Energy Bill — Commons Reason

– in the House of Lords at 3:38 pm on 11 December 2013.

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Votes in this debate

Motion A

Moved by Baroness Verma

That this House do not insist on its Amendment 105, to which the Commons have disagreed for their Reason 105A.

105: Page 125, line 3, at end insert—

“(iii) substantial pollution abatement equipment dealing with oxides of sulphur, oxides of nitrogen, heavy metal emissions or particles is fitted to the generating station.”

Commons Disagreement and Reason

The Commons disagree to Lords Amendment No 105 for the following reason—


Because it is inappropriate for the fitting of pollution abatement equipment to cause the emissions limit duty to apply to existing generating stations.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change 3:39, 11 December 2013

My Lords, we return to discuss the emissions performance standard and whether it should be possible to apply it to existing coal plant in wider circumstances than the Bill currently envisages. The Government set out in earlier debates, both in this House and in the other place, why we believe Amendment 105 is unnecessary. It has become clear over the course of the debates that there is an almost unanimous consensus on the need substantially to decarbonise our electricity generation by 2030. There is a similar consensus that there will be little or no role for unabated coal generation in that future.

In this Bill, the Government have brought forward a suite of measures that they believe will deliver the outcomes that we all wish to see. The Bill will do so without risk to our security of supply and at the lowest possible cost to the consumer. The Government believe that they already have the right balance of measures to deliver a secure, low-carbon electricity system at the lowest cost.

Amendment 105, proposed by my noble friend Lord Teverson, would allow application of the emissions performance standard to any coal-fired power station that fits the pollution clean-up equipment needed to meet the requirements of the industrial emissions directive. To date, only one station, Ratcliffe-on-Soar, is fitting the equipment needed to comply with the directive and there is no evidence that a large number of others are seeking to do the same. However, this amendment could result in all but one of the 12 coal-fired power stations expected to be operational after 2015 being subject to limited hours or forced closure under the directive. There is a risk that this, in turn, could lead to a scenario where more stations close earlier than might otherwise be the case. Were this to happen, it would require more gas generation to be built earlier than we currently project and, crucially, result in increased cost to consumers.

As my right honourable friend the Minister set out in the other place, we already face a significant investment challenge that will require an estimated 16 gigawatts of new gas plant to be built over the decade from 2015 to 2024 and around 45 gigawatts in total of all forms of generating capacity in this period. My department has therefore looked at a scenario where all our coal-fired power stations close by 2025, which is one possible risk of this amendment. The results of this analysis show that, as a result, in the 2020s average household electricity bills would be around 3% to 4% higher, average non-domestic bills would be around 4% to 6% higher and average energy-intensive industry bills would be around 5% to 7% higher.

The Government are taking a balanced and precautionary approach that seeks to protect consumers and ensure our security of supply. Our emissions performance standard is ambitious—the first in Europe—but it is right that ambition should be balanced with measures for a sensible transition. Ultimately we must ensure that we transition to a low-carbon economy in a way that provides certainty for investors, secure energy and is deliverable at the lowest possible cost to consumers.

Amendment 105B proposed by the Motion of the noble Lord, Lord Oxburgh, would bring all existing fossil fuel plants within the EPS regime from 2025, thereby requiring them to operate within the annual emissions limit set by the EPS. In common with fossil fuel plants that are consented after the EPS comes into force and to which it will apply, the power to suspend the EPS contained under Clause 48 could be used to allow those existing plants to operate over and above their limit should it be necessary to avert a threat to security of supply. I am grateful for the spirit in which the noble Lord proposes this amendment but, ultimately, what is at stake with both these amendments is an assessment of risk. I ask noble Lords to consider carefully whether they can be confident that the amendments will not give rise to risks that, were they to materialise, would be difficult and costly to address. The Government do not have that confidence. The question that noble Lords need to ask themselves is: do they have the confidence to take that risk?

