Renewable Energy Bill [HL]

Part of the debate – in the House of Lords at 12:07 pm on 14 January 2005.

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Photo of Lord Triesman Lord Triesman Government Whip, Lords in Waiting (Whips) 12:07, 14 January 2005

My Lords, like many noble Lords, I really welcome the opportunity to debate the vital issues that have been raised by this Bill. I thank the noble Lord, Lord Redesdale, for giving us this opportunity and all the other noble Lords who have taken part in the debate, not as a matter of ritual but because their comments have added to fundamental discussions. I have taken note of some of the good examples of local authorities that have been introduced as adding weight to the clauses—in Merton and Woking. I am sorry to hear about what is being written in train lavatories about Woking. I do not know Woking at all, but I am sure that it is entirely unjustified.

I welcome the support of the GLA for the energy goals that the Government have announced. London is obviously in a position to make a significant contribution to reducing carbon emissions. We will read with interest the detailed strategy which was published last year but still needs a good deal of study. In relation to microgeneration, officials in the DTI have already had constructive meetings with the GLA to discuss its strategy and I will be brought up to date on them. Having said all that, I will explain why the Government will not be supporting the Bill.

The Government have long considered micro-generation an important strand of the long-term energy policy. Indeed, the energy White Paper provided a vision of the energy system in 2020, suggesting that there will be much more microgeneration and that it will generate excess capacity, which can be sold back into the network. It is not fair to say, as the noble Baroness, Lady Miller of Chilthorne Domer, suggested, that the Government have not done a great deal. I can illustrate in the next few moments that we have really done rather a lot. However, I do not want be churlish. I congratulate her on that grant and look forward to hearing how it has been deployed.

As I said, microgeneration is an important strand and it is worth putting that into the context of the Government's commitments to renewable forms of energy: providing 20 per cent of the UK's electricity needs by 2020. That aspiration will drive a significant increase in investment in renewable technologies. Energy provision is indispensable to a thriving modern economy and essential to our society. We need to reflect that the world of energy supply and the diversity of sources is changing, as many noble Lords have emphasised. In the past, we relied on the United Kingdom's domestic fossil fuels with all the problems of carbon emission that they then caused. Our aspiration in the changed circumstances is to meet our energy demands in an environmentally sustainable way and to ensure, so far as we can, that we control the extent to which we are required to import energy from abroad—a point to which I shall return later when I comment on what some noble Lords have said about that.

We have four key aims. The first is that we aim to cut the UK's carbon emissions by some 60 per cent by about 2050. We share the understanding of noble Lords—the right reverend Prelate the Bishop of Chester made the point about global warming and I wholly agree with what he had to say—that global warming is a problem of massive significance; the Prime Minister has said so repeatedly.

Secondly, we aim to maintain security of supply and we are committed to the reliability of energy supplies. Thirdly, we aim to promote competitive markets, including those beyond the United Kingdom, to exchange and enhance sustainable economic growth and to improve our own productivity. Fourthly, we aim to ensure that every home is adequately, affordably and, with proper insulation, efficiently heated. Fuel poverty should be a sad historic memory in every United Kingdom household by 2016–18. Together those aims speak clearly about the Government's green aspirations.

However, aspirations must be translated into action. The renewables obligation introduced in April 2002, backed by direct government investment of £500 million sets a direction of travel and puts in place the milestones over the years. The investment has embraced major capital grants for emerging technologies and some of those technologies, like all emerging technologies, are not yet fully known. What they will be capable of achieving is not altogether proven. That is still to come, as always happens with emerging technologies. New resources for energy research and development are also in the funding stream that I described.

The Energy Act 2004 provides a framework for renewable energy sources to succeed. I mention a few of them because as I said, microgeneration is one strand and it is important to recognise the other strands in this fabric. In the marine sphere, the Government recognise the potential of wave and tidal sources. My right honourable friend Patricia Hewitt announced on 2 August last year £50 million for a marine renewables development fund, which will accelerate commercial development, and promote and underpin sustainable manufacturing for marine energy technologies.

In respect of wind, we have an industry growing in economic efficiency. There has been an improvement of 80 per cent in efficiency in the past two years. We retain our commitment to a renewables contribution of 10 per cent to the UK's needs by 2010. Wind farms will obviously make the key contribution.

