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Baroness Byford: My Lords, I rise briefly to support the amendment. At various stages of the Bill's passage through the House we have discussed the whole future of renewables--particularly biomass and the adaptation of non-food crops. I do not believe that the Minister disagrees with us. I think he accepts that it is not a short-term job and that it needs long-term planning and investment. The people working in this field with whom I have had conversations feel strongly that they would like to have more government support. If the Minister does not accept the logic
behind the amendment, perhaps he will explain to the House how, without such commitments, he sees the development of renewables in the future.
Baroness Sharp of Guildford: My Lords, the amendment has the support of the Liberal Democrats. It picks up the arguments which I put forward in respect of the previous amendment. I refer to the need for long-term planning and long-term contracts. I thoroughly endorse what the noble Lord, Lord Jenkin, and the noble Baroness, Lady Byford, have said on that issue. In relation to biomass, we should also bear in mind that agriculture is going through a major crisis and that it is looking for areas into which it can diversify. Biomass is an important area into which it can diversify.
Lord McIntosh of Haringey: My Lords, I fear that this amendment runs into exactly the same objections as did similar amendments which we debated in Committee and on Report. We do not accept that we should retain a feature of the old non-fossil fuel obligation mechanism--government-mandated long-term renewable supply contracts. That runs contrary to the entire thrust of the Government's market-based policy for the new renewables obligation.
I have to point out that the amendment is unworkable and could be perverse in its effects. No order can ensure that contracts entered into are suitable for use as security for a loan. Requiring indexation of the price paid runs directly counter to the objective of bringing down the price of renewables energy in real terms, so that it is genuinely competitive with energy from other sources. After all the debate we have had on renewable energy, I am astonished that any noble Lord opposite could think that it is possible to have a renewables policy which relies on indexation of the price of renewable energy. Surely, the only way practically that we shall get an increase in the amount of renewables used is by bringing down the price. I am astonished to find the noble Lord, Lord Jenkin, proposing government interference in the terms of contracts between consenting parties. I am sure that the noble Lord's Front Bench cannot possibly agree with that part of the amendment.
Perhaps I may repeat our position on the underlying issue, which is whether the new obligations as planned by the Government will in fact deliver sufficient investment in renewables to meet the Government's renewables targets. The noble Baroness, Lady Sharp, addressed that point. 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. So the Government are putting in place 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 of buy-out receipts.
Renewable energy resources are limited. They are not always available to meet potential demand. The rate at which they can be deployed is limited. The Government are 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.
If we are moving to a market-based approach, the matter of individual contracts and the choice of technologies to meet the supply obligation are surely matters properly left for negotiation between generators and suppliers. I should not have to say that--to the Conservative Party at any rate. Having said that, I would repeat that the obligation on suppliers will be a long-term obligation. Any supplier with any sense, facing a long-term obligation, will negotiate a long-term contract to fulfil it. There is no need, even if it were a practical option, which it is not, to make the kind of provisions included in the amendment.
Lord Jenkin of Roding: My Lords, I believe that the Minister has done rather better in his response to this amendment. The arguments he has deployed seem to have some force. However, without wishing to repeat myself, the fact is that the entire system is essentially an interference with the market and so it is not unreasonable to suggest that that interference might be extended.
However, the Minister has made a strong case and I take entirely his point as regards the indexation clause. It would be wrong to press the amendment to a Division. Given that, I am extremely grateful to all noble Lords who have supported it.
The Minister's speech will be studied with interest by all those who are involved in this area. I hope that it will provide them with some reassurance. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4.30 p.m.
