House of Commons portcullis
House of Commons
Session 2007 - 08
Publications on the internet
General Committee Debates

Energy Bill

The Committee consisted of the following Members:

Chairmen: Mr. David Amess, Mrs. Joan Humble
Baron, Mr. John (Billericay) (Con)
Binley, Mr. Brian (Northampton, South) (Con)
Hendry, Charles (Wealden) (Con)
Horwood, Martin (Cheltenham) (LD)
Iddon, Dr. Brian (Bolton, South-East) (Lab)
Ladyman, Dr. Stephen (South Thanet) (Lab)
Main, Anne (St. Albans) (Con)
Owen, Albert (Ynys Môn) (Lab)
Palmer, Dr. Nick (Broxtowe) (Lab)
Reed, Mr. Jamie (Copeland) (Lab)
Robertson, John (Glasgow, North-West) (Lab)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Swire, Mr. Hugo (East Devon) (Con)
Tipping, Paddy (Sherwood) (Lab)
Webb, Steve (Northavon) (LD)
Whitehead, Dr. Alan (Southampton, Test) (Lab)
Wicks, Malcolm (Minister for Energy)
Chris Shaw, Committee Clerk
† attended the Committee

Public Bill Committee

Thursday 28 February 2008


[Mr. David Amess in the Chair]

Energy Bill


Clause 36

The rewnewables obligation
Question proposed [Tuesday 26 February], That the clause stand part of the Bill.
9 am
Question again proposed.
The Chairman: I remind the Committee that, with we are taking the following: New clause 6—Feed-in tariffs
‘(1) The Secretary of State may by regulations make provision to introduce feed-in tariffs for renewable micro-generation and decentralised energy.
(2) In this section—
“feed-in tariffs” means a requirement on utilities to buy electricity from renewable sources at a feed-in rate to be set by the Secretary of State, dependent on available renewable technology;
“micro-generation” means any generation under 250kW;
“renewable energy” means any form of energy produced in the generation stage without using fossil fuels or emitting carbon;
“a feed-in rate” means a guaranteed payment by the energy suppliers for each kilowatt of electricity generated.’.
New clause 8—Feed-in tariffs (No. 2)
‘(1) The Secretary of State may make regulations for the purposes of requiring designated electricity suppliers to purchase the electricity generated from renewable sources by small-scale generators (“feed-in tariffs”).
(2) For the purposes of subsection (1)—
(a) “small-scale generators” are persons generating electricity below a level to be determined by the Secretary of State following consultation,
(b) “renewable sources” are such energy sources as may be determined by the Secretary of State following consultation,
(c) “designated electricity suppliers” are those persons licensed by the Secretary of State to supply electricity as set out in section 6 of the Electricity Act 1989.
(3) The Secretary of State must consult for the purposes of determining the appropriate form of regulations as set out in subsection (5) below and must—
(a) commence such consultation within a period of six months of the day on which this Act is passed,
(b) determine a reasonable period of consultation,
(c) consult with—
(i) designated electricity suppliers,
(ii) the National Consumer Council (incorporating energywatch),
(iii) the Gas and Electricity Markets Authority (“GEMA”),
(iv) the National Grid,
(v) such generators of electricity from renewable sources as he considers appropriate,
(vi) such environmental organisations as he considers appropriate, and
(vii) such other persons as he considers appropriate.
(4) The Secretary of State shall, within six months after the end of such consultation, make regulations for the purpose of bringing into effect feed-in tariffs pursuant to subsection (1), in such manner as the Secretary of State shall consider appropriate.
(5) The regulations mentioned in subsection (4) above must—
(a) define the renewable sources in respect of which feed-in tariffs shall apply,
(b) define the maximum level of electricity generation in respect of which feed-in tariffs shall be available, as referred to in subsection (2)(a) above,
(c) define which persons generating electricity from renewable sources shall be eligible for feed-in tariffs,
(d) prescribe the means by which tariffs applicable under feed-in tariffs are to be calculated and, where necessary, amended,
(e) prescribe, where appropriate, the terms and duration of the feed-in tariff arrangements,
(f) make provision for the payment and incidence of the costs of connection of relevant small-scale generators to the National Grid,
(g) make provision for the regulation of feed-in tariff arrangements by a designated body,
(h) make provision for the Secretary of State to report periodically on the effectiveness of the regulations made under subsection (1) in achieving their objectives,
(i) provide for the making of any necessary amendments to distribution licences or supply licences held by any person, and
(j) make such changes as may be necessary to existing legislation, including that providing for the Renewables Obligation Order.’
New clause 14—Tariffs for renewable energy
‘(1) The Secretary of State may by order impose on each energy supplier falling within a specified description (a “designated energy supplier”) an obligation to reimburse producers of renewable energy falling within a specified description (a “renewable energy producer”) for each unit of renewable energy produced as set out in subsection (4) (and that reimbursement rate is referred to in this section as a “renewable energy tariff”).
(2) The descriptions of energy supplier upon which an order may impose the renewable energy tariff are those supplying electricity or gas—
(a) in Great Britain;
(b) in England and Wales; or
(c) in Scotland,
excluding such categories of supplier as are specified.
(3) In this section—
“renewable source” has the same meaning as in the Utilities Act 2000 (c. 27);
“renewable energy” means energy from renewable sources;
“renewables obligation” means the obligation specified in section 32 of the Electricity Act 1989 (c. 29);
“specified” means specified in the order.
(4) The renewable energy tariff shall set the reimbursement level for each kilowatt hour of energy produced by the renewable source and may—
(a) be set at different levels for different types of renewable source,
(b) be varied at different times as prescribed in the order or in successive orders.
(5) The order shall set out—
(a) the renewable sources in respect of which renewable energy tariffs shall apply,
(b) the tariff applicable to each renewable source,
(c) which installations shall be eligible for renewable energy tariffs, and any provisions to exclude installations accredited under the renewables obligation,
(d) which renewable energy producer shall be eligible to receive renewable energy tariffs,
(e) which designated energy supplier shall be responsible for paying the renewable energy tariff to a particular renewable energy producer,
(f) the terms and duration of the renewable energy tariff arrangements,
(g) how the amount of energy produced and upon which the renewable energy tariff is payable shall be measured, determined or deemed,
(h) provisions for the regulation of renewable energy tariff arrangements by a designated body,
(i) provision for the Secretary of State to report periodically on the effectiveness of the regulations made hereunder,
(j) any necessary amendment to distribution licences or supply licences held by any person, and
(k) such other provisions as may be required for the efficient and cost-effective operation of the renewable energy tariff.
(6) Before making an order, the Secretary of State must consult—
(a) the Authority,
(b) the energy suppliers to whom the proposed order would apply,
(c) representatives of renewable energy producers to whom the proposed order would apply, and
(d) any other persons he considers appropriate.
(7) An order under this section shall not be made unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.’
Charles Hendry (Wealden) (Con): It is a pleasure. Mr. Amess, to be back under your chairmanship this morning. We finished our previous sitting with an extended, but appropriate, speech by the Minister. Members of the Committee were slightly surprised when I encouraged him to extend it further, but I wanted to prove my alphabetical prowess by noticing that he had missed out a few letters during his journey through the clause.
This part of the Bill will be subject to substantial debate. Some of the issues that we shall discuss this morning were chosen to be debated on Second Reading by many hon. Members. They are the sort of matters that people have focused on particularly in their representations to the Committee.
