4 Nov 2013 : Column 1

House of Lords

Monday, 4 November 2013.

2.30 pm

Prayers—read by the Lord Bishop of Guildford.

Introduction: The Lord Bishop of St Albans

2.39 pm

Alan Gregory Clayton, Lord Bishop of St Albans, was introduced and took the oath, supported by the Bishop of Lichfield and the Bishop of Guildford, and signed an undertaking to abide by the Code of Conduct.

Introduction: Baroness Kennedy of Cradley

2.43 pm

Alicia Pamela Kennedy, having been created Baroness Kennedy of Cradley, of Cradley in the Metropolitan Borough of Dudley, was introduced and took the oath, supported by Baroness McDonagh and Lord Collins of Highbury, and signed an undertaking to abide by the Code of Conduct.

Culture: Art House Cinemas

Question

2.49 pm

Asked by The Earl of Clancarty

To ask Her Majesty’s Government what assessment they have made of the cultural value to the United Kingdom of art house cinemas; and whether they are taking any steps to preserve or promote such cinemas.

Lord Gardiner of Kimble (Con): The Government see this sector as a key element of the film industry. It attracts substantial audiences and is an important part of cultural cinema-going. That is why the British Film Institute—BFI—which is funded by the taxpayer and the National Lottery, has three strategic priorities: to connect the widest possible range of audiences with the broadest range of films; to support film; and to preserve film heritage.

The Earl of Clancarty (CB): My Lords, I thank the Minister for that Reply. Does he agree that the Competition Commission’s ruling following the Cineworld-City Screen partnership—that Cineworld should sell one each of its cinemas in Cambridge, Bury St Edmunds and Aberdeen—is misguided and culturally insensitive since it puts at risk the picture houses, including the Cambridge Arts Picturehouse, which hosts the Cambridge Film Festival, and which the BFI calls,

“an exemplary regional ‘arthouse’ cinema”?

Will the DCMS use all its influence to intervene to have this ruling overturned?

Lord Gardiner of Kimble: My Lords, I entirely understand and, indeed, sympathise with the noble Earl’s concerns, but responsibility for regulating mergers falls to the independent competition authority. The Competition Commission has decided that Cineworld, having bought the Picturehouse chain, should sell one of its cinemas in a number of towns. I know that the BFI has already communicated its concerns to the commission, and it is open to concerned parties to apply for a review of the decision to the commission appeal tribunal.

Lord Stevenson of Balmacara (Lab): The question actually asked was whether the Government will take up this case because it is a grievous and terrible thing to contemplate the loss of three such picture houses. Will the Minister answer the question: will the Government take up with the Competition Commission their concerns, as so adequately expressed by the Minister?

Lord Gardiner of Kimble: I have to repeat to the noble Lord that the Competition Commission is an independent body. The Office of Fair Trading has asked the Competition Commission to look into the matter. Although there is concern and sympathy from many in government, this is now a matter for the Competition Commission, having been instructed by the Office of Fair Trading.

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Lord Brooke of Sutton Mandeville (Con): How many art-house cinemas are there in the United Kingdom?

Lord Gardiner of Kimble: My Lords, my noble friend has hit upon a problem, which is the precise definition of art picture house. There are independent cinemas as well as the mainstream ones. The problem is that a lot of art-house cinemas show mainstream films as well as the more cultural films. However, I think that we are talking about 300 independent cinemas.

Baroness Kidron (CB): My Lords, I declare an interest as a filmmaker and a recent governor of the BFI. A report last week, Rebalancing Our Cultural Capital, documented the way in which arts funding has shifted towards the capital over several decades. The benefit to a Londoner is now three times that of someone living elsewhere in England, and I think that it is in this context that my noble friend asks the Question. Does the Minister agree that if we are to address this cultural imbalance, we must build on the success of existing art venues, such as the excellent art-house cinema in Cambridge that does so much more than show films? Could the DCMS, through its relationship with the BFI, perhaps find a way of distinguishing between commercial screens and the added cultural value that art-house cinema provides?

Lord Gardiner of Kimble: First, I think that the British Film Institute is doing a great deal of important work, with many programmes. The one that I will mention to the noble Baroness is the BFI Neighbourhood programme, which is part of a programme to help establish and develop up to 1,000 community venues for films across the UK. That is an important feature of what the British Film Institute is seeking to do. In addition, there are of course many other initiatives that the BFI is particularly concerned about, to ensure that there is the broadest range of opportunities for people to see films.

The Earl of Glasgow (LD): My Lords, these so-called art-house cinemas are very important to the health of the British film industry. They are sometimes the only place where our films ever get shown. Does the Minister fully appreciate the importance of their survival, particularly outside London and the major cities?

Lord Gardiner of Kimble: My Lords, my noble friend is absolutely right. The picture houses are very important, particularly outside London; in particular in Cambridge, which of course is the venue for the Cambridge Film Festival. There are many reasons why these establishments are particularly important. They are part of our global reach, and all film industry is very important for the British economy. That, of course, is why the film industry has the tax relief it does, which is an indication of the Government’s support for it.

Baroness McIntosh of Hudnall (Lab): My Lords, I declare an interest as a regular patron of the Cambridge Arts Picturehouse. Will the noble Lord consider that perhaps the Government have more of an interest in this issue than he has yet indicated? These picture houses often show live performances of work—for

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example, from the National Theatre—which is a way in which the public funding that goes into our major theatres is made to work much harder than it would if it depended simply upon people coming into the theatres to see the shows. There is a serious interest here for the Government to consider, which is why it would be a good idea for them to put some pressure on whoever needs to have pressure put upon them to make this happen.

Lord Gardiner of Kimble: The noble Baroness is a champion of Cambridge; I know that Bury St Edmunds in particular also has this feed-in from opera and theatre. I am well aware of the importance of that to many parts of the regions, where it is vital. I have to repeat that there is a procedure that has to be undertaken. Concerns have been raised and, as I said, it is open to interested parties to appeal on this matter. However, the problem is that when we have independence, we must mean independence.

Lord Howarth of Newport (Lab): My Lords, I welcome the Minister’s restatement of the mission of the BFI. Nevertheless, has he noticed that it remains the case that across town the multiplex cinemas all show the same few films, whereas other films that have had excellent reviews are nowhere to be seen? What more can the Government do to support the better distribution and availability of high-quality films that are not expected to be money-spinners?

Lord Gardiner of Kimble: That is where the BFI very much comes into the equation and precisely where the experts, as I call them, are leading on this particular point—to ensure that the broadest range of films is available to the public. That is one of the key priorities of the BFI, and I hope that it is successful in that quest.

Wales: Financial Powers

Question

2.57 pm

Asked by Lord Wigley

To ask Her Majesty’s Government what plans they have to give additional financial powers to the National Assembly for Wales.

The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson) (LD): My Lords, the Government announced on Friday that they will implement the key recommendations made by the Silk commission in its first report and will enable the Welsh Government to use their existing limited borrowing powers to improve the M4 motorway as soon as possible. I will issue a Written Statement on this to your Lordships’ House this afternoon.

Lord Wigley (PC): My Lords, I hope that this Question standing on the Order Paper helped to expedite the long-awaited response from the Prime Minister, which I welcome as far as it goes. Will the Minister confirm that she and the Government accept that the Silk report presented a balanced package, and that cherry picking that package would unravel it? Will she therefore state by when the other 20 or so

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recommendations that were not covered on Friday will be announced? Will they be in the Statement that she will make this afternoon? In particular, will she give an assurance that the legislation necessary to enact all the commitments that were made on Friday will be on the statute book before the next general election?

Baroness Randerson: I thank the noble Lord for his Question. Undoubtedly the continued interest in this issue from all sides of the House and well beyond it will have had an influence on ensuring that we had a positive response to the Silk commission’s first report. The Silk commission made 33 recommendations but the announcement on Friday did not go into detail on many of those. A full response to the Silk report will be issued in the next couple of months so that we will be able to deal with this by the end of the year. The intention is that a draft Wales Bill will incorporate Silk recommendations that the Government have accepted, where legislation is necessary. The Government intend to pursue that, if possible, in the fourth Session of this Parliament.

Lord Morris of Aberavon (Lab): My Lords, I was glad to hear the Prime Minister say on Friday that he believed in devolution. I was hoping for the Welsh Secretary to say something on his visit too. Does he also believe in devolution? In the absence of a more equitable allocation of financial resources by Westminster to Wales, do the Prime Minister’s proposals mean that to fund matters such as a Newport road development, Wales will be expected to pay for them out of new Welsh taxes?

Baroness Randerson: The noble Lord has asked two essential questions. My colleague the Secretary of State for Wales has worked extremely hard to ensure that this report has had a positive response from the UK Government. I remind the noble Lord that there was an agreement in October 2012 between the Welsh Government and the UK Government on the future of the Barnett formula. The agreement was that there would be a review process at each spending review, and that if there was future convergence—if that started again—then it would be dealt with by the two Governments working together.

Lord Roberts of Llandudno: My Lords, can the Minister tell me whether the question for a referendum will be devised by the Westminster Parliament or by the Welsh Assembly in Cardiff? Secondly, does she have any idea of a timetable for the referendum and the implementation of whatever it might decide?

Baroness Randerson: I thank my noble friend for those questions. We will provide for the referendum by primary legislation here in Parliament but it will be the responsibility of the Assembly to trigger the referendum, and it is right that the timing should lie in their hands. In relation to the actual question, there will be discussions between the UK Government and the Welsh Government but it will be for the Electoral Commission to study any suggested question and to provide advice, in the way that occurred at the previous referendum in Wales.

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Baroness Morgan of Ely: I thank the Government for eventually responding last week in such a positive way to the recommendations of the Silk commission. Will the Minister explain, however, why they failed to grant permission specifically for long-haul air passenger duty and the aggregates levy to be devolved, as recommended by the commission?

Baroness Randerson: I thank the noble Baroness for her question. Regarding the aggregates levy, the noble Baroness will recall that the Silk commission referred to issues associated with that in relation to the European Union and permission for that. Therefore, until that is resolved, it is not appropriate that that goes forward. On long-haul air passenger duty, the Government are not yet persuaded of the case, but I urge noble Lords in general to await the full response in relation to the reasoning behind these recommendations to ensure that there is a full picture, which will come in the forthcoming weeks.

Lord Elystan-Morgan (CB): My Lords, I would like to ask a general question with regard to the transfer of powers to Scotland, Northern Ireland and Wales. As the Minister will know, in relation to Scotland and Northern Ireland, transfer was on an all-embracing basis subject to a few specific clear exceptions. With Wales, the situation is very different. It is all piecemeal, sometimes involving hundreds of minor transfers over the years. Will the Government look kindly, therefore, upon a proposal that the situation in Wales should equate to that of Scotland and Northern Ireland, thereby bringing cohesion and simplicity and saving a whole generation of Welsh lawyers from constitutional neurosis?

Baroness Randerson: I am aware of the noble Lord’s continued interest in this issue. I am aware, too, that this point has been raised by a number of people. But I remind noble Lords that this is an issue for part two of the Silk commission, and something on which it is already working. I remind noble Lords that the remit of the commission was to look at modifications to the devolution settlement.


European Commission: Staffing

Question

3.05 pm

Asked by Lord Anderson of Swansea

To ask Her Majesty’s Government what assessment they have made of the number of United Kingdom nationals on the staff of the European Commission.

Lord Wallace of Saltaire (LD): My Lords, the Government recognise that there is a problem with the level of UK representation among staff working in the European institutions. The UK represents 12% of the EU’s population but makes up only 5% of EU staff, half of whom are expected to retire over the next 10 years. The Government are committed to reversing this downward trend. In the short term, we are increasing

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the number of civil servants whom we send on secondment to the institutions and, for the long term, we are providing additional support to candidates who are preparing for the concours.

Lord Anderson of Swansea (Lab): I am sure that the Minister will agree that it is against our national interest that there has been such a dramatic decline in the number of British civil servants in Brussels and that, further, we have not succeeded with one British national in the concours since 2010. Does he not agree that part of the reason must be that able British civil servants are deterred by the constant sniping at Europe on the part of this Government—although not, I may say, on the part of the party that he represents? Could not that be in part allayed by giving a guarantee to any civil servant from the UK who goes to Brussels that they will be able to return if they so choose? That was something that was available when we first joined the European Community, as it was.

