Charles
Hendry: We have had a useful debate, and I am grateful to
the Minister for the extra clarification. We will not seek to block the
clause, but we would prefer funding for the developments to come
through the EU ETS. I recognise that she has given further guidance,
but we think that that is a new source of funding that does not add to
consumers’ bills at this time. Consumers are already anxious
about their bills, and an additional levy must inevitably cause some
complications.
Joan
Ruddock: Does the hon. Gentleman not follow my argument
that if he were to take money that has gone to the Consolidated
Fund—receipts from auctions—he would deprive other areas
of public finance, such as schools and hospitals, which are very much
needed and will continue to be needed in the future? Whichever way he
looks at it, the small amount that the levy would put on
people’s bills would be completely offset by his proposals
directly to take public funds, which would be much
worse.
Charles
Hendry: What has been clear in our discussion is that the
funding is opaque. If we look at the budget book and the documentation,
it is difficult to see exactly how much there is. Today, for the first
time, after
months of asking for information, we have had some detail on how much
money is assumed to come from the EU ETS. We need to look further at
how that is allocated. We cannot do that at this stage, and we do not
seek to do so. However, it is a means of avoiding a levy on consumers,
which would have been nice.
The
Government are determined to pursue the levy approach. We will not seek
to block that, because, in the event that money is not available
through the EU ETS, it provides certainty to industry that funding will
be
available. Question
put and agreed
to. Clause
4 accordingly ordered to stand part of the
Bill.
Clause
5The
administrator Question
proposed, That the clause stand part of the
Bill.
Mr.
Binley: In our debate on clause 4, the Minister
said—we all welcomed it—that the intention should be set
out in the Bill so that it is clear. I would hope that the same could
be said about clause 5, but I fear that its intention is not clearly
set out, and therein lies my
concern. Under
the clause, the Government intend to change the authority that is
responsible. I accept that, and it seems sensible that we should have
an authority responsible for the whole clean coal issue. I think that
we would all welcome that, but what changes have the Government thought
about? What is the time frame for the changes, and what sort of
authority will it be? Will it be a regulator? We need to know more
about
that. My
real concern, however, is the explanatory notes, which state that the
clause gives the Secretary of State power, through regulations, to
transfer the function of administrator to another body,
“including to himself” or, indeed, herself—a
further growth in ministerial power over a rather sensitive area. Does
that give the Secretary of State the right to increase or change the
levy, and, if so, in what way? We need to understand that, because
“levy” is simply another word for taxation. What powers
would it give a Secretary of State? I assume that it would give all the
powers given to the authority, but I want that to be clarified. What do
the Government envisage if the measure is enacted? If they do not have
a view, I wonder why this provision is in the
Bill.
Anne
Main: My hon. Friend makes a very interesting point about
this quite complex situation. If someone is unhappy about the operation
of the authority, to whom do they appeal if the powers have been given
back directly to the Secretary of
State?
Mr.
Binley: Given the questions that I am asking, I fear that
I am not competent enough to answer my hon. Friend’s question,
but no doubt the Minister has taken it on board and will be kind enough
to respond. There are serious concerns about the inclusion of the
phrase in the Bill. The Government must believe that there might be a
need to transfer power to the Secretary of
State. Therefore, we need to know why that might be necessary. Will the
Minister be kind enough to make the clause’s intentions
clear?
Joan
Ruddock: The provisions relate to the administrator of the
CCS financial support mechanism. A number of elements make up the
financial support mechanism: the raising of funds through a levy on
electricity supplies, the making of incentive payments to CCS projects
and the monitoring of the assistance schemes under which assistance is
provided. The elements clearly create a need for an administrator to
carry out the functions necessary to administer the levy and payments
to projects. We believe that Ofgem, the regulator of the electricity
supply industry, is well placed to carry out that
role. The
clause therefore appoints Ofgem as the administrator. At the same time,
it provides, as the hon. Gentleman said, that the Secretary of State
has the power to transfer the functions of the administrator to another
public body if required. That will enable the Secretary of State to
take account of any future change in circumstances that might make it
appropriate to transfer the function of the administrator to another
body.
