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“and feed-in tariff price support suggest that feed-in mechanisms achieve larger deployment at lower costs. Central to this is the assurance of long-term price guarantees...the levels of deployment are much greater in the German scheme and the prices are lower than comparable tradable support mechanisms”.
“Contrary to criticisms of the feed-in tariff, analysis suggests that competition is greater than in the UK Renewable Obligations Certificate scheme. These benefits are logical as...uncertainty...discourages investment and increases the cost of capital as the risks associated with the uncertain rewards require greater rewards.”
In other words, the price guarantee delivered by feed-in tariffs offers a better environment for investment. The investment that has been delivered in Germany is striking, as it has engaged a far wider array of investors than the traditional energy companies. The
Renewable Energy Association has pointed out that just 10 per cent. of investment in the German feed-in tariff scheme has come from the major energy companies, while 90 per cent. has come from private individuals, private investors and municipal energy companies.
That is a remarkable opportunity and a key part of the success of the German scheme. That is why the German Federal Environment Ministry expects the scheme to save 52 millions tonnes of CO2 in 2010 alone, and why Germany has 10 times more wind power than us, according to Greenpeace, and 300 times more solar power. That is why Germany benefits from 170,000 people working in the renewable energy sector, which is worth €8.7 billion to its economy.
If Stern is not enough, there is further Government-commissioned advice. Their specialist low-carbon technology agency, the Carbon Trust, has also addressed feed-in tariffs. Its July 2006 report said:
“The most efficient solution in terms of cost per unit of energy and achieving maximum offshore wind capacity by 2015 involves moving away from the current RO towards a fixed mechanism... Feed-in tariffs have been proven to be successful elsewhere (Spain and Germany) in generating significant deployment of low-cost renewable energy. The analysis suggests that a Renewable Development Premium”—
“in the UK will result in 8.8GW of additional wind capacity by 2015, when combined with additional funding... This is c.3.5GW more wind capacity than the base case representing the current RO policy”.
If all the work, the views of the agencies and the consultations are not enough, will the Minister listen to the Secretary of State? On Second Reading, he said:
“Germany has benefited from a consistently supportive policy for renewables since the early 1990s, and it is paying dividends. That clarity and consistency of approach has been a big part of Germany’s success, which we celebrate with our German colleagues...UK renewables investors have highlighted certainty and consistency as two of the factors that will be crucial to continued and rapid growth and development of renewables in the UK.”—[ Official Report, 22 January 2008; Vol. 470, c. 1368.]
Kelvin Hopkins (Luton, North) (Lab): On that basis, can the hon. Gentleman explain why the Government do not now simply imitate precisely what the Germans are doing?
Martin Horwood: There are differences between the German and British energy markets; for example, we have a more deregulated and liberalised market. However, if the hon. Gentleman is suggesting that we should move towards the German model much more quickly, I entirely agree.
I give due credit to the Minister because, in Committee, he seemed to be moving in the direction of feed-in tariffs. However, in the words of the hon. Member for Nottingham, South, we need quickly to unleash much greater momentum. I am afraid that the Minister must move considerably faster, and new clause 4 is the method by which he can do that.
Paddy Tipping:
The hon. Gentleman is right that the Minister was encouraging in Committee about feed-in tariffs. However, does he agree that the renewable obligation and feed-in tariffs can work in tandem?
Given that, surely careful thought is needed about how they can be introduced so that those things work together effectively.
Martin Horwood: I agree absolutely. During the Committee’s evidence sessions, we specifically asked several expert witnesses whether the renewables obligation could continue alongside the introduction of feed-in tariffs, and the consistent view was that it could. Care must be taken with the introduction of such tariffs, but that is why the hon. Member for Nottingham, South has wisely included a provision in the new clause for a 12-month lead-in time. If that is not enough, we are doing something fundamentally wrong. If the Minister accepts new clause 4, he can really start to put his foot on the accelerator, if that is not an inappropriate phrase for a low-carbon debate.
Let me touch on several other measures in the group. New clause 11 was tabled by my hon. Friend the Member for Somerton and Frome (Mr. Heath) and my neighbour, the hon. Member for Stroud (Mr. Drew), who has been a controversial figure today, although he can make many welcome contributions to the green debate. New clause 11 highlights a problem with not only hydro-microgeneration, but the 50 kW definition for microgeneration, which is causing arguments in the wind energy sector. We need a flexible and adaptable approach to renewable energy that recognises real opportunities such as those offered by micro-hydro. It would be wonderful to see a traditional and highly environmentally-friendly form of energy coming back into wider use in a new and modern form, so I welcome new clause 11.
I also welcome the Conservatives’ new clause 17, which, as I understand it, would raise the cap on the amount that the Government can spend on promoting renewable energy. That reflects the fact that surplus funds are building up at the Non-Fossil Purchasing Agency. Amendment No. 1, tabled by the hon. Member for Angus (Mr. Weir), touches on an important issue raised by my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso). There is genuine concern that innovative businesses in renewable energy may be put in an impossible financial situation. I am sympathetic to the issues raised by my hon. Friend and the hon. Member for Angus.
