16:55 The Minister of State, Department of Energy and Climate Change (Michael Fallon)

4 The members of the Expert Panel shall be appointed by the Secretary of State and shall comprise a Chairman, a consumer representative, a representative of the Committee on Climate Change, a representative of the Authority and such other members as the Secretary of State may decide.

‘(10) A direction may not be given under this section to a fossil fuel or renewable energy plant with a rated capacity of 15MW or greater that use any biomass unless they are—

‘( ) Section 42(1) is not to apply in relation to CCS plant until completion of the commissioning and proving period that shall last no longer than 3 years.’.

I thank Opposition Members and other hon. Members for their contributions in Committee. The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), said at the time that the Bill needed clear accountability and that Parliament must have the information it needs to scrutinise the delivery of electricity market reform properly.

Let me turn, fourthly, to nuclear power. The Government have made it clear that nuclear generation has an important part to play in decarbonising electricity generation. It is a source of reliable generation capacity and it is a vital part of our energy mix. CFDs are intended to provide support to all forms of low carbon generation; hence I could not support amendment 23, as it would exclude nuclear generation. I also have concerns about amendment 24, which seeks to limit the amount paid under a CFD to nuclear generation to no more than what can be paid to renewables generation. It would not make sense artificially to link the amount of support for one technology with support for another. Support should be set based on robust evidence and advice that demonstrates, for instance, that the level of support makes a project economically viable—and thus will attract investment—and that it delivers our policy objectives while minimising costs for consumers. More widely, renewables support rates will vary over time, as has happened with the renewables obligation, and a mechanism to link support levels in this way, as proposed in amendment 24, could be cumbersome and could restrict our discretion to set support levels that might otherwise provide value for money.

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17:30 David Mowat (Warrington South) (Con)

The Minister has referred several times in the last few minutes to CCS technology. What is his core estimate of that being deployable on a commercial basis in the UK?

I am not able at the moment to give my hon. Friend a precise timetable. Last year, we had a competition, as he will recall, for CCS. We selected the two principal bids and we are continuing to negotiate, but as soon as I have more news on that, I will ensure that he is one of the first to hear.

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17:45 Michael Fallon (Rutherglen and Hamilton West) (Lab/Co-op)

In relation to the EPS, let me say a few words about amendment 179 on carbon capture and storage. The provisions in chapter 8 on the EPS will have a significant impact on the future development of CCS. The Opposition have consistently and clearly set out our support for developing that technology, which we believe has a vital role to play in our future energy mix alongside other low-carbon technologies. We do not need to go over the same ground again, but I probably first raised with the Minister’s predecessor but one some of the issues about the £1 billion that was supposedly available for capital funding. We know what the Cabinet Office document said was available for this comprehensive spending review period, although I am conscious that the Minister’s Department—or one of his Departments, the Department of Energy and Climate Change—seems to have secured its negotiations with the Treasury on the CSR. I wonder whether the remainder of that £1 billion is part of the savings that have been offered up.

If we do not get the technology developed for CCS, we will face a significant gap in our ability properly to deal with the peaks in our generation requirements. That is why we tabled amendment 179. As the hon. Member for Warrington South (David Mowat) perhaps suggested in his intervention about carbon capture and storage, we are conscious that there have been bumps in the road in moving that technology towards commercial development; I think it is fair to put it in those terms. We are concerned, as are a number of industry bodies, that an unintended consequence of the Bill is that it makes that technology less likely to be developed.

The Minister was right to say that the exemption was in the draft Bill, but was taken out as a result of concerns, expressed by the Select Committee on Energy and Climate Change and others, that it could be a loophole allowing unabated coal generation. The way in which the amendment is framed—it relates to a specific commissioning period—helps to address that sensibly, and to ensure that CCS is given the best chance of developing and being part of the future-generation mix, as many of us wish it to be. I therefore intend to push amendment 179 to a Division.