Lord Wallace of Saltaire: My Lords, the decline in applicants for the European Commission started before the current Government came into office. It is partly a question of language inadequacy; you have to take the competition partly in your second language. Applicants from most other countries take it in English as their second language, in which they are very often highly fluent; we lack sufficient English, or British, students, who are fluent in French or German, the other two languages. If I may say so, there is no evidence that there has been a decline because of uncertainty about Britain’s future relations with the European Union. May I also say that the noble Lord is misinformed, and that some 20 British candidates have succeeded in the concours since 2010? He may have read an article that said that no British civil servant has succeeded in the concours since that date.

Baroness Falkner of Margravine (LD): My Lords, would my noble friend agree that a postgraduate degree qualification from the College of Europe greatly facilitates employment in the European institutions? Could he tell the House whether the scholarships to the College of Europe, suspended by the previous Government in 2010, have been reinstated—and, if so, at what level?

Lord Wallace of Saltaire: My Lords, it is widely accepted that a year studying in both French and English in the College of Europe, in Warsaw or in Bruges, is very helpful in getting students accustomed to the ways of Brussels and what is required in the concours. The last Government cancelled the 24 British scholarships for the College of Europe in 2009. They have been partly reinstituted, with five from BIS for British officials next year, and a number of others from the devolved institutions. In addition, a small group of people, which I think includes several Members of this House, have contributed to a private scholarship scheme, which will fund three scholarships this year. So we are working at it and the number of candidates is now rising again.

Lord Wright of Richmond (CB): My Lords, does the Minister not accept, in spite of what he has said, that many members of the UK public service may have

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been discouraged from applying for jobs in the Community institutions by the fact that they no longer have an assurance of a return ticket to the UK public service—quite apart from the career difficulties presented by the prospect of a referendum on whether or not we should remain in the European Union?

Lord Wallace of Saltaire: All I can say on that is that the evidence is not there. In terms of the secondment of national experts into the European External Action Service, the British are second after the French in the number of those who have succeeded in gaining places; so there is some considerable evidence there. The members of the Diplomatic Service have also been going round to graduate recruitment fairs over the past two years and that has helped to double the number of British applicants for the concours this year.

Lord Foulkes of Cumnock (Lab): My Lords, surely as a Liberal Democrat Euro-enthusiast—

Lord Pearson of Rannoch (UKIP): My Lords—

Lord Foulkes of Cumnock: No, no; the noble Lord doesn’t represent anyone.

The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford) (Con): My Lords, we are wasting time. It is the turn of the Labour Party.

Lord Foulkes of Cumnock: Surely the noble Lord—as a Liberal Democrat Euro-enthusiast; and I am also a Euro-enthusiast—would agree that the problem has been exacerbated by the uncertainty over our future position within Europe. Would he, if he were 20 or 30 years younger, really apply for such a risky position?

Lord Wallace of Saltaire: My Lords, the Prime Minister made it clear in his speech in January that it is in Britain’s long-term interest to stay within the European Union. The Deputy Prime Minister made an extremely strong speech about the position that we will be taking on future membership. I look forward to a speech from the leader of the Labour Party—I think that Europe was not mentioned once in this year’s Labour Party conference—which will ensure that all three parties hold a similar position.

Lord Elton (Con): My Lords, after reminding the noble Lord, Lord Foulkes, that he does not represent anybody any more than the rest of us do—we represent ourselves—could my noble friend tell us what steps Her Majesty’s Government are taking to ensure that the, we hope, increasing number of representatives of this country on the staff of the European Commission are aware of the detail of what the national interest actually is, and that they are kept aware also of the effects of European legislation and regulation on the economy, the community and the functioning of the law of this country?

Lord Wallace of Saltaire: My Lords, many of these things are very informal. When I go to Brussels I talk to British officials, as do many of my colleagues. There is a British-Brussels network. The last time I was in

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Brussels I addressed the alumni of an Oxford college that I used to teach in. There are informal contacts and they keep in touch. However, one does not wish to instruct officials of the Commission, who are there to do a good job and to network between the national and the European.

Lord Pearson of Rannoch: My Lords—

Noble Lords: Next Question.


Schools: Unqualified Staff

Question

3.13 pm

Asked by Baroness McIntosh of Hudnall

To ask Her Majesty’s Government what are their reasons for encouraging the employment of unqualified classroom teachers in state-funded schools.

The Parliamentary Under-Secretary of State for Schools (Lord Nash) (Con): My Lords, we do not seek to encourage teachers without QTS. Indeed, under this Government, the number of teachers without QTS has gone down by 20% from the level of 18,600 it reached under the previous Government. By the Labour Party’s sole measure for this, we are therefore doing rather well. We merely seek to ensure that our children are taught by the best teachers, not just those with a particular qualification. Under a Labour Government, a teacher who had been teaching brilliantly for 30 years and who had a PhD in his subject but did not have that particular qualification would either have to get it or face the sack. How daft is that?

Baroness McIntosh of Hudnall (Lab): My Lords, I congratulate the noble Lord on somewhat sidestepping the Question that I put to him. In passing, I also note that he did not refer to the fact that his right honourable friend the Deputy Prime Minister takes a different view from him on this matter, but perhaps I should not intrude on private grief. The point is that knowledge, enthusiasm and, indeed, natural gifts may be necessary but they are not sufficient in developing professional competence. Does he not accept that, somewhat against the tone that he took in responding to my noble friend Lady Blackstone a couple of weeks ago, to make this point is not to be dogmatic? I do not think that he would disagree with me if we were talking about train drivers or brain surgeons. Will he explain why teachers are an exception?

Lord Nash: My Lords, a number of studies, including a notable one in 2007 by McKinsey, have revealed that a more effective system of selecting teachers is based on things such as their level of literacy and numeracy, interpersonal skills, commitment, willingness to learn and passion for their subject. There is no evidence that teachers with QTS teach better than those without it.

Lord Quirk (CB): My Lords, I am no great fan of the current teacher training in this country, but rather than go on allowing people to teach in the classroom with no such training at all—Mr Gove confessed last week that we still have 15,000 of them—why do the Government not insist on bringing our standards of

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teacher training up to those of the best high-performing jurisdictions in Europe and the world, which they rightly seek to emulate, thus giving those in our great teaching profession the qualifications which are truly worthy of them?

Lord Nash: My Lords, we are seeking to improve the quality of teacher training by bringing more of it into schools. We now have 357 teaching schools and more teachers being taught under SCITT programmes. Ofsted reports that 31% of SCITT courses are good or outstanding as opposed to only 13% for higher education establishments.

Lord Storey (LD): My noble friend the Minister is right to remind us that the number of unqualified teachers in our schools was higher under the Labour Government than it is now. That Government also allowed teaching assistants to teach classes. How does the Minister think we can ensure that qualified teachers get sufficient training to become the school leaders of the future?

Lord Nash: I agree entirely with my noble friend that this is very important and that we have to bring more young teachers into leadership. We trust head teachers to develop teachers in their schools through CPD. Many good schools and good academy chains have a very strong focus on doing this.

Baroness Jones of Whitchurch (Lab): My Lords, the noble Lord may not have been around in 2001 during the passage of the Education Act 2002, and may be surprised to hear that not only his own party but the Liberal Democrats all voted against us when we said that all state schools should have qualified teachers, so I do not think we need any lectures from him on that. I think that most parents were shocked to hear that the Government have removed the requirement for teachers in all state schools to be qualified. Will the noble Lord explain why a Government who started off demanding higher qualifications have now gone completely into reverse gear and want the profession deskilled?

Lord Nash: My Lords, we have just been told by the OECD that our school leavers—Labour’s children—are among the most illiterate in the developed world. Indeed, we are the only country in the developed world where our school leavers’ grandparents were better educated than our school leavers were. We have also recently been told by Alan Milburn that we are the most socially immobile country in Europe. That is why we need to bring teachers from whatever field we can into our school system to improve it, rather than to be dictated to by dogma.

Lord Cormack (Con): My Lords, in spite of what the noble Baroness, Lady McIntosh, said, is it not crucial that truly qualified teachers are those who have a deep knowledge of their subject, a love of it and the ability to transmit that love enthusiastically to others?

Lord Nash: I entirely agree with my noble friend. This is absolutely true and there are many such excellent teachers in the independent sector, many of whom work in partnerships with the state sector. I know that the Labour Party does not like to hear about the independent sector, because it is truly world class—

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Baroness Royall of Blaisdon (Lab): As is the state sector.

Lord Nash: It is not, actually; we have just been told that it has fallen well down the international league tables. Many of these independent schools quite voluntarily go into state schools and give lessons. Some of these teachers are unqualified; under Labour that will not be able to continue.


Political Parties, Elections and Referendums (Civil Sanctions) (Amendment) Order 2013

Representation of the People (Ballot Paper) Regulations 2013

Motions to Approve

3.19 pm

Moved by Lord Wallace of Saltaire

That the draft order and draft regulations laid before the House on 16 July be approved.

Relevant documents: 9th Report from the Joint Committee on Statutory Instruments, 11th Report from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 29 October.

Motions agreed.

European Parliamentary Elections (Northern Ireland) (Amendment) Regulations 2013

Motion to Approve

3.20 pm

Moved by Baroness Randerson

That the draft regulations laid before the House on 18 July be approved.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 29 October.

Motion agreed.

Enterprise and Regulatory Reform (Designation of the UK Green Investment Bank) Order 2013

Motion to Approve

3.20 pm

Moved by Viscount Younger of Leckie

That the draft order laid before the House on 17 July be approved.

Relevant document: 9th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 29 October.

Motion agreed.

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Personal Service Companies Committee

Motion to Approve

3.21 pm

Moved by Lord Hill of Oareford

That it is desirable that a Select Committee be appointed to consider the consequences of the use of personal service companies for tax collection, and to make recommendations, and that the Committee do report by 31 March 2014.

Motion agreed.

Energy Bill

Report (2nd Day)

3.22 pm

Relevant documents: 5th, 6th, 9th and 11th Reports from the Delegated Powers Committee.

Clause 43: Power to modify licence conditions etc: market participation and liquidity

Amendment 59A

Moved by Lord Berkeley

59A: Clause 43, page 27, line 18, leave out “may” and insert “shall”

Baroness Anelay of St Johns: My Lords, I invite colleagues to leave the Chamber quietly so that we may at least hear the mover of the amendment.

Lord Berkeley (Lab): My Lords, the purpose of this amendment, in my name and that of my noble friend Lord Hanworth, is to require the Secretary of State, in dealing with the modifications to the licence conditions, to include in Clause 43(3)(b),

“provision imposing restrictions on the sale or purchase of electricity to or from group undertakings”.

This is an attempt to persuade the Minister, when she responds, to go a little further than she did in Committee last Monday when she said:

“There is no clear evidence that the divestment of retail businesses will increase competition or lower consumer prices”.—[Official Report, 28/10/13; col. 1386.]

I think that there is probably quite a lot of evidence, but we now have the opportunity to test this because, among many statements by the Prime Minister and the Secretary of State for Energy last week, Ed Davey said that they would introduce annual reviews of the state of competition in the energy markets and that the first of these new competition assessments will be delivered by spring of next year. He went on to say:

“The assessment will be undertaken by Ofgem, working closely with the Office of Fair Trading and the Competition and Markets Authority, when it comes into being”.—[Official Report, Commons, 31/10/13; cols. 1095-96.]

Those organisations, separately and together, are probably some of the best experts on competition issues we have in this country. It would be logical and right for them to include within certainly the first annual review a comment about separation. There has been an awful lot of talk about competition, which

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appears rightly to boil down to considering whether there is competition among those from whom you buy your electricity. However, the issue of competition at the other end and separating the generators from the retail end is just as important. I therefore wish to persuade the Minister to agree that the issue of separation within the assessment of competition that has been announced—and is very much to be welcomed—should be included. I beg to move.

Viscount Hanworth (Lab): My Lords, I wish to speak to Amendment 61A in my name and that of my esteemed colleague, my noble friend Lord Berkeley. According to common testimony, the Bill is an extremely complex affair. It seems to have been designed by lawyers and parliamentary draftsmen to render politicians incompetent to assess its intentions and to predict its likely effects. There is a suspicion that the Government are not fully in control of this juggernaut.

Our anxieties in this respect are particularly acute in connection with the provision of a so-called route to market. Such a route should enable the independent generators to survive what seems to be the clear intention of the big six energy companies to squeeze them out of the market. The independent generators are important because they represent the germ from which a genuinely competitive energy market could develop. They are also important because they could be expected in ideal circumstances to provide a large proportion of the investment in renewable energy generation. Some of the Government’s documents recognise this potential. They imagine the proportion of new investment in renewables attributable to independent generators being between 30% and 50% of the total.

