New Clause
10
Renewable
heat
obligation
‘(1)
The Secretary of State shall make regulations which introduce a
renewable heat obligation on suppliers of fossil heating
fuels.
(2) In this section a
“renewable heat obligation” means a market-based
regulation which requires suppliers of fossil fuels for the purpose of
heating, to replace, over a specified period, a rising proportion of
their supply with metered units of renewable heat
energy.
(3) The regulations
must provide that renewable heat energy
units—
(a) are not
eligible for support under the Renewable Obligation on suppliers of
electricity, and
(b) may be
generated using—
(i)
biofuel;
(ii) blended and
co-fired biofuel;
(iii) any
solid, liquid, gaseous or electrical source of energy (other than
fossil fuel or nuclear) which is
produced—
(a) wholly by
energy from a renewable source,
or
(b) wholly by a process
powered wholly by such
energy;
(iv) electricity, where
there is a net surplus of useable heat energy relative to the
electrical input.
(4)
Regulations made under this section must be made within a period of 12
months beginning on the date on which this Act is
passed.’.—[Charles
Hendry.]
Brought
up, and read the First time.
Charles
Hendry:
I beg to move, That the clause be read a Second
time.
We
have had an exciting few moments—democracy in action. We now
understand why we are trying to teach countries around the world that
they should move towards democracy; it is so that they can go through
that rather special moment where people who have spent years arguing
for things then turn around and vote against them when they are given
the opportunity to do so.
The issue of a renewable heat
obligation was raised by many colleagues on Second Reading and by a
number of people who have made representations to us about the fact
that heat should be included in the Bill. A renewable heat obligation
would require energy suppliers to source a percentage of heating fuel
from a range of renewable sources, which could include solid, liquid or
gaseous fuels produced from biomass, passive solar heating systems and
geothermal systems.
About 50 per cent. of the
UK’s final energy demand is in space, water and process heating.
Around 1 per cent. of heat is currently generated from renewables. That
has declined in recent years, both as a proportion of the whole and in
absolute terms, as some industrial wood-fired systems have been
decommissioned because of tightened emission regulations. Around 85 per
cent. of domestic heat, 50 per cent. of industrial heat and 77 per
cent. of commercial heat is provided by gas, with the remainder coming
from coal and oil.
Heat is
responsible for 47 per cent. of the UK’s CO2
emissions and, broken down by sector, roughly 42 per cent. of
those emissions come from the residential sector, 43 per cent. from
industry and 15 per cent. from commerce. By providing more heat from
renewable heat technologies, we could deliver carbon savings of 7.3
million tonnes of CO2 by 2020. The biomass taskforce
estimated that 7 per cent. of the UK’s heat energy could be
provided from biomass alone. A successful example of a community
heating scheme is in Tower Hamlets, which uses a gas-fired combined
heat and power plant to provide heat and electricity at 20 per cent.
below the cheapest supplier, saving 2,500 tonnes of CO2 a
year.
More than two
thirds of the energy output to power stations is lost as waste heat.
That waste costs the UK economy more than £5 billion a year. It
is clear that if our EU targets are to be met, a dedicated support
mechanism for renewable heat will be needed. The introduction of an
obligation on upstream suppliers of fossil fuels into the transport
market creates a precedent for the same sort of mechanism to be applied
in the fossil fuel heat market. That could give a steadily increasing
incentive to generate cost-efficient renewable heat with a buy-out and
recycle mechanism to address the potential for price spikes and provide
a means for addressing any under-supply issues. Linking all three
markets would enable renewables targets to be met with maximum economic
efficiency.
Dr.
Ladyman:
As the person who in a previous
life introduced renewable transport fuel obligations, I point out to
the hon. Gentleman that many non-governmental organisations and
environmental activists have now decided that they oppose that
introduction because one cannot guarantee that the biomass will be
produced sustainably. The Government have taken the sensible
decision that 5 per cent. can produced sustainably, but they will not go
beyond that until we can prove that it can be produced sustainably. If
we were to pass the new clause, it would require the Government to do
something that they cannot guarantee to do sustainably, and would
therefore be far from a green solution to our
problems.
