I think the hon. Member for Monmouth (David T. C. Davies) will be going home tonight and throwing all the contents of his fridge out, because he knows that he can go down to the shop to buy some more food tomorrow. Perhaps he might think about the wider externalities of saving energy and saving demand, because, among other things, having a good demand-side reduction policy means that we do not have to produce the new capacity that otherwise we might have in stream to meet our energy demand, as we would be using energy across the board much more efficiently. Whether or not one believes—he plainly does not—that anthropogenic climate change is a real and pressing issue, using our energy far more efficiently and making sure that those possibly unfundable, difficult-to-organise increases in capacity can be averted by doing so is a prize in its own right. That is the case whether or not one thinks this is intimately bound up with climate change, and I wish to dwell briefly on that precise point.
The Minister showered me with kind words, so he would not expect me to say anything unkind in return. It would be churlish of me, and I was not intending to do so. [Interruption.] There is no “but”. Instead of advocating, at great length, the amendment that I was pursuing on demand-side reduction, I wish to see whether we can unpack a little of some of the consequences of the Government proposals that have now been introduced. I warmly welcome those, and I know that the Minister had quite a hard time in getting them to the table in their current form. Therefore, I very much welcome both the effort that has gone into introducing these provisions and their content. Essentially, the amendments would produce, through the right mechanism of capacity payments rather than contracts for difference, a serious method of addressing the question of demand-side reduction over a long period, but I would place a little question mark against that demand-side reduction capacity or anti-capacity being auctioned through the general capacity auction system. As my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger) has mentioned, we know from experience elsewhere in the world that demand-side auction participants tend to be squeezed out of wider auctions on capacity when they participate.
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If we are left with a mechanism that merely introduces the ring, as it were, to would-be boxers in the demand-side reduction auction world but does not go further than
that to ensure that they can compete in the ring properly, the outcome might look good on paper but will not produce much change over the next period. I am, however, encouraged by the idea that there will be pilot auctions for demand-side reduction measures. I do not know whether the word “pilot” is meant to propose alternative routes to auctioning, which could considerably advantage demand-side reduction measures if they stand outside the overall capacity auction market as far as is possible, or whether they will just be pilots that set out the parameters for arrangements and are therefore limited in their ambition.
I freely accept that among the reasons for tabling my amendments was a wish to ask the Government to table some amendments and to suggest some that might do the job if they did not do so. However, the amendments also try to work out how such a de-capacity market might work. They would draw forward not just the auction but payments taken from the general capacity payments at an early date, in advance of a capacity auction, to ensure that the demand-side payments were auctioned or allocated at an early stage and before such an auction. Although a capacity auction is pretty certain to take place, under the legislation as it stands there is no guarantee that the Government will hold such an auction. The Government must look forward to see what the capacity constraints are likely to be over the next period and declare an auction on that basis and if it happens that the capacity constraints are not what was thought, the Government might decide to have a capacity auction later or not to have one at all.
I would be concerned if the question of demand-side reduction measures was lost because a capacity auction for demand was delayed or removed entirely as a result of those exigencies. The idea of separating out as far as possible the idea of either auctioning or allocating demand-side reduction measures within the overall capacity measures seems to me to have quite a strong measure of sense about it. As for the future, I would like the pilots mentioned by the Minister to fledge into a longer running version of a parallel market for demand-side reduction measures rather than simply leading to the opportunity to take part in the wider auction market, which, for the reasons I have outlined, might not lead to the sort of success that we all want for those measures once they have been put into place.
I hope that when the Minister brings forward more details of the pilots, he will give us a better understanding of what they might look like and whether they might work in the way that I described. If that is the line of thinking, I would be happy not to press my amendment to a Division.