Amendment 61A reflects our knowledge that small generators are presently constrained to sell their output to the oligopolistic suppliers at a very heavy discount. A long-term power purchasing agreement costs the independent generators approximately between 10% and 17% of their net revenue, whereas in Nord Pool, which is the multinational Scandinavian exchange for trading energy, the equivalent cost is between 2% and 6%.

There has been recent evidence that some in the Government are becoming aware of the dysfunction in the energy market and the fact that, notwithstanding their ideological presuppositions, a free-market environment cannot be relied upon to engender competition. Indeed, the Secretary of State for Energy and Climate Change, Ed Davey, said last week in a Statement made to both Houses that he intended to,

“consult on the introduction of criminal sanctions for anyone found manipulating energy markets and harming the consumer interest”.—[

Official Report

, Commons, 31/10/13; col. 1096.]

One doubts whether this sound and fury has any practical significance. The Government seem to lack the leverage and will to intervene effectively in the markets.

The Labour Party takes a more positive approach. It promises to break the vertical integration of the energy oligopolists by separating the generators from the suppliers. The intention is to require energy companies to conduct all trades in a competitive manner on an open exchange. My proposal has been for a state-sponsored electricity and marketing board that would purchase its supplies from independent generators. It

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would aggregate them and sell them in competition with the supplies of the big six energy companies. In my opinion, the participation of the state would be the most effective way of introducing genuine competition into the energy market.

3.30 pm

Lord O'Neill of Clackmannan (Lab): My Lords, when an amendment of this character came up in Committee, I pointed out that we were talking about an amendment that would take us back to some of the original ideas that were circulating at the time of energy privatisation—you might say at the time just before liberalisation, because the two did not happen with quite the speed that one would have wished. I do not think much attention was paid to that point, but initially, we had a system in the UK where we had massive generators responsible for nuclear and the Central Electricity Generating Board. We also had regional electricity companies which could generate no more than 15% of their requirements.

Due to the attractiveness of the liberalisation process to some foreign energy companies, many of them in North America, we saw the acquisition of a number of the regional electricity companies by American companies. Thereafter, we began to see the merging of some of these regional electricity companies, and we boiled it down to what you might call the “big four”. Two of the companies had always been vertically integrated—that is to say, the two Scottish companies which at that time were Scottish Hydro and ScottishPower. By a process of merger acquisition, we had the vertical integration of the companies.

This was not what was intended by some of the ideologues who were the original authors of the liberalisation and privatisation programme. They wanted a system which would be akin, in generating terms, to something along the constitutional arrangements of pre-Cavour Italy. It would have had a catastrophic effect if it had been allowed to happen; a number of city states generating electricity in bits and pieces over the country, much as we had with gas and electricity prior to the Labour nationalisation in the 1940s.

It is fortunate that we did not have that, but what concerns me is that if we are going to have generators of a relatively small kind coming in—windmills attached to the national grid and water mills here and there—they are not going to change the character of the market to any great extent. We could have a situation similar to that in North America, where there are companies still considering the construction of nuclear power stations. In some instances, those stations cost twice the capitalised value of the companies that want to build them, so they have to look for partners across the world.

While these two amendments are well intentioned, I do not think that they will do very much in terms of promoting competition. My feeling is that if we are going to have the promotion of competition and the protection of the consumer from oligopolistic malpractice, we have to have a system of regulation which is capable of addressing that. These amendments go no real way to doing that. Quite frankly, I think they are something for another Bill. That is one of the reasons why I am supporting my party’s proposition that we spend 20 months after the next Labour victory putting

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through effective legislation which will change the regulatory framework, and may well result in a degree of reduction in the vertical integration process.

It is a problem; I do not deny that. However, we have to recognise that if we simply try to create opportunities for small players to become involved, we are not necessarily going to challenge the oligopolistic power of the big players. To challenge the purchasing power of the big four, big six or big seven if you were to include First Utility which, as I understand it, do not presently do any generating, we need far more in the way of regulatory conditions that would work. At the moment, I am not confident that these amendments can do that.

It is useful that, even at this late stage, we have probing amendments, but I find it very difficult and rather embarrassing that colleagues on my side of the House are supporting some of the random writings of the Austrian school of discredited economics that landed us with a great many of the problems that we are now confronting. I would like to think that my noble friend will withdraw his amendment. At the same time, something needs to be done but I do not think that the terms of the Bill and what we are trying to do at present makes the amendment appropriate. It is one thing for us to try to change the electricity market; it is quite another, at this stage, to try to change the structure of electricity generating and the integrated nature of our electricity industry.

Therefore, this is not the time for an amendment of this character. It needs to be better thought out and a lot more care and attention needs to be paid to the significant point which was the undoing of the Austrians in the recent past—that through a process of merger and acquisition you can easily change the nature of the industry. It could be argued that the Major and early Blair Governments did nothing about that process of acquisition and merging. However, unless we had changes on that side of the legislation as well, we could simply encourage the end of vertical integration and then see a process of merger and acquisition. That would take us back to where we are at present, which I do not think anyone would find a particularly satisfactory situation.

Baroness Worthington (Lab): My Lords, I am grateful to my noble friend for tabling these amendments but, although we are sympathetic to their intent, it is fair to say that we would take a different approach.

This part of the Bill, which introduces measures to try to protect independent generators, is a clear indication that there is something very wrong with our electricity market. It is another layer of complexity that the Bill introduces to the market, and it is needed because we have probably all had considerable representation from independent generators saying that they are simply not able to gain access to the market on fair terms. That is very regrettable and a clear sign that something major needs to take place in the shake-up of the electricity market. Unfortunately, the Bill does not do that and was never intended to, and I am inclined to agree with my noble friend Lord O’Neill that another Bill would be needed to sort this out.

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As I said, this is an extra complexity, and my general rule of thumb is that increased complexity equals decreased efficiency. I am sorry that we have had to enter into this market with new provisions to enable independent generators to gain access. All electricity ought to be sold into an open and transparent pool or market so that everyone has a fair crack at the whip and ultimately everybody can gain fair access to customers through supply companies. I fear that these amendments, although welcome, are something of a sticking plaster and would not really get to the root of the problem.

The Labour Party has made it very clear that our solution to this is to split up the vertical integration of the big six and to introduce a new regulator with real teeth, focusing squarely on the consumer and delivering better competition in all aspects of the electricity market. The amendments go some way towards achieving that but I do not think that they do enough, so I am afraid that, although we are sympathetic, we are not able to support them.

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con): My Lords, I thank noble Lords for the debate on the amendments and I shall speak to them after I have spoken to my own amendments in this group. The amendments standing in my name pertain to powers that enable the establishment of a power purchase agreement scheme, which could provide generators with access to an offtaker of last resort. The offtaker of last resort mechanism will benefit both independent renewable generators and investors by providing a guaranteed backstop route to market through which generators can sell their power. This will enable generators to use new and different routes to market, ending their dependency on established players and stimulating new entry and innovation in the PPA market.

The amendments I am speaking to today address specific concerns raised in Committee that the price at which electricity is purchased in PPAs under the scheme should be determined by reference to the current market price. Amendment 61 clarifies that a PPA under the scheme is an arrangement under which a supplier agrees to purchase electricity,

“at a discount to a prevailing market price”.

This amendment confirms our policy intent that the offtaker of last resort mechanism is exactly that: a last resort. Electricity purchased through the PPAs under the scheme must be purchased at a discount to a market price. This will give confidence to suppliers that they will not be required to purchase electricity at above-market prices. I assure the House that it is the Government’s intention that the level of discount should also represent a sufficient level of revenue to enable generators to raise finance. The discount level will form a key part of our consultation in early 2014.

Amendment 63 enables the Secretary of State to make provision in licence or code modifications to determine the appropriate discount and market price for PPAs under the scheme. I believe that these amendments clarify our policy intentions.

Amendment 61A, tabled by the noble Lord, Lord Berkeley, and the noble Viscount, Lord Hanworth, would mean that a PPA under the scheme is an arrangement under which a supplier agrees to purchase

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electricity at a discount to the market price and that the discount is no more than 5%. It is important that the discount is large enough to ensure that PPAs under the scheme are a last resort. The requirement for the discount to be no larger than 5% is not compatible with that; given that open-market PPAs typically have larger discounts, the scheme would quickly become a first, rather than last, resort. This would undermine new entrants to the PPA market and mean that anticipated benefits of the scheme in terms of facilitating a more dynamic and competitive PPA market would not materialise.

On Amendment 59A, I begin by stating my strong, and, I believe, shared desire to see ambitious action to improve wholesale market liquidity, which is crucial to allow independent generators and suppliers to compete without restriction. That is what Ofgem is doing through its ambitious package of reforms to address low levels of liquidity in the market, and what this Government will do should Ofgem’s reforms be delayed or frustrated. If it proves necessary for the Government to act, they should consider all options to achieve their objectives, including those listed in Clause 43. However, it would not be prudent to tie our hands to a particular course of action at this stage.

I hope that noble Lords have found my explanations reassuring and that the noble Lord will agree to withdraw his amendment.

Lord Berkeley: My Lords, I am grateful to all noble Lords who have spoken—some in support, some less so. We have had a very good debate. I think we all agree that this issue is not going to go away. We probably will need to see whether there is new legislation after the Labour Party wins the next election, or whether the annual review from the competition people will result in a recommendation. I beg leave to withdraw the amendment.

Amendment 59A withdrawn.

Amendment 60

Moved by Lord Roper (LD)

60: Clause 44, page 28, line 6, at end insert “; and the Secretary of State must exercise that power and the power to make regulations under section 45 so as to ensure that a power purchase agreement scheme begins to operate no later than the time at which the first CFD is awarded”

Lord Roper (LD): My Lords, in moving this amendment in my name and that of my noble friend Lord Jenkin of Roding, I will speak also to Amendment 62, which is in my name and that of the noble Baroness, Lady Liddell, and to Amendment 64, which is in my name and that of the noble Lords, Lord Jenkin of Roding and Lord Cameron, and the noble Baroness, Lady Liddell.

3.45 pm

We have already begun to discuss the issue of the independent generators, whose success is extremely important if we are to have a significant increase in the amount of new generation in renewables; perhaps 35% to 50% of what we need will have to come from independent generators. Therefore, a viable route to market for these generators, in what is not a particularly

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satisfactory market, is important. The need to break into the current dependency of the independent generators on the big six is obviously important. That is why we had discussions both in the Commons and in Grand Committee on the need to find an appropriate solution. The Government tabled an amendment, which is now Clause 44, to enable the creation of what is referred to as an offtaker of last resort. Curiously, the words “offtaker of last resort” never appear anywhere in the legislation, which is a little confusing to say the least, but that is what we are talking about.

This is particularly important, but it is not totally clear what the effectiveness of the provisions put forward in Clause 44 will be, particularly in light of the wording of the letter that the noble Baroness, Lady Verma, wrote to the noble Baroness, Lady Worthington, and copied to other noble Lords on 22 July, which was rather cautiously hedged as to how far there was a commitment. The reference was that there would be implementation only “if necessary”. The amendment, and the clause now before us, give only a power to the Minister, not a duty. One of the things that we need to do, and which these amendments attempt to do, is to ensure that it is clear that there will be an offtaker of last resort.

I am aware that there will be a consultation in the first part of next year and that the Minister may therefore feel limited as to how far she can go in responding about the nature of such an offtaker of last resort. However, it is essential that before the Bill leaves this House we are clear that the consultation is not about whether or not there will be an offtaker of last resort but of how that offtaker of last resort will operate. That is perfectly legitimate. Unless it is clear that there is to be an offtaker of last resort, the independent generators will not have a bankable proposition that they can discuss with their financiers to get the necessary finance for the new projects that we all believe are so important. Therefore, I hope that we can have some assurance about that matter before we conclude our discussions in this House.

I have raised this matter in the past with the Minister and it is covered by Amendment 60: it is important that these arrangements should be operational in time for the allocation of the first contracts for difference in 2014 and operate for the duration of those contracts. Otherwise, the independent generators would find it difficult to get the financial resources to get bids in those allocations. It is therefore a reassurance to their investors that independent generators will be able, if necessary, to sell their electricity and cover their debt and equity from the outset of the new regime. Until the OLR is operational, the contracts for difference will not be of such value for the independent generators. It is therefore important that we have some assurance that the OLR arrangements as discussed in Clause 44 are clearly defined in time for the first allocation of contracts for difference.

