This amendment would also amend the EPS regulations. The consultation document issued on the EPS back in December 2010 started out with an important premise that we could all support, which was:
“The objective of the EPS is to ensure that while coal continues to make an important contribution to security of supply, it does so in a manner consistent with the UK’s decarbonisation objectives”.
It is important to remind ourselves of that because it was a very good starting point for this process. I note that it mentions decarbonisation “objectives”, and the plural there is very important. We are not faced with a legal requirement to decarbonise in a rush by 2050. A series of legally binding carbon budgets is set for us 15 years in advance. We know that that is the primary framework by which the Government are bound to deliver a decarbonised energy system.
When the July 2011 White Paper, Planning Our Electric Future, came out, the issue of grandfathering the EPS—meaning that the limits created in law should be allowed to be unchanged for plants below those limits—was discussed. It was proposed that the grandfathering should last for 20 years. I am grateful for a briefing from the think tank E3G, which pointed out that at that time the regulators said that 20 years of payback for a gas-fired power station was actually quite a long time and that 10 years was usual for payback on investment. They therefore suggested that a 15-year window for grandfathering would be more appropriate.
Fast-forward to Saturday 17 March 2012 and the surprise joint Statement by Secretary of State Ed Davey and the Chancellor, where it was announced that the EPS limit would remain unchanged at 450 grams per kilowatt hour, all the way until 2025—a considerable increase on that level of grandfathering, against what the regulator proposed and what was initially proposed in the White Paper. Why was this? What had happened in the intervening months? Quite clearly a grand bargain had been struck between the department and the Treasury, and that grand bargain has been the cause of a great deal of uncertainty. Essentially, it has allowed for two competing philosophies and energy strategies to emerge. One strategy is a dash for gas—unabated gas—which is obviously the Chancellor’s preferred option, and the other is much more sensible: the department’s policy of a mix of low-carbon generation. Somewhere along the line, though, the department clearly lost out in the arguments, and now we have an EPS that allows for unabated gas all the way to 2045.
The amendment seeks to change that by reducing the excessively long grandfathering period to the year 2029. We believe that this is consistent with the decarbonisation trajectory that we need to be on, and indeed with the Bill, which, we are told, is supposed to be setting a decarbonisation objective—it is not clear that that will be done, but we anticipate that it will—
in 2016. How that can be set with gas being allowed to operate unabated all the way until 2045 is quite unclear to me.
The length of the grandfathering period seems to go against the existing requirement that all new thermal plants over 300 megawatts should be carbon capture and storage-ready. That provision was put in there for a reason: we anticipate meeting our targets through the application of CCS on thermal plants. If a completely unabated dash for gas is allowed to operate unimpeded until 2045, why should plants be made CCS-ready? It seems illogical to have that requirement but then not to use it.
I am sure that the Minister will come back with lots of arguments about this being a backstop measure and other policies being in place essentially to prevent us from exceeding our budgets, but I will speak to those when we come to the final amendment in this group. Those arguments, which I am sure will be around security of supply, costs and the like, do not stack up. As I said before, the amendments that we are proposing to the EPS clauses act as a package. We have been very encouraged by the warm words and the acceptance of the logic behind the CCS amendment that we have just discussed, and this is a part of that process. It is not just about allowing CCS to have a grace period and a proving period; CCS needs to have a market, and the market drivers are going to be these regulations.
Left to their own devices, generators will continue to build unabated plants. That is the cheapest thing that they can do. They will fit abatement equipment only when they are required to do so. The quickest, cheapest, most efficient way of doing that is through these regulations. These are an essential component in the Government’s armoury to ensure that we meet our carbon budgets and our legally binding carbon targets. I hope that the Minister will see that this is part of a package, and might be similarly receptive to this amendment and the thinking behind it. I beg to move.
6 pm