 House of Commons |
Session 2007 - 08 Publications on the internet General Committee Debates Energy |
Energy Bill |
The Committee consisted of the following Members:Chris Shaw, Committee
Clerk
† attended the
Committee
Public Bill CommitteeThursday 28 February 2008(Afternoon)[Mrs. Joan Humble in the Chair]Energy BillClause 36The
renewables
obligation
Question
proposed [this day], That the clause stand part of the
Bill.
1
pm
Question
again
proposed.
The
Chairman:
I remind the Committee that with this 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.’.
The
Minister for Energy (Malcolm Wicks):
Welcome to the Chair,
Mrs. Humble. I was addressing a question from the hon.
Member for Cheltenham. The rate of compliance for the renewables
obligation between 2005-06 and 2006-07 raised a query in his mind about
the delivery of less generation. However, that is a technical one-off
effect of the tightening of the cap on co-firing. It will be rectified
by the reforms that we propose to introduce through the Bill. We are
making the RO more efficient and effective, thereby driving faster and
wider deployment. If he would like a more technical explanation, I am
happy to give him one in writing if that would be
appropriate.
Martin
Horwood (Cheltenham) (LD): I am grateful for the
Minister’s response. I was not aware of that effect. If it is
the true explanation for the shortfall this year and it is a one-off
effect, that is encouraging, but I would not mind, as well as the
technical explanation that he has promised me, an analysis of the
percentages over the past five years or for as long as the renewables
obligation has been in existence, so that we can establish whether
there is a trend.
Malcolm
Wicks:
I wonder whether one issue in the hon.
Gentleman’s mind is that there is something known as headroom in
the renewables obligation, so we are always setting a percentage figure
somewhat higher than where we actually are. That is how we incentivise
people to come forward with investment, but I am happy to supply any
other information that I can to the hon.
Gentleman.
The hon.
Member for Northavon, who is not here this afternoon, referred to
“Rock Around the Clock”—I think that we have had
the last of those jokes now. He was the second speaker on the Liberal
Benches this morning, so he was very much the Comets to the hon. Member
for Cheltenham’s Bill Haley.
The hon. Member for Northavon
asked what the criteria were for establishing the bands. Bands were set
on the basis of criteria in proposed new section 32D(4) of the
Electricity Act 1989. In particular, the cost data came from a study by
Ernst and Young, but we also took into account other criteria,
including the cost to consumers. We have also paid heed to the results
of our recent consultations on proposals, which supported a limited
number of bands. Consultation has led to some minor changes to the
bands to which he
referred.
Martin
Horwood:
I am sure that my hon. Friend the Member for
Northavon, who apologises for not being present this afternoon, will be
grateful for the information that the Minister has given, and I am sure
that the consultation was right about having a relatively simple
framework of bands. That is obviously desirable, but is the study by
Ernst and Young in the public domain? If so, can it be supplied to all
members of the
Committee?
Malcolm
Wicks:
I am advised that the study is in the public
domain. I will ensure that, in the most practical way, it is available
to members of the
Committee.
The
hon. Member for Northavon also asked whether a European super-grid was
a good idea. Given the development of offshore wind in a number of
member states and the European target for 20 per cent. of all our
energy to come from renewables by 2020, a super-grid is an interesting
long-term idea. Obviously, it raises a range of regulatory and other
issues. I have personally discussed those ideas with Mr.
Adamowitsch, who is the EU offshore wind co-ordinator. I can see why
the hon. Gentleman might smile at the idea of Brussels having such a
co-ordinator, but Mr. Adamowitsch is a distinguished former
Energy Minister from Germany. He visited the UK last year and we
discussed those matters.
The purpose of the offshore
transmission regime, which we will discuss next, is to enable
transmission of the significant amounts of electricity generated from
offshore renewables in offshore waters—offshore wind, but
potentially also wave and tidal—to the Great Britain grid, to
meet our renewable energy targets.
Charles
Hendry (Wealden) (Con): I am fascinated by the mention of
Mr. Adamowitsch. Only the Germans could
try to co-ordinate wind; it is a fascinating challenge. Will the
Minister clarify how the super-grid will be considered? If the area
where the wind energy was generated was part of British territorial
waters, but the
energy happened to be used in Denmark or Holland, for example, would it
count as part of their renewable quota or as part of our renewable
commitment?
