Barry Gardiner
Main Page: Barry Gardiner (Labour - Brent North)
Michael Fallon
My hon. Friend tempts me, but I am afraid that, much as I would like to do so, I am not able to speculate about the terms currently being negotiated with Electricité de France.
Finally on this group, amendments 28 and 29 seek to stop nuclear and fossil fuel generation from participating in the capacity market, which is designed to ensure the security of future electricity supplies. To ensure the most efficient mix of capacity and to avoid favouring specific technologies, the market needs to be technology neutral and support a range of generation sources, such as from fossil fuels, existing hydroelectric and nuclear plant and the demand-side response. I can confirm, however, that we do not intend to allow plant receiving a contract for difference, including new nuclear plant receiving a CFD, to participate in the capacity market. We do, of course, expect existing nuclear plant to play an important role.
Let me deal with some of the wider issues in this group of amendments, including bill impacts, biomass, liquidity and so forth. Amendments 32 and 33 specifically relate to biomass. I would like to thank my hon. Friend the Member for North Devon (Sir Nick Harvey) for raising this issue. His amendment 32 seeks to define biomass in the Bill. Let me make it clear to him that I see no problem with the definition he has drafted, but I suggest that this would be better left to secondary legislation, which would give us the flexibility to amend the definition over time to reflect changes in technologies or, indeed, in the evidence.
In respect of amendment 33, I would not want to limit the amount of support that an individual biomass generator could receive under a CFD, or to impose a condition that biomass generation greater than 15 megawatts could receive support only if it utilised combined heat and power or carbon capture and storage. That would risk excluding efficient forms of biomass generation or forcing all new generation to include combined heat or power, or carbon capture and storage equipment, which it might not be possible to utilise effectively, and I think that it would have the unintended consequence of increasing costs for consumers.
Barry Gardiner
I am grateful to the Minister, who has been extremely generous in engaging in debate. Will he clarify one point? My understanding was that the definition that had been proposed was already incorporated in primary legislation, in an earlier Act of Parliament, and that the objection that he seems to have to it would therefore not apply.
Michael Fallon
I should be happy to check that. I suspect that the hon. Gentleman may be right, but I think that some of my objections would still apply. These things change over time, and I should prefer to have them in secondary legislation. However, if I have wrongly suggested that this is a novel approach, I will certainly get back to the hon. Gentleman.
On amendment 94, we need to be sure that independent generators have a fair chance of entering the market. I am sure that my hon. Friend the Member for Rochester and Strood (Mark Reckless), and other Members who have signed his amendment, would support that. Ofgem will shortly be releasing details of its proposed reforms to improve market liquidity, and I welcome that progress. However, it is crucial for the Government to be able to act if Ofgem is unable to deliver ambitious reforms allowing more independent generation in a timely fashion. That is why we need the backstop powers in clause 38.
Amendments 95 to 99, also tabled by the my hon. Friend the Member for Rochester and Strood, would remove the emissions performance standard from the Bill. I know that my hon. Friend is concerned about its impact on coal-fired generation, and suspect that he feels that the carbon price floor provides sufficient market signals to disincentivise such generation, but the Government's objective is to deliver a clear and unambiguous message to investors that coal-fired generation must significantly reduce its emissions to have a long-term role in our energy mix.
The commitment to decarbonisation is delivered through economic signals such as support for the carbon price, through planning policy—which states that new coal-fired power stations should be equipped with carbon capture and storage—and through the EPS, a coalition commitment that places a firm limit on the amount of carbon that can be emitted, regardless of the price of coal or carbon. That commitment to reducing emissions would be undermined by amendments 173 to 175, and I hope that my hon. Friend the Member for Daventry understands why I cannot accept them. In relation to amendment 174, I should point out that the formula in clause 42 was carefully designed to ensure that potential emissions from new coal plant would be at least halved.
Amendment 148, tabled by the hon. Member for Brent North, would apply the EPS to existing coal-fired plant that installed pollution abatement equipment to comply with the industrial emissions directive. I understand his fear that, if the relatively low price of coal continues, it may lead to levels of coal generation that will put our decarbonisation objectives at risk. However, our electricity market reform measures should mitigate the risk of carbon “lock-in” by driving investment in new low-carbon generation which will increasingly displace generation from fossil fuel.
Amendment 150 would reduce by 15 years the period in which the emissions limit for a new plant is “grandfathered”. Grandfathering until 2045 gives investors in new gas plant the regulatory certainty they need that the EPS will not stop them from making a return on their investment, thus assisting the provision of the new plants that we require in order to replace ageing capacity. Let me be clear: we need gas-fired generation in our future energy mix to balance increasing levels of intermittent and inflexible plant coming on to the system. Amendment 150 would deter such investment and thus reduce, not increase, the reliability of our electricity supplies.
