'(1) The Secretary of State shall make regulations within one year of the passing of this Act with the purpose of requiring designated energy suppliers to introduce a renewable energy tariff for specified producers of renewable energy.
(2) In this section—
"renewable energy tariff" means the reward level for each kilowatt hour of energy produced by the renewable source;
"renewable source" has the same meaning as in the Utilities Act 2000 (c.27);
"renewable energy" means energy from renewable sources;
"renewables obligation" means the obligation specified in section 32 of the Electricity Act 1989 (c.29);
"specified" means specified in the regulations.
(3) The renewable energy tariff shall set the reward level for each kilowatt hour of energy produced by the renewable source and may—
(a) be set at different levels for different levels for different types of renewable source;
(b) apply to metered energy produced or to metered energy exported onto public gas or electricity networks;
(c) apply to sizes of renewable sources specified in the regulations;
(d) be varied at different times as prescribed in the order or in successive orders;
(e) make provision for the payment and incidence of the costs of connection of small-scale generators to public networks.
(4) The descriptions of energy supplier upon which an order may impose the payment of a renewable energy tariff are those supplying electricity or gas—
(a) in Great Britain;
(b) in England and Wales;
(c) in Scotland; or
(d) in Northern Ireland
excluding such categories of supplier as are specified.
(5) The regulations shall specify—
(a) the renewable sources in respect of which renewable energy tariffs shall apply;
(b) the tariff applicable to each renewable source;
(c) the maximum level of electricity generation in respect of which the renewable energy tariff shall apply;
(d) which persons and installations generating from renewable sources shall be eligible for the renewable energy tariff, and any provisions to exclude installations accredited under the renewables obligation;
(e) the terms and duration of the renewable energy tariff arrangements;
(f) how the amount of energy produced and upon which the renewable energy tariff is payable shall be measured, determined or deemed;
(g) provisions for the regulation of renewable energy tariff arrangements by a designated body;
(h) provision for the Secretary of State to report periodically on the effectiveness of the regulations made hereunder;
(i) any necessary amendment to distribution licences or supply licences held by any person; and
(j) such other provisions as may be required for the efficient, cost-effective and transparent operation of the renewable energy tariff.
(6) Before making regulations under this section, the Secretary of State must consult—
(a) the Authority;
(b) the energy suppliers to whom the proposed order may apply;
(c) representatives of renewable energy producers to whom the proposed order would apply; and
(d) such other persons, if any, as he considers appropriate.
(7) Regulations under this section shall not be made unless a draft of the instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.'.— [Alan Simpson.]
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With this it will be convenient to discuss the following:
New clause 11— Electricity from hydro-microgeneration
'(1) The Secretary of State shall, within one year of the passing of this Act, make regulations with the purpose of encouraging renewable energy generation by means of hydro-microgeneration.
(2) In this section—
"hydro-microgeneration" means the generation of electricity by means of a hydro-turbine of less than 100kW capacity;
"microgeneration plant" has the same meaning given in section 7(6) of the Climate Change and Sustainable Energy Act 2006 (c. 19).
(3) Regulations under this section may prescribe—
(a) the treatment of hydro-microgeneration under sections 32 to 32M of the Electricity Act 1989 (c. 29);
(b) licensing for the use of water in a water-course for the purpose of hydro-microgeneration;
(c) that any requirement for abstraction, transfer or impoundment licences under the
(i) Water Resources Act 1991 (c. 57),
(ii) Environment Act 1995 (c. 25), or
(iii) Water Act 2003 (c. 37) is repealed in respect of a hydro-microgeneration plant, provided that no water is removed from the watercourse in the process of generation;
(d) that any requirement to ensure the safety and welfare of fish in a watercourse on which a hydro-microgeneration plant is situated is proportional to the risk of detriment to the safety and welfare of fish.
(4) Any reference to the generation of electricity under this or any other act which applies to hydro-microgeneration shall apply as though the reference was to the generation of electricity by means of any hydro-turbine of less than 100kW capacity.
(5) Regulations under this section shall not be made unless a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, each House of Parliament.'.
New clause 17— Promotion of renewable energy
'In section 7(2) of the Sustainable Energy Act 2003 (c. 30), for "60,000,000" substitute "250,000,000".'.
New clause 20— Access for renewable energy to the electricity and gas grids
'(1) After section 3A of the 1989 Electricity Act (c.29) there is inserted—
"3B Access for renewable energy to the electricity networks
(1) In carrying out their respective functions, the Secretary of State and the Authority shall ensure that—
(a) transmission system operators and distribution system operators guarantee the transmission and distribution of electricity produced from renewable energy sources, without prejudice to the maintenance of the reliability and safety of the grid;
(b) transmission system operators and distribution system operators provide for priority access to the grid system for electricity produced from renewable energy sources;
(c) when dispatching electricity generating installations, transmission system operators shall give priority to generating installations using renewable energy sources insofar as the security of the national electricity system permits;
(d) transmission system operators and distribution system operators are required to set up and publish their standard rules relating to the bearing and sharing of costs of technical adaptations, including grid connections and grid reinforcements, which are necessary in order to integrate new producers feeding electricity produced from renewable energy sources into the interconnected grid, and that such rules—
(i) shall be based on objective, transparent and non-discriminatory criteria taking particular account of all the costs and benefits associated with the connection of these producers to the grid and of the particular circumstances of producers located in peripheral regions and in regions of low population density,
(ii) may provide for different types of connection, and
(iii) shall provide for the sharing of costs to be enforced by a mechanism based on objective, transparent and non-discriminatory criteria taking into account the benefits which initially and subsequently connected producers as well as transmission system operators and distribution system operators derive from connections;
(e) transmission system operators and distribution system operators are required to provide any new producer wishing to be connected to the system with a comprehensive and detailed estimate of the costs associated with the connection;
(f) the charging of transmission and distribution fees does not discriminate against electricity from renewable energy sources, including in particular electricity from renewable energy sources produced in peripheral regions, such as island regions, and in regions of low population density;
(g) fees charged by transmission system operators and distribution system operators for the transmission and distribution of electricity from plants using renewable energy sources reflect realisable cost benefits resulting from the plant's connection to the network.
(2) The Secretary of State shall review and take the necessary measures to improve the frameworks and rules for bearing and sharing of costs referred to in paragraph (d) by 30th June 2011 at the latest, and every two years thereafter, in order to ensure the integration of new producers.
(2) After section 4AA of the Gas Act 1986 (c.44) there is inserted—
"4AB Access for renewable gas to the gas networks
(1) In carrying out their respective functions, the Secretary of State and the Authority shall ensure that—
(a) gas network operators guarantee the transport of gas produced from renewable energy sources, without prejudice to the maintenance of the reliability and safety of the gas networks;
(b) gas network operators provide for priority access to the gas networks system for gas produced from renewable energy sources;
(c) when dispatching gas, network operators shall give priority to renewable energy sources insofar as the security of the national gas system permits;
(d) gas network operators are required to set up and publish their standard rules relating to the bearing and sharing of costs of technical adaptations, such as gas network connections and gas network upgrades, which are necessary in order to integrate new producers feeding gas produced from renewable energy sources in to the interconnected gas networks, and that such rules—
(i) shall be based on objective, transparent and non-discriminatory criteria taking particular account of all the costs and benefits associated with the connection of these producers to the gas networks and of the particular circumstances of producers located in peripheral regions and in regions of low population density,
(ii) may provide for different types of connection, and
(iii) shall provide for the sharing of costs to be enforced by a mechanism based on objective, transparent and non-discriminatory criteria taking into account the benefits which initially and subsequently connected producers as well as gas network operators derive from the connections;
(e) gas network operators are required to provide any new producer wishing to be connected to the system with a comprehensive and detailed estimate of the costs associated with the connection;
(f) the charging of transport fees does not discriminate against gas from renewable energy sources, including in particular gas from renewable energy sources produced in peripheral regions, such as island regions, and in regions of low population density; and
(g) fees charged by gas network operators for the transport of gas from plants using renewable energy sources reflect realisable cost benefits resulting from the plant's connection to the network.
(2) The Secretary of State shall review and take the necessary measures to improve the frameworks and rules for bearing and sharing of costs referred to in paragraph (d) by 30th June 2011 at the latest, and every two years thereafter, in order to ensure the integration of new producers."'.
New clause 21— Adjustment of transmission charges
'(1) Section 185 of the Energy Act 2004 (c. 20) (Adjustment of transmission charges) is amended as follows.
(2) In subsection (1)(a) for first 'a' substitute 'any'.
(3) Omit subsections (10), (11) and (12).'.
Amendment No. 1, in clause 36, page 24, line 44, leave out subsections (4) and (5).
Amendment No. 65, page 69, line 16, leave out clause 78.
The Minister for Energy just made the point that we want to empower citizens to take a more active lead in addressing the challenge of climate change and the shift to renewable energy systems. In many ways, new clause 4 specifically addresses that challenge. Internationally, it is arguable that the mechanism it deals with is by far the most effective one for engaging citizens and delivering a dynamic sense of change.
In presenting this new clause, I begin by giving credit to those who have given enormous support, in the House and outside, to the principle behind it and the commitments we are asking the House to enter into today. There is an astonishing array of supporters of the new clause, including the House Builders Federation, the Institution of Civil Engineers, the Institution of Mechanical Engineers, the Federation of Master Builders, the National Farmers Union, the WWF, the Royal Society for the Protection of Birds, the Trades Union Congress, Greenpeace, the Country Land and Business Association, the UK Green Building Council, Energywatch, the Energy Saving Trust, the Co-op Group—which has clad its own headquarters in solar panels—Sharp UK, Solarcentury, National Energy Action, the Solar Trade Association, the Ground Source Heat Pumps Association, and interestingly enough, Lily Allen and The Premises studios.
In these days of celebrity, it almost becomes obligatory to have a celebrity on board when arguing a worthy cause, but Lily Allen has a fair claim to be recognised as part of that list. She and the company that she is part of in The Premises studios in Hackney, London, have installed an array of about 18 solar panels on the roof—similar to the array on my home—which generate the electricity that powers the studios. I know that she has written to all of my parliamentary colleagues to say that such action should not just be the prerogative of those in a position to do it as a matter of principle. The Government should reach out actively to promote it in order to make citizens the drivers of dynamic change.
In this House, we have to ask how we begin to bridge the gap between UK undertakings and where we need to be by 2020, and how we bridge the gap between where the UK is now and the position of many of our international comparator countries. The international picture is this: almost 50 countries have introduced some sort of feed-in tariff legislation. As a result, most of those countries are well ahead of the UK in delivering a proportion of energy from renewable sources. The UK currently delivers about 2 per cent. of its energy from renewable sources. According to the aspirations that have been teased out from the Bill, it is clear that, at best, the UK will reach a position where it might be delivering 5 per cent. of our energy from renewable sources by 2020. We have entered into an EU commitment to deliver 15 per cent. of our energy from renewable sources by that time. It is quite clear, therefore, that we will need a quantum shift in the policy framework to allow the UK to deliver 15 per cent. of our energy from renewable sources by 2020.
The hon. Gentleman makes a powerful case, but is it not a source of national embarrassment that in order to get an EU average of 20 per cent., the UK has been set a target of only 15 per cent., because we are starting so late and from so far behind? Does that not reinforce his point?
It is an embarrassment, and those who have read the Lily Allen letter will recall that it is described as a "national disgrace". However, we need to remember that 10 years ago Germany started from a similar position and already, this year, it has exceeded its 2010 targets. It now delivers more than 14 per cent. of its energy from renewable sources, and it has made a step-change transition within the same sort of period that we will have to make one. None of those achievements is outside our reach; the question is whether the achievements are outside our vision. Do we have the political will to make the shift?
I fully support new clause 4. I wonder whether my hon. Friend agrees that Germany has gone down that road not just because of climate change or for environmental reasons, but because it wanted a new industrial strategy for creating jobs, wealth and exports without breaching EU state aid rules. Has it not squared the circle?
