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House of Lords

Friday, 13 June 2008.

The House met at ten o'clock: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of St Albans.

Planning and Energy Bill

Lord Hanningfield: My Lords, I beg to move that this Bill be now read a second time.

This might be a short Bill, but it is an important one. Its aim is to enshrine in law the so-called “Merton rule”. It was taken through the other place by my honourable friend Michael Fallon. We are pleased that we are going to have a maiden speech today from the noble Lord, Lord Mogg, who is, I gather, quite an expert in this field. We look forward to hearing him later today.

In 2003 the London Borough of Merton amended its local planning framework to require that, for new developments, at least 10 per cent of the energy required must come from renewable or low-carbon sources generated on site or nearby. About 100 councils have either introduced the Merton rule or are in the process of doing so. The Bill will give Merton-style policies statutory protection. It will permit, but not require, any council to specify that developers should use a small amount of energy from local, renewable resources. It is permissive, localist and green.

Most people now agree that climate change is a serious threat and action is needed. Even those who disagree with the science will surely support efforts to reduce our dependence on foreign oil and gas. Electricity generation accounts for about a third of the UK’s total carbon emissions. Only 4 per cent of our electricity comes from renewable sources. The Government say they hope to increase that to 20 per cent by 2020, but it is difficult to see how that will be achieved. If we are to meet these challenges, it cannot just be a matter for central government. Local authorities must be empowered to act too.

Electricity cannot be stored in any great quantity and about 5 per cent of it is lost through the distribution system. Clearly, it makes sense to produce electricity as close as possible to where it is needed. However, there are many barriers to doing that. Councils are unsure of the legality of introducing their own versions of the Merton rule. Last year’s energy White Paper said that,

The Bill seeks to remove those barriers and ensure that at least a small proportion of the electricity needed by new homes is produced locally. If we can increase demand for renewable electricity technology, innovation will increase and costs will fall. Councils will also be encouraged to emulate and compete with one another to set new standards for energy efficiency.

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The Government’s approach to the issue has been slightly confused. They first backed the Merton approach, then withdrew their support in the face of opposition from some housebuilders, and then finally agreed to incorporate it into central planning guidance last year. They opposed the Second Reading of this Bill in the other place but did not actually vote against it, so I hope the Minister will clarify that today. The Government have argued that this legislation is unnecessary due to planning policy guidance that they have already introduced and other legislation that is being produced. That, however, is not the case. Their Planning Bill will make developers consider climate change measures but does not go into the detail of microgeneration. Planning guidance is a step in the right direction but will not have the same power as this Bill.

The Bill is also important because it will enable councils to act quickly, without waiting months or even years for other legislation to come into effect. The Government want to build 3 million new homes by 2020. About 40,000 new homes are being built every quarter. There is a bit of a temporary hitch with the economic situation at the moment, but, if the targets are going to be achieved, these are the sorts of numbers that will be involved. We want as many of those as possible to include some degree of local power generation. The Bill will give councils the certainty and clarity to act now.

I emphasise that no compulsion is involved here. The crucial word in Clause 1 is “may”. The Bill will not force any council to introduce new regulations or policies against its wishes. Only new developments will be affected. The Bill frees councils to set their own policies to match their own circumstances. A local authority in a windy area, for example, would be free to set wind energy standards different from those set elsewhere. The Prime Minister himself has said that,

That is exactly what the Bill will do. We are not creating red tape but removing the barriers to letting local authorities do what is needed.

Merton Council says that no developer has ever had a problem meeting the rule’s requirements. In every year since it introduced its 10 per cent rule, the total number of new houses there has exceeded the target set by the Greater London Authority. Developers will be consulted when local rules are drawn up and Ministers will have the power to approve local development plans. The British Property Federation, which represents the UK property industry, has said its concerns have been dealt with “very satisfactorily and constructively”, and it supports the Bill.

The Bill has cross-party support. Two former Labour Environment Ministers sponsored it in the Commons, as did a former Secretary of State for the Environment in my party. An Early Day Motion supporting this type of legislation was signed by more than 300 MPs last year. The Local Government Association supports the Bill, the energy industry supports it and environmental groups support it. Even the Minister charged with speaking on the Bill in the other place said that he supported the “intent, manner and sentiment” of the Bill and agreed that local councils should be given the lead in promoting renewable electricity generation.

