Energy Bill

Lord Gardiner of Kimble Excerpts

Thursday 25th July 2013 Grand Committee

[Baroness Worthington]

My Lords, I am grateful to the noble Lord, Lord Stephen, for tabling the amendments, to which I have added my name. We fully support them. As we have said previously, this Bill is a significant intervention and we need to ensure, where we can, a smooth transition from existing policies which have served us relatively well as we make the move into an unknown system. The amendments of the noble Lord, Lord Stephen, are designed to achieve that.

In this context, it is imperative that we do not breach the trust of the industry and the investors who put their money into projects by misinterpreting the term “grandfathering”, which is a clearly understood phrase. It means that if you invest in good faith, there will not be regulatory interventions to change the fundamental tenets of that investment. Unfortunately, the provisions in this section stretch the definition of grandfathering to breaking point.

We particularly support Amendment 55AL. As has been eloquently expressed, the words in the subsection will certainly strike terror into the hearts of investors. They are far too broad and enable changes to the fundamental facts on which an investment was based. It will damage investor confidence not only in relation to that one narrow aspect but more globally. We are asking many investors, entrepreneurial companies and the existing market players to work with this new system. I think that it can work, but if we start on the basis of regulatory uncertainty and not recognising and respecting grandfathering, we will start off on a very poor foot indeed. I think that I am right to say, although it may not have been directly in this context, that I have heard arguments played back by Ministers that have said that we cannot introduce emissions performance standards on to existing coal plant, because that would damage investor confidence. It would mean that people saw us as an unreliable place to invest. This aspect is actually far riskier than that, and I hope that the Minister can give us words of encouragement in relation to these two amendments, which are essential to get us off on the right foot with the Bill.

[Lord Gardiner of Kimble]

My Lords, I thank my noble friend and the noble Baroness for tabling these amendments, and for an illuminating, positive and helpful debate. In Committee, we can help to fine tune a Bill. My noble friend mentioned helping the Government; our duty is to help the nation to get this right. Certainty, trust and the smooth passage of transitional arrangements are certainly key.

Amendment 55AK inserts a requirement for the fixed-price certificate scheme to replicate the arrangements under the renewables obligation. The amendment aims to ensure that the fixed-price certificate scheme will be based upon and replace the RO, which is indeed our intention. I can confirm for my noble friend Lord Stephen that those generators that would otherwise qualify to receive renewables obligation certificates in 2027 and beyond will instead qualify for fixed-price certificates.

Clause 46 already mirrors much of the primary legislation for the RO to ensure that we are able to replicate the effect of the RO, so far as is appropriate. The differences from the RO are a result of the different ways in which the schemes operate; for example, the fact that the price of certificates will be fixed means that this will no longer be a market-based scheme. Amendment 55AL removes the provisions for both regular and ad hoc reviews of support levels under the fixed-price certificate scheme. The Government do not expect to make regular support-level changes under the fixed-price certificate scheme. However, I hope that noble Lords would accept that the Government must be able to respond to significant unexpected changes, such as major cost reductions or increases within a particular technology, so that we can deliver the generation we need for our renewables targets at value for money for consumers.

My noble friend mentioned secondary legislation. In the autumn of 2014, we intend to consult on the secondary legislation for the transition of the renewables obligation to a fixed-price certificate regime. We propose to bring forward this legislation in early 2015.

[Lord Teverson]

My noble friend said rightly that, clearly, any Government need to be able to reduce intervention rates, if technology costs go down—and that needs to happen in terms of consumer value and government expenditure. But in this situation, we are talking only about those projects that have already had investment. The technology is fixed at the time when the investment took place, so I do not completely follow that argument.

[Lord Gardiner of Kimble]

I wanted to put the caveat of the Government seeking to respond having the ability, potentially, to respond. I agree with my noble friend that we may not expect it to happen, but we need to have that ability. My noble friend also mentioned uncertainty about state aid. We are working with the European Commission to ensure that our policies are compliant with state aid rules; we are confident of delivering EMR in 2014, and are helping industry to make early investment decisions. That might have been useful to the noble Lord, Lord Whitty, in an earlier exchange.

These amendments deserve careful and further consideration, and I would certainly look with my noble friend the Minister to provide further information on these matters as the Bill progresses. I would also want to consider with my noble friend ways in which the purpose of Clause 46 could best be clarified and examine proportionate measures for reviewing support levels. It is on that basis that I very much hope my noble friend will be sufficiently encouraged. He and the noble Baroness are hitting some targets because this is an area on which the Government would like to reflect and consider further. On that basis, perhaps my noble friend will withdraw the amendment.