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27: Clause 37, page 33, line 37, at end insert—

“( ) For the purposes of the definition of “the relevant part of Great Britain”, the territorial sea adjacent to England is the territorial sea adjacent to the United Kingdom, other than the territorial sea adjacent to Scotland, Wales or Northern Ireland.

( ) An Order in Council under section 126(2) of the Scotland Act 1998 (c. 46) (apportionment of sea areas) has effect for the purposes of this section and sections 32 to 32L if, or to the extent that, the Order is expressed to apply—

(a) by virtue of this subsection, for those purposes, or

(b) if no provision has been made by virtue of paragraph (a), for the general or residual purposes of that Act.

( ) An order or Order in Council made under or by virtue of section 158(3) or (4) of the Government of Wales Act 2006 (apportionment of sea areas) has effect for the purposes of this section if, or to the extent that, the order or Order in Council is expressed to apply—

(a) by virtue of this subsection, for those purposes, or

(b) if no provision has been made by virtue of paragraph (a), for the general or residual purposes of that Act.

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( ) An Order in Council under section 98(8) of the Northern Ireland Act 1998 (c. 46) (apportionment of sea areas) has effect for the purposes of this section if, or to the extent that, the Order is expressed to apply—

(a) by virtue of this subsection, for those purposes, or

(b) if no provision has been made by virtue of paragraph (a), for the general or residual purposes of that Act.”

28: Clause 37, page 33, line 41, at end insert—

“( ) to customers in the relevant part of Great Britain;”

On Question, amendments agreed to.

Lord Hunt of Kings Heath moved Amendment No. 29:

29: After Clause 40, insert the following new Clause—

“Feed-in tariffs: electricity

(1) The Secretary of State may modify—

(a) a condition of a particular licence under section 6(1)(c) or (d) of the Electricity Act 1989 (c. 29) (distribution and supply licences);

(b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act;

(c) a document maintained in accordance with the conditions of licences under section 6(1) of that Act, or an agreement that gives effect to a document so maintained.

(2) The Secretary of State may exercise the power in subsection (1) for the purpose only of—

(a) establishing, or making arrangements for the administration of, a scheme of financial incentives to encourage small-scale low-carbon generation of electricity;

(b) requiring or enabling the holder of a distribution licence to make arrangements for the distribution of electricity generated by small-scale low-carbon generation;

(c) requiring the holder of a licence to make arrangements related to the matters mentioned in paragraph (a) or (b).

(3) Modifications made by virtue of subsection (1) may include—

(a) provision requiring the holder of a supply licence to make a payment to a small-scale low-carbon generator, or to the Authority for onward payment to such a generator, in specified circumstances;

(b) provision specifying how a payment under paragraph (a) is to be calculated;

(c) provision for the level of payment under paragraph (a) to decrease year by year in accordance with a formula published, or to be published, by the Secretary of State;

(d) provision about the circumstances in which no payment, or a reduced payment, may be made to a small-scale low-carbon generator;

(e) provision about the circumstances in which a payment may be recovered from a small-scale low-carbon generator;

(f) a requirement for the holder of a supply licence or distribution licence to pay a levy to the Authority at specified times;

(g) provision specifying how a levy under paragraph (f) is to be calculated (which may require specified matters to be determined by the Authority or the Secretary of State);

(h) provision conferring an entitlement on the holder of a supply licence or distribution licence to receive a payment from the Authority.

(4) In this section—

“Authority” means the Gas and Electricity Markets Authority;

“distribution licence” means a licence under section 6(1)(c) of the Electricity Act 1989 (c. 29);

“owner”, in relation to any plant which is the subject of a hire purchase agreement, a conditional sale agreement or any agreement of a similar nature, means the person in possession of the plant under that agreement;

“plant” includes any equipment, apparatus or appliance;

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“small-scale low-carbon generation” means the use, for the generation of electricity, of any plant—

(a) which, in generating electricity, relies wholly or mainly on a source of energy or a technology mentioned in subsection (5), and

(b) the capacity of which to generate electricity does not exceed the specified maximum capacity;

“small-scale low-carbon generator” means an owner of plant used or intended to be used for small-scale low-carbon generation, whether or not the person is also operating or intending to operate the plant;

“specified maximum capacity” means the capacity specified by the Secretary of State by order, which must not exceed 3 megawatts;

“supply licence” means a licence under section 6(1)(d) of the Electricity Act 1989 (c. 29).

