Energy Bill

Lord Oxburgh Excerpts

Thursday 4th July 2013 Grand Committee

[Baroness Worthington]

My Lords, I wanted to make a few comments about how such an obligation might work. Of course, I completely concur with noble Lords who have spoken already; this is clearly a probing amendment, and a lot of work will need to be done to think through how it might work in practice.

The one thing that I would like to illustrate is that, on the fuel disclosure requirements that we currently have, 12 suppliers are required to report and many of those report very low carbon intensities because they are specifically green suppliers. Of those that are mixed suppliers, there is a very great difference between them; at the top end of the scale, we have Scottish Power in 2011, whose CO₂ intensity was 580 grams per kilowatt hour. At the bottom end of the scale you have EDF Energy, with 253 grams per kilowatt hour. Obviously, that is because the plant self-serves to those supply companies; they are both energy generators and energy suppliers, so they choose to use their own power. It would be hard to imagine giving one figure that they should all meet, but an obligation might be that they should demonstrate an improvement over time by percentage per annum on their current levels, as recorded over the past six years.

There are a couple of reasons why that idea might be a good one to explore. We know that there is an issue among independent generators, which fear that they will not be able to gain access to the market because of self-serving—the tendency to use your own plant and be vertically integrated. If they were required to shift to a low-carbon footprint and intensity, they would have an incentive to find those independent generators that can generate low-carbon electricity and reduce their footprint. That could knock off quite a few issues in one, if we looked at it in detail.

Another thing to commend that idea is that the measures in the Bill are designed to bring forward investment, but nothing is there to compel anybody to come forward. You can set up a CFD strike price and offer these contracts, but if no one wants to bother getting them they can simply carry on with business as usual. If they had this obligation, it would create a great incentive to find those CFDs, apply for them and come forward. The alternative is simply to keep offering higher and higher strike prices until the carrot becomes so attractive that they have to come forward. So it is a good insurance policy for the Bill, providing a way for the Government to link those targets that they propose to set in 2016 with an actual mechanism for delivery. Let us be honest: a target set by the Government to deliver carbon intensity of any value will be delivered only if you find a way for the commercial operators in the market to deliver it. This is one way, and it has potential supplementary benefits in giving independents confidence that their products will have a market.

I hope that we can look at this issue. As my noble friend has mentioned, this is a probing amendment and lots of the details have to be worked out, but it would be encouraging to hear some positive signals from the Government that we might be able to continue the discussion.

[Lord Oxburgh]

My Lords, I simply add my support for this amendment and urge the Minister to give it careful consideration to meet its objectives, if not the words. Previous speakers have shot all the relevant foxes, so I will not pursue any of those, but simply comment that if we had been considering this Bill two years ago I would have urged the Government to use this as their main means of regulating emissions. We could have done away with acres of complexity in the rest of the Bill. However, that is, unfortunately, water under the bridge. I hope that the Minister will give this careful consideration.

[Baroness Verma]

My Lords, I am extremely grateful to the noble Lord, Lord O’Neill, and of course I look very carefully at all amendments and consider their impact. I am extremely grateful to my noble friend Lord Deben for rightly raising the important points about the information that is already available and the cost burden that it may impose further down the line on consumers. We must be very careful that we do not add to what is already a large pool of requirements put on suppliers and generators.

We are concerned about accountability. The Bill places sole responsibility on the Secretary of State to meet any target range. Once that is set, recognising that it is the Secretary of State who is responsible for setting energy policy in the UK, it is he who will be ultimately accountable to Parliament. My concern about the amendment is that it would be unfair for us to ask suppliers to manage their portfolios in order to meet national carbon intensity limits because, as has been said, it would be incredibly complicated to oversee and would confuse the responsibilities of the state in setting the target range with those of suppliers by specifying the annual level of carbon intensity that they must meet.

The question of the merit order, the order in which generation is dispatched, which is currently in response to price signals, is a commercial decision for industry and I would certainly have reservations about government interfering directly with it. There is, however, a role for government in seeking to achieve decarbonisation by supporting a market framework that will make it more attractive. I think that is what the noble Baroness alluded to by prioritising low-carbon electricity. That is exactly what we are doing through contracts for difference and the carbon price floor to improve the relative economics of low-carbon generation.

Those measures provide a much better means of addressing the gap raised by the noble Lord, Lord O’Neill, under his amendment. To quote my noble friend Lord Deben in the fifth report of his Committee on Climate Change:

“The gap between actual and achievable carbon intensity will be closed as coal plant is retired as the relative cost of coal increases under the rising carbon price floor and given tightening EU legislation on air quality”.

We are reaching that point but we do not need to add extra pressures to provide further information when there is more than adequate information around.

I will finish, and ask the noble Lord to withdraw his amendment, by saying that the Electricity and Gas (Energy Company Obligation) Order 2012 and its predecessors, the CERTs and CESPs, have always required energy companies to save carbon dioxide by promoting energy efficiency measures in households. There is enough going on in the system.