Contracts for Difference (Allocation) (Amendment) Regulations 2016

Lord Grantchester Excerpts

Tuesday 25th October 2016 Lords Chamber

[Lord Grantchester (Lab)]

I thank the Minister for her explanation of the regulations before the House this evening. On behalf of these Benches, I welcome the regulations, which are short and, as the Minister stated, somewhat uncontroversial. They simply extend the period for the allocation of contracts for difference from the current end date of 31 March 2020 to 31 March 2026. Yet, importantly, in doing that, they begin to answer the questions regarding future support for renewable technologies and investment in low-carbon electricity generation post-2020. All 24 responses to the consultation were in favour and several respondents provided valuable additional views, especially concerning the lead-in times for less established technologies.

However, I have a few questions for clarification around the framework for the mechanism and funding. First, can the Minister close the potential gap that might have opened up? Paragraph 7.2 of the Explanatory Memorandum states that the annual support for projects announced in Budget 2016 will be for the period 2021 to 2026, but the previous funding end date was 31 March 2020. I presume that there is not a gap of a year in that funding. However, the implications for spending are considerable and certainly reflect more concern than is implied in the three short paragraphs 10.1, 10.2 and 10.3 on the impact of the regulations. Paragraph 10.2 is particularly curious when it states:

“This amendment does not change the costs to the Government, the LCCC or the Delivery Body”.

It goes on to add:

“Any costs to the consumer of holding CFD rounds are subject to limits on the overall volume of costs in a given year … as a consequence of Government decarbonisation policies”.

The memorandum concludes in paragraph 10.3 that the impact of this particular instrument is negligible. There is no mention of the levy control framework that since 2012 has capped the cost of three schemes to support investment in low-carbon technologies: the renewable obligation, feed-in tariffs and contracts for difference. This framework has hit caps in costs for each year to 2021, which is where my confusion in the memorandum might come from. At this point the Minister needs to clarify whether at paragraph 7.2 the Budget 2016 announcement of up to £730 million of annual support for the period 2021 to 2026 is outwith the levy control framework.