(5) The sources of energy and technologies are—

(a) biomass;

(b) biofuels;

(c) fuel cells;

(d) photovoltaics;

(e) water (including waves and tides);

(f) wind;

(g) solar power;

(h) geothermal sources;

(i) combined heat and power systems with an electrical capacity of 50 kilowatts or less.

(6) The Secretary of State may by order modify the list of sources of energy and technologies for the time being listed in subsection (5).

(7) The power conferred by subsection (1)—

(a) may be exercised generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as specified conditions are satisfied);

(b) may be exercised differently in different cases or circumstances;

(c) includes a power to make incidental, supplemental, consequential or transitional modifications.

(8) Provision included in a licence by virtue of that power—

(a) need not relate to the activities authorised by the licence;

(b) may make different provision for different cases.”

The noble Lord said: My Lords, I am grateful for the opportunity to discuss with noble Lords this group of amendments on the important issue of feed-in tariffs. I announced on Report that we would be bringing forward these amendments and it has been helpful to have input from noble Lords on whether they think that we have got the matter right. We have had to prepare the new clauses at short notice. As a result, we have had to adopt a broad approach, as that was the only way in which we could prepare the amendments in the time available and be confident that they will be sufficiently flexible to allow us to deliver the policy that we all want.

We are fully committed to introducing a tailor-made scheme to financially support small-scale low-carbon generation of electricity. Our intention is that generators will receive a guaranteed payment for generating electricity. We know that different technologies of different sizes will require different rates of payment, and we believe that the provisions in subsection (3)(a) and (b) will allow for this to happen. Cost reductions are encouraged by decreasing the rates of reward, year on year, for new installations, and this is covered by subsection (3)(c).

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However, we also need flexibility to allow us to deliver incentives differently in some situations if the evidence supports it. For example, we may decide that for some scales of generation we need the option of deeming generation from a given installation and then making payment upfront. Subsections (3)(a) and (b) allows for this. I accept that the powers are broad, but until we have completed the work to determine how the scheme might operate we need to ensure that we have sufficient flexibility in primary legislation to be confident that we have not inadvertently closed down options.

Let me give a brief outline of the powers we are proposing. The clause gives the Secretary of State the power to modify electricity supply and distribution licences as well as standard conditions and some documents and to introduce a scheme of financial incentives to encourage small-scale low-carbon generation of electricity. Modifying licences would allow us to piggy-back on the existing electricity licensing framework and to tap into the enforcement and other provisions that already govern the electricity market. Building on the existing framework will dramatically reduce the risk that we inadvertently miss out important elements of that framework. Modifications may include requiring supply licence holders to make payments to small-scale low-carbon generators, either directly or via Ofgem; specifying how such payment is calculated; and imposing a levy on supply or distribution licence holders in order to fund the scheme.

A number of amendments seeking further clarity on how the scheme will operate have been tabled and I shall respond to them at the appropriate time. However, by way of introduction to the general debate, perhaps I should say that the amendment sets an absolute upper capacity cap of three megawatts beneath which the Secretary of State will have the power to set the maximum capacity limit for small-scale low-carbon feed-in tariffs by order. Under this power we have the flexibility to give different levels of reward for different technologies in setting the tariff payments. There are amendments on the upper-capacity limit which take a rather different view and I shall respond to them at the appropriate moment. Other amendments deal with the procedure for amending licence conditions and other supplemental issues. Again, I shall come to those later.

In broad terms this is an appropriate response to the arguments that have been made both here and in the other place, and the announcements that my right honourable friend the Secretary of State and I have made on it have been warmly welcomed. I accept that many details still have to be worked out, which is why there is flexibility in the amendment. Equally, I assure noble Lords that the Government are committed and determined to go down this path. I beg to move.

Baroness Wilcox moved, as an amendment to Amendment No. 29, Amendment No. 30:

30: After Clause 40, line 3, leave out “may” and insert “shall”

The noble Baroness said: My Lords, I thank the Minister for moving Amendment No. 29. Despite the late stage in the proceedings, it is nice to see persuasion and reasoned argument win the day, rather than sheer force of numbers. The government amendment allows

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for the implementation of a feed-in tariff for electricity, which we asked for and was promised by the Minister at Report, so we welcome it. Of course such an important amendment cannot be expected to be added to the Bill without some level of scrutiny, and with the support of many noble Lords around the House I have tabled several amendments in order to explore the Government’s intentions a little further. One of the great disadvantages of tabling complicated amendments at this stage in the Bill is the difficulty of discussing in detail the provisions they contain. My amendments will, I hope, provide the Minister with the opportunity to expand on his opening remarks.

