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The renewables obligation needs to be judged on its record. The Minister sent a letter to parliamentary colleagues spelling out how, within six years of its introduction, the renewables obligation has been
responsible for generating capacity of 2 GWe. That is the same amount as Germany delivers every year from its onshore wind installations alone. Our record is not one of dynamic achievement and growth. Indeed, the international assessment and that of the Audit Commission suggests that the renewables obligation has historically been an expensive mechanism for delivering little apart from big subsidies to existing energy companies. To break out of that trap, we need to engage with mechanisms that have a track record of working.
My hon. Friend and colleague the Member for Morley and Rothwell (Colin Challen) pointed out that the Germans have not taken action simply to be ecologically pure, but have also been driven by clear economic self-interest. One of the architects of the German scheme, a politician called Herman Scheer, has twice been to the House of Commons to try to discuss the precise economics with parliamentarians. One can summarise it simply: since the introduction of the feed-in tariff legislation nearly four years ago, Germany has created 250,000 new jobs in the renewable energy sector. That industry has a turnover of almost £25 billion. Germany is considering setting its own targets, which double the 2020 commitments of 20 per cent. of energy coming from renewable sources because it is already well ahead of the game.
Far from the feed-in tariff system costing the German Exchequer money, reports to the federal Government last December pointed out the huge gains through the sector’s driving reductions of energy charges into the system.
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Moreover, talking to German citizens makes one realise that a momentum has been unleashed that we would do well to understand and encourage here. I have visited several German cities to examine the operation of feed-in tariff systems. When I asked the mayors what their biggest problem was, they replied, “Keeping up with citizens’ demand.” Such is the momentum that, in the previous German elections, not one political party would countenance revoking feed-in tariff legislation because that would have been an act of political suicide. The current joke is that Germans will put a solar panel on anything that does not move. If a dog is asleep in a garden for half an hour, it will wake up with a solar panel on its back.
In Munich alone, there are 1,200 citizens’ solar clubs. The momentum gains pace, driving down the unit cost of solar installations and driving up the proportion of energy that renewable sources provide.
Jeremy Corbyn (Islington, North) (Lab): When the system was introduced in Germany, was there much opposition from the energy companies, which faced competition, and is the same happening in this country?
Alan Simpson:
I discussed the matter in last year’s Budget debate with my right hon. Friend the Member for East Ham (Mr. Timms) when he was a Treasury Minister, and it was suggested that the scheme was contentious and unpopular in Germany. I asked the German Government whether that was the case and they said that it was not unpopular with the public or
the political parties but that there had been some trouble with the energy companies. In the previous year, the federal Government or municipal government had to take energy companies to court on approximately 150 occasions for failure to comply with the law. On each occasion, the public won and the energy companies lost. Energy company interests were the most contentious part of the programme. That is a lesson for us in the UK. We have found ourselves too deeply enmeshed in the large-scale corporate interests of a feeding system for the big energy companies, which has not necessarily fed the momentum for change to renewable energy systems throughout the UK.
Fortunately, none of the challenges in Germany about state aid and market distortion was upheld by the courts. The European Court ruled that the feed-in tariff system constituted a perfectly legitimate way to create a dynamic market with a different competitor base. I believe that we must make that intellectual shift.
However, the debate goes beyond traditional terms. The focus has mainly been on electricity generation. Friends of the Earth, the Renewable Energy Association and other non-governmental organisations put a wonderful advert in the national newspapers last week. It tried to capture the contrasts between the UK and Germany through a different perception of our traditional Anglo-German rivalry. It depicted a mythical Euro solar league, with a shoot-out. There was a goal with lots of footballs in the back, an England goalkeeper in a state of despair and a scoreboard that read, “Germany 200, England 1”. That is the ratio—200:1—of installed solar generating capacity between the two countries. [ Interruption. ] Yes, there was mention of 1966.
