New Clause 29 - Simplification of Renewable Energy Certificates for microgeneration
Climate Change and Sustainable Energy Bill
4:45 pm
Gregory Barker (Shadow Minister (the Environment), Environment, Food & Rural Affairs; Bexhill and Battle, Conservative)
I shall speak to new clauses 29, 35 and 36. We know that the Government intend to table their own amendments on removing the need for sale and buy-back agreements and allowing for so-called amalgamation, effectively pooling together a number of individual generating units so that they can all be treated as one.
Such proposals, however, would still not remove some fairly onerous administrative provisions for those wishing to claim ROCs. For example, there is a requirement for an additional meter, which must be read each year. Moreover, that meter might not be the responsibility of the supplier who provides the customer with the electricity that they purchase. That drives the need for two meter readings, both of which must be processed, which arguably doubles the transaction costs. There is also currently a requirement for the ROC meter to be read within an 11-day window bang in the middle of the Easter school holidays. In addition, the rounding feature for ROCs means that any output between 500 kW of annual energy and 1,499 kW is the same: it is rounded to one ROC.
We believe that the solution is to allow a proper product and installation standard-based approach, whereby each technology type is tested and fitted to an approved standard and appropriate random checks are applied. On that basis, a matrix of product installation types can establish whether a particular installation deserves one or two ROCs each year. The supplier can then redeem that number of ROCs for the duration of the microgenerator’s operation. That completely avoids all the transaction costs that were referred to earlier—and if the process in Whitehall is expensive, it must be incredibly expensive to carry out the process that I have outlined.
The final point is that we are not at this stage asking the Government to introduce such a system of type approvals; we are merely asking them to remove a legislative block that would prevent its ever being introduced without primary legislation. I entirely accept that there is much more work to do on this matter, the detail of which, with the proposed primary legislative change, could be dealt with through the renewables obligation order. That may never happen if the Government choose otherwise.
We need to have the relevant discussion over the next year or so, before a decision is made, but we do not want to have to start the primary legislation process all over again simply to remove a block and then have to go through the secondary legislation route as well. Surely it is a much better and more efficient use of parliamentary time to get the first blockage removed now, while the opportunity exists, without prejudice to the question whether the matter will be seen through in secondary legislation.
With respect to new clauses 35 and 36, the Government came forward in 2005, as part of a review of the renewables obligation, with three proposals on small generators: first, allowing agents to act on behalf of small generators through the process of accreditation in claiming ROCs and allowing them to be issued to agents; secondly, allowing agents to amalgamate the output of small generators; thirdly, removing the requirement for a sale and buy-back agreement for generators who generate electricity for their own use.
There was strong support for those proposals during the review consultation. The changes should be non-controversial and, I hope, enjoy cross-party support. The Bill introduces enabling powers so that the renewables obligation order can be amended to allow for the proposals. There should be consultation on the detail of the proposals prior to the amendment of the renewables obligation order. Subject to primary legislation receiving parliamentary approval, it is intended that those changes will be made to the order from 1 April 2007.
In the context of the renewables obligation, small generators are defined as those with a declared net capacity of 50 kW or less. It is essential to allow agents to act on behalf of small generators and to amalgamate output. Currently, agents are not allowed to act on behalf of small generators, which means that small generators must complete the required administrative arrangements such as gaining accreditation and claiming ROCs themselves. Also, ROCs could be issued to agents who could then sell them on on behalf of a generator instead of issued directly to the generator, who would have to sell them on. For small generators, those administrative processes can be burdensome, particularly when generating electricity and claiming ROCs are not part of their core business. If we are really going to give microgeneration a jump start, we must deal with not only the financial incentives but the administrative burden.
It is likely that generators who are currently able to claim only very small numbers of ROCs in a year may be put off by the administrative burdens involved in achieving a small benefit gain. In particular, the proposed change will help generators whose output is very low, who would not normally be in a position to claim few if any ROCs. We hope that such an amendment will allow a market for agents to emerge—agents who are familiar with the process of accrediting renewable stations and claiming ROCs, and who can achieve economies of scale by acting for large numbers of small generators.
In this way we hope that in future small generators can gain the benefits of the renewables obligation without the current administrative burden. That would be greatly in the spirit of co-operation. However, there would be no requirement for small generators to use an agent if they did not wish to do so. Those who wanted to act for themselves would be perfectly entitled to continue to do so.
The removal of sale and buy-back agreements for small generators is also important. The renewables obligation defines the obligation in terms of the supply of electricity to customers in Great Britain. As a result, there is a requirement that generators that consume their own electricity must first sell it to a supplier, before buying it back for their own consumption. The removal of that requirement for small generators would simplify their administrative arrangements. In addition, they need to obtain a sale and buy-back agreement, which acts as a barrier to some small generators in claiming renewables obligation certificates or establishing stations. The proposals would give us the power to remove that barrier as well as enable small generators to sell surplus electricity that they do not consume—to a private wire network, for example.
Such issues are technical and administrative, and I am largely persuaded that if we are really to encourage microgeneration, there is a great case for a wholesale review of the process. However, what is proposed would be a very good start, and given the context of this Bill and what we are able to do at this point in time, I hope that the Minister will take the new clauses on board.