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This has been an interesting afternoon. It is a step forward. Whether one agrees or disagrees with everything that was said is neither here nor there. The more discussion we have on this issue, and the more the recognition is forced home that urgent action is required, the better. In that sense, I completely support everything that has been said this afternoon.

4.08 pm

Lord Davies of Oldham: My Lords, I agree with the final remark made by the noble Lord, Lord Dixon-Smith: we can advance the cause only by discussing these issues intensively. I am therefore grateful to the noble Lord, Lord Freeman, for his report and for the work of the committee. I offer two apologies, neither of which should occasion too much consternation in the House. First, I, too, would have preferred that my noble friend Lord Hunt was replying to this debate, for the obvious reason, but also because, as the Minister responsible for this area, he has detailed knowledge of this matter and the report is geared towards longer-term strategy. However, when he returns from Brazil—I hasten to add that I offered to exchange roles with him this weekend so that he could have the pleasure of this debate and I would have the arduous task of looking at biofuels strategy in Brazil, but the House will recognise that he was committed to inevitable priorities—we shall get the benefit of his keen interest in this area, which is reflected in the fact that the Government will produce a further perspective on their overall priorities just before Christmas.

Next year, we will produce our full strategy, which will take into account the various matters aired today, especially the legislation that we will by then have in place. I hasten to add to all those who voiced anxiety about the effectiveness of the legislation that it is enabling legislation to improve the prospects of our hitting the targets. The legislation itself does nothing to hit the targets, especially given that—as the noble Lord, Lord Dixon-Smith, was, from his vast experience, able to point out—it will be a little time before the arrangements under the Planning Bill bear fruit. However, without them we would have been severely constrained, so I am delighted that in the week that this important report is being debated we are celebrating the fact that two of the most significant Bills in this area—the Energy Bill and the Planning Bill—have been before the House and extensively discussed. Some of the arguments that we have had today have been fairly well rehearsed in those frameworks.

I also offer the brief apology that I would have preferred that the government response to the report had been published a little earlier than today. I am grateful that noble Lords have been able to absorb it and take it into consideration when making their contributions. I wish that we had been able to provide time for substantial consideration prior to the debate,

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but the Government get caught between Scylla and Charybdis. The Scylla was that, if we delayed the debate, we would have missed the benefits of important contributions in this area; we had space for it, so we produced it earlier than we would ordinarily expect. The Charybdis was that we were not quite ready for the debate. I hope that noble Lords will appreciate that, in producing our response today, we offer no discourtesy to the committee but a desperate attempt to catch up with rapidly developing events and the great benefit of having this debate today.

The debate is timely, given our desire to conclude European negotiations on the renewables directive in the next few weeks and to work to finalise policy, following public consultation on the UK renewables energy strategy last June. The negotiations on the directive are ongoing, with the UK supporting the presidency’s aim to reach political agreement on the 2020 climate and energy package, of which the directive is a part. We want to reach agreement by the end of this year. We are now assessing the many responses received to the consultation on the renewables directive with the intention of publishing our final energy strategy in the spring of next year. This debate feeds into that consultation.

A number of important decisions for future renewables policy will need to be finalised over the next few months. We are pleased that the report highlights the scale of the challenge faced by the UK in meeting the proposed target. If there were doubts about aspects of the technologies to be deployed, this debate has added to them. I know that the anxieties of the noble Lord, Lord James, are shared by others. He well articulated the practicalities of getting various installations in place. I am grateful to him, but he will forgive me for not following him down those intricacies; if I did, I would finish up at the bottom of a deep ocean and not make a great deal of sense.

Let me reassure the noble Lord, however. First, the Government are all too mindful of the constraints. Secondly, the noble Lord will recognise that renewables development will be very significant in Europe and across the world. It would therefore be more than surprising if acute businessmen did not recognise the opportunities that will be vouchsafed to them with the demand of so many powerful Governments and rich economies.

