Energy Bill [HL]

Lord Howell of Guildford Excerpts

Wednesday 14th October 2015 Grand Committee

[Lord Foulkes of Cumnock]

I would like to resume. I was thinking ahead to Paris in the week beginning 7 December, wondering which poor Minister—I hope it is not the noble Lord, Lord Bourne—is going to have to go there and explain how we are going to manage to achieve our targets for reducing carbon emissions by the appropriate date, given what we are doing in relation to solar energy, and now in relation to onshore wind. I certainly would not like to be doing that.

In the light of the fact that there has been this betrayal and that the Government are trying to rush us through some very complicated and detailed amendments with serious long-term effects that will affect not just investors, customers and suppliers but many more people, I must give the Minister notice that I am minded to oppose all his amendments in this Grand Committee unless he can give me some very clear assurances. I will be listening very carefully. If we do not agree this today, it will give the Government another week to try to get it right.

I ask the Minister to go back to his Secretary of State and his other Ministers and ask whether it is really worth the candle to push this through the House of Lords and then go to the House of Commons and try to persuade it, with 55 SNP Members of Parliament snapping away at Ministers’ heels, just for the relatively small amount that it would cost to go ahead as originally planned, and for the relatively small amount of generation involved? Is it really worth pushing ahead with that?

I wonder whether the Government are now regretting having introduced this Bill into the House of Lords. We are supposed to deal with Bills that are not contentious but this one is proving very contentious indeed. The Minister should go back and explain the problems that he is having getting the Bill through the House of Lords and warn his colleagues that it is going to be not just twice or 10 times as hard but many times more difficult to get it through the House of Commons. The Government have a majority there but there are all sorts of ways that it can be upset. I hope that he will consider changing his mind, withdrawing Clause 66 completely, finding some better arrangement that protects onshore wind schemes and keeping the three promises that I mentioned earlier, which the Government have reneged upon. I give him that very serious warning. Perhaps he will reflect that if he had taken my advice to have this matter dealt with in the Chamber, he might not be in the pickle he is in now.

[Lord Howell of Guildford (Con)]

My Lords, I declare my interests, including as president of the Energy Industries Council, which I cease to be tomorrow evening so I shall not need to declare it after that.

I applaud the very balanced assessment of the situation given by the noble Baroness, Lady Quin. It reflected very sensible views about the way this issue should be handled and approached. As for the noble Lord, Lord Foulkes, perhaps he was not in the Chamber at Second Reading, or if he was he seems to have completely forgotten what I said about Hinkley Point. I am very pro-nuclear indeed, but I do not mind saying in front of my noble friend that I have very serious reservations about whether the Hinkley Point C programme is the right way to get our nuclear renaissance going. I just remind him of that before he makes a further comment.

[Lord Foulkes of Cumnock]

I apologise for forgetting that. I was only recollecting what he said in the Chamber this afternoon. I accept that he made that point previously.

[Lord Howell of Guildford]

I thank the noble Lord for that. Turning to the amendments, they are very generous and I congratulate my noble friend on bringing them forward, even though they are rather extensive. They are what we used to call in the other place “liquid legislation”; that is, legislation going through Parliament that all the time is massively amended so that it changes from day to day. The amendments are indeed extensive but also very generous. This is a very exciting industry, part of the great low-carbon renewables transformation in the world that most of us want to see. All around the world, costs not only for solar power, which we were discussing earlier in the Chamber, but for all forms of wind power, onshore and offshore, and all sorts of other associated technologies are coming down dramatically. Really amazing technological advances are being achieved.

I listened to the expert legal commentaries of the noble and learned Lord, Lord Wallace, and I am all for speeding up the planning. However, it has to be remembered that what we are doing here is not legislating to stop all onshore wind. That is a vast industry that will continue and contribute to the energy transformation of the entire planet. What we are legislating for is to bring to a halt, with the various adjustments embodied in the amendments, further subsidy that falls upon consumers. This has to be weighed in the balance. We hear horrid stories about the closure of businesses; the Redcar steelworks is perhaps the most dramatic recent one. When you look at the small print, you find that one of the difficulties is that they are facing much cheaper imports from countries that are not carrying such heavy energy costs. We have to put that in the balance and not just ignore the other side of the argument. There are consumers and taxpayers, often poor households and consumers with very low incomes, at the other end of this process, and we cannot ignore their position.