My first amendments, and those of the noble Baroness, Lady Young of Old Scone, deal with the implementation of the feed-in tariff. They replace the word “may” with “shall” and so would insert a duty on, not a power for, the Secretary of State to implement the tariff. Of all the amendments tabled to Amendment No. 29, this is probably the most important. No doubt many of your Lordships have received strong lobbying from outside groups who are concerned that, despite the encouraging words from the Minister and his colleague the Secretary of State, there are many within his party and the Government who are not as convinced as the support for these amendments has forced them to sound. I hope the Minister will be able to give a categorical guarantee that the tariff will be implemented as soon as possible and give us a clear timetable for the steps necessary to reach the rollout point. I beg to move.

Lord Teverson: My Lords, I welcome the Government’s move forward in this area over the period that the Bill has been going through Parliament and particularly through this House. One of the key areas here is ensuring not just that the Government really intend to write the enabling clauses into the Bill and accept the principle but that there really is a commitment to take this forward so that it becomes a practical and implemented part of the Government’s energy policy and we can get on and reap the benefits of it in terms of the renewable energy that is generated on a smaller scale, and households and communities can join in with the project and make it work. That is why I was pleased to put my name to a number of these amendments. I would be interested to hear from the Government some idea of the timescale in which they intend to bring a feed-in tariff into operation.

It was brought to my attention by one of the groups involved in the low-carbon building programme that funds for that will now end in June 2009. I have a question mark there. That programme has been successful and important in terms of microrenewable energy generation, as part of its work. Are we introducing one incentive as we take out another?

Lord Puttnam: My Lords, I was delighted to add my name to this flurry of amendments. I will speak only the once and hope that what I have to say will apply to everything I have added my name to. I woke up this morning, in common with many of your Lordships, to hear a young man tell almost 300 million people, “Yes we can”. It reminded me that if I go back over the 50 years I have been in the commercial world, there has been one common factor: the incumbent will always throw apparently insuperable obstacles in the

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way of those who wish to change the way that anything is done—in this case, we are talking about the microgeneration of power.

4 pm

I was intrigued to hear the Minister say that he does not wish to close down options. I applaud that. We should not close down options by becoming fixated on an upper capacity of 3 megawatts. To make economic sense, one may in some circumstances have to go to 10 megawatts—certainly, I would say, to 5 megawatts. It seems possible that, at 3 megawatts, many perfectly good schemes will be ruled out as being purely uneconomic, and that communities wishing to take advantage of this opportunity to create their own microgeneration schemes, but on a scale of 5 to 10 megawatts, cannot do so because the incumbents do not wish it to be possible. That would be a poor start to an otherwise brilliant and encouraging initiative by the Government. I urge the Government not to become fixated by an upper capacity of 3 megawatts, because, over time, I suspect that very good schemes will be developed that require a significant increase on that cap.

Lord Campbell-Savours: My Lords, I welcome the new clauses. The Bill has been immeasurably improved in the Lords. The amendments are welcome particularly in Woking, a town in Berkshire which has been at the forefront of the introduction of alternative renewable and sustainable energy technology developments. I shall say a few words on the relevance of Woking to the proposed government scheme.

From an environmental perspective, Woking Borough Council is undoubtedly the most energy-efficient and energy-conservation-conscious local authority in the United Kingdom. I advise noble friends to visit Woking to see for themselves this exemplar in the field of green energy technology. The town and its surrounding community should potentially be a major beneficiary of this initiative by the Government through their investment in photovoltaics, which is considerable, and the proposed investment in wind power as and when sites are identified.

I was able during the Recess to visit many of the town’s projects under the auspices of John Thorpe of Thameswey Energy, a British company which has brought together in a joint venture the local authority and ESCO, a Danish company which specialises in green technology. The company is spearheading the national agenda of community-based energy initiatives in every area of energy efficiency, including combined heat and power. The company also provides green-sourced energy to other local authorities, public bodies and the private sector. Its virtual private wire electricity distribution arrangements for local power consumption point the way forward in a way that should interest many local authorities nationally which want to develop their energy efficiency programmes and which, one hopes, will take advantage of the Government’s proposed scheme when it comes on stream.

