Electricity Capacity (Amendment) (No. 2) Regulations 2025

Lord Offord of Garvel Excerpts

Wednesday 16th July 2025 Grand Committee

[Earl Russell (LD)]

My Lords, these Benches welcome these amendments. This is an important step in our journey towards a full, clean and secure energy future. We are generally supportive of the intent behind the amendments, particularly their aim to accelerate the decarbonisation of our electricity supply.

At the heart of the regulations is a new mechanism designed to allow unabated gas plants to exit their existing capacity market arrangements without penalty. This is a significant change. Previously, capacity providers with a long-term agreement faced termination fees if they left early. This was a disincentive for them to decarbonise from their scheduled expiry, which was often as late as the 2040s.

This instrument now enables these plants to transition to a bespoke support mechanism under a dispatchable power agreement, or DPA, which is categorised as a CCS CfD—a contract for defence related to carbon capture and storage. This managed termination mechanism, set out in new Regulation 34A, aims to allow these plants to retrofit carbon capture equipment, thereby aligning with the Government’s objectives for clean power 2030. This addresses what the Government say is a clear need, identified through stakeholder feedback, for clarity on decarbonisation pathways and penalty-free exits. We welcome this as a way forward.

Furthermore, we welcome the cleaning up Part 3 looking at the removal of redundant provisions from the Electricity Capacity Regulations 2014, the Electricity Capacity (No. 1) Regulations 2019 and the Electricity Capacity (Amendment etc.) (Coronavirus) Regulations 2020; those are all sensible changes, so we welcome the clarification on that.

I will ask the Minister a couple of questions. First, I want understand a little more about the demand side for these measures. Although the consultation response talks about it being broadly supportive, particularly regarding the timing and the appeal route for refusal notices, can the Minister say a bit more about what the true extent of the demand is? It talks about capacity for the exit pathway being 4.4 gigawatts. By my calculations, that is almost two-thirds the electricity consumed by London, so that is a big amount of electricity. If the Minister can just say a little more about the demand side for these changes, that would be helpful.

Can the Minister also say a bit more about at what stage the Government might be in terms of any negotiations with any capacity providers to transition under these regulations? Are the Government in any talks at the moment, and are there any moves once these regulations come into force? How do they intend to review and monitor these regulations? What would success look like for the Government, and how will they be reported back to Parliament, if they are?

I note that the regulations do not include a statutory review clause for these specific amendments and that the broader CM regulations are subject to five-yearly reviews. Obviously, this is a fast-moving space; carbon capture technology is new technology, and other new technologies are coming online. How will the Government review the impact of these regulations in this fast-moving market between now and the five-yearly review period? That is not a criticism of what the Government are doing—I generally support this direction—but this is a fast-moving space with new technologies. If the Minister could clarify those couple of points, it would be greatly appreciated.

[Lord Offord of Garvel (Con)]

My Lords, I thank the Minister for introducing the draft Electricity Capacity (Amendment) (No. 2) Regulations 2025 today.

We have a responsibility to protect future generations, and there is a shared determination across these Benches to confront climate change. That is why today’s regulations will contribute to decarbonising our energy system to reach our net-zero aspirations. However, while net zero remains a laudable ambition, it must surely be achieved in a manner that protects our energy system and ensures that energy remains affordable for households and businesses.

Surely it is time to stop kidding ourselves that this is a just transition when it is clearly not. Can we please instead begin to focus on an affordable transition? His Majesty’s loyal Opposition firmly believe there is nothing just about a clean power target of 2030 if it results in overreliance on intermittent renewables that are manufactured abroad, which means losing jobs overseas and hiking costs for UK customers.

It is right that we have an ambition to produce the cleanest possible energy system in the UK. To do so, we must avoid ideological extremes at either end of this debate and find a middle way that is agnostic about where energy is sourced, so long as it is affordable, reliable and, yes, as clean as possible. In particular, with reference to these regulations, we must retain an element of natural gas, which is so crucial to our domestic heating system.