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Lord Renton: My Lords, the noble Lord has performed a valuable service by stressing the environmental factors which arise with regard to the production of electricity and other forms of fuel. We must prepare for events which cannot always be foreseen. Climatic change will be a vital factor. The

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change in scientific progress, which often comes at short notice and as a great surprise, is another factor which may have a bearing on the matter.

My noble friend who moved the amendment was right to stress what she did. It is an important amendment. It may be that there are some industrial interests which do not want the flexibility and adaptability which the amendment would provide. But it is extremely important that this clause, which is very necessary, should be strengthened and the position it has in mind made more flexible by the terms of the amendment.

As I said, it may be that some vested interests do not welcome it. On the other hand, one should bear in mind that the Country Landowners' Association, the National Farmers Union and some very important scientific industrial lobbies--British Biogen and Abre, the largest biomass generator in the United Kingdom--want this matter dealt with. I think that something should be done, in all parts of the House, to support the amendment moved by my noble friend.

Lord Ezra: My Lords, I support the amendment so ably moved by the noble Baroness, Lady Byford. Before the Secretary of State makes an order relating to the renewables obligation, it is important that, as well as consulting the authority and the council--which he is bound to do--he should also consult closely with the persons who are likely to generate the electricity from renewable sources. It seems to be perfectly logical and sensible that he should do so. Otherwise, there would be a lack of understanding of the scope of the issues involved. The amendment clearly sets out what the Secretary of State should seek to establish before he proceeds to make an order. Therefore, I warmly support the proposal.

Lord McIntosh of Haringey: My Lords, it is difficult to resist an amendment which is moved on the basis of preserving England's green and pleasant land. I find it difficult, on emotional grounds, to resist what is being said. However, there are different ways of preserving England's green and pleasant land. I agree with the noble Lord, Lord Hardy, that perhaps in some parts of the country, wind farms might not be the best way to do that.

The noble Baroness, Lady Byford, is right to be concerned that the new obligations in Clause 62, in connection with electricity from renewable sources, should provide the right investment environment. That is the concern of the Government, too. I assure the noble Baroness that consultation with renewable generators on all the issues listed in the amendment, with one exception, is already taking place, and will in future take place, under the provisions for consultation already in the Bill.

Before noble Lords look at the bottom of page 65 and see reference to the authority and the council, perhaps they would turn to page 66 and see that the consultation required has included, now includes, and will in future include such other persons, if any, as he

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considers appropriate. I assure all Members of the House that the consultation includes those named in the amendment, and will continue to do so.

The exception is the question of long-term supply contracts. As I explained in Committee, the Government simply do not accept that we should retain a feature of the old non-fossil fuel obligation mechanism--Government-mandated long-term renewable supply contracts--which runs contrary to the entire thrust of the Government's market-based policy for the new renewables obligations.

I turn to the broader underlying issue; that is, whether the new obligations as planned by the Government will deliver sufficient investment in renewables to meet the Government's renewables targets. The Government consulted last year on the kinds of support mechanisms which should be used to promote the development of renewable energy.

Among a number of diverse views in the responses to that consultation there was considerable support for an obligation on suppliers. That is why we are putting a long-term obligation on suppliers which will last until 2025. That will determine from the outset the profile of the obligation on suppliers, the eligible renewables, the buy-out mechanism and the mechanism for recycling buy-out receipts.

Renewable energy resources are limited in their availability and the rate at which they can be deployed. I think that that point was recognised by the noble Baroness, Lady Byford. The Government are therefore confident that such a long-term obligation and the premium price which renewables will attract will enable suppliers and generators to bring forward renewables capacity in the confidence that there will be a market for the product at prices that will attract appropriate levels of investment capital.

In line with the move to a market-based approach, the matter of individual contracts and the choice of technologies to meet the supply obligation is a matter properly left for negotiation between generators and suppliers. The Government recognise, however, that in order to meet the 10 per cent target it may be necessary to bring forward long-term technologies such as offshore wind power and energy crops, which were spoken to so eloquently. We are considering support for those technologies in the context of the spending review 2000.

The noble Baroness, Lady Byford, sought assurance that the integrity of the existing non-fossil fuel contracts would be secured. I am happy to give her that assurance. We are working with the industry to ensure the integrity of existing contracts. Indeed, that is the purpose of Clause 67, which we shall come to in due course.

As I have said, it is difficult when amendments are moved in such a way that opposition appears to be supporting sin rather than opposing sin. However, it is not as simple as that. Although most of the matters in the amendment are unexceptional, we think it is

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important to reassert our opposition to long-term contracts which appear to be implied by the amendment.

