As amended in the Public Bill Committee, considered.
New Clause 6
Exception for activities carried on partly on land etc
‘(1) This Chapter does not apply in relation to—
(a) the use of a controlled place for the unloading of gas to an installation which is connected with land by a permanent structure providing access at all times and for all purposes;
(b) the conversion of a natural feature of which part is in a controlled place and part under land, if the operations necessary for the conversion take place wholly or mainly on, over or under land;
(c) the use of a place for the storage of gas, or the recovery of gas so stored, where—
(i) the gas was, or is to be, introduced into the store by means of a well on land, and
(ii) part of the place is a controlled place and part is under land;
(d) the establishment or maintenance of an installation for the purposes of activities falling within paragraph (a).
(2) In this section—
(a) land in England;
(b) land in Wales;
(c) land in Scotland landward of the low water mark;
“well” includes a borehole.’.—[Malcolm Wicks.]
Brought up, and read the First time.
The purpose of these technical amendments is to prevent gas storage and unloading developments from being subject to double regulation, namely under the planning regime, through town and country planning legislation on the one hand, and under the new regime for offshore gas unloading and storage developments that the Bill introduces on the other. Chapter 2 of part 1 of the Bill provides a new regime to license the unloading and storage of gas in the offshore area, comprising the area within 12 nautical miles of the territorial sea and an area beyond that, extending up to a total distance of 200 nautical miles.
The measures have been widely welcomed by the industry and received cross-party support in Committee. However, in written submissions and discussions, industry players have sought clarity on the relationship between onshore town and country planning regimes and the licences provided for in this part of the Bill. They are particularly anxious to avoid double regulation in cases in which an onshore development falling within the scope of the town and country planning legislation extends, in part, to the area of the territorial sea, thereby attracting the offshore regulatory regime established in the Bill.
In response to those concerns, we have tabled a new clause and amendments that are designed to prevent an overlap between those onshore and offshore regimes. The effect of those amendments will be to exempt an onshore gas development from needing an offshore gas licence, even if part of the structure or gas storage area in question extends into the offshore area. Such onshore developments will continue to require consent under town and country planning legislation, but they will not need a licence from my Department as well.
I am grateful to the Minister for tabling the amendments. It seems sensible to address this potential loophole now, and we agree that investors, above all, need absolute clarity. We support the proposed changes, but feel that they should be considered against the general concern that not enough is being done to address the issue of storage.
We all know that about two and a half years ago we nearly ran out of gas. I have teased the Minister before about that because it happened within hours of his saying that we were awash with gas. We are aware of that significant challenge two and a half years ago, but still not enough has been done to address the issue, which should be seen in that context. Much has happened since then, with new pipelines coming into action, new liquefied natural gas facilities being built and the storage facilities at Rough, which were half out of action, now operating fully again.
The situation is nothing like as tight as it was, but we need a more strategic approach to storage, and the Bill is a missed opportunity in that respect. The Minister should be proposing to the House that he will report to Parliament every year on how much storage he believes we will need to address our energy needs in the medium to long term. If he did that, he would also be able to tell the House what steps were being taken to ensure that that need would be met. I regret that such measures are still missing from the Bill, but we are pleased that the potential loophole that we have discussed is being addressed.
Let me reply to that point, which featured in our Committee debates. We all recognise that with the decline of gas in the UK continental shelf, in the North sea, we will be ever more reliant, as we approach 2020, on imported gas. For energy security, therefore, we need more gas storage. The Bill is designed to facilitate that with an appropriate, fit-for-purpose regulatory regime—hence the technical amendments to clarify the relevant planning aspects.
Several companies are coming forward with proposals for extra gas storage, and we strongly welcome that. I am not sure that there is a great deal of difference between the hon. Gentleman and me, but I am pleased that he has had the opportunity to make that point again. On the technical amendments, however, there is nothing between us.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
New Clause 7
Disposal of hazardous material
‘(1) Where the Secretary of State enters an agreement for, or in connection with, the disposal of relevant hazardous material by or on behalf of the Secretary of State, the agreement may provide for a fee to be paid to the Secretary of State.
(2) The Secretary of State may not enter an agreement which provides for the payment of a fee unless the consent of the Treasury has been obtained in relation to the amount of the proposed fee.
(3) The fee for which such an agreement provides may include—
(a) such amount as the Secretary of State considers prudent by reason of any uncertainty which exists about the relevant expenditure which will or may be incurred in connection with the Secretary of State’s obligations under the agreement in relation to the relevant hazardous material;
(b) an amount in respect of such proportion as the Secretary of State considers appropriate of the aggregate of—
(i) the relevant expenditure which has been, will or may be, incurred in connection with the design and construction of a repository in which material (including any hazardous material to which the agreement relates) is to be disposed of, and
(ii) such amount as the Secretary of State considers it prudent to make allowance for by reason of any uncertainty which exists about the relevant expenditure which will or may be incurred as mentioned in sub-paragraph (i).
