Energy Spending Priorities: Investors and Consumers — House of Commons, 2016-07-04
Topic: Energy
Alan Patrick Vincent Whitehead (Labour, Centre-left): It is a pleasure to follow the hon. Member for Eddisbury (Antoinette Sandbach). She has made a very thoughtful contribution, most of which I agree with. I hope that this will set the tone for the rest of the evening’s debate, because there is now a wide consensus that the storm of changes that were made last summer to a whole range of renewables incentives has created enormous problems for investor confidence and substantial uncertainty over the Government’s direction on energy policy overall. The three excellent reports from the Energy and Climate Change Committee that we are also discussing this evening underline how the problems have arisen and what they consist of. However, we have also seen the acceptance by the Government of the fifth carbon budget in the past couple of days. It is great that they have accepted it. It would have been nice to have included shipping in it, but I understand that they are not going to proceed with that. Nevertheless, they have accepted the fifth carbon budget, which describes the onward march of renewables as absolutely essential for the reduction of our emissions. The fourth carbon budget dealt with the essential nature of carbon capture and storage and the forward march of energy efficiency in homes. I made the point in an intervention earlier that the fourth carbon budget assumed that there would be 2.2 million solid wall treatments in homes, but the changes that have taken place over the past year have all pointed in the opposite direction to the imperatives that the Committee on Climate Change put forward in the carbon budgets. There are therefore real question marks in relation not only to investors but to future policy overall. How can we be on target with those budgets—as I hope we will be—at the same time as undertaking all the recent changes The cancellation of the carbon capture and storage programme was thoroughly deplorable. The justification for the changes to the renewables incentives was that this was all about the levy control framework. The framework came in in 2011 and it was supposed to place limits on the levies that were arranged in relation to certain renewables. This would also have an effect on what customers’ bills would look like, as the levies would be passed down to customers’ bills in the end. However, the levy control framework was almost inevitably going to be a car crash, both in terms of how it was conceived and of what it was going to look like by 2020 There now seems to be some clarity about future auctions relating to contracts for difference under the framework up to 2020, but it does not look as though there will be much money in those auctions. It does not look as though they will be significant, and the levy control framework itself will come to a sharp cliff edge at the end of 2020. That is partly because when the framework was first designed, it was largely based on the renewables obligation, which involved a fixed amount of payment from the Government to those receiving renewables obligation certificates, whereas the change to contracts for difference has resulted in varying sums coming forward. As energy prices go down, so the cost of the payments goes up, resulting in less and less money in the levy control framework. This is a fundamentally badly designed arrangement for dealing with future renewables deployment if we are serious about getting that deployment in line with our carbon budgets We need clarification on whether there will be a levy control framework from 2020 onwards. I was interested to discover this morning that a consultation about changes in the 2014 contracts for difference orders had turned into a consultation about whether there should be a levy control framework at all after 2020—not about what it should consist of, or how it should work. I believe the Secretary of State indicated in her "reset" speech that some offshore wind would be auctioned after 2020, in which case there must be a levy control framework, but that is all the information that we managed to obtain. The consultation consists of one question and nine pages, and it does not tell us a great deal about the framework itself.