If we widen the focus, the comparisons are even starker. We do just as badly in other aspects of the renewable energy sectors. By the end of 2007, the UK had installed approximately 80,000 solar thermal energy units; in contrast, Germany had more than 1 million. By the end of 2007, the UK had installed approximately 1,000 heat pumps, while Germany installed 44,000 heat pumps in 2006 alone. The contrast in solar photovoltaic energy is between around 2,500 solar roofs in this country and 300,000 in Germany. The UK has 150 wood pellet boilers and Germany has 70,000, while the UK has 17 biogas plants and Germany has 3,800. All that has happened relatively recently, in the past three to four years.
I want to widen the focus of the debate from just electricity to what we do about renewable heat and renewable biogas. We had a public meeting on that last night. Some interest was generated when it was announced that BERR had a team on heat. [ Laughter. ] Eyes watered and people made discreet inquiries about what exactly that meant. That team is looking into the issue.
Let me address the practicalities of what is already done through feed-in tariff regulations in Germany in those 3,800 biogas plants. Essentially, in our system in the UK, the only way someone trying to reclaim methane from waste—whether it be food, farm or animal waste, or sewage—can receive any assistance or recognition is if the waste is converted into energy at the plant. That means that the producers of the energy are left with heat at a remote location and huge infrastructure costs in transmitting heat back into the towns or cities where the waste came from.
The Germans said, “Why waste all that effort in creating the ducting for heat? Why don’t we just put it back into the system as gas and allow people to take the credit at the point at which they convert the gas back into energy?” The Germans allow that process to take place at combined heat and power plants that are located in the communities that provide the waste in the first place.
The scope for that process is vast. To put it in context, half the food currently produced in the UK ends up as food waste. A study conducted in Germany at the end of last year calculated that if, at the European level, we used food, farm and animal waste, and perhaps even sewage, for the production of biomethane that we then fed back into our gas systems, by 2020 the entire EU could be economically non-dependent on Russian gas. That is the scale of what is possible. However, we have to make the shift, by changing the rules in order to provide the incentives that will at least allow that to happen.
At a time when Centrica is already telling us that it will not be able to control future gas prices, because we now have to buy gas on an international market, which drives prices up, German companies can offer their customers gas prices that will not rise other than by the retail prices index, because that gas is being generated from their waste.
It has also been pointed out that two forms of waste come out of the biogas production process. One is a solid fuel waste, which is a farm-grade fertiliser, which the companies are supplying back to the farms. Again, we should bear in mind that fertiliser prices doubled for UK farmers last year alone. The ability to supply fertiliser back to our farmers has an economic virtue in itself. The second form of waste is a liquid waste, which turns out to be a biofuel. The Germans are using that biofuel to drive the vehicles to collect the waste from people’s houses in the first place.
That is the sort of virtuous circle that is unleashed as a result of making that shift. The sense of empowerment in the process is driven by that community involvement. Hermann Scheer made an additional point, to which the Minister and the Treasury ought to show some sensitivity. More than 90 per cent. of investment in the renewables process in Germany comes from individuals, communities, public authorities and the business sector. Why? Because they can all be stakeholders in the process and because they receive payments from it.
We have locked ourselves into a system in which those who are willing to go down that path refuse to do so without Government subsidy. However, the Germans and almost 50 other countries are showing that it is possible to make the change in a completely different way—one that makes little or no impact on the Exchequer and delivers huge savings and growth in the economy as a whole.
Dr. Brian Iddon (Bolton, South-East) (Lab): As my hon. Friend knows, I raised this issue in Committee. The Government’s response was twofold: first, that there is a pressure problem in feeding biogas into the British mains system; secondly, that biogas has impurities that have to be removed. Has he studied those two issues in the German context, and what can he tell our hon. Friend the Minister about them?
Alan Simpson: I have indeed looked into the problem. The German biogas plants have said that they need over 91 per cent. purity to meet the purity standards for biomethane. However, they are delivering methane into the system at 95 per cent. purity, so purity is just not an issue. Accessing the system is a relatively minor technical problem. The greater problem is a political problem and concerns whether we should require the system to be open to inputs in the way that the German system is. The key is an acceptance of the need for a progressive shift to decentralised energy systems.
