Fifteenth Standing Committee on Delegated Legislation |
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Mr. Robertson: I am sorry to interrupt the Minister again, but I am a little disappointed that we will be dependent on wind for achieving the target of 10 per cent. in five years’ time. Given the intermittency of turbines, we would need to build thousands of them, with capacity when the wind blows of much more than
The Chairman: Order. I ask the Minister, in his response, to steer away from the rocks of irrelevance and to stick to the terms of the order. Mr. O’Brien: Indeed, Mr. Taylor. If I can stick to ROCs rather than rocks, it will undoubtedly be better. The renewables obligation enables the renewables industry as a whole to develop. We know that there are a number of problems that the industry needs to address, but the key point is that the Government aim to use the RO to get the industry to hit the 10 per cent. target. We think that about 7 to 8 per cent. will be provided by wind, of which about 60 per cent. of the generation would come from offshore windmills and 40 per cent. from onshore. The number of windmills is not necessarily the key factor, as some windmills are bigger than others. The offshore ones tend to be bigger and therefore generate more electricity, so fewer are needed than would be needed onshore. We are not talking about the numbers of windmills that the hon. Gentleman seems to be thinking about. We believe that we would need about as many as we have now plus one half as many again to hit the target by 2010. I answered a parliamentary question on that matter recently. Remember that we are also developing biomass and other renewables to meet part of the obligation. We have never taken the position that windmills would be put everywhere but have always said that they would be placed only where they were appropriate, and we have a robust planning procedure to deal with them. The way in which companies become winners or losers under the renewables obligation is important. The RO will produce some winners and some losers, as suppliers have to buy into a fund that is then recycled among others. As they may not get their money back, the process of creating a RO will produce winners and losers. If it did not, we would not have a market. The companies are, in a sense, playing the market to try to get the best advantage in it, and that is why there is now considerable investment in renewables, including wind. There will be many winners and losers in the process, and the aim of companies is to try to win overall rather than lose. Mr. Robertson: If somebody does not buy ROCs and pay into the fund, it is right that they should lose out, as they have not complied with the rules. My question is about mutualisation. Will people who have complied lose out simply because somebody has gone bankrupt? Mr. O’Brien: If there were not a payment in a year in which a company ought to have made a payment, some of the provisions would come into effect and there would have to be contributions to the mutualisation fund to ensure that it was topped up. We have created this process because we have had problems in the past. Therefore, there would be some losers in such circumstances, but they might also be
Mr. Robertson: The RIA refers to payments from recycling. It states:
Therefore, companies will comply yet still lose out. That seems a crude way of making up a shortfall. Is it not possible to do it in a fairer way? I confess that I cannot think of one immediately, but it seems that we are introducing a rather crude system. This is the one part of the order with which I am a little uncomfortable. Why should a company that has complied and done everything that it is supposed to do lose out simply because another company has gone bankrupt? It is not fair. Mr. O’Brien: The fund will not work like that. I accept that it would not be fair if it did. Those suppliers who have not produced ROCs will make mutualisation payments but not receive payments from the mutualisation funds. Those who have produced ROCs—those who have done everything that they are supposed to do—will be able to receive payments. So, the ROC-holding suppliers—the ones who have done things right—will be able to receive the benefits; those who have not, as the hon. Gentleman put it, done it right will not receive the benefits. I hope that that helps. Mutualisation contributions are based on a supplier’s market share. Following consultation, extended periods for payments of mutualisation contributions have been agreed, thus ensuring that suppliers have time to recover their costs before they make a payment. Column Number: 14 To summarise, mutualisation means the industry clubbing together to make up a shortfall. Those who gain tend to be in a minority at present; we are running behind the obligation levels, so the number of gainers is limited. Mr. Robertson: I have established that I am not allowed to stray too far, but I would be grateful if the Minister were to respond on one point. He is doing his best to explain a complicated system to me, but I am not absolutely sure that his comments conform with the RIA. Will he therefore undertake to write to me with an explanation of how the system is likely to work? Mr. O’Brien: I shall be happy to write to the hon. Gentleman. It is a complex system, but it will operate in such a way—I am looking at paragraph 48 of the explanatory memorandum—that those who are, as the hon. Gentleman sees it, complying with the process and doing what they need to do for renewables should benefit broadly, although not substantially, from the provisions. Those in a losing situation will, in effect, be those who are not providing the required level of renewables, so they will not be able to make claims. I hope that we can improve investor confidence through the order, because that will help us move further towards our renewables target. The obligation is a market-led mechanism, and there is inevitably an element of risk, because markets and companies can, and do, fail. However, the Government’s approach is to strive to achieve the right balance, providing sufficient protection to maintain investor confidence without placing undue additional costs on suppliers and, ultimately, consumers. I think that the changes in the order will achieve that. The Chairman: To clarify my advice to the hon. Member for Tewkesbury, which he sought in private, I was referring not to a Standing Order, but to a convention designed to ease the flow of debate. Question put and agreed to. Resolved,
Committee rose at seventeen minutes to Eleven o’clock. |
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