Charles
Hendry:
The hon. Gentleman raises a valid point. Indeed,
my colleagues voted against the RTFO on the grounds that one was not
sure about the sustainability of the sources from which it was coming.
I wanted to stimulate a debate about heat and about the whole of issue
of energy, which has been missing from the debate so far and is missing
from the Bill. Looking at it in this way provides the opportunity to
address how we will do more to get heat from renewable sources. There
are issues, such as the one that he has raised, which provide a
challenge to going forward in this way, but that does not negate the
importance of trying to do more to get more of our heat from renewable
sources than we do at the moment.
Some
observers say that, to encourage the development of low-carbon heating,
local authorities should be mandated to develop a local energy strategy
for heating. In areas with sufficient heat density that would be
district heating, which would use the heat demand in public sector
buildings to underpin its development. Under such a scheme, planners
will be given the power to insist upon district heating, local CHP and
other forms of decentralised energy, including microgeneration, in
granting permission for developments. A study by the Energy Saving
Trust found that in 2000, 83 per cent. of energy usage in the home was
for space and water heating. That excludes electric water heating and
still represents about 24 per cent. of total UK energy
consumption.
4.30
pm
Unlike
mainland Europe, the UK market for low-carbon and renewable heating
remains underdeveloped due to the lack of a coherent strategy. For
example, there is no policy to promote the use of renewable heat. The
Government have set a target that all new homes should be zero carbon
by 2016. The 83 per cent. of energy that a typical home consumes to
provide space and water heating breaks down into 59 per cent. for
heating and 24 per cent. for hot water. A newly built house with good
standards of insulation can reduce heating requirements by about 75 per
cent.
The
new clause offers one way forward to encourage the generation of more
heat from renewable sources. It has significant backing in industry,
but I recognise that there are concerns. Essentially, it is a probing
new clause to stimulate further clarification from the Minister of what
he thinks could be done on this issue. For example, the question of the
interaction with the renewable obligation has not yet been addressed
properly. Effectively setting two administered prices for biomass under
the renewable obligation and the renewable heat obligation will have a
potentially disruptive effect on the outlook for investment in biomass
power and combined heat and power. Some say that that is also highly
unlikely to deliver investment in the heat network infrastructure. Only
investment in the boiler or other heating plant would occur as a result
of that obligation.
The critical factor in
establishing a competitive alternative to gas in the heating market is
this infrastructure. I realise that there are problems with this way
forward, but I hope that it will give the Minister and other hon.
Members the opportunity to talk about what more we can do to address
heat within the framework of the
Bill.
Martin
Horwood (Cheltenham) (LD): It is a pleasure to be serving
under your stewardship again, Mrs.
Humble.
The new
clause is a very welcome probing clause. There are some difficulties
with it and the hon. Member for Wealden has been generous enough to
point some of those out. However, it certainly deals with an issue that
needs to be
addressed.
I
am not sure how many members of the Committee have installed renewable
heat. I have, but it was a bit of a nightmare process. I have solar
thermal panels fitted to my house. I looked to the predecessor of the
low-carbon buildings programme and discovered that grants were in
rather short supply. I realised very early on that it would be
virtually impossible to be one of the few lucky runners who manage to
secure a grant each month. I discovered that there was a rather
bureaucratic process for the approval of various heating systems and
supplies. The kind of heating system that I wanted, which included
under-floor heating as well as heated water, did not at that time
qualify for the Government scheme. In practice, I therefore had to take
the risk of going with a somewhat untested supplier. It was quite an
expensive process. It was one that I was willing to invest in, but for
many members of the population, it would have been pretty
unaffordable.
A real
push is needed to shake down the market and establish leading household
names as popular suppliers of renewable heat technologies of various
kinds at the micro, household level. Costs must also be brought down to
make it a more affordable technology. We need to tackle those
issues.
