Lord Jenkin of Roding
Main Page: Lord Jenkin of Roding (Conservative - Life peer)Energy Bill
Lord Jenkin of Roding Excerpts
Lord Jenkin of Roding
My Lords, I have listened to the two speeches on this with great interest. It is with some anxiety that I confess to differing from the view of the noble Lord, Lord Oxburgh. The intention is, as both speakers have said, to oblige the Government to declare the decarbonisation target for 2030 next year. In quarrelling with the proposals in this amendment, I make it clear that I entirely accept the scientific evidence on dealing with the long-term emissions of greenhouse gases. The evidence is overwhelming, it is accepted by the vast majority of scientists and one has to realise that it is part of the background of what we are considering. I wish that some of those who were putting it forward were a little more honest about the areas of uncertainty that still exist; nevertheless the evidence of the growing concentration of greenhouse gases in the atmosphere is compelling.
I believe that the origin of the proposal embodied in this amendment is a letter last February from the chairman of the climate change committee, the noble Lord, Lord Deben, to the Secretary of State, Ed Davey. It is a complicated letter which I do not propose to read. I would say only that the noble Lord, Lord Deben, was at one time my Parliamentary Private Secretary, and I am proud to see him rise to such dizzy heights. However, he made the same case as the noble Lord, Lord Oxburgh: that to fix the level would give greater certainty to investors. I think that many of my colleagues know that I do my best to keep in touch with a large numbers of the players in the energy field—I call it cultivating my sources. It often gives one a more accurate view of the likely implications of carrying through this policy, because many of these players are among those who will actually have to do it. Only one group has approached me on this matter: the representative body, RenewableUK. All I can say is: I understand why, but they would, wouldn’t they? None of the others has made any reference to this issue, and I think the argument about giving greater certainty to investors is being overplayed.
It is clear that all parties, with some notable exceptions in this Grand Committee, have accepted the case for long-term decarbonisation in order to avoid the hazards of climate change. However, it should be possible to hold to that, and to convince the players of that, without necessarily going to this rather damaging intermediate step. The noble Lord, Lord Oxburgh, referred to the three objectives—and I was present at the lecture which he attended last night—of security, carbon reduction and affordability. In the brief I received from the Energy Networks Association, it was called the “energy trilemma”, a phrase I like. It is the Government’s job to try to balance those three objectives, because it is becoming clear that they cannot all be achieved, whatever the Secretary of State may have said in his press release last week.
For my part, the question of security of supply has to take top place. At the moment, the burden of all these things is falling primarily on consumers. As we were told last night, the purpose of much of the policy in this Bill, and of the Government’s policy generally, is to shift the risk from producers to consumers, and one is seeing the result in electricity bills. The Government’s Fuel Poverty Advisory Group, with which I have been in touch, estimates that the social and environmental costs per customer will rise from about £90 per annum to £220 per annum by 2020. If one takes that into account with other energy costs facing households, I submit that this is quite early on becoming quite unsustainable. The burden falling on customers really cannot be tolerated. I notice that the noble Lord, Lord Turnbull, in an article in House Magazine, made much the same point and was surprised that elements of the coalition seemed prepared to go along with it. I understand the point that he is making. However, not only domestic customers, but businesses are increasingly complaining about being hit by rising costs of energy for industrial and commercial users.
Therefore, I ask myself whether the Government have got the balance wrong. Is balancing out these three objectives sustainable? As I have said, my top priority is energy security, which is often expressed in the phrase, “keeping the lights on”. But it is far more than that. We now live in a civilisation that has become almost wholly dependent on electricity for almost everything that goes on. The consequences of any significant interruption of supply create enormous hazards for every part of the community, which, to my mind, has to be avoided. We really must have a secure and dependable electricity supply. In passing, one has to note that last week’s Electricity Capacity Assessment Report by Ofgem indicated,
“that margins will decrease to potentially historically low levels in the middle of the decade and that the risk of electricity customer disconnections will appreciably increase, albeit from near-zero levels”.
This is not the occasion to explore the reasons for that or how it has come to pass but simply to note the fact. I was the Minister for Energy in 1974 when the country faced widespread disconnections, not for want of capacity but because of industrial action. Whatever the reason, I have to tell my colleagues that it caused acute embarrassment to the authorities, of which I suppose I was one, and resulted in the loss of the general election that immediately followed. We have to recognise that that is an essential feature.
