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Baroness Byford: My Lords, I thank the Minister for his response. I shall look very carefully at what he has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 61 not moved.]

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Lord Ezra moved Amendment No. 62:

    After Clause 65, insert the following new clause--

(" . In making an order and other arrangements under sections 32, 32A, 32B and 32C of the 1989 Act the Secretary of State may also make provision for--
(a) electricity generated by any form of combined heat and power stations;
(b) electricity generated by approved systems of clean coal technology.")

The noble Lord said: My Lords, the purpose of this amendment is to extend the renewables obligation to include combined heat and power and clean coal technology. Perhaps I may deal first with combined heat and power. The Government's support for that way of making better use of the electricity generating capacity in the country is well known. They have set an objective, as they have for renewables, for the year 2010. In discussions I have had with the noble Lord since Committee stage he has assured me that CHP will be included in the energy efficiency obligations which are dealt with in Clauses 70 and 99. That is one kind of obligation contained within this Bill. I am quite satisfied about that.

However, the purpose of this amendment is to make sure that CHP would come into the other kind of obligation, the renewables provision, which imposes an obligation on suppliers to take certain types of electricity. As regards renewables, my proposal is that it should be extended to combined heat and power. That is the simple proposition that I make. In view of the Government's known support for CHP, I believe that it should come into both sorts of obligations contained in this Bill as regards the energy efficiency obligation and the proposed extension of the renewables obligation. That is the proposition as regards combined heat and power.

The proposition as regards clean coal technology we touched on earlier. We ought to be moving in the direction of having plant operating on clean coal technology systems in this country. The noble Lord, Lord Dormand of Easington, is one of a number who have been fighting the battle for years. We need to create a climate in which that type of activity can be stimulated.

As I mentioned at Committee stage, I tried some years ago to persuade the government to extend the non-fossil fuel obligation to include clean coal technology. That was on the point of being agreed, but then it failed. It was a Private Member's Bill and these days the fate of such a Bill is uncertain. It is another way in which the creation of this type of plant could be brought about. If there were an obligation to take a proportion of electricity produced by clean coal technology, then we would get the plant to produce it. There is not a situation at present in which one would put money into the venture because, on a straight comparison with other forms of energy generation, it would be too expensive. And so it is with regard to renewables. That is the whole reason for the renewables obligation. Therefore, I strongly

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propose--I hope that it will gain support--that the renewables obligation be extended both to combined heat and power and to clean coal technology. I beg to move.

Lord Hardy of Wath: My Lords, I endorse the comments of the noble Lord, Lord Ezra. The logic of the case for combined heat and power is clear. It is both sensible and economic. There are also double benefits from combustion.

So far as concerns clean coal technology, we debated this matter earlier and I certainly do not wish to delay the House. I accept that the Government recognise that clean coal technology is desirable and that there could be a substantial international market for its development. The point I wish to make is that, if our mining engineering and related industries are to take advantage of that opportunity, there has to be a home base of a sufficient size to provide the demonstrations required to attract an international audience.

In her admirable speech, the noble Baroness, Lady Byford, was sweepingly condemnatory of fossil fuels. The raw consumption of fossil fuels which emit noxious gases must come to an end. But, whatever we do, the world will continue to burn vast quantities of coal. If we were to shut down all our pits and coal-fired power stations tomorrow, it would make very little difference to the total amount of coal which will be burnt internationally. It is therefore highly desirable for a number of countries to ensure that clean coal technology is supported not only at its research stage but at its development stage, in order to demonstrate to the world that the planet need not continue to be polluted on the scale that it inevitably will be if leads are not taken.

Britain is in a position to give a lead. I hope that the Government will take a favourable view of the case that the noble Lord, Lord Ezra, has been advancing for a very long time, with the support of a number of my noble friends, of whom the noble Lord, Lord Dormand of Easington, is a notable example. I hope that the Government will recognise that we have an international opportunity. We may also be able to respond to an international obligation in a material and sensible way if the views expressed in the amendment are considered sympathetically.

7.30 p.m.

Lord Dormand of Easington: My Lords, my name has been mentioned twice in connection with this amendment, which I strongly support. The arguments need not be repeated; the onus is now on the Government to disprove the case for clean coal technology, which has been made for a number of years.

Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Ezra, and others for the time that they have taken in discussions with me and my officials between Committee stage and now. The meeting we had last Thursday--which ended with us walking out and leaving his advisers talking to DTI

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officials--was particularly helpful. It provided more light than we are often able to achieve across the Floor of the House. As a result of those meetings, I have twice written to the noble Lord: once on combined heat and power on 29th June, and once on clean coal on 3rd July. Those letters are in the Library of the House.

Let me restate what I said in the letter on combined heat and power. I can confirm that the Bill already contains a power which would allow the Secretary of State to set a specific obligation for combined heat and power if he wished. That is what subsection (a) of the noble Lord's amendment would provide. This is by virtue of new Section 41A(5)(b) as introduced by Clause 70 of the Bill, which applies to electricity--if that is difficult to find, it is on page 73, line 39--and there is a gas equivalent under Clause 99.

This subsection provides that the Secretary of State may specify the action which qualifies for the purpose of meeting an energy efficiency target. The effect of this is that he could set an obligation for requiring suppliers to meet energy efficiency targets and specify that the only way of meeting the targets is by installing or otherwise procuring CHP. New Section 41A(9), and its gas equivalent, removes any possible doubt about CHP being able to count towards targets in this way. But I have to say again that we do not intend to use the powers in this way. This is because we are already putting in place an extensive range of measures in favour of CHP, which I explained in Committee and in my letter.

I wrote to the noble Lord, Lord Ezra, on 3rd July to explain the context of the Government's policies for clean coal. I can confirm the main points of what I said. The Government's policy with regard to the coal industry should be seen in the context of the Government's central energy policy objective to ensure secure, diverse and sustainable supplies of energy at competitive prices. Our October 1998 White Paper, Conclusions of the Review of Energy Sources for Power Generation, highlighted the need for an acceptable level of diversity and saw coal as a main contributor to diversity of UK electricity production into the foreseeable future. That is why the Government were so concerned that distortions in the electricity market were pushing out existing coal-fired plant at the expense of new gas build and undertook a programme of reform to remove those distortions.

That programme will be complete with the introduction of the new electricity trading arrangements later this year. At that point we will be able to relax the stricter consents policy for new gas-fired power stations that we introduced to safeguard diversity while the reforms were undertaken. We recognise that the restructuring of the market and the lifting of the stricter consents policy will be a challenge for the UK coal industry, and we are in discussion with the European Commission about a programme of state aid to help the industry through this period of restructuring.

The rationale for government support for cleaner coal technology R&D fits firmly within this policy framework. A key purpose of the R&D programme is

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to identify the extent to which all the extensive coal resources of the UK can be used as a source of energy in the future. Both coal bed methane and underground coal gasification technology offer some promise to contribute to future energy supply in the longer term if they can be successfully developed commercially on a large scale.

A further element of the rationale of the programme is the contribution that cleaner coal technology would make towards achieving global environmental goals as part of the climate change programme. My noble friend Lord Hardy is right about that. In the UK, the availability of gas as a fuel for electricity generation means that clean coal does not offer environmental advantages other than over existing coal capacity. Any clean coal plant would probably displace existing coal plant, at some cost and without substantial efficiency gain.

However, coal used for electricity generation is expected to grow substantially in developing countries and the efficiency gains to be derived from improvements to existing coal plant and the adoption of new advanced cleaner coal technology plant is expected to make a substantial difference to emissions at the global level, again a point referred to by the noble Lord, Lord Hardy. The R&D programme will underpin substantial export opportunities, with business and employment benefits for UK companies.

But we do not see the need for support for demonstration projects as a priority at present. There are a number of commercially proven cleaner coal technologies available from a number of suppliers, both in the UK and overseas. They do not need to be demonstrated again on a commercial scale and subsidised by the taxpayer. Our funds are best channelled to R&D for more advanced technologies capable of offering substantial efficiency and environmental benefits.

However, the Foresight Task Force identified a case for demonstration after about 2005, and the Government undertook in their October 1998 White Paper to re-examine the position in about three years' time. We shall honour that commitment and take account of all the points that have been raised in debate, including the potential export benefits.

I trust that I have given a sufficiently clear statement of the Government's position on the issues of combined heat and power and clean coal to enable the noble Lord, Lord Ezra, not to press his amendments.

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