The
Chairman: Order. The hon. Gentleman is straying, no doubt
inadvertently, from the terms of the order, which are already wide. I
know that he will now want to refocus his remarks on to
that.
Martin
Horwood: Your advice, as ever, is on the mark,
Mr. Bercow, to quote the hon. Member for Inverclyde. I am
expressing concern about the fact that the order is necessary, but not
sufficient. I hope that the Government will see the need for the wider
signals to the market that still have to be sent, as well as for wider
signals to our European partners, to business and to consumers. Those
are especially important as we approach the critical negotiations in
Copenhagen. The mixed signals are a worrying trend, but the order is a
small step in the right
direction. 11.16
am Mr.
Chris Mullin (Sunderland, South) (Lab): I do not pretend
to have great expertise in such matters, but I want to follow up the
points made by the hon. Member for Bexhill and Battle. It always warms
my heart to hear a member of the party of no taxes and non-intervention
demanding more intervention and presumably higher taxes to subsidise
it. The
hon. Gentleman and my hon. Friend the Member for Inverclyde referred to
our manufacturing sector. I represent a constituency in the north-east
of England that once had huge capacity for the sort of fabrication that
should be used in building for offshore, or onshore, wind and other
technologies. Over the years, we have seen all that stripped away and
disappear in the general direction of China and other countries. To
hear that Germany has risen to the occasion by seizing a large lead in
the manufacture of renewable energy technology makes me wonder why we
cannot do it here. Is my hon. Friend the Minister satisfied that we are
doing enough, albeit having set off after a late start, to attract such
business here?
Gregory
Barker: The hon. Gentleman makes an excellent case about
Germany and other European countries that use a feed-in tariff model.
We know that if we want a share of the lucrative export markets in such
technologies, we must first prove dominance in our domestic market. We
cannot hope to have a share in the potentially huge global market if we
do not first prove and test such technologies in our own
market.
Mr.
Mullin: The hon. Gentleman is absolutely right. We have an
enormous opportunity in this country. Such technology must be the
future if the planet is to survive, and we have the skills and
facilities. Is there more that the Government can do to encourage such
manufacturing here? I should be grateful to hear from the Minister
about that before Mr. Bercow intervenes to tell me that I am
straying off wicket.
The
Chairman: indicated
dissent.
Mr.
Mullin: No, I am on the ball—I am glad to have you
confirm that, Mr. Bercow. Thank
you.
11.18
am
Joan
Ruddock: I thank all hon. Members who have contributed to
this interesting debate. I have been asked an enormous number of
questions and I shall endeavour to answer all of them, which will
detain us a little longer than perhaps we would have liked. None the
less, the questions are important. I apologise for the fact that the
Minister of State who is responsible for such matters is not in
Committee. He is taking part in a debate in Westminster Hall, but I
shall do my best to
respond. The
hon. Member for Bexhill and Battle asked about support and whether the
order is enough. We believe that we have got it right, because we have
undertaken a huge amount of consultation with industry and we shall
continue to do so. We do not just decide on something and not intend to
speak to industry again. We will have continuing feedback. We have a
capital grants scheme, the marine renewables development fund, the
Energy Technologies Institute, which we have set up, and an
environmental transformation fund, so we do not just depend on the
renewables obligation. We are putting a lot of other resource into this
field as
well. Mention
was made of skills in relation to what manufacturing could do here.
Again, we are doing everything we can. If we created a market,
potentially a market would be created for manufacture in this country,
not simply for imports. In addition to that we have set up a national
skills academy for power. I am sorry to say that, historically, we have
just not had the skills. However, companies that have learned enormous
engineering skills in the north are now adapting to renewables, so this
is not a hopeless
situation.
Gregory
Barker: On the Minister’s important discussions
with industry to come up with a particular level of banding, how
confident is she that that will be sufficiently flexible, because it
can only represent the decision based on the snapshot of the economy at
this extraordinary time? Is there not a danger that, as the economy
changes and develops and some costs rise while others fall—with
the carbon price hopefully rising again—a view of the economy as
of March-April 2009 will have been locked
in? One
of the benefits of the feed-in tariff system is that it aims to give
not a consistent amount of funding, but a consistent return on capital.
That consistent return on capital, which is implicit in the feed-in,
allows for changes in external costs, but at the same time gives
investors certainty in respect of the long-term return that they would
be likely to receive from large, capital-intensive investments. I
wonder to what
extent—
The
Chairman: Order. If we are to make timely progress,
interventions need to be somewhat shorter. I think we have the gist of
it.
