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I appreciate that efforts are being made to get alternatives such as small-scale renewables to those consumers, but again there is a problem of cost. Many small-scale renewables, such as heat pumps, are very expensive and therefore outwith the reach of many people, even with the grants that are available. I agree with the hon. Member for Carmarthen, West and South Pembrokeshire that it is simply wrong that that group of people do not have the same access to social tariffs as those on mains supplies. Ministers must look again at this issue, which
has plagued the whole fuel poverty debate for a considerable time. This is discrimination, pure and simple, against those people who are fuel-poor in rural areas. We must do something about this, and ensure that they get the same benefit as those who live in towns and can access mains gas. I also echo what has been said by others about those with long-term medical conditions who need more heat.
One of the impacts of ensuring that we meet our carbon targets and improve our infrastructure is that increasing amounts of subsidy are being paid by consumers through their energy bills. Centrica is the first to put a percentage on that, but I am sure that the other companies will do so. The CCS levy will inevitably be another part of that, as will all the other subsidies that are coming through.
People who do not benefit from the various tariffs or the winter fuel subsidy are going to find it increasingly difficult. It is simply unfair that those who require more heat because of long-term medical conditions do not get the help available to pensioners. Again, that must be looked at-as was said earlier, energy bills are not going to go down in the near future. Indeed, when Ofgem was before the Select Committee last week, I believe it said that up to 20 per cent. of the bill could come from various subsidies within a few years. That is a worrying statistic for those who have to pay the full amount of their electricity bills.
Part 3 deals with the change to the regulation of gas and electricity markets and the role of Ofgem. In my time in the House, I have had many spirited discussions with Ofgem about its actions, particularly regarding the hoary old issue of transmission charges. It has always seemed to me that Ofgem had a totally blinkered attitude defined by its ideological interpretation of its principal duty to look at the interests of consumers. That seemed to give it the idea that all generation should be based near the main centres of population, which meant that many renewable energy developments in the more remote areas of Scotland-having listened to the hon. Member for Carmarthen, West and South Pembrokeshire, I appreciate that this may also be a problem in Wales-where much of the wind and many of the waves actually are, faced very discriminatory transmission and access charges over the years to be able to get into the grid and transport the energy to market.
I appreciate that the Secretary of State is taking powers, which deals to some extent with the access charge problem, but there is still a transmission charge problem, although it has been slowly improving. I very much hope that the changes brought about by clause 17, which ensures that climate change and security of supply will become much more important for Ofgem to consider in coming to its decisions, will mean that much of the ideological baggage of the past will have to be jettisoned. I would caution, however, that before this can be done, there will have to be a major cultural change at Ofgem. It is one thing to put these clauses in the Bill, but strong action is needed to ensure that they are given the required weight in Ofgem's decisions. The recent report that Ofgem was seeking to undermine the introduction of feed-in tariffs is a matter of huge concern and shows that it is one thing for a Government to declare a policy and for Parliament to pass a Bill, and quite another to ensure that it is energetically followed through.
I am not sure that clauses 18 to 25 are so welcome, as they might have a negative impact on investment in energy generation in Scotland. These provisions relate to various constraints within the energy distribution system, and it has been a particular problem at the Cheviot gap between Scotland and England, which has rumbled on for quite some time.
At the moment, there are constraints on transmission under the British electricity trading and transmission arrangements. Generators in Scotland pay to be connected to, and to use, the Great Britain transmission system. Annually, such payments amount to 40 per cent. of the total transmission charges, which, allowing for the fact that Scottish generation represents only 12 per cent. of total generation, means that Scottish generators contribute approximately £100 million a year more than what would be a fair share. In return for the payments, generators are entitled to access and to use the transmission system to move their generated electricity to market. Consequently, when they cannot have full access to the system because of inadequate grid capacity, they should be entitled to compensation for the resulting loss-and these are referred to as constraint payments.
