Energy Bill [HL]

Part of the debate – in the House of Lords at 4:00 pm on 29 March 2004.

Alert me about debates like this

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy) 4:00, 29 March 2004

My Lords, exactly. The logical conclusion is that the noble Lord would prefer us to adopt a policy in relation to CHP that undermined the target on renewables. I am saying to the House that we should do both. We have a target to meet our objectives for renewables and a target to meet our objectives in relation to CHP. I agree to a large extent with the noble Baroness, Lady Miller, that we need to redouble our efforts in support of CHP and that we need to ensure that we deliver the target of 10 gigawatts of CHP by 2010—not to the extent that she implied, but we are short of meeting that target at the moment. She is undoubtedly right that there has been some serious setback to the momentum on CHP, but the latest estimates suggest that even on current policies and current price matters we would be delivering about 8.5 gigawatts of CHP by 2010 and therefore the gap is achievable. Provided that we can focus support for CHP, we intend to deliver 10GW of CHP in line with our target.

CHP is not, as a result of the renewables obligation, discriminated against. Every form of power generation must meet the renewables obligation, whether it is coal, oil, gas nuclear or CHP. It is not discriminated against.

The noble Baroness has half an argument on the initial stages of the NETA proceedings, which probably disadvantaged CHP to some extent in terms of the supplier to the National Grid. However, that has been rectified by Ofgem so, that apparent discrimination has been removed.

The noble Baroness is wrong to say that the ILEX report says that it would have no effect on the ROCs' structure. In fact, it says that the effect on ROCs prices, and therefore the proper operation of the market in that area, will be about 5 per cent. We consider that it might be somewhat larger, but 5 per cent is a significant effect on the ROCs market. Indeed, it is almost the equivalent effect created by the TXU shortfall, to which the noble Lord, Lord Jenkin, rightly drew our attention on the previous amendment. If it has an effect of that magnitude, surely we should take it seriously. The fact of the matter is that CHP, although a hugely more efficient form of fossil fuel, is a fossil fuel. It is therefore odd to take it in a way that undermines the achievement of the renewables obligation.

In closing, the noble Baroness referred to the views of another trade association. The only way in which the amendment could stack up would be to increase the size of the renewables obligation to compensate for the effect which the removal of the CHP from that obligation would cause. That is not in the amendment before us. It is more logical, but it would impose an effect on the rest of consumers and industry. The noble Baroness also referred to the cost of achieving the renewables obligation more generally.

The noble Baroness, Lady Miller, the noble Lord, Lord Ezra, and others referred to the strategy on CHP. We will bring together into the CHP strategy all the measures in support of CHP through the fiscal process and any new measures. I can assure the noble Lord, Lord Ezra, that it will slip a little from 1 April, but will be in place immediately after Easter. Therefore, the degree of government support for CHP will be clear.

While I am deeply sympathetic with the need to support CHP, the amendment has serious problems which undermine the renewables obligation and thereby the achievement of the carbons target. We should not be favouring one means of achieving—and we are talking about means—by acting detrimentally towards another. We need CHP and renewables in order to meet what we have set out in the energy White Paper. This amendment would distort that achievement and does not of itself contain rectifying measures to offset that negative effect. I therefore consider that we should not go down this road.