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The economic arguments against feed-in tariffs do not stack up. I have repeatedly asked the Minister and the Departments to come up with the figures to justify that. I am happy to have them tested against other, international experience of doing what we are told is not possible in Britain. So far I have not had that evidence, but if we are making a claim, we ought to stand it up to be tested.
Mr. Charles Clarke (Norwich, South) (Lab): Is my hon. Friend aware that utility companies such as Anglian Water in my constituency, which has a sewerage plant outside the constituency, are taking steps of the kind that he describes, which are making a difference? However, Anglian Water feels that the renewables obligation certificates system, current arrangements and incentives work against its developing in that way, and that it would need some kind of incentive, of the type described in the new clause, to take that work forward. Such companies, which operate at a bigger level than microgeneration, need some form of incentive to encourage that kind of work, which they want to do.
Alan Simpson: I understand that. The problem is that such companies would lose their entitlements to ROCs if they were to put the gas back into the system and take it out where it is needed, yet that is the most coherent way of doing this. There has to be a change of rules.
It is important that the House understands that the potential gains apply far more widely than just to the big energy generators. We brought some of the German companies across to talk to communities in the UK. Some of them are able to say, in relation to some areas, “Not only will we build the biodigester plant for free, in exchange for a 10 or 15-year contract to reprocess the waste, but we will enter into partnership agreements with the citizens who are our customers. If they supply the waste, we will pay them for it and convert it back into energy.” That is what the feed-in tariff allows them to do. It allows citizens to become the drivers of the agenda for change. What is more, it delivers change on a scale to which the UK does not even aspire. In Germany, last year, that measure alone delivered 97 million tonnes of carbon savings. That is 10 times the UK’s aspirational target, which we are nowhere near delivering. Perhaps we do not have big enough dreams.
Dr. Whitehead:
Does my hon. Friend accept that different forms of incentive are needed to ensure that renewable gas is either put into the system—which I think is the right way forward—or used in a way other
than indirectly to get ROCs by generating electricity? Such incentives either already exist under the current RO system or could easily be organised using a feed-in tariff that would apply primarily to microgeneration. Does he think that either a renewable gas obligation or some form of obligation concerning the efficient use of heat would be appropriate?
Alan Simpson: That is a legitimate point to address. One of the great virtues of the new clause is that it gives the Minister and the Government a year in which to address the specifics. There is nothing to bind the Minister to a particular scheme or set of thresholds. Indeed, it invites him to explore as widely as possible what are the most appropriate ways of dealing with renewable electricity, heat and gas. It is an invitation to come up with the most appropriate schemes. I cannot see why there is a reluctance to engage with that, given that the only commitment that is required is to say that we will come back within a year with something that will deliver change, rather than continually consult on the process.
Jeremy Corbyn: In his suggestion, will my hon. Friend make it clear that his definition of biofuels involves the use of food waste, farm waste and other forms of waste to generate gas with which to generate energy, rather than crop-related biofuels, which are very damaging to food supplies in general?
Alan Simpson: Absolutely. It is important to recognise that we should not go down such a damaging path. The displacement of food production from agricultural land for fuel-based production would be disastrous. We can address the issue by managing our waste. For those who have missed that dimension of the issue, it is worth pointing out that when the 2010 EU directive on landfill comes into effect, the UK could end up with a daily bill of £300,000 under our current waste framework, because we have not come up with solutions to deal with our present waste levels. The proposal offers all sorts of ways out of the problem.
Mr. Hugo Swire (East Devon) (Con): On that very point, does the hon. Gentleman agree that there is some confusion among the agricultural community? At one point they were encouraged to grow alternative crops in order to feed the fuel need, but they are now being told that that is the wrong thing to do. I appreciate that the hon. Gentleman is talking about something marginally different, but this is a very significant point, because the agricultural community is now in limbo, not knowing whether to grow those crops or not.
