Electricity Market Reform

Debate between Alan Whitehead and Dai Havard

Thursday 3rd November 2011 Westminster Hall

[Dr Whitehead]

My hon. Friend has just stressed that point. Given that I have about one minute left, expatiating on liquidity to any great extent is probably beyond my abilities. However, he is absolutely right to raise the question of liquidity in the market and the fact that as a result of the lack of liquidity, small companies are pretty much shut out from gaining a foothold in the market. Whatever is done about the big six, that is a very important issue.

Finally, I want to emphasise two things. First, the contract for difference as currently proposed conflates mature technology, the overall costs of which will not change, with emerging technology, where costs may well change. That is to say, it rewards, and particularly in the future will reward, old nuclear technology, as well as new nuclear power stations, for their output. That seems—the Committee alluded to this—a considerable concern, given the pronouncements that continue to be made that the Government are in favour of new nuclear but with no public subsidy. It is necessary at this stage to say either that there will be no public subsidy—that nuclear will not be rewarded for being a mature technology in the way that emerging technologies are, but will take its chance in the market—or that we need to do something about public subsidies for nuclear, for reasons that may be perfectly honourable to consider, and we must be up front and deal with that. Electricity market reform continues to fudge that essential choice that we have to make.

Secondly, we have to enter into capacity payments with a clear understanding of demand-side analysis, which is substantially missing from the proposals in the electricity market reform White Paper. We need to consider capacity payments for energy efficiency and reduction in output, and in relation to things such as interconnectors and electricity storage, which will be an essential part of a balanced, very low carbon economy that takes serious account of the demand side as well as the supply side.

Trying to deal with the entire landscape of electricity market reform in eight minutes flat was a difficult challenge. I hope that I have contributed a few thoughts to the debate, and I look forward to the Minister’s response to a number of issues that hon. Members and I have raised.

[Mr Dai Havard (in the Chair)]

I hope that we can give the Minister and Mr Yeo sufficient time to respond to the debate.