There are two other matters, one of which has already been touched on. The one that has not is covered by Amendment 62 in my name and that of the noble Baroness, Lady Liddell: if you are going to have such an emergency system, it has to be something that can operate quickly, avoiding a long period of negotiation,

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if you need to turn to it because there is a problem. There must be some assurance from the Government that they will be available quickly when they need to be. I hope for an assurance on that matter as well

The final point has already been discussed to some extent under the last group of amendments. It is the level of discount at which the offtaker of last resort would be able to provide his PPAs. The discount should be fixed at a viable level for the duration of the contract for difference. To make the arrangement bankable for investors and for the generators to negotiate with investors, there should be a fixed discount off the strike price or the market reference price, set at a point where independent generators can determine the impact on their cash flows and how much debt they are able to raise to fund a particular project.

As has been said before, to reassure investors in these essential projects of the independent generators, there is a need for a commitment from the Government to viable and workable solutions that meet the points that I have raised. That is essential if we are to step forward on the arrangements that we have discussed under contracts for difference. I beg to move.

Lord Jenkin of Roding (Con): My noble friend Lord Roper has spelt out very clearly the purpose that lies behind this group of amendments. The Government have allowed themselves to get into some difficulty on this. A very good point that may have been made during the discussion of the previous group of amendments concerns a feeling on the part of the independent generators that, although they welcome the addition of four clauses to provide for these power purchase agreements that represent the offtake of last resort, there is considerable scepticism within the industry as to whether they are actually going to be operated. As I mentioned at some length a week ago when I moved the amendment about more competition in the industry, there is a feeling that the oligopoly of the big six larger operators—they account for 92% of the electricity supply to domestic and commercial users in this country—is not going to allow this to work.

Some of the reactions from Ministers have to some extent been contradictory. This is what creates the uncertainty, and in some quarters a degree of scepticism, about whether this is in fact intended. In private, my noble friend’s ministerial colleague, my right honourable friend the Minister for Energy Michael Fallon, was reported as saying:

“I confirm that we intend to have the OLR mechanism in place around the time that the first CfDs are allocated, and Baroness Verma will also confirm this at an appropriate opportunity during the Energy Bill’s passage”.

We have not had that yet. These matters were discussed briefly at Second Reading. More importantly, there were some considerable debates in Grand Committee. Any statement of that kind was conspicuous by its absence. As my noble friend Lord Roper said a few moments ago, before the Bill leaves this House we must have a clear statement from my noble friend that that will happen. As he said in the previous debate, this is not just something to be enabled as a last resort; it has to be seen as an integral part of the new system. That is how it was presented but not how it has

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actually been drafted. The reluctance of Ministers to say on the Floor of the House what they have said privately to the industry is, quite frankly, disturbing.

It is not the first time we have seen that. Last Monday, I moved an amendment about competition in the capacity mechanism system that is being introduced, which my noble friend was quite firm in resisting. She has since written a letter saying that she is prepared to go on negotiating with the independent generators concerned, which is very welcome, but that was quite different from what Michael Fallon said before the Bill reached this House. He made it clear that he was expecting amendments seeking to promote more competition and to make it a very clear duty on the Government, and that he would not quarrel with that. I know that my noble friend was under some pressure last Monday because the Leader of the House was waiting to make a Statement on the European Council, but none the less she refused to do that. I felt it right to withdraw the amendment rather than spend more time dividing the House, and it was not at all clear that there were enough noble Lords in the House at that stage who would have supported it. Still, the fact of the matter is that we were faced with a contradiction between what the Minister for Energy said and what my noble friend has so far been able to say, no doubt under legal advice from her department.

With the greatest of respect to her, that is not good enough. If this offtaker of last resort is to mean anything at all, it must be perfectly clear that it will be able to operate where necessary and on the terms that my noble friend Lord Roper has already indicated. If my noble friend is unable to give that undertaking today, I ask that she goes back to her department and discusses the issue with her colleague, perhaps when he has returned from the Middle East, where he is at the moment. We should get a very clear statement on this when we reach Third Reading on 19 November.

I cannot stress too strongly the degree of unhappiness that exists in substantial sections of the independent industry, which feel that they are being messed about. One reads in the article in the Telegraph today about the difficulty in getting the investment going—as the Telegraph says, a large amount is simply waiting on the drawing board. To a large extent, that is due to a sense of uncertainty about the intention of this legislation. It is open to my noble friend, now or at Third Reading, to clear up some of these uncertainties, particularly those relating to hire-purchase agreements and the offtaker of last resort, on the lines of the amendments to which my noble friend has spoken, so that the companies and the funds that will be providing finance for them will know where they stand and can go ahead. At the moment, they do not feel that; I really must stress that very hard indeed.

4 pm

Baroness Liddell of Coatdyke (Lab): My Lords, in supporting Amendments 62, 64 and 65, I draw attention to my entry in the register of Members’ interests. I will be very brief because the noble Lord, Lord Jenkin, has very much encapsulated the nature of the debate around the offtaker of last resort and the issue of certainty.

I would perhaps be kinder than the noble Baroness’s noble friend as I think that the noble Baroness probably

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does get the issue that we are seeking to articulate here. It is about giving a degree of certainty to companies that are of necessity much smaller than the big six and have difficulty raising finance because in many cases they are involved in infant industries. In the front of my mind is the generation of renewable energy in the islands of Scotland; for example, in the Western Isles, Orkney and Shetland. I know there is to be a consultation on that, but there are opportunities throughout the United Kingdom to access the various kinds of renewable energy that will be available through the activities and investments of independent generators. However, independent generators need to go to the market to raise their funds and if there is not certainty that the Government are really committed to the offtaker of last resort—that it is not a programme for a situation that exists in extremis but is integral to the operation of the market for that 8% or perhaps even less that exists—not only will the market become unbalanced but we will fail to give support to industries and generating capacity that already have the potential to be world leaders.

The noble Baroness’s words at the Dispatch Box will be looked at very carefully by the industry and the funders. Those who have deep pockets and will be prepared to invest in the sector and allow it to move on to a harmonious future need certainty. I will not delay the House any longer but I urge the noble Baroness to think very carefully about what she says. The noble Lord, Lord Jenkin, is right. I suspect that the lawyers have had a lot to do with what her right honourable friend Michael Fallon has being saying and what she has been able to say. I have no doubt that she understands from her own business background that the issue of certainty for investors is what lies behind these amendments, which I support.

Lord Deben (Con): My Lords, perhaps I might help my noble friend on this issue. There is a win-win solution, which is to recognise what has happened very recently in Germany. The big generators always start off being unhappy about the competition. However, RWE in Germany is expected to announce, after decisions made very recently, that it has concluded that it is no longer possible to take that attitude towards other generators in the German market. The Germans have been so tough about the provision for smaller generators. As I have said before in this House, it is remarkable that 50% of the very significant amount of renewable generation in Germany is done by municipalities, co-operatives and individuals.

Until recently, the big generators have fought that because they felt that their own business model was being undermined. It is quite clear from the latest evidence that RWE will take a different view, that it ought to become much more a facilitator of this rather than an opponent of it. If we get the way this is phrased in this Bill right, we will be able not only to help the independent generators but to help the bigger ones to move rather faster in understanding that this is going to be a multiple market in the future.

Therefore, I hope that the Minister will be able to discuss this again with her colleagues because it is a very fast-moving situation. This is not something that is the same today—literally—as a fortnight ago because

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we did not know the RWE movement then so we did not see, although we hoped, that that was what was going to happen elsewhere. If we can take advantage of learning from other people rapidly, this excellent Bill can be made that much better. I hope that she will find it possible to be a little stronger in what she says now and will take this away and discuss it with her colleagues, as my noble friend Lord Jenkin suggested, because there is now a new circumstance in which she will be able to be stronger in her support.

Lord Cameron of Dillington (CB): My Lords, I support all the amendments in this group, as well as the amendments to which I have put my name. Last week we had our debate on the need to open up all sectors of the electricity industry to more competition. We on our side of the amendment were surprised at the reluctance of the Government to acquiesce enthusiastically to what we were proposing. We were even more surprised when later in the week the Secretary of State for Energy and Climate Change went on the “Today” programme and also spoke in the other place about how greater competition was at the heart of the Government’s electricity market reform. I have to admit I had the surreal feeling that there seemed to be one Government at that end promoting competition and talking about its importance and a completely different Government at this end seemingly trying to ward off competition. I hope that this week we have one pro-competition Government in both Houses.

In my short remarks in the debate last week, I linked the need for competition with the need for investment and spoke about how the two are closely intertwined. The UK’s aging energy infrastructure needs some £75 billion invested in new, largely renewable, generation facilities by 2020, and the Government are relying on independent generators, or at least their investors and financial backers, to produce some 35% to 50% of this—that is, £27 billion to £38 billion—before 2020, so this is not a marginal problem. Only by solving it will we ensure that we get the investment we need along with the much needed competition.

Of course, there is a problem. In an ideal world, an independent generator would want a backer for 15 years, because that is the normal length of any form of mortgage agreement for such a scheme, but no supplier is going to gamble on a 15-year PPA because the demand for electricity could reduce over 15 years and a supplier could find itself having bought more power than it could sell. Indeed, already four out of the big six suppliers are not buying power at all from independent generators, while the other two are charging up to 15% or 20% commission on even short-term contracts, which for the independent generator makes for an unviable PPA.

As has already been explained, this situation scares the independent generators and, above all, their investors, so no truly independent generator is going to invest without some form of compromise in the long-term marketplace. Equally, no aggregator is going to enter the fray with the big six oligopoly holding all the cards. We desperately need these independent generators to invest and, as the Government—well, the Government at the other end—keep telling us, it is only by encouraging more competition that we will achieve that investment.

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The department has gone for an offtake of last resort—an OLR—to solve this problem, which is fine, but as it stands, the solution in the Bill is completely useless, as Clause 44 is so hedged about with “may”s rather than “must”s that no self-respecting financier would put any trust in it at all. The Minister’s letter of 26 July, I think it was, does not give them any encouragement either. It is a political cop-out rather than a financial foundation on which to build a competitive electricity industry. The words “political cop-out” may be a bit harsh, but the clause is clearly written from a political perspective, rather than the drafters putting themselves in the minds of an investor or a mortgage company and thinking, “What can I put in this Bill that will really reassure these much needed investors that we the Government say we desperately want?”. They just have not done that.

I hope we all agree that this is not a marginal issue. That is why it is vital that these amendments are adopted. It is vital that OLRs are available from day 1 of CFDs. It is vital that they are operational the moment—well, within seven days—of a generator finding itself squeezed out of the marketplace without a commercial PPA. It is vital that the price on offer is evidently—I stress that word “evidently”—going to be enough to reassure a financial backer that lending money in this new and uncertain marketplace is not going to be a wasted investment. There is an enormous amount hanging on getting this right, so I hope that the Minister will be able to reassure us.

Lord O'Neill of Clackmannan: My Lords, my previous remarks might have been interpreted as being antagonistic to small generators but I am not. What we are talking about here is a reform of the market that will encourage investment, but investment can only be encouraged if there is the prospect of stability. We are yet to receive from the Government a clear indication that there will be stability in this area.

I am not certain that praying in aid the German experience is necessarily that relevant seeing as Germany is having to accommodate the withdrawal from nuclear generation on a considerable scale and will be happy to get generating supplements or replacements from any source that it can. To a certain extent, that might be the same for the United Kingdom if coal is to be exited from our energy mix in a significant way. If that is the intention, and I believe that it is, we must have facilities available to mop up, or fill in the gaps, of what remains.

These amendments provide a clear and explicit set of measures. But they are only amendments and were the Minister able today to give us the degree of certainty required, I imagine that they would be withdrawn. However, what Mr Fallon said elsewhere probably was based on the optimism that has existed throughout the activities of the Department of Energy and Climate Change these many months—that every deal is just days away. Yet the days become weeks and the weeks become months. We do not have much more time. Therefore, it is essential that the Minister gives us a far more positive assurance than she was able to give last week. If she can do that, these amendments will melt like snow off a dyke, as we say in Scotland. However, if

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they do not, they will come back to haunt the Minister, because there will be a clear indication of what could have happened had there been a greater sense of urgency in the Department of Energy and Climate Change than had been anticipated by Michael Fallon before he went eastward.

