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The Chairman: Order. I think that this matter falls outside the scope of the amendments that we are debating. Mr. Hammond: Thank you for that guidance, Mrs. Winterton. I was merely seeking to draw attention to the broad, carrot-and-stick issues surrounding the promotion of renewables. I am worried, as I am sure the Minister will be, that the inclusion of unsubsidised renewables in the scope of subsection (3) will send the wrong signal to the industry. I was merely hoping to probe the Minister on the positive signals that he will be able to send. I am sure that he is aware of the planning issues and the suggestions that quotas should be imposed for renewable facilities in different areas. Perhaps he will take up that theme when he sums up. Amendment No. 6 is in two parts and should be read with amendment No. 8, which comes in a later group. Amendment No. 8, if I may refer to it briefly, would remove subsection (3) from the Bill. Subsection (3) having been removed, amendment No. 6 then deals with the issue that the Minister rightly raised on Second Reading--the advantage that would be enjoyed by large-scale, established, hydro-electricity generating stations, which are renewable in the technical sense of the word but do not share many of the essential characteristics of the other renewable industries that we seek to protect. Hydro-electricity is a well-established technology in many countries, and provides the bulk of the electricity generated. In the United Kingdom it is a relatively small part of the equation, but by far the most significant element of renewable generation in total. It is a form of energy generation with high fixed costs and low variable costs. The Minister has rightly said that, in many respects, it is anomalous to treat hydro-electricity from existing generating stations in a way that suggests that it is an infant industry requiring encouragement. Therefore, the first part of amendment No. 6 would specifically include in subsection (2) the provision that hydro-electricity generating stations that are not NFFO qualifying arrangements--in other words, unsubsidised hydro-electricity generation--would be included in the scope of the levy, together with fossil fuel and nuclear-powered stations. That seems to deal with the issue raised by the Minister on Second Reading. If subsection (3) is necessary to enable him to address the issue of existing large-scale hydro, the amendment does the trick. The second part of amendment No. 6 might at first appear to address a rather obscure problem. It is one that I raised on Second Reading, when the Minister kindly said that he would look at it. I am willing to be corrected, but my understanding is that the pumped storage facilities in north Wales operate as a sort of arbitrage mechanism for the pool--buying electricity from the pool at times of the day when it is cheap, pumping water up to the top, to put it crudely, and then releasing it to generate hydro-electricity at times of the day when the pool price is high. I see that as a green battery. While at present its principle use is to generate profit by arbitraging the pool price, I hope and expect that that pumped storage facility will play a key role in the development of a green electricity market at consumer level in this country. I do not claim to be an expert on the technology, but it is my understanding that no other form of green storage is available at present. Wind energy, by definition, can be generated only when the wind is blowing; solar energy, almost by definition, cannot be generated economically in this country at all; and other forms of renewable energy are often subject to the vagaries of weather and climate. To develop a truly plausible market for green renewable electricity and to sell that concept to the consumer, it is essential to have a plausible means of storing green electricity. Some of the mechanisms proposed so far are, frankly, not about marketing; it is more a case of asking consumers to pay a bit more and promising to invest the money that they have paid--over the odds--into new capital investment in renewables. That is not the same as saying to a consumer that the electricity that he is buying on an hour-by-hour basis will be matched by green electricity generated, and that his decision will therefore have a real and direct effect in stimulating investment in renewable energy technology. Mr. John M. Taylor (Solihull): I have listened in admiration to my hon. Friend's analysis of the deficiencies of electricity storage. He referred to the Dinorweg project in north Wales, by virtue of which water is pumped uphill at economic times and allowed to come down through turbines at more productive times. Is not that a commentary on the failure of society to develop battery technology? Is not the pursuit of the ideal battery a lamentable failure? Mr. Hammond: My hon. Friend is undoubedly right. I know that the development of suitable battery technology will be key to, for example, the development of photo-voltaics for solar electricity production. I suspect however, that the nature of our electricity infrastructure means that the ability to pump water up and let it generate energy at appropriate times is probably a rather efficient form of battery, although it depends on differential pricing, which is related to demand varying at different times of the day. Certainly, it works rather well in our current electricity market. It is just a shame that our topography means that there are relatively few opportunities for similar schemes. I have explained my understanding of how the pumped storage facility works and, I hope, its potential relevance to the development of a consumer green electricity market. I know that the Minister's Department is funding work to explore the possibility of establishing a green electricity pool. Several electricity distribution companies already offer consumers the chance to buy green electricity at a premium price, or are considering doing so. There is evidence in the UK, and certainly in the United States and Australia, that consumers are willing to pay more for renewable generated electricity, provided that they are satisfied that it is genuinely renewable and that, by taking that purchasing decision, they are encouraging investment to be directed towards sustainable electricity rather than further fossil fuel generation. I instinctively do not like levies, taxes, compulsory transfers and subsidies. I would be much happier to see the development of a green electricity market that eventually allows the NFFO subsidy to give way or to be reduced and limited to nascent and fragile technologies, so that the more robust renewable technologies could find a market niche and consumers could take their own decision to pay the levy, instead of having it statutorily imposed on them. Obviously it is early days yet, but if it is possible to persuade consumers that they want to pay a higher price for a premium form of electricity, that would be a desirable solution in the longer run--better than a compulsory across-the-board levy. I have raised these issues today in the hope that the Minister will consider the position in the equation of the pumped storage facility. My concern is that there is a potential for double taxation, although I stand to be corrected if I am wrong. I would not like to think that a potentially valuable and facilitating mechanism could be hindered by double taxation in that the levy could be imposed on the electricity generated when water is pumped up as well as on that generated when the water comes back down. I hope that the Minister will address that point.