It is through the measures in the Bill that we will reform the UK electricity market and attract the capital investment needed to decarbonise our electricity sector at the lowest cost to the consumer. The Government have listened carefully during the passage of the Bill through this House and the other place and have accepted measures that have improved it greatly, but the amendments would add an unacceptable risk. This House insisting on an amendment today will delay the Bill and will serve only to undermine investor confidence. I therefore urge noble Lords to consider both the direct and the wider implications of insisting on their amendments, given those impacts, and that a significant majority opposed this amendment in the elected Chamber. The Government do not believe that the amendments would provide greater certainty without, at the same time, creating risks to our security of supply and of increased costs to the consumer. On the contrary, causing delay to this vital legislation will only create uncertainty and risk delaying investment in our energy sector when it is needed most. I beg to move.

Motion A1

Moved by Lord Teverson

As an amendment to Motion A, leave out from “House” to end and insert “do insist on its Amendment 105.”.

Photo of Lord Teverson Lord Teverson Liberal Democrat 3:45, 11 December 2013

My Lords, I am very aware of my noble friend's remarks. I am also aware of the various matters around this issue. I believe that it is important that we still try to reach a compromise of some sort. Therefore, I wish to reserve my remarks and withdraw my amendment in support of the noble Lord, Lord Oxburgh, in trying to reach a compromise. I therefore beg leave to withdraw my amendment.

Motion A1 (as an amendment to Motion A) withdrawn.

Motion A2

Moved by Lord Oxburgh

As an amendment to Motion A, at end insert “, and do propose Amendment 105B in lieu”

105B: Page 46, line 31, at end insert—

“( ) No fossil fuel plant shall operate after the year 2025 if its emissions are not less than the statutory rate, unless it has been exempted under the provisions of section 48 (suspension etc of emission limit in exceptional circumstances).”

Photo of Lord Oxburgh Lord Oxburgh Crossbench

My Lords, I do not think that I have any relevant interests to declare, but I draw attention to the published record.

We have heard why the Minister feels that we should not persist with the amendment of the noble Lord, Lord Teverson, which was passed by this House with a substantial majority. Noble Lords may also have read the Minister of State’s speech in the other place. Having read the arguments, I concluded that there was little between the Government and those supporting the amendment. For that reason, I am today offering a differently worded amendment that to many of us seems both to meet the spirit of the amendment of the noble Lord, Lord Teverson, and to satisfy government concerns.

I am doing that in my capacity as unofficial chairman of this House’s unofficial cross-party Energy Bill group, which first carried out the unofficial pre-legislative scrutiny of the Bill at the request of the then Energy Minister in our House, the noble Lord, Lord Marland. The group has held widely advertised regular meetings with the Minister and officials during the passage of the Bill, and I take this opportunity to place on record our gratitude.

I also thank the Minister for yesterday convening another meeting of the group and for securing the attendance of the Minister of State for Energy. We heard what he had to say, and he heard what we had to say. We offered him the amendment that is before you today, but his officials advised him not to accept it. I think that to pretty much all those present the reasons offered for not accepting it were pretty thin.

The fundamental purpose of the present amendment —and, indeed, the original Teverson amendment—is to make clear that a role for unabated coal in the national energy mix is not foreseen beyond 2025. Indeed, that is the Government’s position. In the other place, the Minister indicated that he expected the overall contribution of coal to our electricity generation in 2025 to be about 3%. In the unlikely event that external events made it look as though unabated coal would be needed longer, the Bill already contains provisions to deal with that unlikely eventuality.

Noble Lords may ask why we are bothering with this now. It is simply to provide an additional crumb of confidence to those who are contemplating investing in new, gas-fired power generation. It is a bad time for investment in energy utilities and it would be helpful to have a clear indication that gas will be our main means of fossil-fuel generation from the 2020s onwards. It is probably unnecessary to point out that this amendment could have no real effect on energy prices in the foreseeable future. This is mostly because the amendment would have no effect on generation until well into the next decade and partly because power price is largely determined by the swing producer, which is gas. At present, coal is cheap and is making an increased contribution to our power generation. However, you will have noticed that this does not translate into lower electricity prices but rather into better margins for coal-fired power stations.

The Government have said it is urgent that this Bill should become law. We agree, and a simple way of ensuring this is to accept this constructive and simple amendment. I beg to move.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

My Lords, if there is no one else who wishes to speak now, I will.

