Clause
34
Chapter
3:
interpretation
Malcolm
Wicks:
I beg to move amendment No. 1, in
clause 34, page 17, line 33, at
end insert—
‘( ) An Order in
Council under section 126(2) of the Scotland Act 1998 (c. 46)
(apportionment of sea areas) has effect for the purposes of this
Chapter if, or to the extent that, the Order is expressed to
apply—
(a) for the
general or residual purposes of that Act,
or
(b) by virtue of this
subsection, for the purposes of this
Chapter.’.
The
Chairman:
With this it will be convenient to take
Government amendments Nos. 5 and
6.
Malcolm
Wicks:
I think this is the first Government amendment to
this Bill, which is testimony to its soundness. The last major Bill
that I was responsible for taking through the House was the Pensions
Bill, which set up the Pension Protection Fund and which the hon.
Member for Northavon remembers with longing. I recall that because of
the urgency of the action that we needed to take to establish a Pension
Protection Fund and a pensions regulator, we had to amend our own Bill
heavily. Indeed, the number of Government amendments approached 1,000,
and it is with some relief that I introduce the first Government
amendment in this Committee. I assure the Committee that we shall
proceed with few such
amendments.
These are
technical amendments, but it will help if I explain them, and I hope
that this introduction will convince hon. Members that they are
important. The Bill contains a number of provisions that refer to
certain areas of the sea to which the Bill will apply, or that will
fall outside the scope of the Bill. Where we have excluded such waters,
we have done so to preserve the position of the devolved
Administrations. It is therefore important that the boundaries of the
waters referred to in the Bill correspond with the established
boundaries set out in statutory instruments. Those instruments have
been made, respectively, under the Scotland Act 1998 and the Government
of Wales Act 1998. I have therefore proposed the following
three technical amendments, which will help to achieve our
aim.
Amendment No. 1
amends clause 34, which is the definitions clause for the Bill’s
carbon dioxide storage provisions, to ensure that the boundaries of the
Scottish territorial waters that fall outside the scope of chapter 3,
which covers carbon dioxide storage by virtue of clause 16, are those
set out in an Order in Council made under section 126(2) of the
Scotland Act 1998. The current order is S.I.
1999/1126.
Amendment
No. 5 amends schedule 1 to the Bill, which in paragraphs 1 to 3
provides for the disapplication of the Food and Environment Protection
Act 1985 in relation to the Bill’s gas and carbon dioxide
storage provisions. In this case, the necessary clarification relates
to the territorial waters adjacent to Wales. The amendment accordingly
specifies the boundaries of the Welsh territorial waters within which
the Food and Environment Protection Act 1985 will continue to apply.
The boundaries are set out in an Order in Council made under or by
virtue of section 158(3) or (4) of the Government of Wales Act
2006.
Amendment No. 6
will produce similar consequences in relation to the extension of the
power to apply civil law to the offshore area under section 11 of the
Petroleum Act 1998, in relation to gas storage, liquefied natural gas
unloading and carbon dioxide storage. For the purposes of extending
that power to carbon dioxide storage activities, activities within
Scottish internal or territorial waters are excluded. That amendment
will ensure that the boundaries of such waters are those set out in an
Order in Council made under section 126(2) of the Scotland Act
1998.
To reiterate,
these technical amendments will help to achieve the dual objective of
ensuring consistency with the boundaries defined for the purposes of
the Scottish and Welsh devolution settlements, as well as removing any
doubt as to the exact boundaries of the internal or territorial waters
covered by the relevant provisions of the Bill. I hope that members of
the Committee will acknowledge the importance of establishing clear
boundaries in regard to such waters and of ensuring that they match
those drawn for the purposes of devolution. I duly ask hon. Members to
accept these technical
amendments.
Amendment
agreed to.
Clause 34, as
amended,
ordered to stand part of the
Bill.
Clause 35
ordered to stand part of the Bill.
Schedule
1
Amendments
relating to Chapters 2 and 3 of Part
1
Amendments
made: No. 5, in schedule 1, page 80, line 29, at end
insert—
‘(b) after
subsection (2)
insert—
“(2A) An
order or Order in Council made under or by virtue of section 158(3) or
(4) of the Government of Wales Act 2006 (apportionment of sea areas)
has effect for the purposes of Part 2 of this Act if, or to the extent
that, the Order is expressed to apply for the general or residual
purposes of that Act or, by virtue of this subsection, for the purposes
of Part 2 of this
Act.”’.