If the rising burdens for consumers are, as I believe, becoming increasingly unsustainable, and if we fail to give adequate priority to ensuring security, something will give. To my mind, in the present circumstances and, I emphasise, in the short term—not as part of a long-term policy—what must give is the current, very rapid and expensive priority accorded to fighting climate change. If we insist on setting ourselves ever higher carbon reduction targets to be fixed by law for many years ahead, are we not simply locking ourselves into the present unsustainable balance?
As I have said, I do not challenge the longer-term policy on climate change. But we face the choice now either to require, as the amendment proposes, the Government to fix the decarbonisation target for 17 years ahead or, as the Bill stands, to allow Ministers to set the target three years from now after the climate change committee has given advice on the fifth carbon target and in the light of the circumstances at the time. The Government must be allowed the flexibility to do that. That is what the Bill provides in its present form. Not least must they take account of the impact on consumers’ bills.
Lord Oxburgh
Perhaps I might ask the noble Lord whether the provisions of the Climate Change Act and in the present Bill that allow Ministers to change targets and adjust things in the light of changed circumstances are not sufficient to meet the real questions that he has raised.
Lord Jenkin of Roding
I can only reply that if the noble Lord thinks that that is all that is necessary, I cannot think why he has moved the amendment. He is quite right. The committee of my noble friend Lord Deben recommends but does not decide. It is the Government who decide. As I said a moment ago, I want to leave the Government with the flexibility to make decisions in the light of the latest circumstances. However, at the moment the customer is bearing all the risk, and this is unsustainable.
Lord Davies of Stamford
I regret that I was not able to follow very clearly the logic of the remarks of the noble Lord, Lord Jenkin. He seemed at times to be saying that he was in favour of the decarbonisation target and at other moments that the target placed intolerable burdens on the economy. Of course a balance has to be struck, but he did not produce any arguments at all to suggest that, if a decision is simply postponed, we will be better able to get the balance right.
I was particularly surprised that the noble Lord said that of course it is important to give investors certainty but that that argument had been overused. However, he did not deny the validity of the argument. He then said that there was a contradiction between the need to provide investor certainty, the need to provide security of supply and the need to protect consumers’ interests. There is no contradiction at all. It is very much the opposite way around. If one reduces the uncertainty to investors, one reduces the cost of capital and one will see more investment projects approved. One will therefore have greater capacity and greater security of supply.
Equally, if we have greater capacity because there is less uncertainty and because the cost of capital is lower, we will have lower prices. Therefore, consumer interests will be better preserved. Far from there being a contradiction between these considerations, it is extremely important for consumer interests and security of supply that we provide the maximum degree of investor certainty.
Here, I am mystified by what game the Government are playing. The purpose of the Bill, as presented in public up to now, is to provide a framework for investors, and the maximum degree of investor certainty. If they want to do that—it is of course a very sensible purpose to have in mind—why did they introduce into the Bill elements of gratuitous uncertainty that are being addressed by the amendments before us? Why say in one subsection that the Secretary of State must ensure that any decarbonisation target is respected, and in the very next subsection place doubt on whether or not there even will be a decarbonisation target, saying that,
“the Secretary of State may by order”,
instead of “must”? Why are the Government resisting “must”? It is not clear to me at all.
Equally, with regard to the dates, why say that a decarbonisation target may not be set for 2030, leaving open the possibility that there would not be a decarbonisation target even as late as that? Under this Bill, a decarbonisation target cannot be set before 2030 but it does not have to be set by 2030. Again, that is a deficiency that is remedied by the amendments before us. What is the purpose of this Bill if it is not to maximise, within the range of all reasonable practicality, clarity and certainty for investors? If the Government are intending to do that, why in the name of heaven have they gratuitously introduced these elements of uncertainty? It is completely unclear to me what they are doing.
The issue of whether the decarbonisation target should be set for 2014 or 2016 is not quite so important. If that amendment is pressed, I shall probably vote for it, but there could be arguments for waiting until 2016, partly to get the benefit of the advice of the Committee on Climate Change but more especially because there may be a chance of getting EU agreement on a decarbonisation target by that point. It would not be sensible to legislate for a precise figure before we knew whether or not there was a real prospect of getting such agreement, which would be highly desirable.
However, by the same token, anything that contributes to investor certainty contributes to the achievement of those two other objectives: greater security of supply and, ultimately, lower prices for the consumer. The Government really ought to look again at these amendments and I hope that here in the Lords they will accept them.