To ask His Majesty's Government what steps they are taking to increase energy security and lower energy costs; and what assessment they have made as to the potential impact of the conflict in the Middle East on domestic energy bills.

To ask His Majesty's Government what steps they are taking to increase energy security and lower energy costs; and what assessment they have made as to the potential impact of the conflict in the Middle East on domestic energy bills.

To ask His Majesty's Government what strategies are in place to address the impacts of escalating energy prices on the cost of living.

To ask His Majesty's Government what strategies are in place to address the impacts of escalating energy prices on the cost of living.

To ask His Majesty's Government when they expect to break the link between electricity bills and volatile international gas prices.

To ask His Majesty's Government when they expect to break the link between electricity bills and volatile international gas prices.

Lords question for short debate on what assessment they have made of why UK electricity prices are among the highest in the Organisation for Economic Co-operation and Development.

Lords question for short debate on what assessment they have made of why UK electricity prices are among the highest in the Organisation for Economic Co-operation and Development.

To ask His Majesty's Government whether the decoupling of the wholesale price of gas and the price of electricity applies to the Northern Ireland electricity market as well as the market in Great Britain.

To ask His Majesty's Government whether the decoupling of the wholesale price of gas and the price of electricity applies to the Northern Ireland electricity market as well as the market in Great Britain.

To ask His Majesty's Government what is the average price per kilowatt-hour of retail electricity generated by (1) wind power and (2) gas.

To ask His Majesty's Government what is the average price per kilowatt-hour of retail electricity generated by (1) wind power and (2) gas.

Lords question for short debate on what assessment they have made of the impact of the Clean Power 2030 Action Plan upon rural communities.

Lords question for short debate on what assessment they have made of the impact of the Clean Power 2030 Action Plan upon rural communities.

Delivering lower bills and a secure energy supply for working families and businesses is at the heart of the Government’s sprint toward homegrown clean energy. Marginal cost pricing has historically incentivised the cheapest forms of energy to provide as much power as possible. That worked well when the competition was between fossil fuel producers, but less well when there are many cheaper bids from renewable sources for power supply but still the price can be set by more expensive and volatile gas. Accelerating the development of renewable generation, as we are now through clean power 2030, will progressively reduce to a residuum the amount of time that gas sets the price.

Delivering lower bills and a secure energy supply for working families and businesses is at the heart of the Government’s sprint toward homegrown clean energy. Marginal cost pricing has historically incentivised the cheapest forms of energy to provide as much power as possible. That worked well when the competition was between fossil fuel producers, but less well when there are many cheaper bids from renewable sources for power supply but still the price can be set by more expensive and volatile gas. Accelerating the development of renewable generation, as we are now through clean power 2030, will progressively reduce to a residuum the amount of time that gas sets the price.

My noble friend is absolutely right. Although gas accounts for only 30% or so of the market, at the moment it sets the price over 60% of the time with marginal cost pricing arrangements. It is right that we need to go faster and further. Indeed, today the Government have announced plans, among many other things, to ensure that the element of the renewable input into the system—on renewables obligations rather than fixed-price contracts for difference—can be moved over to that latter category as soon as possible, thereby bearing down on the amount of time that gas sets the price in the market.

My noble friend is absolutely right. Although gas accounts for only 30% or so of the market, at the moment it sets the price over 60% of the time with marginal cost pricing arrangements. It is right that we need to go faster and further. Indeed, today the Government have announced plans, among many other things, to ensure that the element of the renewable input into the system—on renewables obligations rather than fixed-price contracts for difference—can be moved over to that latter category as soon as possible, thereby bearing down on the amount of time that gas sets the price in the market.

The Government are looking actively at many different ways of going further and faster as far as the green energy revolution is concerned. Indeed, they are actively looking at the Greenpeace and Stonehaven report on not only delinking but strategic reserves for gas in future. My personal view is that what they are proposing is a little early in the cycle but, nevertheless, could be an important element later on, in how the system stabilises itself once it is mainly renewables and low carbon.

The Government are looking actively at many different ways of going further and faster as far as the green energy revolution is concerned. Indeed, they are actively looking at the Greenpeace and Stonehaven report on not only delinking but strategic reserves for gas in future. My personal view is that what they are proposing is a little early in the cycle but, nevertheless, could be an important element later on, in how the system stabilises itself once it is mainly renewables and low carbon.

Imposing an extra windfall tax, on those elements of the system that are within the renewables orbit but outside the CfD arrangements, takes away the excess profits that those elements make as a result of being aligned with gas in charging those volatile prices. So it is a very sensible thing to do, to make sure that excess profits are not taken from consumers but instead reside with them as lower prices.

Imposing an extra windfall tax, on those elements of the system that are within the renewables orbit but outside the CfD arrangements, takes away the excess profits that those elements make as a result of being aligned with gas in charging those volatile prices. So it is a very sensible thing to do, to make sure that excess profits are not taken from consumers but instead reside with them as lower prices.

