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Ms Katy Clark (North Ayrshire and Arran) (Lab): I strongly welcome much of what my hon. Friend says. It is clear that we are starting from a low base, as many
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European countries produce a great deal more renewable energy than we do. The lesson to be learned seems to be that feed-in tariffs have been very successful in many countries. Is my hon. Friend considering the application of such tariffs?

Malcolm Wicks: It is accurate to say that we are starting from a low base, but it is worth understanding the reasons for that. The fact that we have been blessed with huge amounts of oil and gas from the North sea and the UK continental shelf is one of the reasons why, historically, we did not invest in renewables. It is also fair to point out that, when we look at some of the nations that already produce a significant percentage of renewable energy, such as Germany, we see that much of that energy comes from hydro resources. As my hon. Friend knows, it is worth studying those comparisons. She also asked about feed-in tariffs. Our renewable energy strategy will be published soon, and we will say something about such tariffs in that.

There is much to be said for consistency in macro-renewables. We hear a lot about microgeneration; in terms of macrogeneration, the renewables obligation is, in my judgment, a success story. Every year now, we are seeing momentum towards renewable energy. We would have to think long and hard before changing horses and adopting another mechanism. We could lose a couple of years if we did that, and we are faced with targets that are coming up quite soon—in 2020.

Paddy Tipping (Sherwood) (Lab) rose—

Malcolm Wicks: Let me just finish this paragraph.

However, I said during the Committee stage of the Energy Bill—I repeated the point on Report—that, on microgeneration based in our own dwellings and perhaps in community buildings, including schools and community halls, there might well be a case for our doing more. I will not rehearse all the things that we are doing, but I am proud of what we have done. We are the first Government to publish a microgeneration strategy, for example, but there might well be a case for doing more. We will be outlining options in the renewable energy strategy. As I hope hon. Members know, I am very committed to the development of renewables.

Paddy Tipping: I am grateful for the “however”. May I reinforce the point that the renewables obligation has been a success, and that investment requires a sustainable, long-term framework? The renewables obligation and feed-in tariffs can work alongside each other. If there is an area of weakness in which the Government need to do more, it is around microgeneration.

Malcolm Wicks: That is an argument that I think I have accepted. Sometimes, the debate about feed-in tariffs needs disaggregating. Some people might argue for feed-in tariffs as an alternative, which would involve the scrapping of the renewables obligation. Many others, however, are essentially interested in how we can further incentivise microgeneration.

Steve Webb (Northavon) (LD): The macro story in this directive is that the EU as a whole has to achieve a 20 per cent. goal. If Britain were an average-performing country with an average target, we would be going for 20 per cent., but we are not. We have been
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asked to achieve only 15 per cent., and we appear to be quibbling about that, as far as I can see. Will the Minister clarify whether we are being asked for only 15 per cent. because we have been so hopeless as a result of starting from so far behind, or is it because we do not have much renewable potential? How does all that sit with his assertion that we are No. 1 in Europe for renewables potential?

Malcolm Wicks: As I said, when KPMG was looking at the investment climate, it made a judgment that we were No. 1.

In answer to the question from my hon. Friend the Member for North Ayrshire and Arran (Ms Clark), I was attempting to remind the House of the history of this matter. Looking at the different countries involved, we see that this has a lot to do with their natural resources. I have mentioned hydro, for example. It also has something to do with some countries not having our reserves of oil and gas. As I recall, the hon. Member for Northavon (Steve Webb) is something of an historian, and a fair-minded man. I would urge him to be fair-minded on this. Long before most of us were concerned about climate change, the oil and gas coming from the North sea from the 1970s onwards was surely a reason why, compared with some other European countries, we were not investing in renewables.

David Taylor (North-West Leicestershire) (Lab/Co-op) rose—

Malcolm Wicks: My very short speech is turning into something slightly longer, but I like to please my hon. Friends.

David Taylor: I am grateful to my hon. Friend for giving way. In my humble opinion, he is one of the most successful Energy Ministers that we have had. He has a couple of flaws, however: a regrettable affection for nuclear power, and a relaxed indifference to the impact of open-cast coal mining. Will he react to the points made by my hon. Friends the Members for Sherwood (Paddy Tipping) and for North Ayrshire and Arran (Ms Clark) about Germany? I am a member of the Select Committee on Environment, Food and Rural Affairs and, as part of our inquiry into the citizen’s contribution to climate change, we visited that country last year. There is a huge untapped well of potential support from citizens in this country, who need to be given sufficient encouragement. If a substantial feed-in tariff was at the root of what is happening in Germany, surely the Minister could be a little more positive about it here.

