HL Deb 15 July 2004 vol 663 cc1392-8 19 Clause 120, Leave out Clause 120
Lord Whitty

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 19.

This debate has engendered much interest. The amendment tabled in the Commons removed CHP. The amendment made here would remove CHP from the renewables obligation base. In the Government's judgment, the effect of that would be a small benefit to CHP but would affect the renewables target, just when we are seeing some progress on that. It does not seem to the Government to be the best way of supporting CHP.

However, throughout the debate on this matter there has been support on all sides for recognising that CHP needs further measures to support it. While the focus of the debate has been on whether we should remove them from the renewables base, it does not alter the argument that at present the CHP target of 10 gigawatts is unlikely to be achieved on existing measures. Therefore, we recognise the need to do something about CHP, but we do not want a measure that would introduce a range of uncertainties and which would not be helpful in achieving other targets.

As I have said during the course of the Bill in this House, the Government will certainly look at CHP in the review of the renewables obligation to see whether there are other ways in which the obligation could help CHP without damaging the renewables sector. The discussions in this House and elsewhere have been very helpful in that regard.

In the latest stage of the Commons' consideration of the Bill, an alternative proposition for CHP support was proposed, which was described as similar to a fixed-rate mortgage. The Government would guarantee a certain level of spark spread from CHP; that is, the difference between the price paid for gas and the price paid for electricity generated. In times when the spark spread was below a certain threshold, it would be topped up by the equivalent of a mortgage fund and on other occasions when the spark spread was above the threshold, it would be capped and the mortgage fund would receive an income.

That seems to be an interesting new suggestion, but my colleague, Alan Whitehead, MP, with support from the industry, and my colleague Stephen Timms and I met with them a few days ago to discuss the practicability of such a measure. We are certainly willing to support further consideration of it and to look at the cost benefits and mechanisms. That applies to my department and to the DTI working with the Combined Heat and Power Association; they will look at the matter in more detail. That would not require a legislative change in the way in which this Bill is constructed, but we would have to consider what would be needed to make such a mechanism work. We would also need to avoid the downside risk associated with the price of CHP generated electricity, so that the cost to consumers remained acceptable.

I recognise that there is a need for further help for CHP and that CHP at the moment is undershooting the target for 2010. We believe that a number of measures that we have introduced will help to improve that performance, but something else is probably needed. Therefore, we are not in favour of keeping the change in the renewables obligation which was introduced in this House, but we are in favour of considering other ways of helping the CHP industry that will work in the interests of CHP and the renewables sector. Therefore I hope that the House will accept Commons Amendment No. 19.

Moved, That the House do agree with the Commons in their Amendment No. 19.—(Lord Whitty.)

Lord Ezra

rose to move, as an amendment to the Motion that the House do agree with the Commons in their Amendment No. 19, at end insert "but do propose the following Amendment in lieu of the words so left out of the Bill—

19A* After Clause 119, Insert the following new Clause— "Annual assessment on Combined Heat and Power In section 47 (general functions) of the 1989 Act, after subsection (1)(b), insert— (c) to publish an annual assessment which shall outline what has been the particular impact of the Authority's activities in relation to Combined Heat and Power.""
The noble Lord

said: My Lords, I listened with great care to what the noble Lord, Lord Whitty, has told us about CHP. I was particularly pleased that the Government are now seriously considering additional measures. It is becoming obvious that the target of 10 megawatts by 2010 cannot be achieved. The latest figure given is 8,500. We know that there are 2,000 megawatts of potential CHP on hold at the moment and further doubt has spread throughout the sector.

It is satisfactory that talks are taking place in an active way to find out other measures that may not require legislative backing, which would, of course, impose further delay. I was particularly interested in what is suggested in relation to what is known as the spark spread. That is the difference in the price paid for the gas and the price obtained for the electricity. I wish those discussions well.

However, I believe that it would be a great pity if the Bill were to go forward without any reference whatever to CHP. Therefore, I have proposed a very simple, unobtrusive amendment that at least mentions CHP and mentions it in relation to Ofgem. The fear has been that as a result of the way in which Ofgem has operated, particularly in the new electricity trading arrangements, CHP has come out of it badly. It may well be that Ofgem is really taking CHP very seriously these days, in which case, it would be helped by the amendment that I have proposed; which is that, under the Electricity Act 1989, it should publish an annual assessment which will outline what has been the particular impact of the authority's activities in relation to combined heat and power. That will bring home the importance of CHP to the authority and will bring CHP into the Bill. I beg to move.

