Renewables Obligation Closure Etc. (Amendment) Order 2016 - Motion to Approve

Part of the debate – in the House of Lords at 7:44 pm on 16th March 2016.

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Photo of Baroness Featherstone Baroness Featherstone Liberal Democrat Lords Spokesperson (Energy and Climate Change) 7:44 pm, 16th March 2016

My Lords, I fear that the Minister and I are not going to agree on this. However, it is not very long since we debated the ending of the feed-in tariff order, and I am sad to be here again so soon to enable a debate in which we on these Benches can express our dismay and alarm at the destruction being visited on what was a thriving world-leading industry in renewables—in this particular case, the ending of the renewables obligation for solar PV under 5 megawatts.

I shall not rehearse all the arguments that I made in that debate. I failed to get the Government to publish the calculations on the levy control framework, in which they prayed in aid a projected overspend as the rationale for their harsh and unforgiving bonfire of the renewables. Nevertheless, I appeal to the Government once again for transparency in relationship to the LCF, and ask that the figures are made public, so that the credibility of the Government’s case can be properly assessed.

We lost the battle against the extraordinarily steep and abrupt removal of the feed-in tariffs for solar, wind and hydro. We have tried to get this Government to understand not only the seriousness of this in terms of moving towards a low-carbon future that allows us to meet our legally binding targets, but also the depth to which investor confidence has been undermined in the renewables sector and the long-term, negative impact on the economy that this has caused. It is very disheartening to see so much of the good work achieved by the coalition Government unravelled by this one.

What is clear is that this work, which saw the tripling of electricity from renewable sources and made Britain the fastest-growing green economy in Europe, was clearly led by only one side of the coalition, the Liberal Democrats, and not embraced at all by the other. It was galling to listen to the Prime Minister at Prime Minister’s Question Time today claim that 99% of solar on roofs came under a Tory-led Government. That sticks a little bit in the craw. Since the end of the coalition, this Government are ending support for onshore wind power; sharply reducing support for other renewable technologies, including solar PV and anaerobic digestion; ending renewable energy’s exemption from the climate change levy; reducing the incentives to purchase low-emission cars; privatising and selling off the Green Investment Bank; scrapping the Green Deal with no replacement; weakening the zero-carbon homes standard; adding community energy to the list of sectors excluded from receiving tax relief; ditching the £1 billion budget for pioneering carbon capture and storage; ending the renewables obligation early—the subject of today’s debate—and on and on and on. It is a litany of destruction.

When the Secretary of State announced, following the 2015 election, that she would “unleash a solar revolution”, we on these Benches naively thought that she meant a revolution that supported solar—but each action that has been taken has proven the opposite. That takes us to the statutory instrument before us today, which closes the renewables obligation to solar PV installations smaller than 5 megawatts on 1 April 2016. It will have a detrimental effect on rooftop solar and community energy schemes, which will be left without support, and will cause a significant reduction in investor confidence across the industry—solar and beyond.

Rooftop solar, the cornerstone of the solar strategy produced in April 2014, is now in dire straits. The tariff that has been set for the 1 to 5 megawatts solar band is much too low to incentivise rooftop deployment in that size range, leaving larger rooftops with essentially no route to market. The large-scale rooftop market is potentially the most significant and cost-effective solar market. This market is dominant across Europe and is expected to reach grid parity first, yet the UK is not taking it seriously. The rooftop renewables obligation for solar at less than 5 megawatts must be reinstated to allow these commercial projects to go ahead until March 2017 with the forward visibility they require.

Also marched up the hill by the last Government and then abandoned by this one were community energy groups. Many opportunities were created for local communities to share in the economic benefits of local renewable projects, and yet the rug on larger solar power projects is being pulled from underneath them. It is vital that ground-mounted renewable obligations should remain open to community groups and to developers doing shared ownership or community investment schemes.

