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New clause 21 is drafted with the Scottish situation in mind, as I am sure the hon. Member for Angus (Mr. Weir)—I am delighted to have his support—will remember from remarks made in the Committee considering the previous Energy Bill. When the British electricity trading and transmission arrangements were introduced in the Energy Act 2004, we got zonal transmission charges. The effect of zonal transmission charges is that a generator is penalised for its distance from a notional centre of consumption in the system. The further away the generator is, the more it pays in transmission charges. We are talking about incentives, and the incentivisation under that system would be to
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concentrate generation at some notional point about 50 miles north of Birmingham, where renewable resources are not at their strongest. I do not think that it is to be recommended.

The most potent bits of our magnificent renewable resources, such as offshore wind, wave and tidal stream, happen to be geographically located a long way from a central point north of Birmingham. They are also technologies that at the moment are commercially difficult because they are expensive, because of their situation and, in the case of wave and tidal stream, because they are emerging new technologies—the first commercial tidal stream machinery has only just been installed. Naturally, such technologies cannot match the cost of other generating technologies at this time. Investment decisions, therefore, will have to be finely balanced. To add 2p or 3p per kW extra in transmission charges could be the straw that breaks the camel’s back, and such investment does not happen.

There is a real disincentive built in to the BETTA system. There is a mechanism for dealing with the matter in section 185 of the Energy Act, and new clause 21 would amend that. Section 185 provides for a power to cap transmission charges and the Secretary of State can do that by nominating one—only one, as the Act is currently drafted—specific zone for the production of renewable energy. However, it may be necessary to have more than one. Subsection (2) of the new clause would replace “a” with “any” so that the Secretary of State has freedom of choice. He can select any of several, or more, suitable areas to which to apply the capping powers. The other deficiency in section 185 is that it contains sunset provisions. The import of three of its subsections is that the capping protection cannot last for more than 10 years. That will not give investors any confidence in commercial stability either. I found that provision difficult to understand at the time, and equally difficult now.

Mr. Weir: Is it not also the case that 10 years is one period? It depends on when the generator starts generating in that 10-year period; for individual generators, it could be much less than 10 years.

Dr. Turner: Exactly. That is why I said a maximum of 10 years’ protection. I see no justification for the sunset provisions at all, in all logic, so I wish to remove them. We would then have a reasonable protective measure that would fulfil what the Government probably intended when they drafted section 185 of the 2004 Act.

I submit to my hon. Friend the Minister that there is no reason for delay in legislating to get rapid deployment of renewable energy. We need a comprehensive set of measures; new clauses 4 and 20 are clearly central to that process. Without new clause 20, new clause 4 will not be fully effective. New clause 21 is a further addition, and new clause 19 was not selected but refers to Ofgem’s responsibilities. Ofgem plays a pivotal role and if its primary responsibility is sustainability, it will make a huge difference. I will not expand on that because new clause 19 was not selected, but its purpose needs to be kept firmly in mind.

I appeal to my hon. Friend the Minister to recognise that the Government’s best course is to accept new
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clauses 4, 20, 21 and others. There is no question of party advantage, but potential for great advantage for the country. I therefore strongly urge my hon. Friend to accept the new clause.

Mr. David Heath (Somerton and Frome) (LD): I want to speak about new clause 11, which deals with hydro-microgeneration. Before doing so, let me express my enthusiastic support for the new clause and the remarks of the hon. Member for Nottingham, South (Alan Simpson). If the new clause were accepted, it would do some of what I am trying to achieve in stimulating the growth of hydro-microgeneration.

It is frustrating that we appear to spend so much time in this country hugging ourselves, congratulating ourselves and telling ourselves how wonderfully wise, green and environmentally friendly we are and that we are world beaters, when much of the outside world passes us by and gets ahead of us through mechanisms that are available to us if only we would use them. I say to the hon. Member for Southampton, Test (Dr. Whitehead) that I see no purpose in agreeing with an amendment and then letting it lie on the table. It should not lie on the table; it should be activated. The Minister would be advised to accept the new clause today.

I do not pretend that hydro-microgeneration is the answer to all our renewable energy problems—of course it is not. It is a small part of the portfolio of renewables that we need. Patently, not everybody has a house on a river with a mill. Hydro-microgeneration will not therefore be a huge contributor, but it is part of the process. I am a great believer in decentralisation and finding small solutions and putting them together to make a big difference.

Hydro-microgeneration represents a small but significant part of the renewables market. I had the great pleasure of helping to open a new facility in my constituency last year. Tellisford mill is an old water mill in a beautiful place. Anthony Battersby and his wife Rachel have done a wonderful job in investing in a new water turbine in the mill. They not only provide energy from a renewable source but are socially and environmentally aware in being good neighbours. The mill is not like some renewable energy sources, with which people have a problem. We are considering an old mill, which is being used for the same purpose for which it was used 200 years ago, and that is good. It produces renewable energy for 65 houses, which is good news.