No.
6, in
schedule 1, page 82, line 19, at
end insert—
‘7A In
section 13 (interpretation of Part 2), after the existing text (which
becomes subsection (1))
insert—
“(2) An Order in
Council under section 126(2) of the Scotland Act 1998 (apportionment of
sea areas) has effect for the purposes of this Part if, or to the
extent that, the Order is expressed to
apply—
(a) for the
general or residual purposes of that Act,
or
(b) by virtue of this
subsection, for the purposes of this
Part.”’.—[Malcolm
Wicks.]
Charles
Hendry:
On a point of order, Mrs. Humble. I
wonder whether you can clarify what is happening, because you have lost
me. That is obviously not difficult to do, but I should be grateful for
some clarification. The Government amendments relate to clause 34, and
we have now moved beyond that clause and agreed to clause 35. I am not
quite sure how we can dip back into Government amendments to clause
34.
The
Chairman:
Government amendments Nos. 5 and 6 relate to
schedule 1. The Minister spoke to them previously, but now is the time
to call them for decision under schedule 1 and the Committee has agreed
to them. I do not think that I heard anything when I asked whether any
hon. Member was not of the opinion that amendment No. 6 should be
made.
Schedule 1,
as amended, agreed to.
Clause
36
The renewables
obligation
Charles
Hendry:
I beg to move amendment No. 24, in
clause 36, page 19, leave out lines 5 to
12.
Thank you,
Mrs. Humble, for the helpful explanation that have just
given. It has been a while since I served on a Bill Committee and the
details sometimes slip away. I thought I had found a way by which we
could dive back into issues that we had discussed some time ago and
bring them forward again, but that is clearly not the
case.
Amendment No. 24
takes us into discussion of the provisions on the renewables
obligation, and it may be helpful to give some background. We broadly
welcome the clause. It has to be accepted that the renewables
obligation certificates are a hideously complicated mechanism. One of
my aims when I took on the role of shadow Energy Minister was to end up
with a simpler system of financing such aspects of energy that is
transparent and simple. ROCs are anything but
transparent and simple, but they have delivered significant investment
in some sources of renewable energy. However, those investments have
been overwhelmingly in onshore wind and methane, because those are the
cheapest forms of renewable energy. Only a small amount of investment
has gone into offshore wind and virtually none has gone into
photovoltaics and wave and tidal
technology. 4.45
pm
It is right
that we should review the ROCs and move towards a banding system. Our
goal must be to encourage emerging rather than mature technologies.
However, that needs to be viewed against a backdrop of a poor take-up
of renewables so far in the United Kingdom. Just 4 per cent. of our
electricity production comes from renewables, making us the second
worst in the European Union after Malta. We have 40 per cent of
Europe’s wind. [Interruption.] My hon. Friend the Member
for Billericay thinks that much of that wind is in this room. We have
only 2 GW of installed wind capacity, with three times as much stuck in
planning, compared with 18 GW of wind power in Germany. We are tied in
to ambitious targets for renewables. Some 15 per cent. of all
our energy must come from renewables, according to the EU’s
targets for this country. We need a dramatic transformation of the
process in order to achieve
that.
Amendment No. 24
was brought to our attention by Drax Power in relation to its concerns
that caps on the volume of non-energy crops will result in less biomass
being burnt, which will mean more CO2 being released into
the atmosphere. Drax Power is concerned that
“the threat of a cap will lead to
the price of non-energy crop co-fired ROCs being discounted and will
increase the risk associated with investment in the
technology.”
It has
advised us further that that will
“hit the public through deterring
development in the cheapest form of renewables technology, leaving end
customers to pay yet higher electricity prices for more expensive
alternatives to enable the Government to achieve its
target.”
Drax
Power tells us that
“a
cap is unnecessary under a banded Renewables Obligation regime, and
particularly as there is provision for a review of the bands. The
safeguard which allows for an early review of RO bands, should certain
circumstances arise, is entirely
appropriate.”
Mr.
Hugo Swire (East Devon) (Con): My hon. Friend is making a
good point. Further to that, a lot of farmers are being encouraged to
grow non-energy crops for such power stations. Putting a cap on that
will be a disincentive and many farmers will feel that they have been
misled, having invested money in something that will now be
worthless.