I now turn to the issues in this particular strand of renewables. The Government are committed to a development of photovoltaic means and the first phase of the major photovoltaic demonstration programme worth £31 million runs from 2002–08. In addition, a research and development programme of £2.5 million per annum is in place. I was very grateful to hear from the noble Baroness, Lady Miller of Chilthorne Domer, about the Somerset example in trying to take up and make use of some of those initiatives. Some £66 million in capital grants is pledged to crop and biomass development and the DTI and the New Opportunities Fund have announced a further £4.2 million for the installation of biomass boilers in 11 areas of the United Kingdom. Biofuels are supported by a 20 pence in a litre fuel duty reduction. We are committed to achieving at least 10 megawatts of combined heat and power by 2010.

So alongside the green aspirations, we can claim that there are real green programmes. Some 8,000 jobs are already in existence in the industries that I have mentioned and we believe that that figure will rise to about 35,000 new jobs in the United Kingdom over 15 years in the renewables industry. It is hard to describe that as a mean-spirited programme.

The right reverend Prelate the Bishop of Chester also mentioned other initiatives that should be seen alongside those developments. The recycling industry is a very important element and I applaud the fact that he mentioned it. Its excellent work is exemplified, for example, by the work of organisations such as the Waste and Resources Action Programme and by London Remade and we are pressing rapidly, as technologies allow, into green policy in those areas as well. I personally feel great enthusiasm for this subject.

Plainly, the key objective of all of this is climate change. The right reverend Prelate the Bishop of Chester, my noble friend Lord Berkeley, and the noble Lord, Lord Beaumont of Whitley, all mentioned climate change as did the noble Lord, Lord Hunt of Chesterton and the noble Baroness, Lady Maddock—indeed,

"a duty to look after the earth", was the phrase that she used; and I completely agree. Many of the noble Lords I mentioned also talked about security of supply. That must also be one of the guiding principles, although that issue has come up quite frequently and over a long period.

People have quite often pointed to the areas in which there are oil fields or natural gas resources and have anticipated calamity in all of them. Yet, certainly with regard to natural gas, whatever the political changes in many of the countries involved the fact is that the supply has been secure and uninterrupted in a period of, I believe—and I hope that my memory is correct—some 35 years. We are also trying to increase the number of jobs by stimulating new industries. A good deal of discussion goes on with New Zealand. Alongside the Prime Minister, Helen Clark, the Prime Minister of New Zealand, is very enthusiastic about all those developments.

Microgeneration has to be a significant strand in those developments. By 2020, it should be capable of generating excess capacity that should be sold back into the network. To achieve that long-term vision, we have been giving significant support to microgeneration technologies. We have funded PV installations to the tune of £25 million through the major PV demonstration programme. We have provided a further £10 million to fund large-scale and domestic field trials of PV technologies. With another £l0 million we set up the Clear Skies initiative to support community and household renewable energy sources. Last summer, my honourable friend Mike O'Brien announced in another place an extra £6 million of funding for the major PV demonstration programme and an additional £2.5 million for the Clear Skies initiative. That brings the total support for the programmes that we are discussing in the context of today's debate to £53.5 million.

However, effective support is not only about providing money for grants. We have also been working closely with Ofgem and other key stakeholders to address various technical issues relating to metering and grid connection. Last year, we amended the renewables obligation order to make it easier for small generators to claim renewable obligation certificates—ROCs. Generators producing under 50 kilowatts can now claim ROCs on the basis of annual output rather than monthly output. The forthcoming review of the renewables obligation will consider yet further steps to simplify the process for microgenerators to claim ROCs. I believe that that will help, and I know that the noble Lord, Lord Redesdale, has argued for precisely that kind of approach.

A 50 per cent uplift for innovative technologies, such as micro-CHP, is included in the second phase of the energy efficiency commitment, which runs between 2005 and 2008. As I am sure all noble Lords will remember, the Government signalled their overall support for microgeneration through the incorporation of a specific clause in the Energy Act 2004. Based on an amendment tabled by the noble Lord, Lord Ezra, the clause commits us to producing a strategy for the promotion of microgeneration in Great Britain. Work has been progressing on the strategy but it is too early to be legislating on specific measures. To be effective the strategy must be based on suitable evidence and analysis. Rushing measures into legislation before the preparatory work has been completed would be harmful to the overall strategy.