I know that we are in a period of difficulty. The noble Lord, Lord Dixon-Smith, did not exactly call me out on this issue, although he expressed his anxieties about the next few months, which I understand. However, he will also know that this debate has a more-than-a-decade dimension to it. The report is about a decade of investment and delivery. The noble Lord, Lord James, and the noble Lord, Lord Freeman, in a rather milder form, also expressed anxieties on this point. We anticipate that the investment decisions will be seized by business in an area of considerable growth. I want to assure the House that the Government are well aware that they will need to have a keen eye to these practicalities if they want to see the issues being realised.

The noble Lord, Lord Teverson, put me somewhat on the spot by referring to the Cambridge Econometrics report and its doubts about the position. In 2007, our

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energy White Paper was clear that we could not just carry on with comfortable strategies. The requirements of the target for Europe of 20 per cent and for us of 15 per cent need a step change. I understand entirely the anxieties that are bound to be expressed when some current policy predictions are that we will deliver only 5 per cent in 2020 when we have to hit 20 per cent. In every aspect of their policy on this issue, the Government are concerned about the step change. I hope that noble Lords will appreciate that we cannot prove that we have made that step change yet, but the Government are fully aware of the necessity in certain clear areas—not least the legislative one but also in relation to the structures that we are already putting in place—to reach those targets.

Why are we concentrating on renewables? Obviously, we have to ensure the security of our energy supply; that is an absolute prerequisite. Noble Lords are all too aware that our indigenous resources of energy are decreasing. It is important for the nation that we find alternative indigenous supplies. We all know that we will have dependence on externalities, but excessive dependence would be dangerous, which is why the Government’s long-term energy policy takes into account the fact that we want to increase the amount of indigenous resource if we can. Renewables play an important part in that and help to reduce our reliance on imported oil and gas. We realise that we are dependent on such sources in the foreseeable future, but overdependence would be dangerous.

We estimate that a 15 per cent renewables target could lead to achieving carbon savings of some 20 million tonnes by 2020 and a reduction of between 12 per cent and 16 per cent of gas imports. That is a significant contribution. Moreover, it is estimated that by 2050 the overall value of the low-carbon energy sector globally could be as high as $3 trillion per year and could employ more than 25 million people. That is the nature of the world’s necessary response to different forms of energy production and the reduction of carbon. It also establishes the opportunities that are necessary. Our environment sector is flourishing, with more than 400,000 people employed, 17,000 companies and an annual turnover of £25 billion. We are already leaders in offshore wind, integrated pollution control, energy control systems, carbon trading, water and waste management and environmental instruments and monitoring.

We want to build on these developments to ensure not only that the gaps to which the noble Lord, Lord James, drew attention in terms of supply are filled, but also that opportunities are in place for British business to create jobs for British people. All this can contribute to the expansion of our economy in what is going to be an enormous increase in economic activity in this area.

The starting point of our energy policy is, of course, to save energy. In introducing the debate the noble Lord, Lord Freeman, said that it is also the starting point of the committee’s report. I am glad that we have coincided on starting points, and indeed much of the report points in exactly the same direction as the Government want to go. We accept the chidings set out in the report and the anxieties expressed in certain

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areas, but in broad terms the committee substantially reinforces and helps to guide the Government down paths which I hope to establish we are already engaged in travelling. Moreover, later this year we will carry out a further consultation on measures to encourage energy efficiency.

The noble Lord, Lord Freeman, and other members of the committee no doubt share in recognising that the 15 per cent target is ambitious for this country. It would involve a tenfold increase from the current level in the share of renewable provision as a percentage of total energy production. The noble Lord, Lord Teverson, not just in this debate but on other occasions has emphasised just what a challenge that represents, and he is right to do so. We believe that we can meet the challenge if the policy is appropriate and the market responds effectively, and as I said earlier, I acknowledge the immediate impacts on industrial economic investment through the credit crunch and the depression resulting from a loss of confidence in the economy in the short term. However, that is in the short term against the background of the committee’s report, the policy we are discussing, and what the Government hope to achieve.