Malcolm
Wicks:
I cannot give a definitive answer, as this is just
a pipe dream at the moment—or a wind dream. No doubt, those
questions would have to be considered. At present, there is debate
about what counts towards hitting the 2020 European target. I hope that
if there was a super-grid, which would no doubt sometimes be sending
electricity one way and sometimes another way, we would come to some
sensible arrangement about how it was chalked against the different
national targets. I assume, although I do not want to suggest that this
is the definitive answer, that if electricity came from a wind farm in
British territorial waters it would count against our own target, but
it is too early to make a judgment about
that.
Dr.
Stephen Ladyman (South Thanet) (Lab): I do not know
whether the Minister has the answer to this
question—
Dr.
Ladyman:
This discussion has brought to my mind the fact
that my constituency is largely powered by French electricity because
we buy it from French generators. How do they take account of energy
that they produce renewably and sell to us in south-east
England?
Malcolm
Wicks:
That question illustrates the complexity of the
issue and I am grateful to my hon. Friend.
As an aside, from time to time
I take refuge on the island of Alderney, one of the Channel Islands. My
wife is a native of the island, which has ambitious plans for tidal
power. My way of relaxing away from the UK is to discuss tidal power
with the people of Alderney. I mention that because of another little
complexity: as every schoolgirl knows, the Channel Islands are not part
of the United Kingdom and are actually not part of the European
Union.
Dr.
Ladyman:
I cannot help but point out to the Committee that
I have seen a photograph of my hon. Friend in the Minister’s
office in Alderney. They were old school friends and the Minister was
in short trousers in the photograph.
Mr.
Hugo Swire (East Devon) (Con): I, too, pay tribute to
Alderney. I have been to Fort Clonque, an excellent place where I ran
into Duncan Goodhew, the swimmer, at the airport—he must know a
lot about wave power.
Malcolm
Wicks:
For the record, I was in my short trousers when I
was the school’s 100 yards champion; it was not during a later
period.
Charles
Hendry:
I am not interested in swapping holiday stories
with the Minister, but I am interested in whether he can give us some
more clarity about the exporting issue. When we discussed it this
morning, he said in relation to renewables obligation certificates that
if the energy was generated in the UK and sold to a company in the UK,
it could be exported through the interconnector to France or wherever.
Through the super-grid that would not necessarily be possible, because
it would be sold directly from the super-grid to a country abroad. I
realise that he may not have the answer now, but I know that he is
promising to send me a tome, or a long letter, so perhaps the
information could be included. In the responses we have had from the
Minister there is a lack of clarity about how the process would
work.
Malcolm
Wicks:
To be fair, electricity from various sources will
go into the grid, and some may then go to another country, but we
cannot colour the electricity from renewables green and trace it. We
certainly need to work through the issues that the hon. Gentleman
raises, but we cannot track renewable electricity electrons through the
system, which is why we have renewables obligation certificates to help
track renewable electricity. We should not get too insular about it,
however, because we are signed up to a Europe-wide target. At the end
of the day, the objective is that Europe should hit its renewables
target, and we no doubt need to work together in all sorts of ways to
achieve that.
We have
three new clauses before us, which have been moved by Labour Members,
Liberal Democrat Members and Conservative Members respectively.
Although they all focus on renewables, they focus particularly on
microgeneration and the virtues of a feed-in tariff system, and I shall
now address those issues.
In the context of the EU 2020
renewable energy target, the issue of how we increase the deployment of
renewable energy has become ever more urgent, as these debates have
shown. We certainly recognise that the issue represents a major
challenge, and work has already begun to identify the actions and
measures that will help us to achieve our share of the EU target. There
is no doubt that we will need significant deployment of different
renewables and generating stations of all sizes, from large offshore
wind farms, such as the future London Array, which we expect to be the
world’s largest wind farm, at 1 GW, to smaller, local
generation, which can be below 10 kW.
New clause 14 would introduce a
feed-in tariff for all sizes of energy generation. Feed-in
tariffs are sometimes presented as a kind of magic bullet that will
solve the real or imagined problems of the renewables industry. I do
not believe that is true, and accepting the
new clause at such a crucial point in the development of the renewables
obligation would send entirely the wrong message to industry. It could
damage investor confidence and result in significant delay to projects
coming online.
