Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

I beg to move amendment 2, in clause 2, page 1, line 20, leave out from ‘means’ to end of line 21 and insert ‘—

‘(a) the generation of electricity or heat from renewable or low-carbon sources by the use of any equipment, the capacity of which to generate electricity or heat does not exceed the capacity specified in subsection (2A); and

(b) energy efficiency measures.

(2A) That capacity is—

(a) in relation to the generation of electricity, 5 megawatts;

(b) in relation to the generation of heat, 5 megawatts thermal.’.

Anne Begg (Aberdeen South, Labour)

With this it will be convenient to discuss amendment 3, in clause 2, page 1, leave out lines 22 and 23 and insert—

‘(3) In carrying out any function under this Act, the Secretary of State must have regard to—’.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

The Government believe that clause 2 should stand part of the Bill—members of the Committee will recognise that as the first exception to our proceedings—subject to a number of amendments. Clause 2 is important because it defines the term “green energy” for the purposes of the Bill. Amendment 2 seeks to align better the concept of green energy with the existing scales and definitions that are already familiar in legislation. The amendment makes two key changes. First, in the definition of “green energy”, it changes

“small-scale low-carbon local”

to simply “low-carbon”. Secondly, it adds capacity limits in relation to the generation of electricity and heat. References to renewables and energy efficiency remain in the clause.

The reason for the change in terminology to “low-carbon” is that the explicit introduction of capacity limits obviates the need to require green energy to be small-scale, which answers the question asked by the hon. Member for Cheltenham. Following the change, subsection (2) is left with the phrase

“renewable or...low-carbon...sources”.

That reflects the definition outlined in new clause 1, which will take the place of clause 3, on the microgeneration strategy. That approach not only gives consistency to the Bill but creates certainty, because new clause 1 links the term

“renewable or low-carbon source”

to the sources of energy or technologies specified in section 82(7) of the Energy Act 2004, which is the parent legislation for much of the Bill’s policy.

Setting capacity limits gives greater certainty still. It also removes the need to set those capacity limits in the original clause 1. In setting limits, the amendment achieves better alignment with existing legislation. For example, the 5 MW limit is the maximum capacity for small-scale low-carbon electricity generation set out in the feed-in tariff powers in section 41 of the Energy Act 2008. The 5 MW upper capacity cap was debated at length by Parliament in considering that section of the 2008 Act. While it is recognised that the limit is greater than that of, for example, the definition of microgeneration in  section 82 of the 2004 Act, we concluded that the 5 MW upper capacity cap was appropriate in the context of small-scale generation. The setting of the specified maximum capacity, which is required by the 2008 Act, will be done through secondary legislation and is subject to the approval of Parliament.

Charles Hendry (Shadow Minister, Energy and Climate Change; Wealden, Conservative)

In the course of the Energy Act 2004, there was a proposal that the maximum capacity for small-scale combined heat and power as a low-carbon technology should also be set at 5 MW. The Government rejected that and it was kept as 50 kW. Will the Minister clarify how that ties in? Combined heat and power systems are specifically included within the Government’s definition of microgeneration. There will now be some doubt in people’s minds about where the 50 kW limit and the 5 MW capacity come in.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

The hon. Gentleman will be aware that I was not the Minister at the time of the 2004 Act and I do not have an immediate answer. However, I am sure that by the time I have finished this page of my brief, I will have one and he will get it.

The proposal removes the need to define the term “small scale” in the context of this Bill. Moreover, the higher limit also allows for consideration of plant of a size that could be used for community-scale generation and buildings, such as schools and hospitals, which I am sure the hon. Member for East Surrey intended to include when he drafted the Bill.

Alan Whitehead (Southampton, Test, Labour)

I hope that the Minister will have an response to my minor point. The question of the amended definition, which is important, relates also to the new clause 4 definition, which has a meaning that in turn relates to microgeneration strategy. That appears to be outside legislation. I am not clear whether that line of definition eventually ends up outside legislation rather than inside it, and therefore could be capable of being challenged on the grounds that it is within a document and not within legislation, where it would be clearly defined.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

I do not think that I have any chance of answering my hon. Friend’s complex query. Only those who have been involved in detailed drafting and are familiar with the other Acts will be able to provide an answer. I hope they will be able to pass me a note.

The note I have been passed in relation to the question asked by the hon. Member for Wealden does not answer his question. I am told that the Energy Act 2008 sets 50 kW limits for micro-CHP, but he told us that in posing his question. So the question remains. I hope that we will get an answer, but if we fail to do so, I will write to him, as I will to my hon. Friend if we cannot clarify his point either.

The higher limit would allow the consideration of projects that could be in schools and hospitals. I think that we would all want that to happen. However, no precedent exists in law in relation to a small-scale limit on the generation of heat. For the purposes of symmetry, and because I believe it is sensible, we have therefore included an equal limit of 5 MW thermal in relation to the generation of heat.

Amendment 3 is a technical amendment which is necessary because the Secretary of State is the only person who can perform functions under the Bill. There is, therefore, a need to make it explicit that he or she is the only person who can be put on the face of the Bill.