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The question being answered is clear: do we continue to depend on ever more detailed guidance from central government, or do we let councils set their own targets based on what they think is best for their areas? Energy efficiency and local generation are essential parts of our solution to the problems of climate change and energy independence. Local authorities should be empowered to deliver this. I urge noble Lords to back the Bill. I commend it to the House.

Moved, That the Bill be now read a second time.—(Lord Hanningfield.)

10.12 am

Lord Judd: My Lords, the Bill covers some very important ground. If the noble Lord, Lord Hanningfield, will forgive my saying so, I think that he has got his timing wrong because it would have been much better to look at the necessity for such a Bill after we had had our deliberations on the Planning Bill, for which we are all waiting. The Bill leaves many issues unresolved. It spells out some important principles, but there are a number of issues which are the real challenge.

I like the ethos behind the Bill. As a society, we have been historically spoilt and misled. We have become very dependent on the national grid. There is an interesting argument that the national grid is an obstacle to building up social responsibility for energy and the provision of alternative energy because people have got into a deep culture of simply switching on the light and somehow or other the power will be available. We have to bring people closer to their personal responsibilities. I always feel—I hope that it is not to make too light of it—that we ought to live by example here. I am quite shocked when I walk around in the evenings and see how many lights have been casually left on by colleagues in their offices. I have become a little neurotic about turning off the lights and the stand-by on our television in our office. We have to bring society much closer to its responsibilities. Local democracy has an important part to play in that, and, in that sense, the noble Lord has brought up an important issue.

We have to take other considerations very seriously. Have we learnt from the industrial revolution? With the benefit of hindsight, we can see that the ruination of our countryside—some of our loveliest valleys and other environments—could have been avoided even then if we had had the benefit of hindsight. It is imperative that we increase the supply of alternative energy. It is not just something that we ought or would like to do, but an imperative which should be among the priorities of every government department. However, in the rush to do that, will we repeat the avoidable mistakes of the industrial revolution? We want the energy because we want a society that is worth living in. Therefore, there ought to be imperatives in whatever we do about planning and alternative energy: imperatives for aesthetic conditions to be high among the commitments and requirements of those involved.

Social issues, too, are involved, because so often in schemes of this kind the articulate middle classes can argue off a proposal—“not in our backyard”—and those sections of the population which already have

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most disadvantages environmentally and everywhere else get the projects on their doorstep. There should be a requirement therefore to take seriously into account the social implications of what is being done. It is not a matter simply of the generating plant. We often overlook the infrastructure that becomes necessary even with alternative energy.

We will need to give more specific guidance than is provided in the Bill. The noble Lord would perhaps say that it was more than was appropriate, but I suggest that the Bill is good on principle but weak on the detail of how it is to be handled. We need more specific guidance on what we mean by alternative energy. What is lacking—my point relates to what I said about the national grid—is a recognition that small communities and hamlets such as that in which I live might be encouraged to think about how they work together to get a solution. I have in mind schemes not just for individual families or households but the hamlet as a whole. For example, great advances in modern technology mean that one now needs less water to generate power, although I understand that one needs consistent supplies. More specific arrangements for encouraging small communities to work together in finding local solutions ought to be built into legislation.

There is a range of other possibilities. We never take seriously enough in our considerations the contribution of geothermal heat. I am not a scientist, as will become obvious from my remarks, but there seems to be some confusion about it. Geothermal heat is sometimes marginalised because people say that it does not produce power, but it can make an important background contribution to energy-saving. We do not do enough in our society to encourage the examination of geothermal possibilities in small communities and individual premises. We need more specific guidance and responsibility in that direction.

I have been disturbed of late by a case not far from where I live. A consultancy firm was given a brief to produce a plan for alternative energy for what was seen as a deficit in our area. It produced a scheme for a gigantic wind farm in a very beautiful setting. When people asked whether it was really necessary to have a wind farm there and asked what was the aesthetic and social cost—and this was not in my backyard, I might say—the response was that the terms of reference for the consultancy were specifically on wind power. The firm was given no terms of reference that permitted it, in its consultancy, to look at other possibilities. I live in Cumbria where, at an earlier stage of our social and economic history, there were lots of interesting water projects for providing power to industry. Why is a firm that is given a remit of that kind not given the task of asking about the alternatives and the range of possibilities that could be undertaken? Why was it given no alternative other than to go in and ruin the setting, because that was the only means to meet the energy deficit?