Joan
Ruddock: I think so, too, Mr. Bercow. With
interventions on my answering questions it is particularly difficult to
keep myself in
order. Let
me just say to the hon. Gentleman that there has to be a balance
between complexity and effectiveness. We will review the banding level
in 2013. That is already known to the industry. This is a development
on our previous cycle of renewables obligations. There has to be some
certainty and that would be impossible if
industry thought that we were going to change the banding every other
year. So 2013 is the right time. Obviously, there has to be a link with
the feed-in tariffs, which I will come to in a moment. However, it is
because we consult—the hon. Gentleman has criticised us for
doing so—that we think that we have got it as right as we can
get it. Nothing is perfect, but this is the way that we can go
forward. The
hon. Gentleman talked pessimistically about those who are withdrawing
from projects and about the economic situation. Of course, we all
understand that we are in a difficult economic situation, but that is
no reason to take a pessimistic view. We know that Shell is
withdrawing, for example, but Dong, Scottish and Southern, Vattenfall
and Masdar, have all come into the field, so we believe that this is a
good place to invest in and that the renewables obligation, with the
new banding, will make a big
difference. The
hon. Gentleman said that we had not made progress. As someone who has
campaigned for years on renewable energy, I acknowledge that we did not
start soon enough. Germany was decades ahead of us, so of course it has
made greater progress. But, having started, we have made progress, as I
said in my opening remarks, and we will make more
progress. The
hon. Gentleman asked specifically about the London array. We have met
those who are involved with that project. We have had a number of
meetings at all levels with the developers of the London array and we
have discussed their expected costs for that project in
particular. The
hon. Gentleman talked about reassurances for manufacturing. I think
that I have given some indication of what we are trying to do. He spoke
about jobs in this country through the development—this is also
the answer in relation to the number of buy-outs that are being made
regarding the number of ROCs being presented: that has happened over a
period of years, and we cannot blame business and industry, which
wanted to do much more in terms of onshore wind. The difficulties have
come through the planning system and people’s objections. They
themselves would have gone much further, and not have needed the
buy-outs, if they had been able to make much more progress and get much
more onshore wind up and running.
Martin
Horwood: Blaming the planning system is a familiar, old
chestnut. Other countries, such as Denmark, have made enormously more
progress in onshore wind by giving communities much more of a stake in
most wind projects that go forward. The equivalent of that in this
country is the partnership for renewables, which has been promoted by,
I think, the Department of Energy and Climate Change. However, it has
received precious little support and is making meagre progress. Is that
not the kind of project that we should support on a much larger
scale?
Joan
Ruddock: Without a doubt, if the hon. Gentleman talked to
any of the companies involved, as I did, he would hear from them that
the objections that come repeatedly—particularly, sometimes from
people of his own party—to such planning requests, have
held back the industry; it is not an old chestnut, but a fact.
That is one of the reasons why we took powers for the
Infrastructure Planning Commission, which have been supported—we
must make progress, which is in our national interest.
I was asked
about a low-carbon obligation. I have received some information about
that, as well as about the supergrid. First of all, I am not in a
position to say anything more regarding the supergrid today. We have
considered it as an interesting, but high-cost proposal, and much
further consideration must be given to it. The hon. Member for Bexhill
and Battle asked about a low-carbon obligation. We believe that
different technologies have different characteristics, and our
competition to select our carbon capture and storage demonstration
project is continuing, and it will be supported. We remained committed
to having a commercial CCS project by 2014.
I was also
asked about the renewable heat incentive, and whether projects could
claim ROCs. We are in the business of developing both the feed-in
tariff and the renewable heat incentive. We have to work out in some
detail how they will relate to the renewables obligation. I was
reminded by the hon. Member for Cheltenham about the issue that has
been raised consistently by BT and others on the carbon reduction
commitment, and its interaction with the ROCs. As I have already told
him in meetings, we must prevent double counting, and there must be a
mechanism to prevent that in the design of the renewable heat incentive
and feed-in tariffs. If credits are given because there are no
emissions, that is the way it has to be. In order for people to get the
best benefit, there will be the potential to transfer, in terms of the
microgeneration elements of the ROCs, to feed-in tariffs, when the
tariffs are up and running and people can see where the benefit is. I
hope that he will not take me down the avenue of the carbon reduction
commitment, because it would not be appropriate—perhaps I will
be assisted by the Chairman, who
knows? On
CHP not being supported—another charge made by the hon. Member
for Bexhill and Battle—renewable CHP stations receive an
additional 0.5 ROCs support over standard biomass. We have therefore
attempted to build in some additional support for CHP, which I have
always supported. On the feed-in tariff, the hon. Gentleman spoke about
consistent return on capital. The feed-in tariff is a fixed income, not
a return on investment. The German level is a fixed level of support
for several years ahead. It is therefore not the flexible mechanism
that he thinks it is.