It has squared the circle. When we address costs, it is important that we recognise the phenomenal savings associated with a shift to a feed-in tariff system, and the economic gains that come with it. Germany is an astonishing exemplar of that.
I paid tribute to organisations outside this House for their support for the new clause. I also want to pay tribute to support that I have had from within the House. More than 100 of my Labour colleagues have added their names to early-day motion 890, which stands in my name. The collaboration on this matter involves all the Opposition parties, including the minority parties. Every single party has come together behind this new clause—it has the blessing of an almost unanimous House.
I say "almost" because we come to the stumbling block: the Department for Business, Enterprise and Regulatory Reform. So far, we have been unable to persuade the Minister or the civil servants to take the revolutionary step of returning to the House within one year of the passage of this Bill with proposals for feed-in tariff regulations that relate to renewable electricity, heat and gas. I find that sad, because the Government will have it do it anyway. There is a commitment to conduct a review of the microgeneration strategy, and that must report back in six months. During the French presidency, the UK's 15 per cent. target will be defined. Britain will not be allowed to pay someone else to do the job for us—we must do it ourselves. The matter will be forced back on our agenda, and we must determine the policy mechanisms that will allow us to deliver.
The principal objections that I have heard so far to the new clause are fairly spurious. It is claimed that feed-in tariffs are expensive and that their adoption would somehow mess up the success of the renewables obligation, which Britain introduced six years ago. I shall try to deal with those objections.
First, those who have been involved in discussions with the German Government do not understand the claims that the feed-in tariff system is expensive. It is less expensive than the intervention measures that the UK Government introduced and are currently in place but which have delivered little. The figures from the German Government for feed-in tariff costs last year show that they contribute approximately €35—about £25—to the average German household energy bill. If we total the current UK intervention measures—the climate change levy, climate change agreements, the renewables obligation, the carbon emissions reduction target, contributions from the energy industry and the emissions trading scheme—they add more than £150 to the average UK household energy bill and deliver next to nothing.
The claims that the new clause will mess up the renewables obligation do not stand up either. We could continue with it and the Minister would be free to return in a year with a scheme that did not intrude on support for developing offshore wind, but allowed for a much more imaginative feed-in tariff system relating to a series of initiatives for decentralised energy provision, without which we almost certainly cannot deliver our eco town or eco city aspirations. None is deliverable without a more serious engagement with decentralised energy and a feed-in tariff system.
The renewables obligation needs to be judged on its record. The Minister sent a letter to parliamentary colleagues spelling out how, within six years of its introduction, the renewables obligation has been responsible for generating capacity of 2 GWe. That is the same amount as Germany delivers every year from its onshore wind installations alone. Our record is not one of dynamic achievement and growth. Indeed, the international assessment and that of the Audit Commission suggests that the renewables obligation has historically been an expensive mechanism for delivering little apart from big subsidies to existing energy companies. To break out of that trap, we need to engage with mechanisms that have a track record of working.
My hon. Friend and colleague Colin Challen pointed out that the Germans have not taken action simply to be ecologically pure, but have also been driven by clear economic self-interest. One of the architects of the German scheme, a politician called Herman Scheer, has twice been to the House of Commons to try to discuss the precise economics with parliamentarians. One can summarise it simply: since the introduction of the feed-in tariff legislation nearly four years ago, Germany has created 250,000 new jobs in the renewable energy sector. That industry has a turnover of almost £25 billion. Germany is considering setting its own targets, which double the 2020 commitments of 20 per cent. of energy coming from renewable sources because it is already well ahead of the game.
Far from the feed-in tariff system costing the German Exchequer money, reports to the federal Government last December pointed out the huge gains through the sector's driving reductions of energy charges into the system.
Moreover, talking to German citizens makes one realise that a momentum has been unleashed that we would do well to understand and encourage here. I have visited several German cities to examine the operation of feed-in tariff systems. When I asked the mayors what their biggest problem was, they replied, "Keeping up with citizens' demand." Such is the momentum that, in the previous German elections, not one political party would countenance revoking feed-in tariff legislation because that would have been an act of political suicide. The current joke is that Germans will put a solar panel on anything that does not move. If a dog is asleep in a garden for half an hour, it will wake up with a solar panel on its back.
In Munich alone, there are 1,200 citizens' solar clubs. The momentum gains pace, driving down the unit cost of solar installations and driving up the proportion of energy that renewable sources provide.
I discussed the matter in last year's Budget debate with my right hon. Friend Mr. Timms when he was a Treasury Minister, and it was suggested that the scheme was contentious and unpopular in Germany. I asked the German Government whether that was the case and they said that it was not unpopular with the public or the political parties but that there had been some trouble with the energy companies. In the previous year, the federal Government or municipal government had to take energy companies to court on approximately 150 occasions for failure to comply with the law. On each occasion, the public won and the energy companies lost. Energy company interests were the most contentious part of the programme. That is a lesson for us in the UK. We have found ourselves too deeply enmeshed in the large-scale corporate interests of a feeding system for the big energy companies, which has not necessarily fed the momentum for change to renewable energy systems throughout the UK.
Fortunately, none of the challenges in Germany about state aid and market distortion was upheld by the courts. The European Court ruled that the feed-in tariff system constituted a perfectly legitimate way to create a dynamic market with a different competitor base. I believe that we must make that intellectual shift.
However, the debate goes beyond traditional terms. The focus has mainly been on electricity generation. Friends of the Earth, the Renewable Energy Association and other non-governmental organisations put a wonderful advert in the national newspapers last week. It tried to capture the contrasts between the UK and Germany through a different perception of our traditional Anglo-German rivalry. It depicted a mythical Euro solar league, with a shoot-out. There was a goal with lots of footballs in the back, an England goalkeeper in a state of despair and a scoreboard that read, "Germany 200, England 1". That is the ratio—200:1—of installed solar generating capacity between the two countries. [ Interruption. ] Yes, there was mention of 1966.
If we widen the focus, the comparisons are even starker. We do just as badly in other aspects of the renewable energy sectors. By the end of 2007, the UK had installed approximately 80,000 solar thermal energy units; in contrast, Germany had more than 1 million. By the end of 2007, the UK had installed approximately 1,000 heat pumps, while Germany installed 44,000 heat pumps in 2006 alone. The contrast in solar photovoltaic energy is between around 2,500 solar roofs in this country and 300,000 in Germany. The UK has 150 wood pellet boilers and Germany has 70,000, while the UK has 17 biogas plants and Germany has 3,800. All that has happened relatively recently, in the past three to four years.
I want to widen the focus of the debate from just electricity to what we do about renewable heat and renewable biogas. We had a public meeting on that last night. Some interest was generated when it was announced that BERR had a team on heat. [ Laughter. ] Eyes watered and people made discreet inquiries about what exactly that meant. That team is looking into the issue.
Let me address the practicalities of what is already done through feed-in tariff regulations in Germany in those 3,800 biogas plants. Essentially, in our system in the UK, the only way someone trying to reclaim methane from waste—whether it be food, farm or animal waste, or sewage—can receive any assistance or recognition is if the waste is converted into energy at the plant. That means that the producers of the energy are left with heat at a remote location and huge infrastructure costs in transmitting heat back into the towns or cities where the waste came from.
The Germans said, "Why waste all that effort in creating the ducting for heat? Why don't we just put it back into the system as gas and allow people to take the credit at the point at which they convert the gas back into energy?" The Germans allow that process to take place at combined heat and power plants that are located in the communities that provide the waste in the first place.
The scope for that process is vast. To put it in context, half the food currently produced in the UK ends up as food waste. A study conducted in Germany at the end of last year calculated that if, at the European level, we used food, farm and animal waste, and perhaps even sewage, for the production of biomethane that we then fed back into our gas systems, by 2020 the entire EU could be economically non-dependent on Russian gas. That is the scale of what is possible. However, we have to make the shift, by changing the rules in order to provide the incentives that will at least allow that to happen.
At a time when Centrica is already telling us that it will not be able to control future gas prices, because we now have to buy gas on an international market, which drives prices up, German companies can offer their customers gas prices that will not rise other than by the retail prices index, because that gas is being generated from their waste.
It has also been pointed out that two forms of waste come out of the biogas production process. One is a solid fuel waste, which is a farm-grade fertiliser, which the companies are supplying back to the farms. Again, we should bear in mind that fertiliser prices doubled for UK farmers last year alone. The ability to supply fertiliser back to our farmers has an economic virtue in itself. The second form of waste is a liquid waste, which turns out to be a biofuel. The Germans are using that biofuel to drive the vehicles to collect the waste from people's houses in the first place.
That is the sort of virtuous circle that is unleashed as a result of making that shift. The sense of empowerment in the process is driven by that community involvement. Hermann Scheer made an additional point, to which the Minister and the Treasury ought to show some sensitivity. More than 90 per cent. of investment in the renewables process in Germany comes from individuals, communities, public authorities and the business sector. Why? Because they can all be stakeholders in the process and because they receive payments from it.
We have locked ourselves into a system in which those who are willing to go down that path refuse to do so without Government subsidy. However, the Germans and almost 50 other countries are showing that it is possible to make the change in a completely different way—one that makes little or no impact on the Exchequer and delivers huge savings and growth in the economy as a whole.
As my hon. Friend knows, I raised this issue in Committee. The Government's response was twofold: first, that there is a pressure problem in feeding biogas into the British mains system; secondly, that biogas has impurities that have to be removed. Has he studied those two issues in the German context, and what can he tell our hon. Friend the Minister about them?
I have indeed looked into the problem. The German biogas plants have said that they need over 91 per cent. purity to meet the purity standards for biomethane. However, they are delivering methane into the system at 95 per cent. purity, so purity is just not an issue. Accessing the system is a relatively minor technical problem. The greater problem is a political problem and concerns whether we should require the system to be open to inputs in the way that the German system is. The key is an acceptance of the need for a progressive shift to decentralised energy systems.
The economic arguments against feed-in tariffs do not stack up. I have repeatedly asked the Minister and the Departments to come up with the figures to justify that. I am happy to have them tested against other, international experience of doing what we are told is not possible in Britain. So far I have not had that evidence, but if we are making a claim, we ought to stand it up to be tested.
Is my hon. Friend aware that utility companies such as Anglian Water in my constituency, which has a sewerage plant outside the constituency, are taking steps of the kind that he describes, which are making a difference? However, Anglian Water feels that the renewables obligation certificates system, current arrangements and incentives work against its developing in that way, and that it would need some kind of incentive, of the type described in the new clause, to take that work forward. Such companies, which operate at a bigger level than microgeneration, need some form of incentive to encourage that kind of work, which they want to do.
I understand that. The problem is that such companies would lose their entitlements to ROCs if they were to put the gas back into the system and take it out where it is needed, yet that is the most coherent way of doing this. There has to be a change of rules.
It is important that the House understands that the potential gains apply far more widely than just to the big energy generators. We brought some of the German companies across to talk to communities in the UK. Some of them are able to say, in relation to some areas, "Not only will we build the biodigester plant for free, in exchange for a 10 or 15-year contract to reprocess the waste, but we will enter into partnership agreements with the citizens who are our customers. If they supply the waste, we will pay them for it and convert it back into energy." That is what the feed-in tariff allows them to do. It allows citizens to become the drivers of the agenda for change. What is more, it delivers change on a scale to which the UK does not even aspire. In Germany, last year, that measure alone delivered 97 million tonnes of carbon savings. That is 10 times the UK's aspirational target, which we are nowhere near delivering. Perhaps we do not have big enough dreams.
Does my hon. Friend accept that different forms of incentive are needed to ensure that renewable gas is either put into the system—which I think is the right way forward—or used in a way other than indirectly to get ROCs by generating electricity? Such incentives either already exist under the current RO system or could easily be organised using a feed-in tariff that would apply primarily to microgeneration. Does he think that either a renewable gas obligation or some form of obligation concerning the efficient use of heat would be appropriate?
