My Lords, first, I should like to thank the Minister for her very timely and quick turn-around of the letter that we have just received. It was incredibly helpful and I hope we can carry on in that spirit; it was very much appreciated.
Amendment 27 creates an additional duty in respect of the statement on the carbon intensity of electricity generation that is required under Clause 3(3). Currently, the Bill requires that an annual statement must be made once an order has been made and that that should include a summary of the means by which the carbon intensity was calculated for that year and a declaration of whether the carbon intensity has decreased or increased since the previous statement. Amendment 27 adds an additional requirement to the statement, requiring that it contains details of the actions the Secretary of State will take if intensity has increased since the previous statement.
As I have previously mentioned, carbon intensity of electricity fell dramatically in the 1990s but has since levelled off and in 2012 sharply increased. This was due to a change in the merit order thanks to high gas prices and low coal prices. On Tuesday in Committee, I stated that coal was a common enemy. What I meant to say was that inefficient, unabated coal stations are the common enemy. I apologise for not being clearer about that. Of course, coal can play a significant role in a low-carbon electricity system if it is coupled with carbon capture and storage, which is a very important technology. However, the longer these old unabated stations stay on the system, the longer we will have to wait for investment in low-carbon alternatives, since they are very profitable and can crowd out new entrants to the market.
The Bill must seek to create a legal framework for electricity market reform that provides clarity of purpose and accountability. The Bill contains significant and wide-ranging powers, but there is currently insufficient accountability. Given the implications of the measures in the Bill, it is only right that the Government should be held to account over its performance against its stated objectives. One objective is clearly to increase investment in low-carbon infrastructure and a clear measurement of success is the carbon intensity of our electricity. The requirement to deliver an annual report under Clause 3 is therefore extremely welcome. However, it does not go far enough. If progress is not being made, a statement ought to be made about what will be done to address the reasons for lack of progress.
Of course, increases in carbon intensity in any one year can come about for a number of reasons—the relative price of fuels and the carbon price are important elements that the Government are seeking to correct using the carbon floor price policy. However, there are other reasons why intensity may rise in a given year, such as weather fluctuations, which may lead to an increased demand for electricity, or low hydropower output. They may also be unplanned outages in our nuclear fleet. There are therefore circumstances outside the control of policy and government, which can affect intensity. In these circumstances, any requirement to report on actions to be taken should not commit the Secretary of State to having to act, but there should remain the option to state the reasons for the increase and then to make a case for not taking action. I want to be clear that we do not wish to ask for the impossible, but we do seek slightly more accountability.
If intensity is increasing because of policy failure—for example, if the carbon price is failing to dissuade coal burn or the number of CFDs being signed is too low to deliver sufficient investments in the infrastructure—it is right that the Secretary of State should be required to report this and to detail actions he or she intends to take to correct these failings. Another potential issue is that the UK could seek to delay the closure of coal plants planned as a result of the introduction of tighter clean air regulations. I hope that the Government will not seek a derogation of this kind, because it would have serious implications for the carbon intensity of electricity, and corrective action would then need to be taken to compensate.
The intent behind this amendment is similar to that behind Amendment 22, which was not moved, which sought to require that the duty to a lay a report before Parliament setting out policies and proposals for how the decarbonisation target would be met included a requirement that that report should be modified if it appeared that policies were not going to achieve the target. Amendment 27 has a similar sentiment but offers a much simpler way of achieving that goal. In the event that carbon intensity is not heading in the right direction, there is simply a requirement on the Government to tell Parliament what they intend to do to correct it.
This is a simpler way of achieving the aim that was set out in Amendment 22 and I hope that the Minister will give it serious consideration. The wording may not be perfect, but I think that the sentiment is correct and I wonder if the Minister might propose a workable suggestion of her own.