Moved, as an amendment to the Motion that the House do agree with the Commons in their Amendment No. 19, at end insert "but do propose Amendment No. 19A in lieu of the words so left out of the Bill".—(Lord Ezra.)

1 p.m.

Lord Jenkin of Roding

My Lords, what a deal of kicking, pushing and shoving is necessary to persuade Ministers to move in the direction that the noble Lord, Lord Whitty, indicated a few moments ago. Again and again, this matter has been raised. The association that represents the industry has been assiduous in promoting its cause to both officials and Ministers. I share the pleasure of the noble Lord, Lord Ezra, that something may at last come of it.

I have two points. The first relates to the speech—I heard most of it—that the noble Lord, Lord Whitty, addressed to the CHP Association at its lunch in the Cholmondeley Room on 10 June. It sounded extremely friendly to the industry. However, it came at a time when the Government had moved to leave out Clause 120, which this House had put in. I am told that David Green has asked the Minister's private office if he might have a copy of the remarks of the noble Lord, Lord Whitty, on that occasion, but he has so far been refused. That was, in a sense, a public occasion. There must have been more than 100 people present, most of them from the industry, but with a number of Members of this House and the other place who support the Combined Heat and Power Association. I find it astonishing that a Minister's office should decline to provide the association with a copy of what the Minister said. I hope that the Minister can now give us an undertaking that it will indeed be forthcoming. The incident suggests that Ministers, when appearing in front of a particular audience, were very happy to say how much they applauded and approved of everything that it did, while actually taking legislation through the House which was denying it any further help.

My second point reinforces what was said by the noble Lord, Lord Ezra: the amendment is proposing yet another aspect of power generation on which Ofgem will be obliged to report. It is not asking for any specific relief. I understand the arguments that were made in relation to the amendment about the ROCs. We received a good deal of representation from the rest of the industry about that. However, I hope very much that the Government really can now accept that Ofgem should report in line with what the Minister said about the consideration that the Government are giving to the scheme that was put forward by his honourable friend Alan Whitehead in another place. That would be a useful step forward, but Parliament needs to be told what is taking place on that front. Many of us have received representations from what is an extremely active trade association that represents an important part of the energy industry. We really are owed a regular update of what is happening in this field. I hope that the amendment of the noble Lord, Lord Ezra, can be accepted.

Baroness Miller of Hendon

My Lords, the Minister will obviously appreciate that we have all been very disappointed that Amendment No. 19 would leave out Clause 120, because we thought that we had had such a great success in introducing CHP to the Bill in one way or another. We are very disappointed to see the removal of the clause.

However, like the noble Lord, Lord Ezra, I welcome the comments made by the Minister in responding to the amendment. Indeed, I am intrigued by what my noble friend Lord Jenkin said about what the Minister was able to say at that CHP reception. Regrettably, I met the Minister coming out as I was going in because I had been delayed elsewhere. There was not a written report of the meeting so I did not know what the Minister had said.

If the Minister really means what my noble friend Lord Jenkin reported that he had said, and, indeed, what the noble Lord, Lord Ezra believed to be the case after listening to the presentation of this amendment today, he should welcome and support it. That would at least give us a way of coming to the issue. Since it is not only noble Lords but also the CHP that is requesting something, perhaps I may read a brief note that David Green sent to me. Before I came into the Chamber, I looked at the amendments that we had moved on Report on this matter and I was quite certain that the Minister would not be able to bear it if we repeated them. They went on from page to page and column to column. I did not know that I knew quite so much about the subject until I read Hansard again this morning. David Green's note states: The delivery of the Government's CHP target has been sadly lacking. I think everybody would agree with that. It continues: It has contributed to the sorry story of inaction on CHP that is the Government's approach to CHP. Indeed I very much regret that the Government saw fit to remove this Place's changes to the Energy Bill in relation to CHP. David Green points out that the Government have not managed to come forward with any genuine proposals, other than those few which relate to micro-CHP. They have come forward with nothing more substantial than that.

I urge the Minister to accept the amendment of the noble Lord, Lord Ezra. If he is unable to do that, will he tell the House what the Government plan to do to get the CHP policy back on track? It would remedy the serious problem if he were simply to say that it is an easy amendment for him to accept, which we believe that it is.