The Mendip Power Group has a series of mills along the River Frome. When they are fully operational, they will provide 2,100 MWh, which is a significant contribution. The Mendip Power Group is one of three such groups in my immediate area. We also have the South Somerset Hydropower Group and the Stour and Vale Hydro Group, which is based in Dorset. Between Somerset and Dorset, more than 100 water turbines provide renewable energy. However, everyone involved in the process says that the difficulty of getting past the existing bureaucracy is such a disincentive that they often feel as though they are banging their heads against a brick wall. I want to illustrate and address those frustrations in my remarks.

4.45 pm

Mr. David Drew (Stroud) (Lab/Co-op): Will the hon. Gentleman give way?

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Mr. Heath: I will of course give way to a co-sponsor of my new clause 11.

Mr. Drew: I am pleased to co-sponsor new clause 11. Does the hon. Gentleman agree that another issue that we should examine closely is flood prevention? Much as we need to generate electricity—that is the point of new clause 11—if we get that right, we will also remove the flood risks that will inevitably follow if we do not manage the water properly.

Mr. Heath: The hon. Gentleman is right. A sensible community would manage a whole river basin in a much more sustainable way than we do now. We are trying to do that in Somerset and some other parts of the country, but that means taking energy from the river, using appropriate storage of water to prevent flooding and using the entire ecosystem in a water basin in the most effective way, so the hon. Gentleman is right.

What are the current difficulties? The Minister knows what they are, because I have written to him, as have those who operate the mills, who have also had meetings with his Department and tried to explain the issues. The principal issue is the definition of microgeneration for hydro power. We have mixed definitions of the maximum allowable in microgeneration, but the most effective one, including in respect of the renewables obligation certificate, is a maximum of 50 kW. However, a great number of water turbines generate between 50 kW and 100 kW. I accept that 50 kW is a perfectly viable maximum for many renewable sources; one would need quite a large photovoltaic array on top of one’s house to reach 50 kW. However, that is not a large figure for a water turbine. Indeed, at its best, the technology used in the new water turbines generally produces more than 50 kW.

We conducted a survey of the 100 or so mill installations that I have mentioned in Somerset and Dorset. That survey could be taken as proving the Government’s point. The majority of those mills—89 of them—generated less than 50 kW and only 13 generated more. However, those 13 generated more electricity than the other 89 put together. If we are interested in getting the maximum yield of renewable electricity, the 50 kW cut-off is absurd.

Because 50 kW is the cut-off for the double ROC, those who have installed such facilities or who intend to do so have a strange decision: either they run their installation at less than full capacity, in order to keep within the double ROC maximum, or they take a financial loss. What sort of policy nonsense is it to have renewable capacity, but run it at less than full capacity? There is of course an extra financial loss, because the 50 kW maximum is also used for the income tax exemption, so there is a double hit.

The other financial difficulty that many people face concerns the grid connection, which has already been mentioned. I am told that a 400 m connection can cost £16,500. That is a lot of money on top of the initial capital outlay already required. Oddly enough, mills are usually on rivers and are not normally very close to communities; therefore, there is an inherent cost in providing the infrastructure required to run a renewable installation.

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The second issue that I want to raise is the licensing regime. It seems that the Environment Agency has never talked to the energy Department, in whatever form it has taken, about what is needed. If one tries to get a water abstraction licence for one’s water mill, one might be told that one needs an abstraction licence, an impoundment licence or a transfer licence—one might even be told to get all three. All that for water that never leaves the river. It goes into a leat, is used by the turbine and is returned to the river. It is nonsense to call that an abstraction, yet all those licences are obligations, dealt with by the Environment Agency, that have to be paid for. One has to apply for them and go through all the bureaucracy that comes with that.

There is no consistency in the way that the system is applied. I have two mills in my constituency, one of which I have mentioned. Tellisford has an impoundment licence, while Stowford, which is a little further down the stream, has an abstraction licence. The mills do the same thing, but the Environment Agency is determined that they need different licences, whereas another mill on the same river, Lullington, needs all three licences. Surely, it is not beyond the wit of the Government to devise a single licensing regime for hydro-microgeneration that obviates what I describe, particularly given that water is not being abstracted.

Not only does one need a licence, but one has to report daily on abstraction. No water is leaving the watercourse, but one still has to report to the Environment Agency every day about how much water has been abstracted from the stream into the leat, and how much has passed back from the leat into the river. It is the same amount on either side. That is also nonsense. Each year, from every mill, 365 flow readings go to the Environment Agency, which I doubt is desperate for more work, but that achieves nothing because the same water is going in and out.

Another issue that the Environment Agency is very concerned about is reserved flow, but for all the reasons that I have given, there is no consequence from a mill stream taking water into a loop and then feeding it back into the main watercourse. The stream has probably done that for hundreds of years. That is not a new thing; it was there before the water turbine and will be there after it, but the Environment Agency thinks it an important thing to measure. Interestingly, an Environment Agency officer said to Mr. Battersby, who gave me this information:

That sums up the regime in which those officers are working.