4.30
pm In
our evidence sessions, we discussed whether a new body would be
necessary in the future; I think that the Conservatives had proposed
that new body. At the time, I said that the creation of such a new body
was premature, but this is a long-term programme that takes us to 2020,
conceivably with levy payments and conceivably adding retrofit
payments. We are therefore probably talking about a period of potential
financial support of, say, 15 years. Therefore, it is clear
that we need to have an open mind about what might be necessary in the
future. However, let me be absolutely clear that it is our settled view
at the moment that Ofgem has the appropriate expertise, and indeed
Ofgem is being appointed under this clause.
Charles
Hendry: Does the Minister not accept our concern that this
measure makes the Bill rather narrow? We understand that the funding
mechanism will be fundamental to the projects being developed. However,
there are many other aspects, in terms of organising the funding
mechanism and its strategic deployment, that will have to be overseen,
and there will have to be an organisation to do that. Therefore, does
it not make sense to make provision for that, rather than perhaps
needing new primary legislation to set up another body when the matter
becomes much more urgent? I think that we can all see the need for that
new body. Industry sees the need for it, so would it not be sensible
simply to have the power to create it
available?
Joan
Ruddock: I will be happy to consult officials outside the
Committee, but I am not aware that there would be need to be primary
legislation to set up another body that might have the functions that
the hon. Gentleman has just referred to. This measure is narrow and
specific for good reason: to ensure that the moneys can be raised and
disbursed appropriately and that monitoring can take place. We believe
that Ofgem is the appropriate body to do that. Indeed, we have no plans
at this time to make any subsequent transfer of functions.
Given
the time for which we expect the projects, and what follows from them,
to run, we believe that it is reasonable to have this flexibility,
should it be required, although we do not currently anticipate that it
will be needed. Indeed, some of the other functions that the hon.
Gentleman has referred to could probably be covered by means that did
not require primary legislation nor the transfer of these particular
powers, because they are specific powers.
Mr.
Binley: The Minister is being immensely generous in giving
way and I hope that we are reacting in that spirit.
The Minister
will remember that we scrutinised a Mrs. Jenny Saunders, or
a Miss Jenny Saunders—I do not know her marital status,
actually. I questioned her on the efficacy and efficiency of Ofgem. In
particular, I asked her whether she felt Ofgem was doing a reasonable
job. I think that the information that I got back was that she felt
that it could improve considerably.
Is the
Minister therefore happy to give this power to Ofgem, or does she
intend to ensure that Ofgem ups its efficiency in respect of the task
she is giving
it?
Joan
Ruddock: My hearing of most of the witnesses, including Ms
Saunders, was that they were saying that Ofgem’s functions may
have left a lot to be desired in the past. However, I think they all
said that it was now on a better track and had improved in recent
years. We will debate at a later stage the ways in which Ofgem might
take on board climate change and energy security.
I think that
we are all of the view that Ofgem has perhaps not always performed as
we have wished it to, but considerable improvements in performance have
occurred and new directions are being pursued that are in line with
Government wishes. We are therefore confident that Ofgem, which has
already set up a new unit to cover a number of functions—of
which the issue under discussion will be one—is equipped,
experienced enough and able to do the
job. I
repeat that the provision is narrow, as it needs to be; it is the task
that Ofgem needs to carry out. It is the body that we are appointing
through the Bill to do the relevant tasks. We do not have plans at
present to change that, but we will allow ourselves the flexibility.
Whether there is a need for a different public body with much wider
functions—the kind to which the hon. Gentleman has referred,
perhaps—and whether that would require primary legislation, will
be part of our considerations in the rolling review.