I shall start by speaking to clause 36 stand part, after which I shall introduce new clause 6 tabled in my name and that of my hon. Friend the Member for Billericay. We believe that most elements of clause 36 are standard and sensible. In general, we support the changes but, as I have said, it is against a background of a significant failure of the Government to encourage take-up of renewable energy in the United Kingdom. The other day I said that we were the second worst for renewable energy in the European Union, but I gather now that we are the third worst. It is not only Malta that is worse than us, but Luxembourg. It is a bit of a league of shame to be 25th out of 27 nations.
The Government should not boast about what they are doing, when the reality is that we have come late to the issue and are now trying to catch up with what other countries have already achieved. We hear the Minister talking about his targets and hopes, while his counterparts in Germany and other European countries can talk about their success in this area. It is that success that we need to emulate.
We are moving away from the targets that the Government had set. They had originally set a target of 10 per cent. of our electricity to come from renewable energy by 2010. When that looked hard to meet, it sort of morphed into a target of 20 per cent. by 2020. We know from the Minister’s written reply to me a few weeks ago that the Government have now downgraded those targets and it may be as low as 8 per cent. of our electricity coming from renewable sources by 2010 and as low as 12 per cent.—not 20 per cent.—by 2020.
That is made particularly clear in respect of microgeneration. In an article in The Guardian a week or so ago, Ashley Seager wrote:
“BERR is set to under spend the paltry £18 million in domestic grants of its low carbon buildings programme by £10 million over the three years to March 2009. This is in spite of strong demand for renewables among the public sector.
How bad is the situation? Well, BERR handed out grants for parts of the cost of fitting solar photovoltaic systems covering only 270 houses last year. The Germans fitted 130,000. We have a total installed capacity (including commercial) of 16 Megawatt peak (Mwp). They have 3,800 Mwp.
But even worse, during the year the pace of grant-giving slowed. Last May BERR simply slashed the grants and made them more difficult to get. The result, entirely predictably, was a collapse.
Throughout much of 2006, for example, it was making 30-40 grants a month for ground source heat pumps. In the last three months of 2007, no such grants were made. There is a similar decline for solar thermal...and micro wind turbines. Not a single grant was allocated for a domestic solar PV system last month, while the Germans installed about 12,000 systems.”
That was quite a lengthy quote, but it makes a clear point that we had not one grant for PV in the United Kingdom last year compared with 12,000 installations in Germany.
Dr. Brian Iddon (Bolton, South-East) (Lab): We cannot underestimate the success of the Germans. Like the hon. Gentleman, I am aware of their progress on renewables, but the influence of the Green party has altered the debate in Germany to such an extent that nuclear power is completely ruled out, so it has had to make progress in renewables whether it wanted to or not.
Charles Hendry: The hon. Gentleman has pointed out an interesting dilemma that faces the German Government of how they can be green at the same time as phasing out nuclear. They have a particular challenge, and the rather unnatural coalition that exists in Germany exacerbates that problem.
Albert Owen (Ynys Môn) (Lab): My hon. Friend the Member for Bolton, South-East is right that the Greens had a huge influence, but is it not the case that the current German Government are actually looking to extend their nuclear fleet? They are looking at extension of each of their stations, which is causing them some difficulty, as they cannot meet the demands of economic growth.
Charles Hendry: There is a tremendous tension in the German Administration on this—the CDU elements are keen to go down that route but the socialists are not. It is a very different approach and perhaps the Minister might wish to encourage his German counterpart to understand the British Government’s position on this issue. I do not think we should underestimate the very real tension that exists in the German Administration on this issue.
The Minister for Energy (Malcolm Wicks): I am sorry to subject the hon. Member for Wealden to a series of interventions, but I was thinking that one day, a long time hence, it could be useful practice for him. He quotes the article in The Guardian, which I read with great interest. I think it raises an interesting issue, because sometimes there is a confusion between overall renewables policy—which includes the big plant of huge wind farms offshore and so on—and a subset of that issue, which is very important and about microgeneration.
Now, The Guardian article, having said the Government are rubbish at renewables, then only talked about the low carbon building programme, as the hon. Member for Wealden has done. Does he recognise that these are complementary issues, but rather different? Is his new clause about renewables generally, and the virtues of a feed-in tariff, or is it just about microgeneration?
Charles Hendry: I am very grateful to the Minister for giving me practice in this role. I have, indeed, been learning carefully from him, and what I have learned is to say that I will be coming to that in my speech in a very short time. It is one of the issues that I most particularly want to address, but the particular issue of the new clause—and of that being tabled by the Liberal Democrats as well—is feed-in tariffs and how they can encourage microgeneration. However, they need to be seen against the background of the more general challenge to us in this country about renewables.
Looking at the potential for renewables in this country, we have 40 per cent. of Europe’s wind. We have massive tidal and wave potential; we have PV potential—particularly in the south of England. That does not even touch on the potential for the generation of domestic heat through solar thermal technology or ground and air source heat pumps.
We are all clear that our energy security does not depend on one source of energy. With one third of our generation capacity, about 30 GW, coming out of commission in the next 20 years, we face a very real challenge in keeping the lights on. I think people in this country would never forgive a Government who allowed their lights to go off. They get used to that in the United States, but in this country we are a civilised, developed nation and we are not prepared to put up with that sort of thing. [ Interruption. ] The Minister may draw whatever conclusions he wishes from that. But the reality is that, in this country, we have to put in place the measures that will ensure that the lights stay on in 20 or 30 years’ time.
I referred to wind as being part of that equation. We need to recognise that the Government’s targets for offshore wind are very challenging indeed. They set out a target of 25 GW of new offshore wind by 2020. Various people who are in favour of that say it means about two turbines per day over the next 10 years. Those who are against it say that it could mean as many as 10 turbines per day. The reality will presumably be somewhere in between. However, the National Grid expects that, on current policies, we will have only 12 GW of additional wind onshore and offshore installed by 2020. That is well below the Government’s target. The Government therefore need to give us much greater clarity about how they expect that 25 GW to be delivered.
In addition to that, the Government have signed up to the EU’s proposal to ensure that the EU gets 20 per cent. of its energy—not its electricity—from renewables by 2020. When Prime Minister Blair returned, having signed up for that, our sense was that he had not quite understood what he was doing. We picked up that the reaction from officials in the Department for Business, Enterprise and Regulatory Reform was one of complete of horror that he had signed up for a target involving 20 per cent. of energy and not 20 per cent. of electricity. It is going to be an incredibly challenging objective. He may have known exactly what he was doing, knowing that he was stepping down in a few months’ time and that this would be something for his successor to lead us to instead.
For the United Kingdom to move to that target, a massive change has to take place. It is likely that our contribution towards the EU target will be that approximately 15 per cent. of our energy will need to come from renewables by 2020. In which case, we will need a much higher proportion of our electricity to come from renewables. The people who know most about this subject estimate that perhaps 40 to 45 per cent. of our electricity will have to come from renewables in just 12 years’ time. That is a staggering challenge.
To put that into figures, if we think that in 2020 the peak electricity demand will be similar to today—it is a brave challenge, because it means that there has to be very strong progress towards energy efficiency—we will need about 62 GW of peak energy capacity. If we were to go for the lower figure of renewables—about 40 per cent.—we would need to be getting 25 GW of electricity from renewables by 2020. On top of that, the reality is that most renewables do not work at full tilt all the time. The Severn barrage, if it were built, would be able to give absolutely predictable flows of energy. However, wind turbines, for example, cannot. A typical load factor would be 30 per cent. for onshore wind farms and perhaps 40 per cent. for offshore wind farms. So if wind alone was to deliver that 25 GW, we would need an installed capacity of wind of 60 to 75 GW, compared to 2 GW today.