Throughout the debate about the
rights and wrongs of any support mechanism, we must not overlook the
success of the renewables obligation so far. Renewable generation has
almost trebled since its introduction in 2002, and the reforms in the
Bill will triple it again by 2015. However, the delivery of more
capacity is not simply a matter of the financial support mechanism; a
broad range of factors is at play—not least the planning
system—and we are working hard to address them all.
We must also be careful when
making comparisons with other countries. Most continental feed-in
tariffs operate on the basis that there is a vertically integrated
network operator that can be obliged to offer a tariff. That, of
course, is not the case in the UK, where suppliers are separate from
the network operators. That separation allows suppliers to choose where
they buy their energy, which in turn drives efficiency and innovation.
That does not fit well with a more rigid system in which the
Government, in essence, fix the price. Simply imposing on suppliers an
obligation to pay a tariff will not guarantee that we have an effective
support mechanism for the UK market.
People sometimes talk about
feed-in tariffs as though they were cost-free, but that is simply not
the case. As with any support system, there are cost implications. In
2007, the International Energy Agency published estimates for Germany.
Between 2000 and 2012, the German feed-in tariff regime will result in
payments of €68 billion, of which between €30 billion and
€36 billion will be the additional costs of renewables. By 2012,
the annual cost will be between €8 billion and €9.5
billion. Solar photovoltaics will provide 4.5 per cent. of
Germany’s renewable electricity, while taking 20 per cent. of
total payments. Those important figures should enter our debate, which
is why I asked the hon. Member for Cheltenham whether he had any
financial information for us. Such things need to be factored
in.
1.15
pm
Martin
Horwood:
The Minister raises important questions
about public practice and how the system would work in a liberalised
energy market such as we have. They are perfectly fair points. However,
none of the new clauses oblige the Government to replace the renewables
obligation wholesale with a feed-in tariff system tomorrow. The kind of
costs he mentioned for the established system in Germany—a
rather larger country—do not apply in this case. This is about
enabling powers to allow him, through two of the new clauses, to
introduce feed-in tariffs aimed at decentralised energy and
microgeneration initially on a much more modest scale and cost to the
public finances. He is being a little unfair in citing those
numbers.
Malcolm
Wicks:
Of course, I am coming to that. I make those points
because part of the naivety of the debate—not necessarily in
Committee but generally—
somehow suggests, “Britain bad, Germany good: good old feed-in
tariffs”. However, everyone would recognise that the costs that
I have cited are very considerable.
Part of the debate about energy
policy in Britain is to inform the public and ourselves that, at a time
of rising global energy prices, we are now, perfectly properly, adding
to those prices because of the environmental measures that we take.
That could be at European level through the emissions trading scheme or
through renewables obligations and so on. We must look at the price
impact on the customer—something that is often not done during
the debate. A feed-in tariff regime underestimates the costs of
renewables. Unlike the RO, a feed-in tariff regime covers only the
costs of the generator and it imposes other costs on the electricity
supply chain—for the use of a network, for example, and for
balancing the variable nature of some renewable generation. Those
become hidden subsidies in the feed-in tariff regime, which will be
passed through to consumers. The RO allows the market to take account
of those costs in contracting with renewables generators.
New clause 14 does not, on my
understanding, remove the RO. It seems to envisage a situation in which
the RO continues to run alongside a new regime. Before we decide to
introduce any additional incentives for renewables, we must carefully
consider how those schemes would interact. That will be a key element
of our analysis in developing a strategy for the EU 2020 target.
However, it is by no means a given that a Government-set tariff is the
best approach. For example, people often claim that a feed-in tariff
provides a more predictable support mechanism. We understand that the
German Government recently announced that they would be reducing the
level of the feed-in tariff for solar photovoltaics in Germany by
around £120 per megawatt-hour. That was after the subsidy had
already been reduced by around 50 per cent. over the past 10
years.