I am not going to be drawn too far into those areas that look towards energy solutions beyond 2020—sufficient unto the year is the challenge thereof. If noble Lords will forgive me, I will not stray too far into the details of geothermal energy, which is some way off. I recognise its advantages and I do not see why the noble Lord, Lord James, and others should not take this opportunity to make these points, but nevertheless the report of the committee overwhelmingly addresses strategy up to the year 2020. Neither geothermal nor, realistically, the Severn Barrage, can be readily encompassed in that perspective. We are not certain about the economics of a tidal barrage because it is an enormously complex area. I heard what the noble Lord, Lord Rowe-Beddoe, said in his contribution, and I am sorry that he is not able to be with us, but in his absence I should say that we remain to be persuaded about the economics of the proposal. In any case, it cannot deliver for 2020 and is therefore rather outwith our considerations. However, the discussion reflected the fact that the UK has access to extensive and diverse renewable energy resources. We have one of the best offshore wind profiles in Europe and many opportunities to harness both wave and tidal energy.

Since its introduction in 2002, the renewables obligation as a primary means of providing long-term certainty to the market about the returns available to renewable electricity generation has increased UK renewable electricity generation from 1.5 per cent of total output in 2001 to three times as much in 2007.

We have to go as fast as we can, if not faster. We have, however, made some impressive progress, and the challenge is now to build on that progress. Wind power is now the UK’s fastest growing renewable energy technology. There has been a 33 per cent year-on-year growth rate in the investment in wind power. The UK is only one of seven countries with more than 3 gigawatts of wind power operating offshore and onshore, and we have recently gone past Denmark as the No. 1 country in the world for installed offshore

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wind capacity. We supply the equivalent of more than 400,000 homes with clean, green electricity, so we should not minimise the achievements made so far.

The wind farms that are currently under construction, together with those that have planning consent but await construction, will produce electricity for a further 5.5 million UK homes. A decision on a further 25 gigawatts of offshore wind development will be announced in spring 2009, following a strategic environmental assessment, in addition to the 8 gigawatts from offshore wind farms that have already been built or planned. The market has responded to energy opportunities of this kind in the past, and I have no doubt that it will develop strategies to bridge the gap which several noble Lords have identified in their contributions to this debate.

We have taken action to ensure that the work of government-funded research organisations is properly co-ordinated. Expenditure by the research councils on energy-related basic research has more than trebled since 2003-04 to more than £90 million, and we have spent an additional £200 million between 2005 and 2008 on the work of the Energy Technologies Institute. The new Environmental Transformation Fund is a significant simplification of funding for demonstration projects.

We recognise that we need to act now if we are to achieve these 2020 targets, and we have made great progress with the two Bills to which I have already referred and which provide the legislative structure for expansion. It was said that some parts of the Energy Bill have a certain rigidity, but that is not so. Its terms may look rigid when it becomes an Act, but it provides a framework under secondary legislation for expansion in exactly the areas about which anxiety has been expressed. I therefore assure the House that, aided by its careful consideration of both Bills, we have a framework for building for the future by making the energy changes that we need to make.

The results of the renewables obligation to encourage smaller-scale projects are indeed somewhat patchy, but that is why we have tabled an amendment—I do not underestimate the degree of pressure that came from other parts of the House about this—to introduce a feed-in tariff for low-carbon generation of up to 5 megawatts to allow homeowners, schools and communities to benefit from a guaranteed price for generation. This shows the flexibility that is built into the Bill, and I hope noble Lords will appreciate that the Government have accepted arguments that have been advanced in this House and have made appropriate arrangements to ensure that the Bill meets the approval of both Houses.

