Clause 4 - National targets for microgeneration

Climate Change and Sustainable Energy Bill – in a Public Bill Committee at 3:30 pm on 25 January 2006.

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Question proposed, That the clause stand part of the Bill.

Photo of Joe Benton Joe Benton Labour, Bootle

With this it will be convenient to discuss the following: clause 6 stand part.

Amendment No. 29, in clause 11, page 6, leave out lines 15 to 17.

New clause 5—National targets for microgeneration

‘(1)The Secretary of State must, during the period beginning with 1st November 2008 and ending with 31st March 2009—

(a)designate one or more national microgeneration targets, and

(b)publish a statement of that fact together with a copy of the target or targets.

(2)But subsection (1) does not apply unless on 1st November 2008 the Secretary of State considers that it would be appropriate to designate one or more targets under that subsection.

(3)For the purposes of this section, a national microgeneration target is a target in respect of—

(a)the number of microgeneration systems installed in England and Wales, and

(b)the number of electricity microgenerating systems installed in Scotland, as at a date specified in the target (“the target date”).

(4)The matters to which the Secretary of State must have regard in determining whether subsection (1) applies include, in particular—

(a)the number of microgeneration systems installed in England and Wales,

(b)the number of electricity microgenerating systems installed in Scotland,

(c)the strategy published under section 82 of the Energy Act 2004 (c.20) (microgeneration), and

(d)the results of any research carried out into the effect that designating a target under subsection (1) could be expected to have on the number of microgeneration systems that are installed in England and Wales, and the number of electricity microgenerating systems that are installed in Scotland, by the target date.

(5)If a target is designated under subsection (1), the Secretary of State must take reasonable steps to secure that the target is met.

(6)At any time before the target date, the Secretary of State may review the target and, if he considers it appropriate to do so, revise the target.

(7)If under subsection (6) the Secretary of State revises a target—

(a)he must publish a statement of that fact together with a copy of the revised target, and

(b)the revised target is treated for the purposes of subsection (5) and section (National microgeneration targets: modification of section 1 of the Sustainable Energy Act 2003) as the target designated under subsection (1).

(8)In this section—

“electricity microgenerating system” means a microgeneration system for generating electricity;

“microgeneration system” means any plant or system of plant for generating electricity or producing heat—

(j)which, in generating electricity or (as the case may be) producing heat, relies wholly or mainly on a source of energy or a technology mentioned in subsection (7) of section 82 of the Energy Act 2004 (c.20), and

(k)whose capacity to generate electricity or (as the case may be) to produce heat does not exceed the capacity mentioned in subsection (8) of that section;

“plant” includes any equipment, apparatus or appliance.’.

And the following amendment thereto: (a), at end insert—

‘(5A)If the Secretary of State does not designate a target under subsection (1) he shall publish forthwith a statement of his reasons.’.

New clause 6—National microgeneration targets: modification of section 1 of the Sustainable Energy Act 2003—

(2)Section 1 of the Sustainable Energy Act 2003 (c.30) applies in relation to every relevant sustainable energy report as if after subsection (1B) there were inserted—

“(1BA)The report must also include such information as the Secretary of State considers appropriate about things done during the reporting period for the purpose of meeting any target designated under section (National targets for microgeneration) of the Climate Change and Sustainable Energy Act 2005 (national targets for microgeneration).”,

and as if, in subsection (1C), for “subsection (1A)” there were substituted “subsections (1A) and (1BA)”.

(3)For the purposes of this section—

(a)a sustainable energy report is a relevant sustainable energy report in relation to a target designated under subsection (1) of section (National targets for microgeneration) if the reporting period to which the report relates includes the period, or any part of the period, to which the target relates,

(b)a target designated under subsection (1) of that section relates to the period beginning when it is designated and ending with the target date (within the meaning of that section),

(c)“reporting period”, in relation to a sustainable energy report, has the meaning given by section 1 of the Sustainable Energy Act 2003 (c.30), and

(d)“sustainable energy report” means a sustainable energy report which is required to be published under that section.’.

