Energy Bill [HL] — Second Reading

Part of the debate – in the House of Lords at 1:36 pm on 22nd July 2015.

Alert me about debates like this

Photo of Lord Cameron of Dillington Lord Cameron of Dillington Crossbench 1:36 pm, 22nd July 2015

My Lords, I want to talk only about Part 4 of the Bill. First, I must declare an interest as a farmer in Somerset who has invested in solar PV. However, I reassure the House that, having done my bit, I have no plans for projects, either in solar or wind, so personally have nothing to lose or gain from the Bill or from any other imminent changes to support for renewables.

I am enthusiastic about renewable energy and believe that if we as a nation can kick-start the various renewable technologies, including battery power, by supporting them through their early stages, we will undoubtedly produce at least one or two viable industries that will in future be able to stand on their own feet and bring us big rewards. I might add that it is not only the new renewables that need government support these days. Fresh-start gas and coal-fired power stations still need government financing, and of course nuclear fission is probably proving to be the most expensive of all forms of electricity generation—although in the long run it might be offshore wind that takes that particular biscuit, or even in the short run if salt and sea storms take their likely toll.

However, I also support the government principle, inherent in Part 4, that we should gradually withdraw or at least reduce the subsidy for new technologies in recognition of the fact that mass production, better science and better engineering gradually combine to reduce the costs of production. Although there is still a long way to go in cost saving per output with solar PV, which in my view could produce the cheapest form of electricity we will have in 10 years, the cost curve of onshore wind turbine generation is now flattening and is unlikely to see any major reduction in costs per kilowatt in the future.

With all that in mind, your Lordships might expect me to be a firm supporter of Part 4—or at least of those clauses covering the planned changes from renewable obligations to contracts for difference. However, as with other noble Lords, I can sum up what I want to say by citing the then Energy Minister in the other place when he said, only last January, that the renewables obligation would remain open until March 2017. As it happens, in the same month, the then Energy Minister in this House said:

“No further comprehensive banding review is planned for the RO scheme”.

I realise at this stage of the debate I am repeating what other noble Lords have said, but we absolutely must maintain consistency in our approach to renewables. If we are to meet our targets, our generators, whose investments in projects can take up to 10 years from start to finish, must know where they stand. More importantly their investors, and particularly those small generators who are dependent on bank loans, must all know where they stand.

By these sudden and unexpected changes in policy—and there was another one this morning—the Government have made banks and investors nervous. It applies across the whole renewables sector because, as we heard this morning, going back on promises made on wind can also apply to solar and maybe other technologies. It goes without saying that the uncertainty filters back to the engineers and manufacturers responsible for producing the equipment for these technologies, and they have to invest for up to a 20-year horizon. We must have consistency.

Now as I understand it, as far as wind is concerned the Government have recognised the problem and are trying hard to accommodate projects that have had quite considerable investment but have been put on ice by the sudden change in policy. They are trying to help with the so-called grace periods or exceptions to the change in the rules. However, the problem lies in the details in the Bill: there are no details in the Bill. While that remains the case, the banks and other investors have paused investment and lending and will not resume until they see what the Government are offering—really offering for certain, because there is uncertainty everywhere here now. What politicians say in Parliament clearly has little validity any more in this field. I think banks are probably aware of the concept of one Parliament not being able to control its successor.

If the Government are going to wait until the passage of the Bill before publishing the exact details of the grace periods, these projects are likely to miss not only the March 2016 deadline but possibly the March 2017 deadline, if they indeed qualify. There is a lot of money involved here—money which has been invested as a result of government promises. Therefore, before the Bill comes to Committee in this House, we must have the necessary detail of these grace periods well and truly embedded in Part 4. Indeed, if this morning’s announcement on solar PV is anything to go by, Part 4 may need to be rewritten in entirety.