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Report (3rd Day)

Part of Infrastructure Bill [HL] – in the House of Lords at 9:30 pm on 10th November 2014.

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Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change) 9:30 pm, 10th November 2014

My Lords, a number of noble Lords may recognise this amendment, because this is not the first time we have had this discussion. I am afraid that I do not intend to apologise for retabling it; I shall keep retabling it until the issue is resolved. At the moment, whether because of a lack of joined-up thinking or because it is the Government’s intention, we are seeing perverse effects arising from their energy market reforms, leading to a reinvestment in old coal.

I said earlier that I would far rather we used home-grown gas to generate electricity than see imported Russian coal being burnt in stations built in the 1960s and 1970s that are now well past their use-by date. When I tabled this amendment in Committee, the Minister’s response was to say that she agreed neither with my analysis of the current position nor with my prediction of the future, and was not convinced that the amendment, which, essentially, would bring in a backstop power to enable us to limit the operating hours of old coal, was needed.

Last week Eggborough, one of the coal-fired power stations built in the 1960s that is seeking a three-year contract to extend its life under the capacity payments mechanism, was sold to a Czech energy company which, in addition to running power, heat and energy provision services in the Czech Republic, is also the third largest coal producer in Germany. This is its first entry into the UK market. The company is EPH, whose spokesperson, Daniel Castvaj, said that there were obviously questions over the long-term operation of the plant but that the company intended to run the existing units for as long as possible.

Today a report was released by WWF with the help of Imperial College London. It made the point that I have continually been seeking to make to the Minister and the Government that just wishing old coal away is not going to work. If we want coal to come off our system and be replaced by cleaner, more efficient infrastructure, we will have to regulate to make that happen. We were told during the passage of the Energy Bill that this would be achieved by financial measures, through the introduction of a carbon price floor, which was in the Finance Bill, and that that would see an end to coal. No sooner did that Bill pass into law than that financial provision was frozen. The escalator, intended to drive off coal, was removed.

Everything that the Government told us during the passage of the Energy Bill has changed since it passed into law. More information has now come to light on the impact of the capacity mechanism. That was intended to enable investment in new infrastructure—to bring forward cleaner infrastructure and make sure that the lights stay on. However, the Government’s choices in how they have implemented that measure have meant that there is now a real possibility that we will not see the capacity mechanism bringing forward investment in new gas infrastructure. If we do, it will be on a very small scale. Instead there will be reinvestment in old coal.

Overall, the capacity mechanism and the people who have bid into it demonstrate that we have more than sufficient plans for infrastructure and supply than is demanded by the capacity mechanism. In fact, it will come down to a straight choice between investment in old coal or investment in new gas. The costs of that are such that it is my expectation—we will find out in December whether this is the case—that it will be old coal that wins and new gas will not. Essentially, the capacity mechanism favours short-term investments by allowing coal plant to continue operating unconstrained, at high load factors but lower efficiencies, than if there were investment in cleaner gas.

I am sure that I will hear from the noble Baroness that she disagrees, but the Imperial College study launched today and commissioned by WWF said:

“Imperial College’s economic modelling shows that it is unwise to simply assume that coal-fired power stations will all close in the 2020s. If government wants old coal stations to close it needs to ensure that happens through legislation. We modelled a variety of scenarios and, with the UK’s existing suite of energy policies, in every instance coal still played a role in generating electricity and 2030 emissions targets were missed”.

That was picked up today by the Independent, which went one step further and said that this really showed that the coalition’s commitment to being a green Government was in tatters and that it did not have credibility in its comments on moving to a decarbonised electricity system.

I saw the noble Lord, Lord Turner, here earlier but he is obviously not in his place now. He commented on WWF’s report and I shall take the liberty of quoting him. He said:

“"The Intergovernmental Panel on Climate Change’s latest report update on climate change science makes it unequivocal that we must reduce carbon emissions dramatically to avoid major harm to human welfare. And we cannot achieve the required cuts unless we eliminate unabated coal from the electricity generating system”.

At the end of an extensive comment, he concludes:

“A clear commitment to get unabated coal out of the UK generation system is needed to provide certainty against which businesses can invest”.

The amendment has been tabled a number of times and I make no apology for that. I will keep tabling it, probably until I run out of breath, because I care passionately about achieving decarbonisation at least cost and by keeping our energy supplies secure. It is a very short-term attitude to think that if we patch up old coal and keep it running at high load factors it will somehow be beneficial for the country as a whole. Yes, it may make a small difference in the short term, but in the longer term it will be wasted investment. If we are to hit our targets, we need to get our electricity systems almost fully decarbonised by 2030. We need unabated coal to come off. These stations are old, inefficient and highly polluting. If we do not phase them out, using measures such as the EPS, we will simply see ourselves running very fast to stand still. Every coal station that stays open emits twice as much as a gas station. More renewables and nuclear have to be built to compensate for those extra emissions, at a greater cost. This is really not that difficult to work out: old coal should come off first. It is the most polluting and we are wrong to set in place a capacity mechanism that keeps it going a moment longer than it needs to.

I hope that at some point the Government will see the logic of my argument and accept that something needs to be done if we want to get these coal stations out of our system early in the 2020s. I beg to move.