I am sure
that, as we progress, we will be able to make those decisions
subsequently; they do not need to be taken in this Bill at present. I
think that I have indicated clearly enough that the clause’s
provisions are required, as they specify who will carry out the central
function of administering CCS financial
support.
Mr.
Binley: My apologies, but I did raise the issue of the
information in the explanatory notes. Will the Minister refer to them?
The possibility of transferring the power to the Minister, whoever that
Minister might be, is a pretty important factor in this
discussion.
Joan
Ruddock: The hon. Gentleman and I will share the view that
it is always better not to transfer additional powers of this kind to
Ministers, but we have to have
that flexibility should it be necessary. I have, however, indicated that
we have no such plans. We could have gone along with the proposed
contractual arrangements for the first project where the relationship
is directly with the Secretary of State and the developer for CCS
projects. We have put Ofgem in the position to do the work involved,
which is important to us. We think that Ofgem is the right organisation
to do it and we did not include the provision to suggest that we want
to make a transfer. It is there as a protective clause for the
future.
Mr.
Binley: I welcome the Minister’s answer, but I did
ask about what sort of circumstances she envisaged the power being used
in. If there are no such circumstances, why is the power in the
explanatory notes and why does it
exist?
Joan
Ruddock: It is in the explanatory notes because it is in
the Bill. I have no idea what sort of circumstances might arise, but
the hon. Gentleman will understand that the expert civil servants who
advise us on the issue believe that we should have such a clause. The
drafters of Bills often advise that, too. I am content with that and I
am not ashamed to say that I cannot enlighten the hon. Gentleman on
this point at this
time. Clause
5 accordingly ordered to stand part of the
Bill.
Clause
6CCS
demonstration projects and additional CCS
use Mr.
Mike Weir (Angus) (SNP): I beg to move amendment 16, in
clause 6, page 5, line 23, leave
out ‘coal-fired’. As it
presently stands the bill restricts CCS demonstration projects to
coal-fired projects. This amendment will remove the reference to coal
and allow other projects to be
considered.
The
Chairman: With this it will be convenient to
discuss the following: Amendment 17, in
clause 6, page 5, line 28, leave
out ‘coal-fired’. As it
presently stands the bill restricts CCS demonstration projects to
coal-fired projects. This amendment will remove the reference to coal
and allow other projects to be
considered. Amendment
18, in
clause 6, page 5, line 37, leave
out ‘coal-fired’. As it
presently stands the bill restricts CCS demonstration projects to
coal-fired projects. This amendment will remove the reference to coal
and allow other projects to be
considered. Amendment
19, in
clause 6, page 6, line 1, leave
out ‘coal-fired’. As it
presently stands the bill restricts CCS demonstration projects to
coal-fired projects. This amendment will remove the reference to coal
and allow other projects to be
considered. Amendment
20, in
clause 6, page 6, line 2, leave
out from ‘scale’ to end of line
5. As it presently stands the bill
restricts CCS demonstration projects to coal-fired projects. This
amendment will remove the reference to coal and allow other projects to
be
considered.
Mr.
Weir: Thank you, Mr. Bayley. These amendments
stand in my name and are supported by the Conservative party.
The purpose
of these amendments is self-explanatory, but it is an important issue
at the heart of the Bill. It is now fairly clear that the winner of the
first competition
will be a coal-based plant. There are only two left: Longannet and the
E.ON plant based possibly at Kingsnorth. In discussing
clause 1 this morning, the Minister stated that the next four plants
were intended to include two pre-combustion plants. However, clause 6,
as it currently stands, makes clear that the demonstration projects
will be for coal-fired generation only, as will the additional future
funding that may be available. The effect is to exclude the possibility
of CCS demonstrators being on a gas-fired plant; any pre-combustion
plant would have to be coal-based and not gas-based. I believe that
that is short-sighted and that we should leave open the possibility of
demonstration plants being either coal or gas—or other
possibilities, such as biomass or oxyfuel.
