Clause 33 - The community electricity right

Infrastructure Bill [Lords] – in a Public Bill Committee at 3:30 pm on 8th January 2015.

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Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test 3:30 pm, 8th January 2015

I beg to move amendment 35, in clause 33, page 37, line 9, at end insert—

““Community” shall include any elected authority responsible for the administration of any area defined for the purpose of exercising the right to buy a stake in a renewable energy facility”.

I hope the Minister in particular will perceive the amendment as very helpful. If she does not see it in that way right at this minute, I hope that by the time I have explained it she will conclude that it is particularly helpful. It is based on a little journey I took through clause 33 and schedule 5, relating to what will happen considering that the clause is headed “The community electricity right”.

We might ask ourselves what we mean by “community” when we talk about a community electricity right. The clause begins by stating:

The Secretary of State may make regulations which give individuals resident in a community or groups connected with a community (or both) the right to buy a stake in a renewable electricity generation facility that is located—

(a) in the community (if it is a land-based facility), or

(b) adjacent to the community (if it is an offshore facility).”

That brings us no further towards learning what a community is. Clearly, some people are resident in it and they have the right to buy, and a group involved with the community can have that right.

Schedule 5 should be the right place to go for an answer to questions about what on earth the clause means. It contains the subheading “The community”, which appears a promising place to seek the definition. Indeed, it states that the right-to-buy regulations that the Minister is required to bring forward

“must make provision enabling the following to be identified—

(a) the community in which a land-based facility is located;

(b) the community adjacent to which an offshore facility is located.”

That does not take us much further. However, paragraph 5(2) states:

“A community must be a geographical area which is…wholly in England…partly in England and partly in Wales; or…partly in England and partly in Scotland.”

It is therefore defined that it cannot be nowhere—it must be somewhere. Paragraph 5(3) of the schedule states:

“A community may be identified by reference to one or more of the following factors”.

Those factors are

“distance measured from the facility or some other point…the number of residents”— or, and I think we are getting to something here—

“administrative boundaries of any kind.”

That does not, however, really take us any closer to understanding what a community actually is.

Further definition is provided in paragraph 6 of the schedule, which is titled “The members of the community”. It states that the Minister can decide on who may exercise the right to buy based on

“how old an individual is” or

“how long an individual has been resident in the community”— we do not know anything about that community, but they must have been resident in it. Paragraph 6(5) states that the groups that may exercise the right to buy, who are associated with the community, may be

“identified by reference to…the legal form of the group…the constitution…members of the group” or

“the geographical area or areas in which, or in relation to which, the group operates”.

Again, that is a bit of tautology. Other than knowing that it must operate in a geographical area, we do not know what the community consists of.

The key question is: is a community, or a group associated with a community—in common sense terms, we can define that as a number of people coming together—something that has been elected, or something that has not been elected? Some groups associated with a community are elected, but others are not. If we decide that a community group that has been elected has some sort of validation as being associated with the community, we come to the thorny question of whether a local authority is in or out of the community.

If an elected local authority represents an administrative area, as schedule 5 says, is that considered to be inside or outside the community, or part of the community—or is that the community? If it is the community, presumably under the regulations it would be able to take part in the community electricity right to buy. If a local authority cannot do that, and only groups associated with the community that have not been elected can take part in a community right to buy, the question of election becomes quite important. However, some groups associated with the community do have elections. They have constituencies and hold regular elections in them—indeed, that is part of their legitimacy and part of the validation of their purpose as groups in the community.

Hon. Members with reasonably long memories may remember that, when local improvement money was provided for local authorities, one of the stipulations was that community groups that took part in local development areas should have some form of constitution, which might include elections. Indeed, in a number of places, including my own city, a constituency was set up to ensure that community groups were elected so that they could take advantage of the funds that had come from central Government to benefit the general community, even though the local authority did not gain from that. The question, then, is: do we have any clarification on whether an elected or non-elected community fulfils the definition of a group connected with a community? I do not think that we do.

To muddy the waters perhaps a little further, it might be worth referring to the Department of Energy and Climate Change’s community energy strategy, which  came out last year. I am sure that the Minister will be very familiar with it. Among other things, it talks about how local community electricity facilities can be established, supported and so on. In paragraph 25, it says:

“Local authorities can provide a valuable source of information and advice for community energy groups, and can help coordinate community activity in their area. They may provide loan funds or financial support. They also play an important role in helping support community energy projects through the planning process and encouraging communities to incorporate energy into their neighbourhood plan.”