In saying all that, I emphasise that I take second place to nobody in the priority and urgency of producing alternative energy. I do not belong to the no-wind-farm ideology, which is very foolish—particularly when it comes up with the theory that anyway wind farms do not produce that much energy. If we are talking seriously about alternative energy, it will be an aggregate of

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projects producing very modest amounts of energy. But in saying that this is an overriding priority, let us get the context right with regard to the wider social responsibility, including aesthetic and social values. We should not, in the rush for energy, which we must have, go and ruin the society for which we are trying to produce energy.

10.22 am

Lord Mogg: My Lords, I had not intended to address the House so soon after the gracious welcome that I was given last week, but the opportunity to contribute to this debate was simply too tempting. I am not sure whether the kind remarks from the noble Lord, Lord Hanningfield, are sufficiently accurate in describing me as an expert, but I shall make a few remarks which I hope will relate to the issue.

In time, I hope not to confine myself to energy and to contribute more widely to the work of the House, principally in three other areas. First, I hope to contribute on the European Union, as I have spent many years toiling in the vineyards of European issues, mainly on financial services and the internal market; secondly, on higher education, as I am the proud chairman of governors at the University of Brighton; and, thirdly, on broader general regulatory domains from my past experience.

Giving one’s maiden speech, as I suspect most noble Lords will recall, is a somewhat daunting task, despite the gentle charm and undeserved graciousness in my own respect with which noble Lords will receive it—or, at least, I hope that will be the case. The omens for today are not so good, and Friday the 13th is not an auspicious day on which to start. An earlier request that I made to a cab driver to deliver me from Victoria to the Lords resulted in my belated realisation, half way up Park Lane, that cricket rather than politics was uppermost in his mind.

As I stand here, I recall a Woody Allen remark which I shall adapt to avoid its more morbid overtones and which accurately reflects my feelings. Woody declared himself unafraid to die—in my case to speak—noting that the point was that he just did not want to be there when it happened. But I am here, and I should therefore turn to the Bill under discussion.

I was much impressed by the remarks of the noble Lord, Lord Judd. I cannot say that I agreed entirely with him, but in my uncontentious contribution I shall step aside from making remarks that he would wish to hear from me in my professional capacity. The House does not need me to spell out the challenges that we face; indeed, the noble Lord, Lord Hanningfield, referred to them. Establishing 30 to 35 gigawatts of new electrical generating capacity in the very short space of 12 years, against the extremely demanding targets that have been set at EU and national level, will be formidable. The drive towards securing low-carbon energy sources is a background for this, and other backgrounds are concerns about the security of supply, the economic and political difficulties and whether there is the investment will to establish these developments.

There is no one single bullet that will achieve such objectives. We must find ways in which to invest to develop many different energy sources. The noble

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Lord, Lord Judd, referred to microgeneration, distributed energy—which is the central point of the Bill—biofuels, wind power, tidal wave power and all sorts, along with the more conventional forms, if nuclear can be called conventional. It may be useful to mention to the House the current distributed energy picture. About 10 per cent of GB’s electricity supply, 10 gigawatts, is already provided from distributed energy, but the essential difference, and the reason for this Bill, is that most of that is for on-site, single-generation plants for large commercial and industrial usage. Most will not require licensing because they neither generate, nor distribute, nor supply. What is clearly missing is the contribution of the smaller, local community distributed energy generation.

The debate at national level, as noble Lords have said, is already extensive, as it is at EU level. As chairman of the European energy regulators committees, I have a deep involvement in that. Although more modest in scope and indeed in its length—which is a welcome point for this House to note—the present Bill neatly combines in its Short Title both the other big brothers that accompany it on its route. I refer to the Energy Bill and the Planning Bill. One might think that both could be tucked into this Bill.