New clause 7—Reports under section 1 of the Sustainable Energy Act 2003: microgeneration—

(a)omit “and” at the end of paragraph (b), and

(b)at the end of paragraph (c) insert “; and

(d)things done during that period for the purpose of implementing the strategy for the promotion of microgeneration in Great Britain published under section 82 of the Energy Act 2004.”.’.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

The new clauses are an alternative to clause 4, and amendment No. 29 is a consequential amendment, dependent on the replacement of clause 4. The clause requires the Secretary of State to establish national targets for the take-up of microgeneration through CO2 reduction or the installation of a number of microgeneration units. I want to replace this clause and clause 6 with alternative provisions that are designed to have the same effect.

I invite the Committee to remove clause 4 and replace it with new clauses 5 and 6 and amendment No. 29. The Government and Department of Trade and Industry officials have put it to me that one problem with the clause is that at this stage it is difficult to say what the targets should be, because the potential for technology is still being assessed and improved. I accept their argument, as it is valid. If a specific requirement to set a target with a specific figure were put in place, the question, “What should that figure be?”, could very well be put. It would be difficult to provide a specific answer, and we might end up setting unrealistic targets. They might be too low or too high, and we might not achieve the objective of providing a clear policy direction, which is the whole purpose of national targets.

What led me to propose national targets was the persuasive argument that moving towards targets is important, because it provides the market with the necessary certainty to persuade investors to invest the hundreds of millions of pounds that is needed to enable the mass production of microgeneration devices. One should expect that to lead to a price reduction for consumers of such devices, and, in due course, a virtuous circle in which price reductions lead to increased demand, leading to further investment, further price reductions and the further installation of microgeneration devices.

The advice that I have received is that in the case of many microgeneration devices, once the stage of mass production is reached, the length of time that a consumer has to wait before they start to see a pay-back from their investment can reduce from five, 10 or even 20 years, as it is at the moment, to three, five or seven years, which obviously changes the whole   dynamic of encouraging consumers to invest in microgeneration. We must therefore work towards a situation in which we can set the framework to allow the targets to be introduced once we are clear what those targets should be.

I acknowledge the assistance of the Department of Trade and Industry, as well as of industry, various outside organisations and NGOs involved in discussions about these targets, in drafting the new clauses. Under new clause 5, the Government would be given a requirement to designate national microgeneration targets between 1 November 2008 and 31 March 2009. Under that requirement, the Secretary of State would also be allowed to take into account whether it would be appropriate to designate targets at that point. The factors that he would have to take into account in deciding whether to set targets are set out in new clause 5.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

Is there any scope under the new clause for taking into account the different types of microgeneration technology within the target-setting process? There have been obvious problems with the renewables obligation, in that it has tended to focus on the cheaper more advanced technologies, and has not worked as well in the more expensive less advanced technologies. Is any gradation built into the new clause and, indeed, the Bill to ensure the development of all the different types of microgeneration technology?

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

As I am sure the hon. Lady would expect, there has been considerable discussion about the specific factors that the Secretary of State will have to take into account when setting a target. My understanding is that although there would be no specific requirement to consider the pros and cons of different types of technology—I shall rephrase that; there is no specific target in the Bill—matters to which the Secretary of State would have to refer would include the microgeneration strategy, which is to be published under the requirements of the Energy Act 2004, and the results of any research carried out into the effect of designating a target.

In my view, there is an implication that such a consideration would have to be taken, but the Minister may want to explain how the Government believe the provision will operate. In any event, my Bill sets out a provision for targets to be set, but lists several triggers that would mean that targets would not have to be set in certain circumstances. It is a positive encouragement, or endorsement, in the direction of setting targets.

Several specific factors are to be taken into account, including the number of installations by the target-setting date, the sort of microgeneration that I have indicated, and research into the effects of designating a target.

