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The Minister for Energy (Malcolm Wicks): It is a pleasure to make my first House of Commons speech as Energy Minister on such an important subject, on which I share the enthusiasm of the hon. Member for Somerton and Frome (Mr. Heath). I congratulate him on securing the debate.

Microgeneration is a key area of the Government's energy policy. It has the potential to play a significant role as we move towards our objective of sustainable, reliable and affordable energy for all, delivered through competitive markets. Increased deployment of microgeneration technologies will have a beneficial impact on all four of the Government's energy policy goals. These technologies can reduce carbon emissions; help to ensure reliable energy supplies by reducing the load on the distribution network and helping to avoid   over-dependence on energy imports; promote competitive markets by offering the consumer a wider choice of the means to fulfil their heat and electricity needs; and help to reduce fuel poverty, provided that the fairly substantial up-front costs can be defrayed.

Many different technologies fall under the microgeneration heading: solar power, including photovoltaics, which the hon. Gentleman mentioned; micro-wind turbines; ground source heat pumps; air source heat pumps; and micro-combined heat and power, to name but a few. Micro-hydro power is an illustrious member of this group with a proud history—in the 18th and 19th centuries thousands of mills in this country used the power of water to grind flour and wheat. I wonder whether when they were built they had their protesters too. I understand that a proportion of those old mill sites would be appropriate for generating electricity.

There are obvious limitations to the scope of micro-hydro installations, but this is nevertheless an important technology with much potential in parts of the country that are fortunate enough to benefit from free-flowing water courses.

Our commitment to promoting all forms of microgeneration is long established. The Energy White Paper set out our vision for 2020—a vision that includes much more diverse local energy generation. We want to see more of these exciting technologies providing heat and electricity for individual consumers and communities. We are already doing much to make that vision a reality. For example, since 2002 we have provided £41 million of support for solar power projects, and £12.5 million for household and community renewables projects through the clear skies initiative.

We have ensured that most microgeneration technologies benefit from a low—5 per cent.—VAT level. We amended the renewables obligation order to make it easier for smaller generators to claim renewables obligation certificates. Last year we issued planning policy statement 22 to establish that local authorities could set targets for on-site renewable generation. We
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have been working closely with Ofgem and other key stakeholders to address various technical issues relating to metering and connection to the distribution network.

Let me deal specifically with the support given to micro-hydro projects. We have been keen to promote hydropower through the clear skies initiative, and so far 12 projects have received funding. As the hon. Gentleman knows, South Somerset district council is working in partnership with mill owners to install a number of small-scale hydro plants and energy efficiency measures on mill sites across the area. Two mills—one, I suspect, the one that the hon. Gentleman mentioned, Gants mill—are already on line and generating power, with another seven scheduled for completion by the end of 2006. The project has received £93,000 from the Energy Saving Trust.

Despite all that activity, we are not complacent, and recognise that we need to do more. The hon. Gentleman will be aware of our commitment under the Energy Act 2004 to produce a strategy for the promotion of microgeneration by April 2006.

There is much more work be done in assessing the real costs and benefits of microgeneration in the long term. We need to have a clear picture of the barriers that currently prevent widespread take-up. We must develop a substantial evidence base that allows us to identify the most cost-effective measures to promote microgeneration technologies.

Three factors appear to be acting as barriers—although the hon. Gentleman has highlighted possible other factors—and hindering the development of mature markets for microgeneration products. First, there is the elevated price of most microgeneration technologies. A lack of demand to date has restricted the extent to which the industry has been able to exploit scale economies. The infancy of the industry and the significant expenditure on research and development associated with product development also contribute to the existing high costs that deter many consumers.

Secondly, there is a lack of information. Inadequate promotion and provision of information about microgeneration products is a contributory factor in slow take-up rates. In many cases, consumers are unaware of the existence of such products and the benefits they can bring through reduced energy bills. Finally, there are some technical constraints relating to metering arrangements and connection to the distribution network.

The hon. Gentleman raised other issues—for instance, planning and building regulations. I am advised that the Office of the Deputy Prime Minister is in the process of reviewing the relevant part of the building regulations—part L, I am informed. The hon. Gentleman also mentioned income tax and business rates. I can tell him that initial meetings have taken place between officials in my Department and in Her Majesty's Treasury, and we will continue to explore those issues.

The hon. Gentleman talked about permitted development status for micro-hydro. I am advised that the ODPM is reviewing householder consents, and I shall be happy to raise the hon. Gentleman's points with the relevant Minister. He also referred to the complexity of licensing systems. I am told that the Environment Agency's hydropower working group is developing a best-practice guide for the hydropower industry, and I hope that in that way some of the issues will be explored.
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To inform our work on the strategy, I shall shortly be publishing for consultation a document that will look at many of the issues the hon. Gentleman has raised. The aim of the consultation is to stimulate a wide-ranging debate on some of the difficult issues that seem to be acting as barriers to the widespread uptake of microgeneration. I do not think that there will be any easy answers, but by working with key stakeholders and interested parties—and indeed the hon. Member for Somerton and Frome,
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with whom I want to talk further about this—I hope to develop a strategy for the promotion of microgeneration that will take us towards a future with much more local and diverse generation. There is no silver bullet, no single answer, when it comes to fulfilling the future energy requirements of our nation in the 21st century, but I am convinced that renewables—and within that category, microgeneration—have a significant part to play.

Question put and agreed to.

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