Later on in the strategy, it says:

“There are several examples of supportive local authorities in this strategy, and we want this to be the norm”.

The question I put, then, is: if that is to be the norm, and if local authorities, as elective authorities, are excluded from the definition of “community”, how can that aim be achieved? If, on the other hand, they are to be included—indeed, paragraph 25 suggests that they might be, in the case of loan funds or financial support—would financial support mean, either in part or in whole, that taking on the 5% stake in a community electricity facility as envisaged in the clause would be part of the community electricity right? In other words, if the local authority coughs up all the money for the 5% stake, is that inside or outside the definition in the clause? If it is inside, can the local authority hold that stake in its own right, or must it hold it by a proxy because it is part of the community but not inside it?

I come to why I think the Minister will agree that amendment 35 is very helpful. All those problems could be resolved if my wording were simply to be added to the definition at the end of clause 33(7), which seeks to define community electricity right regulations. The amendment seeks to define what “community” might include as far as community electricity right regulations are concerned:

“‘Community’ shall include any elected authority responsible for the administration of any area defined for the purpose of exercising the right to buy a stake in a renewable energy facility”.

It does not detract from any of the other definitions of community individuals or community groups associated with the community; it merely resolves the issue of whether an elected organisation is part of the community. Given the ambitions of the Department of Energy and Climate Change for its own community energy strategy, that would seem to be a helpful piece of clarification for the purpose of driving the strategy forward. I therefore anticipate that the Minister will have no hesitation in accepting the amendment.

Photo of Andrew Miller Andrew Miller Chair, Science and Technology Committee, Chair, Science and Technology Committee 3:45 pm, 8th January 2015

The question that I want to raise about what I think is a very helpful clause is something that I have been discussing with people for a considerable time. During an extraordinary flight I took in Germany, I realised just how many wind turbines there are there. From the current figures, it turns out that there are something in the order of 10 times more land-based wind turbines in Germany than in the UK. There is also a huge amount of public buy-in to the process there. That, it turns out, is substantially down to the fact that there are community schemes. As I understand it, that German model could not work in the UK, because we do not have a shareholding model that would work to incorporate it. My first question to  the Minister is what discussions she has had with the major electricity providers about creating local partnership businesses, which could be hybrid businesses. We do not have a large number of existing examples, although I have heard of one on the edge of Sheffield that the Minister’s officials might be aware of.

My second question is, why do the rights in question relate just to electricity generation and not to gas as well? I know that we are not yet on the next few clauses, which another Minister will be dealing with, but I have had discussions with some of the other energy producers, including ones that are dealing with hydraulic fracturing, and it seems to me it that could be a useful model to apply to them. Why have the Government not extended their thinking to all forms of energy generation? Biomass plants and other such operations could help reduce the cost of energy distribution, enhance the buy-in from communities about having something in their backyard and provide a more sustainable model of energy distribution for the country. Why is the Minister’s thinking narrowly defined around electricity?

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change

It is a pleasure to serve under your chairmanship, Mr Hood. Since this is the first time I have spoken in the Committee, may I wish everybody a happy new year?

I thank the hon. Member for Southampton, Test, who has a strong reputation in the area of renewable energy, for his interest in the community electricity right provisions and for tabling the amendment. It is helpful to hear his views, and I hope he will find my response as helpful and compelling as he anticipated I would find his amendment.

The amendment proposes that the definition of a community should include any elected authority responsible for the administration of an area. That would then allow it to buy into a local renewable electricity scheme. Before addressing the amendment, I will, if I may, set out the context for the provisions. Energy generation by communities, either through owning installations outright or through shared ownership, can make an important contribution to maintaining energy security, tackling climate change and keeping costs down for consumers.

The Government set out our support for community energy in the country’s first ever community energy strategy, launched in January 2014. Shared ownership was an important element of that. It is about enabling communities to have the chance to buy into renewable projects and have a greater share of the financial benefits. It allows communities to have a real stake and sense of ownership in renewable developments happening on their doorstep. The hon. Member for Ellesmere Port and Neston spoke about his experience going around Germany, and the fact is that some other countries engage their communities more successfully than we do. We are determined to try to do that, which underpins the efforts we are making in this part of the Bill. The structure of energy delivery in Germany is somewhat different and, in a way, makes it more straightforward to achieve that.

