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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.
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.
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.
That the Committee has considered the draft Renewables Obligation Order 2009.
11.39 am
Committee rose.
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