Electricity generation in Scotland already exceeds the capacity of the network, and additional renewable generation in Scotland will exacerbate the situation. Neither National Grid nor Ofgem has previously taken sufficient steps to address the capacity shortfall, even though the problem has been known about since well before 2005. There is an ongoing programme of infrastructure reinforcement works to increase capacity, but it will be several years before the interconnector capacity between Scotland and England is sufficient to eliminate constraints.
National Grid and Ofgem previously put forward a proposal that appeared to target Scottish generators. They wanted to change the system of balancing costs so that constraint payments would effectively be charged back to the same generators, which is to say that generators would pay constraint charges for not being able to access the system, which seemed bizarre in the extreme. Thankfully that proposal was junked. However, the Bill seems to be trying to achieve much the same, although I can see that its proposals are slightly better than the original one. They are limited to the balancing market, there are good appeal mechanisms, and there is a sunset clause that will remove the provisions when the much- delayed upgrades have been introduced.
Placing artificial limits on the level of compensation that Scottish generators would receive-irrespective of the value that they provide for National Grid or the losses incurred by generators-seems daft, but the proposal also seriously undermines the confidence of those who might otherwise invest in Scotland's thermal and renewable energy sectors, including carbon capture and storage. We are placing a great deal of faith in the future of CCS to meet our emission targets, and we need to do everything possible to ensure that that happens. We cannot discriminate against existing and future Scottish generators, because that would call into question the validity of the British electricity trading and transmission arrangements.
I ask Ministers to consider the matter again, and to ensure that they do not introduce a measure that will work against future generation. We need investment in new generation, regardless of whether it involves renewables or not, but such investment will not come about if constraints of this kind are imposed.
Another part of the Bill intrigues me. I may be completely-as we say in Angus-up the wrang dreel, but I should be obliged if the Minister would clarify the meaning of clauses 27 to 31. Clause 27, entitled "Adjustment of charges to help disadvantaged groups of customers", empowers the Secretary of State to adjust charges if he thinks that some consumers are paying unfair charges. So far, so good; none of us, I hope, would disagree with that. I fully appreciate that the clause constitutes, in effect, more or less a restatement of powers that exist in the Utilities Act 2000. It seems to me, however, that the definition of the categories of customers covers all the customers of the energy companies as set out in subsection (5). That is important because of subsection (3), which states that disadvantaged customers can constitute all the members of the group specified in subsection (5).
In theory, the upshot of that is that the Secretary of State would have the power to decide that all the customers of one energy company, or indeed all of them, were paying too much for their energy, and could decide that everyone's bills should be reduced. That might be welcome, but I think we need to know exactly what the clause means. One interpretation is that it would give the Secretary of State power to decide the level of charges that energy companies could impose.
Despite the reservations that I have expressed in regard to certain clauses, I support what the Government are trying to do. If I am fortunate enough to be selected as a member of the Committee, I shall look forward to many happy hours debating the issues. This may be a small Bill, but it contains a great deal that is very important to the future of energy generation in this country.
Anne Main (St. Albans) (Con): One of the delightful aspects of speaking late in a debate is that one has heard so many wonderful speeches. However, the theme that has typified the speeches today is that the Bill is lacking in many respects-that it is a light Bill. A Labour Member, who is not present now, described his own comments as a constructive whinge. I had thought that it was up to the Opposition to produce constructive whinges, so it was good to hear so many of them, and to hear a long list of things that should have been in the Bill but-as has been freely admitted-have not been included because time constraints made it impossible to include anything of note.
I can think of a few measures that could easily have been included, as they touch on the theme of the Bill, but sadly they are not there. One involves the production of biodiesel from used cooking oil. I drew this to the attention of the Under-Secretary of State for Energy and Climate Change in a Westminster Hall debate in October. It was a very lively and well-attended debate, and he said he would reflect on the point. I therefore hoped he might have inserted some constructive measures into the Bill, but I am sorry to say that thereare none.
