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Baroness Byford: My Lords, I rise to support my noble friend Lord Jenkin. I appreciate the words spoken by the noble Lord, Lord Hardy of Wath. I shall not rehearse the excellent presentation with which my noble friend Lord Jenkin moved the amendment. But I would point out that on an earlier amendment the Minister referred to "the short-term solution". Obviously short-term solutions are important. But for very small producers of power, if there is no long term, there is no short term. I add my voice in support of the amendments. I hope that the Minister will reconsider our arguments on this issue.

Lord Ezra: My Lords, I support the amendments spoken to by the noble Lord, Lord Jenkin. The amendments support the Government's intent, which is to secure the renewable sources targets. The two amendments spoken to by the noble Lord, Lord Jenkin, deal with the environment within which renewable sources should be promoted and orders made for the renewable obligation. The second amendment deals with an obligation on the Secretary of State to consult the generators of electricity from renewable sources. When this second issue was debated at Report stage, the Minister stated that there was an omnibus subsection that would enable him to consult,

I regard that as weak and dismissive. He might well say that there are none. The whole clause deals with generation from renewable sources. Therefore, consultation with generators of electricity from renewable sources should be made an obligation on the Secretary of State. The two amendments support the Government's intent. I look forward with great interest to the Minister's response.

Lord Wilson of Tillyorn: My Lords, perhaps I may make a brief comment on a point raised by the noble Lord, Lord Jenkin. In doing so, I declare a direct interest as chairman of an electricity company which has substantial hydroelectric resources. I do not wish to argue a point directly related to that company, but it would be helpful if the Minister could comment on the point raised by the noble Lord, Lord Jenkin. Do the Government wish to encourage investment in hydro resources? It is not a matter to be put on the face of the Bill itself. It is more a matter of attitude.

Baroness Sharp of Guildford: My Lords, I support the amendments introduced by the noble Lord, Lord Jenkin. My name is attached to Amendment No. 6. I do not need to reiterate the arguments. I endorse them entirely. I should like to mention an excellent report last year from the Select Committee on Science and Technology, chaired by the noble Lord, Lord Geddes. The committee looked at the issue of renewable targets and underlined the need for long-term investment.

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Much of the investment, particularly in some of the more speculative renewable areas, such as photovoltaics, needs the surety of the environment to which the noble Lord, Lord Jenkin, referred. It is very important that we consider meeting the renewables target. At present we are at just over 2 per cent of the renewables target. The target is 10 per cent by 2010. We stand little chance of meeting that target unless there is long-term investment.

4.15 p.m.

Lord McIntosh of Haringey: My Lords, I shall deal with each of the amendments in turn. Amendment No. 5 seeks to impose on the Secretary of State a duty to ensure that the terms of any renewables order that he makes are, if I may paraphrase, sufficient to ensure that there are enough investment incentives to achieve the long-term objectives that he has set. I cannot say that I disagree that this should be uppermost in the Secretary of State's mind when setting an order. But I must ask the noble Lord, Lord Jenkin, this question. Can he imagine a Secretary of State making an order when he does not believe that it will bring about the objectives which he himself has set? I think the answer is obvious. On reflection I think he will agree that the amendment is unnecessary.

Amendment No. 6 would introduce a statutory obligation to consult the generators of electricity from renewable sources before making a renewables order. Again, I have no quibble with the underlying thought. Of course those who generate renewables energy should be consulted about the terms of an order. But then so should those who have ideas about how possible new renewable sources can be tapped. Academics and pressure groups will have views. They should be consulted. The general public too have a right to express their views and have them heard. We could make a long list. We have heard differing views on the effect of particular renewables sources on the local environment. But the Bill provides for all of these to be consulted in new Section 32(7)(d), which provides that the Secretary of State must consult,

    "such ... persons ... as he considers appropriate".

It is not necessary to pick out one group for special treatment. Indeed, there are those who argue that it is dangerous to pick out one group for special treatment. However, I am a reasonable person and I am always willing to listen to arguments. The amendment will not work. The amendment refers to,

    "the generators of electricity from renewable sources".