That is a legitimate point to address. One of the great virtues of the new clause is that it gives the Minister and the Government a year in which to address the specifics. There is nothing to bind the Minister to a particular scheme or set of thresholds. Indeed, it invites him to explore as widely as possible what are the most appropriate ways of dealing with renewable electricity, heat and gas. It is an invitation to come up with the most appropriate schemes. I cannot see why there is a reluctance to engage with that, given that the only commitment that is required is to say that we will come back within a year with something that will deliver change, rather than continually consult on the process.
In his suggestion, will my hon. Friend make it clear that his definition of biofuels involves the use of food waste, farm waste and other forms of waste to generate gas with which to generate energy, rather than crop-related biofuels, which are very damaging to food supplies in general?
Absolutely. It is important to recognise that we should not go down such a damaging path. The displacement of food production from agricultural land for fuel-based production would be disastrous. We can address the issue by managing our waste. For those who have missed that dimension of the issue, it is worth pointing out that when the 2010 EU directive on landfill comes into effect, the UK could end up with a daily bill of £300,000 under our current waste framework, because we have not come up with solutions to deal with our present waste levels. The proposal offers all sorts of ways out of the problem.
On that very point, does the hon. Gentleman agree that there is some confusion among the agricultural community? At one point they were encouraged to grow alternative crops in order to feed the fuel need, but they are now being told that that is the wrong thing to do. I appreciate that the hon. Gentleman is talking about something marginally different, but this is a very significant point, because the agricultural community is now in limbo, not knowing whether to grow those crops or not.
That is a perfectly valid point, but again I would draw colleagues' attention back to the comparison with Germany, where the farmers are part of this process. Some farmers grow crops and have solar panels; some farmers rear livestock and have solar panels; some have set-aside and solar panels. Huge amounts of renewable energy from the sun are thus coming from the farms and farmers of Germany. If we are examining the dynamics of a rural agenda to address both food and energy security, all the lessons in how to do so are there within the feed-in tariff structure that is already in place in Germany.
Let me finish with this point. The great message that I want the Minister to hear is that all parties throughout the House have stood solidly alongside each other on this issue, inviting the Government and the Minister to take hold of the reins and give a lead in the knowledge that there will be no political division. There should be no political division, particularly around an issue that the Government will in any case be forced to accept within a year. My concern is that I want to be part of a Labour Government who do not have to be dragged kicking and screaming into the present, let alone the future. That is why I ask the Minister yet again to take over the ownership of the new clause and incorporate it into the Bill, to continue the process of taking forward an issue that unites the whole House, and probably the whole country, in a real dynamic that will give us a sustainable energy future.
I begin by paying tribute to Alan Simpson both for tabling the new clause and for the immensely authoritative way in which he introduced it. He spoke about the importance of having Lily Allen and other celebrity endorsement. For many people, however, he is the star of this debate—[Hon. Members: "Hear, hear."] He has been the driving force, putting the issue on the agenda so that it is no longer peripheral but absolutely mainstream to the whole energy debate.
As the hon. Gentleman said, we need to see the issue against the background of the immense challenge we face. If we are to come close to the European target of getting 20 per cent. of our energy from renewables by 2020, it translates into securing about 40 per cent. of our electricity generation from renewables. That is an immense challenge, but given our overall needs for renewable energy, not just electricity, it is a huge mountain that we have to climb. If we are to succeed, we need every bit of help we can get. It means having onshore and offshore wind; it means exploring the potential of the Severn barrage.
On Monday, I was looking at the barrage in La Rance in France to see what lessons we can learn from it. We need to look into biomass, solar, thermal and ground sources, air source and heat pumps, and we need to look fundamentally at microgeneration. Our vision should be to make as many households as possible not consumers but generators of electricity. That is the nub of the whole debate.
Ten years ago, the UK and Germany started from the same low base in respect of generating electricity from renewables. Today, whereas we get 2 per cent. of our energy from renewables, Germany gets 8.5 per cent. That was a 1 per cent. increase in just one year in the amount of energy Germany gets from renewables—the same amount that we got over a 10-year period. The key to Germany's success was the adoption of feed-in tariffs, which helped to drive the programme forward. There should be no doubt that the issue is of interest to more people than just politicians. There is widespread political interest in it, but all the experts in the sector looking at the issue from outside are also pushing in this direction. Today, Terry Barker, director of the Cambridge centre for climate change, which is engaged in mitigation research, and other experts published a letter in the Financial Times. It says:
"The policies of the UK government to support the development of renewable energy have seen it become one of the worst-performing countries in Europe and stand no chance of getting the UK to meeting its share of the EU target.
We urge the government to adopt a feed-in tariff policy, which has proved so successful in other countries."
The Energy Saving Trust, set up by the Government, has said:
"We would welcome enabling measures in the Bill to introduce a feed in tariff and signal the Government's positive approach to encouraging domestic microgeneration."
Solarcentury, which has campaigned effectively on the issue, has said:
"Throughout Europe, renewable energy feed-in tariffs are a proven and cost effective measure for promoting the rapid uptake of wind, solar, biomass and other technologies. Feed-in tariffs are the principal support mechanism for renewable energy in 22 European countries."
The National Farmers Union has also given us advice and support.
The key point is that the new clause does not adopt a prescriptive approach. It is an enabling measure which allows the fundamental decisions to be made elsewhere, and by the Minister in due course. A submission that we received from the Renewable Energy Association states:
"At this stage Clause 4 only commits the Secretary of State to the establishment of a reward scheme for metered renewable energy and to do so within one year. The Clause leaves open until after consultation the detail of how a metered UK tariff would work, which scale and types of renewable technology would qualify and the level of any Tariff.
It is intended that the Tariff works alongside the Renewable Obligation", so we need not be specific at this stage.
My right hon. Friend is absolutely right. There is no specific provision in the new clause requiring that distinction to be made. Some would argue that a feed-in tariff would be appropriate for larger-scale generation. I think that the renewables obligation works well to encourage both kinds of generation and that we could run the two systems side by side, but nothing in the new clause requires such a decision to be made. The aim must be to achieve the optimal combination from different sources of power. In Germany, private individuals and investors are responsible for 90 per cent. of the investment in renewables, and just 10 per cent. of the investment comes from the major energy companies. In this country, the situation is not reversed; it is even worse than that.
Someone who erected four 10 m high wind turbines at a capital cost of £35,000 could put 16,000 kW back into the grid and receive an annual payback of £500 a year. There is no incentive inherent in that. Does my hon. Friend agree that if we genuinely want everyone to attempt to produce energy from renewable sources, we must move towards the German, or continental, model and provide incentives? Otherwise people will simply give up.
The current system provides no incentive, although there is tremendous enthusiasm. At a meeting that I attended in my constituency recently, about 50 people were asked how many of them generated their own heat and electricity. About three hands went up. When they were asked how many would be interested in doing so, every hand went up. There is an enormous appetite for renewable generation. What is holding people back is the lack of the predictable income stream that could be achieved through feed-in tariffs.
I am conscious of the time and I know that others wish to speak, so I shall not prolong the debate. However, I want the hon. Member for Nottingham, South to know that we strongly support his new clause and will vote for it if he pushes it to a Division, because we consider it a crucial part of our attempt to enable this aspect of the energy debate to take off.
I have tabled a new clause and an amendment. New clause 17 concerns the way in which moneys are looked after. Before the renewables obligation, renewable developments were funded under contract to the Non-Fossil Purchasing Agency. The NFPA continues to operate contracts for existing developments. It auctions the renewables obligation certificates and renewables levy exemption certificates that arise from them, and uses the proceeds to service the contracts.
Over time a surplus has built up, as the value of the ROCs and LECs has exceeded the cost of managing the contracts. Clearly that surplus has been contributed by customers for the purpose of renewables development. At present, however, that money simply sits on the Chancellor's balance sheet as yet another stealth tax. That was recognised in the Sustainable Energy Act 2003, which provided for £60 million of the surplus to be spent on renewable energy. That funded the grants for round 1 of offshore wind and it has been fully spent. However, some £180 million is currently sitting unused in the surplus account. It could be used to help to develop renewables, especially from market technologies that are further away from development at present, such as marine. The measure I propose would remove the statutory bar that prevents that money from being spent for the purposes for which consumers paid it. It gives the Government an option, but not a duty, to direct that that money is spent rather than treated as a hidden reserve. I hope the Minister will accept it as a step in the right direction.
Amendment No. 65—which we will return to, particularly in another place—addresses the Government's responsibilities to report. The Bill as it stands proposes a reduction in such Government responsibilities in these areas. If it is enacted, the Government will no longer need to report on the following: what is being done on a range of specified energy sources, particularly renewables and microgeneration; measures being taken to ensure that the necessary expertise is available; and what is being done to achieve their energy efficiency aims, as required under the 2003 Act.
The Bill also gives scope for changing the reporting periods. In future, reports might cover not a whole year but more than or less than a year. At a time when we are trying to get people more involved in these issues, reducing the reporting requirement on the Government is a step in the wrong direction. We want people to have more information and a better understanding of the issues.
The Government are currently trying to take matters in the wrong direction. They have resisted our attempts to get more information on gas storage availability, which is a crucial part of our energy security. They have resisted our attempts to make sure we have a better understanding of the skills base, which is particularly needed in order to build new-build nuclear power stations. They have resisted our attempts to make sure that there is a better understanding of what is being done to tackle fuel poverty. They have resisted measures for consumers to be told how much of their money is going on environmental taxes. We will pursue this matter further.
The key issue in this entire Report stage is feed-in tariffs. The hon. Member for Nottingham, South set that out extremely eloquently in introducing his new clause. We will support him today. It is crucial that we push this forward as a way of making microgeneration not just an aspiration in this country but a reality—and one that we can deliver now, so that we do not end up asking in 10 years' time, "Why didn't we start that earlier?"
I support the idea of having a feed-in tariff, particularly for microgeneration, because it is important to distinguish between different forms of incentive for various kinds of generation—large and small generation and microgeneration. As this debate progresses—with increasing urgency, I hope— questions must also be asked about incentives to make sure that heat is used efficiently and that biogas comes on stream as a substantial element of our power mix.
In Committee, I moved a new clause on feed-in tariffs, which I particularly wanted to be considered in the context of microgeneration. I did not press it to a Division, in part because of the response that was received in Committee.
On feed-in tariffs, it is important to be clear about what we want to do in future concerning incentives for microgeneration—which, as my hon. Friend Alan Simpson mentioned, will inevitably be an increasingly important part of our energy mix. Indeed, the Energy Saving Trust suggested that by 2050 some 30 per cent. of our total electricity supply could be provided, in one way or another, by smaller-scale generation or microgeneration: by individuals or communities placing the surplus that they have gained from generation in their homes or communities in the grid, thereby adding to the total amount of power available to the general population. We must consider what kind of incentive is the most useful and important in securing that move forward. What will ensure that large amount of renewable generation at all levels, which will ensure that input across a more distributed electricity grid?
I have some experience in this area because I am in the process of installing a solar photovoltaic roof on my house. I hope that it will generate 3 kW of electricity. I mentioned in Committee that I had not gone down the grant route, but I am delighted to tell the House that I subsequently applied for a grant and it was instantly accepted, in what was one of the most speedy turnarounds of any piece of Government bureaucracy that I have ever encountered: within a day of my applying for the grant, I received a message on my computer telling me that my application had been accepted. Even so, the grant will subsidise only a small proportion of the total cost of my solar photovoltaic installation.
I may receive a renewables obligation certificate for my generation, but I want to know what I will get for the surplus that I export from my house now. That is a different form of motivation from the one that large energy generators thinking of investing in renewables will have at the front of their minds. They will want to know what the market will be like by the time they have considered and completed their investment and taken part in the build, and their investment, whatever it might be, is ready to produce for the market. They will also want to know what the market will be like during the life of that particular investment. Thus, they will want to know, among other things, that the market will be stable over a considerable period of time.