Alan Simpson: That is a perfectly valid point, but again I would draw colleagues’ attention back to the comparison with Germany, where the farmers are part of this process. Some farmers grow crops and have solar panels; some farmers rear livestock and have solar panels; some have set-aside and solar panels. Huge amounts of renewable energy from the sun are thus coming from the farms and farmers of Germany. If we are examining the dynamics of a rural agenda to address both food and energy security, all the lessons in how to do so are there within the feed-in tariff structure that is already in place in Germany.
Let me finish with this point. The great message that I want the Minister to hear is that all parties throughout the House have stood solidly alongside each other on this issue, inviting the Government and the Minister to take hold of the reins and give a lead in the knowledge that there will be no political division. There should be no political division, particularly around an issue that the Government will in any case be forced to accept within a year. My concern is that I want to be part of a Labour Government who do not have to be dragged kicking and screaming into the present, let alone the future. That is why I ask the Minister yet again to take over the ownership of the new clause and incorporate it into the Bill, to continue the process of taking forward an issue that unites the whole House, and probably the whole country, in a real dynamic that will give us a sustainable energy future.
Charles Hendry: I begin by paying tribute to the hon. Member for Nottingham, South (Alan Simpson) both for tabling the new clause and for the immensely authoritative way in which he introduced it. He spoke about the importance of having Lily Allen and other celebrity endorsement. For many people, however, he is the star of this debate—[Hon. Members: “Hear, hear.”] He has been the driving force, putting the issue on the agenda so that it is no longer peripheral but absolutely mainstream to the whole energy debate.
As the hon. Gentleman said, we need to see the issue against the background of the immense challenge we face. If we are to come close to the European target of getting 20 per cent. of our energy from renewables by 2020, it translates into securing about 40 per cent. of our electricity generation from renewables. That is an immense challenge, but given our overall needs for renewable energy, not just electricity, it is a huge mountain that we have to climb. If we are to succeed, we need every bit of help we can get. It means having onshore and offshore wind; it means exploring the potential of the Severn barrage.
On Monday, I was looking at the barrage in La Rance in France to see what lessons we can learn from it. We need to look into biomass, solar, thermal and ground sources, air source and heat pumps, and we need to look fundamentally at microgeneration. Our vision should be to make as many households as possible not consumers but generators of electricity. That is the nub of the whole debate.
Ten years ago, the UK and Germany started from the same low base in respect of generating electricity from renewables. Today, whereas we get 2 per cent. of our energy from renewables, Germany gets 8.5 per cent. That was a 1 per cent. increase in just one year in the amount of energy Germany gets from renewables—the same amount that we got over a 10-year period. The key to Germany’s success was the adoption of feed-in tariffs, which helped to drive the programme forward. There should be no doubt that the issue is of interest to more people than just politicians. There is widespread political interest in it, but all the experts in the sector looking at the issue from outside are also pushing in this direction. Today, Terry Barker, director of the Cambridge centre for climate change, which is engaged in mitigation research, and other experts published a letter in the Financial Times. It says:
“The policies of the UK government to support the development of renewable energy have seen it become one of the worst-performing countries in Europe and stand no chance of getting the UK to meeting its share of the EU target.
We urge the government to adopt a feed-in tariff policy, which has proved so successful in other countries.”
The Energy Saving Trust, set up by the Government, has said:
“We would welcome enabling measures in the Bill to introduce a feed in tariff and signal the Government’s positive approach to encouraging domestic microgeneration.”
Solarcentury, which has campaigned effectively on the issue, has said:
“Throughout Europe, renewable energy feed-in tariffs are a proven and cost effective measure for promoting the rapid uptake of wind, solar, biomass and other technologies. Feed-in tariffs are the principal support mechanism for renewable energy in 22 European countries.”
The National Farmers Union has also given us advice and support.
The key point is that the new clause does not adopt a prescriptive approach. It is an enabling measure which allows the fundamental decisions to be made elsewhere, and by the Minister in due course. A submission that we received from the Renewable Energy Association states:
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