Here we all are, almost at the end of the process of electricity market reform in the Energy Bill. We have spent many months debating these interventions in the electricity market and felled a fair few trees printing all the documents. However, despite all this effort, the Bill is still deficient in a number of important respects. It fails to bring about true competition in generation, handing yet more power and money to incumbents via the capacity mechanism, and it fails to make clear that the objective of all this intervention is to decarbonise our electricity. The net effect of these deficiencies is that the process of decarbonisation, which the Bill seeks to introduce, is more expensive than it need be.

The original Amendment 105 and the new compromise amendment tabled by the noble Lord, Lord Oxburgh, seek to achieve the same thing: providing a back-stop for existing government policy that seeks to make unabated coal a diminishing part of the energy mix by preventing lock-in to high-emissions plant in the 2020s. This plant can be upgraded to comply with tighter air quality standards. The more coal we burn, the more effort we have to undertake, using more expensive options, to meet the same emissions reduction targets.

The Government’s chosen policy to constrain coal investment is the carbon floor price, but this is a deeply unpopular and very expensive policy. It lacks credibility as it is a financial Bill measure that can be easily done away with. It therefore creates a huge amount of political risk for investors.

The emissions performance standard underwrites that policy, reducing risk. The EPS is a tried and tested policy and it has the benefit of providing absolute clarity to the market about what is required. It is already used in California and Canada and in both cases the limit on emissions applies to old coal plant, not just new. In Canada the clarity of that regulation has brought forward investment in the world’s first commercial-scale CCS plant, which will open next year. In the UK we have not followed this but have opted instead to try to tax coal off the system—an option that is not delivering at the moment. Unfortunately, there is a great risk that this course of action will continue to fail and operators of coal will decide to sweat their assets for longer, using the large up-front payments they will now receive from the capacity market.

The original amendment required the old coal stations seeking life extensions to operate for only 40% of the time, under the EPS limit, guaranteeing that they would be available for the peak but not allowing them to baseload. In rejecting the amendment, the Government argued in the other place that this change might dissuade some plant from upgrading at all and therefore reduce the amount of plant available for peaking.

The noble Lord, Lord Oxburgh, has listened to these concerns and now tabled an amendment which offers a different approach. His amendment would require the limit on emissions equivalent to 40% of capacity to apply only in 2025, 12 years from now. Operators of upgraded plant would therefore be able to use their three-year capacity payments to offset the costs of upgrading and continue to sweat their assets for another five years at full capacity, which would then be available for 40% of the time thereafter. This seems like a good deal. By 2025, all but one of the six plants that this amendment would apply to will be more than 55 years old, having emitted together over 1 billion tonnes of CO2 over their lifetimes, so 2025 is well past their closure date.

This amendment is a compromise but one which still has the benefit of clarity for everyone: clarity for the coal plant; clarity for gas investors; and clarity for the environment. To leave things as they stand is to allow a known unknown to persist needlessly. With no decarbonisation targets to guide government policy—

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

The noble Baroness is probably drawing her remarks to a close but before she does so, can she explain to me how what she is saying in supporting this amendment is consistent with the leader of the Opposition’s declared policy to hold down energy prices and with maintaining security of supply?

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

It is absolutely consistent because what we have said is that we will seek out the least costly forms of carbon abatement. There is no cheaper way of reducing carbon dioxide than using existing gas stations in place of existing coal stations. That is how the UK decarbonised its economy in the 1990s and that is how we should be doing it again now. However, there is sufficient doubt about that, because of the price of coal relative to the price of gas. It is absolutely consistent to say that we want to keep prices low by supporting this amendment.

One of the things that the Government are currently struggling with is that, at the root of this, there is not sufficient clarity in the backing of these decarbonisation objectives. It would obviously be very easy to solve the energy trilemma by simply lopping off one of the legs. If you simply say, “All we need to do is keep the lights on at least cost”, there is no problem; you would stick with the coal. It seems that this Government are not actually committed to decarbonisation as they have lopped off one of the legs and are seeking a return to coal at just the time when, internationally, we are pressing everybody else to move away from unabated coal.

This is a sensible and moderate amendment, and it gives clarity to everyone. It reduces investor risk, particularly for those people operating gas stations and seeking to invest in new gas stations. I hope that noble Lords on all sides of this House will find that they can support this amendment and I hope that the Minister will ultimately support it, too.

