Here are the climate-related sections of speeches by MPs during the Commons debate Electricity Network Grid Charges.
18:06 Alan Brown (Kilmarnock and Loudoun) (SNP)
This is a long overdue debate on the need to reform the grid charging regime. It is an issue that has been simmering for a long time, and it is now reaching a critical period where, if change does not happen, renewable energy investment and job creation in Scotland will be put at risk, needless sums will be added to consumers’ electricity bills, and the UK Government’s pathway to net zero will also be put at risk. I will go into further detail on that, but a key issue is that the UK Government do not seem to understand the problems or have the desire and willingness to change. As a result, the remit of the regulator Ofgem is not fit for purpose either. It is not just me saying that change is required; the wider industry is saying it too. Scottish Power, SSE, Vattenfall, RWE and Red Rock Power, among others, have all called for changes to the grid charging regime, so I hope the Minister will take these matters seriously and engage with the industry to find a solution.
It beggars belief that three decades on from when the system was devised based on the factors pertaining then, we are still having to highlight the absurdity of the system to the UK Government. What it means in reality is that instead of having a long-term plan for where the best locations are for the generation of renewable energy and the system required to facilitate that, we have one that does the polar opposite.
The reality is that Scottish offshore wind farms are now 20% more expensive than those in English waters. When lowest price is the winner takes all in the contracts for difference auctions, that is clearly a major issue. It means that investment in offshore renewable energy in Scotland is at risk, which means fewer direct jobs and less supply chain work in Scotland, but it also potentially hampers the just transition for the oil and gas industry.
The charging burden also means that the most appropriate efficient locations for renewable energy will not be utilised and maximised, which risks the net zero targets for the entire UK. Achieving net zero is now legally binding, and it is accepted that net zero is required by 2050—or 2045 in Scotland—to mitigate the effects of climate change and abide by the Paris agreement, yet there is no net zero plan in place, and we have a regulatory regime that is not fit for purpose. It makes no sense that the Government have set a legally binding net zero target, but as yet have not made net zero a statutory consideration for the regulator, and that clearly affects long-term planning for the grid transmission network. It could lead to short-term investment that needs further future upgrades, costing bill payers even more money. Both the National Infrastructure Commission and the Business, Energy and Industrial Strategy Committee recommend that Ofgem is mandated for net zero, so could the Minister advise when she thinks Ofgem will be legally bound to consider net zero?
I appreciate the advantages of a wider interconnected grid and, given that Scotland is a net exporter of electricity, Scotland might benefit, but it still does not seem right to have an uneven playing field that could impact on projects here. What is worse, for me, is that there is no control over the source of any imported energy from interconnectors. The Minister knows that. It means that, while the UK is supposed to be going green, we might end up having imported electricity generated from gas on the continent undermining the cost of renewable energy here. That is another paradox that the Minister needs to consider.
The Government cannot stick to the baseload argument, given that 75% of the existing nuclear fleet will be offline before Hinkley even starts generating. To me, that proves beyond doubt that large-scale nuclear is not required. A report recently published by Good Energy in conjunction with Energy Systems Catapult demonstrates that the UK could be operating a net zero electricity network in 2050, based on 98% renewables, with the other 2% being provided by Hinkley, not because it is required but because it is assumed it will be there.
Returning to renewable energy, Scotland leads the world in the development of wave and tidal energy generation, but the UK Government have refused to consider a proper route to market, meaning that the technology development and investment could be lost to countries such as Canada. Will the Minister therefore confirm tonight that the Government will ring-fence a proportion of capacity—the request is 100 MW—in round 4 of the auction process? Will she properly discuss with the Treasury the development of an innovation power purchase agreement to allow companies to enter into agreements to purchase electricity from emerging wave and tidal companies? Does she understand that, if this technology does scale up in the way we want and its generation costs come down, those companies will also be at the mercy of the grid-charging system, unless changes are made? Will she please open discussions with the European Marine Energy Centre on the funding needed to replace EU funding streams?
One small positive in the mix is that Ofgem has now recognised that there is an issue and proposed changes with the targeted charging review and the ongoing access and forward-looking charging review consultation. The downside is that the changes Ofgem currently proposes do not resolve the problem. Indeed, Ofgem’s new proposals could prejudice existing embedded renewable energy sites in Scotland. What assessment have the Government made of Ofgem’s “minded to implement” proposals? Will the Minister finally admit that it is for the UK Government to take charge of the process and make the necessary changes for Ofgem to follow, rather than continuing to say that it is “for the regulator”, which is actually just passing the buck?
The Minister must realise that it is for the Government to set the policy and regime for Ofgem to implement and that a new policy statement is long overdue. I really hope that she can address those points, and that she will work with the industry and the regulator to shape an electricity system that is designed for the 21st century—one that will lead us on the pathway to net zero.
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00:03 The Minister for Business, Energy and Clean Growth (Anne-Marie Trevelyan)
Network charging arrangements are central to the delivery of a secure and affordable net zero energy system, and the Government absolutely understand that. By law, network charging is a matter for Ofgem, as the independent regulator. Network charges are governed by the principle that the user pays. For the transmission network, that means higher charges for generators in Scotland, as much electricity is sent over long distances to centres of demand in the rest of Great Britain. By contrast, homes and businesses in Scotland pay lower transmission charges than consumers elsewhere in Great Britain. This cost-reflective approach ensures the efficient use of the network and keeps costs down for all bill payers.
Ofgem recognises the critical importance of charging arrangements in progressing to net zero. Last week, it published its consultation on a number of reform proposals as part of its access and forward-looking charges review, including a proposed reduction in the up-front charge paid by generators and demand users connecting to the distribution network. Ofgem’s consultation also noted potential issues with transmission charging arrangements and signalled that it is considering a wider and more holistic review of them.
As the pace of the energy transformation accelerates, it will be important for Ofgem to have clear sight of the Government’s policy priorities for energy decarbonisation. We have therefore committed in our energy White Paper to consulting on Ofgem’s strategy and policy statement in 2021. It will set out the strategic priorities of the Government’s energy policy, the policy outcomes sought and the role of the Government, Ofgem and other parties collectively responsible for delivering these goals.
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18:20 James Cartlidge (Conservative)
The offshore transmission review, as the Minister knows, means a lot to my constituents because they strongly support net zero. Offshore wind has been an amazing achievement in East Anglia, but it is bringing new infrastructure and we have the threat of new pylons across open countryside. On pricing, is it not true that one should look not only at the charging, but at expenditure on capital items that are relieving infrastructure pressure? For example, the eastern link, a huge undersea cable off the coast of Scotland that will relieve pressure on the countryside, will be more than £3 billion. People in East Anglia will hope to see similar expenditure so that they have a defrayment of the infrastructure that would otherwise be going over the countryside.
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18:21 Anne-Marie Trevelyan
If I may, I will reply in detail in writing to the very long series of questions asked by the hon. Member for Kilmarnock and Loudoun, to ensure that he gets as full an answer as possible. In closing, I emphasise the importance of the network charging arrangements, which support the delivery of net zero in a fair and efficient way. The reforms that Ofgem is progressing will help us to achieve that.
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