Photo of Joan Ruddock Joan Ruddock Labour, Lewisham, Deptford

Perhaps my hon. Friend can take inspiration from the London plan, which proposes that there should be 40,000 renewable energy schemes in London by 2010 and that all major developments should generate 10 per cent. of their energy needs from renewable sources. He will see from that that a   direction has been proposed. Indeed, a whole range of microgeneration techniques has been proposed that could be put in place with the right support.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

My hon. Friend makes a very valid point. I am sure she will understand that I do not usually follow local government matters in London in great detail, but as it happens I was at a meeting of the London Assembly yesterday, and was made very much aware of the potential for microgeneration in London and of examples that could be taken up elsewhere in England, Wales and Scotland.

The requirement that the Secretary of State should have regard to research into the effects of designating a target is important because he would have to take account of the future effects of setting such a target. He would have to consider how many microgeneration systems had been installed in the past and take into account the strategy risks; in my view—although the Minister may gloss the wording differently—that would require the Secretary of State to consider the future effect of designating any target.

Photo of Nick Hurd Nick Hurd Conservative, Ruislip - Northwood 3:45, 25 January 2006

Can the hon. Gentleman help me to understand better how the new clause moves us on from the current status quo? As I understand it, it will require the Secretary of State of the day to designate a target, unless he or she considers that inappropriate. I am concerned that that is not a very strong signal.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

Obviously, the Secretary of State or his representative today will have to explain how the Government envisage the provision working, but in my view it represents a considerable advance. I have discussed with the Government what would be an appropriate final form for the Bill, and I am convinced by what they have said about the provision representing a considerable step forward.

Hon. Members should bear in mind that before Second Reading the Government were, bluntly, against targets of any sort. My hon. Friend the Minister has shown a willingness to consider the matter in the course of discussions. We are now in a position in which the Secretary of State would be specifically required to designate one or more national microgeneration targets. Yes, there are circumstances in which the Secretary of State would not be required to designate them, if he did not consider it appropriate to do so, but he is given a specific list of matters to which he would have to have regard in determining whether targets were appropriate. Of course he is under an obligation under clause 1 to take into account the overall intentions of the Bill when making decisions under its provisions.

In my view, and that of the Bill’s supporters outside the House, the new clauses represent a considerable step forward, and I am happy to support them. Briefly, new clause 6 would effectively remove the reporting requirements set out in the existing clause 6 and replace them with reporting requirements under the Sustainable Energy Act 2003, which would be more consistent with the overall reporting requirements in relation to energy matters. I see no problem with that   proposed change. For that reason I hope that at the appropriate time the Committee will vote against clause 4 and vote for new clauses 5 and 6. As I indicated, amendment No. 29 is consequential. I hope that the Committee will support the amendment tabled by the hon. Member for Bexhill and Battle which relates to reasons being given by the Secretary of State if a target is not designated.

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs)

Clause 4 requires the Secretary of State to establish national targets for the take-up of microgeneration, in terms either of CO2 reduction or the number of units of microgeneration installed. I understand exactly what the hon. Member for Edinburgh, North and Leith is saying. He wishes to remove the clause and replace it with new clauses because he believes that assessing what targets should be put in place is impossible at the moment, given that the potential for the technologies is still being assessed and improved.

I would point out that we are not talking about something that is far away. Indeed, some would argue forcefully that the technology is here, now; it is just not being implemented and taken up. I refer to the technology quarterly of The Economist, which says that

“The technology exists to enable a radical overhaul of the way in which energy is generated, distributed and consumed—an overhaul whose impact on the energy industry could match the internet’s impact on communications.”

That is the view of some experts on the present potential of microgeneration technology, so in considering the amendment, we must not think that we are a long way from being able to implement those aims.