Martin Horwood (Cheltenham) (LD): Will the hon. Gentleman give way?
Charles Hendry: We need to know from the Minister, or perhaps from the Liberal Democrats, how we are going to achieve that. If we are not going to be achieving it through wind, the Minister needs to tell us where we are going to get that renewable capacity from.
Martin Horwood: This argument is often put forward as a way of casting doubt over the potential of renewables in the long term to support our overall energy needs. Does the hon. Gentleman not accept—as he points out—that some of the technologies such as tidal stream, tidal flow and tidal impoundment are enormously predictable, far more so than nuclear power stations for instance, which often have a downtime? In the full range of different renewable technologies—even with wind and photovoltaics—those variants get ironed out quite substantially. There is therefore a very predictable way in which renewables can contribute overall to base load and peak capacity.
Charles Hendry: There is some predictability. However there is an exponential difference in terms of the speed of the wind power and the energy it produces. So, if the wind drops slightly, there is a significant drop in energy which is quite a challenge for the National Grid to manage. Similarly, with PV, if the sun goes behind a cloud, there can be dramatic changes in the power that can be generated in that way.
I said that things such as the Severn tidal barrage or lagoons would be able to deliver predictability and other tidal lagoons could work in the same way. However, the challenge for renewables overall is that, in most aspects of renewables, there will be a lower load factor than in other forms of electricity generation. That is not to cast doubt on whether it is the right way to go—I believe it is the right way to go—but we also need to be realistic about what can be achieved.
The hon. Gentleman also mentioned nuclear power. Sizewell B has now been operating non-stop for about 500 days, at full tilt, so the modern fleet of nuclear power stations can deliver a tremendous amount of predictability.
Steve Webb (Northavon) (LD): In a non-partisan spirit, I welcome the hon. Gentleman’s support for renewables and I want to embolden him. It is clearly true that an individual turbine may be on or off, but given that we are talking about a network of turbines around the country and a whole mix of renewables, does he not agree with the modelling evidence that the aggregate renewable input is pretty predictable? Would he not further accept that the National Grid is “incredibly relaxed” about the issue of incorporating variable renewable input into the grid—it does not see it as a problem.
Charles Hendry: The reality is that, in a country such as this, the wind is blowing somewhere. There are a perhaps a few cold, still, winter days when there is not any wind movement. [ Interruption. ] My hon. Friend the Member for Billericay says that there is plenty of wind blowing in this room and, across the country at some point, there is almost always going to be wind capacity.
We are right to recognise the average load factor. Countries that have gone into this technology in a big way, such as Spain, find a typical load factor of 25 to 30 per cent. We should be realistic. If we want to achieve a huge input of electricity from renewable sources, we have to take account of the load factor. Therefore, challenging amounts of installation are required to meet that.
9.15 am
The Government are right to introduce banding. There is overwhelming agreement that, unless banding is introduced, renewables obligation certificates will go to the cheapest technologies, such as methane and onshore wind farms. We recognise that there are already questions about the level of the bandings—for example, will two ROCs be enough to stimulate investment in marine and tidal technology? There is an issue there and many in the industry have profound concerns. However, there is no doubt that the banding proposals are a move in the right direction.
I have specific questions about the Bill, before coming on to the new clause on feed-in tariffs. It is not clear precisely what proposed new section 32A(4) to the Electricity Act 1989 is about. In which circumstances will a ROC apply only to one part of the United Kingdom? What is the breakdown on that? I am not sure if the Minister is referring to Scotland or Northern Ireland, for example, or to a smaller element like Croydon, which we know from what he said earlier is an area of outstanding natural beauty with great wind potential. Can he be clearer about what the proposed new section means?
On proposed new section 32B(3)(b), what is the situation if the electricity is exported, for example, through the interconnector? Can ROCs be used only with regard to electricity generated in the UK and sold to customers in the UK or can they also be used with regard to electricity generated in the UK and sold abroad? Particularly, I would like to draw his attention to proposed new section 32B(10)(d) on page 21. For the benefit of the Committee I will read that out:
“Those ways are—...
(d) being used, as respects part, as mentioned in one of paragraph (a), (b) or (c) and as respects the remainder—
(i) as mentioned in one of the other paragraphs, or
(ii) as respects part, as mentioned in one of the other paragraphs and as respects the remainder as mentioned in the other”.
Malcolm Wicks: That is perfectly clear.
Charles Hendry: I am glad that the Minister tells us that it is perfectly clear. We are looking forward to his detailed explanation. I wish to be there with the Minister when the Plain English Campaign next come to present the gobbledygook award. There are sometimes elements of legislation that are, to some extent, opaque. This is more opaque than we are used to.
The Minister could also give us greater clarity about proposed new section 32M—the fossil fuel reference is rather vague, and what parameters are involved? We certainly think it sensible that, as in proposed new section 32H, small payments can be carried over. That is a practical way to avoid unnecessary costs and excessive burdens. It brings us to the heart of the problem with the Government’s proposals and to the new clauses on feed-in tariffs.
The truth is that ROCs are too bureaucratic and are not well suited to microgeneration. The Government approach to microgeneration has failed to deliver the goods. There is massive potential in the United Kingdom for huge growth in microgeneration, but that could be thwarted by the Government’s lack of imagination about how to fund its growth.
Mr. Hugo Swire (East Devon) (Con): I am most grateful to see my hon. Friend in person having been woken by him this morning when he was sticking it up the Government, which he is continuing to do with tremendous aplomb. [ Interruption. ] This morning, he was talking about post offices.
Does my hon. Friend agree that this is an opportune moment for the Minister to speak a little about the anomalies when he replies? In Scotland, wave attracts five ROCs and tidal attracts three ROCs, which is a phenomenal incentive for investment in Scotland that could cost investment in other parts of the UK because of the disparity.
Charles Hendry: I am grateful for my hon. Friend’s remarks and for his clarification about how I managed to wake him this morning, although I felt that he used less than elegant parliamentary language.
Malcolm Wicks: You are looking after Committee members rather well.
Charles Hendry: Indeed. I am used to my constituents telling me that they went to bed listening to me on parliamentary programmes; they certainly went to sleep in the process. I am pleased to have had that invigorating effect on my hon. Friend.
My hon. Friend raises an important point, and there is a real issue. If we are serious about stimulating these technologies—marine and tidal—that are in their infancy and that have a tremendous amount of potential, we have got to make sure that the ROC is set at the right level. People will find it difficult to understand why different levels would be set in different parts of the United Kingdom. They would assume that, if that were the case, all the investment would go into Scotland even though there is tremendous potential in other parts of the United Kingdom for tidal and marine power to be developed.
There is strong agreement that ROCs are not the right way forward for encouraging microgeneration and decentralised power. An individual householder wanting to install photovoltaics or a small wind turbine will find that the complexity of the ROC system will make him lose the will to take the project forward; indeed it could well make him lose the will to live it is so complex. He wants three things: a simple system, a predictable income stream over a given number of years and an easy ability to see the return that he will get on his investment. The ROCs cannot do that but a feed-in tariff will.
There has been a debate about whether to replace ROCs with feed-in tariffs but there has been no common ground because of concerns about switching one system to another and how that could jeopardise long-term investment decisions. I understand that concern. There appears to be evidence that ROCs have merit for large projects while feed-in tariffs have merit for smaller systems. What we found overwhelmingly in the evidence to the Committee was that there is support for the move towards ROCs in that way. In its briefing notes, the BWEA said:
“BWEA supports the introduction of a feed-in tariff for small renewable systems generating under 50kW of electricity.”