Baroness Byford: My Lords, I thank the Minister for his lengthy and detailed response. I also thank the noble Lord, Lord Hardy, for his comments; my noble friend Lord Renton and, indeed, the noble Lord, Lord Ezra. I shall read carefully what the Minister has said and discuss it with my noble friend Lord Jenkin, who is extremely sorry that he is not able to be in his place.

In addition, perhaps I may make two comments regarding onshore and offshore wind power, which were referred to in the Minister's response and in contributions by other noble Lords. The truth of the matter is that once such wind power stations are set up, they will cost nothing, whereas the planting of non-food crops involves ongoing costs. I would be grateful if the Minister could consider that point before Third Reading. There is a difference between the two. Wind can be captured at no cost, but growing crops have to be cared for and there are continuing costs.

Lord Hardy of Wath: My Lords, the noble Baroness is right. However, construction costs can be considerable, and there are ongoing costs. There is the problem of noise and the problem of people who live nearby who did not want wind power stations near their homes in the first place. In some cases, there is a great deal of bird mortality as a result of the operation of windmills. From time to time, the sails fall off. Wind speeds can sometimes be so high that they cannot possibly operate and produce electricity as they are designed to do.

Baroness Byford: My Lords, I am grateful to the noble Lord. He perhaps adds to the point I make. I referred earlier to non-food crops produced by farmers on set-aside land. I also said that that would obviously encourage wildlife and biodiversity. The comments of the noble Lord add to my argument, which I am delighted to hear.

Lord McIntosh of Haringey: My Lords, I believe that the noble Baroness invited me a moment ago to write to her between now and Third Reading. Time is short, but if she has not seen the leaflets on renewables published by the Department of Trade and Industry, I shall certainly send them to her.

Baroness Byford: My Lords, I thank the Minister. However, I am sure that I have seen the leaflets. Perhaps I may also mention one matter following the Minister's response.

In response to an earlier amendment and indeed, in the Minister's response to me, it was said that market forces would perhaps have a bearing on this matter. However, earlier, the Minister stated that market forces could not be entirely replied upon. Hence, I press the point that the amendment is extremely important.

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I thank all noble Lords who have taken part in the discussion. I shall discuss the matter with the noble Lord, Lord Jenkin. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

7 p.m.

Baroness Byford moved Amendment No. 54:

    Page 65, line 42, at end insert--

("( ) Operators of generating stations producing electricity from renewable sources shall be permitted to supply electricity produced by the generating stations to more than one party.").

The noble Baroness said: My Lords, in moving Amendment No. 54 I shall speak also to Amendment No. 59.

Amendment No. 54 seeks to allow small generators to obtain the best possible price for their output. A generator using wind power, for example, will not be able to predict exactly how much output he will have available at a given time in the future. He is required to contract to supply three-and-a-half hours ahead. If he contracts, say, for 20 kilowatt hours and can only make 18.3, he falls foul of what is called the "balancing mechanism" and is charged heavily for his failure.

Amendment No. 54 will allow each operator to calculate his minimum output, sell that at price X and then contract with another company to receive anything above X. The company who takes that excess may be a supplier, it may be a consolidator or an electricity broker, and may be in the local area or anywhere in the country. The advantage to the generator is that he avoids the penalty of under-producing and may obtain a premium for the fact that his output comes from renewable sources and can be counted by an end-user towards avoidance of the climate change levy.

This arrangement was endorsed by Ofgem/DTI and in the conclusions of its document of October 1999 on page 84, Section 75, it said,

    "The new balancing mechanism unit splitting arrangements will allow ... a fixed volume to be sold to a supplier within the same Grid Supply Point Group. Since the output contracted is fixed and secure, the price achievable for this output should be attractive ... The remaining unpredictable proportion ... could then be managed either directly by the generator or by using the services of a supply aggregator acting at either a local or national level".

I understand that the reason this option is not on the face of the Bill is that major alterations would have to be made to what is called the "master registration agreement". Global warming and the need to use renewable sources is too serious a matter to allow substantial changes to an operating agreement to stand in the way.

Amendment No. 59 will enable renewables generators to ensure that they can obtain any renewables premium, even if they sell their physical output to a supplier who does not need to meet the renewables obligation. Sales by generators might be made at brown electricity prices and the certificate sold separately to a supplier who needs it to make up any difference between green and brown electricity prices. Some customers want to buy green power. The "greenness" of the electricity from renewable energy

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sources has a value that is separate from, or additional to, the value that the customer places on the energy. One could say that renewables generators produce energy and greenness as two separate outputs. Amendment No. 59 enables them to sell those outputs separately. I beg to move.

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