Subject to the amendments outlined above, which are important for reasons of consistency and certainty and to align the Bill better with existing legislation, the Government are content that clause 2, as amended, should stand part of the Bill.

Peter Ainsworth (East Surrey, Conservative)

It is becoming increasingly clear, to me at least, that one of the many advantages of allowing the Government to make the running with their new clauses is that the Minister has to answer all the really difficult questions.

Charles Hendry (Shadow Minister, Energy and Climate Change; Wealden, Conservative)

Or not.

Peter Ainsworth (East Surrey, Conservative)

Indeed. I hope that the Minister will, in due course, have answers to the questions that have been posed on the amendments, which I support. Amendment 2 offers a definition of green energy that is clearer than the one in the Bill on Second Reading. The definition of course includes heat, which the Bill originally overlooked. I am delighted about that. It is important progress and a vindication of the co-operative approach that we have adopted.

I also welcome the capacity limit, which is about the right level. There is no perfect way of determining what the right level is, but that should enable local communities and community-based organisations to take up initiatives in green energy. We want communities to become involved in solving the problems of climate change in all sorts of ways. Amendment 2 supports that agenda.

As the Minister rightly said, amendment 3 is purely a technicality. Only the Secretary of State can perform functions under the Bill and the amendment makes that abundantly clear.

Charles Hendry (Shadow Minister, Energy and Climate Change; Wealden, Conservative)

I want to return to the point that I raised earlier because it is important to have a clear understanding of what is intended. We completely support the purpose of amendment 2, which is to provide greater simplicity and clarity—so that there is one general threshold at 5 MW. Is it the case that, within the definition of the Bill, CHP of up to 5 MW would be allowed, yet it would only benefit from the feed-in tariff up to 50 kW? Is that the difference? Or is the Minister proposing that there should also be a change to the feed-in tariff regime to provide clarity and uniformity?

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

I apologise to the hon. Gentleman for not being provided with a clear answer to his question.

Martin Horwood (Cheltenham, Liberal Democrat)

Will the Minister give way?

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

I hope that the hon. Gentleman is not about to tell me what I should know.

On the feed-in tariff, I am certainly not aware of any proposals to make a change. When he posed the question, the hon. Member for Wealden said that the limit on micro-CHP was set at 50 kW. I will endeavour to provide him with an answer in due course.

Martin Horwood (Cheltenham, Liberal Democrat)

I would not dare to presume to tell the Government what to say in response—not yet, anyway. Is one of the potential problems with combined heat and power that it is not technically and strictly a renewable energy source? It is certainly an energy-saving one and it would be interesting to discuss in more detail—perhaps I can buy the Minister a little time—whether it will come within the definition of a low-carbon energy source.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

I am being told that I was correct in saying that we are not using the Bill to change the details of feed-in tariffs, so there is nothing more to be said on the matter. I have already repeated that the limit of 50 kW on CHP will remain for those tariffs. I am going to stick my neck out, but as the questions were posed, it seemed to me that CHP did not fall within the definition of green energy. I am trying to get that checked; I have just come to the Bill and do not have the background to it. I need to be sure whether we are covering that matter.

David Howarth (Cambridge, Liberal Democrat)

I think the point that is causing some discussion on the Liberal Democrat Benches is that the definition of “energy efficiency measure” in new clause 4 is

“a measure to improve efficiency in the use by consumers of electricity, gas or any other source of energy”.

It is at least arguable that CHP is a measure that improves efficiency in the consumer use of gas.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

I am grateful to the hon. Gentleman for his assistance. My concern is that I need clarity; I need to be absolutely certain. I am being told that CHP is included. However, nothing in the Bill changes anything that I have said about feed-in tariffs, or about the levels that we have made obvious in terms of the generality for the 5 MW in cases of both heat and electricity.

Charles Hendry (Shadow Minister, Energy and Climate Change; Wealden, Conservative)

CHP would absolutely be included because new clause 1 says that “renewable or low-carbon source”

“means a source of energy or technology specified in ... the Energy Act 2004”.

In the 2004 Act, under microgeneration, section 82(7)(i) has:

“combined heat and power systems”,

so it most definitely is included. I am not seeking to make the Minister’s life more complicated, and I hope that she accepts that with good intent. I am happy for her to write to us. If, on further reflection, there is any confusion, she might want to table a further amendment on Report. We do not want to disrupt the course of the Bill, but there is a lack of clarity that it would be helpful to clear up.

Joan Ruddock (Minister of State, Department for Energy and Climate Change; Lewisham, Deptford, Labour)

I am more than happy to see that that happens—both to write to the hon. Gentleman and to see whether there is a need for greater clarity. As I have demonstrated, he has raised a number of questions on which I was not briefed. They were clearly not anticipated and I have insufficient background knowledge to give him a proper answer. Let us admit it; he has confused  me, but we will deal with those matters and have certainty in a written response. If there is a need to do something, that will be done on Report.