Charles
Hendry:
My hon. Friend is right. That is an important
point. The first time that I debated with the Minister was on a
Statutory Instrument Committee relating to ROCs. Co-firing with biomass
was an important element in that debate. The Minister was struck by the
strength of opinion from all parties in the House. I was grateful to
him for the way in which he reviewed that
matter.
The amendment
would delete proposed new section 32A(2)(d) to the Electricity Act
1989.
Steve
Webb (Northavon) (LD): I have been quiet so far this
afternoon. I am just warming up. I have some sympathy with the
amendment, although not for the reason that the hon. Gentleman has
given. I have seen the briefing that he properly refers to. My
understanding of what the clause would do is different from his,
although that does not necessarily mean that it is
right.
The proposed
new section that the hon. Gentleman wants to remove allows the
Government to require the energy companies to buy particular sorts of
ROCs. It says:
“a
specified number, or a specified proportion, of the renewables
obligation certificates produced
by”
the
“supplier...must
be certificates in respect of electricity
generated”
in
various ways. As I understand it—I hope that the Minister will
correct me if I am wrong—that gives the Government the power not
simply to ban ROCs and let the market get on with it, but to
superimpose on banded ROCs a further requirement. For example, let us
suppose that we had ROCs from a particularly obscure renewable that the
Government decided suddenly that they wanted to favour. Rather than
just change the banding, they could require the energy companies to buy
ROCs from that renewable source. That is how I read the provision. If
that were right, it would bother me.
The whole principle of banding
ROCs and picking technologies, for which I can see the case, makes me
nervous. The idea that subsequent to having banded and picked
technologies, and given them different rankings, the Bill would give
power for indeterminate meddling—in specified ways, or other
specified cases or circumstances—does not create the certainty
that generators would want. That is what worries me about the lines
that the amendment tabled by the hon. Member for Wealden would take
out. They might create additional uncertainty and, given that we are
talking about long-term investments in some cases, even having the
banding reviewed, which we shall deal with under subsequent amendments,
is a source of uncertainty. My worry is that the subsection is another
source of uncertainty, and I hope that the Minister can clarify why the
powers are needed, because I am not yet convinced that they
are.
Malcolm
Wicks:
I am grateful for the chance to talk about a part
of the Bill that raises some issues, and to explain how we arrived at
the formulation before us. We shall be talking about the renewables
obligation at some length today, so I wish to provide the Committee
with some brief background information about how it
works.
The renewables
obligation or RO requires licensed electricity suppliers to source a
specific and annually increasing percentage of the electricity that
they supply from renewable resources. The current level is 7.9 per
cent. for 2007-08, increasing to 15.4 per cent. by 2015-16. It is
expected that the obligation, together with exemption from the climate
change levy for electricity from renewables, will provide support to
industry of up to £1 billion per year by 2010. Suppliers will
fulfil their obligation by presenting renewables obligation
certificates, often known as ROCs, which are awarded by Ofgem to
generators for renewable
electricity. The generators then sell the ROCs either together with
their electricity or separately. At present, all renewable generators
are rewarded equally with one ROC per
megawatt-hour. The key
reform in our proposed package of measures, which the Bill will give us
powers to carry out, is the introduction of banding, so that
technologies will be grouped and awarded with different numbers of ROCs
per megawatt-hour. I am sure that we shall discuss the provision in
more detail but, for now, I wish to focus on the
amendment.
Amendment
No. 24 would remove the power under proposed new section 32A(2)(d). The
power is intended to enable the Secretary of State to require
electricity suppliers in meeting their obligation to source a minimum
proportion of their electricity from specified sources, descriptions of
generating station or means of generation. It is necessary and should
be retained. I want to describe first how the power is drafted and then
deal with the concerns expressed over how it will be
used.
Proposed new
section 32A(2)(d) is a translation of an existing power. In reforming
the RO under the new Energy Bill, we are repealing all the existing
legislation and replacing it with proposed new sections 32 to 32M. I
hope that that makes considering the entirety of the reformed RO
legislation much easier. However, we have carried forward the existing
legislation into the proposed new sections where the existing powers
are still relevant. The subsection that we are considering now is one
such case.
In the
Electricity Act 1989, existing sections 32A(1)(b), (c) and (d) give the
Secretary of State the flexibility to make provision so that only
renewable electricity from certain forms of generation or renewable
source can be used to satisfy the obligation. In other words, under the
existing powers of the 1989 Act, the Secretary of State already has
powers to focus the obligation on specific technologies or renewable
sources if that is appropriate. To take a purely hypothetical example
for illustration, he could use the power to require that a certain
amount of the renewable electricity that electricity suppliers supply
to meet their obligation must come from wave
power.