11 amI have come to the end of my remarks on the first group of amendments, which cover a wide range of issues. They seek to establish the Government's intentions, clearly to label the package, as it were, and to remove the obfuscation of the Bill's title. We seek to limit the levy to a single rate so that its purpose is absolutely clear and incapable of being subverted for an alternative and discriminatory use. We seek also to deal explicitly with the question of renewables and the Minister's concerns about hydro-electric generation. Mr. Ian Bruce: Mrs. Winterton, I know that you looked tentatively at the Government Benches to see whether you could tempt any Labour Members to speak, so I am most grateful to be called. I want to declare a small interest. I tried to find a coal-fired station tie to show my concern about the Bill's possible effects on coal-fired electricity, but I was only able to find an advanced gas-cooled reactor tie, which has the Central Electricity Generating Board in the background. There is a tale behind the tie that is relevant to our discussion. When the industry was being broken up and changing from a nationalised to a private industry, electricity companies and power stations thought that they should be marketing themselves. The tie was designed when Lord Marshall still believed that there would be a single industry that would include a nuclear element. Many remained in private hands for a long time, so the tie that I am wearing may well be a collector's item. I collected a number of such ties when I was with the Industry and Parliament Trust. I thought that I would mention that in case it was thought that I was in any way biased. Amendments Nos. 1 and 7 concern the title of the Bill. That is an important issue and we are not trying to split hairs. One must say, in all honesty, that when the fossil fuel levy was first thought of, the Government of the day used it as a fig leaf to conceal the fact that their aim was to raise funds to pay for the closure of nuclear stations because the CEGB, which should have been putting money aside to cover the high cost of cleaning up nuclear generation, had not been doing so while nuclear stations were generating electricity. The Government, therefore, saw the levy as a clever mechanism for raising those funds, and in time that mechanism worked. As part of that fig leaf, the Government of the day decided that they would take action on green energy. The levy was a means of paying for nuclear clean-up and the closure of the power stations, which might have made nuclear generation more expensive than other forms rather than cheaper. They decided to introduce a genuine non-fossil fuel levy to help green technologies. In the meantime, we have found that is it not appropriate to continue calling the levy a fossil fuel levy. We know, for instance, about the burning of municipal rubbish. That is a controversial issue, which I will not take up because it would need a debate all of its own. Conservative Members have suggested that the levy should simply be called an electricity levy. That is a simple term, which cannot be misunderstood. People will ask what it is all about. I was looking through the papers of the House and found that it had dealt with the gas levy account the other day. The gas levy has nothing to do with other types of levy; it is a form of taxation. People should not be confused by all the different names. It would be worthwhile defining what the fossil fuel levy does. I take as my script the Electricity Industry Review of Electricity Association Services Ltd. We should be clear about what the levy does because, if we read earlier documents, it is clear that there is some confusion. The review states:
regional electricity companies--
On the next series of amendments, I will talk about how that will affect the cost of electricity, particularly in light of the Government's aim to increase the proportion of renewables to 10 per cent. It is important for the Minister to tell the Committee what his purpose is and what he intends to do in regard to the levy. What will the regulations do? There are regulation-making powers in section 32 of the Electricity Act 1989. We are amending section 33 and providing for a different way of collecting the levy. We are seeking in the amendment to write the universality of the levy into the Act; universality was the mechanism in the past. I have some difficulties with the amendment. If the purpose of the levy is to reduce the amount of gaseous emissions, which is what we committed ourselves to doing at Kyoto, it is strange to say that we will put it on nuclear power, which does not create such emissions--nor indeed does hydro. Should we levy charges on anything that does not create CO2? The Minister might have decided to have a differential levy, what are his plans are in that regard?
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| ©Parliamentary copyright 1998 | Prepared 26 February 1998 |
