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19 Jun 2008 : Column GC445
19 Jun 2008 : Column GC445
19 Jun 2008 : Column GC445
Thursday, 19 June 2008.
The Committee met at two o'clock.
[The Deputy Chairman of Committees (Baroness Gould of Potternewton) in the Chair.]
Energy Bill
(Second Day)
Clause 34 [Power of Secretary of State etc to transfer functions]:
Lord Bach moved Amendment No. 16:
The noble Lord said: I will speak also to Amendments Nos. 17 to 25 and 77, all of which are government amendments. I hope that I can be brief.
I will begin with a brief word about Clause 34, to which the first group of amendments applies. It enables the functions of the Secretary of State and Scottish Ministers to be transferred, by order, to another authority, or multiple authorities, once it is decided which authority is best placed to exercise such functions. The power to make orders or regulations, however, cannot be so transferred.
These are technical amendments but they all have a single purpose. Clause 34 currently refers to functions being transferred to a “person”. The Delegated Powers and Regulatory Reform Committee of this House has requested that this be replaced with a reference to a “public body” in order to ensure that only public, rather than private, bodies could be tasked with carrying out the functions on behalf of the Secretary of State or Scottish Ministers. This recommendation is entirely consistent with our intentions in relation to this clause, as any potential transfer has been envisaged only in connection with public bodies, such as the Crown Estate.
We consider, however, that the Delegated Powers and Regulatory Reform Committee’s suggestions will provide additional clarity and may reassure the general public and the potential operators of carbon dioxide stores that, if the Secretary of State or Scottish Ministers decide to transfer their functions under this chapter, the transfer will only be to one or more public bodies. Amendments Nos. 16 to 25 all leave out the word “persons” and insert other suitable words.
I turn to Amendment No. 77, which is in this group. It is a response to another recommendation of the committee; that is, a change in procedure for making regulations under Clauses 13 and 27. Such regulations, if made, would specify the powers and duties of inspectors of offshore gas storage and unloading and carbon dioxide storage facilities, respectively. Amendment No. 77 is proposed in relation to Clause 94, as this clause governs the procedure for making secondary legislation envisaged in this Bill.
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Clauses 13 and 27 specify that inspectors’ powers and duties may include powers of any kind specified in Section 108(4) of the Environment Act 1995. The powers contained in the section are extensive and range from the power to take samples and measurements to the powers of entry, investigation and questioning. However, the powers that may be given to inspectors are not limited to those specified in that section, and in that sense the powers in Clauses 13 and 27 are open-ended.
We therefore agree with the committee’s recommendation to subject the making of the regulations to affirmative procedure because, due to their open-ended nature, they would benefit from more detailed parliamentary scrutiny. My department is content that such a power would be used infrequently and that, as such, the change in procedure would not be burdensome. We have chosen that option, rather than the other option recommended by the committee—namely, that of restricting inspectors’ powers to those specified in Section 108(4) of the Environment Act 1995—to ensure that the necessary flexibility in prescribing inspectors’ powers and duties in relation to the new offshore regimes we are creating is retained. That flexibility is important. I beg to move.
Lord De Mauley: As the Minister has helpfully explained, these amendments follow the recommendations of the Delegated Powers and Regulatory Reform Committee. That being the case, we see no reason to object.
Lord Redesdale: I am not objecting to these amendments in any way, but I have a question. In the Bill, the phrase “another person” was used. I had not seen that before. Would it need to be a named person of an organisation? That could cause major problems if the person were then to change. This is only a point of clarification, because I have not come across a “person” being set out in a clause in this way.
Lord Bach: The amendments that the Government are seeking to persuade the Committee to adopt leave out in every instance the expression “person”—and, in one instance, “another person”—and insert the expression “body”. This is so that the world knows we are talking about a public body as opposed to a private person.
Lord Redesdale: My question was whether the phrase “another person” could stand, as specified in the Bill as it is set out at the moment. Would it have to be a named individual in a company fulfilling that function?
Lord Bach: I am advised, and I should have known this, that the expression “a person” can and does include a body corporate. We have used the word “body” in the amendments, however, in order to make clear that the transfer would be to a public body.
On Question, amendment agreed to.
Lord Bach moved Amendments Nos. 17 to 25:
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On Question, amendments agreed to.
Clause 34, as amended, agreed to.
Clause 35 [Chapter 3: interpretation]:
Lord Bach moved Amendment No. 26:
The noble Lord said: These are minor drafting amendments aimed at clarifying the definitions of Scottish and Welsh territorial waters that are currently contained in one chapter of the Bill and which have been inserted in legislation that the Bill amends. They will remove a very small element of uncertainty in the definitions currently provided, which was uncovered in discussions with interested parties and will therefore remove any possible doubt about what boundaries are the relevant ones and in which circumstances. In one case the definition also applies to certain internal, as well as territorial, waters.