Malcolm Wicks: My hon. Friend is a great expert in this area, and he will know that the feed-in tariff system has been successful in Germany, but at some expense. At a time when energy affordability is the topic of the moment, along with the impact on our own constituents, I would ask him to look again at the considerable cost of the feed-in tariffs in Germany. I am now advised that they are propelling the German Government towards phasing down some of their financial support for that very expensive technology. Let us also remember that our objective is to bring on microgeneration, rather than to act as a fan club for
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one particular mechanism as opposed to another. We should all be open-minded about the best way of bringing on microgeneration.

Several hon. Members rose

Malcolm Wicks: I am not sure whether I can please everyone, but at least I can give everyone a fair hearing.

Joan Walley (Stoke-on-Trent, North) (Lab): In view of what the Minister has just said about Germany, and of what he said to me in a letter on this very issue in March, in advance of the Energy Bill going through Parliament, and of the EU report’s finding that now,

will he share with us what work he has done on the competitive electricity market? That was one of the main reasons that he put forward earlier for not opting for feed-in tariffs.

Malcolm Wicks: That was quite a complicated question, and I want to ensure I have understood it fully. The point about competitive electricity markets and feed-in tariffs was the bit that puzzled me.

Joan Walley: In a letter to me on this subject, the Minister said:

In view of what he is now saying about domestic microgeneration, can we now make some progress on that issue? Will he tell me how he has dealt with the competitive electricity market and whether there is now a possibility of making real progress towards feed-in tariffs?

Malcolm Wicks: Clearly, the reason that I did not understand the words was that I had written them in a letter to my hon. Friend. Obviously, I did not have time to write a clearer letter, and I apologise to her for that. A lot will come out in the wash when we publish our renewable energy strategy, which will happen quite soon. If, after that, I need to clarify anything for my hon. Friend, I am sure that there will be an opportunity to do so.

I shall now turn, at last, to the proposal itself. Because the cost-effective renewable potential of each member state was not taken into account in the setting of the targets, and because of the target’s significant economic implications, it is imperative that member states are able to deliver their targets in a way that minimises the additional cost to consumers. I touched on this issue earlier when I said that affordability was very much the issue of the moment for many of our constituents.

It is also important that the EU should demonstrate to the wider world that it can achieve ambitious targets in a way that reinforces rather than hinders the competitiveness of our industry. Cost-efficiency is therefore essential to the credibility of the targets. In practice, this means that member states must have sufficient flexibility in meeting their targets, suited to national circumstances. The Government therefore support the principle of renewables trading between
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member states and derogations for exceptionally large projects that are not complete by 2020. I could be thinking of the odd barrage here or there. We welcome the indicative nature of the interim targets.

Biofuels were raised earlier. Sustainability is, of course—I wish to confirm this—our No. 1 priority. When the 10 per cent. target for use of renewables in transport was agreed at the 2007 spring European Council, at which it was acknowledged that the majority of the target would be met through use of biofuels, it was subject to two key conditions: it must be possible to meet the target sustainably and second-generation biofuels must become commercially available. Those conditions were reaffirmed in the 2008 spring Council conclusions and should be incorporated into the relevant articles of the renewable energy directive. Biofuel sustainability should also be required by the fuel quality directive.

The Government are pressing for robust sustainability criteria to be included in the directive to ensure that the biofuels targets will not have negative impacts on, for example, greenhouse gas emissions. That is hardly the result that we would want. Alongside that, the Secretary of State for Transport commissioned the Gallagher review to assess latest evidence of the indirect effects of biofuels. The review is due to report in June and will inform our position on the EU discussions. We will not agree to a target until we are convinced that adequate safeguards are in place to ensure that it can be met sustainably.

Mr. David Heathcoat-Amory (Wells) (Con): I am grateful to the Minister for giving way. This is obviously a controversial part of the directive because of the damage that could be done by biofuels to the environment and to food production. Is he happy that article 15 would explicitly prevent member states from having stricter sustainability rules than are provided for in the draft directive, which I think he is hinting are inadequate? They seem to me to be highly inadequate. Our existing domestic rules are stricter, so he would be switching strict national controls for laxer European ones by majority vote. That is obviously unsatisfactory. How does he see a way forward on that?

Malcolm Wicks: There is increasing concern not just in the UK but across the world and certainly across Europe about sustainability. I had hoped that what I have said would reassure the right hon. Gentleman that our voice in Europe will very much be on the side of sustainability. We are all concerned about the emerging evidence on producing biofuels instead of food crops. We are all aware that the rising price of some staple foods—rice, for example—is causing huge concern among the populations of many countries. I want to reassure him that we are pushing for sustainability. There will still be a significant role for biofuels and it is important that we do not throw the baby out with the bathwater on that issue, but sustainability is the crucial word.