A number of
hon. Members have asked about the two ROCs upper limit. It is
appropriate to have an upper limit. That is a serious point. It is
being suggested that we need to provide more support and more ROCs.
Hon. Members should remember, however, that the cost of support given
in that way will be passed on to consumers. Serious consideration
should be given to consumers’ interests during an economic
downturn. We cannot say, “Let’s give the largest possible
subsidies,” without considering consumers. There has to be a
balance. We will consider whether further support is justified as we
develop the renewable energy strategy, which we hope to produce later
this year. That will give us another opportunity to see whether more
should be done, but not via this
mechanism. The
hon. Member for Bexhill and Battle asked about value for money. The
changes under the draft order will increase value for money by some 30
per cent. As we
have indicated, we will reduce the level of support for some
technologies, such as co-firing and biomass. The renewables obligation
is not only about carbon savings in the short term; it is about
transforming the market. I know hon. Members also believe
that. Early on in
his speech, the hon. Gentleman suggested that far too much support was
still being given to landfill gas and that it accounted for the
majority of the ROCs issued. According to Ofgem’s annual report,
however, that is not the case: 4.8 million ROCs were awarded for
onshore wind compared with 4.5 million ROCs for landfill
gas.
Gregory
Barker: That is all right
then.
Joan
Ruddock: Well, the hon. Gentleman wants us to have gone
only for the newest technologies, but the fact is that we were behind
the curve. We incentivised some of the easier technologies; that
brought forward more renewables projects and we have now adjusted the
banding to reflect the fact that they now need far less support. Our
approach is therefore logical.
To respond to
the questions about Ofgem and its software, Ofgem’s costs are
subject to industry consultation and I am told that its new IT system
has been a great success. Unless anyone can contradict me, I have to
believe that my information is correct.
I was asked
specifically about the flexibility to review bands. The Secretary of
State has powers to review under article 33 of the draft order. I have
tried to make the case that we would not want to do that quickly, and
that we are to have a review in 2013.
I was asked
about the differences in Scotland. I greatly appreciate the remarks
made by my hon. Friend the Member for Inverclyde, who rightly says that
policy made here in the UK must be made for the whole of the UK. ROCs
work to ensure that although there are devolved powers, we have a
system that works together. That means that the cost to consumers is
shared by the whole of Britain and not transferred to separate
countries which, as has been indicated, would be impossible.
Ministers in
Scotland have the power to set separate bands. They have announced
their desire to provide additional support to wave and tidal stream
technologies, and we think that they will go for five and three ROCs
per MW respectively. We in England and Wales believe that two ROCs per
MWh, with additional grant support, is an appropriate level of support,
hence our proposal. My hon. Friend is right to say that we cannot
embrace only one technology: we must have a mix of generation and a mix
of fuels. That is why we have the energy strategy and why we need
continuing contributions from coal, which we know must be cleaned up,
and from nuclear power. He made a powerful case for that mix and for
security of supply.
The hon.
Member for Cheltenham commented on the potential for unsustainable
biomass to enter co-firing. As I have said, reporting is built into the
proposed legislation and the Department for Environment, Food and Rural
Affairs has put a great deal of work into establishing protocols. We
hope that we have got the balance right in terms of making things
possible and not making them too difficult.
My hon.
Friend the Member for Sunderland, South spoke about the need for us to
do more to attract business to this country, and I share his
enthusiasm. I
have given some indication of the variety of ways in which we are doing
that, particularly through the Energy Technologies Institute, the power
skills proposals and other measures. We are doing and will continue to
do everything we can to encourage renewable energy manufacturing and to
make more jobs available in this country. In our view, the
banding will give greater incentives that we hope will lead to greater
manufacturing opportunities. Last week, at
an OECD meeting, I talked with someone who is very familiar with this
field. He told me, “What your Government are doing is so good
that people in
Germany will start looking across the channel to invest, because they
see that that is where the new developments are going to be.” I
take that as a hopeful sign, and I commend the draft order to the
Committee. Question
put and agreed
to. Resolved, That
the Committee has considered the draft Renewables Obligation Order
2009. 11.39
am Committee
rose.
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