That is one of the key considerations in ensuring that renewables obligations have the right banding in terms of generation. We have discussed that issue during the passage of the Bill and there was no disagreement about it in Committee from any side. We must also consider over what period that obligation exists and, indeed, what headroom will exist in respect of the obligation to ensure that the pull through continues. That matter was also discussed in Committee.
Large generators will take considerable cognisance of all those issues. There is considerable evidence to suggest that although the emplacement of large-scale renewables facilities has lagged in this country for particular historical reasons, the installation of large-scale offshore wind facilities is proceeding rapidly. That is due, at least in part, to the security that the renewables obligation gives those installations and to the idea that they will therefore be able to export their product over a considerable period of time with the support of the renewables obligation behind them. As far as large-scale generation is concerned, it appears to me that the renewables obligation has begun to have a considerable effect.
Why during its first six years did the renewables obligation not encourage large-scale offshore wind power? Nothing has changed in the North sea and nothing has changed in the renewables obligation, so what has happened suddenly, after six years? Why is it such an ineffective mechanism that it took six years to have an impact? That has to be compared with the rapid progress that has been made in Germany.
The hon. Gentleman makes a valid point about the progress of the installation of larger-scale renewable generation, but the picture in the UK is complex. It relates partly to incentives and partly to planning permission. The record of several authorities—I shall not mention which party is in control in those areas because that would be otiose as far as this debate is concerned—for uncertainty when it comes to planning applications has been a factor in the rate of progress of installations.
Another substantial factor, which I attempted to address in Committee, is the issue of connections to the grid. At the moment, there is a substantial delay to projects that already have investment agreement and, in some cases, planning agreement because they do not have a reliable time for connection to the grid and, therefore, they do not have the ability to make money from the electricity they are exporting.
The Government have now been in power for 10 years. Does the hon. Gentleman agree that if they had wanted to be at the forefront of this change they would have overcome all these hurdles of connectivity to the grid, planning permission and other issues, as have other European countries such as Germany? We have had a complete absence of leadership on this and we are now beginning to pay the price.
Moving as rapidly as we would want from the position that the UK was in, for particular reasons relating to the source of its energy supplies and the choices that it made historically about those sources—and therefore the mechanism by which those supplies would be delivered—to where we know we have to get to in the near future with regard to the proportion of energy supply that comes from renewables sources, has been a considerable challenge, and will remain so. It is true that the planning environment has not helped in that process. The Planning Bill will address some of the issues of larger-scale renewable power stations and the Marine Bill, which will be introduced later this year, will provide a single permission regime for offshore generation. So things are changing, and so will the circumstances in which large-scale renewable sources operate.
It is true that if we take all the investment proposals for both onshore and offshore installations that are in the pipeline, that are consented but awaiting build, or that have everything in place but no date yet for connection, the total amount of electricity generation represented is getting on towards filling the gap in power supply that we need to fill over the next few years. That represents a substantial change in large-scale electricity supply.
There are therefore several different factors affecting the development of large-scale renewable installations, one of which is the nature of the incentive for investment in the first place. The renewables obligation has generally worked relatively well to bring those investment decisions forward. However, the renewables obligation has barely touched microgeneration. As I have demonstrated, it is not a particular incentive for those who are developing microgeneration. A feed-in tariff would be a much better incentive in that area. The issue that we would then have to address, which is central to my concerns, is that we are not in a position to build incentives on a tabula rasa. We have a series of existing arrangements for developing power and the importation of renewable electricity that are based on the renewables obligation. If we chucked all those arrangements out of the window and went for a universal feed-in tariff tomorrow, that would fundamentally disrupt a number of the investment decisions on larger-scale electricity generation. In fact, large-scale electricity generation would be put in reverse.
It is important not only to get the feed-in tariff right, but to get the tariff's application right. If we are thinking along the lines of introducing such a tariff, it is important to get its nature right, particularly as regards microgeneration. Should a feed-in tariff be based on the total production undertaken by a microgenerator? Should it be a net tariff based on what the microgenerator exports? Should it be an estimated tariff as a proportion of the total invested? A number of different instruments could be used depending on what is decided.
The way in which the feed-in tariff works in Germany has led to a few perverse consequences, although I agree with my hon. Friend the Member for Nottingham, South that it has been immensely positive in terms of drawing through microgeneration. However, those who install solar photovoltaic panels export all the electricity generated from those panels into the grid, take a feed-in tariff for that and then buy all their domestic electricity from the grid. The perverse consequence of that is the lack of interchange between what those people produce from the panels on their roof and what they consume in their houses.
It seems to me that one of the purposes of engaging in the development of microgeneration, particularly microgeneration that is locally sourced and distributed, is that there should be a relationship between the electricity consumed in the house and that produced by the roof panels. If the system does not connect the two, part of the purpose of such microgeneration is missed. That might be an accidental consequence, but it results from the design and operation of the feed-in tariff.
It is important that we get any feed-in tariff right, because I agree with my hon. Friend the Member for Nottingham, South that such a tariff is almost inevitable. It seems that there is no better way to move microgeneration to the next phase of implementation than some form of feed-in tariff. However, we need to consider different incentives, for example on renewable heat and gas, and to be clear about how they apply.
After I moved my clause in Committee, I was encouraged to hear my hon. Friend the Minister suggest that the idea of a microgeneration feed-in tariff in particular would be one of the subjects of a review this summer. It is fair to say that he has developed that policy since the Committee sat. The question for the House, as it was in Committee, is whether the amendment or a similar one should be left on the table or whether we should go for a vote. In order to ensure that we get things right and undertake the consultation over this summer that was suggested by my hon. Friend, the amendment should remain on the table—it should not be withdrawn and never heard of again. There should be an understanding that we will have to go in this direction, so it is important that we get that direction right, that the review is completed quickly and that the mechanism for getting microgeneration right in the UK is implemented.
I hope that the review will be the subject of a further energy Bill next year, as has been widely suggested. That Bill should deal with questions such as how we obligate and implement action on renewable heat and make sure that the present escape into the air of heat that has no energy output is covered by an obligation system. Energy companies should be obliged to do something with that heat, or suffer a penalty for not doing so.
I should like to join in the congratulations to Alan Simpson on bringing forward new clause 4, and on the elegant and persuasive way in which he proposed it. I am happy and honoured to be one of the new clause's co-signatories.
The hon. Member for Nottingham, South has gathered an extraordinary coalition to support new clause 4. At the last count, 276 hon. Members had signed the early-day motion, and the hon. Gentleman has managed to unite Mr. Redwood at one extreme with Mr. Galloway at the other—something that must be virtually unique. He has also brought the National Farmers Union together with Greenpeace, and the TUC with the Country Land and Business Association, and he has generated wide support in the renewable energy sector.
For me personally, though, the icing on the cake is that the hon. Member for Nottingham, South has got the support of Lily Allen. That is extremely welcome: I am sure that he will agree that "All Right Still" is a work of genius, and that "Lily and Friends" is a much underrated show. If the Minister were to accept new clause 4, I am sure that the hon. Gentleman would put in a good word, so it is possible that we will see the Minister on Lily's sofa before too long. That would be great.
More seriously, the Government's direction of travel on this matter has been positive, but once again it seems to be leading us towards more consultation, and possibly yet another energy Bill. The Government seem reluctant to accept even the modest and flexible powers set out in new clause 4. Oppositions are quick enough to criticise Ministers who want to take on too much power, but this Minister should seize this opportunity to be praised from all sides of the House for taking on at least some powers that we all want him to have.
More delay would be a serious concern, as it would mean that we would drift on with this matter into 2009 or 2010, with further primary or secondary legislation—perhaps both—needing to be discussed. The question is why would we need to delay further, when so much work has been done already?
The Government commissioned a world-leading piece of work to analyse policies for climate change mitigation in detail. It is called the Stern report, and it addresses the question of feed-in tariffs in some detail. Stern says:
"Comparisons between deployment support through tradable quotas— in other words, the sort that we have already—
"and feed-in tariff price support suggest that feed-in mechanisms achieve larger deployment at lower costs. Central to this is the assurance of long-term price guarantees...the levels of deployment are much greater in the German scheme and the prices are lower than comparable tradable support mechanisms".
Stern goes on to say:
"Contrary to criticisms of the feed-in tariff, analysis suggests that competition is greater than in the UK Renewable Obligations Certificate scheme. These benefits are logical as...uncertainty...discourages investment and increases the cost of capital as the risks associated with the uncertain rewards require greater rewards."
In other words, the price guarantee delivered by feed-in tariffs offers a better environment for investment. The investment that has been delivered in Germany is striking, as it has engaged a far wider array of investors than the traditional energy companies. The Renewable Energy Association has pointed out that just 10 per cent. of investment in the German feed-in tariff scheme has come from the major energy companies, while 90 per cent. has come from private individuals, private investors and municipal energy companies.
That is a remarkable opportunity and a key part of the success of the German scheme. That is why the German Federal Environment Ministry expects the scheme to save 52 millions tonnes of CO2 in 2010 alone, and why Germany has 10 times more wind power than us, according to Greenpeace, and 300 times more solar power. That is why Germany benefits from 170,000 people working in the renewable energy sector, which is worth €8.7 billion to its economy.
If Stern is not enough, there is further Government-commissioned advice. Their specialist low-carbon technology agency, the Carbon Trust, has also addressed feed-in tariffs. Its July 2006 report said:
"The most efficient solution in terms of cost per unit of energy and achieving maximum offshore wind capacity by 2015 involves moving away from the current RO towards a fixed mechanism... Feed-in tariffs have been proven to be successful elsewhere (Spain and Germany) in generating significant deployment of low-cost renewable energy. The analysis suggests that a Renewable Development Premium"— a feed-in tariff—
"in the UK will result in 8.8GW of additional wind capacity by 2015, when combined with additional funding... This is c.3.5GW more wind capacity than the base case representing the current RO policy".
"Germany has benefited from a consistently supportive policy for renewables since the early 1990s, and it is paying dividends. That clarity and consistency of approach has been a big part of Germany's success, which we celebrate with our German colleagues...UK renewables investors have highlighted certainty and consistency as two of the factors that will be crucial to continued and rapid growth and development of renewables in the UK."—[ Hansard, 22 January 2008; Vol. 470, c. 1368.]
There are differences between the German and British energy markets; for example, we have a more deregulated and liberalised market. However, if the hon. Gentleman is suggesting that we should move towards the German model much more quickly, I entirely agree.
I give due credit to the Minister because, in Committee, he seemed to be moving in the direction of feed-in tariffs. However, in the words of the hon. Member for Nottingham, South, we need quickly to unleash much greater momentum. I am afraid that the Minister must move considerably faster, and new clause 4 is the method by which he can do that.
The hon. Gentleman is right that the Minister was encouraging in Committee about feed-in tariffs. However, does he agree that the renewable obligation and feed-in tariffs can work in tandem? Given that, surely careful thought is needed about how they can be introduced so that those things work together effectively.
I agree absolutely. During the Committee's evidence sessions, we specifically asked several expert witnesses whether the renewables obligation could continue alongside the introduction of feed-in tariffs, and the consistent view was that it could. Care must be taken with the introduction of such tariffs, but that is why the hon. Member for Nottingham, South has wisely included a provision in the new clause for a 12-month lead-in time. If that is not enough, we are doing something fundamentally wrong. If the Minister accepts new clause 4, he can really start to put his foot on the accelerator, if that is not an inappropriate phrase for a low-carbon debate.