Photo of Viscount Hanworth Viscount Hanworth Labour

My Lords, we have been told that the Energy Bill has two purposes. The first purpose is to secure the much needed investment in new plant for generating electricity. The second is to decarbonise our electricity supply. Amendment 105, which has been rejected by the Government, was closely aligned with these two purposes. Its effect was to ensure that if there were major upgrades to coal-fired power stations, such as to enable them to meet the European emission requirements in respect of sulphates, nitrates and heavy metal contaminations, they should also be constrained to meet the emissions performance standards in respect of carbon dioxide that are imposed by the Bill. The subsequent amendment tabled by the noble Lord, Lord Oxburgh, reinstates this requirement but includes a let-out clause that would allow the Government to alleviate the requirement, if necessary. Presumably, this would be appropriate in a case where the lack of capacity was so pressing as to imply a real danger of the lights going out.

The Minister, Michael Fallon, argued in the Commons that to include such amendments would add to the risks faced by investors. The logic of his position escapes most of us, who believe that the original Amendment 105, or its replacement by the amendment of the noble Lord, Lord Oxburgh, would clarify the intentions of the Bill in a way that would actually encourage investment. Why does that Minister insist on the rejection of these amendments? Is it that he wishes there to be a loophole in the legislation that would allow dirty, coal-fired power stations to remain in operation, notwithstanding the ostensible purpose of the Bill? There are certainly grounds for such a suspicion. However, the Minister has asserted on several occasions that he doubts, even with the allowances the Bill affords, whether any of the old coal-fired power stations have a future.

Perhaps we should believe in his good intentions and allow ourselves to look elsewhere for the reasons for his intransigence. The reasons are not hard to find. The Minister has a need to conciliate a faction in his party that is firmly opposed to all measures aimed at staunching the emissions of carbon dioxide. They point to the cases of Germany and the Netherlands, which are in the act of commissioning unabated coal-fired power stations. They demand to know why Britain should be imposing constraints upon itself when others are failing to do so.

I believe that the Minister’s stance has the sole purpose of allowing this faction to believe that the intentions of the Energy Bill can be eventually subverted. If he does not himself intend this outcome—and we must be generous enough to believe this—then he must be intent on bamboozling some of the members of his own party whose objectives differ from his own. This is not the sort of consideration that should influence the legislation. The legislation will be greatly clarified by the inclusion of these amendments, which would make its intentions unequivocal. On this basis I would urge your Lordships to support the amendment of the noble Lord, Lord Oxburgh.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative 4:00, 11 December 2013

My Lords, I will be brief about this. I understand the argument put forward by the noble Lord, Lord Oxburgh, and I accept that he is trying to reach a compromise. This Bill started with the support of all parties in Parliament. I was a little disappointed to hear the noble Baroness’s complaints that the Bill does not meet many of the requirements that she would wish to see in it, but on the whole her party has supported the Bill. Indeed, it has gone further and recognised that the Bill’s passage is deeply important to the future of our energy industries here.

My noble friend Lord Lawson described it as the worst Bill he had ever seen, took part in the first day of Committee and we have not heard from him since. The fact is that everybody else who has taken part in the passage of the Bill has recognised that the new machinery, which sets up the electricity market reform as an essential part of our generation and consumption measures, is crucial for foreign investment—for all investment, but particularly when we have some of the larger foreign companies willing to invest in this country. Nothing upsets them more than if they see that there is uncertainty in Parliament over the Bill.

Picking up one point made by my noble friend Lady Verma, we have offered the other House a chance to consider the amendment that was carried in this House. It was firmly rejected by a much larger majority there than passed it here. That is the purpose of this House. We have done it. It would be extremely damaging to the general intentions of this Bill if, yet again, we were to send it back to the other place. It would send the wrong message.

I understand the points, made by the noble Viscount, that there may be some marginal advantages. I have had representations from the gas industry about this. The overwhelming reason, however, that we should reject the amendment of the noble Lord, Lord Oxburgh, is that the Bill needs to be passed. It should be passed without any further delay. For that reason, I intend to vote very firmly against his amendment.