In particular, Amendments Nos. 26 and 27 clarify the definition of the territorial sea adjacent to Scotland for the purposes of Chapter 3 of Part 1 of the Energy Bill, which establishes the regulator regime for carbon dioxide storage.
On the other hand, Amendments Nos. 28, 29 and 30 clarify the definition of the territorial sea adjacent to Wales for the purposes of Part 2 of the Food and Environment Protection Act 1985.
Amendments Nos. 31 and 32 clarify the definition of tidal waters and parts of the sea in or adjacent to Scotland, up to the seaward limits of the territorial sea, for the purposes Part 2 of the Petroleum Act 1998.
I hope that the Committee will support these technical amendments.
On Question, amendment agreed to.
Lord Bach moved Amendment No. 27:
( ) if no provision has been made by virtue of paragraph (b), for the general or residual purposes of that Act.”On Question, amendment agreed to.
Clause 35, as amended, agreed to.
Schedule 1 [Amendments relating to Chapters 2 and 3 of Part 1]:
Lord Bach moved Amendments Nos. 28 to 32:
( ) if no provision has been made by virtue of paragraph (b), for the general or residual purposes of that Act.””19 Jun 2008 : Column GC448
On Question, amendments agreed to.
Schedule 1, as amended, agreed to.
Clause 37 [The renewables obligation]:
Lord De Mauley moved Amendment No. 33:
The noble Lord said: The amendment is the first on the rather long Clause 37. We appreciate that the Government’s intention was to consolidate the renewables obligation and to put it into one legislative block. That seems to be an attempt to simplify something of labyrinthine complexity, which, for what it is worth, I suppose must be welcomed.
A lot remains unanswered about ROCs. Only 4 per cent of our electricity production comes from renewable energy. The EU directive that places a 15 per cent target on renewable energy reduction will, I fear, not be met by gentle encouragement. We need a revolution. That will only happen if emerging technologies are given much more support. The renewables obligation has certainly encouraged the development of renewable energy, but this has been preponderantly in only a couple of areas; namely, onshore wind and methane. Photovoltaic and tidal technologies, for example, so far do not seem to have benefited very much.
Banding the RO is a welcome step to addressing some of these discrepancies. The advantage of a banded RO is that it should incentivise various renewable technologies. Encouraging the growth of emerging technologies will be essential to a low-carbon energy industry. Allowing for different levels of funding should ensure that differing technologies receive the appropriate level of support.
The amendment was brought to our attention by Drax Power Limited, which is involved in co-firing biomass as a way of reducing its emissions. The new RO differentiates between energy crop co-firing and non-energy crop co-firing. Yet, with the increase in the price of wheat and the volatility of the markets, it is increasingly difficult to secure a supply of energy crops—crops grown with the express purpose of energy production.
Therefore, interest is turned to non-energy crops; in other words, by-products generally of food production, such as corn husks. Current provisions in the Bill maintain a cap on the amount of non-energy co-firing that will be awarded through the RO. It is the only renewable source that will be capped. Drax has advised us that this could have a serious negative effect on the encouragement of renewable co-firing. Indeed, it has been put to us that it could have the opposite effect from that which we would, I am sure, all agree is desirable. No doubt the Government have received similar intimations.
Essentially, Drax’s position is that if there is a cap on non-energy co-firing, there is always the chance that that cap could be reached, at which point production might become uneconomic. Because of that constraint,
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2.15 pm
The Minister in another place maintained that provisions allowed for changes on the bands and further distinctions to be made within any given area of renewables. That is what is now being requested. As is the case with much of this Bill, the amendment concerns big companies, which generally have rather long long-term plans. As I am sure that the Minister will appreciate, leaving a business plan to the ambiguous further distinctions that a Secretary of State might make is risky business. If we are to encourage renewables with vigour, every available opportunity to provide clarity should be seized.
The parallel fear is that without greater clarity, the market will be skewed. We appreciate that the banding of the RO is an attempt to address that, but if we are really out to encourage the uptake of the cheapest and cleanest technologies with a market mechanism, we cannot pick winners. That leads me to my final question on the amendment: is the Minister absolutely satisfied that the market mechanism created with the banded RO will not lead to the picking of winners, with all the risks that human intervention brings? I beg to move.
Lord Redesdale: I considered putting my name to the amendment, and would have done if I had got round to it. It has been admirably moved.