Let me touch on several other measures in the group. New clause 11 was tabled by my hon. Friend Mr. Heath and my neighbour, Mr. Drew, who has been a controversial figure today, although he can make many welcome contributions to the green debate. New clause 11 highlights a problem with not only hydro-microgeneration, but the 50 kW definition for microgeneration, which is causing arguments in the wind energy sector. We need a flexible and adaptable approach to renewable energy that recognises real opportunities such as those offered by micro-hydro. It would be wonderful to see a traditional and highly environmentally-friendly form of energy coming back into wider use in a new and modern form, so I welcome new clause 11.
I also welcome the Conservatives' new clause 17, which, as I understand it, would raise the cap on the amount that the Government can spend on promoting renewable energy. That reflects the fact that surplus funds are building up at the Non-Fossil Purchasing Agency. Amendment No. 1, tabled by Mr. Weir, touches on an important issue raised by my hon. Friend John Thurso. There is genuine concern that innovative businesses in renewable energy may be put in an impossible financial situation. I am sympathetic to the issues raised by my hon. Friend and the hon. Member for Angus.
New clauses 20 and 21 and amendment No. 65 are welcome improvements to the Bill, and we would happily support them. Indeed, amendment No. 65 appears to be modelled on a Liberal Democrat amendment tabled in Committee. The amendment is designed, as Charles Hendry rightly pointed out, to keep Government reporting to fixed timetables, and to ensure that reporting is clearly focused on the Government's progress in supporting renewable energy. That is needed more than ever. Renewable energy offers us the opportunity to have many new, clean sources of power, to have a more efficient, decentralised and resilient energy system, and to make an important contribution to the battle against climate change.
The Government need to grasp the urgency of the situation. I would love to quote a lyric from the Lily Allen song "Alfie" that sums up exactly what is needed, but it would certainly be unparliamentary language. The gist of it is that there is an urgent need to dismiss distractions and get on with what really needs to be done. I agree with the hon. Member for Wealden that new clause 4 is the single most important opportunity to ensure that that happens that we are being offered today.
I will not detain the House long. I have been struck by the fact that, as I am opposed to nuclear power being developed, I face the discipline of having to consider all the other forms of energy that might make up an efficient energy mix in future. I have considered what my hon. Friend Alan Simpson said about feed-in tariffs; he explained better than I could that they are efficient, help to ensure security of supply, and help to produce a plurality in the energy market that would otherwise not be there.
I am also struck by the idea that if we are not careful we will construct a process that is very much in the hands of big power, whether that is nuclear power or any of the array of providers that will be in place. The process that my hon. Friend outlined involves a democratisation of the argument; I wish that he had said a bit more about that. New clause 4 would bring local people into the process in a different way, and would produce a plurality in the market that could generate efficiency. To people who are interested in competition, I add that it would create greater, better and efficient competition.
Some of my hon. Friends are concerned about how the measures fit with the other obligations. As I understand it, new clause 4 says, "Go and consider the issue for 12 months, and come up with mechanisms that produce not conflict but co-operation and collaboration that results in the best of both worlds." I would have thought that the term, "a third way", might have been tempting for some Labour Members. The new clause also does other things: it imposes a discipline on us to ensure that what I have outlined happens. I say to my hon. Friends that the review in the summer and the other measures mentioned are necessary—in fact, they should happen in any event; they are just matters of efficiency—but if the new clause is added to the Bill, it will provide the discipline that will ensure that things happen in a structured way. It will give the House the capacity to understand, monitor and control the process, so that it comes back to us.
Let me reinforce the point that the new clause is one way of ensuring that, in future, individuals can understand where they are, in terms of the consumption, supply and generation of electricity, because it allows communities to get involved, as well as individuals. It allows collective capacity; it is not just about an individual putting a windmill on their roof. The measure is about communities, planning, consent, and co-operation. To me, the democracy argument is as important as the efficiency argument.
I support new clause 4, which was so ably introduced by Alan Simpson. He said more about it than I could ever say, so I shall move on to my amendment No. 1, which is much more technical and deals with the interaction between research and development grants and renewables obligation certificates for certain projects.
There is a concern that efforts to avoid giving projects double help may put in doubt the future of some projects. That was suggested to me by those who were involved in the DOWNVInD programme, which I am told is one of the largest renewable energy research and technology development programmes in Europe. The project is funded by Talisman Energy and Scottish and Southern Energy, with significant contributions in kind from many of its 18 other participants from seven EU countries.
I understand that in addition to private capital, the project received research funding from the European Commission's sixth framework research and technology development programme, the then Department of Trade and Industry's new and renewable energy programme, and the Scottish Government's science and technology development programme. The public sector support for the project was predicated on the observation that offshore wind was an emerging technology confined to shallow near-shore waters.
The DOWNVInD programme was essential to move the offshore wind technology to deeper waters more distant from shore, and was obviously looking to the future of offshore wind. That was noted in the then DTI's grant offer letter, which stated that
"the project is high risk, and does present an opportunity to better understand the economic and technical prospects for offshore deepwater windfarms".
The problem is that, because of the way the subsections that I am seeking to delete from the Bill are written, as the project has received public sector grants, it might not be able to take up the new banded ROCs. Special arrangements will apply to projects in receipt of capital grants, but that would mean that if projects qualified for up-banding, they would have to pay back some of the research grant, as proposed new section 32E(5)(a) sets out:
"if the grant or any part of it has been paid, to repay to the Secretary of State the whole or a specified part of the grant or part before the repayment date".
The result of that would be that projects that received ROCs would have to repay grants.
I am told that the proposal was originally aimed at post-demonstration projects in receipt of capital grant, such as the round 1 offshore wind projects. However, the wording means that projects such as DOWNVInD would become subject to the regulations and would no longer be able to get ROCs. They would never be able to move beyond the demonstration stage because they would be unable to produce energy and get the benefit of ROCs.
Does the hon. Gentleman agree that although the UK is a world leader in marine energy technology, the incentives for the offshore ROCs, as opposed to the other mature technologies, are so few that they do little to incentivise the offshore technology?
Indeed. Onshore wind is now a mature technology, and that is recognised in the proposals for the new ROC bandings, where it will remain at one ROC. We need to incentivise emerging technologies such as deep-water offshore wind—but not only wind technologies. Martin Horwood mentioned the concerns of his hon. Friend John Thurso about tidal projects in the Pentland firth, which have huge potential but need the capital funds for research and development in the first stage. If they are to produce electricity, they need access to the ROC procedure. However, under the provisions as written, that would not happen. I ask the Minister to reconsider that point and not to put at risk projects such as DOWNVInD and the tidal and wave development project in the Pentland firth. Such projects require the grants to get off the ground in the first instance, but they also need the support of ROCs, as do those involving other renewable technologies.
I turn briefly to new clause 20, which is in the name of Dr. Turner. It refers to transmission charges. It would not do for an Energy Bill to pass without my talking about such charges; I seem to have been doing that for years in this place. I support what the hon. Gentleman is trying to do. I shall be interested in what he says about the new clause; if I read it correctly, it seeks to end the discrimination in transmission charges. That has been a matter of huge concern to many of us in Scotland for many years.
Although Scotland has huge potential for renewable development, there is a problem with the transmission charges and how Ofgem has developed them. It means that there is discrimination against projects in remoter rural areas; it is considerably more expensive to transmit energy from such projects than it is from developments in, say, the south-east of England. If the intention behind the new clause is to do away with that discrimination—and I think that it is—I wholeheartedly support it. I hope that the Minister will take it on board and finally deal with the matter, so that I no longer have to stand here and talk about transmission charges and I can move on to something else.
I must confess to a grave feeling of personal disappointment with the Bill, because it is being published at a time when Parliament has thoroughly recognised the vital importance of combating climate change and, I hope, of promoting renewable energy, which is one of our most potent weapons for fighting climate change. I am disappointed because this legislative vehicle has nothing to promote renewable energy, with the exception of the banded renewables obligation certificates, which are welcome. However, that is only one measure, and we need a comprehensive policy framework. New clauses 4, 20 and 21 form part of a proposed comprehensive framework. Clause 19 would have been another part of it had it been selected by Mr. Speaker.
I should like to express my support for new clause 4. The banding of ROCs goes some way towards doing what feed-in tariffs do in Germany. However, the ROCs are still expensive to administer and still provide uncertain value; the redemption value of a ROC is not fixed, so there is still investment uncertainty. It is still worth considering feed-in tariffs not only for microgeneration, for which they are clearly the only workable approach, but as a parallel mechanism for larger, commercial-scale generation. Existing generators could elect to stay with ROCs and new generators could have the option of going either with ROCs or a new feed-in tariff system. There is no need for conflict. Another great advantage to feed-in tariffs is that they do not cost the Treasury a bean, whereas operating the ROC system is very expensive to the public purse.
I thank the hon. Gentleman for his suggestion. I was going to put that point to my hon. Friend in almost the same words when I finish.
It does not matter whether we have feed-in tariffs or ROCs, as this is not the only policy instrument that is necessary if we are to get the large-scale and rapid deployment of renewable energy that we need. That is not the sole secret of Germany's success—it is just one measure contained in the German Renewable Energy Sources Act, which also contains many other vital provisions. New clause 20 would carry out the proposed EU renewable energy directive, which is itself based on the German Act. The two most important provisions concern grid access. In this country, we have the bizarre situation whereby 15 GW of totally approved wind generation cannot get access to the grid, and will not get access for many years. That is a totally unacceptable situation that we must do something about if we are getting serious. New clause 20 proposes that there should be guaranteed access to the grid for renewable generators. If that means that the grid needs to be strengthened or reinforced or to have new lines laid, then so be it—the grid operators would have to do that. They would have to raise the capital in the normal commercial way, and Ofgem would have to approve it. That is what happens in Germany, and it works. The grid operators may grumble, but they do it.
It is no good if the generator is installed and connected if its output is not maximally used. If we want to maximise renewable energy, the output of a renewable generator should have a priority call on the grid whenever it is generating. That is the provision in the renewable energy directive and the provision that holds good in Germany under the Renewable Energy Sources Act, and that is what new clause 20 would provide. Whichever financial incentive mechanism we use, whether multi-banded ROCs or feed-in tariffs, if we do not have the facility to take the electricity and use it, it is of no value. We need a comprehensive framework.
New clause 21 is drafted with the Scottish situation in mind, as I am sure Mr. Weir—I am delighted to have his support—will remember from remarks made in the Committee considering the previous Energy Bill. When the British electricity trading and transmission arrangements were introduced in the Energy Act 2004, we got zonal transmission charges. The effect of zonal transmission charges is that a generator is penalised for its distance from a notional centre of consumption in the system. The further away the generator is, the more it pays in transmission charges. We are talking about incentives, and the incentivisation under that system would be to concentrate generation at some notional point about 50 miles north of Birmingham, where renewable resources are not at their strongest. I do not think that it is to be recommended.
The most potent bits of our magnificent renewable resources, such as offshore wind, wave and tidal stream, happen to be geographically located a long way from a central point north of Birmingham. They are also technologies that at the moment are commercially difficult because they are expensive, because of their situation and, in the case of wave and tidal stream, because they are emerging new technologies—the first commercial tidal stream machinery has only just been installed. Naturally, such technologies cannot match the cost of other generating technologies at this time. Investment decisions, therefore, will have to be finely balanced. To add 2p or 3p per kW extra in transmission charges could be the straw that breaks the camel's back, and such investment does not happen.
There is a real disincentive built in to the BETTA system. There is a mechanism for dealing with the matter in section 185 of the Energy Act, and new clause 21 would amend that. Section 185 provides for a power to cap transmission charges and the Secretary of State can do that by nominating one—only one, as the Act is currently drafted—specific zone for the production of renewable energy. However, it may be necessary to have more than one. Subsection (2) of the new clause would replace "a" with "any" so that the Secretary of State has freedom of choice. He can select any of several, or more, suitable areas to which to apply the capping powers. The other deficiency in section 185 is that it contains sunset provisions. The import of three of its subsections is that the capping protection cannot last for more than 10 years. That will not give investors any confidence in commercial stability either. I found that provision difficult to understand at the time, and equally difficult now.
