developers circumnavigating the CCS requirement by building additional or replacement capacity on an existing power station.
Schedule 4 will therefore allow the EPS to be applied to an existing coal station in the event it is upgraded in a way that extends its technical lifetime for a period comparable to that of a new plant, but it does not trigger application of the EPS by way of the planning regime.
The Government are working to reduce the country’s reliance on unabated coal in a way which is cost effective for both industry and consumers. The noble Lord, Lord Oxburgh, is not in his place, but in the balance that we are seeking for the new technologies and the way forward for low-carbon technology we have also to be mindful of consumers. That is why consumers should have priority alongside the other matters that the noble Baroness and my noble friend have articulated so strongly. However, I hope that in this circumstance my noble friend will feel able to withdraw his amendment.
Baroness Worthington
My Lords, the Minister mentioned in his reply that under the gas strategy only two plants would be operating. I am rather dismayed to hear that. I am not a great fan of the gas strategy at any time but that has made me even less confident in its analysis. It is absolutely clear that already four plants have opted in to fit, to be compliant with the IED regulations. That is considerably more than two. Once they have fitted that filtration equipment, they will have a capital cost that they will want to see returned. They are not going to suddenly decide to shut up shop in 2025. There is a high degree of complacency, based on the fact that the analysis and the modelling that were done did not take into account the following important factors. Coal prices are low and are going to stay low. If you own a coal-fired power station today, you can see pound signs ringing in your register for many years to come and that is a huge incentive to comply and go forward with the air quality standards. Also, the filtration equipment is very likely to come down in cost, making that equation even more favourable. Finally, with capacity market payments coming—we will have a chance to debate that on Thursday—that is another financial incentive to keep these plants running. The Government are being complacent and I urge the Minister to think again.