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New clauses 20 and 21 and amendment No. 65 are welcome improvements to the Bill, and we would happily support them. Indeed, amendment No. 65 appears to be modelled on a Liberal Democrat amendment tabled in Committee. The amendment is designed, as the hon. Member for Wealden (Charles Hendry) rightly pointed out, to keep Government reporting to fixed timetables, and to ensure that reporting is clearly focused on the Government’s progress in supporting renewable energy. That is needed more than ever. Renewable energy offers us the opportunity to have many new, clean sources of power, to have a more efficient, decentralised and resilient energy system, and to make an important contribution to the battle against climate change.
The Government need to grasp the urgency of the situation. I would love to quote a lyric from the Lily Allen song “Alfie” that sums up exactly what is needed, but it would certainly be unparliamentary language.
The gist of it is that there is an urgent need to dismiss distractions and get on with what really needs to be done. I agree with the hon. Member for Wealden that new clause 4 is the single most important opportunity to ensure that that happens that we are being offered today.
Mr. Dai Havard (Merthyr Tydfil and Rhymney) (Lab): I will not detain the House long. I have been struck by the fact that, as I am opposed to nuclear power being developed, I face the discipline of having to consider all the other forms of energy that might make up an efficient energy mix in future. I have considered what my hon. Friend the Member for Nottingham, South (Alan Simpson) said about feed-in tariffs; he explained better than I could that they are efficient, help to ensure security of supply, and help to produce a plurality in the energy market that would otherwise not be there.
I am also struck by the idea that if we are not careful we will construct a process that is very much in the hands of big power, whether that is nuclear power or any of the array of providers that will be in place. The process that my hon. Friend outlined involves a democratisation of the argument; I wish that he had said a bit more about that. New clause 4 would bring local people into the process in a different way, and would produce a plurality in the market that could generate efficiency. To people who are interested in competition, I add that it would create greater, better and efficient competition.
Some of my hon. Friends are concerned about how the measures fit with the other obligations. As I understand it, new clause 4 says, “Go and consider the issue for 12 months, and come up with mechanisms that produce not conflict but co-operation and collaboration that results in the best of both worlds.” I would have thought that the term, “a third way”, might have been tempting for some Labour Members. The new clause also does other things: it imposes a discipline on us to ensure that what I have outlined happens. I say to my hon. Friends that the review in the summer and the other measures mentioned are necessary—in fact, they should happen in any event; they are just matters of efficiency—but if the new clause is added to the Bill, it will provide the discipline that will ensure that things happen in a structured way. It will give the House the capacity to understand, monitor and control the process, so that it comes back to us.
Let me reinforce the point that the new clause is one way of ensuring that, in future, individuals can understand where they are, in terms of the consumption, supply and generation of electricity, because it allows communities to get involved, as well as individuals. It allows collective capacity; it is not just about an individual putting a windmill on their roof. The measure is about communities, planning, consent, and co-operation. To me, the democracy argument is as important as the efficiency argument.
Mr. Weir:
I support new clause 4, which was so ably introduced by the hon. Member for Nottingham, South (Alan Simpson). He said more about it than I could ever say, so I shall move on to my amendment No. 1, which is much more technical and deals with the interaction
between research and development grants and renewables obligation certificates for certain projects.
There is a concern that efforts to avoid giving projects double help may put in doubt the future of some projects. That was suggested to me by those who were involved in the DOWNVInD programme, which I am told is one of the largest renewable energy research and technology development programmes in Europe. The project is funded by Talisman Energy and Scottish and Southern Energy, with significant contributions in kind from many of its 18 other participants from seven EU countries.
I understand that in addition to private capital, the project received research funding from the European Commission’s sixth framework research and technology development programme, the then Department of Trade and Industry’s new and renewable energy programme, and the Scottish Government’s science and technology development programme. The public sector support for the project was predicated on the observation that offshore wind was an emerging technology confined to shallow near-shore waters.
The DOWNVInD programme was essential to move the offshore wind technology to deeper waters more distant from shore, and was obviously looking to the future of offshore wind. That was noted in the then DTI’s grant offer letter, which stated that
“the project is high risk, and does present an opportunity to better understand the economic and technical prospects for offshore deepwater windfarms”.
The problem is that, because of the way the subsections that I am seeking to delete from the Bill are written, as the project has received public sector grants, it might not be able to take up the new banded ROCs. Special arrangements will apply to projects in receipt of capital grants, but that would mean that if projects qualified for up-banding, they would have to pay back some of the research grant, as proposed new section 32E(5)(a) sets out:
“if the grant or any part of it has been paid, to repay to the Secretary of State the whole or a specified part of the grant or part before the repayment date”.
The result of that would be that projects that received ROCs would have to repay grants.
I am told that the proposal was originally aimed at post-demonstration projects in receipt of capital grant, such as the round 1 offshore wind projects. However, the wording means that projects such as DOWNVInD would become subject to the regulations and would no longer be able to get ROCs. They would never be able to move beyond the demonstration stage because they would be unable to produce energy and get the benefit of ROCs.