As
the hon. Member for Wealden said, 47 per cent. of our carbon emissions
derive in one way or another from heating. Of that, 12 per cent. is
from heat generated by electricity so there is a direct link back to
electricity generation. Of the remaining 35 per cent. of direct
heating, a very high proportion comes from gas and fossil fuels. We
definitely need a long-term framework of financial incentives to
incentivise not just individuals at household level and energy
suppliers, but communities, social enterprises and others to take
advantage of technologies such as combined heat and power. The
low-carbon buildings programme is effectively a broken reed and a dead
duck, and nothing from the Government has yet supplied it. I am tempted
to use another horse racing analogy and say that it has fallen at an
early fence. We certainly need some kind of incentive scheme to promote
renewable heat at community level, where it is most
effective.
I support
the new clause, but there are some aspects that I would like to
challenge. First, subsection (2) states that the provision would only
require
“suppliers of
fossil fuels for the purposes of heating, to replace, over a specified
period, a rising proportion of their supply with metered units of
renewable heat energy.”
Of course, if one looks at the large
proportion of heat that is supplied by the generation of electricity,
one will see that there are electricity suppliers, such as my own,
Ecotricity, that do not have any fossil fuel supply. It is an entirely
renewable supplier, so it would not benefit from any incentive under
that phraseology because it is not a fossil fuel supplier, even though
it is not a supplier of renewable heat as such. To shift and
incentivise the market towards renewable heat, we need something a
little more inclusive.
There is also the problem of
the interplay between the renewable heat obligation and the renewables
obligation. That needs to be worked out, as it is not clear how that
would work with regard to the energy suppliers. As the hon. Member for
Wealden mentioned, the Combined Heat and Power Association argues that
one of the most critical elements in getting combined heat and power
off the ground at community level is the need to build local
infrastructure. That is what makes the critical difference in
establishing it as an alternative to gas. I am not clear how the new
clause would take us forward on that, so perhaps he will address that
point in his closing remarks.
Finally, there is the issue of
sustainability, which was raised by the hon. Member for South Thanet. I
do not think that that is as much of a problem as there would be with
liquid transport biofuels, where there is clearly a big concern about
sustainability. I think that a great deal of local heat technology and
the use of local biomass from waste products is probably very
sustainable, but he is right to say that we need to be sure that
certification and the methodologies are in place. I support the new
clause and think that it is a welcome probing clause. It asks the most
important question: if it is not exactly the right formula, what is and
what will the Government do?
I hope that the Minister, on
this one occasion, will not promise us yet more consultation exercises,
because we have been discussing renewable energy and heat of various
kinds in this country for decades and have had endless consultations.
He should aim—I shall venture to suggest another horse racing
analogy—to be the Kauto Star of British Politics in that area at
least and forge ahead in a really proactive way, rather than just
resting on his laurels having won one Gold cup and indulging in yet
more consultation. It is clear that we need a long-term financial
framework, and if not this one, then
what?
Dr.
Alan Whitehead (Southampton, Test) (Lab): I strongly
support some form of heat obligation or similar, because it is
important that we take account of that large area of UK energy,
particularly in the context of the 2020 targets that have now been
agreed for renewable energy. I support the idea in principle, but the
new clause, as has been pointed out, seems to confuse itself
substantially with the existing renewables obligation, particularly in
its later provisions, and that would need to be fundamentally
disentangled.
We should
consider further the idea, which was raised in the Committee earlier,
of pursuing some form of renewable gas obligation as a substantial
proxy for elements of renewable heat obligation because of the
substantial part of our heat requirements that is fuelled by gas. I
also ought to report to the Committee the sad news that I already have
renewable heat on my roof, and
nothing whatsoever went wrong with the installation, the application for
a grant to assist in the installation or its working. I know that that
is a surprise to the
Committee.
Dr.
Ladyman:
Perhaps I should start by declaring an interest,
because I have just realised that my home is equipped for burning
renewable fuel, as defined by the clause. I have a beautiful house that
was built in 1714. It has a huge inglenook fireplace in which logs are
the only sensible thing to burn.