The Government argued in Committee that it would be wrong to give the Secretary of State the power to introduce a new system or mechanism in future, as it would cause uncertainty. That is very different from the stance taken by the Government in the amendments that we will discuss tomorrow on 2030 decarbonisation, which give the Secretary of State a power to set a target if he so chooses, so the argument does not stand up to scrutiny. There are important points relating to a strategic reserve that I am sure my hon. Friend the Member for Southampton, Test will seek to make. I do not think that having that power in the Bill will necessarily have the impact that the Minister suggests.

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18:30 Martin Horwood

First, let me make it clear, particularly to Ministers, that I support the Bill. The attempt to lock investment in low carbon technologies into British energy markets is vital and demands an interventionist approach. In a sense, I agreed with a lot of what the hon. Member for Daventry (Chris Heaton-Harris) said in describing what are in effect subsidies and quite an interventionist approach in the Bill—something I think is justified for renewables and when bringing forward clean, greener technologies to tackle the urgent question of climate change. I also welcome the important Government amendments that try to ensure that consumers enjoy the lowest possible tariffs.

Perhaps courses in negotiating skills might be recommended for members of the Department of Energy and Climate Change on that front. To be fair, Ministers have made it clear that they do not intend to sign the contract with EDF at any price, but the difficulty is that we in Parliament simply do not know that there has not been adequate scrutiny.

The effect of new clause 5 and a panel of expert scrutiny would be to ensure that all technologies negotiating contracts for difference were subject to scrutiny, including offshore wind and other renewables. New clause 5 and new schedule 1 are not specifically anti-nuclear, but they are anti-unearned subsidies. The Energy and Climate Change Committee called for that in its report, and Which? addressed it in the drafting of these provisions—I am grateful for that. Such scrutiny and transparency are particularly relevant when, as the Committee pointed out, a mature technology dominated by a single large supplier means there is little competitive pressure and the strike price naturally tends to rise in such a situation—even more so, as the hon. Member for Rochester and Strood (Mark Reckless) pointed out, if one side has almost conceded that it needs to sign the contract at the end of the process.

A Government who were serious about tackling fuel poverty and high energy costs would instead pursue more effective ways of meeting our energy needs and decarbonising our power sector, namely through renewable energy, energy efficiency, demand reduction, and demand-side measures such as energy storage, genuinely smart grids and interconnectors.

The UK has the potential to be a massive industrial leader in renewables and efficiency—solutions that could deliver huge cost reductions and a substantial boost to the UK economic recovery, manufacturing and jobs, yet the Bill goes in the opposite direction. Moreover, the secrecy of the Department of Energy and Climate Change negotiations with EDF further undermines confidence in the credibility of the Government’s claims that the deal represents value for money for consumers.

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18:45 Mark Reckless (Wansbeck) (Lab)

Will the hon. Gentleman clarify something for me? Is he saying that we should not worry or think about our obligations on climate change? If he is not saying that, how does he expect his electorate to pay for what he is suggesting?

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.

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—

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20:15 John Robertson

However, I have a big problem with amendments 3, 4, 6 and 7. As I said in an intervention on the hon. Member for Liverpool, Wavertree (Luciana Berger), I have a worry—the same sort of worry as the Minister—about the effect that the amendments would have on the company. It seems that one aspect of the Bill is about trying to get investment into the energy industry. For far too long there has been insufficient investment; a lot of modernisation and new investment is needed to get our energy system up to scratch. The figure is 10% of the turnover, whatever that turnover will be—I am still not clear what the word covers. That takes me back to the days when I served on the Select Committee on Energy and Climate Change with my hon. Friend the Member for Glasgow North West and we had the big six in one day and asked them about their profits. We asked whether they had made their profits selling to the consumer and they replied, “Oh no, we didn’t do that.” We asked whether they made them through generation, and heard, “Oh no, we didn’t make it from that.” We asked, “Where did you make those profits? You have large profits,” and no one could answer the question. There is great difficulty in pinning down what is meant by profit and turnover. In a time when we have six big energy companies, five of which are effectively multinational companies—we have seen in recent weeks what happens with the tax of multinational companies—we need a bit more clarity about what is meant by turnover.

It is a pleasure to follow the hon. Member for Angus (Mr Weir). He was an excellent member of the Energy and Climate Change Committee when it was first put together and I am very sorry that he is not still a part of it—but there is time for him yet, as they say.

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