The Energy Saving Trust, set up by the Government, said:
“We would welcome enabling measures in the Bill to introduce a feed-in tariff and signal the Government's positive approach to encouraging domestic microgeneration.”
The Royal Society for the Protection of Birds said it would like a system to
“pay small-scale generators a premium for the electricity they produce via a feed-in tariff”.
It goes on to quote the Stern review 2006, which said:
“Comparisons between deployment support through tradable quotas 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.”
We also had a very helpful note from Friends of the Earth on this matter. [ Interruption. ] That is probably one of its members ringing to ensure I get this in. It says:
“Friends of the Earth believes there is an urgent need for the Government to introduce a feed-in tariff scheme to support an expansion of smaller scale and decentralised renewable electricity schemes including: domestic and commercial microgeneration, onsite renewable technologies, and community owned renewable electricity schemes. These are particularly neglected in current policy. The Government's recent consultation on the Renewables Obligation admitted that it was never designed to support microgeneration technologies.”
It also says:
“A feed-in tariff has many advantages over a quota system such as the UK's Renewable Obligation (RO). It gives certainty and guarantees for investors, is transparent, easy to administer, promotes diversity of supply and is flexible.”
It concludes:
“A feed-in tariff is a proven cost-effective mechanism for developing renewable electricity capacity which could be brought in alongside the RO reforms in the current Energy Bill to support smaller scale renewable technologies which are currently poorly supported by existing policies but which will be vital if the UK is to meet its EU target.”
We had the chance in the evidence sessions to question people further on those matters. I do not want to take up too much time going into these but some of them bear a small amount of repetition. Philip Pearson on behalf of the TUC said:
“There is a piece missing in the jigsaw, and that is to assign a portion of electricity to securing a feed-in tariff in the way that has happened in Germany and Denmark— particularly in Germany, where it has been enormously successful with approaching 200,000 jobs in renewables, driven by a support mechanism that we do not have.” ——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 7, Q11.]
We heard from Gaynor Hartnell of the Renewable Energy Association, who said:
“I was hoping to add to the question on green renewable technologies. I said that the renewables obligation is not a very suitable mechanism for smaller-scale generation. Similarly, it is not ideally suited for emerging technologies where one is expecting the price to go down fairly rapidly, because it builds in quite a lot of inertia. A feed-in tariff is more effective for that kind of technology as well. Our wave and tidal device developers look with envy at countries such as Portugal and Ireland, which have feed-in tariffs for renewables, and expect to do business in those countries where that policy makes the climate much more conducive to their business.”—— .”——[Official Report, Energy Public Bill Committee, 19 February 2008; c. 91-2, Q177.]
Finally, I have a couple of quotes from our environmental sessions. Russell Marsh from the Green Alliance said:
“We want the Energy Bill to have a power that enables the introduction of a feed-in-type mechanism, particularly for heat, although we also need a feed-in-type mechanism for smaller-scale electricity.”——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 68, Q132.]
We also heard from Benet Northcote of Greencoast—I am sorry, Greenpeace. I am not sure who Greencoast are, but they are probably on the roof of the building as we speak. He said:
“To reiterate on feed-in tariffs, they are also tremendously important. You must look at the success of countries that have adopted feed-in tariffs, notably Germany, where they are massively outstripping our delivery of renewables in terms of solar power and wind. It is acknowledged that the changes that the Bill makes to the ROCs and the current framework will not get us to the necessary targets.”——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 68, Q133.]
Malcolm Wicks: May I repeat my question, and it is a genuine question, because I am interested in the argument? Is the hon. Gentleman advocating feed-in tariffs as a replacement for the renewables obligation or as a device for microgeneration? The arguments are rather different. I say that because, in the evidence that he cited, someone favoured feed-in tariffs for marine energy and talked about Portugal, and someone else talked about micro. What is his position?
Charles Hendry: Our new clause makes that quite clear. We understand the concerns of those who currently benefit from ROCs, who believe that the transition from ROCs to feed-in tariffs would be too complicated and would jeopardise investment. We think that there may be a case for such a transition, but we do not think that this is the time. We therefore want the ROC banding system to move forward and we think that that is the way forward for the larger projects.
Feed-in tariffs are, however, the right way forward for microgeneration. In our new clause, we say that we will set microgeneration facilities at less than 250 kW, which is substantially higher than the Government’s current definition, although we think that is about the right level. We also see a case for introducing feed-in tariffs for emerging new technologies to which ROCs do not apply. They would, for example, be quite a good way forward for marine and tidal. We are not suggesting the wholesale replacement of ROCs with feed-in tariffs, but we see particular merit in the tariffs where microgeneration is concerned.
As the Minister will be aware, there was significant cross-party support for feed-in tariffs on Second Reading. As he has heard, people outside are urging us to go down that route, and he will have heard for himself in our evidence sessions that many people feel that feed-in tariffs are the right forward.
You will be aware, Mr. Amess, that two new clauses have been tabled on feed-in tariffs—one in the name of myself and my hon. Friends and one in the name of the Liberal Democrats. The approach that the Liberal Democrats propose is rather more prescriptive, but both approaches are equally worthy.
Dr. Alan Whitehead (Southampton, Test) (Lab) rose—
Charles Hendry: I am happy to give way to the hon. Gentleman because he has also tabled a new clause.
Dr. Whitehead: I was merely going to point out that the new clause that I hope to move shortly also addresses this issue.
Charles Hendry: I am sorry—I should have paid tribute to the hon. Gentleman for the work that he has done on this issue, both in Committee and outside. We owe him a great debt of gratitude. As he says, his new clause addresses similar issues and concerns.
We do not mind which approach the Government support, but they should support one. There is overwhelming evidence that we will need feed-in tariffs if we are to make the most of microgeneration, in particular. ROCs will never achieve the breakthrough that we need on microgeneration.
There are much wider issues about how we will achieve the extremely ambitious and challenging targets that the Government have set for renewables, and the Minister may wish to say something about that in due course. However, on the new clauses dealing with microgeneration below 250 kW, there is overwhelming evidence that feed-in tariffs should be the way forward, and there is overwhelming support for such an approach.
The Chairman: May I point out again that we are debating clause 36 stand part, and no one is moving any new clauses? Those will be dealt with at the end of the debate, and it will be entirely up to hon. Members whether they wish to move them. However, we have grouped the three new clauses with the clause 36 stand part debate, so it is appropriate to debate them now.
Martin Horwood: I will start by referring to something that the Minister said at a previous sitting. I have not yet had the opportunity to congratulate him on the birth of his grandson Matthew, which I am happy to do on this occasion. I am sure that it will give him a whole new perspective on biomass—it certainly did for me when I became a father.
9.30 am
The three new clauses are in the same territory—feed-in tariffs. I will not dwell for long on the clause, but the hon. Member for Wealden was a little unkind to the Government, because although we share many concerns about the performance of the renewables obligation and renewables obligation certificates as the basis for promoting renewable energy, it is true that if we accept that the renewables obligation is where we are at the moment and that it will be part of energy policy in the immediate future, the clause and the Bill as a whole take us forward quite significantly, in that the banding of ROCs in particular is a very positive step, which is widely welcomed by the renewable energy industry.
Having given that encouragement, I have to say that it is nevertheless true that the basis for all three options on feed-in tariffs is that the UK’s share of electricity from renewables is one of the lowest in the European Union at only 4.3 per cent., compared with the EU 25 average of 13.6 per cent. I am happy to accept that, in some cases, as in Austria, the very high percentages from renewables are due in large part to the geography of the country. At the same time, however, other countries that are not noticeably mountainous, such as Ireland, have exceeded our renewables percentage quite comfortably, with none of those in-built natural advantages, so the UK’s performance on renewables is poor.