As chairman of the British energy regulator, conventionally known as Ofgem, I readily acknowledge the important place that this Bill plays in the broader regulatory mosaic of our emerging energy policy. It would help to deliver and ease the passage for the delivery of the very challenging targets that have been set at the various levels. Its approach aligns well with the Government’s planning policy statement on climate change and with our own work, to which I shall briefly refer in the concluding part of my intervention. It anticipates the renewable energy strategy that the Government are apparently to make in a few weeks’ time.

The Bill will help to pave the way for local authorities to set reasonable requirements for energy use and efficiency in local plans, as the noble Lord said that in his opening remarks. An important word is “reasonable”—and it must be within the context of the overall national plan. The Bill should open the way and stimulate the development of community energy schemes. Since the use of distributed energy can be seen as an increasing part of this supply mosaic, I support the proposal.

It is an enabling measure, “necessary but not sufficient”, in the words of every well known civil servant. I shall mention a few other arrangements that will also contribute to the adaptation of our current policy framework, to greater and more extensive use of distributed energy schemes at local level. Indeed, I could have bored noble Lords to tears if I had spent my whole speech simply going through the titles of all the activity involved in renewable energy and investments at a European and national level, but I saved them that treat because it is the 13th of the month.

Ofgem has been exploring how to ease the costs of removing the complex administrative and practical difficulties of launching the scheme without, importantly, reducing the protection to consumers that is offered by our present legal regime, mostly through the licensing

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arrangements that we operate in the regulatory authority. I anticipate an early announcement of our conclusions, but they have been extensively consulted on, and the conclusions that have been reached will come as no surprise to those who have followed this debate.

It is quite clear that we have to dismantle as many of the obstacles to entry for these schemes. If, as I hope, the Bill is used to stimulate interest, and to develop and make approaches within the broad confines of local authority plans, new schemes could well come forward, but it is not helpful if those schemes are stopped at the gate by complexity or costs. Within our discussions we found ways of tackling the present onerous and costly requirements that were designed for a past age. Indeed, the noble Lord, Lord Judd, referred to the past and the way in which our grid needs to be adapted and the whole distribution system examined. Energy is changing in its use, scarcity and costs. It may be that price levels will determine a greater interest in energy efficiency than any of the measures that we devise ourselves.

While we importantly maintain the protection offered to consumers—an issue that we do not want to address by removing the safeguards in the Bill—we believe that we have developed an overall approach that will be supported by those whom we have consulted, including, most relevantly in this House, the London Climate Change Agency.

The Bill opens the way to translate local authorities’ commitment to sustainable development and carbon reduction policies into practical community schemes. It allows them to impose reasonable requirements in their plans so that local renewable resources can be tapped into. It allows a practical translation of low- carbon policies at local level into reality. It reinforces the vital need for energy efficiency standards to be applied to their developments. The Bill therefore has my full support.

10.32 am

Baroness Hamwee: My Lords, I have the privilege of congratulating the noble Lord, Lord Mogg, on behalf of the whole House, and I do so warmly. His toiling in the vineyards culminated in 10 years as director-general of DGXV, later DG Internal Market. Retirement, although it does not look like retirement to me, brings him chairmanship of Ofgem and membership of the High Level Group on Competitiveness, Energy and the Environment at the European Commission. I wrote down that the Bill was tailor-made for him; probably he is tailor-made for the Bill. I hope that he feels happier now. Woody Allen is never happy, but I hope that the noble Lord feels happier about being here, because we are very glad that he is here.

I thank the noble Lord, Lord Hanningfield, and welcome the Bill, which we on these Benches support. It is, as he said, a short Bill on a fast-moving subject—fast-moving agenda is probably the jargon. I very much enjoyed, as well as the maiden speech, that of the noble Lord, Lord Judd, with his thoughtful comments on infrastructure and resources, including water, among many other interesting aspects.

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The Merton rule that is permitted by the Bill will not necessarily follow the Merton percentage of 10 per cent. I checked with my own authority of Richmond upon Thames, which is already on 10 per cent but moving soon to 20 per cent and reducing the threshold of the number and size of developments at which the rule will bite. I discovered yesterday that planning consent for the expansion of a supermarket in my local shopping centre has been conditioned to make those concerned, as the council says,

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