I hope the hon. Gentleman will forgive me if I say that perhaps we can address his point about hydraulic fracturing in the more substantive debate that will be coming on that subject. I will address it when we get to it.

As far as our proposals on community energy in clause 33 are concerned, we have a two-pronged approach to increasing community shared ownership of renewables. It is led first and foremost by the work of the shared ownership taskforce, which is driving forward the voluntary approach to increase the number of offers of shared ownership for onshore renewables. It launched its framework to guide that process in November last year. Only if the voluntary approach was not successful would we consider exercising the community electricity right powers.

Photo of Chris Heaton-Harris Chris Heaton-Harris Conservative, Daventry

Is the Minister slightly surprised that it has taken so long for the initiative to be launched or accepted by the industry? When I first came to the House I met many of the onshore wind operators, and it was suggested to them at that point, as was a standard way of consulting communities when operators have proposals. They seemed not to want to take up either of those things at that time. Is the fact that they are now not getting so many onshore wind approvals through the planning system perhaps the reason that they have finally seen the light, or is there now a genuine interest in the communities in which they are developing?

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change

That is an interesting point from my hon. Friend; I think I would say it is a combination of those factors. What we are seeing is a groundswell of interest from communities, and a desire from the initiators of the projects to engage more successfully with communities. The operators are beginning to see examples of where that is happening and are perhaps feeling that they, too, want to be part of that process and engage with communities in a more successful way than some of them have been able to before.

The powers that we are proposing could only be exercised from June 2016 onwards, and only following a formal consultation. By taking the proposal through Parliament, we are sending a clear signal about how seriously we want to achieve an increase in community shared ownership of renewables.

The Government fully support the role of any elected authority, such as a local authority, in helping to achieve our vision for community energy and community shared ownership. That is the point specifically raised in the amendment tabled by the hon. Member for Southampton, Test. We recognise that those authorities are uniquely placed to work with communities and other partners, and indeed many successful community energy company projects, both in this country and internationally, have had significant backing and support from local government.

However, I do not agree with the approach that the hon. Gentleman proposes, however helpful his amendment is. His approach is to set out now in primary legislation specific details about who may be eligible to exercise the right to buy. The powers in the clause allow for future regulations to give groups connected with the community the right to buy. Our preferred approach is to leave to secondary legislation the specific details of which groups would be able to exercise the right to buy. Therefore, our provisions do not define a “community” in the way that the hon. Gentleman’s proposed amendment would. They require secondary legislation to define “community” by reference to a geographical area, and allow that future regulations will define members of that community, which could include groups such as local authorities.  Those groups could exercise the right to buy by reference to a range of factors. We do not wish to take a prescriptive or potentially restrictive approach to who might be able to exercise that right.

In a way, the hon. Gentleman’s argument has revealed the potentially confusing nature of the definition of “community”. Therefore, I suggest that the Bill is not the place for that definition. There is an important reason for that: shared ownership is a relatively new area, so we want to have the flexibility to take on board the new models and approaches that we expect to come forward.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I hope the Minister will accept that the amendment simply uses the word “include”. It is not prescriptive; it would not exclude other groups. In the same way as individuals have been set out in schedule 5—for example, individuals who are not bankrupt—it would simply add detail to which groups are included in the definition and which are not. It would not exclude anything, nor is it prescriptive.

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change

I take the hon. Gentleman’s point, and because it sounds like such a reasonable and helpful point, I looked into it at some length when preparing for the Committee. I am advised that it would be a mistake to include a group in the way that he has set out, because if we did so other versions of a community would say, “But you haven’t included us.” By starting down a road of saying, “It includes this”, we would create the potential for something else not to be included.

Also, we want to allow new developments to take place that can provide good examples, and we would like to see those developments before legislation is prepared containing the further definition of “community”.

Photo of Andrew Miller Andrew Miller Chair, Science and Technology Committee, Chair, Science and Technology Committee

Equally, however, taking the point that my hon. Friend the Member for Southampton, Test made, I am sure that the Minister will accept that the word “individual” in subsection (1) does not mean every individual she would want to prescribe. The word “include” does not force her to include, because of the wording of my hon. Friend’s amendment. It seems that she is using a selective argument. I ask her to rethink it, because, with a great deal of respect, what she is saying does not make a great deal of sense.

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change 4:00 pm, 8th January 2015

With a great deal of respect, I do not agree with the hon. Gentleman. The existing legislation allows local authorities to participate, so I do not see the need to set them out as a separate entity, included within the word “community”.