Is it not also the case that 10 years is one period? It depends on when the generator starts generating in that 10-year period; for individual generators, it could be much less than 10 years.
Exactly. That is why I said a maximum of 10 years' protection. I see no justification for the sunset provisions at all, in all logic, so I wish to remove them. We would then have a reasonable protective measure that would fulfil what the Government probably intended when they drafted section 185 of the 2004 Act.
I submit to my hon. Friend the Minister that there is no reason for delay in legislating to get rapid deployment of renewable energy. We need a comprehensive set of measures; new clauses 4 and 20 are clearly central to that process. Without new clause 20, new clause 4 will not be fully effective. New clause 21 is a further addition, and new clause 19 was not selected but refers to Ofgem's responsibilities. Ofgem plays a pivotal role and if its primary responsibility is sustainability, it will make a huge difference. I will not expand on that because new clause 19 was not selected, but its purpose needs to be kept firmly in mind.
I appeal to my hon. Friend the Minister to recognise that the Government's best course is to accept new clauses 4, 20, 21 and others. There is no question of party advantage, but potential for great advantage for the country. I therefore strongly urge my hon. Friend to accept the new clause.
I want to speak about new clause 11, which deals with hydro-microgeneration. Before doing so, let me express my enthusiastic support for the new clause and the remarks of Alan Simpson. If the new clause were accepted, it would do some of what I am trying to achieve in stimulating the growth of hydro-microgeneration.
It is frustrating that we appear to spend so much time in this country hugging ourselves, congratulating ourselves and telling ourselves how wonderfully wise, green and environmentally friendly we are and that we are world beaters, when much of the outside world passes us by and gets ahead of us through mechanisms that are available to us if only we would use them. I say to Dr. Whitehead that I see no purpose in agreeing with an amendment and then letting it lie on the table. It should not lie on the table; it should be activated. The Minister would be advised to accept the new clause today.
I do not pretend that hydro-microgeneration is the answer to all our renewable energy problems—of course it is not. It is a small part of the portfolio of renewables that we need. Patently, not everybody has a house on a river with a mill. Hydro-microgeneration will not therefore be a huge contributor, but it is part of the process. I am a great believer in decentralisation and finding small solutions and putting them together to make a big difference.
Hydro-microgeneration represents a small but significant part of the renewables market. I had the great pleasure of helping to open a new facility in my constituency last year. Tellisford mill is an old water mill in a beautiful place. Anthony Battersby and his wife Rachel have done a wonderful job in investing in a new water turbine in the mill. They not only provide energy from a renewable source but are socially and environmentally aware in being good neighbours. The mill is not like some renewable energy sources, with which people have a problem. We are considering an old mill, which is being used for the same purpose for which it was used 200 years ago, and that is good. It produces renewable energy for 65 houses, which is good news.
The Mendip Power Group has a series of mills along the River Frome. When they are fully operational, they will provide 2,100 MWh, which is a significant contribution. The Mendip Power Group is one of three such groups in my immediate area. We also have the South Somerset Hydropower Group and the Stour and Vale Hydro Group, which is based in Dorset. Between Somerset and Dorset, more than 100 water turbines provide renewable energy. However, everyone involved in the process says that the difficulty of getting past the existing bureaucracy is such a disincentive that they often feel as though they are banging their heads against a brick wall. I want to illustrate and address those frustrations in my remarks.
I am pleased to co-sponsor new clause 11. Does the hon. Gentleman agree that another issue that we should examine closely is flood prevention? Much as we need to generate electricity—that is the point of new clause 11—if we get that right, we will also remove the flood risks that will inevitably follow if we do not manage the water properly.
The hon. Gentleman is right. A sensible community would manage a whole river basin in a much more sustainable way than we do now. We are trying to do that in Somerset and some other parts of the country, but that means taking energy from the river, using appropriate storage of water to prevent flooding and using the entire ecosystem in a water basin in the most effective way, so the hon. Gentleman is right.
What are the current difficulties? The Minister knows what they are, because I have written to him, as have those who operate the mills, who have also had meetings with his Department and tried to explain the issues. The principal issue is the definition of microgeneration for hydro power. We have mixed definitions of the maximum allowable in microgeneration, but the most effective one, including in respect of the renewables obligation certificate, is a maximum of 50 kW. However, a great number of water turbines generate between 50 kW and 100 kW. I accept that 50 kW is a perfectly viable maximum for many renewable sources; one would need quite a large photovoltaic array on top of one's house to reach 50 kW. However, that is not a large figure for a water turbine. Indeed, at its best, the technology used in the new water turbines generally produces more than 50 kW.
We conducted a survey of the 100 or so mill installations that I have mentioned in Somerset and Dorset. That survey could be taken as proving the Government's point. The majority of those mills—89 of them—generated less than 50 kW and only 13 generated more. However, those 13 generated more electricity than the other 89 put together. If we are interested in getting the maximum yield of renewable electricity, the 50 kW cut-off is absurd.
Because 50 kW is the cut-off for the double ROC, those who have installed such facilities or who intend to do so have a strange decision: either they run their installation at less than full capacity, in order to keep within the double ROC maximum, or they take a financial loss. What sort of policy nonsense is it to have renewable capacity, but run it at less than full capacity? There is of course an extra financial loss, because the 50 kW maximum is also used for the income tax exemption, so there is a double hit.
The other financial difficulty that many people face concerns the grid connection, which has already been mentioned. I am told that a 400 m connection can cost £16,500. That is a lot of money on top of the initial capital outlay already required. Oddly enough, mills are usually on rivers and are not normally very close to communities; therefore, there is an inherent cost in providing the infrastructure required to run a renewable installation.
The second issue that I want to raise is the licensing regime. It seems that the Environment Agency has never talked to the energy Department, in whatever form it has taken, about what is needed. If one tries to get a water abstraction licence for one's water mill, one might be told that one needs an abstraction licence, an impoundment licence or a transfer licence—one might even be told to get all three. All that for water that never leaves the river. It goes into a leat, is used by the turbine and is returned to the river. It is nonsense to call that an abstraction, yet all those licences are obligations, dealt with by the Environment Agency, that have to be paid for. One has to apply for them and go through all the bureaucracy that comes with that.
There is no consistency in the way that the system is applied. I have two mills in my constituency, one of which I have mentioned. Tellisford has an impoundment licence, while Stowford, which is a little further down the stream, has an abstraction licence. The mills do the same thing, but the Environment Agency is determined that they need different licences, whereas another mill on the same river, Lullington, needs all three licences. Surely, it is not beyond the wit of the Government to devise a single licensing regime for hydro-microgeneration that obviates what I describe, particularly given that water is not being abstracted.
Not only does one need a licence, but one has to report daily on abstraction. No water is leaving the watercourse, but one still has to report to the Environment Agency every day about how much water has been abstracted from the stream into the leat, and how much has passed back from the leat into the river. It is the same amount on either side. That is also nonsense. Each year, from every mill, 365 flow readings go to the Environment Agency, which I doubt is desperate for more work, but that achieves nothing because the same water is going in and out.
Another issue that the Environment Agency is very concerned about is reserved flow, but for all the reasons that I have given, there is no consequence from a mill stream taking water into a loop and then feeding it back into the main watercourse. The stream has probably done that for hundreds of years. That is not a new thing; it was there before the water turbine and will be there after it, but the Environment Agency thinks it an important thing to measure. Interestingly, an Environment Agency officer said to Mr. Battersby, who gave me this information:
"We are very good at measuring change, but absolute rubbish at deciding if it matters or not."
That sums up the regime in which those officers are working.
The final subject that I want to talk about is fish. I do not want to be unkind to fish. They are very important, and I do not want to do anything that would be detrimental to the safety or health of the various species. The Environment Agency considers water turbines to be a major hazard to fish, even in a stream that has no migrating species. I understand the need to put facilities in a stream along which salmon or trout migrate and need a passage through a weir or need to bypass a turbine, but not if there are no migrating species. If the weir has been there for hundreds of years, the fish, if they have any species memory, will presumably know that it is there by now, and will use the main river course instead, rather than bump into the weir and hurt their snouts. That is not a serious issue. Why, then, does the Environment Agency expand it to become a major obstacle to the production of energy from this source?
I do not wish to detain the House any longer, but I want the Minister to understand that many people are desperate to invest in renewable energy and they have the means to do so in a way that is socially and environmentally responsible. They can make a real contribution—not the biggest contribution in the world, but a real contribution nevertheless—to providing energy into the system. Obstacles and impediments are in their way, which could be avoided if only the Department and the Environment Agency would take these concerns seriously.
I do not intend to press my new clause to a Division, but rather like that put forward by the hon. Member for Nottingham, South, mine provides a year for the Government to get their house in order and provide the necessary changes to regulation in order to accomplish what we all want. I hope that the Minister will not tell me just what is technically wrong with the new clause. I am sure that he can find something wrong with it, but that is not the point. My intention was to stimulate debate about one small sector of renewable energy that we could encourage to a much greater extent if we avoided the obstacles and made the fiscal arrangements more appropriate than they are now.
I would love it if the Minister were to stand up and declare that he supports the feed-in tariff proposal, and if he will not, I hope that the House will persuade him to change his mind. In the same breath, I hope that he will also look seriously at the issues in my new clause, and put in the necessary changes in order to stimulate this small but important sector of microgeneration.
This group of amendments covers a wide range of renewables issues, so I hope the House will forgive me if I am on my feet for some time trying to answer all the points raised. I would like to try to do justice to them and address as many of them as possible. I would like first to deal with the renewables obligation-related amending provisions; secondly, with issues related to transmission; thirdly, with the Government's reporting on energy; and, finally, with the issue of feed-in tariffs.
The intention behind new clause 11 is, as we have just heard, to encourage the deployment of hydro-microgeneration. It proposes exempting micro-hydro installations from the licensing requirements set out by the Environment Agency. Those requirements were put in place for the purpose of protecting our rivers and wildlife. However, there is always a balance to be struck and I am aware of the micro-hydro sector's concerns around the burdens that the regulations place on it. Those impacts are not always easy to assess, which is why I believe it is right to pursue a route to better co-operation between the industry and the regulator, rather than to disapply regulatory protections.
My officials are aware of the issue and they are keen to find a way forward, if possible, with the Environment Agency. For example, my Department has funded a project between the industry and the Environment Agency to develop a good practice guide on the environmental impact of micro-hydro schemes.
The new clause also proposes changes to the treatment of micro-hydro under the renewables obligation. The detail of how it is implemented is already set out in the Renewables Obligation Order 2006, which takes account of relevant differences between technologies, including hydro-generation. I believe it would be inappropriate—not to mention increasingly complex—for microgenerators to have separate regulations, as seems to be suggested, dealing just with hydro-microgeneration for the purposes of the renewables obligation.
Specifically on the definition of hydro-microgeneration, the bands for all technologies will be set out in the order and there is no need for either separate secondary legislation or a definition in primary legislation to deal with the issue. All the changes to the order, including the thresholds for support levels, will be subject to statutory consultation before introduction. My officials have met representatives of the industry to discuss these issues and have committed to consider them further in the light of a study that the British Hydro Association is carrying out on the scope for micro-hydro, so I believe that the right place for the industry and others to voice their concerns is as part of that consultation and not through this Bill.
I was about to say that I hope I have provided the hon. Gentleman with some reassurance, but I give way to him now.
Very little reassurance, but the Minister has said that consultations will continue, which is welcome. May I point out to him that on his own Department's website a micro-hydro plant is defined as being below 100 kW, not below 50 kW? I hope he will bear that in mind.
The issue at stake is how that relates to the renewables obligation, but I hope I have given the hon. Gentleman the reassurances that he wanted.