A menu of options is before us. We think that our new clause 8 is the best and most comprehensive of the three on offer, but I am quite happy to admire the simplicity of the Conservatives’ new clause 6—it has a certain elegant simplicity. Both of our new clauses focus particularly on microgeneration and decentralised energy, but also on offer is new clause 14, which is in similar territory but has a broader remit. All these proposals can provide the basis for what I hope will be a real debate with the Minister about the potential for feed-in tariffs. Even if he does not accept any of the three options on offer today, perhaps he will introduce amendments at a later stage that go down the same path.
The problem with the renewables obligation scheme is that it is not really succeeding, even within its own terms, because the proportion of renewable energy generated within the scheme is falling as a percentage of the renewables obligation itself. In other words, the amount that is being fulfilled through the generation of renewable energy is falling compared with the proportion that is being fulfilled simply by the purchasing of ROCs. In 2006-07, 4.4 per cent. of the electricity supply came from renewable sources, against an RO level of 6.7 per cent., so the uplift that the renewables obligation is supposed to be delivering is not actually pulling up renewable energy in the same proportion. I am glad that the officials appear to concur with that conclusion.
As some witnesses said in our evidence sessions, planning issues may be involved, and other factors may be causing a drag on the uplift of renewable energy, but the contrast with the example of Germany is striking. Let us consider photovoltaics, for instance. To date, Germany has installed more than 3.5 GW of solar photovoltaics; the UK figure is approximately 15 MW—a pathetically small amount in comparison. Nearly 50,000 people are employed in the German solar PV industry; the UK has approximately 1,000. That includes 500 at Sharp’s European PV manufacturing plant in Wrexham, and 95 per cent. plus of the Wrexham output goes to Germany and other non-UK markets, so the extent to which the renewables industry in Britain is developing only with the encouragement of other countries’ renewable energy policies is quite striking.
The success story continues: in Germany, renewable electricity rose from 11.5 to 14 per cent. between 2006 and 2007. In the past year alone, there were 235,000 jobs in renewable energy as a whole in Germany. So that is an economic success story, and it is identified as such by the German federal Government.
Malcolm Wicks: I am interested in the hon. Gentleman’s argument. He mentions the economic success story in Germany, but has he been able to do any research on the costs on the German feed-in tariff system, compared with, say, the £1 billion that we will be spending on the renewables obligation by 2010? Perhaps he has not, but that is a relevant consideration.
Martin Horwood: I will emulate the hon. Member for Wealden, who is, like me, learning from the Minister, and say that I could write to the Minister in due course with that kind of information. Clearly, the perception in Germany is that there has been investment in and costs relating to the scheme, which is structured differently from the way that we have approached the matter in this country, but it has been a real success story and it has brought real economic benefit to Germany. All that has happened, of course, with fewer natural renewable resources than we have on these islands. We have an enormous amount more natural wind and wave potential, for instance, than Germany has.
I was interested in the comments made by the hon. Member for Bolton, South-East on the interplay in Germany and the presence of a strong anti-nuclear lobby in the Bundestag that has helped drive policy urgently towards renewables at the expense of nuclear. That rather supports the fears expressed by Greenpeace, Friends of the Earth and we Liberal Democrats about a risk of crowding out a real drive towards renewables by losing focus and being distracted by proposals to support the nuclear industry.
Dr. Iddon: I can assure the hon. Gentleman that there is adequate pressure on the Minister from within his own party.
Martin Horwood: I am absolutely delighted to hear that: if it comes from such a well-informed source, it will, I hope, prove effective.
Of course, it is equally urgent that we do not crowd out clean technology in general. Perhaps we have all been slightly guilty of focusing on renewables as the only clean path in the short term, whereas, as we have already discussed, carbon capture and storage and clean coal technology are equally important, at least as a transitional technology, in fulfilling the potential energy gap that the hon. Member for Wealden rightly raised concerns about.
Steve Webb: In anticipation of the day when my hon. Friend is a Minister and I pass him notes, let me say that, on Second Reading, the Chairman of the Select Committee on Environment, Food and Rural Affairs, the right hon. Member for Fylde (Mr. Jack), said that it was a myth that the German feed-in tariff was
“some giant German subsidy or that it is costing German energy users an unaffordable amount—it is not, as the average figure is €2 per household per month.”—[Official Report, 22 January 2008; Vol. 470, c. 1414.]
That sounds like good value.
Martin Horwood: I am, as ever, grateful to my hon. Friend for putting that on the record and saving me the trouble of writing to the Minister. That opinion underlines the point is that we are making. The beauty of the German scheme is that it provides an incentive not just for big generators, but for small and medium-sized enterprises and for microgeneration at community and household level. We have tried to facilitate that in new clause 8.
We propose enabling powers. We use the magic word “may”, which has been much discussed in the context of the European Union this week and the meaning of which is well understood. We are not mandating the Minister to do this straight away and not asking him to rush into things; we are asking him to go into it in a measured way and, I say quite explicitly, alongside the renewables obligation. In the evidence-taking sessions, quite a lot of witnesses said that they thought that it was perfectly viable to introduce a feed-in tariff system initially on a small scale but one growing in stature, alongside an existing renewables obligation. That is the basis on which we could do it. For example, if the system were introduced simply for microgeneration at first, that could provide a model for a wider scheme in due course.
Charles Hendry: Does the hon. Gentleman agree that one of the great advantages of feed-in tariffs is flexibility? Therefore, we could start off by giving people a guaranteed amount in returns that the energy saved would produce over 20-year period, but as that technology takes off, we could reduce that for the next 20-year period. Each investor would have a sense of a guarantee about the returns that they would receive, but as the technology matures and moves forward, we could make a quick and easy change to the feed-in tariff; it is a flexible system.
Martin Horwood: I completely agree. The flexibility and assurance that the feed-in tariff system would give to investors in certain industries is an important advantage.
Another advantage, one to which the hon. Member for Wealden referred, is its simplicity and therefore its accessibility to those who aim to generate renewably at a low level—for instance, households. In his opening remarks on the clause during our previous sitting, the Minister referred to village primary schools. I cannot imagine that a village primary school would be brave enough to take on the ROC system; it is an ambitious target. However, it is feasible under a system of feed-in tariffs and microgeneration that a village primary school might consider it, either through biomass or other technologies; it could feed into the grid and receive a guaranteed sum in return for the energy generated. In that way, a feed-in tariff system could release the innovative potential of individuals, businesses and communities, as it has in Germany.
I believe that we have chosen our moment carefully enough to give the Minister a system that could release that sort of potential without undermining the existing renewables obligation system at a larger level. I therefore hope that new clause 8 will attract widespread support. If the Committee senses that one of the other two new clauses on offer might provide a better path, I would be quite happy not to press our new clause at a later stage in favour of others—or, if the Minister gave sufficiently strong assurances, to consider other options that he might put on the table.
The Minister is presented today with a menu of options—a rich diversity of offers—all aiming to fulfil the hunger that we have for feed-in tariffs in the drive towards renewable energy that has been achieved in other European countries. We are opening the door for the Minister, so that he can be one of the greenest Ministers ever, in driving this forward in an imaginative way. I hope later to commend the clause to the Committee.