Photo of Lord Turner of Ecchinswell Lord Turner of Ecchinswell Crossbench

My Lords, I speak in favour of the amendment. I find it difficult to understand, for anybody who concentrates not on tactical issues such as the speed of passing of the legislation but simply on the wording, what their opposition in principle could be. The simple fact of the case is that Parliament several years ago passed an Act of Parliament by huge majorities, committing us to the very significant decarbonisation of our economy: an 80% reduction in CO2 emissions by 2050. It is the clear conclusion of all analysis, including that of the Committee on Climate Change that I used to chair, that there is no believable path to that emissions reduction by 2050 which does not involve the very significant—almost total—decarbonisation of electricity in particular by around 2030.

Clearly that is completely incompatible with a role for coal other than as providing a small number of hours a year of peaking capacity into the mid or late 2020s. This amendment would simply ensure that that possibility would clearly be excluded—with, however, a get-out under Section 48 if that at all endangered an adequacy of supply. It simply seeks to ensure that we will not have unabated coal in significant quantities in the late 2020s, and it does so 12 years ahead, in order to influence the decisions on investment that are required for security of supply.

I fail to see what the disadvantages of the amendment are. It would give greater clarity over our plans for coal and over the opportunities for gas, and I therefore support the noble Lord, Lord Oxburgh, in his amendment.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

My Lords, I am prompted to rise because of the rather unwarranted attack that the noble Viscount made on Ministers. None of us takes responsibility for security of supply in the future. The late Baroness Thatcher used to say that the only thing that was certain in politics was uncertainty. None of us knows what the future holds or what the likely position will be in 12 years’ time. This amendment would remove the flexibility that a future Government would have in order to keep the lights on. It is really quite wrong of the noble Viscount to present this as some kind of political matter that is exercising Back-Benchers in the other place, as he did, with Ministers responding to that rather than to their responsibility to ensure that we have security of supply. I notice that when I asked the noble Baroness on the opposition Front Bench about security of supply, she did not deal with the issue.

At the end of Question Time, we had a Question about China. We are now importing vast quantities of carbon from China because of the expansion of coal-fired power stations there, and exporting jobs that would otherwise have been here. To present this as some kind of neutral political argument—

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

I shall give way in a second, if I may. I bow to the considerable experience of the noble Lord, Lord Turner, in this matter, but there was a thing called the financial crisis, which he is also very familiar with, which followed and which has big implications for jobs and prosperity in future. Ministers are entirely right to take account of that.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

I thank the noble Lord for giving way. I referenced security of supply in indicating that this would create greater certainty for gas investment, not least by changing the merit order so that gas operated for more of the time. The noble Lord’s interruption made me lose my place at the time, but I was going to go on to mention that I learnt yesterday that one of our biggest renewable projects, the biomass conversion at Eggborough, is now in jeopardy because Ministers in this Government have changed the early CFD feed-in rules in this Bill, which we have yet even to sign into law. The rules have been changed midway through so that the Eggborough project, which currently accounts for 4% of our supply and gives us firm renewables that mean that we can back off from wind, is now in deep jeopardy and is expected to have to close as a result of this Government changing their mind.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

The noble Baroness makes my point for me: there is no certainty in the future.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

Under this Government, under future Governments—whatever. All that the Government are arguing in this regard is, “Don’t close off options that may, in the event of the unforeseen happening, occur”. The noble Baroness, who presumably has concluded that she is never going to be in government again, has no interest in that, but those of us who believe that our parties will be in government would like to see our Ministers keep their options open. I hope that the House will reject this amendment.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

Does the noble Lord accept, though, that because demand for electricity is currently flat, keeping options open squeezes out investment in new options?

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

Before I sit down, I say to the noble Baroness that I would be more persuaded by her if she and her party were to be more open-minded about the prospects for fracking, for example, in her advocating the future generation of electricity by gas. As always, though, the noble Baroness wants it both ways, and I hope very much that the House will support my noble friend and reject this amendment.

