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The study that the Government commissioned from a company called Element Energy Ltd sets out the precise scale of potential energy that is waiting for us. The company pointed out that almost 8.9 GW of renewable energy could be delivered for the UK by 2020 with a range of preferential feed-in tariffs. At some point, we will need to return to the practicalities of what those tariffs will be. Different tariffs will need to apply to photovoltaics, to wind energy on different scales and to wave energy. They will have to be discounted over different time periods. The suggestion was that even if
we set a starting tariff of 20p per kWh for wind energy, that would deliver 5 GW of new renewable energy by 2020.
If we start to put those facts together, we realise that the energy that will be delivered by 2020 has the scope to exceed existing UK energy generation from the whole nuclear industry before any of the new nuclear power stations start to deliver a single watt of energy, which will not happen before 2022. That transformation will be possible, and I would like the Minister to clarify the details rather than sign up to aspirations. There is no point in the House being pretty much united on a desire to set off in a race to a different renewable energy future if we are unable to say when the race will start, how long it will run for and what the course will be. We need clarification of the details today.
The amendments that have been tabled would strengthen the timetable, structure and vision of the Government new clause in Lords amendment No. 42. If we can get the Minister to endorse and clarify that this afternoon, we will emerge with a Bill that we collectively as a House of Commons can feel proud of, and which will genuinely take us into our own renewable energy revolution.
Charles Hendry: May I congratulate the hon. Member for Nottingham, South (Alan Simpson) on the work that he has done on this matter? The hon. Member for Cheltenham (Martin Horwood) was completely right to draw attention to the fact that, in his very modest way, the hon. Member for Nottingham, South had left himself off the long list of people to be congratulated, but it is genuinely the case that without him and his drive, commitment and willingness to work with others we would not be where we are today.
I also join the hon. Member for Nottingham, South in paying tribute to organisations such as Friends of the Earth for the very constructive way in which they have engaged in the debate. They have put a tremendous amount of work and detail into arguing the case, and it is absolutely appropriate that they should be thanked as well.
I hope that the Government might be willing to go a little further than they have so far. We are very grateful indeed for their agreeing to put feed-in tariffs into the Bill, and I hope that they will find it in their heart to accept the amendments before us today. I somehow suspect that they might not, but nevertheless I hope that they can be persuaded in the course of the debate. I think that we now have 95 per cent. of what is needed, and we just need that other 5 per cent. of detail to reassure people about exactly what direction the feed-in tariffs are going in and what they will deliver.
Initially, of course, the Government rejected the concept of the feed-in tariff, but they were subsequently prepared to accept it as we went into the Bill. However, it was clear all along that there was tremendous agreement and support for the principle among the non-governmental organisations, Members of Parliament on both sides of the House and their lordships. If we had had the Government’s agreement earlier, we would be further down the line and it might have been possible to introduce feed-in tariffs within a year of the Bill getting Royal Assent, which I assume will be in the next few days.
Some of the work could have been done earlier, but we are where we are. As I say, the Government could have done more, and we would have been willing to
assist them. As far as the consultation is concerned, I think that it should be possible in some cases to lock the people involved in a room and say, “You’re not coming out till you’ve agreed on the terms.” That could apply to some aspects of smart metering as well. It is all very well to say to people that we need months and months to talk through the detail, but if they realised that they were not going home to see their wives and kids at the weekend until they had worked out the detail, I think that we would have agreement on these matters pretty soon. A greater degree of urgency would be welcome.
Mr. Gummer: My hon. Friend might like to cast his mind back to the time of the packaging directive. Members of the industry said that they had to share the obligation among themselves, but they could never make up their minds about how that would work. I threatened that they would have to continue their deliberations over Christmas, and it was surprising how soon their wives made sure that they made their minds up.
Charles Hendry: My right hon. Friend makes a valid point. Clearly, if the people involved in the consultation are not reaching agreement, we could lock him in the room with them for the weekend. There is no doubt that that would move us forward to an early conclusion in these matters.