In addition, it has to be remembered that many of the investors behind the projects we are talking about have not just entered into them entirely from the goodness of their hearts or because they want to save the planet. Investors enter into these great projects because they can make a profit, and I have nothing against that; that is excellent. Less excellent, however, is that they sometimes enter into them because the subsidies seem so juicy and attractive and they think that they are going to make exceptionally large profits. So I just say to my noble friend, and I am sure he would agree, that we should bring to an end—with these many concessions and in a very balanced way—this particular growth of additional subsidies. In future, let us make sure that investors in these industries understand, as I believe the wise ones do, that the projects that they want to go for are the ones that are really likely to be extremely profitable, particularly in Scotland, and very competitive with all other forms of energy. They should be careful if they think that they are just going to ride on an indefinite continuation of very large subsidies because Governments and policies change. Wise advisers to wise investors will always warn them that the best projects are those for which the subsidies are a minimal part of the reward, and the profitable and efficient operation of the industry itself, and the rapid adaption of new technology, are the larger part of the profit generated. In every case, we advise that subsidies can end.

[Lord Deben (Con)]

My Lords, in discussing these amendments, it is worthwhile reminding ourselves of the enormous success of the system which the Government and their predecessor put into place. The fact that these prices have fallen significantly is in part—indeed, in very strong part—due to the encouragement that this Government and the previous Government have brought to play. Sometimes, we talk as if all this technological advantage has just happened because people have been clever. Actually, it has not: a market was created. Certainly, the successes of offshore wind have been achieved because people had a proper market, with a proper continuum, and were therefore able to invest.

I declare an interest as chairman of the Committee on Climate Change. Although I have to sit on one side or the other, that makes me entirely independent on these issues. The fact that we can talk about offshore wind being competitive now, in a way that we had never thought of, is entirely the result of the foresight of all three political parties in various assemblies putting this opportunity in place. Let us not just say that the technology has improved so wonderfully that it is now in this new position; it is actually a very good example of the relationship between government and the provision of opportunity by others. Any new technology has to compete in a world where there are enormous advantages for old technologies, because of the investment they had in the past and a whole range of subsidies that happen throughout the world. That is certainly true of the fossil fuel industries.

I point next to the fact that one of the reasons why the cost has risen is that these technologies are actually more efficient than we ever thought they were going to be. When the Committee on Climate Change proposed that it would cost us some £7.6 billion to ensure that we were on track to decarbonise our electricity supply, and therefore on track for meeting our statutory requirement to reduce our emissions by 80% by the year 2050, the then coalition Government accepted that amount. It is actually costing more than that, partly because of the fall in the gas price. The gas price affects this because of course a contract for difference takes place, so when the price of gas falls the additional cost comes back. However, it is also partly because offshore wind is immensely more efficient than we thought it would be. It is putting more energy into the grid, which costs us more because that is the deal we have done. So the background to these amendments is one of success, not failure. We are not having to do this because it has cost us more by being a failure; it is because it has been a success.

The amendments seem to go a very long way towards meeting the one legitimate argument that needs to be faced: the reasonable expectation on the part of business that if it invests, it will get certain advantages from the Government. The Committee on Climate Change is primarily concerned not with means but with ends. We are concerned with delivering the budgets to which the Government and Parliament are committed. Frankly, Governments have every right to make changes if they want to, as long as the changes end up in such a place that we are able to meet the requirements of the carbon budgets laid down by Parliament as a result of the recommendations of the Committee on Climate Change. So I am very leery of being led into a position of saying that this or that mechanism is the right one. However, I have to say that it is very important that business should not get the impression that promises made are broken.

That does not mean to say that if you subsidise people now, you will always be subsidising them. That is not true. Sometimes, when I listen to some of the green organisations, you would have thought that the moment you promise to do something, you are then going to do it for ever, and that somehow you are letting people down if you do not. That is also not so. All I am saying here is that there are two different issues. On the one hand is the right and ability of the Government to alter, extend or restrict the subsidy that they offer in the light of changed circumstances and, on the other, the duty of the Government to ensure that they meet fully the obligations into which they have entered.