Energy Bill — Report (2nd Day)

Part of the debate – in the House of Lords at 5:15 pm on 4 November 2013.

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Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change 5:15, 4 November 2013

If the noble Baroness will allow me to continue, I may be able to illustrate further and more clearly the Government’s intentions.

The Bill is about creating the conditions for investment. Intervening in this way and targeting the EPS on a particular set of generators and their assets risks damaging the confidence of investors in the UK as a place to invest in the energy sector. This is precisely the opposite of what the Bill is designed to achieve.

The amendment would also create a direct interplay between the EPS and what is a complex European directive, and I question whether the proposed amendment would be compliant with the UK’s European obligations, especially those under the industrial emissions directive. The way in which European law interacts with our domestic law in this area is complex, and the Government are not in a position to reassure the House today that the amendment would be compliant.

In summary, to accept this amendment would not be consistent with the purpose of the EPS. It is unnecessary and could potentially have negative impacts. Our position is supported by the CBI which said in its Report stage briefing,

“the current EPS proposal should remain unchanged”.

Do not be mistaken, the Government do not want old coal hanging around forever. We want, through the combined effect of all the measures in this Bill, to create the conditions for an orderly, cost-effective transition away from high-carbon coal through investment in lower carbon alternatives. We want this to be achieved in the way that best protects the consumer.

I turn now to the amendments that stand in my name. They seek to assist the development and commercialisation of carbon capture and storage by providing that a time-limited exemption to the emissions performance standard will apply to carbon capture and storage projects during their commissioning phase. While this has always been the Government’s policy intention, these amendments seek to provide certainty in the Bill. Amendment 73B provides for a three-year exemption period for fossil fuel plant that use a complete

CCS system. It also provides that the exemption period may only begin once the complete CCS system is ready for use and is physically in place. The exemption is time-limited and available until the end of 2027. This reflects our view that the exemption is a temporary measure designed to assist the development of CCS and we expect learning from the first projects and those expected quickly to follow to remove the need for an enduring exemption.

Amendment 74B adds to the existing powers available under Schedule 4 and enables the exemption to be applied with modifications so that it can be applied to only those parts of the fossil fuel plant that are fitted with a complete CCS system. This ensures that any unabated parts of the fossil fuel plant remain subject to the limit imposed by the EPS. The remaining amendments are consequential to deliver these objectives.

I emphasise that the exemption will be available to all future CCS projects that meet the necessary requirements, irrespective of whether they come forward under the Government’s CCS competition.

I hope that noble Lords will agree that these amendments provide helpful certainty to potential CCS investors. I hope that my noble friend will take reassurance from my response to his amendments and think carefully before deciding what to do. Investors will be watching us closely. The Government want to ensure that the UK remains an attractive place to invest. In the transition to a low-carbon economy, we want to put the interests of the consumers first.

We are beginning slowly to turn the corner of one of the bleakest economic downturns that we have faced for many decades. We see confidence returning in the interest of investors wanting to come to our great nation. Noble Lords raised the question of investment. Since 2010, we have seen £35 billion-worth of investment come to the UK, £20 billion of that in renewables. We know that we must do all that we can to reduce any financial burdens that consumers will ultimately bear. We did not invest when we should have done. This Government are doing so. My department is determined that we should not be facing threats to our energy security. It is because we are serious that this Bill is before your Lordships. The decision that you must take and bear is simple. Any delays to investment ultimately will impact on consumers.

I hope that I have made it clear that we want to see dirty fossil fuel off our grids, but in a timely, cost-effective and managed process. I hope that I have reassured my noble friend.