Lord Whitty

My Lords, I do not want entirely to destroy the consensual atmosphere, although I suspect that by the time we have finished on this amendment, I will have. Before I address the amendment, I must respond to the noble Lord, Lord Jenkin. Without beating about the bush, he effectively accused me of saying one thing in one place and another thing in another. He also accused my private office of being unco-operative. I refute both of those charges.

On the speech that I made at the CHP reception, I am informed that my private office never received a request for a copy of it, but it may be that David Green has mentioned it to me personally and that I have said to him, as I say to noble Lords now, that I do not always stick very closely to any prepared speech. I do not stick to them even in this House, as noble Lords will have noticed from time to time, and in the case of receptions, I very often speak off the cuff. There is therefore no text of my speech. What that speech covered was what I said in Committee in relation to the renewables obligation; namely, that we would give the matter serious consideration, but that the time to do so was not in this legislation, but in the review of the renewables obligation next year and that, as I said a few minutes ago, we need to do more to enable the CHP industry to reach its target of 10 gigawatts. That is a very serious problem which is facing government as a whole and my department as the prime department with responsibility for CHP in particular. I agree that more needs to be done in that respect.

Lord Jenkin of Roding

My Lords, on the question of the Minister's speech on 10 June, I entirely accept his description of what subsequently happened. If I mentioned his private office, that was per incuriam. David Green asked the question and he received the same answer as that we have heard today. That speech was not scripted by the department; it was something else of which no record has been kept. One has to recognise that Ministers do that—I have done it myself—but that is the explanation.

Lord Whitty

My Lords, I suspect that the noble Lord did that rather more frequently when he held a more elevated position than mine. Nevertheless, the speech revealed that there is consistently strong support for the Combined Heat and Power Association and the CHP industry and a recognition of the difficulties that current measures and current economics have meeting that target; I repeated that in Committee and in our debate today. There is not much inconsistency there. I recognise that the Government have a serious problem meeting that target, which is in the Energy White Paper but which also pre-dated it.

The amendment was moved very reasonably by the noble Lord, Lord Ezra, and spoken to very gently by the noble Baroness, Lady Miller. I oppose it not for reasons of principle but because it is not necessary and in an effort to avoid duplication. Ofgem/GEMA already has a statutory duty to make an annual report to the Secretary of State and to Parliament. That includes details of progress on all projects identified in the work programme and the environmental action plan and duties relating to small generators and CHP. There is already an obligation on Ofgem/GEMA to report. As we indicated in the government strategy on CHP, we will continue to monitor and report annually on progress towards the CHP target. We do that through the annual report on the implementation of the Energy White Paper, which will be available to Parliament, and in the Digest of United Kingdom Energy Statistics, the latest of which is due for publication at the end of this month. Formal reports are already required of Ofgem and the Government that cover the CHP point, among others.

To pick out CHP and place another reporting mechanism in the Bill appears unnecessary. It might be seen by some in the CHP industry as a gesture, but it is not a necessary gesture and it would not change the existing requirement to report, and to report fully, on what has been achieved—or not achieved—in terms of the CHP target. I therefore ask the House not to agree to the noble Lord's amendment.

Baroness Byford

My Lords, the Minister said that there was a duty already to report to Parliament. Is that duty laid down in an Act or does it simply happen?

Lord Whitty

My Lords, the duty on the authority is in the legislation. I refer to the duty on the authority to report to the Secretary of State and the Secretary of State's duty to report to Parliament. That involves the legislation that set up GEMA—I will not give chapter and verse—and is reflected in this Bill.

Perhaps I should correct myself. The Sustainable Energy Act contains the explicit requirement. That is the legislative requirement.

Lord Ezra

My Lords, I have listened carefully to the Minister's response to the amendment. I am still rather puzzled about why he rejected including it in the authority's obligations under the Electricity Act. Under that Act, the authority already has to make a report covering various related issues and it appears logical and appropriate that CHP should be included in it. Perhaps it has to be dealt with in other ways under other legislation but that appeared to be the most appropriate place and a convenient way in which CHP could he mentioned in the Bill. I am very sorry indeed that the Minister was not prepared to accept that. It would not apparently have placed any additional burden on the authority if it already had to do so under other legislation. It might have involved some repetition but it would have given a signal in this important piece of legislation, which we are now seeing through its final stages, that the Government attach importance to CHP. However, as I said when I withdrew an earlier amendment, I certainly do not wish us to divide on this issue. I regretfully beg leave to withdraw the amendment.

Amendment No. 19A, as an amendment to Amendment No. 19, by leave, withdrawn.

On Question, Motion agreed to.

1.15 p.m.