Lord Jenkin of Roding
Main Page: Lord Jenkin of Roding (Conservative - Life peer)Electricity Capacity Regulations 2014
Lord Jenkin of Roding Excerpts
Lord Jenkin of Roding (Con)
My Lords, my noble friend the Minister has made a very brave and thorough attempt to explain all these complicated regulations to the Committee and I do not envy her her task. This is an immensely complicated business, and I approach this as one who has spent many months over the last two or three years dealing with these matters—first on the Energy Bill, now the Energy Act 2013, and in the months since then. I see that I am surrounded by a very select band of aficionados who have been doing the same, and I think that between us we have the capacity to put some questions to my noble friend.
I entirely endorse the description of the scrutiny committee, which reported a few days ago. In paragraph 9 of its report, it said:
“The number of statutory instruments laid, and the highly detailed nature of their provisions, are not conducive to a rapid understanding of their effect”—
to which I can only say, “Hear, hear!”. Of course, the committee expresses some anxieties about how far consumers can be helped to understand these measures. In response to that, the then Minister for Energy undertook to provide what he described as an,
“additional, succinct explanation of the legislation”.
I invite noble Lords to look at Appendix 1 to the Select Committee report. I m not sure that the six pages of detailed description can match what Mr Fallon said on that occasion. This is a serious problem. The scrutiny committee was clear that much more needed to be done to explain this complicated system to consumers.
Baroness Verma
My Lords, I thank all noble Lords for their helpful remarks and questions. It has been a well informed discussion. These are complex measures and, quite rightly, my noble friends and other noble Lords have asked for clarification. If I do not respond to any questions raised during the debate, perhaps it might be helpful if I undertake to write to noble Lords and place copies in the Library. There were a large number of questions and it may well be that we have overlooked some of them.
I start with the questions posed by my noble friend Lord Jenkin. I would like to put on record my apology to my noble friend for responding to his letter rather late. There were gremlins a-playing and I can only blame them. I hope my noble friend will agree that usually I try my level best to give prompt—and maybe lengthy—responses to questions that he and other noble Lords put to me in the department.
We want to ensure that independent generators are very much part of what we are trying to deliver; making sure that the lights stay on, and driving down costs to the consumer through competition. A number of questions were put to me around that matter. My noble friend raised the issue but other noble Lords have added their concerns about why it cannot be April rather than the October date that has been laid out. I will try my utmost to bring the date as far forward as I can and I will be happy to meet independent generators to give those assurances. However, noble Lords who know me will know that I would rather play on the side of caution. Rather than over-promise and then fail to deliver, I would prefer to put in place a date I feel I can deliver. That does not stop me—I hope my noble friend and other noble Lords will take away this assurance—from pushing to get an earlier date, but I felt I could deliver on the October date.
As always, my summer holiday will be spent pushing dates with officials, but perhaps my noble friend can take back to the independent generators that the date is not set in stone; that it is there because I would rather not over-promise. I am willing to work closely with the independent generators and I would be happy to meet them and reassure them. Perhaps my noble friend will take up that offer.
My noble friend asked how much capacity will be procured. The Secretary of State confirmed on 30 June that the first delivery year will procure 53.3 gigawatts for 2018-19. These will be procured at two auctions: one later this year will procure 50.8 gigawatts, and the second phase in 2017 will procure 2.5 gigawatts. He also asked if the indicative CFD budget included the contract for the capacity measure. The answer is no. The interactive budget numbers published this morning relate only to the CFD mechanism.
My noble friend inquired about the Bill’s impact on the CFD. My department’s latest analysis suggests that household electricity bills will, on average, be about 6% lower per year over the period 2014-30 under EMR compared to meeting the Government’s objectives under the existing policy instruments. It is estimated that the annual electricity bills of businesses will be around 7% to 8% lower.
Lord Jenkin of Roding
I am grateful to my noble friend for that. She reiterated the statement made this morning by her Secretary of State regarding 6%. I hope that my noble friend Lord Deben will forgive me for asking this question again. The sums spoken of in the EU Commission’s consent for state aid are very large. Unfortunately, I sent the numbers to Hansard, so I do not have them in front of me. My question is: how much of that represents subsidies that will have to be paid by consumers? The Minister will know that I have another amendment, which we will be discussing in October, to the Infrastructure Bill, under which I am asking for us to know what it will cost consumers. This is the same question. It is not the overall cost; it is how much of the cost of contracts for difference will fall on consumers.