For example, Plymouth city council invested £500,000 alongside a local co-operative in a shared ownership scheme, launched in February 2014, that will invest in solar panels on 20 sites. Panels have already been installed on schools and community buildings, and there are plans for a new round of investment raising this year to support further installations. In that example, the local authority invested not directly but via an eligible community entity known as a community interest company. The community electricity right provisions would not close  the door to that type of innovative approach. Instead, we will draw on those approaches when designing the details of any secondary legislation to ensure that the provisions are implemented successfully on the ground.

Photo of Andrew Miller Andrew Miller Chair, Science and Technology Committee, Chair, Science and Technology Committee

I am familiar with the legal basis of CICs. It clearly provides a definition for a community. Given the example of my hon. Friend the Member for Southampton, Test, could a local authority operating a CIC be incorporated in the definition of “community”—yes or no?

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change

The hon. Gentleman is entirely correct. Since the example that I gave is already participating and is a classic example of community energy participation, it is fair to assume that a local CIC constructed by the city council would qualify. I do not want to set out different definitions of “community” in this part of the Bill. We want to learn from the existing examples, of which the council is one, and then move on to a better definition, based on actual experience, over the next few years.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

If a local authority did not set up a community interest company but decided to invest in a supply to a group of houses through its housing revenue account, as is being done by Southampton city council for a community energy and heat facility, is that acceptable as an investment of 5% of a community electricity programme, in the same way as a community interest company funded by a local authority is?

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change

It seems entirely likely that it is. I do not want to give a specific qualification when I do not know the details. I hope that the hon. Gentleman will take from the points I have made in response to his amendment that we intend to include local authorities. We will see how to construct that, and how it will best come through once the voluntary approach has more examples in it. I hope we will be able to use those examples to design the best sort of legislation. In conclusion, I hope the hon. Members have found my explanation reassuring and will withdraw their amendment.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I must say, I can think of more reasons why the helpful amendment should be included, but I am obliged to the Minister for her somewhat helpful clarifications. Therefore, I do not wish to pursue the amendment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

It is a pleasure to serve under your chairmanship, Mr Hood. I will briefly touch on issues relating to the community electricity right. I have some questions, which I hope the Minister can answer. Following on from the discussion on the amendment of my hon. Friend the Member for Southampton, Test, there are wider issues with the clause.

The community electricity right has been presented as a backstop power that will be invoked if the voluntary framework developed by the shared ownership taskforce proves not to be as successful as anticipated in increasing  the number of new schemes that offer stakes to communities. In general terms, we welcome the fact that there is an opportunity to provide a mechanism to help that along the way with the voluntary agreement if the voluntary framework does not prove to be successful.

The remit of the shared ownership taskforce, however, related solely to onshore renewables. The CER, by contrast, seems to include offshore renewables within its scope. Will the Minister clarify, first, whether I have got that right and, secondly, if so, the logic behind linking the CER to the shared ownership taskforce when the two appear to apply to different suites of technologies among different forms of renewables generation? I have received representations from some offshore developers who have been caught slightly off guard by the clause. Did the Government intend to discuss it with some of those stakeholders subsequent to publication of the measure, rather than before? Is there a particular reason why the provision has been framed as it has?

I also note that the clause heading is “The community electricity right”, but in the Minister’s wider comments on the clause in response to the amendment of my hon. Friend the Member for Southampton, Test, she said—this is clear from the Bill—that we are talking only about renewable electricity. There is an increasing level of decentralised energy right across the sector, and not only in renewables. I am sure that the Minister will recall that the previous time that we appeared across from each other—perhaps even in this room—we were discussing a statutory instrument on the capacity market. As she knows, the capacity market details confirmed at the start of this week include a certain amount of small-scale, distributed fossil-fuel generation. The sub-20 MW generators secured 15-year contracts for 740 MW.

Increasingly, therefore, there is decentralised generation in other areas. That touches on the point made by my hon. Friend the Member for Ellesmere Port and Neston about unconventional gas and some of the areas that we will come to later. At some point in the future, we might have greater scope for small-scale distributed gas extraction as well as generation. Given such issues, does the Minister expect that the CER—which should really be called the community renewable electricity right, in the light of everything that she has said—to be too narrow in focus, or is it simply its description in the Bill that perhaps ought to be looked at again? Does she envisage that the CER or equivalent measures could one day apply to non-renewable electricity sources as well?