The Earl of Caithness (Con): My Lords, there can be no doubt that there is a unanimous view within the Chamber that we want independent operators and more competition. Of course, the difficulty for the Government is getting the balance right. We talked about the trilemma last week: finding the right balance of affordability, supply and decarbonisation of energy that we all want.

However, I disagree with the noble Lord, Lord Cameron of Dillington, when he spoke of Clause 44 being hedged around with “may”s and not “must”s. It always amuses me that when one is in opposition “may” should always be “must”, but the moment that one gets into government, one is advised that “must” should always be “may”. Therefore, I do not think that having “may” in Clause 44 will put off investors or financiers in any way.

My noble friend Lord Deben said that if we get this right, it will be a win-win situation. I think that my noble friend on the Front Bench is aware that it will be a win-win situation, but I do not think that the amendments actually help. They tilt the balance too far. In Amendment 62, the idea is to allow a party to a CFD to be able,

“to borrow money commercially for its business purposes at adequate levels, reasonable cost and over a reasonable period”.

As a businessman, I would love the Government to give me that guarantee for my business. It would be exactly what I wanted, because if I were not happy I could go to judicial review against the Government for not forcing financiers and investment people to give me the terms that I considered right.

That is a point of detail on the amendment, but my general point is that we are all agreed that we want competition, and I think that the Government have just about got it right in the Bill. However, I would like a firmer commitment from my noble friend the Minister that this will actually work in practice.

4.15 pm

Baroness Worthington: My Lords, I support Amendment 60. I am grateful to all noble Lords for their contributions to this debate. I will not reiterate my earlier comments, which are that I consider this whole section of the Bill to be a sad necessity that need not have been there had the Government grasped the bigger picture of properly introducing competition during their energy market reforms. However, Amendment 60 seems to be eminently sensible. It is clear, from all the contributions we have heard today, that there is insufficient confidence among independent generators that the Government are serious about introducing something to assist them at this time. It is also quite clear that the clauses we are now debating are a last-minute addition to the Bill.

When the Government started out on this process they maintained that there was no problem and nothing to be worried about; I suspect that this was because

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they paid far too much attention to what the big six were telling them and insufficient attention to what the independent generators were saying. We therefore have these four clauses, which do not go far enough in providing the detail or the certainty that investors require. Ministers should at the very least be able to concede that these arrangements will be in place in time for the awarding of the first CFDs; that would be the absolute minimum.

On the other amendments, which are slightly more detailed—I agree with the noble Earl, Lord Caithness, that they may be too prescriptive for primary legislation—the regulations that flow from these clauses must be published before the Bill leaves this House, as we need to see the detail. I apologise if the draft regulations have in fact already been published; they may have been lost in the huge number of documents, for which we are grateful, that have been issued to us. However, if they have not been published, can the Minister tell us when they will be so that we can see how this policy will work and appreciate the detail? I hope that that will go some way to reassure the noble Lords who have spoken in this debate this afternoon.

Baroness Verma: My Lords, I thank my noble friends Lord Roper and Lord Jenkin, and the noble Baroness, Lady Liddell, for their amendments on the issue of route to market for independent renewable generators. Taken together, these amendments would place the Secretary of State under a duty to ensure that: a PPA scheme is in place by the time the first contracts for difference are allocated; the terms of PPAs under the scheme are demonstrably viable for eligible electricity generators and will enable them to borrow money on reasonable terms; eligible generators can obtain a PPA under the scheme within seven days; and that all generators eligible for a CFD are eligible for a PPA under the scheme.

I am grateful to noble Lords for the opportunity to clarify the Government’s intentions, which are very much in keeping with the spirit of these amendments. I assure the House that, as my right honourable friend Michael Fallon has said, the Government are committed to consulting on the introduction of an offtaker of last resort mechanism, and that they intend, subject to consultation, a scheme to be in place by the time the first CFDs are signed. That will give generators and investors the certainty that they need to make investment decisions. However, it would not be appropriate to place the Secretary of State under a duty to establish a scheme by a particular date before the final policy design has been completed and consulted upon.

The Government are also committed to ensuring that the mechanism is viable for eligible independent generators, which should enable generators to borrow money on reasonable terms. However, the Government cannot guarantee that, since access to finance and the viability of the scheme for individual generators are affected by a variety of factors that are out of our control. We also fully intend that those generators which need to access a PPA under the scheme will be able to do so quickly and simply via a transparent and fair process.

It is important that the scheme is targeted at those generators which genuinely need to access it. The

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scheme may not be suitable or necessary for all CFD-holding technologies, so we do not judge that it is appropriate for this to be required in primary legislation. I also assure the House that the Government intend to grandfather the terms of PPAs under the scheme, including the level of discount, from the date a generator signs its CFD.

I met with the Independent Renewable Energy Generators Group last week to reassure it on these points. It confirmed that it believes that the offtaker of last resort is a viable solution to its concerns, subject to the final decision—sorry; subject to the final design. The details of the offtaker of last resort mechanism will be specified in secondary legislation following consultation early next year, so it is not appropriate at this stage to set them out in the Bill. I reassure noble Lords that we aim to have secondary legislation in force by the time the first CFDs are signed. This is a challenging timetable. It is subject to consultation and parliamentary process. However, this should not have a material impact on generators since they will not need access to backstop PPAs until after projects have been commissioned, which is likely to be several months after signing the first CFD.

Noble Lords also asked when the first CFD allocations will become available. We have already signalled that we intend to consult, possibly in the early new year, and aim to have secondary legislation in force by the time of the first CFD. I hope that I have reassured noble Lords that the Government’s intention is to ensure certainty for smaller generators. We want to see greater competition. We believe that the measures we are taking and the mechanisms we are using are the right ones. I hope that the noble Lord will find my explanations reassuring and will therefore agree to withdraw his amendment.

Lord Roper: I am grateful for the support my amendment has had from all parts of the House. I am also grateful that the Minister has listened to what has been said and, indeed, made some reassuring comments. I am certainly reassured to a significant extent. She said that she wished to act in keeping with the spirit of the amendment and I am happy about that. I also understand the constraints imposed upon her by the consultation. However, I return to one of the points I made in introducing the amendment and that comes back to a phrase she used, which I hope I understood. She said initially the final “decision” and then moved on to say the final “design”. I believe that she meant the final design; that is, not whether or not there will be an offtaker of last resort but how it will work—the design for such an offtaker.

Baroness Verma: My Lords, I can clarify: absolutely, it was “design”.

Lord Roper: My Lords, that is indeed a very reassuring statement. It suggests that the Government are moving in the direction that we wish. I suspect it means we will not need to return to this at Third Reading. We have had some useful assurances today and, on the basis of that, I beg leave to withdraw the amendment.

Amendment 60 withdrawn.

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Amendment 61

Moved by Baroness Verma

61: Clause 44, page 28, line 14, at end insert “at a discount to a prevailing market price”

Baroness Verma: My Lords, I beg to move.

Amendment 61A, as an amendment to Amendment 61, not moved.

Amendment 61 agreed.

Amendment 62 not moved.

Amendment 63

Moved by Baroness Verma (Con)

63: Clause 44, page 28, line 24, at end insert “(including provision for determining a market price and the amount of a discount at any time)”

Amendment 63 agreed.

Amendments 64 and 65 not moved.

Amendment 66

Moved by Baroness Verma

66: Before Clause 49, insert the following new Clause—

“Closure of support under the renewables obligation

(1) After section 32L of EA 1989 insert—

“32LA Renewables obligation closure order

(1) The Secretary of State may make a renewables obligation closure order.

(2) A renewables obligation closure order is an order which provides that no renewables obligation certificates are to be issued under a renewables obligation order in respect of electricity generated after a specified date.

(3) Provision made under subsection (2) may specify different dates in relation to different cases or circumstances.

(4) The cases or circumstances mentioned in subsection (2) may in particular be described by reference to—

(a) accreditation of a generating station, or

(b) the addition of generating capacity to a generating station.

(5) A renewables obligation closure order may include provision about—

(a) the meaning of “accreditation” and “generating capacity” in subsection (4);

(b) when generating capacity is to be treated as added to a generating station for the purposes of that subsection.

(6) References in this section to a renewables obligation order are references to any renewables obligation order made under section 32 (whenever made, and whether or not made by the Secretary of State).

(7) Power to make provision in a renewables obligation order (and any provision contained in such an order) is subject to provision contained in a renewables obligation closure order; but this section is not otherwise to be taken as affecting power to make provision in a renewables obligation order of the kind mentioned in subsection (2).

(8) Section 32K applies in relation to a renewables obligation closure order as it applies in relation to a renewables obligation order (and subsection (3) above is not to be taken as limiting the application of that section).

“32LB Renewables obligation closure orders: procedure

4 Nov 2013 : Column 28

(1) Before making a renewables obligation closure order, the Secretary of State must consult—

(a) the Authority,

(b) the Council,

(c) such generators of electricity from renewable sources as the Secretary of State considers appropriate, and

(d) such other persons, if any, as the Secretary of State considers appropriate.

(2) The requirement to consult may be satisfied by consultation before, as well as consultation after, the passing of the Energy Act 2013.

(3) A renewables obligation closure order is not to be made unless a draft of the instrument containing it has been laid before and approved by a resolution of each House of Parliament.”

(2) In section 32M(1) of EA 1989 (interpretation of sections 32 to 32M)—

(a) for “32L” substitute “32LB”;

(b) after the definition of “renewables obligation order” insert—

““renewables obligation closure order” is to be construed in accordance with section 32LA;”;

(c) in the definition of “specified”, after “renewables obligation order” insert “or a renewables obligation closure order”.

(3) In section 106 of EA 1989 (regulations and orders), in subsection (2)(b) after “32,” insert “32LA,”.

(4) In Article 56(1) of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6)) (power to amend Part 7 of that Order to take account of amendments of corresponding Great Britain provisions), the reference to amendments made to sections 32 to 32C of EA 1989 includes a reference to subsections (1) and (2) of this section.”

Baroness Verma: My Lords, Amendment 66 provides the Government with the power to close the renewables obligation to new capacity. As noble Lords know, this closure is planned for 31 March 2017 as part of the transition to contracts for difference. We had previously considered that the renewables obligation could be closed using existing powers within the Electricity Act 1989. However, we have now concluded that a specific power in this Bill will put the closure arrangements on a more reliable and transparent legislative basis.

To ensure that consumers and industry have confidence that closure will take place consistently across the UK, the amendment provides the power for the Secretary of State to close the RO in England, Scotland and Wales. It enables the Northern Ireland Executive to make similar provision for the Northern Ireland renewables obligation. To give industry early certainty on the way in which the Government propose to use this power, we intend to publish this week detailed proposals on RO grace periods for those projects that are delayed due to circumstances beyond their control. These proposals will include a 12-month grace period for projects subject to current investment decisions, giving developers making such decisions this winter substantial reassurance that their investments are not at undue risk from the RO closure date.

Amendments 70 and 107 to 109 support Amendment 66 by making consequential drafting changes. Amendment 110 ensures that the power on RO closure will come into force immediately upon Royal Assent. This allows the secondary legislation for the RO closure to be brought forward quickly, which is important for investor certainty.

4 Nov 2013 : Column 29

In response to the very helpful points made in Committee by my noble friend Lord Stephen and by the noble Baroness, Lady Worthington, the Government have brought forward Amendments 67 to 69 to clarify the scope of the powers for the fixed-price certificate scheme. Amendment 67 removes the power for regular reviews of support levels under the fixed-price scheme. The Government have no plans to change these support levels as, in a closed and grandfathered scheme, we are unlikely to need to do so. It is therefore appropriate to remove the provision for regular reviews, which implied that we expected to make such changes. However, it is also appropriate to retain a mechanism to change support rates if unexpected developments were to make that essential. I assure noble Lords that the conditions that must be satisfied for a review to take place will be specified in secondary legislation, and subject to statutory consultation and affirmative resolution by Parliament.

Amendment 68 places a requirement on the Secretary of State to exercise certain powers under the fixed-price certificate scheme in a manner which replicates the renewables obligation. This requirement confirms the existing purpose of the clause, in response to concerns raised by the renewables industry and by my noble friend in Committee. The fixed-price scheme will respect our grandfathering policy and will reflect the RO, which has always been our intention. Amendment 69 ensures that the duties on the Secretary of State in relation to the strategy and policy statement do not apply to the fixed-price certificate scheme in Northern Ireland. I hope that noble Lords have found this a helpful explanation of the amendments, and I beg to move.

