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20 Nov 2002 : Column 760—continued

10.54 pm

The Minister for Employment Relations, Industry and the Regions (Alan Johnson): I congratulate my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on securing the debate. He has a long-standing interest in renewable energy, especially solar power—an issue on which, as we have just heard, he speaks with great expertise, and perhaps with rather more expertise than me. My hon. Friend the Minister for Energy and Construction cannot be here tonight, but I will do my best to respond for the Government.

We are at a critical stage in the development of renewable energy. As my hon. Friend says, the Government have set ambitious targets for renewables. Our current target nationally is that, by 2010, 10 per cent. of the United Kingdom's electricity needs will be supplied from sources that are eligible for the renewables obligation.

We introduced the obligation on 1 April this year and it sets out a secure basis for the development of renewables by providing a market for renewable energy for the next quarter of a century. The value of support provided to the UK renewable energy industry through the obligation is estimated to reach #1 billion a year by 2010—a massive commitment by any standards.

Although the obligation is helping industry to take forward renewable technologies that are close to being commercially competitive—for example, onshore wind generation—we are also putting in place programmes of support for emerging technologies. The Government have committed nearly #250 million in capital grants over the next three years, together with #19 million a year for renewables research and development, mainly focused on offshore wind generation, energy crops and solar photovoltaics.

I am well aware that the 10 per cent. target is challenging and that we are starting from a low base—at present, less than 3 per cent. of our electricity is generated from renewables—but the Government are determined to achieve the target. The 10 per cent. target would represent an annual saving of 2.5 million tonnes of carbon emissions—a very worthwhile contribution to the UK climate change programme and to meeting our Kyoto target—but the 2010 target is not the end of the story by any means.

As my hon. Friend said, in June last year, the Prime Minister asked the Cabinet Office performance and innovation unit to carry out a major review of strategic energy policy issues for Great Britain up to 2050. The PIU energy report was published in February and contained recommendations about bringing environmental policy to the heart of energy policy, including setting a 20 per cent. renewables target for 2020, but the energy review also stressed the importance of maintaining security and keeping options open.

The Government welcomed the report as a valuable input to necessary wider debate on energy and have been undertaking a consultation with energy stakeholders

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and the public during the summer. That will lead to an energy White Paper, which will be published at the start of the new year. I cannot be expected this evening to speculate about the White Paper's contents, except to say that it will address the role of renewables into the future.

As my hon. Friend says, solar photovoltaic technology is perhaps the most suitable renewable for use in urban areas because it is clean, silent, can be mounted on buildings and requires no extra land area. It also generates electricity at point of use, thus avoiding losses through the transmission and distribution network. It is also largely maintenance free and can be integrated into roofs, cladding and atriums, making buildings more architecturally attractive.

The Department of Trade and Industry has supported the development of photovoltaics—PV—through a number of initiatives: the research and development programme, the domestic and large-scale field trials, the major PV demonstration programme and some parallel initiatives. For a number of years, the DTI has had a modest PV research and development programme, which has concentrated on addressing some of the technical and non-technical barriers to the deployment of PV, such as the lack of objective information. More recently, the programme has begun to support the development of components and systems by UK industry, and improvements in the costs and performance of PV cells and modules.

The research and development programme also involves putting about #10 million over three to four years into a series of domestic and large-scale field trials. The domestic field trial is supporting 30 projects in social and private housing schemes, new build and refurbishment, totalling about 500 homes and 750 kW peak capacity. The large-scale field trial for public buildings is supporting about 15 projects in buildings, such as council offices, sports stadiums, visitor and leisure centres, schools and universities.

In March, my right hon. Friend the Secretary of State for Trade and Industry launched the #20 million first phase of the major PV demonstration programme, which aims to install PV systems on 3,000 dwellings and 140 non-residential buildings within three years, with an average grant of 50 per cent. After the first six months, #2 million of grants had been allocated and the first dozen installations completed. If the first phase is successful in bringing down costs and building a UK industry, it is expected that it will expand into a full 10-year, #150 million programme, with a target of 70,000 to 100,000 roofs.

My hon. Friend also raised the potential of combined heat and power. The Government share his view of its significance. CHP has an important role to play in meeting our climate change goals, cutting fuel poverty and increasing the diversity and competitiveness of our energy supply, bringing considerable economic and environmental benefits. As with electricity generated from renewable sources, the Government have ambitious targets for combined heat and power. We remain committed to our target of at least 10,000 MW of good-quality CHP by 2010. Again, that is a challenging target—the current capacity is around 4,700 MW on around 1,550 sites, representing about 6 per cent. of electricity generated in the UK. With continued

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monitoring, support measures and by taking into account the views of the CHP industry, however, that target can be achieved.

