Clause 1 - Security and integrity of supply
Energy Bill [Lords]
9:15 am
Mr Brian White (North East Milton Keynes, Labour)
I seem to have been talking about these issues for a long time—often under your chairmanship, Mr. O'Brien—as I was a member of the Committees that considered the Utilities Bill in 2000 and my private Member's Bill, which became the Sustainable Energy Act 2003.
It is important to understand the sentiments behind clause 1, so I will make a few points on that before I talk about amendment No. 38A. Security of supply is one of the primary objectives of the energy White Paper. We must not be afraid to make that objective statutory, or to state that we are committed to it and that we are confident that we can achieve it. What is the worry about clause 1? It is important that the Government send out a strong message to the market that they will back their words with responsibility.
The clause would send a message to beneficiaries of the policies in the White Paper—the renewables and the combined heat and power industries—that they can take heart from the Government's serious commitment. The Government may say that they are already on board because of legislation such as the Electricity Acts, but to be seen simply to remove the clause without replacing it would cause serious damage.
There have been many misleading comments about last year's blackouts, and about the industry being down on capacity; my hon. Friend the Member for Sherwood (Paddy Tipping) asked about that. The blackouts are not an excuse for Government intervention in the market, but they were, as the hon. Member for Tewkesbury said, a wake-up call to the Government and industry to plan for the long term. There is a functioning, competitive wholesale market, which can deliver security of supply, but only within a properly regulated framework. That is where I part company from the hon. Gentleman.
The market has always been subject to short-term fluctuations, but it is important to get long-term investment decisions right. The message that we send out, particularly through this clause, about security of supply is important. The obsession with low prices and
small margins has not created a good environment for investment, but neither will a regulator without clear objectives. We need a clear set of objectives for the regulator, which signal to the market that there is a commitment to security of supply. I accept that there are several ongoing infrastructure projects, and they are to be welcomed. Of course, the industry will say that it does not want extra bureaucracy for Ofgem, because generators will simply pass costs on to suppliers, who will pass them on to customers, but we need a strong framework if there is to be investment in capacity over the long term.
One thing that worries me about this debate is that we talk about the upstream supply and about capacity in relation to supply only, but we do not consider the demand side of the equation. We must consider the different stakeholders. Plenty of companies could contribute to security of supply—for example, the whole CHP industry—as could our use of renewables and micropower, but we talk about pipelines in Russia and terrorist incidents, rather than the bread-and-butter issues that will ensure our security of supply. The Minister and the Government need to address them.
The regulatory impact assessment, which we received just before the Committee began, stated that no benefits would be accrued from clause 1. I would make a different argument; there are benefits. The clause is a signal to the market for long-term investment in some of these companies.
The regulatory impact assessment states that the provision would not have a direct impact on small firms. Again, I would argue to the contrary. Small firms in the microgeneration industry could ensure that each house could have microgeneration for a short time, which would enhance the security of supply. It is not enough simply to look at the upstream supply side; we also need to look at the demand side and at some parts of the grid where issues surround the security of supply.
We ought to be putting the work done by the joint energy security of supply working group on a statutory basis, and the Minister might consider that as an amendment on Report. My amendment is not meant to be put to a vote, but to draw the attention of the Committee to the issues about demand-side management. Given that we are looking for extra capacity, we ought to provide that by reducing demand.
I could go on for some time about some of the Government objectives, but I will not. I will concentrate on a rather parochial matter—I apologise for doing so, but it illustrates the point that I am trying to make. Over the next 30 years, 70,000 new houses will be built in Milton Keynes. If the Government remove clause 1 and say, ''It's all there—don't worry'', the message will go to the construction industry that building houses with zero carbon effect is not an issue of security of supply.
Measures could be introduced on how those houses are constructed that would enhance the security of supply for the country: building the houses with zero carbon effect and, as we build those houses, taking measures for renewable energy and combined heat and power. If those security measures are built in to the initial construction of houses, they will reduce demand and provide security if there are problems upstream.
If the clause is retained, the Government will send the message to the construction industry that the industry is part of the solution. Not taking demand-side management on board would say to the construction industry that the matter was a problem for the electricity companies and for international treaties. Security of supply is a matter for us all, and I urge the Minister to take that point on board.
I understand that the EU is also considering security of supply. I hope that the Minister will make sure that the issues of the supply side and the demand side are taken on board during those discussions. The Government have a good record over the last four years of making such points on a range of issues concerning climate change. There are opportunities, if we are prepared to take them. Clause 1 and my amendment, in particular, give us the opportunity to send a strong signal to the market that the issue is not simply about the upstream concerns.