4.30 pm

Baroness Worthington: My Lords, I am grateful to the Minister for explaining the amendments that she has tabled and spoken to today. I am particularly grateful for new Clause 66, which was something that we debated in Committee.

The issue that was under discussion was that we are, in this Bill, removing the renewables obligation—the policy that has supported renewables and has led to a significant increase in renewable energy and different forms of renewable electricity. The removal of the renewables obligation is significant because it contained an inbuilt incentive on the big six to keep investing in new clean technology. We are now removing that through this Bill. Unfortunately we have not been able to convince the Government to replace any form of obligation into this Bill on either the Government or the suppliers. We are now entering a period where we have to entice investors rather than oblige them. That is an issue that may come back to haunt us—a phrase that has been used before today.

I seek words of reassurance that, in the detailed arrangements that are set out in the regulations that close the RO, the Government will not prescribe a date until they are absolutely certain when the CFDs can come into operation. The issue here is that this Bill is going to be subject to state aid clearance; we need to be absolutely confident that we do not wind down the existing support mechanism before we are completely sure that we have a new support mechanism in its place.

4 Nov 2013 : Column 30

There has been mention of the year 2017 in numerous government consultation documents and documents on this topic. At this stage we cannot be sure that 2017 is the right year. I urge the Minister to make sure that draft regulations are not overly prescriptive and that they give us the flexibility we need to ensure that there is a very good transition from one successful policy to a new untested policy which we hope will deliver but, as has been mentioned on a number of occasions, we still have concerns that it will not—especially for independent generators.

Baroness Verma: My Lords, I thank the noble Baroness and reassure her that we are of course mindful of all the concerns that she has raised. The RO closure date of 31 March 2017 was chosen in order to allow for that period of parallel running between the RO and the CFD. If we were to extend the RO, we might need to hold a further banding review for the post-2017 banding levels, and generators would not know the post-2017 banding levels until 2015-2016.

Any accreditation after 2017 would receive less than 20 years of RO support. The RO is subject to a 2037 end date. It would be wrong to extend this given that the CFDs are being put into place to provide better value for generators.

Baroness Worthington: I merely point out that these amendments remove the need for banding reviews, so I do not think it is true to say that we cannot have more flexibility over the end date because of banding reviews as these amendments remove the requirement on government to review the banding. I urge the Minister to reconsider that.

Amendment 66 agreed.

Clause 49: Transition to certificate purchase scheme

Amendments 67 to 70

Moved by Baroness Verma

67: Clause 49, page 42, leave out lines 45 to 47

68: Clause 49, page 44, line 46, at end insert—

“32XA Certificate purchase orders: corresponding provision

(1) This section applies where the Secretary of State exercises a listed power in the making of a certificate purchase order.

(2) The Secretary of State must—

(a) so far as the order is made for a GB purpose, exercise the listed power in the way that the Secretary of State considers will replicate the effect of provision contained in a renewables obligation order (whenever made, and whether or not made by the Secretary of State) by virtue of the equivalent GB power;

(b) so far as the order is made for a NI purpose, exercise the listed power in the way that the Secretary of State considers will replicate the effect of provision contained in an order under Article 52 of the 2003 NI Order (whenever made) by virtue of the equivalent NI power.

(3) The duty in subsection (2) to exercise any listed power in the way mentioned in that subsection applies only to the extent that it appears to the Secretary of State that—

(a) it is reasonably practicable to exercise the listed power in that way, and

(b) exercising the power in that way is not inconsistent with other duties or requirements of the Secretary of State (whether arising under this Act or another enactment, by virtue of any EU obligation or otherwise).

4 Nov 2013 : Column 31

(4) In the Table—

(a) a “listed power” is any power specified in the first column;

(b) the “equivalent GB power”, in relation to a listed power, is the power specified in the corresponding entry in the second column;

(c) the “equivalent NI power”, in relation to a listed power, is the power specified in the corresponding entry in the third column, and in that column references to an Article are to an Article of the 2003 NI Order.

Listed powerEquivalent GB powerEquivalent NI power

Section 32O(2)(a)

Sections 32A(2)(a) and 32G(2)(a)

Articles 53(2)(a) and 55(2)(a)

Section 32O(2)(b)

Sections 32A(2)(b) and 32G(2)(c)

Articles 53(2)(b) and 55(2)(c)

Section 32O(2)(c)

Section 32G(2)(e)

Article 55(2)(e)

Section 32O(2)(f)

Section 32A(2)(c)

Article 53(2)(c)

Section 32S

Section 32B

---

Section 32T

---

Article 54

Section 32U(5) and (6)

Section 32C(5) and (6)

Article 54A(5) and (6)

Section 32V(1)

Section 32D(1)

Article 54B(1)

Section 32W(5) to (8)

Section 32E(4) to (6) and (8)

Article 54C(4) to (7)

Section 32X

Section 32J

Article 55C

Section 32Z1(2) (so far as relating to definition of “renewable sources”) and (3)

Section 32M (so far as relating to that definition) and (2)

Article 55F(1) (so far as relating to that definition) and (2)

Section 32Z1(9)

Section 32M(7)

Article 55F(3)

(5) The duty in subsection (2), so far as it has effect in relation to the exercise of the listed power under section 32V(1) to specify different amounts of electricity in relation to different cases or circumstances, applies only to the first exercise of that listed power.

(6) The relevant part of Great Britain to which a renewables obligation order relates may be ignored for the purposes of subsection (2)(a).

(7) It does not matter for the purposes of subsection (2) whether or not a renewables obligation order, or an order made under Article 52 of the 2003 NI Order, is in force at the time when the listed powers in question are being exercised.

(8) In this section—

“2003 NI Order” means the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6));

“GB purpose” means the purpose of imposing the certificate purchase obligation on the purchasing body of GB certificates;

“NI purpose” means the purpose of imposing the certificate purchase obligation on the purchasing body of NI certificates.”

69: Clause 49, page 45, line 37, after “Part)” insert “, and by section 123(2) of the Energy Act 2013 (duties in relation to strategy and policy statement),”

70: Clause 49, page 48, line 25, leave out ““32,”” and insert ““32LA,” (as inserted by section (Closure of support under the renewables obligation)(3))”

Amendments 67 to 70 agreed.

Clause 50: Duty not to exceed annual carbon dioxide emissions limit

Amendment 71

Moved by Lord Teverson

71: Clause 50, page 49, line 1, leave out “Until (and including) 2044,”

4 Nov 2013 : Column 32

Lord Teverson (LD): My Lords, in moving Amendment 71, I will speak to my Amendments 73 and 74 as well. I understand that people who know better than I have described my Amendments 71 and 73 as clunky and I immediately put up my hand. I am trying to do the very simple thing of turning something that the Government described as a grandfathering clause into something that really is a grandfathering clause. It came as some surprise to us in Committee, when we perhaps read the Bill with greater care than we had done previously, that in terms of emissions performance standards, the Bill effectively fixes an EPS right up until the beginning of 2045. I refer not just to plants that already exist but to those that will be built well into the future. The emissions performance standard in this section of the Bill applies to plants built right up to 2044.

I seek to improve this position. I hope that I am offering greater investor certainty in terms of grandfather rights to those who might invest in new gas plant or plant in other power sectors covered by the EPS. Certain vehicles, for example, are approved when they are manufactured and first go on the road and keep the relevant grandfather rights until the end of their working life. That is what I propose in this amendment. As I say, it would provide investor certainty in terms of grandfather rights but, just as importantly, it would ensure that a regular review takes place.

Section 5 of the 2010 Act refers to three-yearly reviews, but those are non-statutory. I have been reminded that Clause 58, on page 56 of this Bill, contains a statutory mechanism to look at these things every five years. I suggest that this should be done every three years and that there should not be a need to change primary legislation—that is the difference—in order to change the EPS. It seems to me a very strong lock if the EPS is defined specifically in the Bill. I understand that the existing provision in the Bill seeks to provide investor certainty but I seek to give greater investor certainty by saying that once a plant is consented it keeps that EPS right the way through, at least until it has to be reconsented. I hope that the Government will think that that is an improvement.

Amendment 74 deals with a very important area. Coal plants are effectively excluded from the EPS under this legislation. However, unabated coal plants are one of the main sources of our nation’s overall emissions of CO2. This is a major challenge in terms of our climate change targets and our desire to bring down carbon emissions in the United Kingdom. The amendment seeks to do a number of very positive things. It would help fulfil the Government’s intentions around carbon emissions and their energy policy. The Government have rightly made provision in the Bill that if certain major modifications are made to fossil fuel generating stations they have to be reconsented and the EPS becomes applicable, thereby making it impossible to run an unabated coal station. I seek to extend that provision to all major changes, including those plants attempting to reinvest to comply with the industrial emissions directive—the successor to the large combustion plant directive. We seek to do this because the Government’s trajectory for their carbon plan has always assumed that fossil fuel unabated coal stations will come out of UK

4 Nov 2013 : Column 33

generating capacity in an ordered manner after 2016. All that this amendment intends is to make sure that that actually happens.

Why is there a question mark now? It is because coal, primarily because of shale gas in the United States, has now become incredibly cheap. One of the outcomes has been that last year coal accounted for around 40% of total electricity generation and overtook gas which is now only about 28% of electricity generation—hence the UK’s carbon emissions went up last year quite significantly. The amendment would ensure that, although investment to prevent the output of mainly nitrous pollutants and thereby comply with the IED might now become economic and allow coal stations to carry on with this exemption from the EPS for many decades to come, the Government will actually keep to their trajectory in terms of taking carbon out of the system.

Let me first stress, perhaps paradoxically, what the amendment would not do. It would not take out coal immediately. As I said, it complies with the carbon plan which the Government have already published. Coal can continue to operate beyond 2016 under derogations and, in fact, can operate for some 17,500 hours, limited, right up to 2023. The importance of that is that coal-fired power stations can still operate during peak times and therefore make sure that we do not have blackouts. So the amendment does not get in the way of security of supply.

The other thing the amendment would not do is put up electricity prices. As we well know, electricity prices are primarily driven by the wholesale gas price and although coal prices have come down quite significantly, unfortunately, as we know, wholesale gas prices have not and so electricity prices have not either. It sometimes makes me ask what the generating companies have done with the extra margin from the coal production, but we will leave that argument for another day.

The amendment would ensure that there is no longer a baseload coal generation into and beyond the next decade. That is crucial for climate change and the Government’s wish to bring down carbon emissions. It would also meet those Government predictions. There are two other things that the amendment will make sure of: one is that there is a continued incentive for carbon capture and storage. Clearly and quite obviously, if unabated coal can continue exempt from the emissions performance standards, then CCS will go absolutely nowhere.

Crucially, the amendment would make sure that new gas investment can actually take place. It was interesting to read this morning in the Daily Telegraph, which has a great interest in energy, about a report that was, I think, released today by an organisation called EY. The article is headed:

“Gas and nuclear plants that could power all UK homes ‘on hold’”.

It goes on to say:

“Gas and nuclear power plant projects with sufficient capacity to supply electricity to every UK household are on hold … some 23GW of new gas plant has received planning permission but just 4pc is being built, with the rest suspended or on hold ‘with owners waiting to see if the economic and policy environment become more favourable’”.

4 Nov 2013 : Column 34

One of the reasons it gives for that is the cheap coal influx from America which has made the situation worse.

As I often do, I endorse exactly what the Daily Telegraph says; this is a really important issue. We need new gas generation; the planning permissions are there and cheap coal is one of the reasons that investment is being held back. We need to move forward with it and the amendment is important because it helps fulfil the Government’s carbon plan and policy and makes sure that the investment that we need in new gas is actually able to move forward. I beg to move.

The Chairman of Committees (Lord Sewel): I have to inform your Lordships that if Amendment 71 is agreed I cannot call Amendment 72, by reason of pre-emption.

4.45 pm

Lord Jenkin of Roding: My Lords, if no one else wants to stand up at this stage, perhaps I may just say a few words. I have found this a very difficult question. I have received a good deal of representations in favour of my noble friend’s amendment, and others sounding a warning note. I have said to them all that I will want to listen to the full debate, particularly to what my noble friend on the Front Bench has to say.

