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However, there is a genuine reason for our thinking that 3 megawatts is about right. On the one hand, I echo the noble Lord, Lord Jenkin, in saying that investor certainty is essential. The last thing that we want to do is discourage decisions about investment. On the other hand, we want to encourage the small microgenerating schemes to which we see the FIT applying. We are trying to get the balance right, which is not easy. There are many considerations. Going for the 3 megawatt capacity cap, but allowing ourselves discretion to go into the detail of the different areas where we might set caps below that, is the right way forward, giving us some flexibility or “headroom”, as the noble Baroness said, for further discussion, consultation and work, but also ensuring that the great majority of large-scale investors have certainty. That essentially is why we have gone for the 3 megawatt cap. I have been convinced that it is essential to have a
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Lord Puttnam: My Lords, I apologise for having just had to run out to a meeting. If it became evident that 3 megawatts was not an economic figure for community generation, what mechanism would be used to raise it to 5, or even 10, megawatts? It is one thing to create investment confidence for the big companies, but there is surely an obligation to create investor confidence for the small generator.
Lord Hunt of Kings Heath: My Lords, my noble friend is trying to tempt me down a path that I do not want to go down. I know what he wants me to say—that of course we will be flexible and respond to circumstances as they arise. It is perfectly possible that another energy Bill will come at some stage and that noble Lords may propose to come back to this issue. While I am concerned simply to leave this where it is and say that we are flexible, I am also concerned not to give the impression to companies wishing to invest seriously in this area that somehow the 3 megawatt limit is okay for the moment but that in a year or two it might have risen. That is why I am reluctant to go as far as my noble friend wishes me to go. We think that the 3 megawatt cap is right for the long term—and I really must place that on the record.
I should make it clear, too, that we think that the renewables obligation is absolutely critical to delivering the vast majority of renewable electricity that we need to meet the challenging targets set by the EU for 2020. That is why maintaining investor confidence is so important, while we keep enough flexibility to ensure that we direct support to small-scale projects at the right capacity.
I say in response to the remarks of the noble Baroness, Lady Young, that the types of projects that we are trying to incentivise through the feed-in tariff scheme range from the individual householder to the larger community-scale projects. As for deciding on an upper limit, our analysis shows that an upper limit of 3 megawatts will enable a feed-in tariff scheme to support a variety of projects. For example, at one end of the spectrum, a typical household might use about 4 megawatt hours of electricity per year. That electricity requirement could be provided by a 4 kilowatt wind turbine or a 4 to 5 kilowatt PV installation. A school’s electricity requirement might typically be met by a wind turbine below 50 kilowatts and a hospital by a larger system closer to 250 kilowatts. In addition, at the other end of the spectrum, a 3 megawatt wind turbine has the capacity to generate enough electricity to power in the region of 1,500-plus homes per year—potentially enough electricity to power a village. The cost of such a project would be around £4 million to £4.5 million, which is clearly not an insignificant sum.
As a further example of the significant scale of 3 megawatts as an upper limit, a 3 megawatt biomass plant could support around 3,000 to 4,000 homes. That is why we think that the 3 megawatt cap is about right, as it provides investor confidence and avoids any wait-and-see behaviour for at least 95 per cent of deployment currently covered by onshore wind turbines under the renewables obligation.
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The noble Baroness, Lady Young, talked about headroom. I think that she suggested that we should accept the amendment proposing 10 megawatts and then have the opportunity for consultation, as a result of which we could say that we would set the limit much lower, as we have in the flexibility given by the government amendments. But there is still the problem that, if we suddenly accepted 10 megawatts as the limit, it could jeopardise investment decisions for quite a large number of projects that we wish to see go ahead immediately. The essential point is that we should go for a limit that is reasonable and defensible but which does not inhibit a lot of investment decisions.
The noble Lord, Lord Teverson, is also tempting me down paths that I should not go down. He said, “You’ve got the 3 megawatt limit but, come on, give some more details about where you might place the limit, if you went below it”. I do not think that we have done enough work so far to be able to give the noble Lord an indication of that. Clearly we need to do an awful lot of work in the next few months. As I have said, we will be happy to find ways of involving Members of your Lordships’ House who have a particular interest in those discussions.
