Energy Bill

Neil Carmichael Excerpts

Wednesday 19th December 2012 Commons Chamber

[Mr Davey]

My hon. Friend makes an interesting point. National Grid will have the job of setting the first stage of the electricity market reform delivery plan, and I will give it guidelines, as agreed with the Chancellor, on how it should set that plan. We will make it clear that it must consider power sector decarbonisation even ahead of the target that will be set in 2016.

It is worth reminding the House that the renewables energy target for 2020 was set in 2008, some 12 years ahead of the target date. If we set a decarbonisation target for 2030 in 2016, that will be a full 14 years ahead of its target date. It is therefore clear that we are planning for the longer term and that we have logic on our side. It would have been great if the Opposition could say that they had argued for this before, but they did not. I am glad they are joining us now.

The Bill’s central objective is to achieve electricity market reform, with a new investment mechanism at its core: the feed-in tariff with contracts for difference. Contracts for difference will provide long-term electricity price stability, and therefore revenue certainty, to developers and investors in technologies such as carbon capture and storage, renewables and nuclear.

[Neil Carmichael (Stroud) (Con)]

The Bill’s measures will provide clarity and certainty for investors wishing to develop infrastructure. Does the Secretary of State agree that that is imperative in delivering the model he is talking about?

[Mr Davey]

My hon. Friend has great expertise in this area, and I entirely agree with what he says. Revenue certainty will reduce investment risk, and it should therefore also reduce the cost of financing—the cost of capital. That is far more important for low-carbon technologies than for fossil fuels, because so much of the cost of renewables and nuclear is the set-up capital cost. Our electricity market reform is, essentially, shaping a new low-carbon market, in order to stimulate the energy investment Britain needs.