Lord Hunt of Kings Heath (Lab)

My Lords, I am most grateful to noble Lords who have taken part in this short but none the less interesting debate. As we move to a clean power system and closer to achieving net zero, it will be critical to ensure we have adequate flexible electricity capacity that can be ramped up quickly when renewable generation is low, such as on dark, still days. We believe the capacity market remains an effective insurance mechanism for security of electricity supply, providing revenue certainty to market participants and a secure and affordable electricity supply that families and businesses can rely on. I am grateful to the noble Lord, Lord Offord, for his general support for the regulations. I certainly acknowledge that a lot of the groundwork was undertaken by the previous Government, as he suggested. I can also assure him that we as a department will continue to provide oversight of the way the arrangements will operate. As for the point raised by the noble Lord, Lord Lilley, the noble Lord, Lord Offord, referred to the REMA consultation, which we have debated as well. I think that Professor Helm’s proposals were considered by the previous Government, who decided not to take them forward. My understanding is that there was thought to be insufficient evidence that putting responsibility for procuring flexibility on generators, which would mean decisions being taken at a project rather than a system level, would lead to a low-cost capacity mix. Many respondents also expressed concern that this option would increase risks on renewable generators, leading to higher strike prices and overall system cost without the compensating benefits of efficiency or security of supply. We remain of the view that the current system is probably the best way to manage the issues that I have referred to. I thank the noble Earl, Lord Russell, for his support. The question of reviews was also implicit in the question from the noble Lord, Lord Offord, and alongside the five-year reviews, each year an assessment is made of the required capacity to meet the expected level of peak demand in four years’ time. The majority of the predicted capacity required is secured well in advance. A proportion of capacity requirement is secured one year in advance, based on latest demand forecasts, so it is a continuous process, if you like. We keep the capacity market mechanism itself under constant review and consult regularly on amendments and incremental reforms. In late 2024 we consulted on a number of changes to the capacity market to ensure security of supply and enable flexible capacity to decarbonise. We hope this will ensure that supply can meet demand as we transition to net zero. As for the comment about the mix of technologies going forward, the report by NESO and my department’s clean power action plan set out our view of the technologies by around 2030. We will rely on unabated gas as the main mature, reliable technology capable of filling that role at the moment. We expect that the amount of unabated gas we need will reduce as we deploy more low-carbon technologies. Our aim is to move gas into a reserve role, used primarily to ensure security of supply. The noble Earl also mentioned tidal and other technologies, and we remain open to those possibilities. He may know that I am meeting the noble Lord, Lord Alton—tomorrow, I think—to discuss tidal, so we are not ruling out the use of those technologies. I am grateful to noble Lords.