We will watch the progress of the consultation very carefully. There should be no doubt in the Government’s mind that, if they do not deliver the feed-in tariff by the last date for a general election in 2010, we will make it a key plank of our election policies. We will make clear our determination to make it a priority to move this matter forward with greater urgency and dedication. Nevertheless, we hope that the Minister will be able to satisfy us about how the Government will deliver the feed-in tariff within the time scale that we seek.
The hon. Member for Nottingham, South also mentioned Government amendment (g), which proposes a change in the threshold limit from 3 MW to 5 MW and which will be moved later by the Minister. Concerns have been expressed by some groups that raising the threshold of the feed-in tariff above a limit of 1 MW would start interfering with the renewables obligation. We tabled amendments precisely to allow for the variation of the feed-in tariff, according to technology and the size of development. Some older and more developed technologies do not require the boost that a feed-in tariff would give to newer small-scale renewables.
The 5 MW limit is an upper limit only, and would not necessarily apply to all technologies at all sizes. We therefore understand why the Secretary of State has decided on that threshold. The idea behind it is to allow the inclusion of non-commercial scale projects, such as those that will be installed by homeowners, small businesses, local authorities, community groups, farmers and others. That would help out hospitals and schools that want to facilitate greater use of renewables and ensure low emissions as part of our 2020 targets. It would also help households to reduce their reliance on the grid, ameliorating levels of fuel poverty. However, we also understand why those in the wind sector were anxious about the threshold, as they are concerned not to have a system that jeopardises any investment plans. The key to resolving the problem is to have much greater clarity. We therefore urgently need the Government to indicate what upper limits for
feed-in tariffs would apply to which technologies, so that investors in every sector can understand fully what is being proposed and how it will affect them.
I am also keen to speak to the amendments in my name, and the name of my hon. Friend the Member for Tunbridge Wells (Greg Clark) and other hon. Members, through which we seek to get more detail about the exact definition of a feed-in tariff. They have been tabled because concern has been expressed about the nature of the feed-in tariffs that the Government propose to introduce. The Government were initially reluctant to introduce the feed-in tariff principle at all, so there are concerns that they might seek to wriggle out of the commitment that has been made while the Bill is passing through both Houses of Parliament.
A letter from Friends of the Earth to Members of Parliament, signed by many people associated with such issues, says:
“We are concerned that neither of the amendments that the Government has made to the Energy Bill include a timetable for their introduction, and that the feed-in tariff amendment does not contain basic provisions to guarantee the introduction of a genuine feed-in tariff.”
It goes on to quote Lord Hunt, who said that:
“our hope is that a feed-in tariff scheme will be operational in 2010. Clearly, I have to say that that is a hope, and I cannot give that as an absolute commitment, because a lot of work needs to be undertaken.”—[ Official Report, House of Lords, 5 November 2008; Vol. 705, c. 234.]
Those comments have caused some concern, because they may mean that the 2010 target could be allowed to slip; the Minister has already made it clear that that might happen.
Those of us who have advocated a feed-in tariff for some time have always been clear that it must contain the basic elements of a feed-in tariff that are lacking from the Government amendment. There must be a definition that can apply only to a feed-in tariff. We are keen explicitly to exclude any option that would allow the payment to take any form other than that of a feed-in tariff. For the scheme to work effectively, the Government must fix the level of the tariff and guarantee the tariff level for a specified contract period. There would, of course, be different tariffs to reflect different technologies, and there would also be a need for the variations in the tariff to reflect the scale of the application involved.
Mr. Gummer: My hon. Friend says that Government should fix the tariffs; I believe that the experience elsewhere has been that it is better to have the tariffs fixed independently, to ensure that they are fixed on the basis of scientific comparison of the amount of investment necessary for different sorts of renewables. Does he not agree that that might be a better way of proceeding in Britain?