I also have a couple of questions about how prescriptive the CER might be. As the Minister said, it is intended as a backstop power, and earlier she set out the time frame in which it will become operative. It might well become a suitable option for many communities, but this is not necessarily about shared ownership alone. Some communities might prefer an agreement that lowers their bills or pays for energy efficiency measures directly. The approach employed in industry takes a range of different options, including the flexibility to suit the communities in question. If that fails, the CER is much more prescriptive, so would it not be much better if it offered or could be applicable to the range of options that we see now?

The hon. Member for Daventry, in his intervention, said that this has been discussed for a number of years. From his discussions, he felt that there was perhaps  reluctance among some developers, and that that had been changing in recent times. I, too, have had discussions with a number of different sources who have suggested an increasing awareness of and appetite for securing community stakes in developments. My hon. Friend the Member for Ellesmere Port and Neston gave some reasons for that, such as it helping local communities to engage in the process of the development and to understand the issues, as well as how they use energy. Those are points that the Minister has made in other forums.

If the scheme that we are discussing—effectively, the backstop scheme being allowed—is not flexible enough, perhaps we are missing an opportunity to ensure that the widest possible range of forms of community ownership and engagement with community benefit are built into a backstop to something much more widely cast than the measures appear to be. Can the Minister respond to those points, to aid us in our understanding of the intent and scope of the CER as set out in clause 33?

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change

I thank the hon. Gentleman for his comments, which I will seek to answer as best I can. He is right overall that this is a backstop power. With that in mind, one must consider what type of power it is. It does not seek to be prescriptive; it seeks flexibility, so that it can be used if necessary at some time in the future. Given that there are so many different developments in the renewable market, it is difficult to say how it will be used.

The hon. Gentleman’s first point was about whether the legislation is out of sync with the taskforce set up specifically to consider shared ownership for onshore renewables. We are clear that if the powers were ever exercised, they would apply in the first place to the onshore technologies that currently form part of the voluntary process, but only if the voluntary process is not successful. There is scope for the community electricity right to cover offshore renewables, but on a much longer time scale. As the provisions give us the flexibility to include such technologies as we think are right, that would be further down the line, without the need for new primary legislation.

If the powers were to be extended to offshore renewables, that decision would be subject to a formal consultation and would be informed by the experiences drawn from other technologies, as well as views from relevant stakeholders in respect of offshore renewables. However, at this stage, it is not our intention to establish a voluntary process for offshore renewables, although we would encourage offshore developers to offer a stake to the community where appropriate.

Photo of Andrew Miller Andrew Miller Chair, Science and Technology Committee, Chair, Science and Technology Committee

Just for clarity, when the Minister uses the words “onshore” and “offshore”, where does she place tidal river barrages and so on? Are they included or excluded?

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change

I think I will come back to the hon. Gentleman on that important point in order to give him a certain answer.

To return to the normal type of offshore development with which we are all familiar, offshore wind, we would like developers to offer a stake to the community where appropriate, and we may set up a voluntary taskforce in due course. However, at the moment, we keep an open mind about it.

The hon. Member for Rutherglen and Hamilton West also mentioned the impact of the capacity market results earlier this week. I will come back to him on that point if I may, so that I can give him a fuller answer. He asked whether concern that the powers were too broad might create uncertainty in the industry; that tied in with the points made by the hon. Member for Daventry about encouraging developers who might have been slower to participate in the past.

We think that the provisions strike the right balance between providing certainty to industry and retaining a sufficient degree of flexibility for the future. They will allow us to react to changing circumstances, including costs, plans and community views, and the development of the renewable electricity market, and particularly to take on board any lessons from the newly established voluntary approach to increased shared ownership. However, the powers set out the scope, in terms of the minimum size of renewable electricity schemes to which the power could apply, giving certainty to industry and community energy groups.

I understand that “offshore” is defined for the hon. Member for Ellesmere Port and Neston in clause 33(7), so he can let us know what he thinks about that and whether he would like a further view on it in due course.

I hope I have answered the questions of the hon. Member for Rutherglen and Hamilton West. This is above all a backstop power. We feel that it will add momentum and enthusiasm to developers who might not yet have considered whether to engage the community. We want the voluntary approach to work, but if it does not work, the Secretary of State has a backstop power, which is essential for providing extra backbone to the voluntary approach.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

Schedule 5 agreed to.