Mark Reckless
I am sorry to hear the hon. Gentleman not focusing on his constituents’ heritage. Climate reduction and the carbon issue should relate to cost. The coal price has collapsed globally largely because of the success of shale gas in the US and its export of coal, and that means that the cost of the proposals is now far larger than it was. Global temperatures rose until 1998 or 2000. Since then, projections of an exponential increase in temperature have not been borne out by recent data. We have cut our emissions by 24% since 1990, which I think is larger than any other country. What we are left with is a complete mess of policy in the Bill, with various subsidies interacting and greatly increasing bills for our consumers, and I am not sure what the effect will be on reducing carbon emissions compared with, say, the US, which has had a big decrease.
We should look at the cost of coal and the extent to which carbon may be reduced by different things. In this country, we have a price of £16 per tonne on carbon. Under the EU emissions trading scheme, it is less than £2. We are making a great unilateral cross that we must bear when other countries in Europe, for example Germany, are constructing more unabated coal. We will have to buy electricity through the interconnectors, which will hurt our balance of payments and increase the cost to our constituents while we shut down our cheap coal plants. At the same time, shale gas has not come on stream due to the moratorium, as well as ownership and other regulatory restrictions. We will end up with some of the most expensive energy in the world and it is not clear what the impact will be on reducing carbon output.
At the same time as we are closing existing power plants because of the EU, we are banning unilaterally the construction of new plants. The cost of how much we are putting up electricity prices for our constituents should be added to the £9.8 billion figure. We would be much better off if we had a proper market in electricity production, rather than a market rigged against consumers. The Minister, through clauses 38 to 40, wants to introduce a huge network of conflicting subsidies that will let the Government, ex-post, change the conditions of someone’s electricity supply contract. All that will do is increase the price of investment to guard against that risk—yet another thing moving us away from the free market in electricity that might drive down prices for consumers who, certainly in my constituency, are finding the costs very difficult to bear. The previous Government’s policies were bad enough, but the Bill will lead to long-term contracts that may be impossible to get out off, and which will force consumers to pay higher prices for energy for years into the future.
Barry Gardiner
I rise to speak to amendments 148 and 150 in my name, and to amendment 179 in the names of my right hon. and hon. Friends.
Under the large combustion plant directive, 8 GW of old coal has to close by 2015. Of that, 6 GW has already gone, with the remaining 2 GW being considered for conversion to biomass. That leaves 20 GW of old coal set to stay on the system. Of that, approximately 15 GW is being considered for all options, which means that it could be opted into the integrated emissions directive, investing in air filters for NOx and SOx in order to comply. This plant would then not have to close in 2023, and would naturally seek to maximise its return on that capital cost by continuing to provide base load generation capacity unconstrained by the EPS.
Amendment 148 would ensure that where substantial pollution abatement equipment properly dealing with the oxides of sulphur, nitrogen, heavy metals or particles is fitted to the generating station in such a way that makes it compliant with the EU IED while still emitting above 450 grams per kWh, the plant would then be brought under the EPS framework. Without the amendment, many plants will succeed in circumventing the EPS, which would undermine the EMR, the UK’s carbon budgets, the incentive to invest in CCS and the coalition agreement, which committed the Department of Energy and Climate Change to introducing an EPS as a backstop to unabated coal. Remember, these old coal plants have already recouped their capital costs. Allowing them to avoid the EPS cannot therefore be justified, and I dispute what the Minister said about the importance of not accepting the amendment in order to allow new coal to recoup its costs.
Ian Lavery (Wansbeck) (Lab)
Does my hon. Friend agree that coal has a huge role to play in the energy mix of this country? It must, however, be on the basis of burning coal cleanly, using carbon capture and storage. The Government must get a move on and provide the finances to ensure that that happens as soon as possible.
Barry Gardiner
I am in 100% agreement with my hon. Friend. I am happy to put on the record that coal is the energy of the future for the next 40 years; not necessarily in this country, but around the world. Unless we develop CCS and export it to such countries as China and India, which are going to be using coal, the future will be bleak for all of us. It is imperative to incentivise CCS, which is why amendment 179, in conjunction with amendments 148 and 150, is so important.