New clause 17 amends the Sustainable Energy Act 2003 to increase the money available for spending on the promotion of renewables that is available from the non-fossil fuel obligation levy fund. That money arises from transitional arrangements introduced when the support system for renewable electricity generation moved from the non-fossil fuel obligation to the renewables obligation. Through the Sustainable Energy Act, we have already made available £60 million of the money arising from the NFFO transitional arrangements for spending on renewables.
I understand what hon. Members are trying to achieve in seeking to increase Government expenditure on renewables, but I think we should focus on the bigger picture and the Government's existing wide range of support for renewables. Public sector funding for renewables and low-carbon technology innovation is increasing steadily, both in the UK and more generally in the European Union.
Research councils' expenditure on energy-related basic, strategic and applied research is planned to reach £300 million over the current comprehensive spending review period. The Energy Technologies Institute, a new public-private partnership designed to co-ordinate research on and development funding for low-carbon energy technologies, currently has a budget of £600 million over the next 10 years, with the potential to increase to £1 billion with the addition of new partners. The Technology Strategy Board has a total budget of more than £1 billion over the current CSR period, which will include funding for energy development technologies. The UK element of the environmental transformation fund has £400 million over the next CSR period to invest in low-carbon and energy efficiency demonstration technologies.
Most important of all, we must not forget the substantial support that is available through the renewables obligation. Along with exemptions from the climate change levy, the RO will provide around £1 billion of support each year by 2010. Moreover, we will be considering a full range of policy options for supporting a step change in the deployment of renewable energy as part of our renewable energy strategy. Any decisions on additional funding will be made in the context of future spending settlements.
In the light of the assurances that I have given, I hope that the new clause will not be pressed to a Division.
Before I deal with amendment No. 1, let me explain the purpose of the subsections that the amendment seeks to remove. Because of the importance of getting our reforms of the RO right, it has taken some time for the Government—consulting industry and others—to develop the proposals. To ensure that developers continued to contribute new investment in the interim, we made a commitment to allow any projects becoming operational after
However, some of the existing projects that will become eligible for a higher level of support once banding is introduced will also be in receipt of grant funding. The grants will have been notified to the European Commission as state aid, and will have been assessed on the basis that the generators will receive one ROC per MWh. We therefore need a mechanism to ensure that we do not find ourselves in breach of state aid rules through generators' accumulating subsidies from different support mechanisms beyond the allowable thresholds.
The amendment proposes to remove the power for the order to allow generators in receipt of a grant to choose between receiving the new higher band for ROCs but surrendering the grant, and retaining the grant and continuing to receive one ROC per MWh. Ultimately that will be a commercial decision for generators, but it allows them the option of "banding up" when they could otherwise be barred from doing so by state aid rules. It is important for that power to remain in the Bill so that when a banded RO is introduced generators can make a commercial decision on the path that they prefer, while ensuring both that state aid rules are not infringed and that consumers and taxpayers are given value for money. I hope that the amendment will not be pressed to a vote.
I understand what the Minister is saying, but is there not a danger that the research and development stage will never come about if there is no guarantee of a sustainable future?
I do not quite understand that point; I will be happy to discuss it with the hon. Gentleman outside the Chamber. We have got substantial support for research and development, but our purpose is to try to avoid double subsidy, not just because of state aid principles but because that would not be a proper use of money.
I have a long way to go in my speech before I reach some of the issues of particular interest, but I shall give way once more.
The Minister just said that this was not about state aid rules alone. If it were just about state aid rules, could there not be flexibility so that if the project truly needed the double ROCs and the initial grant to overcome the start-up costs, the issue could be revisited to see that it still complied with state aid rules?
This is more a matter of not subsidising something twice when that was never the intention; that would be a perverse consequence.
New clause 20 seeks to provide priority access to the electricity and gas transmission and distribution systems to electricity and gas produced from renewable energy sources. The text of the first part of this amendment, which relates to electricity, comes from the draft EU renewables directive. Before I start analysing the provisions further, I should make it clear that once the Commission's proposals for priority access are finished and the directive agreed, these proposals could be implemented in the UK in a number of ways, not all of them involving primary legislation. We need to be careful not to implement something now just because we have the legislative opportunity.
Turning to the substance of the amendment, the first issue is that there is no current definition of priority access. Without a clear meaning of priority access, it would be difficult to avoid uncertainty, which would impact on existing generators and those planning future investments. That could discourage investments and would have serious repercussions on the meeting of our energy needs and targets.
The next issue is whether priority access is both consistent with our wider energy policy goals and the best route to accelerate the growth in renewable generation. It is important to have conventional generation alongside renewables, but it is essential that the access regime encourage new investment in reserve capacity. Without that, we could have serious difficulties in maintaining a reliable electricity system. In this context, we are considering reforms to grid access arrangements as part of the transmission access review with Ofgem, to ensure that the regulatory framework remains fit for purpose in the medium and long term, and to speed up the connection of renewable generation. It is clear from this work that there are ways in which we could significantly improve the connection opportunities for renewable generation. We will set out that analysis when the final report of the review is published in May. However, it is important also to remember that from the perspective of a renewable developer, connection in a reasonable time consistent with the development programme for their project timetable is likely to be more important than whether they have been treated more favourably than other technologies.
On the second part of the new clause, which is not part of the EU directive I mentioned earlier, let me reiterate what I said in Committee: the Government are keen to support and investigate the cost-effective potential of renewable gas to contribute to the UK share of the EU target to achieve 20 per cent. of the EU's energy from renewables by 2020. Renewable gas, or biogas, is produced by feeding organic material such as food waste, sewage sludge, animal slurries or energy crops into an anaerobic digestion plant, or from the decomposition of organic matter in landfill sites. It is important to remember that through this Bill anaerobic digestion—the biomethane it produces—will achieve two ROCs under the revised and reformed RO procedure.
By removing the carbon dioxide and other impurities, biogas can also be used to make biomethane. Theoretically, it is possible to inject biomethane directly on to the gas network in the UK, provided that the biomethane can meet the gas quality standards and pressure requirements of the national grid. The "Heat Call for Evidence" invited contributions on the potential of biomethane, the barriers to its deployment, and how best to tackle these. We will be feeding these considerations into our broader work on the renewable energy strategy. Until we have reviewed the evidence about the costs and processes involved in upgrading biogas to biomethane and injecting it into the gas system, we cannot judge what potential unintended or undesirable consequences might flow from the changes to the duties of the Secretary of State and the authority that are being proposed.
Moreover, we need to look at this matter in the round. We need to assess how biomethane fits with the ongoing work to develop a new renewable energy strategy by spring 2009. That will include looking at all renewable heat technologies and potential support mechanisms, rather than focusing on a single technology, as the new clause does. The kind of market enablement that it would provide thus seems entirely premature, and I ask hon. Members not to press it to a Division.
New clause 21 proposes changing section 185 of the Energy Act 2004. Section 185 was introduced as a transitional provision to ease the implementation of cost-reflective transmission in Scotland. It allows the Secretary of State to adjust transmission charges in a particular area of the country to help to mitigate any material hindrance to renewables development caused by the charges.
The new clause proposes the following changes to expand the scope of section 185: removing the provisions that set time limits on the duration of a scheme adjusting transmission charges, and removing the requirement that only one scheme can be in force under section 185 at any one time. We are in the process of analysing whether there is a case for adjusting transmission charges on the Scottish islands under section 185. Renewable developers also face other practical issues, and that fact, along with section 185's narrow focus on transmission charges, makes me believe that it is not the right instrument for supporting the development of renewables for the country as a whole.
Moreover, as we have just discussed, negotiations are under way at a European level to grant renewables priority access to the grid, and I have also made it clear that transmission will be one of the issues that will be closely examined in this summer's consultation on our renewable energy strategy. I therefore ask hon. Members not to press the new clause to a Division.
On amendment No. 65, I would like to remind hon. Members of why we have included clause 78 in the Bill. We did so, first, to introduce flexibility in the timing of our annual energy report and, secondly, to remove statutory requirements that are either replicated elsewhere or are over-prescriptive. I believe it is right that we streamline our reporting requirements to ensure that our report is topical. We need reporting to be sufficiently flexible so as to allow us to exclude less relevant technologies and to include more relevant ones as developments dictate. Our changes facilitate that and, as such, we should retain them as part of the Bill.
There was some concern in Committee that we were repealing the requirement to report on energy efficiency. Let me reassure hon. Members that that important issue will still be covered in a number of reports produced by Government: under the Housing Act 2004, we are required to report on energy efficiency targets in residential accommodation; we produce the UK energy efficiency action plan, which we will regularly update as required under the EU services directive; and we would also expect to capture energy efficiency issues as part of our reporting on carbon emissions in the annual sustainable energy report.
I hope I can also reassure the House that we will still be reporting on the important issue of security of supply through the energy markets outlook, which is a commitment from the 2007 energy White Paper, and as a result of the duties to report under two EU directives relating to supply of gas and electricity. I remain convinced that those reports will cover the practical information on security of supply in which Parliament and wider stakeholders would be interested.
Our proposals to create some flexibility in the reporting period and cycle were designed to ensure that we could publish a report that was as relevant as possible by timing its publication around the availability of the most recent data. Such an approach would also allow us to join up with the reporting cycle proposed in the Climate Change Bill. I therefore listened with interest to the concerns being raised in Committee that our proposal to introduce flexibility on the reporting period and publication date could raise the spectre of the Government being tempted to use that flexibility to take the opportunity to delay publication of our report in order to obscure bad news. That was never our intention. The Government take the issue of reporting progress very seriously.
Even so, I have reflected on those concerns and considered whether there was an alternative way to allow the Government to produce a more relevant and up-to-date report while meeting the concerns about flexibility. In view of that, I have asked my officials to review whether we should consider a specific reporting period or specifying a publication date. The Government will return to the issue in due course, and I therefore hope that the amendment will be withdrawn.
Finally, I deal with feed-in tariffs and new clause 4, which I know are of some interest to the House. For those who take an interest in contemporary Labour history, it is interesting to note that this time my hon. Friend Alan Simpson is supporting new clause 4.
I am not surprised that we are again revisiting this issue and that there is considerable cross-party support for a feed-in tariff for microgeneration. Although I can appreciate the desire to ensure that we have the right incentives and mechanisms in place to increase the deployment of renewable energy, especially in the light of our EU 2020 target, I cannot—for reasons that I hope to convince the House of—support this particular new clause. It seeks to require the Secretary of State to introduce a feed-in tariff, but it does not specify the size of generation it covers. It could cover all sizes of energy generation, large as well as small. If adopted, that could have a potentially serious effect on investor confidence.
Does the Minister agree that it would be an enormous assistance to the production of renewable energy, through the utilisation of waste or bio products, in rural areas such as my own if we had some mechanism that would reward that better?
Perhaps the hon. Gentleman will allow me to proceed with my argument.
I turn to the effect that amending the Bill in the way suggested would have on large-scale generation. The renewables obligation has been hugely successful since its implementation in 2002, adding some 2 GW of new renewable capacity. Hon. Members sometimes underestimate the momentum now behind renewables in this country and therefore inadvertently talk down the great efforts that have been made by that sector. In addition to the 2 GW that we now have, the renewables obligation has also been the major incentive for the 1.5 GW of renewables capacity that is now under construction, the 6.5 GW that has been consented and is awaiting construction and the 10 GW that is now in the planning process. That amounts to an additional 18 GW of pipeline projects in just six years of operation.
Most weeks, a couple of hon. Members approach me to urge that I not go ahead with a wind farm in their constituency. If we were not doing some of the right things, I would not be getting those representations, although that is not to say that we will always agree to every project.
It is also important to recognise that later this year the UK will probably overtake Denmark as the world's leading nation in offshore wind generation. I am also pleased to remind the House that some months ago we gave planning consent to the biomass plant in Port Talbot, which will be the world's largest. I do not accept the criticism that we have stalled or are moving slowly on this issue. We started from a low base, and Opposition Members can explain that, because it did not occur under our stewardship—although that is rarely recognised in speeches. We started from a low base, but there is now a great deal of momentum.