Our challenge
in creating the proposed new sections under consideration today is to
ensure that the powers are translated so that they remain relevant to
the new reformed RO, the changing renewables market and fast-developing
renewables technologies. We have done that in two ways.
First, the references to the
specified amounts of electricity counting towards the obligation need
to be changed to reflect the fact that in future suppliers’
obligations will be expressed in numbers of ROCs, rather than the
amount of electricity. The new provisions allow the Secretary of State,
in an order, to specify that a number or proportion of the ROCs
produced by an electricity supplier, in discharging the obligation,
must be certificated in respect of certain types of
generation.
Secondly,
where the law previously allowed the Secretary of State to identify
sources or descriptions of stations, we now need to be more flexible in
order to take account of how technologies and ways of generating
renewable electricity are developing and of
how distinctions are becoming more subtle. Certainly, we need to do that
in order to introduce banding. For instance, in the new RO we will make
distinctions between on and offshore wind, energy crops and regular
biomass, large and small installations, and so on. As we move forward,
we might need to make further distinctions. That is why we wish to allow
scope for the Secretary of State to identify specific types of
generation and to focus the obligation on them. That means that the
power requires sufficient flexibility to allow him to pin down the
types, sorts or means of generation, if any, that he wishes the RO to
focus on. The references in proposed new subsection 32A(2)(c)(iii) and
(iv) to
“specified ways,
or...specified cases or
circumstances”
provide us
with that scope.
I
hope that that explains how the new formulation of the power has been
arrived at. Electricity companies want to know what it will be used
for. I can confirm that it is not currently our intention to use it in
order to focus the obligation so that suppliers would have to, for
example, present a certain number of ROCs in respect of a single
renewable technology, such as wind power. To a large degree, we
anticipate that banding will allow us to provide the correct level of
support to different technologies. However, given that the move to
banding in the development of new technologies will add complexity to
the renewables picture, we cannot rule out wanting to consult on using
the power to boost a particular renewable type of generation as our
policy evolves in pursuit of challenging targets. We certainly
recognise that, before 2020, we will need to do more to support
renewables in a changing and more complex
environment.
Steve
Webb:
Presumably, if the Minister decided that he wanted
to support a particular renewable technology, the alternative would be
to whop up the banding. Why does he need, therefore, what appears to be
a meddling power? We can do that by changing the banding, but the
provision before us represents super-meddling, which is beloved of the
Prime Minister. Why can the Government not just use different banding
to achieve the same
goals?
Malcolm
Wicks:
Banding is our desired instrument and the one for
which we are legislating, but it is difficult to anticipate the future
of emerging technologies. We just want to keep our options open. I have
said that at the moment it is not our intention to use the power to
support a particular technology. Rather than removing one of the tools
at our disposal, we should retain it, as I have been saying, in case we
need it in the future. I stress, of course, that if we consider using
it, a decision would continue to be subject to consultation and
parliamentary scrutiny through the affirmative procedure. For those
reasons, I wish to retain the power in the
Bill.
I was asked
about Drax’s call for a cap on co-firing to be removed. The
amendment in question would not have the proposed effect. We have
consulted on the cap on non-energy crops biomass. There is considerable
concern that co-firing is particularly volatile, because the fuels are
readily available. We have taken the view
that the cap makes RO more reliable for investors
and, therefore, should be retained. I was asked by the hon. Member for
East Devon about farmers and their encouragement to grow energy crops.
We encourage the growth of energy crops, which are defined by
legislation for the purpose of—sorry, I have lost my train of
thought on a definition. Certainly, however, a cap on non-energy crops
biomass—I think that I shall have to write to the hon.
Gentleman. For some reason, my powers of scrutiny of notes have been
lost. [Interruption.] The energy is there, but the handwriting
is not helping me.
Charles
Hendry:
I am grateful to the Minister for most of that
answer, at least. He has reassured us to some extent, but I wonder
whether, if organisations such as Drax Power continue to have concerns
after hearing what he has said today, it would be possible for them to
meet with officials in his Department, and whether he could facilitate
that to ensure that their views are fully taken into account and they
can be properly reassured. Based on what the Minister has told us, I
beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
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