Clause 65 [Alternative way of discharging renewables obligation: payments]:
Lord Jenkin of Roding moved Amendment No. 8:
- Page 68, line 9, at end insert--
The noble Lord said: My Lords, I rise to move the amendment standing in my name and that of my noble friend Lady Byford, the noble Lord, Lord Ezra, and the noble Baroness, Lady Sharp. We tabled a similar amendment at an earlier stage. The amendment seeks to reflect the undoubted fact that different sources of renewable electricity are at different stages of development. Some will require a great deal more development expenditure than others and therefore the costs involved may well be substantially
This subject was covered at some length in the report of the Royal Commission. The report contains an interesting table detailing the DTI's own classification of the likely timescales over which new and renewable energy technologies will become available. In the medium term, certain biomass residues, offshore wind and energy crops will be developed. In the longer term, technologies such as fuel cells, photovoltaics and wave power will come on stream. In the very long term we shall see technologies such as tidal barrages.
However, the Bill does not recognise differing scales of development at all. The cap on the buy-out price is to be a flat rate cap on everything. The Royal Commission very properly voiced the anxieties of what will be the effects. In paragraph 7.112, after welcoming the introduction of the scheme to replace the NFFO and supporting the general approach of the Government, it stated:
By suggesting that a differential price cap should be introduced on the buy-out price, the intention behind the amendment is to reflect that proposition. As we have discussed previously, the price cap is there primarily to protect consumers. However, as one renewables generator recently commented rather sharply to me, "The Government has got to make up its mind. Does it want to protect consumers or does it want renewable energy? The chances are that it probably cannot have both".
If the Government are putting the protection of consumers at the top of their priorities in this part of the Bill, they may well find that they will not meet their renewables targets. The amendment seeks to give them the opportunity to put that right. I beg to move.
Baroness Byford: My Lords, I support the arguments put forward by my noble friend in moving this amendment. I believe that the targets on renewable energy sources are a matter of great concern to Members on all sides of the House rather than only those on these Benches. If we do not take care, those targets will not be met. Whatever can be done in the Bill to help to achieve those aims will be greatly appreciated by many, both within and outside of this House.
Lord McIntosh of Haringey: My Lords, the short answer to the challenge set by the noble Lord, Lord Jenkin, is that consumers have an interest in renewable energy sources because those consumers are both present and future consumers. Unless real progress is made towards the achievement of our targets on
I must repeat what I have said at earlier stages of the Bill: this amendment is unnecessary. The fact that the Secretary of State was contemplating setting different buy-out prices for different technologies would imply of necessity that he was having regard to different costs of different technologies. It cannot mean anything else. By the same token, it is not conceivable that the Secretary of State would set different prices without regard to the implications for the levels of renewables generation likely to be achieved as a result. Again, the Bill as drafted cannot mean anything else. Furthermore, it will not benefit the Bill to have an amendment of this kind added to it.
Unless there should be any doubt about this matter, perhaps I may set out again our thinking on how our support for the new technologies is going to work. I believe that it is generally agreed that as electricity suppliers move towards the 10 per cent target they are likely to find that the supply of cheaper renewables may run out or will not be available in sufficient quantities to achieve the more demanding targets. The suppliers will look increasingly towards more expensive sources of renewable energy--for example, offshore wind and energy crops--to meet their obligations. Those energy sources cannot be brought in overnight. In their own interests, it would be prudent and sensible for electricity suppliers to look ahead now to ensure that such technologies will be brought forward on a timescale and in sufficient quantities to meet their needs. The suggestion behind the amendment is that price bands should be used to achieve that. I should point out that the legislation does not rule out the use of price bands. However, we have no current intention to put them to use. If we did, then we could use the existing provisions of the Bill without having to make further provision along the lines suggested in the amendment.
I am not unsympathetic to the intentions that lie behind the amendment, but the Bill very adequately provides the basis on which electricity suppliers themselves will be urged and, if necessary, even forced towards the objectives so eagerly sought by the noble Lord, Lord Jenkin, and indeed by the Government.
("( ) The Secretary of State shall have regard both to the costs of production of differing sources of renewable electricity and to the implications for fulfilment of the renewables target when setting the differing sums which are to be regarded as discharging the renewables obligation under this section.").
"We are concerned however that, because all generating plants using renewable energy will be competing against each other on price, there will not necessarily be sufficient support for those technologies which have the greatest long-term potential but may be more expensive at present. The experience under NFFO illustrates what we see as the danger".
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