Electricity Capacity (Amendment etc.) (Coronavirus) Regulations 2020

Lord Grantchester Excerpts

Thursday 2nd July 2020 Lords Chamber

[Lord Grantchester (Lab)]

I thank the Minister for his considered explanation of the instrument before the House. As he explained, it has two purposes: to support market participants during the pandemic by removing or relaxing temporarily certain obligations or deadlines that they are contracted to adhere to during the current delivery year of 1 October 2019 to 30 September 2020; and to make permanent other changes to the capacity market as a consequence of the judgments made by the Court of Justice of the EU in October 2019 over the state aid provisions that the capacity market entailed. These regulations are also under the Energy Act 2013 to provide capacity in the electricity market to meet consumer demand.

On the easements in response to the effects of the pandemic, the measures are sensible, temporary, proportionate and flexible. Once there was full clarity, the consultation did not seem to expose strong disagreements or objections, albeit that it lasted for only one week at the end of April. It is recognised that where capacity market contractors have problems with construction deadlines, supply chain supply issues or financing arrangements there should be leeway and discretion to help them through any present difficulties.

The necessary changes following the Government’s agreements to alterations to the capacity market operations after the EU’s state aid judgments need further critical appraisal. At the time of the EU court’s annulment, there was anxiety that the capacity market was not fit for purpose and did not operate fairly, especially regarding demand-side response—DSR—measures, which had made complaints once the market came into being after the EU initially had passed the state aid provisions. The two changes made to the demand-side response measures are welcome, and arguably the disruption could have been avoided if they had been enacted at the outset. The other three measures are also, in many regards, helpful to DSR, are welcomed and seem to allow for a more flexible, more competitive market through the T-1 capacity auction, reduction on minimum capacity thresholds and interconnectors.

That is as far as the regulations go. Can the Minister set out any further commitments given at the time of the judgments that are not included in these measures? Does that mean that further amendments will be brought forward at a later date, or will they be held up in further negotiations until December and may never come forward? I understand that these commitments are regarding interconnectors and deal with the prequalification of foreign capacity to the system, because they are not in the UK to be able to bid into the capacity market, and are not to do with either the actual size of the interconnection or whether more interconnectors will be built. Could the Minister explain the implications of this and what the current position is?

Could the Minister also explain what changes there might need to be regarding generation emission ceilings on capacity? When traditional technologies such as gas-fired generation bids into the capacity market they must quite rightly comply with legislative plans to limit emissions. There has been a consultation on whether to limit emissions by both kilowatt-hour of electricity and the average per year. Has the Minister’s department come to any conclusions on these matters, especially since, as I understand it, commitments to bring forward changes were made at the time of the court’s judgment?

I am content to approve the regulations, but seek reassurances from the Minister regarding the capacity market’s possible further developments. Perhaps he might finish by clarifying how much further delayed the energy White Paper, which would so helpfully shed light on all these matters, might be?