Energy Bill

Lord Kerr of Kinlochard Excerpts

Thursday 25th July 2013 Grand Committee

Initial reaction from stakeholders has been broadly positive. However, I accept that there is much more work to be done to turn these initial proposals into a fully functioning mechanism. The Government will work with stakeholders to develop detailed proposals over the next few months, and plan to consult on options later this year. Before I conclude, I would like to—

[Lord Kerr of Kinlochard]

Before the noble Baroness sits down, will she explain again why she rejected Amendment 55AFB in the name of the noble Viscount, Lord Hanworth, which would have inserted in government Amendment 55AF a reference to current market prices? I find my entry in the Register of Interests extremely misleading because it should imply competence to deal with this Bill, whereas I find it extremely hard to penetrate. However, I would have thought that over time the PPA must bear some relation to market prices. It cannot be set for all time, surely. The Minister seemed to be saying that it was important to give the certainty of a fixed price. That would mean a variable degree of subsidy, depending on what was happening to the actual price in the market.

I also have some difficulty with Amendment 55AB, introduced so impressively by the noble Lord, Lord Roper. I find it difficult to get away completely from the idea of efficiency being a criterion as well as independence. All the emphasis on the ability to borrow in the markets or from the banks and thus to have the certainty of a demonstrably viable price seems to take us far away from the market and questions of efficiency, although I am all for encouraging independent generators. However, the Minister’s rejection of Amendment 55AFB really puzzles me. Surely there must be some relationship with current prices in the market.

[Baroness Verma]

My Lords, I will respond to the noble Lord, Lord Kerr, on Amendment 55AFB in a moment but, first, I will reply to some of the other questions that have been posed.

I reassure noble Lords that we have had a reasonably positive response to our amendment from stakeholders, including RUK, RES and the Renewable Energy Association, although I recognise that there is a lot more work to be done. We will be working very hard with the industry and other stakeholders to make sure that we have a bankable solution. The noble Baroness, Lady Liddell, asked what I would be doing during the summer, and this will be one of my tasks.

My noble friend Lord Deben was absolutely right when he said that we need to be absolutely sure that we are able to explain our intent clearly. I hope that I will be able to reassure him that I will continue to work before Report to ensure that our proposals are understandable and available to the market. Like all noble Lords, I feel that this is an incredibly complex and complicated area, so it is absolutely right that we are able to explain ourselves very clearly.

All noble Lords said that it has taken us a long time to get to where we are. However, it is a complex issue. We launched a call for evidence last July regarding the introduction of backstop powers in the Bill in November, and we have brought forward amendments. We want to work very closely with the industry to develop further proposals and we will be consulting in the autumn. However, in all this we need to make sure that the independent operators feel that they have a large stakeholding and that they are being responded to.

The noble Lord, Lord Cameron, asked why we do not keep GPAM in reserve as the NFPA already exists and has proven to work. The NFPA is not suitable for GPAM. The nature and scale of projects under GPAM are very different and would need a very different type of action, so there would not be a natural transfer across.

In response to the intervention of the noble Lord, Lord Kerr, concerning Amendment 55AFB, the PPA price would be set at a fixed discount to the market price, but the discount itself would not be set by reference to the current market. Does that make sense?

[Lord Kerr of Kinlochard]

Yes, it does—I think.

[Baroness Verma]

Did it not make sense? Perhaps I will get a little more inspiration while I finish reading my notes.

The noble Baroness asked whether Ofgem or some other body would keep the market under review. Yes, Ofgem will use existing powers to review it so as to make sure that it is working.

Finally, the noble Baroness, Lady Worthington, referred to the green growth figures. We are really pleased to see that they are growing, given the drop-off in the economy. I know that she and I and other noble Lords agree that we need to trumpet it at every opportunity. I hope that I do, because I think it is absolutely excellent news and one of the core strands of the department is the green growth agenda, which we are trying to build on. There are 1 million plus jobs supported by the green economy. That is on a par with financial services, and we have enormous scope to develop that. I very much agree with the noble Baroness, Lady Worthington, on that.