The central purpose of the grandfathering provision in the EPS is to enable investors in newly consented plant to recover their costs prior to being forced to fit CCS and/or limit their running hours. The grandfathering date in the Bill as it stands is simply not credible. The EPS currently allows unabated gas to operate as base load until 2045. This is not plausible in a carbon-constrained world in which international commitments to reduce carbon are more likely to increase than otherwise. More to the point, grandfathering to 2045 reduces the policy levers available to government, and is likely to reduce the demand for CCS for coal and seriously undermine the credibility of CCS for gas. The EPS is the backstop; it is a very different policy lever from the decarbonisation target. As such, it should retain flexibility to account for policy failure. I have not sought, therefore, to amend the level of the EPS, because in a situation of extreme policy failure, we might need to continue to use some of the unabated gas into the late 2020s. The inclusion of a 2030 decarbonisation target should reduce that risk significantly, but it would remain a risk, and one for which the EPS would have to account.
Amendment 150 proposes a 15-year window up to 2029 providing an adequate commercial time frame and aligning itself with the 2030 power sector decarbonisation trajectory. It would provide increased investor confidence by being more credible than the current 2045, and by setting a shorter grandfathering period, new gas plant would be incentivised to begin operation sooner, assisting efforts to address energy security concerns in this decade.
Amendment 179 would remedy the problem of the Energy Bill’s requiring CCS projects to operate under the EPS regime from day one. The amendment would apply the EPS to CCS projects only once an agreed and clearly defined commissioning and proving window had passed. That approach would remove an unnecessary regulatory burden for project developers and lower the cost for consumers, as the EPS risk would not need to be factored into the CFD strike price, and would achieve the Government’s aim—
John Robertson
That is a very good answer, but the Minister gave an answer earlier that was found to be wrong, so I will wait for a note to come over to him.
Barry Gardiner
I have listened carefully to the debate. Is there not in my hon. Friend’s mind, as there is in mine, a concern that we are putting on companies a financial penalty that will ultimately be borne by consumers? Should we not instead address the real problem, which is directors’ liability? It was noticeable in the recent SSE case that no criminal prosecution for fraud was brought, even though the maximum penalty was imposed. Would it not be better to impose a strict liability on the directors of the companies, so that it is not the consumer who ends up paying the fines?
John Robertson
My hon. Friend makes a very good point, which brings me to the next issue that I wanted to raise: what happens to the money? If we get £1 billion off a company—not that that is likely, because it would be a lot more than we get at present—or even £100 million, surely that company should have to pay that back to its consumers. It should not give it to the Treasury to spend, though I am sure it would spend it in a very nice manner. It should go towards what it was designed for: paying for electricity. That £100 million or £1 billion should go back to the customers of that company. I ask the Minister to look at that.
The Bill is a great deal better than it was when we scrutinised it on the Select Committee. Everything else about the Bill has been rushed. Look at the number of amendments tabled today, and the number of things that we are not being told—the strike price and so on. We are basically being given a promise that it will be all right on the night. We need to know what the Bill is. The Select Committee had five weeks’ scrutiny of the Bill, when normally the period is 12 weeks. Then we waited an inordinate amount of time for the Bill to come back to us. When we got it, we sent it back to the Minister and told him that it was a dog’s breakfast; it was terrible. We then got something else. It has been through Committee, and we have improved it. I implore the Minister to consider the amendments that hon. Members on both sides of the House are putting forward, and seriously look at using the best bits to improve the Bill further, because this is an okay Bill, but that is all it is; it is not good. It is probably slightly better than what we had at the start, but we still have a long way to go. I ask the Minister to consider that.
I also ask the Minister to look at the issue of people paying their taxes. We see that npower has admitted that it does not pay corporation tax. Another three of the major companies say that they do not pay much corporation tax. I am pleased to say that the two companies with Scottish links say that they do pay their corporation tax, although I would still like to look at the books.
There lies the biggest problem that we have with energy: looking at the books. What are the books? I have talked to Ofgem and to the Minister. What do the books cover? That goes back to the definition of cost and the definition of turnover. Where does the generation element come in and where does the retail element end? What happens to all the money that is made on either side of the box in the middle? That is a real problem. When billions of pounds of profit are made on one side and appear not to be counted, and billions of pounds are missing on the other side so the companies put the prices up, they keep making money but the consumers—the poor, the elderly, the disabled, the hard-working families that the Minister likes to talk about—are all suffering, and it appears that our Government do not care.
We should be doing more. We have even got to the stage where HMRC hired a gentleman called Volker Beckers, who was the chief executive of RWE npower. I bet he knows how to deal with tax for those energy companies. I hope he uses the same skill as he used for RWE not to pay corporation tax to get the same money out of the same company for HMRC.
There is much that is good in the Bill. I hope the Minister will consider the amendments moved by my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) and listen to what my friend the hon. Member for Angus said. Between us all, we will make the Bill better, but we must remember that at the end of the day it is the people who put us here that we should be looking after.