I agree with the Labour shadow Minister that the regulations are relatively straightforward, so we will not oppose them either. There are, however, a number of questions that still need to be answered.
First, paragraph 14.3 of the explanatory memorandum slips in the fact that a review of the operation of the electricity market reform programme was supposed to have been undertaken by December 2018. It is completely unacceptable that that report is now effectively more than two years out of date, and blaming Brexit and covid does not really stack up. What is the timeframe for that report’s coming before Parliament? What is the mechanism for presenting the findings of the review, and what will the scrutiny arrangements be, so that the Opposition parties can challenge it?
Paragraph 7.7 of the explanatory memorandum states that the cost of new premises is outwith the control of the CfD counterparty. Why are those costs outwith its control? Why are new premises needed? Does the need for new premises take into account the fact that it looks like many companies will be doing much more homeworking and hybrid working?
Paragraph 10.8 of the explanatory notes explains that the CfD counterparty budget has been cut to reflect the Chancellor’s squeeze on public sector pay. The Minister touched on that, but the cuts are £111,000. How many employees had their pay frozen to generate a saving of £111,000?
On the capacity market, what steps have been taken to reduce the reliance on diesel generators? How much of the capacity market is based on fossil fuel generation? There is no point in continuing to move towards net zero when the capacity market relies on fossil fuel generation, so the Government need to address that.
Paragraph 7.7 of the explanatory notes also confirms the much-increased capacity in the auction. I certainly welcome the increased capacity in the forthcoming auction, but can the Minister advise us on whether the procurement process will be amended to incentivise the use of local content in the UK supply chain to ensure a proper green recovery? Does she understand that if procurement continues to be based on price only, then the likes of CS Wind in Cambeltown and BiFab yards across Scotland
will never win enough work to compete on price regularly? They can do the quality, but they need sustained work to get to a place where they can compete on price.
What steps will be taken in this auction to ensure that offshore wind projects in Scotland are not prejudiced due to the grid charges? It is outrageous that generators connecting in the north of Scotland still have to pay to connect to the grid, but generators connecting in the south of Great Britain are paid to connect to the grid. It is completely unfair and needs to be revised. I would like to know when the Government will do that, and what they will do to ensure that generators in Scotland are not prejudiced in the forthcoming auction.
Now that we have an increased target for offshore wind generation of 40 GW by 2030, what steps is the Minister taking to speed up the development of an offshore grid to help to facilitate this transformation? Will there be ring-fenced pots for wave and tidal in the forthcoming auction? What consideration has she given to power purchasing agreements to free up investment in the development of these emerging technologies? Also, what is she doing to ensure a route to market for pumped hydro? One of our colleagues has suggested a CfD for hydrogen. Would she agree to that? We also need a CfD mechanism for pumped hydro storage; that could double storage capacity. SSE is ready to go with a new pumped hydro scheme at Coire Glas, and Drax has developed proposals for an additional pumped hydro scheme at the Cruachan dam, but a route to market is critical to free up private investment.
Paragraph 12.4 of the explanatory notes states that these proposals will account for only 0.1% of a typical consumer’s bill, but as the hon. Member for Southampton, Test (Dr Whitehead) asked, what will be the cumulative effect of the CfD process on bills? If a user is struggling to pay for their electricity, they use less electricity, so the impact on their bills will be much higher, because they use less electricity than a typical consumer. We need to remember that the bills of the people who are really struggling—the fuel poor—will be more adversely affected in real terms. What will the Government do to take account of that, and what assessment has been made of the cumulative impact? As we move towards net zero and the ever-increasing CfD rounds, what measures will be put in place to protect the fuel poor? This will be particularly relevant when it comes to funding heat decarbonisation. The Committee on Climate Change has estimated that something like £250 billion-worth of expenditure will be needed to decarbonise our heating systems. It is impossible to imagine that that can just be put on users’ bills, so other mechanisms will be required.
While I am mentioning costs, I cannot help but mention the Government’s obsession with nuclear power. The £92.50 strike rate for Hinkley will look even more ridiculous once the next option round is completed. The fact is that both units at Hinkley will probably not be operational until 2028, while the existing nuclear power plants will go offline in 2022 and 2024. If the UK manages to keep the lights on for a few years without that nuclear power, that alone will put the baseload argument to bed. It is complete bunkum, and the Government need to move away from their obsession with nuclear and their determination to get Sizewell C signed. As the hon. Member for Southampton, Test, says, that would place an unacceptable burden on the bill payers of the UK, and it would be helpful if the Government woke up and realised that.
Will the Government finally update their estimate and appraisal system, which makes the bizarre assumption that nuclear costs will fall in the future? The Department for Business, Energy and Industrial Strategy’s system favours nuclear and is prejudiced against onshore wind, so it needs to update its processes.
I look forward to hearing from the Minister. As I say, I will not oppose the regulations, but there are a lot of questions still to be answered. The Government’s overall energy policy needs to be updated, and they need a clear near zero strategy. I am more than happy to meet the Minister to discuss this at any time.
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