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Energy Bill

moved Amendment No. 29A: 29A: After Clause 91, insert the following new Clause— ““Electricity and Gas Acts: interests of consumers (1) The Electricity Act 1989 is amended as follows. (2) In section 3A (principal objective and general duties of Secretary of State and Authority), after each occurrence of the words ““consumer”” or ““consumers”” insert ““, existing or future,””. (3) The Gas Act 1986 is amended as follows. (4) In section 4AA (principal objective and general duties of Secretary of State and Authority), after each occurrence of the words ““consumer”” or ““consumers”” insert ““, existing or future,””.”” The noble Lord said: My Lords, I declare an interest as a director of Falck Renewables. The purpose of this amendment is to achieve the same objectives as the amendment that I introduced in Committee, but to do so more elegantly. It is motivated by our national failure both to move early enough to replace existing infrastructure that is approaching the end of its useful life and to build in a timely way new infrastructure that is needed to meet the need of climate change. By giving prominence to the interests of future as well as existing consumers, the amendment raises to the level of a primary objective of Ofgem a duty to give high priority to sustainability and security of supply. Of particular concern today is the capacity and shape of our grid for the transmission of electricity. There is no point in building new power stations or wind farms if the electricity cannot be transmitted to where it is needed. The present grid was designed and built nearly half a century ago to distribute electricity radially, from a limited number of large power stations. Today not only is much of it due for replacement and upgrading but it also needs urgently to be reconfigured and extended to accommodate changing patterns of electricity generation that arise from the increased use of wind generation power to meet our 2020 target. Progress in exploiting all renewables has been painfully slow, for two reasons. The first is delay in obtaining planning decisions. In one case, an important overhead power line took 14 years to obtain consent. This problem is being addressed by the Planning Bill that is at present before this House. Today’s amendment relates to a second delay—namely, in connecting new generating capacity to the grid. The grid has to be reinforced and reconfigured because most of the remaining attractive sites for renewable generation are either in the far north of the UK, or offshore, or both, while the main demands for power are in the midlands and the south. At present, there is effectively no way of getting power from one to the other. This is leading to a chicken and egg situation. Generating companies are unwilling to commit to building new capacity—for example, off north-east Scotland—unless it is clear that what they build can be rapidly connected. The capital that they invest brings no return until the wind farm or wave machine can supply power to the grid. On the other hand, the regulator is seen as having been reluctant to allow a rate of return sufficiently attractive to encourage transmission companies to build new transmission capacity ahead of demonstrated need. Clearly, building either transmission or generating capacity ahead of need means that there is a risk of one or the other being stranded—that is, being inactive indefinitely or at least until the complementary facility is built. Risk has a price tag and in the present urgent situation the regulator must find means of de-risking this process to acceptable commercial levels. If this does not happen, it may be necessary for Ministers to intervene, simply because otherwise essential infrastructure will not be built in time. In all fairness it has to be said that Ofgem has finally begun to respond to these pressures and more than £4 billion of grid expenditure has been authorised up to 2012. The purpose of this amendment is to ensure that that progress is not just maintained but accelerated. If the Government accept this amendment, as I hope they will, the message will not be lost on either Ofgem or those whom it regulates. The infrastructure developments that I have been discussing will take years to implement. There are, however, measures that could be taken modestly to improve the situation in the short term. The transmission access review that was recently undertaken by the Department for Business, Enterprise and Regulatory Reform and Ofgem has shown that the existing transmission capacity is not always used to full capacity. This is because the present arrangements for sharing are on a voluntary commercial basis. In some cases, they are not fully effective and leave capacity unused that could be used by others. In our present situation, it would be worth while giving consideration to whether Ministers need powers to ensure that, when commercial processes fail, spare capacity is made available to those who could use it. The present arrangements for prioritising grid access for new generating plants have also been subject to criticism. Under the present first come, first served arrangements, an incomplete project may retain its precedence over others that are ready to go. It is widely believed that insufficient priority has been given to transmission needs of renewable energy sources. Although beyond 2020 other renewable technologies are likely to play an increased role, for the present our main source of renewable energy will be wind. It is an unfortunate fact that, even in the most attractive locations, wind turbines are unlikely to generate electricity for more than 30 per cent, or at best 40 per cent, of the time. The expectation is that at any one time, somewhere in the country, the wind will be blowing and intermittent generation will be staggered round the grid. Unfortunately, this cannot be guaranteed and the country may occasionally be affected by a nearly general calm—and so backup is needed. Countries that generate a high proportion of their electricity from wind, such as Denmark, at about 20 per cent, avoid short-term electricity shortages by having high-capacity connectors to neighbouring countries through which they import or export power in response to wind conditions. On present plans, the UK will approach the Danish proportion around 2020 and the case for reinforcing our interconnectors with the mainland European and/or Scandinavian grids should be considered. There is a financial and carbon balance to be struck between providing back-up from domestic fossil fuel plant and importing electricity from abroad. In the interests of energy security and energy costs, we probably need both. There is some question whether such international interconnectors are likely to be promoted by existing commercial interests. Energy security clearly has a value to the country as a whole, but it does not necessarily have a short-term value to the market, and Ministers might like to consider whether they need powers to ensure that appropriate interconnectors that may be needed can be built. Finally, I shall say a word on costs. Depending on the design details, the costs of refurbishing and extending the grid are likely to run between £10 billion and £20 billion between now and 2020. The good news is that, even if a major expansion and development of the grid were agreed today, we would be looking at a 10-year time span for its completion, with the heavier expenditure in the latter half of the period. This means that the present financial crisis should not be taken as a reason to procrastinate. For the immediate future, all that is needed is public commitment and careful planning and design work. I suspect that Ofgem might well argue that it is already moving in the direction that I suggest. That may be so—but it is not fast enough, and I believe that its corporate feet must be held to the fire. I am conscious that on three occasions today I have raised the question of ministerial intervention. I have done this with reluctance but, in our present situation, if the market does not respond rapidly enough, intervention is the only alternative. The message is urgency; to have any chance of building the infrastructure in place, in time, it is essential that preparations are made now and progress ought to be limited not by bureaucracy, by regulatory failure, or by market failure, but only by our physical ability to build fast enough. I beg to move.