Viscount Hanworth
Main Page: Viscount Hanworth (Labour - Excepted Hereditary)
Lord Deben
My Lords, we may have noticed that there is a good deal of support on both sides for what the Government are trying to do. I hope that my noble friend the Minister has noticed the tone in which these discussions have been carried through. We would like to be convinced, and we are unconvinced only because these measures are quite difficult to understand. The document that I have here is not for bedtime reading, unless you wish to give up on the Mogadon, because it is very complex.
One thing in the Climate Change Act that the climate change committee is supposed to do is to ensure that the public understands what it is doing. I do not think that that is a bad thing to have at the back of one’s mind. I just hope that I do not have to stand on a platform at this moment and explain in simple terms what is in here. I suspect that my noble friend the Minister would agree that that is not the most comfortable place in government just at this moment. It is not because there are things that are necessarily wrong with it, but there are extremely complicated things in it, and we want to make sure that it is as good as it can be. That is my first point.
On the amendments, I remind noble Lords that this is no small matter. Electricity from renewables increased last year by 19%, which is pretty remarkable; it is 11.3% of the total. We are not talking about some tiny little thing, which is what the climate change dismissers are always saying. This is no longer a gleam in the eye of Greenpeace; it is a central part of what we are seeking to do. Therefore, we have to recognise that enabling the elbow room for the renewables sector is very important. The Government have recognised that and, on all sides, people have said that the government amendments do extremely well.
I want to put three simple propositions to my noble friend. First, it is instinctively difficult for free marketeers such as me to be entirely keen on a system where the Government are fixing almost every element of the process. I recognise that it may be necessary—and, indeed, if it is necessary, I shall be the first to defend it. But I think that she understands why one starts by being a little concerned about that.
Secondly, we need a convincing explanation of why some kind of auction is not part of the set up. It has been shown around the world that the one way in which you get lower prices is through a descending auction. There is no doubt about that. The advantage of that is that it does have that effect. From what happened in Brazil it is clear—it is not that it has not been tried and found wanting; it has been tried and it works—that you can bring prices down if you operate in that way.
It gives huge confidence to the public because, instead of the Government having to explain in the context of a document such as this why they have delivered this, that or the other, they are able to say to the market, “Look, the price has been fixed at the lowest figure we can see working”. There is a real issue of communication here and a need to explain why—apart from the unconvincing pushing aside in the other place when Ministers said it would be very expensive and complicated. I was a Minister for 16 years and I knew that any civil servant who said we could not do something because it was expensive and complicated had not worked it out. That mechanism is always used; it is the technique. I look with care at those behind my noble friend. An issue may be complicated but you might be able to make it simple, but the idea that it is expensive I have never seen proved in any independent area. I would like to be 100% on the side of the Government on this but the whole concept of a competitive system based upon some kind of auction is so valuable that we should not lose it.
Thirdly, the worst kind of debates in the other place, and even more so in your Lordships’ House, are about what it means rather than about what should be done. My worry in this area is that if we get to the Floor of the House and spend our time trying to work out what it means, we will probably get it entirely wrong. It would be valuable if the Government could clear that bit out.
The noble Baroness, Lady Liddell, and I have not always agreed on matters over the years but at least on this we can be at one. We want to arrive in October with a clear view of what is being proposed and what its ramifications are so that if we do not agree with it at least we are talking about the same thing. I fear that if we argued about it now we would be arguing about something that was different in the mind of every Member of the Committee. After all, we have chosen to try to understand these things rather more than the generality. I hope my noble friend will treat the amendment with that kind of approach, rather than saying, “It does not quite work in this way or that way”.
Viscount Hanworth
My Lords I shall speak to Amendments 55AE, 55AFA and 55AFB, which are all in my name. Amendment 55AE, together with my subsidiary amendments in this group, covers the same ground as the amendment of the noble Lord, Lord Roper, and others but it is not as specific in what it calls for. The amendment was conceived before the government amendments in the name of the noble Baroness, Lady Verma, were tabled. I do not believe that the government amendments provide an adequate answer to the problems. My subsidiary Amendments 55AFA and 55AFB, which seek to amend one of the government amendments, are testimony to this.
Amendment 55AE calls on the secretary of State to make regulations that will ensure that the independent electricity generators that employ renewable technologies will find a route to market for their produce. We are aware that the Government are relying on those enterprises to provide a large proportion of the investment in renewable electricity generation: the figure is anything between 35% and 50% of the new investment. There is also a widely perceived danger that, in the absence of further provisions in the Bill, the independent generators will be squeezed out of the market. The reality is that the big six electricity firms, who supply more than 90% of the electricity that is sold to consumers and businesses, have been expanding their generating portfolios to include an increasing proportion of renewable energy. In the process, they have been dispensing with the services of the independent generators. The renewables obligation, which for a while was effective in obliging the big six to purchase the output of the independent generators, is becoming ever less effective in sustaining them. The suspension of the renewables obligation in 2017 would surely spell the doom of the independents unless some effective measures are enacted to prevent that.
Baroness Worthington
I thank the noble Baroness for alerting us to that. As I was saying, there is clearly an issue and a need for intervention. There are existing alternatives for the independent generators. Perhaps one thing that we need to explore is how we can strengthen those independent suppliers. Ecotricity was a very good example. It was set up to build wind farms but found that the way that it could build its business best was to have a supply arm creating its own form of vertical integration. It is a way of creating more liquidity and plurality in the market to help those independent suppliers to buy from the independent generators. That seems logical, so perhaps we can explore how those can be better balanced.
There are also aggregators in the market. One problem that independent generators face is that individually they do not have the capacity to employ traders. The big six all routinely employ traders for all sorts of reasons, and that gives them a massive market advantage from being able to enter the various markets themselves. Aggregation and the provision of grouped trading services is necessary to help to support suppliers. That is another area that we could look at in more detail to see whether something needs to be done to make it more effective.
Finally, if we find, once the Bill is passed and we are on the road towards a low-carbon economy, that independent generators are simply not getting PPAs, we must make sure that we are monitoring the situation closely. I hope that the authority will be given a clear direction to be listening and asking what is happening in the market following the Bill's enactment. I shall end on a hopeful note. If it then transpires that that there is insufficient liquidity and PPAs are not being granted, perhaps the authority will accept that it has not done enough to generate competition in generation.