Dr. Whitehead: I shall speak to new clause 14. We have already heard that it is one of a plethora of options on how to address tariffs in the context of the renewables obligation. Before proceeding any further, in my view, it would be inappropriate to throw the renewables obligation system up in the air; the world would presumably have to stand still for a considerable period while a universal alternative feed-in tariff was introduced.
Indeed, investment decisions that have already been made, and investment plans that have yet to be made, as I know from discussions with a number of people who are thinking of investing in renewable energy, are all related to the continuation of the renewables obligation. Those decisions were considerably enhanced not by the passing of changes in the renewables obligation banding but by the anticipation that such a change will take place, and they would be put on hold or even jeopardised as a result of changing horses in midstream.
Whatever the universal abstract merits of a feed-in tariff might be, substituting it now would not be a good way forward in developing renewable energy installations in the UK. Indeed, one of the key lobbying elements of many of those who are looking to invest in renewable energy has not been about having a universal feed-in tariff but about ensuring a longer-term certainty for the status of the renewable obligation—and the status of the headroom behind it.
In that context, we must be careful not to look at the difference between the issuing of renewable obligation certificates and the amount of renewable energy that we have as though that difference represented a failure in the renewable obligations themselves. It is necessary to have headroom in the system. That is part of the mechanism that drives renewable obligation forward, because if there is headroom ROCs have a value; if there is no headroom, they have little value and the system does not work as well as it should do.
9.45 am
It is important not only to have certainty about the time span for the existence of ROs and the banding that they represent, but to have headroom in the system, so that ROCs have some value and there is, therefore, some ability to plan on the value of the certificates that come forward over a period of time.
Bearing those points in mind, we would need to be careful when considering whether to substitute the present ROC system with an entirely new system. As has also been remarked in Committee, there is before us a substantial development of investment in renewable energy. Part of our deliberation has to be about how to ensure that that happens and how best the different forms of renewable energy can be developed within the time scale that we seek.
It is also important that we are careful not to make comparisons between different countries’ levels of renewable energy without paying some attention to the circumstances in which those countries have operated in the past. It is not just about a feed-in tariff and—certainly, in respect of microgeneration in this country—it is not just about ROCs. For example, it appears that there has been relatively little take-up of grants through the low-carbon building programme, particularly for solar photovoltaics, for a variety of reasons.
I speak from experience, and I should declare an interest with respect to new clause 14: if it is carried with acclaim—or even carried—at a future date, I might benefit on the grounds that my house needs re-roofing and I will be re-roofing it this Easter, with a 3 kW solar PV ray embedded in the roof of the house. If there is an extremely generous feed-in tariff for microgeneration in the near future, I will be able to retire on the proceeds. However, in establishing the process by which that roof could be installed, one of the things that I came across was the planning regime, as do many people in such circumstances.
As those grants are presently constructed, certain requirements that relate to planning must be fulfilled before somebody can start to develop a timetable for the installation—getting the builder and the solar roofer together and so on. The hurdles are so considerable and the planning regime across the country for what people can and cannot do concerning microgeneration is so uncertain between authorities that, in this instance, I came to the conclusion that the best thing to do was to proceed without even applying for a grant, and that is what I have done.
I hope that help is at hand, by way of the imminent final lap of a change in the general permitted development order. That change was heralded by the Climate Change and Sustainable Energy Act 2006, which my hon. Friend the Minister had a substantial role in assisting during its passage through the House some while ago. The GPDO will be organised to provide a clear and understandable regime across the country with regard to what is permitted to be put on to roofs and in gardens and houses, and what is not.
Mr. Swire: That is quite an ambition. Does the hon. Gentleman concede that, in my part of the world, existing buildings—very often thatched—are disadvantaged? Photovoltaic panels cannot easily be put on a listed thatched house in East Devon. Perhaps we should concentrate more on new build, rather than on existing build.
Dr. Whitehead: Indeed; the hon. Gentleman has a point. The sustainable buildings code will ratchet up the code level at which new build will take place up to 2016. After a certain amount of new build at particular code levels, that new build will require not only that houses are reactively energy efficient, but that they are proactively equipped for their own energy generation. That will be achieved through the installation of solar PV, turbines or ground-source heat pumps imbedded in the house as it is built, and it will be an important part of the new build microgeneration approach. Thatched buildings are rather bioefficient due to the thatch itself. Thatch could be seen as a form of long-term energy efficiency. I am not sure that those who developed thatched roofs in mediaeval times thought of them in quite that way, but that is how they are.
The issue for microgeneration is to ensure that the GPDO happens. That might be done by issuing a statutory instrument in the spring. If there are impediments, or if people put forward reasons at a late stage about why the SI cannot go ahead in April, a window of opportunity and a considerable period will be lost. It is important that the statutory instrument goes ahead and clarifies GPDO issue in April. In those circumstances—I put this in the conditional tense—I might have been the recipient of £2,500 to assist with my solar PV roof.
Charles Hendry: I am interested to hear about the hon. Gentleman’s plans. If the system of support came through ROCs rather than from a feed-in tariff, would he bother to apply for ROC support for the project, or would he decide that the system was too complicated to bother about? One of our main concerns is that that sort of good practice, which we are keen to encourage, would come through feed-in tariffs, but not through ROCs.
Dr. Whitehead: The hon. Gentleman anticipates my next paragraph. The questions are, first, whether one gets any assistance for the development of such a project, and secondly, what the lifecycle of the project is after that and the extent to which that form, or other forms of microgeneration, can be subject to an efficient use of the ROC system. Given the output from the system that I am likely to have, I can probably apply for a ROC. I have not yet applied for it, so I am not certain how many hurdles need to be overcome. However, I certainly anticipate that it would be ROC-able.
However, there is a wider issue around ROCs and microgeneration. I would distinguish between the idea of changing horses in midstream as far as a universal feed-in tariff is concerned and the question of how we underpin microgeneration in the future. By and large, microgenerators have not accessed the ROC system so far. Some have done so in some circumstances, and there have been suggestions and, indeed, some changes in terms of whether one could have so-called ROC-ettes for microgeneration, and whether there should be ROC farming, whereby a number of sub-ROC microgenerators in an area gather together as a ROC farm and get a ROC at the end of the process. [Hon. Members: “Rock on. Northern Rock?”] Yes, it will be interesting to see whether confidence in the ROC system continues in the north and north-east of England to the same extent as in the south.
The central point is that, at the very least, we could and should look at whether some form of tariff system would be a way to develop microgeneration, either in parallel with or instead of the ROC system. First, it would not interfere with the long-term planning process. In effect, it would not change the system that applies to microgeneration, because the system of ROCs is undeveloped anyway. Also, because most microgeneration will be on the margin of ROC-ability given the lower levels that ROCs apply to anyway, a tariff system probably would represent an easier way to encourage the output of microgeneration than by trying to gather together part-ROCs and then deal them out to the various people who are in a part-ROC system through some form of farming.
My new clause 14 would give the Minister a great deal of leeway in deciding how such systems might develop. Indeed, it does not even include the expression “feed-in tariff”. It refers to how the Minister may develop systems and designate particular systems for such arrangements, and how he may address the producers of electricity in terms of what their obligations would be under such arrangements. It also enables the Minister to vary the tariff rates according to the kind of microgeneration or generation that is involved.
My modest suggestion is that, of the three new clauses on offer, mine represents the best present to the Minister—naturally, I would say that—but I join the hon. Member for Cheltenham in suggesting that this is not necessarily a question of having a mighty battle about which one gets the nod this morning. It seems possible, within the overall outline of the present system, to vary the approach that is taken to microgeneration. As far as our discussion today is concerned, that idea has legs, and if my hon. Friend the Minister is able to respond positively about how it may be taken forward, the question of whether one has a particular line here or there, or a new clause here or there, fades into the background.