Martin
Horwood:
No, on the specific issue of the adjustments to
the German system. On further investigation, the Minister might find
that those changes were grandfathered so that new entrants were earning
the lower rate of the feed-in tariff. More importantly, they are a
measure of the success of the German photovoltaic industry because they
reflect a lesser need to subsidise the expanding and successful solar
industry. Therefore, they are a measure of the success of feed-in
tariffs, not a weakness.
Malcolm
Wicks:
I was addressing the issue of consistency. Going
forward, it is good to be as specific as possible, so that new
investors can do their arithmetic properly for the
investment.
Many of
the arguments for why we should not introduce a feed-in tariff in the
Bill also apply to new clauses 6 and 8. I will not reiterate the
points, but since the new clauses are more specific and seek a power
permitting the introduction of a feed-in tariff for
microgeneration and decentralised energy, I hope that the Committee will
bear with me if I make two additional points.
First, we are clear that
microgeneration has an important role to play in our renewable energy
mix. That is clear from what I have already said. Our commitment is
proven by the focus and support that the Government have given to
microgeneration. In 2006, we saw our first-ever published
microgeneration strategy. We have made £86 million available in
capital grants in the low-carbon building programme to reduce the cost
of buying and installing equipment. We have provided independent
certification of products and services, and a route for complaints with
the microgeneration certification scheme. This spring, we shall remove
the need for planning permission for most domestic installations that
have little or no impact beyond the host property. My hon. Friend the
Member for Southampton, Test focused, in part, on that in his
speech.
That is not
all. Proposals in the Bill will enable the Secretary of State through
the order to allow microgenerators to double the number of ROCs that
they can receive at present. That is a significant advance. We have
already taken steps to simplify the process for microgenerators under
the RO, including allowing them to make annual claims for ROCs and
simplifying the accreditation forms. We shall continue to simplify the
access of microgenerators to, and benefit from, the
RO.
Since the most
recent changes that we made last April, the number of microgenerators
accredited under the RO has increased by 250 per cent. For example, I
am especially pleased that Ofgem will shortly be making an online
accreditation system available that will make accreditation to the RO
easier. The significant amount that the Government have already done,
or have in train, demonstrates our commitment to the growth of
microgeneration.
My
second point, however, is that, although we remain convinced of the
benefits of microgeneration and its potential role, against the
background of rising energy prices and the inevitably constrained
resources available in the economy to tackle climate change, we are
also conscious of the fact that microgeneration is more expensive than
a number of other large-scale forms of renewables. That is inevitable,
given the state of that technology. Therefore, any decision that we
take in the context of further support for microgeneration needs to be
balanced carefully against whether additional resources might be more
cost-effectively targeted at other forms of renewables. Such options
could include renewable heat, which can be cost-effective for
households that are not connected to the gas grid. Members of the
Committee might like to note that most of the estimated 100,000
microgenerators in the United Kingdom are reusing renewable heat
technologies.
For all
those reasons, when giving evidence to the Committee on Tuesday 19
February, which I think was last
week—
Malcolm
Wicks:
Indeed. I was grateful for the opportunity to
announce that, as part of the renewal energy strategy consultation that
my Department will conduct in the summer, we will include consideration
of the role of microgeneration and distributed energy going forward.
That will include looking at other support options, such as feed-in
tariffs. All those arguments strengthen my view that it is premature to
amend the Bill with the powers under the new clauses in advance of the
work on the renewable energy strategy and the consultation in the
summer. It is not until we have completed that work that we should
consider whether additional legislation is necessary and, if so, of
what
type.
I
reiterate my support for microgeneration, notwithstanding some of the
issues that I have raised, not least because it enables the citizen to
take action against global warming. We often debate climate change and
renewables in terms of big institutions, such as Ofgem, the European
Union and member states, and talk about big programmes, but there is
growing concern among most of our citizens that we are part of the
problem of CO2 emissions in respect of our dwellings. More
and more constituents want to become part of the solution. There are
different ways in which they can do that, but one is if we can
facilitate the development of
microgeneration.
Martin
Horwood:
The Minister’s remarks
were perhaps influenced by a traditional civil service approach, but he
was rather like a man building a monumental castle with lots of
ramparts in defence of current policy and then opening a little back
door to enable us to discuss feed-in tariffs during the consultation in
the summer. Having said that, it is very welcome that the Government
are to include feed-in tariffs in that consultation. I would like to
put on record my appreciation to the Minister for that
concession.