Dr. Gavin Strang (Edinburgh, East) (Lab): I know that my hon. Friend recognises the distinction between biodiesel from oil seed rape and bioethanol from wheat or whatever, but may I ask him for an undertaking that the Government really will drive hard to insert the
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objectives that he has been setting out—the principles of sustainability—in the common agricultural policy? That is fundamental to our future direction in Europe and in the UK.

Malcolm Wicks: Yes, I can give my right hon. Friend that assurance and I am grateful to him for raising that matter.

The draft directive is being considered by the Energy Council and the European Parliament. The March European Council agreed that the package should be adopted before the European Parliament is dissolved for the 2009 elections to show EU commitment in the next round of international negotiations on a new climate change deal.

Peter Luff (Mid-Worcestershire) (Con): I sense that the Minister is drawing to a conclusion and I have been waiting to hear something that he has not said so far. He is right to express scepticism—it is implicit in the motion—about our ability to meet the targets implied by what the EU is asking of us, particularly on electricity generation, but he has said nothing about renewable heat. Is not that one of the really big gains that we could make as a society?

Microgeneration is important and feed-in tariffs are very interesting, but surely renewable heat is the big issue. How does it feed into the directive, if the Minister will excuse the pun, and has he anything to say on that important subject in the forthcoming statement on renewables?

Malcolm Wicks: Although I do not think it is relevant to the directive—I will take advice if I have that wrong—I want to reassure the hon. Gentleman, who is Chairman of the Select Committee on Business and Enterprise, that here in the UK we take the issue of heat very seriously. Looking back over more than one decade, if I may put it that way, one could accept that heat has been something of a weak link in energy policy. Despite some history in this country of interest in district heating and combined heat and power, we should acknowledge that.

The Office of Climate Change, which was established only a year or so back, looked at the issue of heat for one of its first projects—not just renewable heat and, for example, heat pumps, but the more general issue of how we can use the heat from power stations, for instance. The renewables side will be a feature of our renewable energy strategy.

In drawing my remarks to a conclusion, which I was about to do before the Chairman of the Select Committee intervened, may I say that we are absolutely committed to our share of the EU target? For different reasons, which most Members of the House—I cannot speak for all—would understand, different member states starting from different bases will have different targets. Our target will be 15 per cent. or thereabouts. It is a tremendous challenge, but one that the Government are committed to meeting.

6.46 pm

Charles Hendry (Wealden) (Con): First, I thank the Minister for arranging for the motion to be debated on the Floor of the House. That is an important contribution. This is a significant issue that many hon. Members will be keen to speak on.

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The motion before us is really two motions. It begins with the normal, rather platitudinous statements that we have come to expect of such motions, saying how marvellous they are, but the key part is the last few lines, which contain the words

We have had a couple of sentences from the Minister about flexibility, but not much about cost-effectiveness. I hope he returns to that issue.

There can be no doubt that the directive and the targets that it contains represent a significant challenge. In 1997, the EU set out the target that 12 per cent. of energy should come from renewables by 2010. It looks increasingly unlikely that that target will be met. The Minister is no stranger to the shortcomings of targets. The Government have had their own target that 10 per cent. of our electricity should come from renewables by 2010. Now they are saying that it may be only 8 per cent.

When it was clear that that target would not be met, it morphed into 20 per cent. from renewables by 2020. However, the Government’s latest answer to a parliamentary question suggested that the figure could be as low as 12 per cent. There is clearly an enormous amount of work to be done if we are to have the step change that the directive would require.

The EU targets are not just for electricity; they are for energy overall. That represents a massive challenge. We will be required to bring 10 times more renewable energy on stream in the next 12 years as compared with the past 12. That is just for electricity. It involves nearly seven times as much energy from renewable sources as has been achieved already.

It has been calculated by those outside the House that a 15 per cent. energy requirement for Britain translates to 40 per cent. of our electricity having to come from renewables. How do we get there? That is one of the big challenges that we need to address. Peak usage in the UK is about 62 GW, and 40 per cent. of that coming from renewables would involve producing about 25 GW of renewable electricity by 2020. Most of that would have to come from wind power, because the other technologies simply are not yet in a position to deliver an amount of such magnitude. With a typical load factor of 35 per cent. for wind, we might be looking at 70 GW of installed wind capacity by 2020 to achieve that. That is a massive target, and nothing indicates that we are remotely on course to achieve it.

I recognise the investment that has been made in energy in the past and the huge contribution that it represents, but we are talking of an investment in offshore wind of a similar magnitude to the investment in oil in the North sea over recent decades. Doing for offshore wind what has been done for oil presents a big challenge. I also recognise the massive contributions that British companies are making. I know that the Minister visited the subsea exhibition here earlier today, but I do not know whether he saw, as I did, products being developed by First Subsea, which are making a huge difference to the ease with which massive structures can be attached to the sea bed.

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