Charles Hendry:
My right hon. Friend makes a valid point. There is concern that the feed-in tariff could be set at so low a level that no one would wish to take it up. That would be an effective way of killing off a feed-in tariff, if the Government were inclined to do so. Clearly, independent input is required, and because there may be elements of public funding involved, the Government
have a direct interest in that being the case, too. Clearly, the issue would have to be addressed in the consultation. Perhaps the Minister could comment on what the most appropriate way is to bring forward the measure.
We are all clear that a feed-in tariff scheme must be different from the scheme for the renewables obligation certificates. We must be sure that the provision is not intended to introduce a super-ROC scheme. Lords amendment No. 42 on feed-in tariffs uses the phrase, “Feed-in tariffs”, only in the title of the proposed new clause inserted by it. No definition is provided elsewhere in the amendment, so we see the case for providing greater detail. We may look to you, Mr. Speaker, to decide whether we may vote separately on the amendments, rather than voting on them as a block, depending on the response that we receive from the Government.
Amendment (c) to Lords amendment No. 42 is, again, in our names. Paragraph (a) of the amendment adds
“a specified period of time”.
A feed-in tariff needs to be a guaranteed level of payment for a fixed period of time, in order to give investors the certainty that they need and a guaranteed rate of return for each unit of electricity generated. In Spain and Germany, the tariffs run for a period of 20 years. However, under Lords amendment No. 42, there is no specified time. We have not suggested a specified time, but we need greater assurance from the Minister that the concept will be in place, and that a specified time will indeed be part of the mechanism.
Paragraph (b) of amendment (c) would change a proposed new sentence from
“how a payment...is to be calculated”
“specifying the level of payment.”
The new clause would require the Government to specify only how the payment was calculated, rather than the level of payment. If the Government were to set the tariff payment level, it would not be a feed-in tariff in any sense that we recognise.
4.30 pm
Paragraph (c) of amendment (c) would give the option to establish what is called tariff digression. For example, either every year or, more likely, every few years, the tariff rate for new installations starting that year is likely to be slightly lower than before. The current wording of the Lords amendment would allow, through the Secretary of State simply publishing a new formula, the tariffs to be changed after the generator had started on a tariff. Certainty is needed for anyone deciding to invest in small-scale generation, and it would not be provided if the Government had the power to change the tariff halfway through the period in which it was supposed to be fixed at a certain level. That part of our amendment would make it clear that tariff degression applied only to new entrants, and not retrospectively to existing generators.
Our third amendment, (d), examines the need for the tariff to be set at different levels for different technologies. That is a basic feature of feed-in tariffs throughout Europe, and the Government must be prepared at least to make provision for it. The amendment would not force the Government to use the provisions, but it would give the Secretary of State the option to do so. The amendment would also allow for the banding of
feed-in tariffs to be dependent on the size of development, so, for example, a technology generating between 300 kW and 3 MW might get a lower level of tariff than the same technology generating between 50 kW and 300 kW. That reflects the need for greater support for smaller installations. The level must be set at a rate that will provide incentives for the installation of small-scale generation.
Mr. David Drew (Stroud) (Lab/Co-op): When I looked at that argument, I wondered whether it would be appropriate to include the provision in the Bill, or whether it would not be better off in secondary legislation, given the changes that are taking place in renewable energies, as we speak. I wonder whether the amendment would be too technical for the approach under discussion. What are the hon. Gentleman’s comments on that?
Charles Hendry: I am grateful to the hon. Gentleman, whose amendment is a beacon of clarity compared with some of the other technical aspects of the Bill. We have considered very carefully the point that he makes, and our view is that it is better to set out clearly now what is meant by a feed-in tariff so that there is no need for a discussion later, in which people say, “We haven’t got what we thought we were getting.” In our discussions with the relevant non-governmental organisations, we have found that they are concerned, as are other external commentators, that because of the lack of definition in the Bill, there is scope for a misunderstanding to arise later, and that is what we are very keen to avoid.
