My Lords, my thanks to noble Lords who have spoken in the debate: the noble Lords, Lord Ravensdale and Lord Teverson, and the noble
Baronesses, Lady Hayman, Lady Altmann and Lady Bennett. I will quickly review what I think they said and set out our amendment.
The noble Lord, Lord Ravensdale, set out the principal purpose for the Bill. Split in four ways, it will: increase energy systems’
“resilience and reliability … support the delivery of the UK’s climate change commitments … reform the UK’s energy system while minimising costs to consumers and protecting them from unfair pricing”,
and improve the overall efficiency of the UK energy system and economy. It also requires an annual report to Parliament on the above. The first three of those points are lifted directly from the opening paragraph of the Explanatory Notes, while the fourth is also an objective of the ISOP simply made wider.
Labour tabled an amendment in Committee, and I will remind noble Lords of its contents. The context of that was, at that time, the cost of living crisis; the energy price cap was going up to £3,549 per year. National Energy Action predicted that the number of UK households in fuel poverty would rise to 8.9 million. Tory leadership candidates at that time were vying for leadership to be Prime Minister but were running away from the issue of net zero; the High Court found that the net-zero climate strategy was inadequate, and the Climate Change Committee found that credible plans existed for only 39% of emissions, citing “major policy failures” and “scant evidence of delivery”. As regards energy security at that time, gas prices were expected to surge to record highs the week after the Nord Stream 1 pipeline was shut down, and European prices had risen by nearly 400% over the past year. The UK relies on gas for about 40% of its power generation, and even more on the coldest days when demand is high and wind generation tends to be low. In 2017, a BEIS report included a scenario for a complete cut-off of Russian gas and found that the UK could see “significant unmet demand” if the cut was prolonged and continental European countries paid whatever was necessary.
However, the Bill is a hotchpotch of things thrown together, lacking an overarching theme to tackle these issues. Our amendments would have set out a purpose for the Act, increasing resilience and reliability; supporting the delivery of UK’s climate change commitments; reforming energy systems; binding the Secretary of State and public authorities to these purposes; requiring the Secretary of State to designate a statement as a strategy and policy statement with regard to the purpose of the Act; and requiring the Secretary of State to review the strategy and policy statement on a five-year basis. That would have forced successive Governments into long-term thinking about the specific purpose, not limiting the impact and ambition of the Bill to what has been tacked together, which simply does not go far enough or tackle the immediate problems.
The amendment from the noble Lord, Lord Teverson, would place gas and electricity markets under a duty to assist in the delivery of net zero, and our amendment would require the Secretary of State to designate a statement giving GEMA a mandate for considering the role of energy in supporting government policy in achieving net zero. The amendment from the noble
Baroness, Lady Hayman, would include in Ofgem’s general duties a specific requirement to have regard to meeting the UK’s net-zero emissions.
Briefing from RenewableUK sets out the argument for Ofgem remit reform. It states:
“Ofgem’s remit has not changed since its establishment in 2000, and does not prioritise electricity decarbonisation”—
in line with recent government legislation or stated ambitions. It has only a consideration of greenhouse reduction. It continues:
“As a result, Ofgem has been unable to substantially reform its working practices and regulatory frameworks in response to the 2008 Climate Change Act and the UK’s subsequent net zero ambition, to detriment of renewable energy investment and decarbonisation pace.”
It goes on to say that the Government have an opportunity to reform Ofgem’s remit in the Bill we are addressing today.
There is some key evidence for that. Mike Thompson, the Climate Change Committee’s chief economist, noted the integration of energy with transport and heat, including the potential for
“cars sitting on driveways acting as batteries and putting electricity back into the grid”.
He argued that there is a
“need for real integration and a regulator that can think from a systems perspective”,
suggesting that hydrogen and heat networks should be within Ofgem’s remit.
Jonathan Brearley, chief executive of Ofgem, said:
“Planning the system and setting how it evolves should not really be done by the regulator. The regulator’s job is to make sure that that is done efficiently and effectively by the companies concerned.”
We appreciate that argument.
A number of witnesses told the committee that the net-zero target should be included explicitly within Ofgem’s statutory duties. Dr Hardy said that he would
“put net zero up top”,
balancing out its other duties against the context of
“hitting that legislated carbon target”.
Professor Mitchell said that
“net zero has to be the raison d’être of Ofgem”
and argued that
“delivering on legally enshrined commitments to decarbonise”
should form part of Ofgem’s principal duty.
The committee concluded:
“To ensure that, on an enduring basis, the appropriate focus is given to net zero within its competing priorities, we recommend that Ofgem’s duties should be amended to include explicit reference to having due regard to the net zero target. While Ofgem maintains that net zero considerations already factor into its decision-making, adding net zero explicitly to its statutory duties will serve to make this clear.”
We feel that the UK needs not to be left behind but to show similar ambition in its plans for the future of the electricity industry, including Ofgem’s remit.