Charles
Hendry:
I join the hon. Member for Cheltenham in saying we
are pleased that the Minister is to consult formally on this issue, but
that has to be tinged with disappointment that he is not prepared to go
further.
In
particular, new clause 6 simply gives the Secretary of State a power
to introduce feed-in tariffs at some time in the
future. It does not require him to do so; it does not specify how.
Looking at the time scale, the consultation process will start later in
the year. One assumes that will run for some months and that there will
be a further few months while the responses are evaluated before the
Minister comes back to the House to give a statement. If at that
point—we are looking at the middle of next year—the
Government decide that feed-in tariffs are the right way forward, we
then have to find a slot in the legislation programme, presumably in
the following Session. So realistically we are looking at two years
before feed-in tariffs could be on the statute book. That is an
appallingly unsatisfactory delay.
If the Government are to decide
relatively soon following this consultation process to go down the
route of feed-in tariffs—and I hope they do, especially for
microgeneration—it would make sense to have the enabling clause
in this Bill so that they can immediately lay the measures for how they
are going to do that before Parliament in secondary legislation. This
is an opportunity to take a year of delay out of that process.
Many of the
contributions we have had have emphasised that time is not on our side.
We know we are lagging behind others in microgeneration. All of us, I
believe, want to see a step change in the approach we are taking
towards that. Indeed, we put forward a document just before Christmas
on microgeneration—I imagine it was on the Minister’s
wife’s Christmas list for him to read while they were in the
Channel Islands. We talk about how one makes every home a generator;
how one encourages more people to go down the route of photovoltaics;
how one stimulates an incredible change in the culture of this country
towards electricity generation.
At the moment, there is
enormous enthusiasm but confusion among the public. They want to do
more but they do not know how to. The ROC system is part of that
confusion. Feed-in tariffs would give much greater clarity, certainty
and predictability. We have not had a single witness who did not agree
with that—apart from the Minister himself. Every other person,
in their written and oral submissions, said that they support the
inclusion of feed-in tariffs in the Bill. All we are looking for is the
capability to introduce this through secondary legislation in a shorter
time scale than would be required if we had to go again through the
whole process of primary legislation. We waited a long time for this
energy Bill and it would be very unfortunate if the Government passed
over this
opportunity.
Malcolm
Wicks:
I was just thinking whether we had waited a long
time for the Energy Bill. I do not think we should apologise for the
fact that we have looked at energy strategy most carefully. We had the
energy review, which I led for the then Prime Minister. We then
consulted and had an energy White Paper. These are quite complex
issues.
I would be
loth to support any new clause that did not put us in the right place.
I have said that I am open to the argument. In terms of incentives for
microgenerators—both the householder and perhaps the management
committee of the small community building, the church hall or
whatever—we are not necessarily in the right place. I have
acknowledged that. I have detailed the things we have done and I think
we have done them quite well. We are not in the right place and I want
to see how we can get there. We are going to do that through our
strategy review.
If
we legislate now, we could get to the wrong place. I said earlier that
we would look at feed-in tariffs but we will also look at other
mechanisms. There should be no theology about this. How do we enable
and facilitate microgeneration? That is the issue. I would be reluctant
to support a new clause now that might not be right. Through our
renewable energy strategy, which is looking at the whole of
renewables—the macro as well as the micro—we can work out
whether we need to do more, what the best mechanism is and how we
should proceed then.
1.30
pm
Mr.
Jamie Reed (Copeland) (Lab): Energy policy cannot exist in
a bubble or in a vacuum. We are now discussing energy policy in the
context of climate change and security of supply, but we also need to
discuss it in the context of its social consequences and
impacts, not least energy costs to the consumer. The witnesses we heard
during our evidence sessions were asked, by me and I am sure by other
Members on a number of occasions, what they believed the consequences
of feed-in tariffs would be on what one might ordinarily describe as
working class people. They were asked if this issue was a middle class
obsession and if they had concerns about the effects of feed-in tariffs
upon energy consumers at the poorer end of the social strata. Before
the Minister finishes his speech, can he address that issue because we
do not exactly know the answers? That is another good reason for us not
rushing headlong into the feed-in tariff culture, as proposed in the
new clauses here today.