Baroness Verma
I am extremely grateful to my noble friend for that clarification. I hope that I will be able to respond to that. If not, if my noble friend will allow me, I will write to him.
I am always pleased by the great energy with which the noble Viscount, Lord Hanworth, contributes to our debates but, as my noble friend Lord Deben pointed out, we had a very dysfunctional system before, so we need to go forward by ensuring collectively that the systems we have put in place since privatisation allow for greater competition, for costs to be driven down and, especially, that we are meeting our carbon commitments as well as ensuring security of supply.
I do not agree with the noble Lord’s premise about how we are approaching this. These are complex instruments and, with complex instruments, we have to ensure that people reading them can understand them. I undertake to try to make the instrument easier to understand. The noble Viscount showed me a big pile of notes. Sadly, all of us have had to drive through those because of the complexity of the Energy Bill 2013 and what we are trying to deliver through it.
I thank my noble friend Lord Deben for his intervention. First, I put on record our appreciation for all the work that he does as chairman of the Climate Change Committee, his great understanding and the very useful support that we gain from the work done by him and his committee. I agree completely that we need a real mixed portfolio of technologies and that, although energy security is crucial, we must not lose sight of our commitment to reduce carbon emissions by 80% by 2050. Therefore, it is important that, when we are talking about the need for energy security, in everything we do we are mindful of that target as well.
My noble friend also asked whether we were doing enough to push for competition. Vigorous competition and transparency is the key to keeping prices as low as possible, and to raise consumer confidence in the market. It is in a much better place today than it was when we first came to power in 2010. That is because there are now many more players in the market—although, I entirely agree, not enough. We have to open up markets and make them certain for the smaller players so that we do not have them disappearing, as they did when we the big six took over by consuming them.
The noble Lord, Lord Whitty, asked whether consumers understood what EMR was. I know that many of us have stood at the Dispatch Box with that question in mind because it is incredibly complex. I can assure the Committee that I have looked at different ways of making sure that the message goes out to the consumer. Ultimately all of us are working to ensure that consumers are the beneficiaries and can understand the policies that we are trying to deliver. As with all complex pieces of legislation, it is about how we bundle it up without losing the underlying measures that we are trying to deliver. I will take the noble Lord’s views back to the department and instruct it again to try to talk in a language that has more outreach. But with complex legislation, there are limits to what we can do.
The noble Lord also asked what engagement we have had with consumer groups. He is aware that we have been closely involved with all stakeholders, including consumer groups. They have been part of every discussion and we have consulted them on everything that we are doing. It is important to say that as far as we are aware, we have not tried to exclude anyone, but have taken their views on board. The noble Lord also asked about allocation rounds and whether they should operate on a quarterly basis. An allocation round takes about three to six months, depending on whether there are any appeals. This means that the earliest another allocation round could be scheduled would be around May or June next year, when we know how many contracts have been signed and are able to reallocate any unspent budget.
The noble Lord also said that there was not enough support for solar. The noble Baroness, Lady Worthington, also mentioned that. We work closely with the solar trade associations and others to assess the RO grace periods and other issues that have been raised by them to ensure that full participation is possible in the CFD auctions. The amount of money allocated to Part 1 in this allocation round and in the indicative budget for October 2015 will enable around 1.6 to 1.8 gigawatts of solar PV deployment, and potentially more depending on the strike price at which individual projects will bid for.
The noble Lord, Lord Oxburgh, asked about consultations, particularly with smaller players in the market. I can assure him that more than 30 consultations have been published on EMR since last summer and overwhelmingly, a number of them were to ensure that we had given support to stakeholders, particularly the smaller players. We wanted to ensure that they could understand the reforms and effectively engage in the consultation process. If the smaller players feel that they have not been involved enough we must do more, but the department has worked incredibly hard to engage at all levels with smaller players. The noble Lord, Lord Oxburgh, and the noble Baroness, Lady Worthington, asked why CCS was not mentioned. It is an eligible technology and I draw the Committee’s attention to Part 10 of the allocation regulations which enables the Secretary of State to direct the CFD counterparty to offer, for example, two CCS generators.
The noble Baroness asked about the impact of a dynamic despatch model on capacity. It is quite complex so if the noble Baroness will allow it, I will write to her and to other Members of the Committee.