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

Part of the debate – in the House of Lords at 8:15 pm on 16th March 2016.

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Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales 8:15 pm, 16th March 2016

My Lords, I thank noble Lords for their participation in this debate. I will of course address some of the points that have been raised but, before doing so, perhaps I may just clarify one or two issues.

First, the Government are of course committed to combating climate change, as the right reverend Prelate kindly acknowledged, through our participation in Paris and the marvellous result achieved there. However, we want to do so in the most cost-effective way for bill payers.

The solar industry in the United Kingdom has been a success story and has seen significant cost reductions. The noble Baroness, in opening, did not talk about the Liberal Democrat position on subsidies. The noble Lord, Lord Teverson, sought to clarify that, but I think the opponents of what we are seeking to do need to set out what level of subsidy they regard as acceptable at this stage, because, crucially, the costs have come down: so much so that the largest solar developer in the United Kingdom, Lightsource Renewable Energy, has said publicly—it is on its website—that it will be building subsidy-free sites this year. This order does not end solar and, if we can get solar deployment without the subsidy, that raises the question of why we are subsidising it. This Government believe that when the costs of deploying come down—as they have—so should support. This statutory instrument is a necessary step to protect bill payers and to end subsidies where they are not needed.

Before looking at some of the specifics raised in the debate, I want to set out what the costs of the renewables obligation and indeed other renewable policies, such as feed-in tariffs and CFDs, will be over the lifetime of this Government. There seems to be a feeling that we are cutting off all renewable subsidies. That is not the case. The cost on the levy control framework goes up every single year in this Government, and that is after the action we are hoping will be taken today. The total cost in 2015-16 is £5,230,000,000. Next year it will be more than £6 billion. In the succeeding year it will be more than £7 billion. In 2018-19 it will be over £8 billion. In 2019-20 it will be £10 billion, and in 2020-21 it will be nearly £11 billion. So to those who suggest that somehow, we are turning our face against renewables and ending subsidies, I can say that that is not remotely the case.

I shall address some of the specific points that were raised. As I said, the noble Baroness, Lady Featherstone, did not talk about the position of the Liberal Democrats in relation to subsidy, but I remind the Liberal Democrats that the coalition Government—after all, it was a department led by a Liberal Democrat Minister—recognised the need to revisit the 5 megawatt and below solar subsidies if we had overdeployment, or if overdeployment were projected. Overdeployment is projected by a ratio of 1:4, so it really needs to be addressed, and this is quite consistent with what the Liberal Democrats said when they were in government. We are taking this action for two reasons. It is not just about the levy control framework; it is also about the subsidy. We do not believe that we should be paying subsidies where they are not needed. The evidence is— I quoted the largest developer—that they are not needed.

The noble Baroness raised the issue of roof-top solar. We do not accept that the feed-in tariffs have been set too low to support commercial roof-top solar. Almost 8 megawatts of installations over 50 kilowatts have secured a feed-in tariff since the scheme reopened in February. That is significant and demonstrates that there is ample opportunity under the existing FIT scheme to do just that.

I turn to the points made by my noble friend Lady Byford about the subsidy regime. I very much agree with what she said; she put it very crisply and very correctly, if I may say so, that subsidies are not for ever. They are there for as long as they are needed, for pump-priming and for getting things moving, but as the costs come down it is absolutely right that we re-address this. To be fair, the noble Lord, Lord Teverson, made that point; he may disagree with what we are doing but at least he accepts the need to revisit this and look at when a subsidy is needed and when it is not. That is a relevant debate to be had, but that did not seem to be the debate that the noble Baroness set out initially.

The noble Lord, Lord Grantchester, talked about moving towards a market approach. I am not sure whether that is something he approves of—he is indicating that he does—but that is what we are doing. If the largest solar developer is saying that it is installing solar without the subsidy this year, that is rather relevant to this debate.

It is not as if we are not doing other things in energy and climate change that are needed. We have a considerable innovation budget, and I think most noble Lords will approve of the fact that we are looking at small modular reactors with a significant part of that £250 million innovation budget in this Parliament. That is something we want to get moving, and plans were set out in the Budget Statement today on just that.

I know that the right reverend Prelate the Bishop of Salisbury is very interested in this area and has been very supportive of some of the action the Government have been taking, including the designated closure of coal and so on. He asked why we are aiming for the mid-range of solar. We are not. After the action we have taken today, and based on the best estimates we get, deployment is still above the top level of the estimate set out under the last Government: it will be 12.8 gigawatts, and the top level of what was considered necessary by the last Government was 12 gigawatts. Therefore, even after the corrective action we have taken, we are still ahead of that.

I understand some of the concerns that have been expressed, but in relation to this measure I can say only that we do not need this subsidy. There is deployment without it, and we would be wrong to subsidise where it is not needed. We would be wrong, as a Government, not to take action on a subsidy where the evidence is that it is not needed.