Clause 84 - Gas and Electricity Markets Authority sustainability duty
Energy Bill [Lords]
8:55 am
Dr Desmond Turner (Brighton, Kemptown, Labour)
Thank you, Mr. Sayeed. I have been trying to keep on track. The hon. Gentleman is quite right. That plan was unfortunately a no-hoper because the cost of submarine cable is so high. The carrying capacity of the proposed cable was not going to be that great, so it would not have been good value, which is sad as it was a nice idea.
These proposals, which come from the regulator and are made against the statutory background to which the regulator works, would have an extremely damaging effect on renewable energy. The Government are aware of that. Clauses 180 to 184 set out a protective mechanism to prevent that from happening to renewable generators, but there are two points here. This will apply only to renewable generators. No one will build a gas-fired power station in Stornoway, but there might well be wave and tidal machines just off the coast. The only generation that will be affected by these proposals is renewable generation.
Having looked at the best efforts of the parliamentary counsel in clauses 180 onwards, I am not convinced that they are drafted in a way that would give anyone confidence. As we are trying to promote renewable energy against the background of a liberalised energy market, a regime that enables investors to invest with confidence in the long-term future of the enterprise is vital. At present, there is no investor confidence in renewable energy. It does not exist even for it to be frightened away. One of the prime reasons why there is no confidence is the current terms of reference—the legal framework to which the regulator works—and the implications for what follows in the structure of the market.
To put it bluntly, we have to be able not necessarily to distort but to angle the market in such a way that renewable energy is favoured. Otherwise, it cannot happen in a liberalised market economy. As it is, the Ofgem proposals for transmission charges carry a perverse incentive to non-renewable energy. If someone was simply looking to make money by generating electricity, they would set up a fossil fuel station in the midlands—somewhere just north of Birmingham, where the notional centre point of consumption is and where they would probably pay negative transmission charges. That perverse incentive also exists in the proposed system.
My hon. Friend the Minister also has responsibility for the Post Office, and we all know that it makes standard charges wherever a letter is posted from or to in the United Kingdom. A letter posted in Stornoway costs exactly the same to deliver to Westminster as one posted in Golders Green. I am sure that if, perish the thought, we were in a Committee debating a proposition to change the postal charging system from standard to locational, he would produce robust arguments to rebut it. He would be absolutely right to do so.
What is the difference with electricity? A letter posted in Stornoway is still identifiable as having been posted in Stornoway when it arrives in Westminster. However, a kilowatt-hour of electricity supplied to the system at Stornoway is not recognisable at all. It is just a stream of electrons. Energy is a national commodity and something that we need to consume on a national basis.