Much has been said about the success of feed-in tariffs in other countries, particularly Germany. We should remember that Germany has benefited from a consistent supportive policy, as the Secretary of State reminded us, since the early 1990s—a period when I had no responsibility for such matters. The consistency of that approach has been a big part of Germany's success, giving investors a solid base in which to invest. Consistency is important in relation to the renewables obligation, which is why I mention it. Whatever the merits of feed-in tariffs in other countries, we need to consider what will work best in the UK. I know that it is sometimes tempting to go to a country such as Germany and say that everything looks greener, but we need to beware of simple comparisons.
Feed-in tariffs and the renewables obligation are simply different methods of providing support to renewables projects. There should be no theology about this. We are talking about different mechanisms and which mechanisms might be fit for purpose in the UK.
I am not saying that. I want to continue with my argument. We have things to learn from one another when it comes to climate change and carbon emissions. Maybe Germany can learn something from us about the need for a major demonstration project on carbon capture and storage in Germany—another way of cutting carbon emissions. I refuse to believe that somehow things are altogether better in another country than they are in the UK.
Not just yet, although it is nice to see the hon. Gentleman.
People sometimes talk about feed-in tariffs as though they were cost-free. That is not the case. We need to look at the costs as well as the benefits. As the International Energy Agency's 2007 report on the German system recognises:
"The country's feed-in tariff for renewables has resulted in rapid deployment of new electricity capacity, but has done so at a high cost."
The IEA report estimates that the German feed-in tariff regime between 2000 and 2012 will result in payments of €68 billion, of which some €30 billion to €36 billion will be the additional costs of renewables. It is important to point those facts out. By 2012, the annual cost would be between €8 billion and €9.5 billion.
It is also worth reporting the IEA's finding that solar PV would provide some 4.5 per cent. of Germany's electricity while taking some 20 per cent. of the potential payments. When we compare systems, it is important that we look at the costs as well as the benefits.
I apologise that I was unable to be present to hear all the Minister's comments. As I left my office, I heard on the monitor some of his arguments against new clause 4 and they seemed reminiscent of those used by the Department on the subject of agency workers: we ought not to do anything here, because it might scupper our efforts in Europe. In fact, Britain was not playing ball with Europe in the most progressive way.
I think that I need to reflect further on the comparison, which has not immediately struck me as helpful, but it might be. I will reflect on it.
Not just yet, no, as I have given way to the hon. Gentleman a couple of times. I shall come back to him later.
I am grateful for the Minister's comments on the cost, but does he also accept that we need to take on board, in full, the German Government's report on costs and on economic savings that come out of their commitment to renewables? Their figures show clearly that they can deliver savings of up to €5 billion a year, and the economic benefits of 250,000 new jobs generate spending in the economy. Meeting their own energy needs rather than having to buy from external sources is an enormous cost saving as well as a huge boost to their energy security.
I agree that we need to look at both costs and benefits, but we also need to accept that long-term consistency is the hallmark of the German regime. Therefore, it might not be sensible for us to change horses now and move away from the RO.
Alan Simpson is right to suggest that we need leadership from the Minister and the Government, because we are simply not getting it. The Minister says that he is weighing up the costs and the benefits, but I can tell him that the costs are the subsidies involved, and that the benefit is that microproducers will be encouraged to take energy production seriously. The Government need to lead on this, because otherwise we will fall behind other countries just as we have already fallen behind Germany.
As far as Germany is concerned, we must remember that the endgame of all the different mechanisms is to reduce carbon emissions. Again, I refuse to accept the simple comparison that suggests that Germany is in a better place than we are—
I shall explain what I mean, as I want to be helpful to the hon. Gentleman. Per capita carbon dioxide emissions of 9,937 kg in the UK compare with 10,936 kg in Germany, which suggests that something is going right here. Moreover, energy use per capita is significantly higher in Germany than it is in the UK. We have to careful about comparisons, because the endgame is about two things—climate change and energy security.
On consistency, industry representatives have told us again and again that they want the Government to ensure that decisions are implemented as quickly as possible so that investors can rely on a stable and consistent policy framework. We have given that commitment, so the new clause could have an effect opposite to what those who propose it intend. Industry and investors have told us that it would be likely to create uncertainty in the market that would lead to delays in new investment.
We are moving forward with reforming the RO. Indeed, the Bill amends the RO to make it sensitive, and it will remain the main policy mechanism for renewable electricity. Any move that threatens to replace the RO would destroy investor confidence and would be likely to result in significant delays to projects coming on line. That could put the delivery of the EU emissions target at risk.
The Government have also received a clear steer from industry that financial support for large-scale generation is not the main barrier to delivering more renewable energy. We are also working hard, as colleagues know, to address a range of other factors, including the planning system and grid access.
I want to turn now to smaller-scale generation.
If my right hon. Friend is not going to talk about smaller-scale generation, I will give way to him.
I am grateful to my hon. Friend for giving way. Many of us accept that there has been consistency in Germany about the feed-in tariff, and that we have been consistent about ROs, but all sorts of new micro-technologies are being developed and my hon. Friend Alan Simpson has made a persuasive case about them. The Minister is about to deal with those new micro- technologies, but is he prepared to look at different ways to incentivise that new sector that would not disturb the consistency that he has described?
As I anticipated, my right hon. Friend's question leads me into the next section of my argument. It is important, because I sometimes think that there is a bit of confusion in the debate about renewable instruments—that is, feed-in tariffs as opposed to ROs. Are we talking about how to incentivise all renewable projects, macro as well as micro, or is the House mainly interested in microgeneration? That is why I now want to discuss smaller-scale generation, which has been the subject of much debate in the media and in this House, especially over the past week or so but also for a longer period of time. I recognise the great support for the early-day motion. I sympathise with, and fully support, people's yearning for appropriate incentives to encourage the faster take-up of microgeneration. Several hon. Members will know that I have long been an advocate of microgeneration, both in principle and through my attempted practice as a citizen. I have long held the view that if we are to tackle climate change and global warming, there will be important roles for big institutions—the EU, the G8 and the United Nations— big Governments and big corporations. There is also a need for a proper carbon market. However, I have also always taken the view that we need to empower more of our concerned citizens—the recycling generation, if I may call them that, who want to do something about their dwellings and community buildings—to be active citizens on behalf of the environment.
Let me make some progress before I come back to my hon. Friend—[Hon. Members: "Give way!"] I do not think that I will, because my hon. Friend is eager to hear my argument.
Under the low-carbon building programme, we have made some £86 million available in capital grants to reduce the cost of buying and installing equipment. We have removed the need for planning permission for domestic installations that have little or no impact beyond the host property. People have called for that for some time, and the Government—the Department for Communities and Local Government—have listened. We have also announced double the support for all microgeneration technologies under the RO, once banding is introduced. That support will be maintained after the first banding review of 2013.
We often hear that the RO is complex, especially for microgeneration, compared with Germany's feed-in tariff. I understand that there are 500 different feed-in tariffs in Germany, with about 120 to 150 more tariffs being added each year. That is not the simple, straightforward picture that some people assume is the case. However, we are not complacent about the changes required to simplify our RO. In April 2007, we introduced the use of agents within the RO. Since then, the number of microgenerators accredited under the RO has increased by more than 250 per cent. We have simplified the accreditation form, and such forms can now be completed and submitted online.
Additionally, suppliers are voluntarily, albeit supported by the RO, offering a tariff system for electricity generation from microgeneration—really, a feed-in tariff. For example, Scottish and Southern Energy is offering 18p a kWh to small generators for their electricity that is exported to the grid. However, that is not all. We will launch a consultation this summer on what we should do to increase renewable energy use to meet our share of the EU 2020 target. That will cover a broad range of issues and involve collaborative efforts across Government and with business, consumers and the wider community. The proposals will strive for the best value for money for UK taxpayers and consumers. As the Prime Minister explained in November, we want a serious national debate about how to achieve our targets.
Some hon. Members will be aware that I announced in Committee that as part of the strategy, we will examine a range of options further to support microgeneration, including a consideration of whether a feed-in tariff might be a better support mechanism than the renewables obligation for small-scale generation—I am thinking of domestic dwellings, community schemes, small civic buildings and small businesses. It would not be right to impose a requirement to introduce a feed-in tariff now without first carefully examining precisely how it would operate, whether there might be better alternatives, and the impact that it might have. We need to be confident that any legislation covers all scenarios and does not impact negatively on existing legislation. In my view, such work can be taken forward only in the wider context of what else we might do to meet our target.
I had nearly given up. I appreciate a great deal of what my hon. Friend the Minister says. There are lessons to be learned from Germany; one of them is that Germany is still proposing new coal-fired power stations without carbon capture and storage, so it is not all green on the other side of the street. My question is: if a group of people want to come together to set up some kind of community microgeneration, why should we set an artificial cap on the power that the group can generate? I think that he is saying that we would artificially cap microgeneration at, say, 50 kW to preserve the renewables obligation.
As we saw in the case of micro-hydro, there is always the issue of where one draws the line, yes? [Hon. Members: "Yes!"] I am happy to draw the line under the positive arguments that I am putting forward. [Laughter.] It is nice to amuse the latecomers. As I have said, I recognise that there is a financial gap in the renewable energy strategy, and that there is a need for a new financial incentive. We will look properly at feed-in tariffs—I said that weeks ago; I am not just saying it today—and at other mechanisms for householders and community schemes. I understand the importance of what my hon. Friend says, because renewables should not solely be about big corporations doing things to local communities. We should enable communities to do things for themselves as part of the active citizen agenda.
I hope that hon. Members are reassured that we are taking the issues seriously. After the renewable energy strategy, we will bring forward appropriate proposals—including proposals for legislation, if necessary—as soon as possible. I ask my hon. Friend the Member for Nottingham, South to consider withdrawing new clause 4 in light of my comments.
I have listened to the concerns and arguments that the Minister has put forward. Let me try to address two of his concerns, and then his arguments. The first concern is about the commitment that he has already made to considering the issue of microgeneration. The great difficulty is that there is a whole series of issues that the Government have agreed to consider. For instance, they agreed to look at the 2010 fuel poverty targets. Unfortunately, having done so, they decided that the targets were too difficult to reach, and that we will not meet them, so that commitment will not get us out of the mess that we are in.
Secondly, the Minister expressed concern about the fact that if a feed-in tariff scheme were applied too widely, it could create chaos. He did not mention the fact that he would be in charge of determining how widely the scheme would apply, so the chaos would be his, as is the current chaos. We have to recognise that although good things that are beginning to happen, they are beginning to happen in a country that is at the bottom of the European renewables league. There is nothing in our programme that will allow us to meet the 2010 targets to which we have committed ourselves.
What we are asking colleagues to vote for, through the new clause, is a commitment on the part of the Government to come back within a year with a framework that sets out how we would introduce appropriate feed-in tariff legislation that applies to the different technologies and to electricity generation, heat generation and the production of biogas. We are talking about a timetable, more than anything else.
Let me explain the significance of the timetable. Last December, our Government sent Ministers to the conference on climate change in Bali. The scientists reporting to that conference said to global leaders that in the next five to eight years we will determine the fate of the generations that will follow. It is what we do in those five to eight years that will determine whether we pass the tipping-point for climate chaos or not. We cannot avoid having to deal with the crises ahead of us, but we do not need to allow chaos to develop. That requires us to act on a dramatic scale now. There is nothing in the framework before the House that will allow us or equip us to take that step. I am asking colleagues from all parties in the House to have the courage to take that step.
"A love declared for days to come,
Is as good as none."
Consultations without commitments are as good as none. The House today has the opportunity to make a commitment that crosses party divides, that crosses interests in society, but that unites us in a commitment to deliver something meaningful and sustainable. I hope we have the courage to do so.