In addition, amendment (d) would require the Secretary of State to make provision for how costs relating to connecting installations to the grid or to the distribution network will be dealt with. It would not pre-determine how the costs would be dealt with, but simply require a determination to be made. Our concern is that if the provisions are not made, suppliers might be able to make such charges as they wish to small generators to make their investments unattainable.
I should also like to speak to amendment (f), standing in my name and that of my hon. Friend the Member for Tunbridge Wells (Greg Clark). There are concerns about the very low combined heat and power—CHP—threshold of 50 kW, compared with the 3 MW limit set for supporting renewable energy, and the effect that it may have on people investing in CHP. Under the renewable obligation, only larger-scale investments have prospered, but CHP has been recognised as one of the most significant drivers in reducing carbon dioxide emissions. Our cities are responsible for about 80 per cent. of greenhouse gas emissions, and their potential for installing CHP is enormous. To reach our targets on reducing carbon emissions, CHP must be encouraged. CHP can reduce the carbon emissions of a building by as much as 40 per cent., according to some external advisers.
The Combined Heat and Power Association, in a briefing to Members ahead of the debate, said:
“A 50 kW CHP plant would serve a development of between 50 and 100 dwellings.”
However, the association noted:
“Raising the cap to 5 MW would encourage the deployment of CHP in community schemes of the order of 5,000 to 7,500 dwellings. It would increase the likelihood of developing local district heating schemes.”
We are keen to see such development and roll-out of combined heat and power. If the 50 kW support threshold for CHP is not increased to the same level as the threshold for renewable sources of energy, the result will be to tilt the economics against investment in more effective CHP schemes. William Orchard of Orchard Partners, an expert on these issues, has said that the
“50kW limit will distort the market and discourage investment in larger 500kW CHP used to heat blocks of flats”.
Such projects should be at the heart of our thinking as we try to drive forward this complete change in our approach to energy, towards renewable energy and clean energy.
Although we all accept that renewable sources are the ideal for CHP, a fossil fuel CHP project can also deliver savings. In a submission to us, Clarke Energy, which implements a lot of CHP schemes across the country, said that the limit
“would imply that fossil-fuel CHP schemes above 50kW output are not to be encouraged and not beneficial”.
We all know that that is not the case and that we would be keen to see such schemes introduced as well.
We want much greater use of district CHP schemes. However, under the Government’s plans, such schemes would receive support only if they used the ROCs, with all the complexity and confusion that that would involve. We want, for example, to encourage district general hospitals to replace their old boilers with CHP systems. Their output would typically be about 1 MW, or slightly more; however, they could reduce the carbon emissions of a large district general hospital by as much as 2,000 tonnes per annum and save it as much as £350,000 in running costs. If the systems generated more power than was needed, they should be eligible for support from a feed-in tariff. To exclude them would seem perverse; they might not be using renewable fuels, but would still have taken a significant step in the right direction.
The Minister has said that he is reluctant to accept the change. However, in the course of the Bill we have seen so many of our proposed changes accepted following protracted parliamentary scrutiny, and here we are proposing just a little further degree of detail. If we got that into the Bill, the people who have been delighted by the overall decision to include feed-in tariffs would be genuinely thrilled that what the tariffs are intended to do was tied down in detail.
Colin Challen (Morley and Rothwell) (Lab): I should like to add my tributes to those that have already been made. I pay tribute to my hon. Friend the Member for Nottingham, South (Alan Simpson)—my good friend, whose roof turbines will no doubt be spinning tonight—and to the Secretary of State, who has shown a real willingness to engage in the argument and see off some of the lobbying from vested interests. As my hon. Friend the Member for Nottingham, South said, it is clear that some of that lobbying has sought to keep other people out of this gravy train. That is reprehensible.
I also pay tribute to the Opposition, whose opinion poll lead has dropped to a mere three points in the past few days. Even now, however, they are urging us on to get a vote-winning formula ready by 2010. The subtitle of our manifesto might be “Power to the people”, and we should be grateful to the Opposition for urging us to have the measures in place in time for the next general election. I am sure that it will be a great vote winner.
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