Contribution
I am grateful to the noble Baroness for speaking in the way she did. I am a member of the Secondary Legislation Scrutiny Committee, which produced the report she referred to. I ought also to declare a former interest in that I was a director of a company that briefly, while I was a director, owned Lynemouth, a generator which could notionally benefit from this scheme. But, contrary to what the Minister said, these regulations are virtually all about Drax. As we said in our report,
“the main financial beneficiary of the proposed new arrangements would be … Drax … by far the largest biomass generator in the UK.”
I find these regulations remarkable in at least four ways. First, their presentation is remarkably shifty. The title, draft Contracts for Difference (Miscellaneous Amendments) (No. 2) Regulations, does not tip you off that what we are actually talking about here is massive subsidies for massive carbon dioxide emissions. We are talking about Drax. As the SLSC pointed out, it was also quite odd to produce an Explanatory Memorandum which never mentions the word “Drax”.
Secondly, the regulations are remarkable because the costs are remarkable. Drax has already enjoyed £6.5 billion of subsidy, and here we go with another £1.8 billion—over £1 million a day. The price of the electricity produced and sold, £113 per megawatt hour, is well above that paid for offshore wind farm electricity, also under similar contracts for difference. Thirdly, it is remarkable that the emissions are so high. As the noble Baroness, Lady Bennett, said, they are 18% higher than comparable coal-fired generator emissions. Drax will remain the UK generator producing the most carbon dioxide per unit of electricity produced.
Fourthly, it is remarkable that, whereas Drax used to be pushed as the site at some future date of a carbon sequestration and storage scheme, that has been dropped. That story does not exist any more. There is no CSS in these regulations. There is nothing about CSS, I assume, in the contracts with the company. The company has in fact paid off the staff who were working on CSS, so that story is dead.
Therefore, it is counterintuitive that Drax is still sailing under a green flag. It is a delight to hear a distinguished former leader of the Green Party denouncing that flag: it should not be on this pirate ship. Given the opportunity cost of the sequestration forgone in the forests of western Canada that are cut down, and the cash cost of processing that wood into pellets and shipping it across to the United Kingdom, the sustainability story about Drax was never particularly convincing. The Public Accounts Committee was quite right to say in its report of 25 April that:
“The current approach relies heavily on generators self–reporting the sustainability of the biomass they use and third–party certification schemes, giving a sense that generators are marking their own homework”.
It is more than a sense; they are marking their own homework. The report continues:
“Neither DESNZ nor Ofgem know whether the approach to assurance is effective in making sure biomass is from sustainable sources”.
They do not know.
Drax commissioned KPMG to write a report. The noble Baroness, Lady Bennett, referred to it, so I do not need to. The Minister says that it is not for the Government or Ofgem to pass it to us. The PAC said that it should be shown to Parliament—that it should be published. My committee, the SLSC, said that it should be published before this debate, which surely is right. The Minister’s argument is that it is not his to publish. He is the man who is awarding this enormous contract to the company—£1.8 billion. It is open to him to suggest to the company that it might assist the Government in deciding in favour of what the company wants, if the company were to do what Parliament has asked. However, that does not appear to have happened. We do not know what KPMG said because we are not allowed to see the report. That seems rather high-handed of the company and suggests that it may have something to hide.
There may be a case for Drax, which the Minister touched on when he talked about security of supply. He did not mention this, but that case could be dealing with the risk of a black start. Having these huge turbines turning up there could be convenient if you get a crisis and a black start. I could be persuaded that we need to keep this immensely expensive scheme going for security of supply, but it would have been more honest if the Government, in their Explanatory Memorandum for these regulations, had made that case, which they did not. Instead, we have their sustainability case—which does not fly, for the reasons given—to explain the astonishing cost of the scheme.
The selling of the scheme looked shifty; the refusal to produce the KPMG report on sustainability looks high-handed. The noble Baroness’s regret amendment was well justified and exactly right. Had she been in the mood to press for a vote, I would happily have voted for it.