Another crucial aspect is the need for strengthening of the grace periods, to which the Minister referred. They are indeed a bone of great contention. Let me give the Minister one example from a leading UK solar company setting out the practical effect of the 22 July 2015 grace period qualification deadline. It was unknowable to the industry even 24 hours in advance: 22 July was the first anyone knew about it. This company had a project that was 95% ready to submit as a full planning application but was not intending to submit it until about a week after the consultation was published. When the 22 July consultation was published, it scrambled like mad to submit it, but the application now straddled 22 and 23 July because some key documents could not be sent in until the morning of 23 July.

As the Minister said, it was not until 7 December 2015 that DECC firmed up the July 2015 grace period qualification cut-off date, and Sections 2F and 2G in the order will apply retrospectively to 22 July 2015. So this company now has £1 million tied up in a project which many not qualify for anything, solely on a technicality that it could not control, despite the fact that the planning application was 100% valid and less than one day late—albeit that the lateness was not its fault. What on earth are the Government thinking by penalising British SMEs in this way when they have invested in and developed projects in good faith and on the assumption that government commitments to maintain investor confidence in the UK renewables sector through a stable renewable obligation regime meant something?

As the Minister said, in the consultation in July last year the intention was clear that the qualifying grace period after disclosure would match that offered in the closure of the larger-scale renewable obligations the previous year. In fact, it was specifically stated. Sadly, in the final decision published in December, the position was changed to require a valid planning application as of 22 July, not a submitted planning application. This leads to a change to the original proposal. If, as the Minister said in his opening statement, it was to prevent a rush of companies that were not really ready trying to reach the finishing line, that is not an answer to the serious businesses that have committed real money to doing what the Government were asking of them.

Finally, as part of the July consultation, the Government proposed removing grandfathering for future solar renewables obligation projects with immediate effect. This is the guarantee that once a project is invested in and built, the level of support will not be changed. Companies do their sums on this basis, and it is a vital aspect of subsidy support. This principle underpins confidence to invest in new projects. Any company that makes an investment on one basis and suddenly finds that the set of financial assumptions it has used have changed is going to be very wary of any similar investment. This crucial aspect is being removed in all those projects which had been pre-accredited before that decision was taken and where there was a delay getting connected to the grid. Grandfathering is also being removed from any projects that applied for planning since July 2015 but before closure.

Investor confidence has been significantly damaged simply by the proposal to remove this guarantee—not just with solar, or even with energy, but potentially with all infrastructure. Increased risk increases the cost of capital. This vastly overshadows the relatively small amount of money that the Government seek to save through this proposal. It is less than £50 million per annum. It is estimated as between 50p and £1.20 per household. Energy UK estimates that £200 billion of private-sector investment in the energy sector is needed by 2020, of which £43 billion has been met. A 2% political risk premium on the remaining £157 billion of investment will equate to £3.14 billion per annum, dwarfing the saving of £50 million that the policy intends to make.

We ask that grandfathering be reinstated for all projects. Grandfathering is not covered in the SI, and its reinstatement would require an explicit statement from the Government. It is this that we seek. The Scottish Government have announced that they will retain a grandfathering guarantee for key policies supporting investment in solar farms, despite the proposals from the Department of Energy and Climate Change to end the protection in England and Wales—so England and Wales will be sorely disadvantaged as the industry puts its money where it feels it will be secure. That is a clever move by Scotland, but it is a very stupid move by our Government, if noble Lords will forgive me for saying so.

We on this side are asking Her Majesty’s Government to reinstate the renewables obligation for solar PV under 5 megawatts and to guarantee that existing solar projects will not be affected by future changes to policy. We regret the unfathomable and unprecedented attack on the green economy by this Government, and we will bring it to the nation’s attention at every point of attack. In the context of the recent signing of the wonderful Paris agreement, and in the light of our obligations and legally binding targets, this latest assault on our renewables industry is just that: the latest in a very long line of attacks. It is utterly unacceptable. I beg to move.