That, for the purposes of any Act resulting from the Natural Environment and Rural Communities Bill, it is expedient to authorise the making of provision requiring charges to be paid in respect of licences issued by Natural England.[Joan Ryan.]
Mr. David Heath (Somerton and Frome) (LD): It is a great pleasure to have this opportunity to discuss local energy generationan important matter that was not given sufficient emphasis during the general election campaign. There is considerable consensus across the House on at least some of our objectives. I hope that we all agree that reducing demand, either through improvements to home insulation or through greater energy efficiency, should be our starting point for dealing with future energy requirements. I hope also that we agree on the desirability of promoting renewables wherever possible. I have to qualify that by saying that although I believe that all renewables are more benign than the conventional alternatives, I recognise that not all renewables are appropriate to every location, which is why recently a strong view has been expressed that microgenerationsmall-scale generation within a locality for a particular household or group of householdsmay be a more effective alternative, which we should explore.
Microgeneration can make a significant contribution to our total energy needs. It is often more socially and environmentally acceptable than the alternatives. It allows individuals to contribute directly to energy outcomes and to affect the way in which energy is supplied in their local neighbourhood, and it is often good for the householder to be able to contribute in that way. In addition, it provides a diversity and continuity of supply, which we should all welcome.
I acknowledge the Government's interest in the subject, which has been expressed on more than one occasion, and I understand that they are drawing up a strategy under section 82 of the Energy Act 2004 to deal with microgeneration. I was heartened by the comments of one of the many predecessors of the hon. Member for Croydon, North (Malcolm Wicks) as Minister for Energy, the hon. and learned Member for North Warwickshire (Mr. O'Brien), who on 15 September 2004 said:
There is also a considerable degree of parliamentary interest in the subject, as evidenced by the Bill promoted in the last Parliament by the hon. Members for Nottingham, South (Alan Simpson) and for East Surrey (Mr. Ainsworth) and my hon. Friend the Member for Hazel Grove (Andrew Stunell). I expect that that measure will be reintroduced in this Parliament.
Microgeneration takes a number of forms, including micro-combined heat and power; micro-wind, which is being successfully championed by another former Energy Minister, the former Member for Western Isles; fuel cells; and photovoltaics, which I saw being used to great advantage in Japan when I visited with the Committee on Science and Technology. In Japan, there is a much clearer Government policy of incorporating into their equivalent of building regulations
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requirements for photovoltaics in buildings, which means that in the very near future Japan will have a large number of buildings that are so equipped. Perhaps we in this country should consider varying our building regulations in a similar fashion. To complete the list of methods of microgeneration, we have heat pumps, solar thermal and micro-hydroelectric.
I shall concentrate on the last of those categories, as I have seen some extraordinarily good examples in my constituency. I recognise their value and I want to see the bureaucratic hurdles that may be preventing a wider expansion of the sector removed, if possible. I note that another of the Minister's predecessors, the hon. Member for East Ham (Mr. Timms), now the Minister for Pensions, said on 29 April 2004 that there could be up to 40,000 locations in the UK where micro-hydro could be implemented. I am happy to say that a significant number of those are in my constituency. My constituency consists of the Somerset levels, which are much too flat to be appropriate for hydroelectric power, and the edge of the Mendip hills, which are very suitable. There are a large number of old mills there which were formerly used for flour or other grinding or in connection with the iron industry in days gone by and which are suitable for conversion.
We have two extremely active groups in my constituency. One is based in the south Somerset area and is a shining example. I have been pleased to be associated with it by attending the opening and visiting it on a number of occasions. At Gant's mill just outside Bruton, Brian and Alison Shingler have produced an excellent project which is not only generating power, but acting as an educational facility for people visiting the mill. Much of the leg work and the energy behind these proposals comes from Keith Wheaton-Green who works for South Somerset district council.
The other group is the Mendip power group. A few months ago I had the opportunity to visit Tellisford mill on the River Frome, where Anthony Batttersby is in the process of installing a water turbine. The Mendip power group has a number of other mills, several of them on the River Frome, such as Stowford, Rode, Shawford, Clifford and Staplemead creamery, and on tributaries, such as Bridge house at Great Elm, Coleford and Witham Hole. In all there are 14 sites associated with the Mendip power group. It is anticipated that those 14 sites will produce 855,000 kWh per year, which is a significant contribution. It is enough to power 195 homes and will save 400 metric tonnes of CO 2 , which is the equivalent of a car travelling 2 million miles. That seems to me a worthwhile objective. Tellisford mill alone will produce 170,000 kWh, which is enough for 40 houses. That is approximately the size of the hamlet of Tellisford, so we have a local energy generation plant that is producing the energy to power that community. That seems a correct way of approaching the problem.
As regards costs, at Wallbridge mill, another site in the group, there was an existing turbine which needed restoration. That cost £25,000. Tellisford was a ruined mill. It needed a new turbine, which cost £120,000. There is about an 11-year break-even period.