That debate was about the production of biodiesel by recycling used cooking oil of UK origin. That is a highly sustainable way to produce energy. We have hundreds of restaurants, fast-food premises and commercial food producers, all of which use large quantities of cooking oils. When used, they become a waste product, and they can be both costly to deal with and difficult to
dispose of. Within manufacturing industries, huge quantities of fats and oils are used, with significant quantities of waste food oils resulting from processing methods. When recycled properly, it can be a truly sustainable fuel, and we all want to increase our use of such fuels as much as possible. The Bill should have gone a little further in this regard, because it is ridiculous to dispose of such waste oils when they are ultimately a valuable recyclable resource. If we are worrying about the lights going out and shortages of fuel, it is also ridiculous that, despite the fact that the huge amount of waste from used cooking oils could be used highly efficiently as a truly recycled product, people are paying to get rid of it.
Earlier this year, I discussed this matter with Richard O'Keefe, director of Green2Go. He was the inspiration behind the debate in October. His company was established in 2007 with the express intention of providing renewable and sustainable heat and power solutions. We are hearing a lot about dirty solutions, such as coal, having to be made greener, but this is a green solution.
Green2Go is a relatively small company, but it is a key proponent of this effort. It estimates that there are currently 250 million litres of the waste product of used cooking oil available from commercial sources and significant further amounts from domestic sources. In areas that pride themselves on trying to increase recycling, such as St. Albans, we are also getting rid of this product at the domestic level.
Biodiesel, which can be manufactured from used cooking oil, is a particularly sustainable renewable fuel, whose use can reduce lifecycle carbon emissions by up to 90 per cent. If we were to use that fuel, it would help us deliver on our challenging energy targets. Used cooking oil does not cause additional deforestation, as it is a waste product that would otherwise have to be disposed of by professional collectors at significant cost-in the debates on this, it has been mentioned that sometimes it is not disposed of properly and it goes down into rivers and drainage and there is then the high cost of cleaning that up as well. Certain green pressure groups have great worries about whether the steps we are taking to try to ensure that the lights do not go out are green, but this is certainly green. It does not cause any land-use change, and the fuel is consequently one of the lowest-carbon forms of biodiesel. Converting to biodiese used cooking oil that might otherwise have gone to landfill is an excellent example of a sustainable biofuel.
The Under-Secretary of State agreed with all this in our earlier debate. As he said it was a valuable debate, I am hoping I shall hear some more from him about the issue today. This type of biofuel contributes to reducing carbon emissions and waste minimisation. As it uses a waste product, there is no resultant pressure on land use and no impact on food prices. There is a big concern about third-world countries that should be growing crops to eat but that are instead exporting crops for making biofuels. This does not contribute to that concern. Vital resources are not diverted from a valuable existing land use.
Methanol is commonly used in the process of producing biodiesel from used cooking oil. However, in March 2009-not very long ago-Ofgem reversed an earlier position and ruled that the use of methanol made from natural gas in biodiesel production discounts the fuel
from being included in the renewables obligation scheme. That cannot be right. Many right hon. and hon. Members who are present have served on the Select Committee, and I see its acting Chairman, who will remember when the Committee was discussing this part of our energy remit. I raised the discounting with a witness who was giving evidence to the Committee, and he described it as a "bonkers anomaly".
A bonkers anomaly was introduced under this Government's watch in March 2009. As the Government are aware of this bonkers anomaly, I would have thought that they would have taken the opportunity in the short time left to them to address it. The ruling was made following consultation and discussion with the Department of Energy and Climate Change. As a result of the presence of that very small portion of fossil fuel derived from methanol in some biodiesels, we have this bonkers anomaly. The ruling is based on a very literal interpretation of the law, which classes the entirety of the biodiesel produced in such a way as a fossil fuel under article 9 of the renewables obligation, despite the fact that the fossil fuel element of the fuel, made from used cooking oil, is relatively small-about 11 per cent. by mass.
Members of the UK biofuels industry believe that the Ofgem ruling on biodiesel is likely to have a significant effect on the UK's industry and would have ramifications for our future domestic supply of renewable energy. That is what the Bill should be considering-to ensure that we have domestic supplies of renewable energy so that the lights do not go out. That is why there is a real missed opportunity in the Bill. I hope that we will have a chance to raise that issue in Committee.
