Oral Question: Energy Bill Amendment Uncertainties

- Tuesday, 4th June 2013

 

Carbon

Mr Yeo: I recommend that my right hon. Friend look at the latest report from National Grid, which shows that the amount of back-up required for wind farms is extraordinarily low. More importantly, on the broader point about costs, I am sure he will be aware—because he takes a close interest in these matters—that nothing in the amendment would affect the cost of electricity between now and 2020 because the support for low-carbon technologies during that period is capped by the levy control framework. The amendment would have no impact on electricity prices for consumers for the next seven years.

 

I am sure that my right hon. Friend also takes a close interest in what electricity prices will be in the 2020s, and it is theoretically possible that approving this amendment could lead to higher prices during that period. That would depend heavily on an assumption about what gas prices will be doing in the 2020s, and I would not be confident to make such a forecast. If he is really concerned about the cost to consumers—a concern that I share—he should address his attention in the short term to the Treasury, which has imposed a minimum floor price for carbon. That will have the effect of raising electricity prices before 2020. It is an imposition that applies only in the United Kingdom and therefore puts us at a competitive disadvantage with the rest of the European Union. I hope he will join me in making continued representations to the Treasury to drop that policy.

 

As currently drafted, the Energy Bill gives the Secretary of State a power to set a decarbonisation target for 2030, but it does not compel him to do so. It also prevents him from exercising that power before 2016. Suggestions that the amendment would force him to set the target at 50 grams per kWh in 2030 are mistaken. It would merely require him to set it in accordance with advice received from the Committee on Climate Change. There is nothing in the amendment that would require him to set a particular figure. If the Committee were to recommend a figure higher than 50 grams per kWh, the Secretary of State would have to heed that advice. If he did not do so, he would have to explain why.

 

The Committee on Climate Change itself would not have a completely free hand in determining its advice to the Government. It would still have to take account of all the matters referred to in clause 2(2). I remind the House of five of those key points. The Committee would have to take account of

 

"scientific knowledge about climate change…technology relevant to the generation and storage of electricity…economic circumstances, and in particular the likely impact on the economy and the competitiveness of particular sectors of the economy…fiscal circumstances, and in particular the likely impact on…public borrowing"—

 

and—

 

"social circumstances, and in particular the likely impact on fuel poverty".

 

Mr Peter Lilley (Hitchin and Harpenden) (Con): My hon. Friend began by saying that the whole purpose of his amendment was to provide certainty. He is now saying, "This won't be certain because it will depend on half a dozen things that we cannot forecast." Why does he imagine that people will invest on the basis of a legal obligation to do something in 2030 that it is impossible to do now, and that they will not invest on the basis of subsidies that are available now and that can be removed only as a result of breach of contract?

 

Mr Yeo: I am not sure that I completely follow my right hon. Friend's concerns. Those points in the Bill will simply ensure that, in the event of an unexpected substantial change in economic circumstances or the emergence of a new technology, the Committee on Climate Change would have an opportunity to review its advice. Indeed, I would hope that it would want to do so in normal circumstances anyway. Moreover, investors are accustomed to having to adjust their decisions and expectations in the light of changing events.

 

I am seeking, through the amendment, to remove another element of uncertainty. I want to ensure that the Government's current commitment to moving down 

 

a pathway of slowly decarbonising the British economy and reducing its dependence on fossil fuels, which is particularly relevant to the electricity generating industry, is reinforced by accepting an obligation to set the target in secondary legislation during the next 10 months. I believe that that would be wholly helpful to investors. It would give them a more secure and predictable framework in which to make their decisions, as well as having an effect on the returns that they might expect.

 

 

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