Both solar PV and combined heat and power are being encouraged by the Government and are playing a part in meeting our targets. However, achievement of our targets for renewables will require a step change in the development of renewables. That requires us to realise the potential of all our sources of renewable energy—we cannot rely on any one source. The renewables obligation is a market-led measure and will remain so. We have no plans to attempt to determine the contribution of particular forms of technology. As hon. Members will be aware, different renewable technologies are at different stages of development. Currently, the largest single contribution of electricity from renewable sources comes from hydroelectricity.

Moving a little ahead, in the period up to 2010 the major expansion is likely to come from wind power. Onshore wind is a proven technology and is close to being commercially competitive. I acknowledge concerns about individual projects but each project is subject to planning consents, and environmental and other considerations are taken into account on a case-by-case basis. On Monday, my hon. Friend the Minister for Energy and Construction opened Bowbeat wind farm near Peebles, the largest in Scotland and one where local interests have been very supportive. The Minister will shortly be launching a consultation paper setting out options for putting in place a robust framework to make sure that we make the most of the UK's rich potential in terms of offshore wind. Last month, he announced the first two grants for two offshore wind farms. A grant of #10 million went to each of the two projects: National Wind Power's North Hoyle Project off the coast of north Wales, and PowerGen's Scroby Sands wind farm off the Lincolnshire coast. Together, those projects have the capacity to provide 100,000 homes with clean electricity, and another eight applications are in the pipeline.

We cannot therefore afford to ignore the contribution of other renewable technologies if we are to achieve the increase in renewables-based electricity that we want. Looking further into the future, wave and tidal power have the potential to make a significant contribution, although the various forms of technology have yet to be proven commercially.

The renewables sector is doubly important for the UK, not only because of the urgent need for offshore renewable energy to meet targets, but as a tremendous opportunity for UK industry. Increased activity brings opportunities for jobs and investment.

The UK developed an immensely profitable supply chain industry for oil and gas, and we now have the same opportunity to develop a world-class UK renewables industry and supply chain that will create large numbers of jobs in this country. Renewables UK, the new organisation that I set up earlier this year, is working hard to catalyse change. It aims to create renewables jobs and bring renewables investment to the UK. The unit's overall aim is to maximise UK jobs and investment in renewables both domestically and worldwide by promoting enterprise, innovation and

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competitiveness in the UK supply chain. That applies as much to solar photovoltaics as it does to other forms of technology.

Several of my ministerial colleagues have met the larger companies from the United States, Japan and Europe, and I am happy to say that there are signs that one or two of them may be interested in setting up small operations in the UK. However, that is likely to happen in the longer term, as most of the bigger players would wish to see a market of 30 MW a year before committing themselves to assembly plants here.

The total installed capacity in the UK by 2005 is unlikely to be more than 20 MW. However, we are working with companies under the research and development programme to develop building-integrated solar products such as Intersolar, Marley and Pluswall. We are also attempting to encourage electronics companies to get involved in the manufacture of charge controllers. The installed capacity of solar photovoltaics in the UK at the end of 2001 was 2.7 MW, so the main contribution of solar photovoltaics to renewable electricity is likely to come well beyond 2010.

My hon. Friend also mentioned the problems associated with planning consents for renewables, especially wind farms. I share his concerns. Department of Trade and Industry officials are currently in consultation with those of the Office of the Deputy Prime Minister on revisions to the planning policy guidance note that sets out policy on development plans for renewable energy projects. Our aim is to update and improve the planning guidance for local planning authorities, so that it aids their decision-making on applications for renewable energy projects. My right hon. Friend the Deputy Prime Minister will go out to a

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full three-month public consultation with planning policy statement 22 on renewable energy around the turn of the year.

I should like to close my remarks by emphasising the importance of renewable energy and by again thanking my hon. Friend for using this debate to enable this important issue to be aired. Renewable energy contributes to all four strands of our energy policy. First, it contributes to security of supply, which, in today's society, is fundamental. Our industries and, indeed, our homes are dependent on reliable energy supplies. Secondly, it provides competitively priced affordable energy for business and individuals. Thirdly, it gives protection for the most vulnerable by first reducing and then ending fuel poverty. Finally, it reduces the impact of fossil fuels on the environment where renewables play perhaps their most essential role.

I hope that I have demonstrated that the Government are committed to renewable energy. This is an exciting time for renewables and it presents us all—government at both national and local level, and industry—with opportunities and with challenges. What is going on with solar photovoltaics and with combined heat and power are good illustrations of the challenges ahead and of what can be achieved. However, they are not the only examples, or of course the only renewables. Our task in meeting the demanding targets that we have set requires the vision to carry forward our objectives and to turn potential into reality. There are many barriers in our path, but the rewards are immense: reliable sources of clean energy, a reduction in carbon emissions, and a developing renewables industry. We all need to work together to lead the way into a renewables-based future.

Question put and agreed to.

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