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Lord Tombs: My Lords, before the Minister replies, perhaps I may refer to his comment that it is difficult to tax or to apply obligations to overseas-owned companies. Does he accept that in the electricity renewables obligation we do just that with French, German and American-owned companies operating in this country?

Lord Whitty: My Lords, yes, that is so when we are dealing with a limited number of suppliers and a limited number of channels into the electricity supply system whereas this obligation as drafted in the amendment would apply to a wide range of fuels. Therefore, it increases the complexity. I do not say that there is not a way round it but it is an important increase in the practical objections to the amendment.

On my noble friend's suggestion, I am sure that my colleagues and I would be prepared to talk to noble Lords and others about this area. However, I do not think that we shall reach a definitive conclusion in time for the process within this House, and probably not the process within another place. We already have a date for Third Reading. In view of progress today, it may or may not be met. Nevertheless, it is not far off. We need to ensure that we have genuine consultation, without the Government having made up their mind. I am open to discussing any alternative amendment that the noble Lord, Lord Carter, or anyone else, brings forward. But anything which appears to drive the

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Government to one conclusion on this matter would be somewhat difficult. With that qualification, I shall be happy to talk to anybody.

Lord Ezra: My Lords, I thank all noble Lords who have taken part in the debate, including the Minister. All seem to be in favour of doing something along these lines. There has not yet been consultation on the directive, the results of which could lead to a conclusion on how the directive was to be carried out. This could take some time.

None the less, before the Bill leaves this House it would surely be helpful if it made some provision on this important issue on which we have had two fairly lengthy debates. I am glad that the noble Lord, Lord Carter, supported by the noble Baroness, Lady Byford, put forward the suggestion about a more flexible amendment. The Minister was not sure about the timing. None the less, his response was that his door was open; he was ready to talk. I suggest, therefore, that we arrange a meeting between interested Peers and the Minister to devise an amendment—it can be brought forward at the next stage—which will not tie down the Government too much but which emphasises the importance which we all attach to this important issue. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Ezra moved Amendment No. 195B:

    After Clause 109, insert the following new clause—


(1) For the purposes of promoting and developing the use of new and renewable energy sources, the Secretary of State shall within twelve months of the passing of this Act publish a strategy for microgeneration ("the strategy").
(2) In drawing up the strategy or any revision of the strategy the Secretary of State shall consider the role of microgeneration in—
(a) reducing the emission of carbon dioxide,
(b) alleviating fuel poverty,
(c) reducing the need for reinforcement of electricity networks, and
(d) ensuring security of supply of electricity.
(3) In preparing the strategy or any revision of the strategy the Secretary of State shall consult such persons as in his opinions of producers of energy by means of microgeneration.
(4) The strategy shall include such targets for the generation of energy by microgeneration as in the opinion of the Secretary of State are practicable and cost effective.
(5) It shall be the duty of the Secretary of State to take reasonable steps to—
(a) implement the strategy, and
(b) ensure that any targets included in the strategy are met.
(6) The Secretary of State may from time to time revise the strategy and any revised strategy may set new targets for the generation of energy by microgeneration and it shall be the duty of the Secretary of State to take reasonable steps to—
(a) implement the revised strategy, and
(b) ensure that any targets included in the revised strategy are met.

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(7) In this section the following terms shall have the following meanings—
"new and renewable energy sources" means sources of production of energy from or by means of—
(a) wind power,
(b) solar power,
(c) ground source heat,
(d) micro combined heat and power systems,
(e) micro hydro power, and
(f) other low or zero carbon sources;
"microgeneration" means generation of energy by means of equipment installed in, or for use by, a single unit or a small number of units of residential accommodation or office accommodation."

The noble Lord said: My Lords, Amendment No. 195B deals with a strategy for microgeneration. I declare an interest in the subject as I did in Grand Committee. I am interested in particular in the promotion of small-scale generation of electricity.

I emphasise that those who are involved in microgeneration were extremely pleased that the Chancellor mentioned in the recent Budget that it was intended to reduce the rate of VAT on microgeneration equipment from 2005 onwards subject to current tests being carried out successfully. This is an important step forward.

We consider that it should be complemented by another step: to devise a strategy for microgeneration development. When I moved a similar amendment in Grand Committee, the Minister said that he thought it unnecessary because the subject of microgeneration was being dealt with in a number of other ways. My response was that while that is no doubt the fact, it would be helpful if all these strands could be brought together in one document. It would help to focus attention. It would help to achieve what the Government attach great importance to; namely, to increase domestic energy efficiency.

This equipment will be available towards the end of this year and during next year. The sale of increasing quantities of the equipment will help to achieve not only a great increase in energy efficiency in the home—it will enable electricity as well as heat to be produced—but will also contribute to a reduction in CO2 emissions. There is substantial scope for the sale of such equipment in the boiler renewal market. It amounts to about 1 million items per year. So there is a substantial prospect of great improvement in the efficiency of domestic energy consumption through the promotion of this type of equipment.

The Government have already taken one step to promote this concept and I hope that they will be prepared as a second step to devise a strategy for microgeneration which will bring together all that is being done elsewhere, focus attention on the issue and enable us to go forward on the twin planks of government energy policy: to increase energy efficiency, in particular in the domestic market; and to reduce emissions. This development would help to achieve both objectives. I beg to move.

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Lord Jenkin of Roding: My Lords, I added my name to the amendment because it seemed to epitomise what should flow from the final break-up of the Central Electricity Generating Board. So long as the CEGB was the primary producer of electricity, it was bound to consist of only large plants and huge transmissions lines, with the distribution that we know. Now that has gone. We are operating in a much freer market. There are opportunities for new technologies of exactly the kind the noble Lord, Lord Ezra, described in order to diversify the supply of electricity in this country.

I believe that that is right. It needs to be a focused strategy. That is what the amendment seeks. That is why I was happy to put my name to it.

7.15 p.m.

Baroness Miller of Hendon: My Lords, regrettably, time is running out. It was not helped by having two Statements. My noble friend Lord Jenkin and I were delighted to put our name to this important amendment.

Noble Lords may remember that in Amendment No. 2 on Clause 1 on Report we included microgeneration in the many matters on which the Government are required to report annually. The amendment has been so well moved by the noble Lord, Lord Ezra, and supported by my noble friend that I need do no more than indicate my support.

Lord Whitty: My Lords, the noble Baroness is correct. Slightly against my advice, the House passed an amendment requiring us to report on a number of matters including microgeneration. Therefore, in a sense the first part of the amendment is already on the face of the Bill as it will leave this House.

The second part deals with setting a target for microgeneration and a strategy for ensuring that targets are met. I am strongly in favour of the technologies of microgeneration of all kinds. They can contribute towards achieving targets for renewables and CHP, and the overall target for cutting CO2 emissions. That is why we have done a number of different things; I shall not go over all of them again.

That is why we allowed the contribution of CHP to be reflected in talking about annual output and annual export declarations. We have established the Distributed Generation Co-ordination Group, included research for microgeneration and micro-CHP, and so forth. The Chancellor referred to micro-CHP and a possible VAT reduction, which is subject to effective validation. Therefore, one can see that there is a whole range of support.

If, in addition to the broader objectives to which microgeneration will make a contribution, we want to impose a separate strategy, that will probably confuse the issue too far. We have a strategy for CHP to which micro-CHP will contribute. We have a strategy for

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carbon reduction more generally. I do not see the need for a "micro-strategy" to be set up as an alternative or separate strand. However, microgeneration—embedded generation of all sorts—will make a major contribution to the achievement of all our targets. But I cannot accept the second part of the amendment.

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