Malcolm
Wicks:
My hon. Friend has raised a good point. I have said
that I am always concerned when we have systems that mean the poor pay
more for energy, albeit inadvertently, and that is true for food as
well in many respects. Better-off people with bank accounts and credit
can often pay less for energy. When we move forward with a potential
support system, we have to be careful that we are mindful of the
factors that my hon. Friend raises. I am bound to say that, in my
Department, we are considering how we can bring the worlds of
microgeneration and our concerns about fuel poverty together. That is a
Department for Environment, Food and Rural Affairs responsibility, but
we developed the energy efficiency commitment into what will now be
called CERT—the carbon emissions reduction target—and it
will now include a microgeneration element. At the moment, I am looking
to see whether we might do more through our low-carbon building
programme to tackle fuel poverty. That is sensible and it addresses the
socio-economic issues that my hon. Friend raises. If we can use new
technologies to tackle old social evils such as fuel poverty, we begin
to get to the right place.
Charles
Hendry:
The exchange that we have just witnessed is
interesting. It is unfortunate for many of us that the Bill will not
give us the opportunity to talk about fuel poverty. Indeed, the
amendments that Conservative Members have tabled on fuel poverty and
those on social tariffs by Labour Members have been ruled out of order
because of the way that the Bill has been defined. That is unfortunate.
Will the Minister agree to see whether he can come back on Report with
a clause that would try to achieve what we are seeking? In other words,
that is a clause that would create a permissive environment so that he
could introduce feed-in tariffs through secondary legislation at an
early stage. If it was deemed, as a result of the consultation process,
that that was the right way forward, the tariffs could be brought in
earlier than if they had to go through primary
legislation.
Malcolm
Wicks:
I will certainly promise to think again about that.
I will not go as far as the hon. Gentleman is tempting me to go, for
the reasons that I have established about our need to develop a
sensible strategy. It is too soon to say whether other recommendations
in that strategy will require future legislation, but I suppose that it
is possible. There could therefore be future legislative opportunities.
For the reasons that I have indicated, I do not think that I can
concede that point to him at the moment.
The points that my hon. Friend
the Member for Copeland introduced about the cost implications for
different social groups are very important. The evidence that I was
able to produce from the costs in Germany is important, although the
hon. Member for Cheltenham intervened, I think helpfully, on that. I
have figures that photovoltaic systems cost around 30p per kW hour at
present, against between 6p and 7p an hour for large scale onshore
wind. We must be mindful of those things, in relation to various
developments and the way in which we support what are inevitably, at
the moment, rather expensive
technologies.
Martin
Horwood:
I share the frustration of the hon. Member for
Wealden about the potential critical delay in the introduction of
measures that might come out of the promised consultation. I want to be
helpful; would it be possible for the Minister’s advisers to
produce an opinion, by the time we next meet, on whether the
introduction of any kind of feed-in tariff system would be legally
possible as a result of the consultation, without further primary
legislation, or whether there is, as Opposition Members feel there is,
a question of a requirement for yet more primary legislation and
delays? After all, we have had endless energy reviews and Select
Committee reports on renewable
energy.
Malcolm
Wicks:
Without promising too much, I have said that I
shall reflect on the issues. I emphasise, however, that I have not
committed us to introducing a feed-in tariff for microgeneration; I
have said that it will be among the options that we shall consider. It
would be foolish for us to get enthusiastic about one mechanism when
there might be others, which could be more cost effective, to
consider.
Charles
Hendry:
I shall not prolong the debate, but I am
profoundly disappointed—given that there is cross-party support
for the measure, and overwhelming support within the industry and
environmental and consumer groups for going down route—that the
Minister has taken such a hard stance against it. I hope that he will
reflect on that subsequently and decide whether he can do something on
Report that will respond to some of the relevant
concerns.
Malcolm
Wicks:
Has the hon. Gentleman costed his proposals? He is
being quite tough with me about that; presumably he has costed the
implications of the new clause.