Energy production in the UK has been set extremely ambitious long-term targets for renewable sources, yet many feel that the 2009 legislation-or at least Ofgem's interpretation of it, and I note that Ofgem is mentioned regularly in the Bill and it should have its attention drawn back to the anomaly-does not offer any incentive to use such a form of renewable fuel in the generation of electricity and heat. When I mentioned that to the Under-Secretary, I was encouraged. He agreed to meet representatives of the industry who had raised the anomaly with me to discuss it in more depth. I had heard that they were having trouble getting hold of him and I hope that he will tell me tonight that they have met. I would love to hear any update about any meeting that he has had with them. If he has not met them, I press him to renew tonight that commitment to meeting them.
The renewables obligation came into effect in 2002 to support renewable electricity projects in the UK. Under the obligation, suppliers are required to meet their obligations by presenting sufficient renewables obligation certificates-it is a mouthful, so I shall call them ROCs-which are green certificates issued to an accredited generator for eligible renewable electricity generated. The 2008 consultation by Ofgem, which led to this decision, focused on the detail that the methanol used in the process was normally derived from natural gas, itself a fossil fuel. Ofgem therefore set out that it was difficult to view biodiesel made in that way as a renewable fuel as set out in the Electricity Act 1989 and in specific parts of the Renewables Obligation Order 2006 (Amendment) Order 2007. Instead, Ofgem argued that biodiesel produced from the reagent will in turn fall within the term "fossil fuel"-that is, the whole of the
biodiesel-under article 9 of the renewables obligation and concluded that biodiesel produced in such a way should be classed as fossil fuel generation under articles 9 and 18.
I believe that the Government do not want this anomaly and that, in October, the Minister saw that the argument in favour of it was nonsense. Given that the ruling stated that where fossil fuel-derived alcohols are used no ROC will be issued, even for the biomass-derived portion of the biodiesel involved, will he-or whoever speaks on behalf of the Government-take up the suggestion that we made in October to have 0.9 of a ROC to recognise such a truly renewable biofuel and the greenness of the energy provided by it? Electricity generators cannot receive the renewable obligation on electricity that is produced from that fuel. That is despite the fact that the fuel element is so comparatively small and despite the fact that the majority of the fuel is truly recycled from the waste stream and would have no other purpose.
There was widespread industry reaction to the Ofgem ruling on the basis that exclusion from the scheme would not encourage the generation of renewable energy-something that we have talked about at length tonight. Ofgem itself has concluded that its ruling ran counter to the desires of the majority of respondents to the 2008 consultation. Ofgem has further admitted that the issues that many such respondents raised are policy decisions that are the responsibility of the Department of Energy and Climate Change and are outside the remit of Ofgem's role as the scheme's administrator.
I have raised this issue in a sitting of the Energy and Climate Change Committee, in which we discussed low-carbon technologies in a green economy-I note that our acting Chairman, the hon. Member for Sherwood (Paddy Tipping), is nodding. When I raised it with Greg Archer of the Low Carbon Vehicle Partnership, he did not hold back; as I have said, he described the situation as a "bonkers anomaly". He is not the only expert who has misgivings about the situation. I hope that the Minister will update me regarding the possibility of introducing a 0.9 ROC. He has agreed to investigate that idea, and I am sure that he will have made some progress in that regard. Used cooking oil can produce significant carbon savings and is an excellent way of using a waste product to create energy, but it currently seems to be uneconomic for many producers to do that. Will the Minister re-examine the legislation covering the treatment of biodiesel that is produced from used cooking oil to see whether anything can be done to iron out the anomaly? I would also welcome a statement on the implementation of the renewable energy directive.
Mr. David Jones: Before my hon. Friend leaves that point, will she enlighten the House as to what form of fossil fuel is comprised in that 0.1 of a ROC or that 10 per cent., of cooking oil? I should not have thought that cooking oil could possibly comprise any fossil fuel.
Anne Main: I probably have not explained that point well enough. Some 89 per cent. of the fuel will be from used cooking oil and 11 per cent. will be from the methanol that is used, which is derived from gas. That is the fossil fuel element that has unfortunately given rise to the bonkers anomaly.
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