I must break off for a moment to correct the record. Apparently, I said—and I am sure that the officials are right—that the Government have a 10 megawatt target for CHP; in fact, it is a 10 gigawatt target, which is considerably bigger. I am glad to be among the first Ministers to have dramatically understated the case.

I turn to the specifics of the Bill. Clause 1 gives the Secretary of State the power to establish a scheme enabling the sale of electricity by domestic microgenerators. If such a scheme were established, under Clause 1 electricity suppliers would automatically be required to purchase electricity from microgenerating customers at the market rate. Microgenerators already sell their electricity, and legislation is not required to achieve that. To go a step further and to require suppliers to buy the electricity at the market price risks distorting the electricity supply market and would be incompatible with the liberalised arrangements of the British electricity market.

The framework underpinning our competitive energy markets was established to provide market-based solutions to our energy needs, governed by an independent regulator. That provides certainty and gives confidence that those who we need to invest will do so, and will deliver our energy supply as a consequence. Intervention of the kind envisaged in Clause 1 is likely, we believe—though not by any intention—to deliver the opposite. Clearly, microgenerators will be concerned that they can sell any excess electricity generated. I can assure the noble Lord, Lord Redesdale, that we are looking carefully at that matter as part of the work on the strategy for the future. It is important that, within the framework of competitive energy markets, there are no barriers to entry for microgenerators.

Clause 2 obliges the Secretary of State to require local authorities to set targets for microgeneration. Like other noble Lords, I have heard the example of Merton and other places. Last year, Merton introduced a policy expecting all new non-residential developments over a certain size to reduce predicted carbon emissions by 10 per cent through the use of onsite renewable energy sources. It did this without any requirement from the Secretary of State to set such targets. The Government made it clear in planning policy statement 22 in August 2004 that local authorities could include such policies in their local development documents. I understand that a number of local authorities have similar policies in place, or are planning to introduce them in future. So it would appear that local authorities are taking the lead in that area without the need for added intervention.

It is not clear whether anything like a majority of local authorities would welcome government legislation. Indeed, we believe that they would not. That point was made by noble Lords. Therefore, the problem does not seem to mean that there is a need for further statute, but I take the point made by the noble Baroness, Lady Maddock, on the potential for other incentives. Without trying to elaborate on that, I would welcome the opportunity of a discussion with her about what she believes might be an interesting approach.

We shall continue to monitor progress in this area and will make a proper assessment of the effectiveness of the updated planning policy before making a judgment as to whether further legislation is needed. In the mean time, I can only applaud the authorities that have taken innovative steps to promote embedded generation, and would encourage others to look at implementing similar policies.

Clause 3 requires the Secretary of State to make an order classifying small renewable energy developments as permitted developments under the Town and Country Planning (General Permitted Development) Order 1995. The Office of the Deputy Prime Minister is currently undertaking a review of that order. Although the noble Baroness, Lady Miller of Chilthorne Domer, asked me to anticipate Mr Prescott's announcement, I have no intention of doing so at this stage.

However, no one would find it particularly useful if we took a casual attitude to planning at any stage of significant developments. Like the windmills of old, people may come to love them; but, at the moment, I notice that people keep tilting at the windmills of new. They do not seem to treat them with the same affection, although I hope that that will not be true of the windmill that the noble Lord, Lord Redesdale, may potentially establish in north London.

Clause 4 would create an obligation similar to the current renewables obligation, but with reference to energy rather than electricity. I understand what the noble Lord is trying to create in what he refers to as a "renewable heat obligation". Such an obligation would be much more complex than the current electricity obligation. The heat market involves a wider range of fuels and types of suppliers than the electricity market, and there is not a suitable regulator that could replicate the role played by Ofgem in terms of administering that obligation.

It is also not clear what level of carbon savings would be achieved through the obligation. Enforcement costs are likely to be very high and perhaps out of proportion to the benefit of any heat that would be achieved through renewable sources resulting from this measure. The noble Baroness, Lady Maddock, made the point that time and attention would have to be given to the detail and that that would in itself require probably quite large resources and at pretty high cost. The DTI has commissioned a study of the market of heat generated from renewable sources and the heat produced by combined heat and power plants. I think that we should wait for that before trying a legislative fix.

Clause 7 extends the Bill to cover devolved administrations. That would be problematic in Northern Ireland as responsibility for energy policy has been transferred to the Northern Ireland Assembly. I shall not go into the detail of the arrangements that have been devolved to Scotland.