I would
remind the Committee that we had the opportunity to get ahead of the
field with the Peterhead scheme, which was a joint venture involving BP
and Scottish and Southern Energy. I have talked about that many times
and I will not bore the Committee by going into great detail.
Considerable investment was made in that development, which would have
demonstrated the use of carbon capture and storage on a gas-fired
station. It would also have generated energy from hydrogen as well as
the storage of the captured CO2 in the Miller oil field. As
a result of indecision, continual delay on the competition and the
final decision to exclude pre-combustion schemes by the UK Government,
that opportunity was lost and is now being pursued in Abu
Dhabi. We
run a real danger of doing the same again by putting all our eggs in
the one basket with this clause. When the Minister was asked about this
issue in the evidence session, she said that coal was the most
carbon-intensive fuel and that a solution was needed. No one here would
disagree with that and, as the hon. Member for Northampton, South never
ceases to remind us, there are many, many years’ worth of coal
under our ground. We need a solution that will use that coal for energy
security, if nothing else.
When asked
specifically about gas, the Minister restated the importance of coal
but
added: “It
is not just what we can learn in this country; we need to learn from
what is happening in other countries as
well.”——[Official Report, Energy Public
Bill Committee, 7 January 2010; c. 111,
Q244.] She
went on specifically to mention what the Norwegians were doing with gas
CCS. I
would draw Members’ attention to the excellent paper submitted
to the Committee by Professor Gibbins. In paragraph 13, he
states: “With
respect to technology demonstration elsewhere, conditions are more
relevant in Norway, but low demand there for fossil fuel may hinder
rapid development of gas CCS at scale. Conditions elsewhere in the
world where gas with CCS is being discussed, notably the Middle East,
are rather different with respect to ambient conditions and gas and
CO2 prices, so optimum technology approaches may also be
different
there.” In
effect, neither of these may be suitable for either the conditions in
the UK or the speed with which we need to get gas CCS up and running.
But it seems to me, in respect of the Minister’s response, that
exactly the same argument can be made about coal. Both the USA and
China, for example, are pressing ahead with coal
technology, mainly due to the energy mix in the countries. Indeed, the
professor indicated that the first commercial plant may well be in
China. We need to
look at what technology would deal with the decarbonisation of our
energy supply to meet our carbon reduction targets. We undoubtedly need
to have CCS for coal to unlock our vast coal reserves, but we also need
to look urgently at the decarbonisation of
gas. The
point was made forcefully by Professor Gibbins during the evidence
sessions when he
said: “The
reason why the Bill needs to take in natural gas is that it seems
likely that because we now have these quite stringent targets for 2030,
we will have to fit a significant amount of natural gas plant with
carbon capture and storage in the 2020s. To be able to plan for that,
you need to have demonstrated the technology and to have the reference
plants to look at and say, “This is how it’s
done,” and to be absolutely clear about what you’re
doing. That’s why you would work on
gas.”——[Official Report, Energy Public
Bill Committee, 5 January 2010; c. 44,
Q94.] 4.45
pm Members
will be aware that a large part of our current generating capacity is
gas-fired. This morning, the hon. Member for North Southwark and
Bermondsey said that it was 41 per cent., while Professor Gibbins said
that it was over 30 per cent. Whichever it is, it is substantial and
unlikely to change in the immediate future. Indeed, I looked at what
was happening at the moment, and 33 new applications for gas plants
have already been granted, with a further nine being under
consideration—perhaps as much as a further 10 MW of generation
capacity. Even as we move towards a low carbon economy, we clearly have
many existing and proposed gas stations; equally, those newer gas
stations will still be operating after 2020. As Professor Gibbins
states, “while
the building of new coal generating capacity before and after 2020 is
still uncertain, so it is probable that gas fired plant will be the
source for a major part of UK power-sector emissions of fossil carbon
dioxide in the 2020s and beyond.”
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