Charles
Hendry:
Yes, absolutely. I am sure that the Minister read
the pamphlet that I referred to, which discussed how the proposal would
be paid for. It would be paid for out of the auctioning of the EU
emissions trading scheme. That would provide a phenomenal amount of
money, which the Government could use to pay for feed-in tariffs. It
would not require any taxation increases or charges elsewhere. A sum of
money exists that has not yet been allocated, so it cannot be a
spending commitment that the Chancellor would want to take into account
in trying to hold us to account.
Charles
Hendry:
Yes, of course he has. I would not have said it
otherwise. It is made clear in the policy paper, and in the speech
given by my right hon. Friend the Member for Witney (Mr.
Cameron) at the beginning of December to explain exactly how we would
pay for the relevant measures. We aspire to Government and we are not
giving uncosted commitments or making announcements without explaining
how we are prepared to pay for
them.
On the funding point,
is the hon. Gentleman confident that his proposal will have no negative
effect at all on those poorer people who struggle with their energy
costs and for whom, frankly, the feed-in tariff is an
irrelevance?
Charles
Hendry:
The hon. Gentleman’s second point is wrong;
but to deal first with his first point, going down the route of
renewable energy will push up costs. Typically, of a £1,000 bill
at the moment £80—8 per cent.—is related to the EU
emissions trading scheme, the carbon emissions reduction target and
other charges in relation to renewables policy. The consumer is already
paying more for that element, and one expects the cost to rise over
time. However, that does not mean that one should not be looking at
doing more to get energy from renewables.
There is a separate issue,
however, which is what the Government feel they should be doing about
fuel poverty, and measures such as the winter fuel allowance and trying
to ensure that the people most likely to be in fuel poverty have the
means to pay the bills. One issue is an energy policy issue and one is
a benefits policy issue. Clearly they are both issues for the
Government, but one should not damn the desire to move towards
renewables because of concern that there will be costs that will not be
covered elsewhere. There is a responsibility to cover those costs
somewhere else.
The
answer to the second point is that we do not see any reason why people
in fuel poverty could not benefit from microgeneration. If a large
block of social housing had on its roof photovoltaic cells, providing
electricity for the people who lived in those properties, and a wind
turbine next to it, not only could they get their electricity from a
wonderfully green source, but there would be scope for putting the
excess—over and above that which they need—back into the
grid and they could then derive an income from
it.
Charles
Hendry:
One should not see microgeneration as the preserve
of the rich with large estates where they can put up wind turbines. We
have a much greater
vision, and throughout the country, people should be encouraged to take
that approach. That is what is so exciting about
it.
Martin
Horwood:
The hon. Gentleman was right to hold me off from
intervening, because he has just made the very point that I was going
to make. There is a potentially important community benefit, and small
scale microgeneration can deliver not only revenue to communities from
the sale of electricity, but reduced fuel bills. The Carbon Trust is
already developing an important precedent for it in the partnership for
renewables initiative, which exactly illustrates the point that he very
well
makes.
My final
point returns to the clause more generally. I have two concerns, one of
which relates to exports. We have not had a clear answer about the
issue from the Minister, but the Bill is quite clear. Proposed new
section 32B (3)
says:
“The
matters within this subsection
are—
(a) that the
generating station, or, in the case of a certificate issued otherwise
than to the operator of a generating station, a generating station
specified in the certificate, has generated from renewable sources the
amount of electricity stated in the certificate,
and”—
this is the
important
part—
“(b) that it
has been supplied by an electricity supplier to customers in Great
Britain (or the part of Great Britain stated in the
certificate).”
From what
the Minister has said today, particularly about the super-grid, we do
not have clarity about the provision’s meaning. The proposed new
section says
“that it has
been supplied by an electricity supplier to customers in Great
Britain”.
If
the super-grid does not sell to customers in Great Britain, but exports
directly from British territorial waters to Denmark, Holland, Germany
or wherever, what are the implications of the change in the ROC system
for it? We must have greater clarity about the process than we have
received from the Minister so far. He, himself, was slightly confused
about how it might work, so I hope that during the course of this brief
intervention, the people who are scribbling furiously at the back may
be able to give us some initial guidance.
