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House of Commons
Session 2007 - 08
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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


[Mrs. Joan Humble in the Chair]

Energy Bill

Clause 36

The 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—
Malcolm Wicks: Do not ask then.
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: Will my hon. Friend give way?
Malcolm Wicks: Of course. I am not very good on the Isle of Man, so please do not ask about that.
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: Absolutely.
The Chairman: Order. We have had enough of Alderney now.
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: Will the Minister give way?
Malcolm Wicks: I shall give way on the issue of consistency.
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—
Charles Hendry: It seems a long time ago—
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
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.
Malcolm Wicks: Has the shadow Chancellor agreed to such hypothecation?
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.
Mr. Reed: Will the hon. Gentleman give way?
Charles Hendry: I can see trouble.
Mr. Reed: The hon. Gentleman does me a disservice.
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.
Martin Horwood: rose—
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.
Charles Hendry: I am very grateful for that kind comment.
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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