10 am
Steve Webb: It is a pleasure to follow the hon. Member for Southampton, Test. His contribution was well informed, as ever. With his reliance on solar photovoltaics, he will not be able to get a ROC around the clock.
I want to pick up on a few clause stand part issues that we have not dealt with. I expected the Minister to say a little more, because, like the hon. Member for Wealden, I was hungry for more when he was speaking last Tuesday. On the relative value of the bands—we are getting half ROCs, one and a half ROCs and two ROCs—the numbers in the most recent briefing seem to have changed slightly from those in the Library note, which is interesting. Will the Minister tell us the reason for having two? Why not have two and a half or 1.75? The numbers have a very specific implication—an extra amount of subsidy—so they must be pro rata to something. Will he say more about where the numbers have come from? I am sure that he knows off the top of his head, and any source would be fine.
The hon. Member for East Devon raised the next issue that I want to discuss. I must admit that I have learned something this morning: I had not come across McROCs before, but the fact that Scottish ROCs appear to have different rates from those south of the border is quite serious. Obviously, there is coast all around the British isles, but if there is a different rate of return north of the border, that is a significant issue. The Minister did not mention that in his introduction, so I hope that he will deal with that point.
Charles Hendry: The hon. Gentleman makes a fascinating point. I am a great enthusiast for the super-grid. It is an extraordinary and exciting idea, and it would be wonderful if it happened. However, given that we have a ROC system in the UK and Germany has a feed-in tariff system, there will have to be some way of marrying up those systems. The grid will be in different territorial waters and investment will be according to where the system will have the most support. How does he think those systems could be reconciled?
Steve Webb: That is an important issue. I assume that because different national economies will draw electricity from the super-grid at different points, when a British power company or electricity user draws electricity from the super-grid, reimbursement will be in the form of ROCs. In Germany, it might be used by German industry or generators. I imagine that that is how it could work. However, there might be perverse incentives. One can imagine it being drawn in one way and there being an inter-connector to sell it back. There must be co-ordination.
Charles Hendry: That brings us back to the issue of exporting power, which I discussed earlier. The idea with the super-grid is that when the wind is blowing in the British part of the North sea, if the electricity is needed in Denmark or Germany, it will be sent there, where it will be bought. The whole notion of the super-grid is that it will be tradeable. Has the hon. Gentleman, or the Minister, thought about how that could tie in with the proposed system?
Steve Webb: I share the hon. Gentleman’s interest in imports and exports. He raised that issue earlier, and I look forward to hearing the Minister’s response.
The only other issue that I want to raise, on which the hon. Gentleman might have touched briefly in a previous sitting, is the Ministry of Defence’s attitude to offshore and onshore wind. That is germane because clause 36 provides differential incentives in relation to offshore and onshore wind, which is great if DBERR is trying to promote such development, but problematic if, at the same time, the MOD is trying to stop it. We have had a written answer suggesting that the MOD has objected to a significant number of wind projects—I will give the Minister a reliable number in a moment. Defence Estates objects to more than half of all wind farm applications and the reason for that seems to be that the radar systems cannot cope. I find it alarming that advanced military radar systems cannot tell the difference between a stationary wind turbine and an incoming intercontinental ballistic missile. That is alarming on several levels.
The Ministry of Defence says no because it can, but really it ought to be asked more difficult questions. Why does our Ministry of Defence want to block so many applications whereas other Ministries of Defence, which presumably also want to tell the difference between an incoming missile and a wind turbine, appear not to be blocking them? Surely, if there is a general radar and air traffic issue, Britain will be affected in the same way as mainland Europe. Why is our Ministry of Defence being picky? A written answer from the Secretary of State for Defence says that the MOD has opposed 28 wind farm applications between 2005 and 2007. Defence Estates itself objects to just over half of 1,000 project application pro formas that it receives annually. There is a substantial problem and it is getting worse. I hope that the Minister will take action to deal with it.
Anne Main (St. Albans) (Con): Does the hon. Gentleman agree that the timing of some of the objections is a problem? Often, there is no voice against an application until a very late stage. I was talking to the wind energy companies about that, and it is disheartening for them to face significant costs and disappointment at a late stage of the planning application.
Steve Webb: The hon. Lady is absolutely right. Apparently, in some examples, initial consent is given, the process drags on and the consent is then revoked, which makes the whole process much more expensive. On the one hand, we are trying to give incentives through clause 35; on the other, another arm of Government is making this form of development more expensive. There are a whole raft of examples of that.
Dr. Stephen Ladyman (South Thanet) (Lab): I am concerned that the hon. Gentleman is being a little unfair to the MOD. It is true that air traffic control centres and the MOD raise objections to wind farms. They did so in the case of the London array, which was being built off the shore of my constituency, but eventually the concerns were negotiated away. That seems to be the pattern: they register their objection to get people to the table and negotiate the problems away.
Steve Webb: If that were the case, the picture would not be as bad as the one I am painting, but there are two problems. First, when the MOD does not register an initial objection, the wind turbine does not end up in a different place and remains where it always was. Then two years later the MOD suddenly decides that there is a problem. That must be unacceptable, as I am sure that the hon. Gentleman would agree. Secondly, such objections add to the cost of the process. If there are legitimate objections—and in some cases there will be—they need to be addressed quickly, but unpredictable behaviour and long delays cannot be the way forward.
Dr. Ladyman: I wonder whether the hon. Gentleman appreciates the irony of what he has just said. He makes a big deal about the MOD making a complaint on rational grounds, which I argue will get negotiated away, but he skates over the fact that the local council objected simply because of the way the project looked.
Steve Webb: That is part of the planning process and the council had a democratic right to make those observations. Central Government cannot stop local authorities expressing those views; nor should they. The hon. Gentleman is being too glib in saying that the problems will all be negotiated away; what if objections are erratic, come late in the process and take a long time? Wind farm folk who come to talk to me say that it is hard to get to the key decision maker in the Ministry of Defence, and that they do not get responses. If there are particular objections, they are not negotiated, and there is paralysis, which is a problem.
Charles Hendry: Is not the vital point that the council was right to object, but it did so at the appropriate time? What went wrong was that the Ministry of Defence said initially that it had no objections, but subsequently changed its mind, by which time the company had spent an enormous amount of time and money on development. Everyone understands that the Ministry of Defence has an absolute right to object on grounds of national security and radar issues, but it should do so at the appropriate time. Furthermore, the MOD’s vision is that every wind farm application that has ever been submitted is still a live application, even when they have been dropped. It thinks that it is looking at masses more applications than is the case.
Steve Webb: I think that that is right. The Ministry of Defence has a legitimate role, but if there is an insuperable issue, or one that needs addressing, it must raise it at the start, it must be consistent, and the matter must be resolved quickly. None of that is happening. If the Minister wants clause 36 to work, and the banded renewables to provide the incentives that he wants, he must assure us that he is—dare I say it?—banging heads together in the Ministry of Defence to try to get it to stop behaving inappropriately.
Malcolm Wicks: I was listening with great care to the discussion about the MOD, and I hope to be able to say something about that. The matter is obviously one of concern, but I think that we are making progress. In a way, the debate has been in two halves: part of it was about my speech on clause stand part, and that was followed by a fascinating series of speeches primarily about how we can better incentivise microgeneration. That has been the essence of the debate, and I shall start by responding to some of the issues raised by the hon. Member for Wealden.