Photo of Lord Teverson Lord Teverson Liberal Democrat

My Lords, I will comment on the amendment of the noble Lord, Lord Oxburgh. I agree and sympathise with my noble friend Lord Jenkin’s point that the Bill needs to proceed and that we must get it on to the statute book. The only reason I have pursued this is that, as the noble Lord, Lord Turner, suggested, the issue of the continued generation of electricity by coal is fundamental to the policies of both this and the previous Government, and therefore needs to be clarified. These two amendments are attempts to increase as far as possible certainty for investors and clarify the way forward. As the noble Lord, Lord Forsyth, said, that is not completely possible, but at least we can start to close down the risks and probabilities, which is one of the main purposes of the Bill. That is why the amendment has been pursued. I have been happy—although reluctant—not to pursue my own amendment but to try to reach a compromise.

Pricing is not a problem here. Would coal being removed from electricity generation lead to the threat of price increases? In the past few years, when coal has come on, we have not seen prices fall; in fact, the more coal has come on the system, the more they have gone up. That is the correlation; I would not say it is directly causal, but that is the history of how this has worked.

On security of supply, the vast majority of that coal comes from Russia and Colombia, with a little bit from the United States as well. The security of supply arguments do not, therefore, all run in one direction. On the question of how the coal generating industry is treated under any of these amendments, it will be free to operate at peak times for a long time. That, along with contributing into the capacity market, will be greatly to the financial benefit of the power station operators.

That is why these amendments are important. I know that this is not important to everybody, but it is estimated that our carbon emissions went up by 4.5% last year, at a time when we were hoping to bring them down. That was because of the increase in coal generation of electricity, according to the Department of Energy and Climate Change.

This is a good Bill. I congratulate my noble friend the Minister on all that she has succeeded in doing during the passage of the Bill. This is the only contentious Lords amendment, and I seriously regret that the Government have not been able to find a compromise or to help us through this important, core issue.

Photo of Lord Dixon-Smith Lord Dixon-Smith Conservative

My Lords, I had not expected to intervene in this debate, but the previous two speeches have forced me to my feet. I remind the House that these amendments, and this part of the Bill, are talking about 2025. There is only one significant carbon target which must be met, which applies in 2050. The rest of it is interim planning. If we are being silly here, of which I am quite capable, and sticking to an interim target, we are taking a very short-term view.

Photo of Lord Turner of Ecchinswell Lord Turner of Ecchinswell Crossbench 4:15, 11 December 2013

My Lords, I simply point out that the interim targets in the form of the actual budgets are legally binding commitments of the Government under the Climate Change Act. Once the budgets are set—three budgets in advance—they are not merely planning guidelines but are part of the Government’s legally binding commitments.

Photo of Lord Dixon-Smith Lord Dixon-Smith Conservative

I am used to the Chancellor of the Exchequer making annual Budgets and I have been involved in politics indirectly and directly for a very long time. If the Chancellor of the Exchequer is forced to, shall we say, amend interim budgets, it seems to me that sticking our feet in the ground over an energy budget is not exactly wise.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change

My Lords, I am grateful to all noble Lords for their contribution to the debate. I hope that in my opening remarks I made it clear that the Government recognise the intention behind this amendment. Of course we share that intention, but I believe that the differences between us are very narrow, even though they are very important.

It boils down to an assessment of risk. All sides in this debate can agree that we neither expect nor desire large amounts of unabated coal to be operating in the 2020s, but, as my noble friends Lord Forsyth and Lord Jenkin of Roding have rightly pointed out, we cannot be sure today exactly what will be required in those years. The Government’s position is that we should take a precautionary approach, given the serious potential for security of supply implications and the impact on consumer bills if we get it wrong. We should send a clear signal that unabated coal has only a limited future in helping us to transition to a lower carbon economy by creating an EPS that applies to any new coal plant. I appreciate the attempt of the noble Lord, Lord Oxburgh, to find an alternative, but no responsible Government could or should take risks that potentially put energy security in danger.

The noble Baroness, Lady Worthington, raised a point on the capacity market; our view is that capacity payments are likely to have only a marginal impact on the overall economics of coal plant and more important drivers on occasions where upgrading will relate to the overall state of an operator’s plant, an operator’s view of the market and the value that they place on retaining coal as a hedge. Even were they able to do so, this could mean that coal plants stay open longer, but they would operate at low-load factors and hence have low carbon emissions, given the evolution of the energy market with more low-carbon generation and carbon pricing. The noble Baroness could not give complete assurance that energy security would not be at risk. She could not say that prices would stay the same—her own party’s policy does not say that.