We fully support the committee’s recommendation to introduce financial support for renewable heat, which the noble Lord, Lord Freeman, emphasised when he introduced the debate, and we have tabled a further amendment to the Bill to create a power for the introduction of a renewable heat incentive to ensure that homes and businesses are heated from low-carbon sources.

I emphasise again the appropriateness of the legislative measures that we are taking. This is also true of the planning process. As I have indicated, I recognise the

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noble Lord’s keen interest in this area, his long acquaintance with it and the fact that he survived the rigours of the Planning Bill and the extensive discussions on it over the past year. Those of us who were not directly involved in consideration of the Planning Bill were all too well aware of the intensiveness of the discussion and the lengths of the debates, but we have, as a result of that, a framework for the future.

We have also announced measures to address the issues key to the successful deployment of the renewable technologies. To shorten the timescales to connect to the grid, for example, the department, Ofgem and the electricity suppliers are working together to speed up connections of projects that are ready to go. There is no doubt that connection with the grid is absolutely crucial to electricity generation and the opportunities for all those who may provide it through various sources. We are developing a new regulatory regime for the offshore grid to enable connection of the significantly increased amounts of offshore wind-generating capacity. I am grateful to the noble Lord, Lord Bradshaw, who drew attention to this issue. It is fundamental.

I do not know whether the noble Lord, Lord Bradshaw, produced an analogy between the grid and a main railway structure, but in trying to get past my obtuseness in grasping some of these matters my officials have used as a comparison the nature of the feed-in to the national railway system, from a whole range of branch lines, and connection to the national grid. We were doing a reverse Beeching, if you like. I am not sure whether I have enlightened the House with that analogy but, I confess, it was of help to me.

As part of the manufacturing strategy we have announced an intention to create a new Office for Renewable Energy Deployment, ORED, to help address issues such as the time taken to reach planning decisions and encouragement to business to identify and seize the opportunities in the supply chain for renewables technology. I recognise that we need to do more. I merely seek to establish that, thanks to this report, we now have the signposts on where we need to go. I hope that I have indicated that we are already quite a long way down these paths with the strategies we are pursuing. But a great deal more needs to be done, and all noble Lords who have taken part in this and related debates will be watching the evolution of government policy closely over the next six months as crucial aspects of

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the building blocks in relationship to the European requirements are put in place.

I emphasise again that although this debate is about the UK’s targets and the UK’s contribution, we should recognise that this report is that of a sub-committee of the European Union Committee. That is because this is a European issue, and the strategies we pursue are those which we hope will give a lead to others who are more slowly off the mark, or to others such as the Danes. Denmark is a unique country both in relationship to Europe and in wind energy, but the House will have noted that I took some pride in the fact that we went past the Danes this year in the amount of energy generated from wind farms. So I am sure the Government are on the right tack.

4.33 pm

Lord Freeman: My Lords, this has been a very interesting debate. I thank the Minister and the Department for Energy for achieving what is almost a parliamentary record: responding within four weeks to a Select Committee report. On behalf of the committee I am most grateful for that speedy and comprehensive response, in so far as it is possible to give one before publication of a detailed policy in the spring. I suggest to your Lordships that that is when we should return to this subject either in Select Committee or in your Lordships’ House or in both.

I also thank the noble Lords on the two Front Benches, who are rarely thanked in these debates: the noble Lord, Lord Teverson, and, in particular, my noble friend Lord Dixon-Smith, with his vast experience. I also thank my noble friend Lord James of Blackheath, the noble Lord, Lord Bradshaw, and the noble Lord, Lord Rowe-Beddoe, who sends his apologies because he has been involved in, as I understand it, a semi-judicial hearing today. It was particularly kind of him to come and contribute to the debate. I thank your Lordships. The state of parliamentary knowledge has been advanced.

On Question, Motion agreed to.

Counter-Terrorism Bill

The Bill was returned from the Commons on Wednesday 19 November with amendments and reasons. The Commons amendments and reasons were printed in accordance with Standing Order 51(2).

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