By way of context, I agree entirely with my hon. Friend the Member for Southampton, Test, who indicated that we need to understand the recent history of different countries with regard to renewables. Our country’s recent energy history needs to be understood partly in the context of the huge energy resource in the North sea and the wider UK continental shelf. Unlike other countries, we have had an abundant resource of fossil fuels. We took the decision shortly after the second world war to build civil nuclear reactors, whereas other countries—understandably, because it is up to member states—are opposed to nuclear.
It is fair to point out, as Liberal Members have done, that some countries are rich in hydro resources because of their terrain. I sometimes think that those who make too glib a comparison with Europe—no one here has done so today—do not take hydro into account. It is a significant percentage of European renewable resources, and it is only fair to point that out.
Having admitted that the UK has come relatively late to renewables, we have not come late to CO2 and greenhouse gases. We are one of the few member states that will hit the 2012 Kyoto protocol target. Greenhouse gas and CO2 emissions reduction are the primary objectives for tackling climate change, and I sometimes think that when talking about nuclear, energy efficiency or renewables, we should keep our eye on the ball: the threat to our planet from global warming. We must approach that task in a number of ways, of which the renewables strategy is a key component, but not the only one.
We have heard some comparisons with Germany today, and I want to give some data on Germany in terms of feed-in tariffs. But it is worth bearing in mind—we like to beat ourselves around the head a bit in the House—that the UK’s CO2 emissions per capita are lower than Germany’s.
Charles Hendry: Will the Minister confirm that two of the main reasons that we have been able to meet those Kyoto targets are first, the dash for gas, because we invested in gas in a way that other countries did not, and secondly, the loss of the United Kingdom’s manufacturing industry, which has been exported to China? China and other countries in Asia now produce the CO2 that those businesses historically produced, but above all, the dash for gas was responsible.
10.15 am
Malcolm Wicks: Yes, that is a very substantial component, and the hon. Gentleman is right to remind us that when examining a nation’s carbon dioxide emissions, the balance between traditional manufacturing and the development of service sectors is important. That was a useful intervention—as ever. There may be a deterioration in the future, but currently, the quality is extremely high.
May I say something about the Government’s renewables strategy? I shall say it briefly, because we must understand the issue in two parts. Current Government policy will, by 2010, already deliver about £1 billion of resource to the renewables sector per annum through the renewables obligation. So, when some say that we should spend more, let us bear that figure in mind: by 2010, as I understand it, £1 billion will be spent per annum through the RO. We are providing other grants and so on, too, so it is already a substantial resource.
Our White Paper set out ambitious measures to increase renewable energy production in the UK from 2 per cent. of all energy, which is more or less the figure now, to some 5 per cent. by 2020. However, we know that we need to do much more in the light of the challenge posed by the European Union’s target of 20 per cent. for the whole European Union by 2020. We expect the amount of electricity that we produce from renewable sources to triple to about 14 per cent. by 2015 when compared with now. On electricity, we currently produce about 4 or 5 per cent., and we expect the figure to triple by 2015.
My main point is that we now recognise that we must do far more if we are to meet our share of the European Union’s 2020 target. The Commission said that our target should be 15 per cent.; I am sure that it will be there or thereabouts, but we are discussing the fine detail. It will be a very substantial effort, and current policies alone will not, in any way, enable us to hit that target, whatever it turns out to be.
We are therefore thinking again and hard about a renewables energy strategy. We will consult on it and publish a document in the summer to develop a strategy that will get us to whatever our target turns out to be. It will be very substantial. We have a raft of successful policies that are moving us ahead, but are they enough? No, they are not. Do we need to do more and do we need a new strategy? Yes, we do. In simple terms, that is our current position.
Anne Main: I congratulate the Minister on his forceful support for renewables. There is in my constituency a renewable energy station at junction 20 of the M25, and I should like to welcome him there to see some of the groundbreaking work that it staff are doing. I hope that he will accept that invitation to see what can move us forward with extra renewable impetus.
Malcolm Wicks: I am very happy to accept that invitation. It would be wonderful to go there next Thursday afternoon, but unfortunately there are more theoretical issues to deal with.
Charles Hendry: Will the Minister give way?
Malcolm Wicks: Yes, of course—another invitation!
Charles Hendry: The Minister is always welcome to my constituency; I am not sure, after my earlier comments, whether I would always be welcome to go to his. On the size of the challenge, if 40 per cent. of our electricity will have to come from renewables to meet the EU target, does he agree that that equates to 25 GW, or thereabouts, of available peak demand, which will have to come from renewables? Does he agree that that is the size of the challenge?
Malcolm Wicks: I certainly recognise, given that it is easier at the moment to produce renewable energy for electricity than for some other things, that the proportion of our electricity coming from renewables—I have heard figures of 35 or 40 per cent., perhaps more—will be colossal. As we develop our renewable energy strategy, we will look at the numbers and the implications very carefully and I think it is best to leave it there.
The hon. Gentleman asked me about proposed section 32A(4) and the implications for the UK. As he knows, there are already three separate renewable obligations: one for England and Wales, one for Scotland and one for Northern Ireland and these are co-ordinated for maximum efficiency and we want this to continue. Certainly industry wants this consistency and this certainty. If, however, devolved Administrations decide to open up differences in banding, this power allows us to make sure it does not disrupt the other obligations, but we are working very closely with the devolved Administrations to ensure that our united approach continues, which, I repeat, is what the industry is asking of us.
The hon. Member for Wealden, who was the only person in this room who was disappointed by the shortness of my speech the other day and who obviously went to a very good school because he understands the alphabet pretty clearly, asked me about the proposed section 32M which touches on fossil fuels. I think I need to give him a detailed explanation. This section defines some of the terms we have already discussed and allows the Secretary of State to set out in the order the definition of what constitutes waste for the purposes of the RO and how the proportion of fossil fuel in the waste is to be determined. The provision enables waste, which has a relatively high proportion of plant and animal matter, and—this is the crucial point— some fossil fuel content to be treated as a renewable resource, for example crop residue left over after a production process that contains some fossil fuel contaminants. This type of waste is typically referred to as biomass. As well as waste that can be treated as biomass, the RO also supports the electricity generated from the non-fossil fuel content of waste when used in combined heat and power stations, or when converted to a fuel by anaerobic digestion, gasification or in other ways.
This new section will enable the order to make provision as to what may be accepted as sufficient evidence of the proportion of fossil fuel content of waste in these circumstances, which could include the use of declarations by generators. This is intended to overcome difficulties that operators face in the accurate and cost-effective measurement of the fossil fuel content of mixed wastes. To avoid the risk of inaccurate calculations, this section also includes a provision enabling the regulator, Ofgem, to require sampling of fuels in specified situations to ensure that ROCs are awarded only for genuine renewable generation.
The hon. Member for Wealden also asked about proposed section 32B(3)(b) in terms of the implications if some renewable electricity is exported. The amount of electricity exported is a very small proportion of the whole, but as long as generators can sell to suppliers in the UK, they will be able to claim ROCs should some of that electricity be exported. That is the only sensible way to proceed.
The hon. Member for East Devon asked about Scotland. Decisions on banding in Scotland have not been made and it is not the case that marine there gets five ROCs. There is currently additional support for marine through the marine supply obligation in Scotland. However, this is currently set at zero. We are working with the Scottish Executive to ensure a UK-wide banded RO system, and this is really what the industry and what generators want.
The hon. Member for Cheltenham referred to a technical, arithmetical matter about the fall in the rate of compliance for RO—
It being twenty-five minutes past Ten o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.
Adjourned till this day at One o’clock.

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2008
Prepared 29 February 2008