Dr.
Whitehead:
It is a biomass heat
station.
Dr.
Ladyman:
Indeed. Were we to pass the new clause, my
excellent log supplier would be able to claim renewable obligation
certificates, which he would sell to the local coal merchant and reduce
the price of my logs. So I suddenly feel attracted to the new
clause.
Having said
that, I want to emphasise sustainability. There is always a temptation
to think that if 5 per cent. of something is good, 10 per cent. must be
twice as good. The European Commission has fallen into that trap, where
biofuels are concerned. It assumes that because 5 per cent. can be
produced renewably, 10 per cent. must be much better. If it cannot be
guaranteed that that biomass is produced sustainably and that someone
is not cutting down a rain forest or displacing food production to
provide it, the carbon benefit of burning that biomass is
negative.
After a lot
of soul searching and calculations, the Government concluded that we
can be confident of producing 5 per cent. of our transport fuel
renewably from sustainable biomass production. They went through a
great consultation and put huge effort into getting a set of criteria
that will guarantee that the material is produced sustainably. I am
confident that the renewable transport fuel obligation, as it stands,
will have a sustainable net carbon benefit. Go beyond that 5 per cent.,
however, either to produce transport fuel or to produce a source of
biomass for heat production, and it cannot be guaranteed that that will
be produced sustainably. It may be that we can work out a way of doing
that in the
future.
It is unfair
to criticise too much, because the hon. Member for Wealden has made it
clear that it is a probing new clause that is intended to stimulate
debate. I support that intention. I would certainly like to see better
ways of producing heat, but it should not be assumed that biomass and
waste, and all the other things mentioned in the contributions, have
not already been taken into account in calculating how much renewable
transport fuel we can produce. They have been taken into account. We
already assume that some of that transport fuel will come from waste
sources.
Martin
Horwood:
The hon. Gentleman is knowledgeable on the
subject. Is he aware of the analysis by the Swiss Government, who have
already set a framework for analysing whether biofuels are sustainable?
That analysis places things such as soya and the American wheat
industry at the most unsustainable end of the spectrum. Local biomass,
however, is by and large sustainable, and makes a positive contribution
to carbon reduction.
Dr.
Ladyman:
It may be that for small
countries local biomass production can be a sustainable source of
biomass. We are not a small country. We already have 34 million
vehicles on the roads. Five per cent. of our road transport fuel is a
huge amount of fuel and will require a huge amount of sustainable
biomass. At this point, nobody is able to guarantee that anything more
than that 5 per cent. can be produced sustainably. I agree that there
are ways of calculating whether biomass is sustainable, but there is no
international agreement yet on any of them. I hope we will have an
international agreement soon. Whereas I am four square behind getting
my hon. Friend the Minister to think about those issues, and behind
moving to a position where we can contribute towards heat production
from biomass, I counsel the Committee not to push the Government too
fast down that road because they already have a huge task of ensuring
that the renewable transport fuel obligation is delivered
sustainably.
4.45
pm
Malcolm
Wicks:
This has been a good debate. On balance, I would
say generously that it has produced more light than heat. I thank my
Parliamentary Private Secretary, my hon. Friend the Member for
Broxtowe, who, by convention, cannot speak on these occasions, for
helping me with that part of the script. I will not follow the hon.
Member for Cheltenham and make comparisons with horses and racing. One
gets the impression that an event might be taking place near his
constituency. I have been so diligent in swotting up for the Committee,
I have missed out on exactly what gold cup it is.
We are all very impressed that
the hon. Member for Cheltenham has installed solar panels; that is a
very worthy and interesting experience. I am bound to say that, given
his party’s opposition to most forms of energy, including
nuclear and fossil fuels, and given that his party comrades have
objected to wind farm after wind farm, I have a horrible feeling that
he has installed solar panels out of some optimistic belief that the
Liberal Democrats might form a Government and that that will be his
family’s only form of
heating.
Malcolm
Wicks:
I think that the hon. Gentleman wishes to confirm
my
hypothesis.