As I see it—I may be wrong, and I am open to be corrected—the Government face something of a dilemma. The noble Lord, Lord Teverson, quoted the figures on the existing volume of coal-fired electricity generation in this country. I think he said that it is now about 44%, despite the significant closures of some of our biggest coal-fired power stations which have taken place in the past 12 months. The Government clearly recognise that there must be no power cuts and that the impact of such cuts on the country’s business and, indeed, on the Government’s reputation would be quite devastating. Therefore, as the Prime Minister said to me and a number of my noble friends back in July, there must be no power cuts and we will have to do whatever we have to do to make sure that we keep the lights on. As the Minister who presided over the three-day week back in 1974 I have every sympathy with that, because it is not a comfortable position for any Government or Minister to be in. That is the first priority of which the Government have to take account.

On the other hand, if the Government want to make it possible for coal-fired power stations to continue, there will be a severe impact on the incentive to build new power stations. The gas-fired power stations have much lower emissions; a modern station may have as little as one-third the emissions of a coal-fired station. Given that we have spent a lot of time during our consideration of the Bill discussing the need for a proper financial structure for the new generators, many of which would want to build gas-fired stations, one can see the Government’s dilemma. I am not entirely sure that I can see the matter as clearly as my noble friend Lord Teverson has, and I will want to hear the argument.

I, too, have a copy of the Daily Telegraph article. My noble friend left out rather a significant sentence and was very kind to my noble friend on the Front Bench. The article said that the problem was due to the Government’s “dithering”. We have heard a certain

4 Nov 2013 : Column 35

amount about that—it is what the

Telegraph

said and what my noble friend left out. As has been said many times, there is no doubt that there is a considerable hiatus in the investment in new generating capacity, a consequence of which has been the oft-repeated and increasingly serious Ofgem warnings about the narrowing of the margin between capacity and demand. The Government, therefore, simply cannot go on risking that hiatus. So what is to be done?

I have read an interesting report in a paper that was prepared for the European Climate Foundation by Simon Skillings of Trilemma UK. I found it a helpful analysis of the whole problem. One of the things that Mr Skillings said—and I am following some of the argument of my noble friend—is that:

“Perversely, the decision of large amounts of coal-fired generation to opt-in to the IED”—

the European directive—

“presents a greater threat to security of supply. This is because opted-in coal plant would be able to operate at higher load factors, presenting a significant risk to investors in new gas-fired plant and owners of existing gas-fired plant that may currently be mothballed”.

I have drawn attention, both on Second Reading and subsequently in Committee, to the substantial amount of gas-fired plant which is currently being mothballed, and which would take varying lengths of time to bring back into production. Mr Skillings continues:

“New plant is, therefore, less likely to be built, and mothballed plant is more likely to be closed, under these circumstances”.

That seems a considerable dilemma. I have to confess, having studied both sides of the argument and tried to understand all the evidence, that I am still unclear as to what is the right course.

As I said at the beginning of my speech, I have been replying to those who have been making representations to me about this group of amendments by saying, “I will want to listen to both sides of the argument before finally making up my mind”. I do not know whether my noble friend will want to press the amendment to a Division; we shall have to wait and see. Other noble Lords who have signed other amendments in this group may wish to come in and I will listen to them with equal attention. However, I find this a difficult dilemma. We have got existing coal power stations, they are producing energy and they are helping to close the gap between demand and capacity. Therefore, to countenance a significant reduction from that source and assume that it will be made up with generating capacity by new investment seems to be taking a considerable risk.

My noble friend has advisers who follow this a great deal more closely than I can, and I shall be interested to hear what she has to say. I have to confess that, for me, it is a difficult issue.

Lord Stern of Brentford (CB): Coal is the dirtiest of fuels: it emits around twice as much carbon dioxide per kilowatt hour as gas; it is responsible for more than 40% of world energy greenhouse gas emissions, and for more than 25% of UK greenhouse gas emissions. Amendment 74 will encourage the switch from coal to gas; delaying that switch could substantially increase the cost of meeting our climate change targets. Gas itself has emissions which, if unabated, are far too

4 Nov 2013 : Column 36

high for the medium or longer term but may provide a useful bridge in the shorter to medium term—that is, until around 2030 or so. After that, gas or coal would have to be abated or replaced with renewables or nuclear if we are to meet our targets. Unless the world acts to phase out or abate via carbon capture and storage, in the next few decades coal will be very likely to take the world into very dangerous levels of greenhouse gas concentrations.

If we could be confident of a strong carbon price then Amendment 74 might not be necessary. That would be a clear way of addressing the colossal market failure associated with greenhouse gas emissions. Such a strong carbon price would likely make renewables and nuclear more than competitive with gas and coal in the next one or two decades. However, with apparent quarrelling within the Government, and possible backtracking and “reviewing” constantly in the air, who could be confident about such a strong carbon price?

Work as an academic economist, as chief economist of the EBRD, as chief economist of the World Bank and as head of the Government Economic Service in the UK has made it clear to me that government-induced policy risk is a major deterrent—perhaps the major deterrent—to investment around the world. That is indeed why energy investment in the UK has been so inhibited and it is why we need the clarity that this amendment brings. Clarity can unleash investment; confusion, on the other hand, risks both the lights going out and a world of dangerous climate change.

The Government have been working towards a clearer strategy in the Bill, and many, including me, welcome that, but they have allowed uncertainty and vacillation to creep back in. This amendment would go far to overcome the doubts on policy that the Government themselves have created. It would essentially drive out unabated coal from the UK by 2030 other than in a back-up role. That is exactly what we have to do to achieve our targets and to make our contribution. How can we ask others to stop treating the atmosphere as a dump if we are not prepared to move strongly to do so ourselves?

China, where I have been working for 25 years, India, where I have been working for 40 years, and many other countries look to Europe and the US for leadership. If we do not show that leadership, they will conclude that the rich world is not serious on this subject. Let us recognise that China—the largest economy in the developing world and the biggest emitter in the world—is changing. Targets in the 12th five-year plan were strong. A peak in emissions in 2025 is now being discussed in relation to the 13th five-year plan. I have been involved in a number of those discussions and, before now, dates earlier than 2030 have not been mentioned. In addition, a peak in coal consumption in China within a decade is under open discussion. However, China is looking at others, including us. We should not delude ourselves that because we are small our example does not count.

By accepting the amendment, we can provide the clarity that will unleash investment, reduce our emissions, manage effectively the costs of so doing and have a real influence on others. That is why I support Amendment 74 in the name of the noble Lord, Lord Teverson.

4 Nov 2013 : Column 37

The Earl of Caithness: My Lords, when we discuss a group of amendments, the majority of which are government ones, one of the difficulties at Report is that we will not have heard the Minister talk to those government amendments. However, I expect that my noble friend will talk to them and I should like to ask her to take a little time to explain why we have the date 31 December 2027 in Amendment 73B.

Carbon capture and storage was one of the areas highlighted in the report of Sub-Committee D, which I referred to last week. I think we were all saddened that so little progress had been made on it. Therefore, I should also like my noble friend to say how she anticipates an increase in the use, and perhaps even the commercialisation, of carbon capture and storage, particularly when Germany has turned its back on it and apparently does not want to take any active part in it.

Turning to Amendment 73 in the name of the noble Lord, Lord Teverson, I understood that in any case the Government were going to review the EPS on a three-yearly basis. The Bill states that it will be statutorily reviewed every fifth year in accordance with the 2010 Act, but I understood that they were going to do so on a three-yearly basis as well. I wonder whether my noble friend could confirm that.

With regard to Amendment 74, which is obviously the key amendment here, I, like my noble friend Lord Jenkin of Roding, am torn. I have certainly received representations from people saying that this would be a disastrous way to go. The noble Lord, Lord Stern, made a very powerful case, as would be expected, but that is only one side of the argument. There is, of course, the trilemma, which we are all very much aware of: it is not just a question of decarbonisation and the removal of bad pollutants; there is also affordability of supply and continuity of supply. Like my noble friend Lord Jenkin, I have received representations that Amendment 74 would, if passed, jeopardise our security of supply.

I believe, too, that it puts us out of kilter with the rest of Europe. There is only a limited amount that we can do as an individual country. I was grateful that the noble Lord, Lord Stern, said that our voice is still heard; but we live in a nasty, tough, commercial world. If others can import cheap American coal and keep their energy prices lower as a result, and we prohibit ourselves from doing so, we put our businesses at risk. We make it more difficult to get the growth that this country so badly needs; and it is through that growth that we will be able to implement the reduction in carbonisation that we all want.

I am therefore unable to support my noble friend Lord Teverson on this—it takes us too far. It tilts the trilemma too much towards the green agenda and does not take enough account of the other important issues.

5 pm

Lord Lester of Herne Hill (LD): My Lords, I was in China the week before last, in Xi’an and Beijing. I will say just this. Having witnessed the smog that inhabits the whole of Xi’an and Beijing, and from my conversations with Chinese opinion-formers—who made it clear that they look to this country and recognise their own

4 Nov 2013 : Column 38

failings in not having tackled these problems earlier—I can confirm everything that the noble Lord, Lord Stern, has said about China. For those and other reasons, I support the amendment.

Lord Oxburgh (CB): My Lords, I, too, support these amendments. We have to recognise that the Bill has been a long time in gestation. What has changed since the Bill was originally conceived is that the bottom has dropped out of the coal price. It is very important to point out to the noble Earl, Lord Caithness, that in fact cheap coal does not mean cheap power: it means big profits for the owners of coal-fired power stations. As the noble Lord, Lord Teverson, pointed out, the electricity price is effectively tied to the gas price because of the operation of the mechanisms. As things are at present, it is effectively the low coal price that is driving the operation of coal-fired power stations and giving very substantial profits to those companies that have them. Indeed, roughly half that capacity is owned and operated by the big six.

I will not draw on your patience longer, but simply say that I understand the point made by the noble Lord, Lord Jenkin. There is effectively a chicken-and-egg situation here. Unless we give the market the certainty that these amendments would give, we shall not see the investment in gas that is needed to maintain the attainability of our longer-term targets.

Lord Deben: My Lords, the noble Lord, Lord Jenkin has rightly pointed to the crucial problem, which is: how do we deal with that period in which there is fear that the lights will not stay on? That is a proper fear to have and should be the first fear of any Government, because there is a responsibility to keep the lights on. There ought to be a second fear, too: namely, that we keep the lights on in such a way that the next generation has an even worse position, because we have polluted the atmosphere further and made the fact of dangerous climate change even greater. We naturally have to look at this very carefully.

However, on this occasion it seems that those who are most concerned with keeping the lights on, and I certainly put myself in that category, and those who are also concerned with climate change, and I put myself in that category, too, are in fact pushing at the same door. If we do not have a mechanism whereby it is sensible to invest in gas, that bit of the transition will not take place. That would seem to most of us to make it more difficult to provide affordably for the energy that we need.

The noble Lord, Lord Oxburgh, as so often, put his finger on one of the other problems. When we talk about these things, let us not confuse the cost of production with the price at which it is sold. Those of us who, like me, have represented constituencies, know how many people are close to the edge when it comes to warming their homes. The whole question of affordability is utterly crucial. However, the idea that if we burnt coal we would get cheap power is not so. We need to have a mixture—a portfolio of means of generation—in which gas will play its part.

We have heard a lot recently about the opportunities that shale gas will give us. I find both extremes unacceptable—from those who think it means the end

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of the world at one end to those at the other who feel that it will be a game-changing matter. They are both wrong, but there is a place for gas. If that gas were produced at home, that would contribute considerably, not to a lowering in cost because it would have little to do with that, but to greater energy sovereignty, which is worth while.

The question is how we move from a situation which we hardly imagined, because the bottom had not fallen out of the coal market, in which we have to provide for the transition from coal to gas to one in which we do provide for that transition. The difficulty is that I suspect both those who tabled the amendments and the Government are on the same side—both groups want to achieve this. The real question is that there is a kind of fear of letting go of nurse’s hand—that is, the coal—in case we do not get the gas. I would like to turn it around the other way: if we do not do this, I am not at all sure that we will get the gas. That is crucial. I hope very much that the Government will enable us to have a situation in which we provide for that transition.

I have been trying very hard during these debates to remain entirely independent because all I have spoken are the words that the Committee on Climate Change, which I chair, has put forward. The committee has made it clear that it feels that this kind of transition needs to be facilitated in this way. I do not want to make this a great division because I do not think it is one; it is a question of how we do this safely in the new circumstances to which the noble Lord, Lord Oxburgh, referred.