Co-firing has major benefits to be discussed in the Committee. Drax is a coal-fired power station. From the briefing that we get, you would automatically think that we are going to remove all coal-fired power stations and that that will be the end of the problem. There has been a recent case of green groups stopping shipments of coal to Drax power station. The problem with coal is that it is the highest carbon dioxide generator of any form of generation that we have in the country. However, we still generate a great deal of baseload from coal, so removing coal from the mix is unrealistic at present, although there are major problems with coal-fired generation.
Many people have almost stopped talking about coal-fired generation, almost believing that it will be shutting down and disappearing from the mix. Indeed, a large number of coal-fired generators will quite soon not be on the grid because they will not meet the strict environmental controls set down by the Government—and rightly so. However, co-firing needs to be looked at extremely carefully, because it is unlikely that Drax will be leaving the energy mix soon. An enormous amount of money has been spent on Drax to make it more efficient and environmentally friendly. Co-firing can change the nature of the use of coal. We have discussed pre-combustion and post-combustion technology. It has been estimated that the use of biomass in the co-firing process at Drax alone will save 3 million tonnes of carbon dioxide.
I find it difficult to think of many other areas that would save that amount of carbon dioxide. Under the figures given by the Energy Saving Trust, that is the equivalent of changing a vast number of boilers or of
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Lord Woolmer of Leeds: I support the amendment. I visited Drax with the All-Party Energy Group a few days ago and we discussed the matter then. The cap and the banding system are very much intertwined. Setting the ROC, the renewables obligation certificate, banding at half a unit is, one assumes, a way of ensuring that this technology is given a modest benefit, but nothing like as substantial as, for example, that for Billingham, which is quite right for the reasons set out in the Bill.
I presume that the ROC is set at half a unit for non-energy biomass co-fired generation because the Government estimate that that degree of incentive is enough to generate the amount that they want to see from that form of renewable energy. If the cap comes into play, it would imply that too much incentive was being given. When the bandings are reviewed from time to time, it would seem sensible to review downwards the incentive to this form of co-fired generation. To achieve that needs not a cap but a stated guideline from the Government to the market as to what would trigger a downward reduction in the banding allowance.
A cap is not needed. If the Government and the regulator stated clearly the guideline amount of generation that they wished to see in setting the ROC, that would come into play if this form of generation became substantial. A 10 per cent cap for this form of generation is equivalent at half a unit to 20 per cent of the renewables’ contribution to electricity generation. It is a substantial amount. If the banding ratios are set to reflect market forces, and the banding system is periodically to be reviewed as the Bill states, why is a cap necessary in addition to a differential band?
The whole system is intended to be market driven, providing market signals through the different values of the ROCs to the different forms of generation. If the cap is used and reached, which of the non-energy co-fired biomass generators will secure the market? Who will be able to sell? Some of the generators will not be able to sell all the energy that they generate, which is why there would be a cap on it.
Drax put the proposition to me and, no doubt, to other noble Lords that it was significantly the most efficient and lowest-cost co-fired generator in the country. That market advantage, through efficiency and investment in plant, also applies to its co-fired non-energy generation. In a sense, Drax should have nothing to concern itself about. If there is a cap, it will be able to sell most or all of its electricity generation because it will be the cheapest.
Drax’s concern is that some generators are a part of integrated generator supply businesses, which will buy, first, from their own plant even if it is not the most efficient and the least cost. If that happens, ultimately, consumers would pay more for their electricity than necessary, because the most efficient generator is not able to sell its output despite it costing the least. If the
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Is the Minister satisfied that the price at which integrated generator suppliers trade in their renewables electricity generation internally is robustly transparent, so that the marketplace knows whether they are buying from the most efficient supplier at the least cost? If the Government persist in this cap system, which I genuinely believe is misguided, are they willing now, or on reflection at a later stage of this Bill, to consider giving an assurance that, in the event of a cap becoming effective, they would be minded to keep a close eye and, if appropriate, to instigate the necessary competitive investigations should there be evidence of market abuse?
Lord O'Neill of Clackmannan: I share many of the concerns about this amendment raised by previous speakers. The amendment is timely in that, almost at the beginning of our consideration of this Bill, we are dealing with the interface between the competitive economics of different kinds of energy at the same time as the environmental worries that we have about some of these forms of generation. Certainly, conventional wisdom has come to the point where we look at coal as being dirty and old-fashioned, but probably still very attractive in so far as it is very flexible. One thing that we must never forget about coal-fired capacity in this country is that if everything else fails, a coal-fired power station can be got going in several hours. Hydro would be even better. I once had the opportunity to press the button in a small hydro complex in the Highlands. Within eight minutes, we could see signs of activity and generation. For practical purposes, it is essential to have large plant, preferably going at baseload. But we are conscious that, if we were to do that, it would make our CO2 emissions even more embarrassing than they are now.
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