Martin
Horwood:
The Minister ought to give way
on this. As far as I know, the only form of energy that we have
objected to is nuclear. We even support fossil fuel generation with
carbon capture and storage. We have supported every form of renewable
energy, including geothermal, which the Minister left out of the
clause. Geothermal energy is being used viably by Gloucestershire
police in its new headquarters and Chelsea Building Society in its new
call centre, both of which are in or near my constituency and both of
which I
supported.
Malcolm
Wicks:
We will leave it there. I suspect that the sporting
event that the hon. Gentleman has alluded to on nine or 10 occasions
will produce quantities of biomass that might help him with the
renewables issue.
Energy
consumed for heating accounts for about 40 per cent. of the UK’s
primary energy consumption. We have heard about the considerable
proportion of CO2 that it produces. Heat is produced and
used by a huge number of consumers, ranging from individual
householders to very large industrial plants. In thinking about
tackling climate change, heat is clearly a sector that we cannot afford
to ignore. The Government already have a number of policies in place to
tackle emissions from heat, including the European Union emissions
trading scheme, energy efficiency measures generally and fuel poverty
initiatives.
With
programmes such as the low-carbon building programme, the energy
efficiency commitment and, in future, the carbon emissions reduction
target, we are focusing on improving the energy efficiency of
dwellings, thereby reducing demand for heat. A third of the emissions
savings estimated from the measures set out in the energy White Paper
will result from energy efficiency policies, and much of that will
relate to reductions in heat demand. Most of the estimated 100,000
microgenerators in the UK—including our colleague—are
using renewable heat technologies such as solar and ground source
heating.
Our minds,
however, are increasingly focused on renewable heat, particularly given
the EU target of 20 per cent. of our energy in Europe coming from
renewables by 2020. We need to do more to tackle heat emissions if we
are to meet that challenging target. The Prime Minister, in his speech
to the WWF in November last year, announced that we will do more and
introduce measures as part of the renewable energy strategy next
summer.
For that
reason, I am sympathetic to the intentions behind the new clause,
tabled by the hon. Member for Wealden. It would require the Secretary
of State to introduce a renewable heat obligation, which would require
suppliers of fossil fuel heating to source an increasing proportion of
their fuels from renewables. However, I am sure that the Committee will
not be surprised to hear me say that I believe that it is premature to
amend the Bill in that way. Tackling carbon dioxide emissions from heat
is not straightforward. Any step to encourage greater use of renewable
heating options would need to consider a wide range of factors,
including the different needs of various customer groups and the large
range of technologies available, each of which has different
potentials, costs and practical implications with regard to the type of
support that would deliver the best
outcomes.
We are in
the middle of reviewing our policy on heat, and the new clause would
pre-empt that work. Last year’s energy White Paper,
“Meeting the Energy Challenge”, restated the
Government’s commitment to decarbonising heat and to increasing
the use of renewable heat. Specifically, we said that we
would
“conduct further
work into the policy options available to reduce the carbon impact of
heat and its use in order to determine a strategy for heat. The work
will look at the full range of policy
options”.
Since
then, the Office of Climate Change, working closely with several
Departments, including my own, has undertaken an in-depth study of
heat. That project has focused on providing an overview of heat and the
cooling sector—air cooling is quite important in this
regard—to analyse the carbon impact of heat generation
and cooling, to assess the potential to reduce that and to identify and
assess alternative or additional policy
mechanisms. On
31 January, the project culminated in the publication of “Heat
Call for Evidence”, which seeks further information on which the
Government can base the next stage of our work. It outlines our
understanding of the opportunities and prospects for renewable heat and
examines options for possible financial support mechanisms to promote
it, including capital grants, a feed-in tariff and a renewable heat
obligation. The call for evidence will feed valuable information and
insight into our strategy in
2009.