While I congratulate the Government, I also congratulate Woking on its ability to harness cross-party political support for what can only be described as an outstanding achievement. I only hope that the Minister

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will feel able to join me in paying tribute to those in the town for their work. It is clear from my most recent discussions with those involved in Woking that they believe that feed-in tariffs will give renewed stability in a market that they are constantly developing. Such stability is required if we are to meet our 2020 targets. I say to the Government, well done.

Baroness Young of Old Scone: My Lords, I add my praise to that offered to the Government for coming forward with this amendment on feed-in tariffs, because it is a major breakthrough in circumstances where, for many years, we have seen introduced a series of instruments designed to drive up renewables which simply have not done that at the lower scales. It took us an inordinate amount of time to come to that conclusion. We changed the system a few years ago, and we have begun to see the bigger-scale renewable schemes really start to motor along, which is to be welcomed, but we are still failing on the smaller-scale renewables. The feed-in tariff is therefore to be welcomed and hugely overdue.

The series of amendments that have been tabled in this and subsequent groups are well worth the Government considering, as they might improve the amendment that they have tabled. Amendments Nos. 31, 32, 33 and 35, to which I have put my name, ginger the process up a bit. We are running out of road, as we have the 2020 target to meet for renewables, and we could well fail our obligations under the directive. All the work that has been done by the climate change commission and in previous reports has demonstrated that the early carbon reductions will be the most important ones. It is not hitting the 80 per cent 2050 target but achieving very rapid carbon reduction targets in the early stages that is necessary to prevent us running the risk of some of these irretrievable and irreversible whole-system climate changes.

So well done to the Government, and two cheers. We would give the proposals three cheers if we could get some of our amendments adopted into the Government’s proposals.

Lord O'Neill of Clackmannan: My Lords, I congratulate my noble friends on introducing these amendments. I have been perhaps somewhat less than enthusiastic in every respect about the feed-in tariffs, because there are downsides to them. It is therefore quite reasonable for the Government to embrace the conditional mood and make this a duty rather than a power. It may be that in several years’ time we will have subsequent energy legislation and we will be able to refine it. We will have to return to these issues very quickly for other reasons. If the Long Title of the Bill is sufficiently sensitively drafted, it should be able to embrace amendments of the kind that might be necessary if we want to make an increase from 3 megawatts to 5 megawatts, if there is a desire and demand for that.

What is important is that when we recognise the significance of small-scale developments, it is not just in the generation of power or the saving of the planet; it is also in the case of small wind farms being established on small hill farms, for example, as a means of sustaining the farming business in these small entities. I know

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that in my old parliamentary constituency there were several farms that wanted that little bit of assistance that would have enabled them to have small-scale wind farms, in places such as the Ochils and discrete valleys, where they would not necessarily be offensive to the eye or damaging to bird sanctuaries, and so on. That would make the difference between a farm perhaps failing and a farm being able to continue.

We sometimes forget that there are quite sensible wider economic arguments in favour of renewable power and assisting renewable power. For that purpose, I am very grateful to the Government for how they have responded. It is often said that there is more rejoicing in heaven when a sinner repenteth—and, in this instance, it is perhaps the late repentance that makes it all the more welcome. Nevertheless, we have this provision, which is a start. I understand that one of the basic rules of scrutiny is that when a member of the opposition goes through the Bill and sees a “may” he should insert a “shall” and get a debate. Those are D101 opposition tactics in Committee. Nevertheless, it would be sensible for us not to have to divide on this. Those who legitimately seek scrutiny will get from the Minister the kind of response and positive statement that he gave at the beginning, which was encouraging in itself. I look forward to hearing what he has to say.

Baroness Corston: My Lords, I support noble Lords who have spoken in favour of feed-in tariffs. About five years ago, in my previous residence, my husband and I had solar panels for hot water and photovoltaic panels for generating electricity. I cannot say how excited I was, watching my electricity meter going backwards in the summer when I had the fridge, the freezer and the kettle on. I have to admit that my enthusiasm was positively childlike. In the winter, of course, I used electricity from the generating company because the hours of daylight were shorter. The sums of money that we got from the company were extraordinarily small, and it always struck me that it was doing much better out of this deal than I was. There should be proper recognition of people who are prepared to install microgeneration on their property and who feed amounts of electricity into the national grid. Those amounts may be generally quite small, but when we start to get them en masse they will produce a significant amount of electricity, and there should be proper recognition of that.

Lord Reay: My Lords, I declare my land-owning interest, which is listed in the Register of Members’ Interests.

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