What are the problems faced by the people at the forefront of addressing the issues of energy production through local power generation? Some of the problems are generic to all microgeneration facilities. Despite the best efforts of Ministers in the Department, which I
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acknowledge, there is the lack of a co-ordinated approach across the whole. I know that there is an attempt to deal with this, but it is still clear that Government Departments are not entirely at one in providing the clear focus on the need for renewables that we would wish to see.
I received an unsolicited illustration of that point in the post when it was announced that I had secured this Adjournment debate. Given my constituency's location, the letter came from an unlikely source, the City Remembrancer of the Corporation of London, who points out the difficulties that the Corporation of London has experienced with its combined heat and power system in the City, which, as a result of the introduction of the new electricity trading arrangements, can be economically run only at peak periods when electricity can be sold at higher prices. That is nonsense; the facility is capable of doing so much more, and it seems a shame that it should be partially mothballed in order to meet other requirements.
There are also fiscal barriers to progress. A correspondence has taken place between not only the Department of Trade and Industry, but other Departments about the application of business rates and income tax. The Secretary of State for Environment, Food and Rural Affairs sent Keith Wheaton-Green a helpful letter in which she made it plain that she has a great deal of sympathy for people affected by that point. She was happy to confirm that the existence of a microgeneration facility would not prejudice a domestic property by incurring a business rate liability. If such a microgeneration facility is a business, however, that is not necessarily the case, and such matters are examined individually.
"On income tax, DTI and HM Treasury officials are currently examining this issue in order to see if there is a way of exempting microgenerating householders from income tax when exporting electricity."
It is dated 7 April 2005, and I would be grateful if the Minister told me whether any advances have been made in that consideration. It seems to me that there is an argument for the introduction of a thresholdperhaps 50 kWbelow which there is no risk of incurring either a business rate or income tax liability. Perhaps the Minister will consider that point. Those who are promoting the microgeneration Bill would also like to see a requirement to purchase energy on the part of the utilities, which would provide certainty and stability that is otherwise lacking.
Those who are interested in hydroelectrics have forcibly pointed out the difficulties with the licensing system. They showed me the forms that they must fill in, which are astonishingly complex. There is virtually no difference between applying to run a small water turbine and applying to run Hinkley Point in terms of the complexity of the information that is required, the volume of impounded water and other similar matters. That makes it very difficult for someone who is not expert even to attempt to apply. The process is lengthy, and it can take more than three months to obtain a licence from the Environment Agency. It is also expensive and can cost more than £2,000, including the necessary advertising costs, and I question whether it is necessary. Could it be subsumed within the planning
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process? Could we introduce a threshold below which such activities are exempt as permitted development, which might apply to not only water turbines, but micro-wind turbines, too? Such policies would certainly promote the use of microgeneration among householders.
On financial support, the clear skies grant does not match the required scale of investment in water turbines. The contribution is very small, and the scale of the available grant does not encourage maximum output, which one might expect to be the object of Government policy. If the clear skies grant is changed, I can only put in a plea for its replacement by something simple and non-competitiveit should be certain that a grant will be received once a project is completed in order to encourage a lot of people who might otherwise have doubts.
Perhaps the Minister might also like to consider the possibility of interest-free loans. I understand that the Government are not normally desperately keen on providing those; nevertheless, if we have a clear policy objective and a high capital outlay, there is clearly an incentive for the Government to look at ways of reducing liabilities for the householder in the early part of an investment period.
There is a disparity between what the utilities provide in terms of grant, and an incredibly complicated payment system, with renewable obligation certificates, levy exemption certificates, and payments from the utility companies. At the end of a Westminster Hall debate on 23 March, the hon. and learned Member for North Warwickshire (Mr. O'Brien) made an intriguing comment about what he described as ROC-ettesthat is, renewable obligation certificates in a diminutive form appropriate to microgeneration. I wonder whether any further work has been done on that.
If we are serious about encouraging water turbines, we must accept that it must be a high priority in the use of our water resources and should perhaps have a higher priority than some of the other competing interests. There should be an onus on the responsible authorities to ensure riverine maintenance in order to allow turbines to work effectively.
There are all sorts of reasons why this technology is appropriate. Its locality means that there is a minimal line loss. It promotes economic activity in rural areas. It has the capacity to operate in environmentally sensitive locations. That is rare for any technology, but this is also something that enhances local life, brings historic buildings back into use and aids their conservation, gives a continuity to all the technologies that may be worth rediscovering, and contributes to the overall energy requirement of the country. It is a technology that is worth supporting and whose time has come.
It would be very good if there were permanently established opportunities for householders to see such technologies in action around the country. I spent the last week at the Royal Bath and West show, where it occurred to me that it would be a perfect site for a permanent exhibition given the number of people who go through there and are interested in the use of technologies in rural areas and diversity within the agricultural community.
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This is a perfect opportunity to show the potential for alternative technologies in producing energy in ways that are entirely compatible with the rural environment. I hope that the Minister may be able to help us in pointing the way forward.