My Lords, I thank the Minister for setting out these instruments so clearly and the noble Earl, Lord Russell, for his contribution. These
four instruments implement key aspects of the British industry supercharger, as mentioned by the Minister, a package announced in February 2023 to make energy-intensive industries—EIIs—in Great Britain competitive. These industries face challenges in the coming decade. The primary issue is the relatively high cost of energy in the UK, which makes it difficult for them to remain internationally competitive. Furthermore, there is a need for them to implement transitions toward greener technology, with lower carbon leakage, as we strive to move towards a net-zero economy. We recognise these challenges and broadly support these instruments, in so far as they seek to address them for these industries, which are vital for our national security and the literal fabric of our national growth.
The first instrument exempts eligible EIIs from the costs associated with funding the capacity market and seeks to ensure that there is sufficient supply despite fluctuations in demand, especially at peak times of day or in colder periods, and in supply, for example when wind generation is low. While we support this instrument, have the Government considered whether this will lead to any shortfall in the capacity market? If so, what measures are in place to mitigate this?
The second instrument concerns additional costs due to green levies which the UK imposes and some of our international competitors do not. We do not want this differential cost to drive our energy-intensive industries abroad, so this instrument adjusts an already existing scheme and exempts EIIs from 100% of the costs of funding various environmental schemes. Industrial electricity costs in comparable neighbouring countries are evidently not static, so will the Government keep them under review? If there is movement, do they have plans to make further adjustments if necessary?
For both these instruments, the Government’s calculations accept expected increased electricity bills for non-eligible users, including small businesses, charities and households. For this instrument, that is cited at 20p to 30p per megawatt hour. With the current spot price at just under £60 per megawatt hour and the reduction since the start of this year already being closer to £30, that certainly does not seem a massive amount. However, will the Minister outline how much these regulations, in conjunction, will add to the average household electricity bill per annum? The third instrument follows by necessity to enable the Secretary of State to revise the renewables obligation level from 2024-25.
The fourth and final instrument makes minor amendments to the Energy Act 2023, sets out funding for the payments via a levy on suppliers and appoints an administrator. Such support payments are to be made to the EIIs quarterly. Will there be an automated process for eligible recipients to receive these payments with the minimum administrative fuss? Have the Government made forecasts as to whether the costs of this scheme will outstrip the contributions from the electricity suppliers, which will effectively be funding the EII support levy? Are there any provisions in place for this possibility, so that the scheme does not collapse if it is successful?
This instrument allows corrections to be made to support payment entitlements. It will also make provisions for the administrator to hold a reserve fund so that EIIs will always be able to receive payment. Do the
Government expect this will need to be used? If so, how big will it be and is there a maximum time limit over which the administrator will be expected to cover the shortfall?
We will be very happy to support these four instruments if the Minister can provide some assurances on the concerns I have mentioned. I look forward to his response.