The
call for evidence also considers issues such as how to promote
renewable heat, including biogas; the role of low-carbon electricity
and heating; how surplus heat can be captured, transported and used,
especially where we have a well established gas network; options to
reduce the heating needs of existing buildings, focusing primarily on
the residential sector; the relationship between the EU emissions
trading scheme and heating; the prospects for including heat in
existing and proposed carbon markets; the non-financial barriers to the
greater deployment of renewable heat technologies that will need to be
tackled alongside any financial support mechanism; the potential for
district heating; and the possible incentives and regulatory changes
necessary for an expansion of such
schemes.
Complex
issues need to be worked through before we can know that a renewable
heat obligation could work or whether it would be the most
cost-effective support mechanism for heat. For example, unlike
electricity, heat is not supplied directly to end users; rather, they
are sold a range of heating fuels. The renewables obligation works
because the end product is uniform. That allows us easily to measure
how much of it is supplied and to impose an obligation to supply a
percentage of it from a renewable source. The situation is not as
straightforward with
heat.
I do not agree
that we should commit the Government to pursuing a particular financial
support mechanism for heat, because all the options and implications of
implementation have not yet been fully evaluated, and there is no
guarantee that the measures that we will propose in the renewable
energy strategy could be implemented by the new
clause.
My hon.
Friend the Member for South Thanet talked about biofuels, and he is a
great expert on these issues because of his ministerial experience. I
can, in a sense, confirm what he was saying, in that we take concerns
about unsustainable sources of biofuels very seriously. The
Government’s commitment to biofuels is subject to their being
sustainable. The renewable transport fuel obligation is designed to
encourage the use of only the right type of biofuels. It will require
companies to report on the carbon that the biofuel has saved and the
wider environmental impact. We are keen to move beyond that to
mandatory standards as soon as we
can.
We are
introducing similar reporting requirements for the use of biomass under
the renewables obligation. We will be able to keep the issue under
review through the introduction of sustainability reporting for biomass
users. That will enable us to monitor any sudden growth in the use of a
biomass fuel and expose biomass sources to public scrutiny. A survey of
the scientific
evidence on the environmental impact of biofuels, commissioned by the
Department for Environment, Food and Rural Affairs, is due to be
published
shortly. No
doubt, that will be disappointing news to the hon. Member for Wealden,
who proposed the new clause. However, as he has indicated, it was
probing in nature and has provoked a useful debate. Given the
importance of tackling emissions from heat, only once we have finished
the necessary analysis will it be appropriate to reach a decision on
whether and what type of legislation is necessary. I give no apologies
for that, because I am confident that taking the time to consider
matters properly will help us to deliver the right policy. Therefore, I
hope that the hon. Member for Wealden will consider withdrawing the
motion.
Charles
Hendry:
The Minister thinks that I will
probably be disappointed by his rejection of the new clause, but I have
moved beyond the stage of disappointment during the past few weeks. I
have accepted that, however much he may say that he is grateful or
sympathetic, he will proceed to say that the amendment or new clause is
completely unacceptable to the Government. However, the Minister has
made a good case on this subject. As I said in moving the new clause,
it is a probing one, because I feel that we need to do more about
renewable heat, heat loss and other such issues. It was a way of
stimulating that debate, as it has done so. I think that there is
overwhelming agreement that more needs to be
done.
Malcolm
Wicks:
In a spirit of generosity, I think that the hon.
Gentleman was about to withdraw the motion, and I thank him for that.
To encourage him further, when I said that the renewable energy
strategy would be available next summer, I was being too pessimistic
about the speed and energy of my officials. In fact, it will be
available next
spring.
Charles
Hendry:
I am delighted that my new clause has forced the
Minister’s officials to bring forward the case and to work
through the night burning all that oil and creating all that heat to
provide us with the strategy in due course.
Malcolm
Wicks:
Not oil, but
biomass.
Charles
Hendry:
That is more feasible, perhaps, than wind turbines
on the roof of the
Department.
I am
grateful to the Minister for his response. We have addressed the main
questions, and some aspects of the idea of a renewable heat obligation
certainly need further thought. Therefore, I beg to ask leave to
withdraw the
motion.
Motion and
clause, by leave, withdrawn.
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