Strictly speaking, that means every generator of energy from renewable sources. It means that if a single one were to be left out, including a very small generator of energy from electricity sources, there could be a risk of ultra vires challenge in the courts. I am prepared to let the amendment go on the basis that when it goes back to the Commons we will have to reword it to avoid the risk I have indicated but still achieve the objective of noble Lords who propose it. With those provisos I shall not oppose Amendment No. 6.

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Before I sit down, perhaps I may say a few words about hydro power and wind power. Hydro power is included in the definition of "renewables". We certainly do not want to use the powers to support large-scale commercial hydro power which is already commercially established and does not need any help. Regarding wind power, to which my noble friend Lord Hardy referred, there is no question of our leaning on councils to grant planning permission for wind farms. We have made clear that the strategy is market-based and we shall not be picking technologies. I hope that the noble Lord will not press Amendment No. 5 and will accept that Amendment No. 6 can be accepted only subject to subsequent amendment.

Lord Jenkin of Roding: My Lords, we seem to have scored a second victory today. I am grateful that the Minister has agreed to accept Amendment No. 6; otherwise we might have been tempted to press it to a Division. We shall not. We look forward to seeing what comes back from another place. I take the point about drafting. We shall deal with that when we reach it.

On Amendment No. 5, the noble Lord asked a rhetorical question. He asked whether I could imagine any Secretary of State who would not want to create a climate favourable to investment, with the right incentives and so on. If I was dealing with reasonable people, that might well be the case. But I suspect that some of us could think of names where that might come rather low in their order of priorities. That is why we thought that the provision should appear on the face of the Bill. However, as the Minister has met us on Amendment No. 6 and made a good case against including Amendment No. 5 in the Bill, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Jenkin of Roding moved Amendment No. 6:

    Page 65, line 40, after ("apply;") insert--

("( ) the generators of electricity from renewable sources;").

On Question, amendment agreed to.

Clause 63 [Orders under section 32: supplementary]:

Lord Jenkin of Roding moved Amendment No. 7:

    Page 67, line 11, at end insert--

("( ) In the case of electricity from biomass, or from such other renewable sources as the Secretary of State shall specify, any such order shall specify a minimum contract term of not less than 15 years for the delivery of the specified amount of electricity from renewable sources by the designated electricity supplier, and that the terms of any contract made between the electricity supplier and the provider of the renewable resources pursuant to such an order shall be in a form approved by the Secretary of State and shall provide that--
(a) it shall run for not less than 15 years from the start of generation,
(b) the price paid by the supplier to such supplier shall be subject to an annual price adjustment to reflect the effects of inflation, and
(c) the contract must be in a form capable of being used as security for a loan or loans to such provider.").

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The noble Lord said: My Lords, the potential producers of electricity from biomass have argued most insistently that there need to be long-term contracts. Those firms will require substantial investment. In many cases they are quite small firms--perhaps family firms--and they will need to borrow from the bank in order to be able to finance their investment. There is a special case to be made in this respect. Perhaps the Minister will be prepared to recognise on the face of the Bill that there should be a requirement for long-term contracts.

We have argued this point before and the Minister has explained clearly why the matter should be left to the market. The problem is that the renewables obligation is of itself an interference with the market. If there were no renewables obligation, and if the non-fossil fuel obligation had not been introduced by the previous government, does anyone seriously believe that we would have had as much investment in renewables as there has in fact been? I do not believe so because the market would not have moved anything like as quickly in that direction. It is perfectly proper for government to insert a requirement of this kind based on long-term environmental objectives--from before Rio and afterwards--to increase the share of the power market supplied from renewable sources.

Having decided to do that, having decided to manipulate or guide the market in a particular direction, I do not find it in the least offensive to say that that must be accompanied by other regulatory changes to ensure that it actually happens. The potential producers of electricity from biomass are assuredly not confident that without some clear steer on the need for long-term contracts they will be able to negotiate contracts with the suppliers which will enable them to meet the requirement.

We have added the words,

    "or from such other renewable sources as the Secretary of State shall specify".

It is left entirely to the Secretary of State to decide whether other people in this category could well argue for the protection of long-term contracts. Contracts are at the heart of this matter. That was stated in a government publication, which I shall not quote again because I quoted it on the second day of Committee stage. Having decided to go down this road, I am unclear why the Government are not prepared to recognise that long-term contracts are the best way of securing their renewables objectives. I beg to move.

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