I am a little concerned that we are kicking the matter into the long grass by default. If we accept that we cannot require a target in the Bill because we cannot state what that target might be, then we might be put in the impossible position of having no answer to that question while at the same time demanding targets. Targets are crucial, as they will provide the market certainty needed to persuade investors to invest the initial tens of millions of pounds—I have seen one estimate of £30 million to £50 million—needed to kick-start mass production, which would then virtually halve the price and cut the payback period from between five and 10 years to between three and five years. That is what is needed to change microgeneration from a niche market product to a mass market product, which all consumers can consider and embrace.

The long-term signals that the target sends out to the private sector are essential. I am worried that those long-term signals might compromised by the hesitation implied in accepting the clause. The private sector will provide the lion’s share of investment and of research and development funding for all such products. That is as it should be, but that private sector funding relies on the Government setting a sufficiently stable framework and a sufficiently long-term horizon within which that long-term funding and bank lending can be made.

Although I am not entirely comfortable with the proposition that targets cannot be laid now, I am willing to accept it. However, I have therefore tabled a small amendment, which would require the Secretary of State to state his or her reasons if indeed a target is not set. That might sound a little pernickety, but that the thinking of the Secretary of State, and of the Department and its officials, is fully explored is important, as is the Secretary of State being held fully accountable for that decision on the Floor of the House of Commons.

As I said in my opening remarks, the technology is already arriving and we cannot afford any further delay. With that, I hope that the Committee will see fit to support my small amendment.

Photo of Andrew Stunell Andrew Stunell Shadow Chief Whip (Commons), Liberal Democrat Chief Whip

One always looks with some scepticism at amendments such as these, particularly when they appear to weaken the Bill. I understand the logic of the case made by the hon. Member for Edinburgh, North and Leith. However, there is a significant safeguard in new clause 7, which sets out more clearly that the target setter has to explain why they have not set a target—they are under more than an obligation simply to think about that.

If target setting is simply left to the discretion of the Secretary of State, the Chancellor or another member of the Government, they may be moved in future by quite different considerations from those that are in our minds today. They might be concerned about the possible impact on the profits of companies operating in the private sector if they were forced to introduce a new technology, which might provide less opportunity to make money compared with the selling of a standard product. If one considers central heating boilers and microgeneration plants, there may well be a good deal of resistance from manufacturing associations to going down that route. The decision could be affected by issues relating to the extra cost that might be imposed on consumers should they have to purchase extra equipment, or by the thought that to overcome those barriers the Government might have to commit public funds in order to secure success. There could be grants for those who install such equipment, which would impose a burden on central Government that they were unwilling to pay, or some kind of support for the industry’s research programme, which again, the Government might be unwilling to pay for.

If I may reflect on my experience with the ODPM in relation to building regulations it is clear that when the House passes legislation that clearly sets out an intention, a Department is perfectly capable of saying, “That’s all right but we think there are some other factors that are more important.”

The present Minister, as he was quick to say after his appointment, may not be long for his post; Energy Ministers seldom are. To refer back to my text for the day, he said that the pace of efficiency improvements has been slower than needed. He is minded to move ahead quickly—we will give him the benefit of the doubt—but will future target setters set targets   without a specific requirement to do so being embedded in legislation, or will they duck those decisions because of difficult local, tactical, political influences that come into play and muddy the waters?

We have to be careful about saying that no targets are required. If we accept the provisions that say no targets are required, we must adopt new clause 7 to ensure that there is some requirement on the target setter to explain publicly why that is the case. If new clause 7 is adopted, I can be more confident, or at least more willing to accept the removal of the wording from the Bill as drafted. The hon. Member for Edinburgh, North and Leith and the Minister have a duty to reassure the Committee that they will not use the changes to escape the implementation of the Bill as intended, which is necessary if the Government are to come anywhere near achieving their efficiency and conservation targets.

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

I suspect that there is not a great deal between us on this point. We are working on a comprehensive strategy to remove the barriers, such as planning requirements, that prevent the development of a sustainable market for the technologies. The strategy will be published by the beginning of April. There are already two specific targets to which microgeneration installations contribute: a target to have 10 per cent. of our electricity provided by renewable energy sources by 2010 and a target to have 10 GW of combined heat and power capacity installed in the same time frame.