Malcolm
Wicks:
Why does the hon. Gentleman need greater clarity
now? We do not have a super-grid; it is an idea. I think that it is a
great idea—an interesting idea. The European Union thinks that
it is a good idea, it has asked former Minister Adamowitsch to examine
it and we have had preliminary talks. However, the hon. Gentleman talks
as if the grid is about to get up and running and as if it is a
critical issue that we need to know about by Tuesday. The same
situation has occurred once or twice during our debates, regarding
provisions that will not be introduced for many years.
Will not the hon. Gentleman, in
a kind moment, concede that we have time to think through the issues
rather than imply that, in the Bill, I must be absolutely precise about
the way in which some renewable electrons in Cheltenham sometimes find
their way to Prague? Is he, in asking me that question, being fair, or
is he, I suggest very kindly, being slightly
ridiculous?
Charles
Hendry:
The hon. Gentleman will be very lucky to get an
admission that I am being slightly ridiculous; it would be an unusual
admission to make. I always seek to be kind, apart from on the
“Today” programme at seven minutes past 7 this morning,
when I was in a slightly different mode. There is an important issue
before us, however. We are making an Act of Parliament, a statute that
will exist for many years to come, and the provision potentially puts a
big hurdle in the way of the super-grid. I do not know whether
Airtricity, the company that is looking to develop it, has been
consulted on the issue, but if it will not be able to use the ROC
system for the generation of wind power offshore, which it would
directly export from British waters to Germany or somewhere else, there
is a potential flaw in the Bill and we are right to address it
now.
Perhaps the
Minister will tell me that Airtricity and others have been consulted
and are completely happy with the provision, in which case I am more
than happy to withdraw my concerns. If they are happy, we should be.
However, my fundamental concern is that there is a distinct lack of
clarity about what that aspect of the clause means, and I am simply
trying to get the Minister to give us greater
clarity.
1.45
pm
Malcolm
Wicks:
I certainly have not received any representations
myself—I do not know whether my officials have—from the
industry about that concern, because I think that they, rather like me,
see its introduction as being some time ahead. However, in the context
of the European Union’s 2020 target and the detailed discussions
that are now taking place between member states and the Commission, the
issue of what a nation state’s target means and whether some
renewables might be generated in another European country if it were
more cost- effective is being discussed. Those issues are not entirely
dissimilar to this one. If and when there is a great grid of wind
farms—perhaps tidal and wave—we can address the
implications of that in a timely fashion. I will make sure that we
consider the matter as part of the renewable energy strategy that we
are developing, on which we are consulting in the
summer.
Charles
Hendry:
There is furious scribbling going on in the
background, which may provide greater enlightenment in due course. I am
grateful for the Minister’s response. I am not seeking to be
obstructive or awkward and we will certainly not vote against the
clause because of this particular element, but I feel that there is a
potential obstacle to the exciting, new and innovative approach that we
want. I am keen to make sure that that obstacle is removed.
In my earlier comments, I
referred to the gobbledegook provision, which is proposed new section
32B(10)(d). I read it out and nominated the Minister for a plain
English award for gobbledegook. I asked him to explain what it means
because it is so extraordinarily opaque and difficult to understand. I
imagine that one of his officials is still in a darkened room with a
wet towel around his head trying to find out what it does mean. Before
we move on, I would be grateful if the Minister could clarify that
provision.
Malcolm
Wicks:
Luckily for me it so happens that I can do so.
Having, perhaps rather unkindly, nominated the hon. Gentleman for
asking the most absurd and ridiculous question, he has nominated me for
gobbledegook. I thought that the purpose of proposed new section
32B(10)(d) was perfectly clear, but for the sake of clarity let me read
something out.
ROCs
can be issued to generators where it can be demonstrated that the
electricity from renewable sources has either been supplied by an
electricity supplier to customers in Great Britain or Northern Ireland,
or the electricity has been used in a permitted way. I agree that the
legal drafting in proposed new section 32B(10)(d) might not be easy to
follow—that is what my brief says—but it simply makes it
clear that a permitted way includes any combination of
self-consumption, supply through a private wire network and provision
to a transmission or distribution system. Those permitted ways cover
various situations where electricity generated from renewable sources
has not been sold on through a supplier or where it is difficult to
prove that it has. I hope that that clarifies the purpose of this part
of the clause.
Question put and agreed
to.
Clause 36
ordered to stand part of the
Bill.
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