Electricity Supplier Obligations (Green Excluded Electricity) (Amendment) Regulations 2023

Baroness Sheehan Excerpts

Monday 20th March 2023 Grand Committee

[Baroness Sheehan (LD)]

My Lords, I thank the Minister for his introduction of the SIs. I will take the Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2023 first and then the other one second. I can broadly support this SI, but I have a few points that I want to raise.

The Explanatory Memorandum explains that the proposals were made in the review of the scheme to provide relief to energy-intensive industries for a proportion of

“the indirect costs of funding renewable electricity policies”.

However, it makes no mention of the responses to the consultation. I am afraid that I have been unable to find a government response on these proposals. My first question to the Minister is: is that response in the public domain and, if so, where can I find it? Also, how many consultees responded on questions 3 and 4, which cover the proposals in this regulation? What was the distribution of views and what alternative proposals were made? Did any consultees highlight risks or unintended consequences? It would have been useful to have seen responses on that.

As trading data will be unaudited, what independent checks will be carried out on that data to ensure that gross value added is not being under-reported or energy costs overstated to meet the eligibility criteria of at least 20% of the GVA being from electricity costs? When will the Government respond to the other proposals in the review?

I will close with a thought on a more strategic outlook that the Government could take. Rather than piecemeal subsidies, a possible longer term and more comprehensive solution to carbon leakage would be the carbon border adjustment mechanism, whereby high-emissions industries migrate to the parts of the world with the lowest effective price on carbon. A CBAM would allow tariffs to be charged on imported goods in proportion to the difference between their emissions and those for the corresponding goods made at home. Ministers reported in May 2022 that they would consult on such a mechanism by the end of last year. That time has come and gone, so I wonder whether the Minister could provide an update to the Committee on when we might have that consultation. There are rumours that it might be due to start in the next month or two. Can the Minister confirm that or say no to it?

I turn to the Electricity Supplier Obligations (Green Excluded Electricity) (Amendment) Regulations 2023. The Minister mentioned briefly, and it was laid out clearly in the Explanatory Memorandum, why the UK’s departure from the EU means that the UK Government are no longer required to make provision to exempt certified green imported electricity from EU member states from the electricity supplier obligations—that is, as the Minister explained, from payments which are used to support feed-in tariffs and contracts for difference. This instrument will remove the green excluded electricity exemption from the contracts for difference scheme so that the electricity from renewable sources that is imported to Great Britain from an EU member state, and is currently exempt from the contracts for difference reconciliation scheme, will no longer be exempt.

The Explanatory Memorandum tells us that the current

“exemption benefits licensed electricity suppliers in Great Britain who import renewable electricity from EU member States”.

That is clear so there is an incentive to import green electricity, as things stand, which is a good thing. Can the Minister confirm that the proposed abolition of the exemption means that the energy supplier obligation reconciliation payments will have to go up, as a result of losing this benefit? That is the logical conclusion of the statement in the EM. Removing the exemption will put in place an incentive instead for energy suppliers to move away from green energy imports from the EU, and I wonder whether that is the Government’s intention.