I recognise that there is a lot of support for a specific microgeneration target. Many responses to our consultation on the strategy suggested that such a target would have a beneficial impact on the growth of the industry. However, even if we were persuaded by the arguments for an additional target, it would be difficult to set a meaningful one given that the industry is in its very early stages. Indeed, I propose a new political philosophy: not every good policy idea needs its own target. Hon. Members may find that surprising coming from a new Labour Minister, but I put it forward for consideration.

I opposed the wording of the original clause 4 in my hon. Friend’s Bill because it placed a specific duty on the Secretary of State to set a target now—my hon. Friend was being very modest in not requiring either the Prime Minister or the Queen to set that target, but we have had that debate—regardless of the difficulties involved in setting targets for an industry that is in its infancy. However, I am content with his proposed amendment, which gives the Secretary of State a suitable period in which to assess the progress of the industry and undertake further research into the impact of any target that might affect the overall strategy or the growth of the industry. If by November 2008 the indications are that a target would have a beneficial impact on market penetration by microgenerators, we will be able to undertake further work to develop a suitable target or targets.

Hon. Members may have noticed that the clause draws a distinction between the scope of any such target in England and Wales and its scope in Scotland. That is because heat-generating technologies are a devolved matter. Not all the hot air is in England and Wales. When setting a target, we will have full discussions with the Scottish Executive, with the aim of agreeing a target for all microgeneration technologies across the UK, without prejudicing the Executive’s right to have a specific target for heat-generating technologies in Scotland. I think that the approach to targets proposed in my hon. Friend’s amendment is a sensible way forward.

I want to comment on the intervention by the hon. Member for Chipping Barnet (Mrs. Villiers)—clearly, coming from that constituency, she is a supporter of biomass. I think that she was suggesting in her useful contribution that we should have sub-targets for different technologies. It is the Government’s role to show an interest in and support R and D in some of the new and interesting technologies, such as biomass and tidal power. Indeed, we offer such support, because we need to find ways to pull through into the market the technologies that can survive there. That is a serious issue. However—I hope that I am not contradicting myself; I do not believe I am—it is not the Government’s job, and certainly not a Minister’s job, to pick out what will be the successful technologies in years to come. The hon. Lady was not necessarily putting that idea forward, but I do not believe that micro-targets would work. However, she made an important point about the different technologies that exist now.

The hon. Member for Bexhill and Battle, the Opposition spokesman, has tabled an amendment that gives the Secretary of State a duty to publish his reasons for not designating a target, should that be his decision in November 2008. I noted that the official spokesman for the Liberal Democrats supported a Conservative amendment—but it is not for us to judge which three Liberal Democrats might join the Conservative party this week. The support that he was offering his colleague may or may not have been a clue. We have looked at the amendment and there may be a range of reasons for rejecting it. However, when I was considering those reasons while turning over my compost heap on Sunday afternoon, I could see no merit in any of them. Indeed, I am content to support the amendment.

Photo of Andrew Stunell Andrew Stunell Shadow Chief Whip (Commons), Liberal Democrat Chief Whip 4:00, 25 January 2006

Was that an indication that the Minister is thinking of joining the Conservative party?

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry

To be honest, I still think that that party needs some leadership, but I am not tempted.

Clause 6 would give the Secretary of State a duty to report on the implementation of our microgeneration strategy and on the achievement of any target that we may set. I made it clear on Second Reading that we would report on such issues as a matter of course, so I have no objection to recasting clause 6 into new clauses 6 and 7. I also support amendment No, 29, which is consequential on clause 4 not standing part of the Bill.

In summary, I do not support clauses 4 and 6. I do support amendment No. 29 and new clause 5, as amended by amendment (a), and new clauses 6 and 7. I am sure that that is perfectly clear to all of us.

Question put and negatived.

Clause 4 disagreed to.

Clause 6 disagreed to.