The noble Lord, Lord Jenkin, is absolutely right about avoiding confusion or overlap between the FIT scheme and the ROC scheme. We are anxious to invite comments about how we should do this. I have already set out our initial thinking. He made an interesting point last week about the network operation of voltage. We will have to look into that. I hope that I did not give him the impression that I would have a definitive answer by today, because I do not have one, but I am advised that my officials will look into working with Ofgem and the energy companies. Clearly we do not want to cause the kind of problems that he has suggested, so I hope that he will accept that I am taking this seriously, even though I cannot respond immediately.
I recognise that there is no simple answer. We have tried to get the balance right and to set the cap at a level that will provide enough flexibility and encourage the small-scale generation that we want through a feed-in tariff. At the same time, it is essential that we give certainty to the companies that are taking the kind of investment decisions that we need them to take if we are to meet this challenging target. On that basis, I hope that noble Lords will accept that the 3 megawatt cap, with the flexibilities given within it, is probably the right way forward.
Lord Jenkin of Roding: My Lords, I am grateful to those who spoke in the debate and for the Minister’s reply, which was not wholly unhelpful. We have to debate this while being uncertain how this flexibility, which the Minister has mentioned several times, will actually work. The noble Lord, Lord Teverson, asked for a bit more detail and was promptly chased off the patch altogether, albeit in polite parliamentary language. That is what makes this difficult. The Minister’s paper, which he kindly circulated a day or two ago, says that,
- “if the evidence points to a lower limit, we will have the necessary powers to set a lower limit for onshore wind”—
but where and for whom, and how will people know what it is?
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There is bound to be a period of consultation and therefore a period of considerable uncertainty. My fear is that, at a juncture where great efforts are being made through the planning system to overcome planning obstacles such as the grid-link systems—I have had the same paper from Ofgem that was quoted from earlier in the debate, and one does of course hope that some of the larger schemes in the pipeline will come forward—this level will create a grey area of overlap between the operation of the RO and the feed-in tariff, thereby encouraging gaming, as it is called, where people try to juggle between the two. They may wait until a feed-in tariff becomes operative so that they get the benefit of it and in the mean time delay their investment. We shall simply have to wait and see.
I hope that we have sufficiently aired the problems that the Government face. I am grateful for the Minister’s earlier offer to keep in touch with those who have spoken on this matter so that we may take part in the consultation, which I am sure will be helpful, but I am genuinely anxious, as I have said. The purpose of the amendment was to flush out a bit more of the Government’s thinking, which the Minister was good enough to provide. Therefore, I beg leave to withdraw the amendment.
Amendment No.44, as an amendment to Amendment No. 29, by leave, withdrawn.
[Amendment No. 45, as an amendment to Amendment No. 29, not moved.]
5.30 pm
Lord De Mauley moved, as an amendment to Amendment No. 29, Amendment No. 46:
46: After Clause 40, line 87, at end insert—
“( ) The Secretary of State shall review and report annually on the effectiveness of the scheme, and consider such amendments as he considers appropriate.”
The noble Lord said: My Lords, the amendment is simple and would ensure that existing legislation imposes sufficient requirements on the Secretary of State to review and report regularly on the working of these provisions. The Minister has argued for the flexibility that the government amendments provide, but such flexibility leaves open the possibility of the introduction of an entirely inadequate scheme. Proper reporting requirements would allow flaws in the implemented scheme to be identified and solutions proposed. I beg to move.
Lord Hunt of Kings Heath: My Lords, the noble Lord, Lord De Mauley, has raised a fair point. I am happy to say that Section 47 of the Electricity Act 1989 puts a duty on the authority to keep under review, and collect, information about activities to which that section applies. The section will be extended by a provision in Schedule 4 to include small-scale low-carbon electricity generation. It will also give the Secretary of State a power of general direction to the authority to which it must have regard in reviewing those activities. In addition—this goes back to our debate on Report—we are likely to detail progress on the effectiveness of the FIT scheme as part of our annual report under the Sustainable Energy Act 2003. I hope that that provides the noble Lord with the necessary reassurance.