The final subject that I want to talk about is fish. I do not want to be unkind to fish. They are very important, and I do not want to do anything that would be detrimental to the safety or health of the various species. The Environment Agency considers water turbines to be a major hazard to fish, even in a stream that has no migrating species. I understand the need to put facilities in a stream along which salmon or trout migrate and need a passage through a weir or need to bypass a turbine, but not if there are no migrating species. If the weir has been there for hundreds of years, the fish, if they have any species memory, will presumably know that it is there by now, and will use the main river course instead, rather than
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bump into the weir and hurt their snouts. That is not a serious issue. Why, then, does the Environment Agency expand it to become a major obstacle to the production of energy from this source?

I do not wish to detain the House any longer, but I want the Minister to understand that many people are desperate to invest in renewable energy and they have the means to do so in a way that is socially and environmentally responsible. They can make a real contribution—not the biggest contribution in the world, but a real contribution nevertheless—to providing energy into the system. Obstacles and impediments are in their way, which could be avoided if only the Department and the Environment Agency would take these concerns seriously.

I do not intend to press my new clause to a Division, but rather like that put forward by the hon. Member for Nottingham, South, mine provides a year for the Government to get their house in order and provide the necessary changes to regulation in order to accomplish what we all want. I hope that the Minister will not tell me just what is technically wrong with the new clause. I am sure that he can find something wrong with it, but that is not the point. My intention was to stimulate debate about one small sector of renewable energy that we could encourage to a much greater extent if we avoided the obstacles and made the fiscal arrangements more appropriate than they are now.

I would love it if the Minister were to stand up and declare that he supports the feed-in tariff proposal, and if he will not, I hope that the House will persuade him to change his mind. In the same breath, I hope that he will also look seriously at the issues in my new clause, and put in the necessary changes in order to stimulate this small but important sector of microgeneration.

Malcolm Wicks: This group of amendments covers a wide range of renewables issues, so I hope the House will forgive me if I am on my feet for some time trying to answer all the points raised. I would like to try to do justice to them and address as many of them as possible. I would like first to deal with the renewables obligation-related amending provisions; secondly, with issues related to transmission; thirdly, with the Government’s reporting on energy; and, finally, with the issue of feed-in tariffs.

The intention behind new clause 11 is, as we have just heard, to encourage the deployment of hydro-microgeneration. It proposes exempting micro-hydro installations from the licensing requirements set out by the Environment Agency. Those requirements were put in place for the purpose of protecting our rivers and wildlife. However, there is always a balance to be struck and I am aware of the micro-hydro sector’s concerns around the burdens that the regulations place on it. Those impacts are not always easy to assess, which is why I believe it is right to pursue a route to better co-operation between the industry and the regulator, rather than to disapply regulatory protections.

My officials are aware of the issue and they are keen to find a way forward, if possible, with the Environment Agency. For example, my Department has funded a project between the industry and the
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Environment Agency to develop a good practice guide on the environmental impact of micro-hydro schemes.

The new clause also proposes changes to the treatment of micro-hydro under the renewables obligation. The detail of how it is implemented is already set out in the Renewables Obligation Order 2006, which takes account of relevant differences between technologies, including hydro-generation. I believe it would be inappropriate—not to mention increasingly complex—for microgenerators to have separate regulations, as seems to be suggested, dealing just with hydro-microgeneration for the purposes of the renewables obligation.

Specifically on the definition of hydro-microgeneration, the bands for all technologies will be set out in the order and there is no need for either separate secondary legislation or a definition in primary legislation to deal with the issue. All the changes to the order, including the thresholds for support levels, will be subject to statutory consultation before introduction. My officials have met representatives of the industry to discuss these issues and have committed to consider them further in the light of a study that the British Hydro Association is carrying out on the scope for micro-hydro, so I believe that the right place for the industry and others to voice their concerns is as part of that consultation and not through this Bill.

Mr. Heath rose—

Malcolm Wicks: I was about to say that I hope I have provided the hon. Gentleman with some reassurance, but I give way to him now.

Mr. Heath: Very little reassurance, but the Minister has said that consultations will continue, which is welcome. May I point out to him that on his own Department’s website a micro-hydro plant is defined as being below 100 kW, not below 50 kW? I hope he will bear that in mind.

5 pm

Malcolm Wicks: The issue at stake is how that relates to the renewables obligation, but I hope I have given the hon. Gentleman the reassurances that he wanted.

New clause 17 amends the Sustainable Energy Act 2003 to increase the money available for spending on the promotion of renewables that is available from the non-fossil fuel obligation levy fund. That money arises from transitional arrangements introduced when the support system for renewable electricity generation moved from the non-fossil fuel obligation to the renewables obligation. Through the Sustainable Energy Act, we have already made available £60 million of the money arising from the NFFO transitional arrangements for spending on renewables.

I understand what hon. Members are trying to achieve in seeking to increase Government expenditure on renewables, but I think we should focus on the bigger picture and the Government’s existing wide range of support for renewables. Public sector funding for renewables and low-carbon technology innovation is increasing steadily, both in the UK and more generally in the European Union.

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