It is time that we looked at the elephant in the Chamber—the investors. After months of uncertainty, investors are looking at us in dismay. The most important thing we need to do is to provide certainty for investors by securing Royal Assent. The Confederation of British Industry has said that the Energy Bill has undergone significant scrutiny within Parliament as well as by industry and other stakeholders and it has the broad support of industry and investors in its current shape. It is important to the success of EMR that the Energy Bill receives Royal Assent in 2013, allowing investors to make those well needed decisions about investment.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

I thank the noble Baroness for giving way. Will she comment on my questions about Eggborough, as that is the very first test of whether this Bill is actually going to deliver? It was part of DECC’s announcement on projects that are going forward under the FID enabling scheme but I hear that next week they will receive a letter saying that they are not eligible for the first tranche because of a new system that the Government have introduced of rationing out the CFD contracts.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change

My Lords, the noble Baroness is of course aware that negotiations that are commercially sensitive cannot be discussed; I will not go further than that because these are sensitive issues and it would not be right of me to discuss individual plants, particularly on issues of commerciality.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

I will just say that the Secretary of State was at Drax unveiling a new project that is being enabled under the CFDs. If it is that confidential, why was he there?

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change

My Lords, I shall continue by trying to conclude quickly. The Bill has undergone thorough scrutiny and the Government have listened very carefully to all the concerns raised during its passage through this House. I am grateful to my noble friend Lord Teverson for his warm words. We have responded to a great many of the issues raised by colleagues from all sides of the House on, for example, domestic tariffs and access to markets, and we have introduced new topics—for example, carbon monoxide and smoke alarms.

We must acknowledge that the other place has accepted 112 amendments and, moreover, has welcomed them. It has recognised the expertise that this House has brought to the scrutiny of the Bill and the real improvements to it that this House has made. However, the other place has decided with a considerable majority that it does not agree with this amendment. The elected Chamber saw an unprecedented majority for the Bill as it completed its passage through the other place. Today, we can decide that the Bill proceeds to the statute book—a Bill that is essential for protecting consumers and for ensuring security of supply and decarbonisation of our economy. Nothing will send a firmer signal to investors than that this House will do nothing that prevents the Bill receiving Royal Assent.

Photo of Lord Oxburgh Lord Oxburgh Crossbench

My Lords, so much for my attempts to find an uncontroversial middle way of bringing all sides together. The temperature of this debate has been a little higher than I would have expected and, indeed, than I would have hoped. I agree with a great deal that the Minister has said on both security of supply and the Bill’s importance for investors. However, the fact is that the amendment increases, rather than reduces, both those things. If Members with a keen sense of smell have detected a faint aroma in the Chamber, it is the aroma of red herrings.

The Minister spoke of concerns about certainty for investors if my amendment is agreed, and the noble Lord, Lord Forsyth, said the same thing. He is quite right: we do not really know what is going to happen in 10 years’ time, but the Bill contains a measure that allows the Government to disregard these constraints if severe circumstances mean that it is necessary to do so. Therefore, that question of security of supply does not really exist.

As far as looking at certainty for investors is concerned, in the near term the necessity is for investment in gas-fired power stations. Everyone agrees with that. This amendment would improve, not reduce, certainty for investors in the time that we can look forward to. I do not know anyone who does not think that we need new gas-fired power stations, and the amendment would help investment in that regard.

The noble Lord, Lord Jenkin, rightly said that we have to get on with it. I am going to press this matter to a vote. I do not think that it need delay the passage of the Bill for more than a few days. As far as investors are concerned, getting the right Bill before Christmas, which the Government can certainly do if they are so minded, will be the main thing. The fact that that happens a day or two later is neither here nor there, and there will be a much more certain basis for investing in new gas.

Division on Motion A2

Contents 215; Not-Contents 262.

Motion A2 (as an amendment to Motion A) disagreed.

Division number 1 Energy Bill — Commons Reason

Aye: 213 Members of the House of Lords

No: 260 Members of the House of Lords

Aye: A-Z by last name


No: A-Z by last name


Motion A agreed.