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Lord De Mauley: My Lords, I thank the Minister for that answer. For this evening’s purposes, I beg leave to withdraw the amendment.
Amendment No. 46, as an amendment to Amendment No. 29, by leave, withdrawn.
On Question, Amendment No. 29 agreed to.
Lord Hunt of Kings Heath moved Amendments Nos. 47 and 48:
47: After Clause 40, insert the following new Clause—
“Power to amend licence conditions etc: procedure
(1) Before making a modification, the Secretary of State must consult—
(a) the holder of any licence being modified,
(b) the Gas and Electricity Markets Authority, and
(c) such other persons as the Secretary of State considers appropriate.
(2) Subsection (1) may be satisfied by consultation before, as well as by consultation after, the passing of this Act.
(3) Before making modifications, the Secretary of State must lay a draft of the modifications before Parliament.
(4) If, within the 40-day period, either House of Parliament resolves not to approve the draft, the Secretary of State may not take any further steps in relation to the proposed modifications.
(5) If no such resolution is made within that period, the Secretary of State may make the modifications in the form of the draft.
(6) Subsection (4) does not prevent a new draft of proposed modifications being laid before Parliament.
(7) The Secretary of State must publish details of any modifications as soon as reasonably practicable after they are made.
(8) In this section, “40-day period”, in relation to a draft of proposed modifications, means the period of 40 days beginning with the day on which the draft is laid before Parliament (or, if it is not laid before each House of Parliament on the same day, the later of the 2 days on which it is laid).
(9) For the purposes of calculating the 40-day period, no account is to be taken of any period during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.
(10) In this section “modification” means a modification under section (Feed-in tariffs: electricity)(1).”
48: After Clause 40, insert the following new Clause—
“Feed-in tariffs: supplemental
(1) A modification under section (Feed-in tariffs: electricity) of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Electricity Act 1989 (c. 29).
(2) Where the Secretary of State makes modifications under section (Feed-in tariffs: electricity)(1)(b) of the standard conditions of a licence of any type, the Gas and Electricity Markets Authority (“the Authority”) must—
(a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and
(b) publish the modification.
(3) The Secretary of State may by order—
(a) make provision conferring functions on the Authority or the Secretary of State (or both) in connection with the administration of any scheme established by virtue of section (Feed-in tariffs: electricity);
(b) make such modifications of provision made by or under an Act or an Act of the Scottish Parliament (whenever passed or made) as the Secretary of State considers appropriate in consequence of provision made under paragraph (a) or section (Feed-in tariffs: electricity).”
On Question, amendments agreed to.
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Clause 51 [Nuclear decommissioning: regulations and guidance]:
Lord Davies of Oldham moved Amendment No. 49:
49: Clause 51, page 46, leave out lines 12 and 13 and insert—
“(5A) The Secretary of State must publish guidance about factors which it may be appropriate to consider in deciding whether or not—”
The noble Lord said: My Lords, I will also speak to government Amendments Nos. 50 to 53, which seek to provide additional certainty and clarity to potential operators of new nuclear power stations and oil and gas installations respectively, without undermining the robustness of the regimes. I recall that we began the debate when my noble friend Lord Rowlands raised the issue in Committee, when I undertook that the Government would think further about it. We had to do more than that, however, because the noble Lord, Lord Jenkin, tabled subsequent amendments. Our amendments in this group have been laid in response to that debate on Report.
First, on the nuclear amendments, the House will recall concerns being voiced on Report on behalf of industry about the need for greater certainty on the factors that the Secretary of State may take into account when deciding to approve or modify a programme subject to conditions. Amendment No. 49 is our response. It creates a duty on the Secretary of State to publish guidance on factors that it may be appropriate to consider when approving a programme or subsequent modification to a programme in Clause 51(5). Amendment No. 50 then creates a duty on the Secretary of State to have regard to this guidance, thus providing the potential operator with a greater level of certainty as to the factors that the Secretary of State will take into account when approving or modifying a funded decommissioning programme, while not unduly limiting his flexibility in this regard.
