Energy Bill

Lord Teverson Excerpts

Tuesday 23rd July 2013 Grand Committee

[The Earl of Caithness]

My Lords, I support in principle what my noble friend Lady Parminter is proposing in this amendment. The evidence that we got in Sub-Committee D was that interconnection throughout Europe needed a great deal more money spent on it, as the noble Lord, Lord Cameron, has told us. It needs to be improved, but that is a two-way process. The noble Lord, Lord Cameron, referred to some of the difficulties and I recall those being adduced to the committee.

My concern with this is therefore: what is the point of the UK producing a strategy when nobody else is producing one? We can produce a strategy and the Government can be questioned in the House about it, but if the French are not altering their system so that we are compatible and one can move the electricity to and fro, or if the problems have not been resolved with Norway—as was highlighted, there was a problem getting a connection with Norway or with the Danes—it seems a little pointless us having a strategy. Surely this ought to be done within the EU context. However, my noble friend Lady Parminter and the noble Lords, Lord Cameron and Lord Whitty, have the advantage that since I have left Sub-Committee D, they interviewed the Secretary of State. Although I have read the transcript, I would hope that they can enlighten us on what the Secretary of State had to say on our report, which we will discuss in more detail on Monday.

In some ways, I support the principle of great interconnection, although there will be problems from time to time. I know that the noble Lord, Lord O’Neill of Clackmannan, is more secure about the vote in September next year than I am. I wonder whether there is a way of preventing nuclear energy getting into Scotland because Scotland will not want nuclear energy from England. Can we adapt the grid so that one cannot get nuclear energy; it would only upset the Scots?

[Lord Teverson]

I rise to speak to my Amendments 55AA and 55AD, as part of this group, but perhaps I can come to the interconnection amendment of my noble friend Lady Parminter first. It seems to me to be blindingly obvious that this is something that we should do. I note the comments of the noble Lord, Lord O’Neill, who may be asking the right questions but he is being slightly too negative. A strategy does not cost billions; implementing it costs billions. When talking about investment in electricity generation, network costs, and so on of potentially £200 billion, looking sensibly at a major part of the jigsaw of interconnection is very important. We should remember that this amendment refers to the capacity payment part of the Bill, so this bit is not saying that we should run UK base load and rely all the time on interconnection. It is a common-sense look at the fact that European energy markets and individual national markets operate at different times, have their own characteristics and different peaks. Therefore, it makes a huge amount of sense to try to benefit from the synergies of capacity, weave them together and make the system work better. There are all sorts of problems with the energy market, but it does not stop the UK trying to make the best out of it, and then fit that within a broader EU strategy. I, too, look forward to the debate on Monday evening.

I move on to my own amendments and apologise to the Grand Committee for using a double negative. It is a probing amendment, trying to find out the Government’s thinking. I am trying to determine what is known as an eligible supplier in terms of the CFD market—someone who has a generating capacity outside the United Kingdom. I am not at all clear about this. I know that the Government have had discussions. We have mentioned Iceland and Ireland before but it would be useful to understand generating plants outside the United Kingdom. I am especially thinking about those that are dedicated to the UK, but there is a broader issue, which is maybe more difficult, on whether they can enter into contracts for difference.

I was struck by the Minister’s comments on the importance of price to the consumer. If we looked at it on that basis, clearly we should be buying internationally as much as we could in terms of bringing extra competition into the market and trying to bring prices down. Clearly we would not entertain CFD contracts that were more than that. Of course, there is the strike price. I would hope that with that extra competition there would be pressure on bringing the strike price down over time.

My second amendment, Amendment 55AD, would put a timeframe on the Government for making arrangements for such extraterritorial generation in order for CFDs to come on board. We often talk about offshore wind generation. This is perhaps the ultimate in offshore wind generation and other forms of low-carbon electricity. I look forward to the Minister’s response.

--- Later in debate ---

[Baroness Verma]

My Lords, as I have said, I read Hansard with great care to see what responses I can give to noble Lords, but I consider every amendment very carefully and, of course, pay great consideration to each and every point that is raised.

[Lord Teverson]

Perhaps I may thank the noble Lord, Lord O’Neill, for the consideration he has given to this side and for his suggestions. That was an excellent analysis of how things should work.

[Baroness Parminter]

I thank all colleagues on both sides of the Committee for their contributions, some of whom have made the case more eloquently than me. Certainly, the noble Lord, Lord Deben, in his imitable style, did just that with his portfolio analysis. I am also grateful to the Minister for outlining what are, in effect, the initiatives that the Government have taken to date on interconnection, which give life to what the Secretary of State told our committee last week—I think that his words were that he was as passionate as we were about interconnection. That is to be commended. I remain of the view that it would be helpful to have a clear commitment to a strategy in the Bill. In the light of the Minister’s comments, I will go away with a skip in my step and hope that over the summer the skip might progress into a run, and that we might eventually see something in the Bill. Despite all the work that we are doing to ensure that we have sufficient supply in the UK to keep the lights on, to keep consumers’ bills as low as possible and to deliver the energy that we need, it is imperative that we look to opportunities with our European partners. On that basis, I beg leave to withdraw the amendment.

--- Later in debate ---

[Viscount Hanworth]

My Lords, we know that strike prices will differ across various technologies but I query whether that degree of flexibility is sufficient. There may be a case for varying the strike prices to cater for the different components of the same technology. I am thinking, for example, of the differences within the technology of gas powered LGC generation between the base load CCGT plant and the plant that is devoted to satisfying peak demand, which may be OCGT.

The cost profiles of the two varieties may be very different as will the wholesale prices commanded by their outputs. Should they be subject to the same market reference price and the same strike price? I am asking that question, in all innocence; it is not a tendentious question. But I have observed that the Minister has indicated or implied that there may be special accommodations within certain technologies for interconnection. If I am making any assertion, it is that we need a lot more detail and I am not sure that it has yet come forth. We need a lot more detail that would address the realities of electricity generation.

[Lord Teverson]

While I am sympathetic towards this, I have the impression that if the Government do not want this to work they will find a way to make it not work. Such an amendment is probably not the thing that saves this. Therefore, I am not sure that this works, but in terms of trying to make sure that there is some commitment to this form of energy generation in the future, I understand the motivation entirely. However, I suspect that any future Government who did not want to do this would find another way around it.