Mr. Swire: Does the hon. Gentleman agree that although the UK is a world leader in marine energy technology, the incentives for the offshore ROCs, as opposed to the other mature technologies, are so few that they do little to incentivise the offshore technology?
Mr. Weir:
Indeed. Onshore wind is now a mature technology, and that is recognised in the proposals for the new ROC bandings, where it will remain at one ROC. We need to incentivise emerging technologies such as deep-water offshore wind—but not only wind technologies. The hon. Member for Cheltenham
(Martin Horwood) mentioned the concerns of his hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) about tidal projects in the Pentland firth, which have huge potential but need the capital funds for research and development in the first stage. If they are to produce electricity, they need access to the ROC procedure. However, under the provisions as written, that would not happen. I ask the Minister to reconsider that point and not to put at risk projects such as DOWNVInD and the tidal and wave development project in the Pentland firth. Such projects require the grants to get off the ground in the first instance, but they also need the support of ROCs, as do those involving other renewable technologies.
I turn briefly to new clause 20, which is in the name of the hon. Member for Brighton, Kemptown (Dr. Turner). It refers to transmission charges. It would not do for an Energy Bill to pass without my talking about such charges; I seem to have been doing that for years in this place. I support what the hon. Gentleman is trying to do. I shall be interested in what he says about the new clause; if I read it correctly, it seeks to end the discrimination in transmission charges. That has been a matter of huge concern to many of us in Scotland for many years.
Although Scotland has huge potential for renewable development, there is a problem with the transmission charges and how Ofgem has developed them. It means that there is discrimination against projects in remoter rural areas; it is considerably more expensive to transmit energy from such projects than it is from developments in, say, the south-east of England. If the intention behind the new clause is to do away with that discrimination—and I think that it is—I wholeheartedly support it. I hope that the Minister will take it on board and finally deal with the matter, so that I no longer have to stand here and talk about transmission charges and I can move on to something else.
Dr. Desmond Turner (Brighton, Kemptown) (Lab): I must confess to a grave feeling of personal disappointment with the Bill, because it is being published at a time when Parliament has thoroughly recognised the vital importance of combating climate change and, I hope, of promoting renewable energy, which is one of our most potent weapons for fighting climate change. I am disappointed because this legislative vehicle has nothing to promote renewable energy, with the exception of the banded renewables obligation certificates, which are welcome. However, that is only one measure, and we need a comprehensive policy framework. New clauses 4, 20 and 21 form part of a proposed comprehensive framework. Clause 19 would have been another part of it had it been selected by Mr. Speaker.
I should like to express my support for new clause 4. The banding of ROCs goes some way towards doing what feed-in tariffs do in Germany. However, the ROCs are still expensive to administer and still provide uncertain value; the redemption value of a ROC is not fixed, so there is still investment uncertainty. It is still worth considering feed-in tariffs not only for microgeneration, for which they are clearly the only workable approach, but as a parallel mechanism for larger, commercial-scale generation. Existing generators could elect to stay with ROCs and new generators could have the option of
going either with ROCs or a new feed-in tariff system. There is no need for conflict. Another great advantage to feed-in tariffs is that they do not cost the Treasury a bean, whereas operating the ROC system is very expensive to the public purse.
Mr. Gregory Campbell (East Londonderry) (DUP): In light of the cross-party support for new clause 4 that has been heard in the House, would not the Minister bring great credit to himself and display great courage by adopting it as a policy?
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Dr. Turner: I thank the hon. Gentleman for his suggestion. I was going to put that point to my hon. Friend in almost the same words when I finish.
It does not matter whether we have feed-in tariffs or ROCs, as this is not the only policy instrument that is necessary if we are to get the large-scale and rapid deployment of renewable energy that we need. That is not the sole secret of Germany’s success—it is just one measure contained in the German Renewable Energy Sources Act, which also contains many other vital provisions. New clause 20 would carry out the proposed EU renewable energy directive, which is itself based on the German Act. The two most important provisions concern grid access. In this country, we have the bizarre situation whereby 15 GW of totally approved wind generation cannot get access to the grid, and will not get access for many years. That is a totally unacceptable situation that we must do something about if we are getting serious. New clause 20 proposes that there should be guaranteed access to the grid for renewable generators. If that means that the grid needs to be strengthened or reinforced or to have new lines laid, then so be it—the grid operators would have to do that. They would have to raise the capital in the normal commercial way, and Ofgem would have to approve it. That is what happens in Germany, and it works. The grid operators may grumble, but they do it.
It is no good if the generator is installed and connected if its output is not maximally used. If we want to maximise renewable energy, the output of a renewable generator should have a priority call on the grid whenever it is generating. That is the provision in the renewable energy directive and the provision that holds good in Germany under the Renewable Energy Sources Act, and that is what new clause 20 would provide. Whichever financial incentive mechanism we use, whether multi-banded ROCs or feed-in tariffs, if we do not have the facility to take the electricity and use it, it is of no value. We need a comprehensive framework.
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