We also debated on Report whether the offence under Clause 57 of knowingly or recklessly supplying false or misleading information to Ministers should apply in all cases. Government Amendment No. 51 creates a materiality threshold so that only information that is false or misleading in a material respect falls within scope of the clause. This makes Clause 57 consistent with equivalent offences in other areas of legislation, such as Sections 117 and 201 of the Enterprise Act 2002.
As regards the oil and gas decommissioning amendments, it will be recalled that on Report the noble Lord, Lord Jenkin, proposed an amendment to Clause 69, which was aimed at more closely linking the liability for decommissioning an offshore installation to companies that have received benefits from the installation. On Report, the Government voiced concerns that, although the amendment had much merit, it did not make it clear that it was the principal use of the installation only that should create that link and that benefits arising from secondary services would not make the recipient liable. On hearing that the Government were anxious about the terms of the amendment, the noble Lord, Lord Jenkin, graciously withdrew it. However, we accept that he raised an important point, which we need to address.
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Amendments Nos. 51 and 52, which are technical in nature, will make it clear that liability will apply only to licensees who are entitled to benefit, or have benefited, from the principal purpose for which the installation is maintained, or is intended to be established. They will create a precise link between the benefit and activities on the relevant field. The liability will not extend to licensees on a different field, even if they receive a secondary service from the installation. The amendments will extend similar clarification to gas unloading and storage and carbon sequestration activities.
The Government believe that these amendments add to the clarity and practicability of the respective frameworks, while maintaining their robustness. I am grateful to the noble Lord, Lord Jenkin of Roding, for tabling his constructive amendments on Report. I hope that he and the House will accept that the amendments proposed here meet the objectives that he outlined at that stage. Accordingly, I beg to move.
Lord Jenkin of Roding: My Lords, I am tempted just to say thank you, but I will say one more word. There is no doubt that the Minister’s officials who worked on the oil and gas amendments devoted a great deal of time and ingenuity in trying to come up with a solution that met the requirements both of the industry and of the department. That they have succeeded is a great tribute to both sides. I should like to pass on—if the noble Lord will be kind enough to do so—the thanks of the industry for the efforts that were made.
Lord Rowlands: My Lords, I support the sentiments of the noble Lord, Lord Jenkin. This issue was first raised in the other place. The subsection that this amendment amends was brought into the Bill as a result of representations that began in the other place and were pursued by me and others in Committee and by the noble Lord, Lord Jenkin, on Report. It is a good example of the Government listening and responding. They have always wanted to achieve what the industry was asking for. Therefore, it is a pleasure to support that achievement.
Lord Davies of Oldham: My Lords, I am grateful to both noble Lords. As I indicated, their assiduous work earlier in the Bill’s progress enabled us to arrive at a much improved and satisfactory situation. I am particularly grateful to the noble Lord, Lord Jenkin, for his appreciation of the work done by officials on this significant task. These are complex and challenging issues and an enormous amount of work has been done, some of it under considerable pressure. We all recognise that we have not had too much time to adjust to the results of debates on the Bill in this House.
My officials are so vigilant that they have indicated that I made a slip, which I wish to correct. I said that the oil and gas decommissioning amendments were Amendments Nos. 51 and 52. In fact, they are Amendments Nos. 52 and 53. I apologise for the slip and take this opportunity to correct it. I am grateful to the officials, as ever, for pointing that out.
On Question, amendment agreed to.
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Lord Hunt of Kings Heath moved Amendment No. 50:
50: Clause 51, page 46, line 18, at end insert—
“( ) When making a decision of a kind mentioned in subsection (5A), the Secretary of State must have regard to the guidance for the time being in force under this section.”
On Question, amendment agreed to.
Clause 57 [Offence of supplying false information]:
Lord Hunt of Kings Heath moved Amendment No. 51:
51: Clause 57, page 49, line 11, leave out “false or misleading information” and insert “information which is false or misleading in a material respect”
On Question, amendment agreed to.
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