My Lords, I am grateful to my noble friend Lady Parminter for raising the matter of electricity interconnection, which the Government agree is an important area given the range of potential benefits. Through my notes I will also be able to answer my noble friend Lord Caithness’s two questions.
We have previously considered the amendment in Committee. The Government considered the arguments made and, earlier this month, committed to publishing a policy statement on electricity interconnection by the end of 2013, well in advance of the date which my noble friend’s amendment would require. This will set out our support for increased interconnection that is appropriate and economic. My noble friend will be aware that the Government also recently supported a number of interconnection projects to become projects of common interest under the EU regulation on guidelines for trans-European energy infrastructure. The UK Government support that regulation and its intention to accelerate completion of the internal energy market by facilitating cross-border energy infrastructure. Five GB electricity interconnection projects have been selected as projects of common interest under the regulation, including with France, Belgium and Norway. They will enjoy streamlined planning procedures and, where appropriate, a mechanism to agree cross-border cost allocation. They will also be eligible to access financial instruments such as loan finance, grants for feasibility studies and, potentially, grants for work under the Connecting Europe Facility, which has a pot of €5.1 billion over seven years. Four renewable generation projects located in Ireland, with potential to develop into interconnection, were also selected as projects of common interest. This brings the combined capacity of all potential interconnection projects currently in the pipeline to more than 12 gigawatts. My noble friend will also have seen our proposals for how interconnected capacity may be able to participate in the capacity market from 2015. We are currently working proactively on the details of this proposal and we will welcome further engagement with stakeholders to try to make this possible.
I also highlight work being undertaken by Ofgem to develop a supportive approach to interconnection. Ofgem is developing a new cap and floor regulatory approach for interconnection for application to the proposed Project NEMO between GB and Belgium. The Government are confident that this approach, if extended, will promote investment in interconnection. However, as the cap and floor approach looks to consumers potentially to take on some risk, it is important that careful consideration is given to its application. We are working closely with Ofgem as it takes forward its wider Integrated Transmission Planning and Regulation project, considering the need for enhanced planning or strategic evaluation of future interconnection. Ofgem is also working to ensure that GB electricity prices reflect scarcity to a greater extent. As interconnection developers invest on the basis of price differentials on either side of the link, this is likely to make investment more attractive.
I hope noble Lords will appreciate that, following Committee, the Government have made a public commitment that will satisfy the intention behind this amendment, and do so sooner than the amendment
itself would require. I therefore hope that my noble friend will be reassured and will feel content to withdraw her amendment.