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Energy Bill

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, is 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 Government persist in the cap system, how do they intend to ensure that a vigorous and rigorous eye is kept on the competitive nature of the market in this form of co-fired generation? 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?