Energy Bill

Lord Stephen Excerpts

Tuesday 18th June 2013 Lords Chamber

[Lord Stephen]

My Lords, I start by referring to my interests as listed in the Members’ register.

This is an overwhelmingly positive Bill with overwhelming but not—as we have seen clearly today—unanimous support across the political parties and, indeed, the Cross Benches. Many positive changes have been made to the detail of the Bill and much of that detail is now absolutely correct. Some of the changes—for example in relation to the counterparty—have been referenced already. Having the Government underwrite the counterparty role is vital. The proposal to move the feed-in tariff limit from 5 megawatts to 10 megawatts is very welcome, while the early release next month of the draft EMR delivery plan, with the information on the strike price for the contracts for difference, will be crucial. In the short to medium term, the capacity market for gas will be crucial in keeping the lights on. The capacity market has not been an issue of huge political debate. It does not get hearts racing in the other place or on the Floor of this House, but it is very important to get it right. The first thing to happen will not be a switching-off of the lights; it will be instructions to major industrial users to stop using electricity. That will be very serious for our economy and for the messages that it sends out.

All those are good points in relation to the detail. In relation to the capacity market, I would be very pleased if more were being said—particularly in the medium to long term—to encourage the storage of renewable power. That is crucial to the credibility of the renewable sector. More could start to be done in the Bill to encourage that.

All of this represents a huge opportunity to the UK economy. The Minister said that there will be £110 billion of investment this decade and £7.6 billion per year by 2020. However, it has not happened yet. There needs to be real industry confidence. That confidence has been severely dented by delay and by the DECC versus the Treasury battle—the Conservative-Liberal Democrat battle—that we have witnessed over recent months and has been played out in the media. That sort of squabbling has done real damage. It is crucial to get not only a confirmed strike price but also EU clearance and political harmony on all of this.

I worry about EU clearance. It would be straightforward to get state aid clearance if this were only about renewables but it is not only about renewables, it is about nuclear as well. I worry about the potential delay and the impact that that could have on final investment decisions in the renewables sector. It is crucial to have continuity, consistency, clarity of political purpose and political support. In too many aspects of the industry, investment is stalled right now. Major international investors are voting with their feet and going elsewhere. I would predict that some of the big announcements that have been made—for example by turbine manufacturers—about inward investments into the UK will not happen due to the lack of continuity and the lack of clear political commitment. That is a real cause for worry.

Tackling climate change is urgent. It cannot wait. There is overwhelming evidence and overwhelming agreement about that among the scientists, the economists and other experts. We have heard it from the very good contributions made by the noble Lords, Lord Stern and Lord Deben. Global warming and climate change is perhaps an inconvenient truth but it is a truth nevertheless—and it is one that must be tackled now. The climate change deniers have got to be challenged. Do they have overwhelming, incontrovertible, infallible evidence on their side? To that I would say, “No, no and no again”. The Bill is a crucial and very major reform.

The ROC system is far from ideal. It is a system under which subsidy stays high even if electricity prices rise. Consumers’ money can therefore be very considerably wasted. It was a pretty complex and very British—solely British—solution. However, ROCs did at least create certainty and confidence in the industry. Contracts for difference are theoretically better, but the change has to be well handled to maintain confidence. So far that has not happened. Squabbling, as I mentioned, has led to a loss of confidence and the delay has created the sort of uncertainty that no industrial sector likes.

There is also a degree of illogicality in those who talk about being anti-onshore wind but in favour of offshore wind. If you want to protect the consumer and keep prices down, offshore wind is—as has been mentioned already today—much more expensive than onshore wind.

As for nuclear, I still have very serious concerns. It is slow to deliver. It is expensive. More than 60% of DECC’s budget is currently spent on nuclear. The nuclear waste is toxic and dangerous. It has a very long half-life. The nuclear sector relies on a depleting uranium supply from uncertain sources in politically unstable nations. Fusion would be a wholly different thing but we are far from there yet. Perhaps most importantly, investment in nuclear tends to reduce the urgency of the investment in renewables. As I have already mentioned, it could also lead to a delay in state aid clearance for contracts for difference, and clearly a huge amount of government resource has been taken up in the negotiations with EDF on the whole nuclear issue.

We need a simple and clear determination to stop burning fossil fuels. It is a declining resource. It will also be increasingly expensive, even if there are short-term reductions. It is a very damaging and polluting resource that causes climate change and global warming. There is no bigger issue facing the future of our planet, which is why this debate today is so important.

That brings us to decarbonisation. I would far rather see a decarbonisation target coming sooner. It is another area of coalition dispute—another Treasury versus DECC battle. There was no target in the original Bill, however, and I am very pleased that there is now provision for a decarbonisation target. Although I would be prepared to wait until 2016, the acid test will be the response and the attitude of others. Major investors, manufacturers of turbines, those involved in the renewable sector, those who make the final investment decisions, have made it very clear that they are looking for a strong decarbonisation target to support their investments. I certainly believe that it should not be an enabling or an optional provision. There should be a requirement on the Government to fix a decarbonisation target.

I want to make two final points. The first is on energy efficiency and demand reduction. There is huge potential in these areas, which are vital. They have been neglected areas of energy policy for too long. However, switching from fossil fuel—not just for electricity but also for our heating and our transport—will require very significant amounts of electric energy. That always has to be remembered.

Secondly, community renewable schemes are vital. The Bill rightly encourages them and will do more to support them. However, in the real world—in the practical world of finance—the current problems with the Co-operative Bank could be very damaging to many community projects. I believe that a great deal will have to be done to keep these projects alive. A Bill on its own will not be enough.

In summary, we need to get on with it. Let us have no more delays or divisions but instead show political clarity and unity in order to deliver the confidence needed to create thousands of jobs and billions of pounds of new investment and cleaner, greener and more secure energy for everyone in the UK—for business and for consumers. There are many other countries investing in renewable energy where the sort of political divisions that we have witnessed this afternoon simply do not happen. They are going for it and doing so with absolute determination, conviction and commitment. The Bill can help us to do that in the United Kingdom, and it must do exactly that. It should therefore be supported.