Clause 36
Energy Bill
5:00 pm
Charles Hendry (Shadow Minister, Business, Enterprise and Regulatory Reform; Wealden, Conservative)
The first of the two amendments in my name and that of my hon. Friend the Member for Billericay examines the research and development costs in enabling the industry to make efficiency gains.
The Bill outlines factors that the Secretary of State must take into account in considering banding provisions, which predominately make a great deal of sense. It looks at the costs, including capital costs, the income of operators of generating stations and who is exempted from the climate change levy, and the desirability of securing the long-term growth and economic viability of the industries associated with a generation of electricity from renewable sources. The amendment would simply add a factor to that last one, which is designed to help the industry develop as quickly as possible.
Challenging targets have been set for the growth of the industry. The evidence is that it will follow a traditional S-curve, with a slow start-up, then rapid growth before tailing off subsequently. It is in all of our interests to have rapid growth coming through as quickly as possible, and therefore we should actively be encouraging research and development work to make efficiency gains and to achieve economies of scale. That is a different issue to proposed section 32D(4)(d) of the Electricity Act 1989, which relates to the long-term growth and economic viability of the industries involved, as that does not specifically involve trying to do anything to encourage early growth. The amendment would add an extra element to encourage and reward research and development. It would also help to encourage that work to be done in the UK and, as it is research and development, such work would not be affected by EU rules on state aid.
Amendment No. 17 is a rather different issue and relates to the regularity with which reviews should be carried out. As I said earlier, we support the principle of banding, but we recognise that technology is changing fast and levels of bandings need to reflect that. Having already seen how the current ROC system has encouraged some technologies, such as methane and onshore wind, over others, we recognise that there needs to be change. ROCs have helped to mature the lower-cost industries relatively quickly and now it is right to channel extra help to the more expensive technologies. The Bill gives the Secretary of State the right to alter bands, either at intervals set in secondary legislation, or when there has been a specific change that he believes would justify a reassessment. The amendment would put on the face of the Bill a requirement that there should be a reassessment of the banding levels at least every four years. If the Secretary of State decides to carry out a review less than four years after the previous review, it would not prevent him from doing so, but it would mean that we could not simply stumble on without a review for several years. With the best will in the world, things take longer than we might wish, but having talked about banding for at least the last two years that I have been doing this job, we owe it to those investing that they should have clarity about how the process will move forward.
The Minister may say that the order will specify the appropriate length of time between reviews, but orders cannot be amended readily in Committee and there is a strong case for the Bill to set down clearly when reviews will take place. That would also make it easier for different industry groups to make representations about the appropriate level of the ROCs and it would drive forward investment if business knew when the next change was likely to happen.