The effect of the windfall tax is, essentially, to start returning some of those excessive bill contributions back to bill payers so that their overall bills are less than they otherwise would be.

The effect of the windfall tax is, essentially, to start returning some of those excessive bill contributions back to bill payers so that their overall bills are less than they otherwise would be.

The reference that the noble Baroness makes to Denmark is an interesting one, inasmuch as the Danish system is wholly integrated between renewables, heat and power of different kinds—particularly district heating and various such things, which can be used in conjunction with other forms of energy to provide a balanced overall system. It is true that Denmark continues to produce oil and gas but also that Denmark is, along with the UK, looking at methods of making sure that relates to production for the future rather than exploration.

The reference that the noble Baroness makes to Denmark is an interesting one, inasmuch as the Danish system is wholly integrated between renewables, heat and power of different kinds—particularly district heating and various such things, which can be used in conjunction with other forms of energy to provide a balanced overall system. It is true that Denmark continues to produce oil and gas but also that Denmark is, along with the UK, looking at methods of making sure that relates to production for the future rather than exploration.

I thank my noble friend for that question, because he has, remarkably, just anticipated the development of the strategic spatial energy plan and a reformed national pricing delivery plan, both of which came out this morning. Both plans address exactly the longer-term balance arrangements as far as electricity is concerned, particularly how prices can be the lowest possible for the deployment of electricity and gas resources across the country.

I thank my noble friend for that question, because he has, remarkably, just anticipated the development of the strategic spatial energy plan and a reformed national pricing delivery plan, both of which came out this morning. Both plans address exactly the longer-term balance arrangements as far as electricity is concerned, particularly how prices can be the lowest possible for the deployment of electricity and gas resources across the country.

I thank the noble Lord for that question. I cannot stand here and guarantee that that move will be brought forward by one year, as he suggests. It is a very sound idea. The future homes standard, which is now in place, is instead of the net-zero low-carbon standards that should have been implemented about 15 years ago, if the previous Government had not thrown them out. We are catching back up, as far as possible, and making sure we can get that done in good order.

I thank the noble Lord for that question. I cannot stand here and guarantee that that move will be brought forward by one year, as he suggests. It is a very sound idea. The future homes standard, which is now in place, is instead of the net-zero low-carbon standards that should have been implemented about 15 years ago, if the previous Government had not thrown them out. We are catching back up, as far as possible, and making sure we can get that done in good order.

Of course, the Government have addressed those costs, particularly in the recent move to take elements of the levies away from levy arrangements and into the general Exchequer. That is part of the £150 off energy bills that the Government have recently reported. The noble Lord is absolutely right about the effect of levies on prices, but I hope he will also accept that that is exactly what the Government are doing at the moment: bringing prices down for the consumer by transferring how those levies work for the future.

Of course, the Government have addressed those costs, particularly in the recent move to take elements of the levies away from levy arrangements and into the general Exchequer. That is part of the £150 off energy bills that the Government have recently reported. The noble Lord is absolutely right about the effect of levies on prices, but I hope he will also accept that that is exactly what the Government are doing at the moment: bringing prices down for the consumer by transferring how those levies work for the future.

The noble Earl treads a fine distinction between the possible daylight robbery of standing charges and the fact that some charges need to be levied collectively because of the various fixed

costs that the system has, which have to be contributed to in order to deliver the service to individual consumers. How you charge those standing charges is a matter of considerable debate and something that the Government are looking at. Whether, for example, you charge them as an overall fixed sum or as a sum per household, depending on its energy bills, is a matter of considerable debate at the moment. The idea that standing charges should relate more exactly to what standing charges should be for in the first place is a point well made.

The noble Earl treads a fine distinction between the possible daylight robbery of standing charges and the fact that some charges need to be levied collectively because of the various fixed

costs that the system has, which have to be contributed to in order to deliver the service to individual consumers. How you charge those standing charges is a matter of considerable debate and something that the Government are looking at. Whether, for example, you charge them as an overall fixed sum or as a sum per household, depending on its energy bills, is a matter of considerable debate at the moment. The idea that standing charges should relate more exactly to what standing charges should be for in the first place is a point well made.

To ask His Majesty’s Government what plans they have to review the effect of the marginal pricing structure on the cost of electricity for domestic consumers.

To ask His Majesty’s Government what plans they have to review the effect of the marginal pricing structure on the cost of electricity for domestic consumers.

To ask His Majesty's Government whether they are having discussions with Ofgem about (1) shifting its regulatory focus from gas to heat, and (2) considering cost recovery for heat networks through its upcoming price control framework.

To ask His Majesty's Government whether they are having discussions with Ofgem about (1) shifting its regulatory focus from gas to heat, and (2) considering cost recovery for heat networks through its upcoming price control framework.

To ask His Majesty's Government what steps they are taking to decouple the price of wholesale electricity from the cost of gas beyond moving more renewables into Contracts for Difference.

To ask His Majesty's Government what steps they are taking to decouple the price of wholesale electricity from the cost of gas beyond moving more renewables into Contracts for Difference.