I very much hope that my noble friend will be able to give us confidence in the Government’s answering of this question if she is unable to accept the amendments that are put before her. If we do not do one or other, we will find ourselves unable to guarantee reasonable prices or the continuance of the lights being on because we have not made the transference that is essential in any case and which I thought everyone supported.

Baroness Worthington: My Lords, I was pleased to add my name to Amendment 74, and I support the other amendments in the group. At the start of this process way back in 2010, the Government said in a consultation document:

“The objective of the EPS is to ensure that while coal continues to make an important contribution to security of supply, it does so in a manner consistent with the UK’s decarbonisation objectives”.

The way that the EPS is drafted does not achieve that aim. The EPS was a response to the Kingsnorth protests against the building of a new, unabated coal plant. It was borrowed, but not fully, from similar regulations in California. The Minister, Greg Barker MP, can take credit for introducing this policy. However, in California they are clear that the limits that are placed on coal stations apply in the event of a coal station seeking a life extension. That is what this amendment is designed to do: to complete this process by adding that important missing element.

New coal was never the most carbon-intensive source of electricity; old coal is. The world has moved on since Kingsnorth. Low coal prices and high gas prices have caused higher operating levels at coal stations

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now than ever before. As a result, as the noble Lord, Lord Teverson, mentioned, we have seen UK emissions going up, not down, and our carbon intensity increasing last year, not decreasing. How are we going to hit decarbonisation targets if we do not have a tool in our armoury to do something about this issue? We could have a policy of carbon pricing, as the noble Lord, Lord Stern, has mentioned. However, carbon pricing policy has not addressed this issue, and will not. We need regulation.

Turning to the security of supply, 8 gigawatts of old coal capacity has recently shut. This has brought down our historically high overcapacity to a more modest level, yet our carbon intensity is stubbornly high, at around 500 grams per kilowatt hour. This is because the 12 coal stations that are still operating, representing 15 gigawatts of power, are base-loading. They are no longer providing back-up power in the winter peaks but are operating throughout the year and making their owners a considerable amount of money. The Committee on Climate Change has been clear that were we to get the merit order of existing plants right, we could shave almost 200 grams off that figure overnight without having to build a single brick or power station.

The 12 stations that I have mentioned have tightening air quality regulations in front of them, which will affect their operating post-2016. However, they have a range of options for what to do in the face of those tightening regulations. One is not to refurbish; they will then be required to close by 2023. Another option is to convert to biomass. The final option is to fit the filters that would enable them to comply with the air quality standards. They could then remain open indefinitely. In that situation, they would certainly wish to continue base-loading, since they would have made new capital investment on which they would want to seek a return.

The new air quality standards start in 2016. I am sad to say that Defra, the lead department, is in danger of not complying with those regulations because it is failing to provide enough detailed information about what these power stations are planning to do. This can be only because it is intent on giving the maximum flexibility while the details of the Bill are worked out, because the Bill contains another very important element that changes the fortunes of coal: the capacity mechanism payments. The capacity mechanism will give existing coal plants an up-front cash injection just at the time they need it to make those refurbishment decisions. Plants will be eligible for three-year contracts. We cannot be certain how much those contracts will be worth, but it will certainly be in the range of £80 million to £100 million or more over the three years. The cost of fitting the filters is a surprisingly similar number of around £100 million for a 1 gigawatt plant.

If they decide to make these capital investments and tip into this compliant state, this will reduce their thermal efficiency even further. Are the department and the Minister aware of how inefficient these stations are and quite how much of the heat is escaping as lost energy into the atmosphere? That is quite apart from the carbon load that is also being added. Fitting these

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filters would also increase the operating costs of these plants. The chemical plants necessary do not operate for free.

The Government’s policy is not to support the application of an EPS to coal seeking life extensions, and no doubt we shall hear some of the reasons from the Minister. Other noble Lords have touched on the security of supply issue. As long as this question over 15 gigawatts of coal is allowed to remain unanswered, how can any investor in replacement capacity move forward? If you are not sure how many plants will be operating and whether they will be base-loading, you will find it very difficult indeed to make the case for investment in new capacity and to bring mothballed capacity back on. I will not go into too much detail on this but we have all had representations from gas investors saying that they support this amendment. We should just remember that, in a carbon-constrained world and under a carbon-budgeting system, every coal station that remains on the system displaces two gas stations because gas can operate with half the emissions of coal

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The Government may also try to argue that the introduction of this EPS would create regulatory uncertainty but that is not at all the case. We have made it clear that it is needed now. Only those defending the status quo and continuing to profit from the use of their existing assets will claim that this is changing the rules for them. The owners of these stations ought to be fully aware that, as we move forward to a low-carbon economy, their stations will be the first to go. It is far and away the cheapest and most efficient way of reducing emissions, as the UK found during the 1990s when we did exactly this and transitioned out of coal and into gas. I am very hopeful about the next decade. This EPS does not mean that we will not see investment in coal. We will see investment in coal, which will come through in carbon capture and storage projects. The arguments that have been made today about investor certainty when it comes to gas equally apply to CCS. It is in the coal industry’s best interests to see this amendment passed so that it, too, can invest in its future. Coal has a future, but only with CCS.

The final reason that the Minister may offer for not supporting this amendment—which would be very regrettable—is that it is not needed because we have a carbon floor price. No one can really say, with all honesty, that there is any political certainty that the carbon floor price will survive. We have had comments recently from the Prime Minister and others that have very much cast doubt on whether that carbon floor price will still be around. You cannot roll back green levies, or even review them, without seriously looking at the carbon floor price again. Even if it were to be maintained, it would need to be at a very high level, around £40 a tonne, in order to achieve the sort of fuel switching that this amendment would instigate.

The Government will no doubt say that everything is fine in their models and that these coal stations will close, as the cost of fitting the filters is too great and the benefits are not there. During my time at Scottish and Southern, I saw it go through the investment decisions that needed to be taken to comply with

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sulphur limits. The benefit of having an asset in an existing, connected station, with all the staff that you need, is enormous. A bird in the hand is always worth two in the bush, and these companies are very likely to make these decisions to invest. I would go as far as to say that we will see Scottish and Southern, the owners of Fiddlers Ferry, making that decision if we do not get this policy right. EDF, which owns West Burton and Cottam, will do the same, as will Scottish Power, owners of Longannet. There may be others. There are certainly 12 stations that could do this and we need to see none of them do it.

The final point that I am sure will be raised is that this is somehow going to push up the cost for consumers. The noble Lords, Lord Teverson and Lord Oxburgh, have already eloquently explained that it is gas prices that set the wholesale price and therefore we are not seeing the benefit of the very reduced price of coal. It is true that, upstream, the generators are making in the region of 20% profit, a large part of which comes from these coal stations. However, it is far from clear that they are handing it on to the consumer.

If we do not take this most obvious, easy and simple way of reducing our carbon emissions and we are serious about our decarbonisation—the Minister has reiterated the Government’s commitment to our decarbonisation targets—we will be forced to adopt more expensive subsidies. This policy will deliver us carbon reduction quickly and at least cost. Supporting this amendment is an indication that we are serious about climate change but, more importantly, that we are serious about achieving our objectives at the least cost for the consumer. This is an amendment that supports the consumer and I hope that the Government will find that they can support it.

Baroness Verma: My Lords, I will speak to the amendments in my name. I am grateful to my noble friend Lord Teverson and the noble Lord, Lord Whitty, for their amendments and to all those who have contributed to this debate. I remind the House of the policy intent behind the EPS. It is to ensure that no new coal-fired power station is built without CCS, and that it is done in a way that does not undermine the investment we will need in gas generation to keep the lights on at a reasonable cost to consumers.

Amendment 72 seeks to shorten the grandfathering period of the EPS from the end of 2044 to 2029. This shortening by some 15 years will increase uncertainty for gas investors. Without this certainty, we risk deterring or increasing the cost of new gas investments, with the obvious potential consequences for security of supply and costs to consumers. I recognise that 2044 is a long way off but this date is derived from what investors tell us is required. Under the current provisions, new gas plants consented in the later part of this decade and built in the early 2020s would have a little over 20 years of certainty in respect of how the EPS will apply to those assets. That is the amount of time that investors tell us is required to pay back all debt and see a return on equity in the project. In other words, with grandfathering, the EPS is not a barrier to financing new gas generation plants.

Noble Lords may be concerned that we may be locking in high levels of unabated gas generation well

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into the future that could risk achieving our legally binding 2050 carbon emissions target. I reassure noble Lords that the other measures under our market reforms will ensure that this is not the case and, therefore, that the EPS is consistent with our 2050 decarbonisation target. This is because unabated gas generation will be increasingly displaced by low-carbon generation over time. The Government set out clearly in our gas generation strategy how we expect gas plants’ load factors to decline as low carbon comes on to the system, and how in the very long term we expect it to be economically attractive for gas plants to retrofit carbon capture and storage equipment. Grandfathering the EPS until 2044 will not prevent this from happening. Grandfathering to just 2029 would risk deterring or increasing the cost of the investment in the new gas plants that we need to be built up to 2030.

I turn to Amendments 71 and 73. The approach proposed by my noble friend is very close to the one that we have already adopted. The Government have already committed to a regular three-yearly review of the EPS. The EPS will also be reviewed as part of the statutory review of EMR under Clause 58 of the Bill. The amendments would enable the statutory rate of emissions and the period for which it will apply to be revised very quickly following a review by way of an order. This is an approach that the Government have considered but have concerns about. The ability to revise the EPS very quickly could result in a specific investment hiatus in the run up to a review, due to the uncertainty that the review process introduces. Pre-development costs for power projects can run into tens of millions of pounds, so investors will be very aware of the risk that a quickly implemented decision to revise the EPS could render a project economically unviable, with the financial loss that could result.

That is why we have taken the approach that any future changes to the EPS should be by way of primary legislation. Combined with the three-year period between reviews, this will help to ensure that projects that are already in the planning system—by that stage having already had significant financial commitment—are able to complete that process before any changes to the EPS that would affect their project come into force. However, I recognise the spirit in which my noble friend has brought this amendment and the helpful intent to bring greater certainty to the review process and the process for making any future changes to the EPS. I will reflect on his suggestions with a view to how we might underpin his concerns without creating any unnecessary investment hiatus.

Turning to Amendment 74, the Government’s goal is an orderly transition away from coal to lower-carbon fuels over time in a way which does not create unnecessary costs for consumers. While we do not expect large numbers of coal plants to invest in clean-up equipment, a very small number of our more efficient plant may wish to do so. This amendment is very likely to deter that investment. In this scenario, more coal stations would have their operation constrained, and there could be more stations closing around the end of the decade than might otherwise be the case. This could require more gas plant to be built earlier to fill the gap at greater cost—ultimately, to consumers. Why should

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we close down our options in this way now when it could put our security of supply at risk and significantly increase costs to consumers? A small number of cleaned-up coal plants could provide greater diversity and bring additional resilience to the electricity system in the coming years, helping to ride any bumps in the road, given the significant investment challenge that we face.

I have also considered carefully the argument that by taking action to drive the closure of all of our coal power stations, we would be giving certainty to investors in new gas generation. While this may be conceptually true, it could also be true to say that you would give certainty to investors in electric cars if you banned all petrol vehicles, but that does not mean it would be a prudent or cost-effective thing to do.

Baroness Worthington: Is the Minister aware that the setting of the EPS on these refurbished plants would not cause them to close but would simply prevent them baseloading? They would still be available for the rest of the decade and the decade beyond to act as backup plant.

Baroness Verma: 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 for ever. 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

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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.

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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.

Lord Teverson: My Lords, I thank the Minister for going through that so comprehensively. She is right that this is a very green Bill. My noble friend Lord Lawson was quite right to accuse it of being a decarbonisation Bill. That is exactly what it is.

I very much welcome my noble friend’s comments about Amendment 71 and my amendments around grandfathering clauses. I do not think that I got the phrasing absolutely right and I look forward to her looking at that.

On Amendment 74, I want to come back to something said by my noble friend Lord Caithness. He said that

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we need to be practical and down to earth and to get involved in the reality of energy. This amendment was precisely about that. We have to remember that, as this provision stands, it does not guarantee that coal capacity will be there; it is left entirely to the whims of investment committees of the big six as to whether they decide to invest. We give up control at that point—we do not know. The future is indeterminate. If we passed this amendment and it became part of the Bill, we would then know what would happen. To me, that is better than knowing what might or might not happen.