(4) In this section—
“hazardous material” has the meaning given by section 37 of the Energy Act 2004 (c. 20);
“relevant expenditure” means expenditure incurred by the Secretary of State, the Nuclear Decommissioning Authority or any other person;
“relevant hazardous material” means hazardous material which is, or is required to be, the subject of a funded decommissioning programme.’.—[Malcolm Wicks.]
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
This issue attracted a good deal of attention in Committee, and properly so. The new clause makes explicit in the Bill the policy that the Government have made clear in the nuclear White Paper, in the consultation on the guidance for funded decommissioning programmes, on the Bill’s Second Reading and in Committee. The Secretary of State will set a fixed unit price for new nuclear operators, including a significant risk premium for the disposal of waste. The new clause makes transparent our intentions regarding the pricing of long-term waste management.
Let me give a brief recap of our intentions for the benefit of Members who were not present in Committee. We are creating a framework to ensure that operators of new nuclear power stations are responsible for, and make prudent provision to meet, the full costs of decommissioning and their full share of waste management costs. The effect of the framework will be to ensure that operators of new nuclear power stations return the sites, after those stations have been decommissioned, to a state that will be agreed with regulators and the planning authority—it is likely to be similar to a greenfield state. That will be financed by making provision, throughout the generating life of the power station, for back-end costs.
Under the framework, any potential operator will have to submit a funded decommissioning programme to the Secretary of State for approval. Such programmes will have to include the technical steps that will be required to manage and dispose of radioactive waste and spent fuel and to decommission the power station and clean up the site. They will also have to include a prudent estimate of the costs involved in those steps and proposals on how the operator will accumulate funds to meet those costs. Our intention is that before development consents for new nuclear power stations are granted, the Government will need to be satisfied that effective arrangements exist, or will exist, to manage and dispose of the waste that they will produce.
The Minister says that before such projects go ahead, provision will have to be made for cost, but will that be monitored by the Government over the life of the station and the life of the disposal of the waste, which could be for a long time? How will it be dealt with over such a length of time?
I welcome the interest in the issue from Scotland. We are introducing a regime to put into practice the principle that new nuclear must pay its full costs, including those for the disposal of waste. We are setting up a new committee to help us get the finances right, but the purpose of the fixed price is to give the investor confidence at the beginning of the life of a nuclear reactor about what the costs will be—[Interruption.] It may help if I make a little progress. We missed the hon. Gentleman in Committee—I know he would have aided our deliberations—and I am sure that I would have been able to persuade him that new nuclear has a role in a modern economy, whether it be in Scotland or elsewhere in the UK.
Will the Minister remind us whether the Bill applies to Scotland? Like him, I welcome the comments from the hon. Member for Angus (Mr. Weir), but my impression is that some political parties in Scotland say no to nuclear, which is not a sensible long-term policy.
That is also my understanding. Some in Scotland are saying no to nuclear, so the Bill’s provisions in respect of these issues do not, sadly, apply to Scotland. Let me make some progress.
The Government will set new-build operators a fixed unit price for the disposal of their intermediate level waste and spent fuel. That figure will contain a significant risk premium over and above the expected costs of disposing of intermediate level waste and spent fuel. The fixed unit price will be set by the Government on a case-by-case basis when a new-build operator comes forward to construct a new power station. The risk premium added to the fixed unit price will reflect the level of uncertainty in the cost estimates of waste disposal at the time the agreement is entered into.
For example, the fixed unit price for waste disposal for a power station being constructed in five years’ time might well be different from the fixed unit price agreed for a power station being constructed in 10 years’ time. The difference arises because, over time, it is likely that understanding of the expected costs of the geological disposal facility and associated activities will increase. Therefore, at the time the agreement is entered into, the Government could be more comfortable attaching a different risk premium to the fixed unit price.
That raises a question, does it not? We do not know how many people are going to come forward to build new nuclear power stations. If we make an estimate based on, say, five new stations being built, that will imply a certain share of the depository costs being divided five ways. If, in the end, 10 such stations are built—or the Scots come to their senses and allow some new nuclear build in Scotland so that more than the estimated number of stations are built—the share of the repository costs later on will be lower than they were earlier on. Will there be any process to enable rebates to be given to those who made a more than fair share of the contribution because they came forward earlier?
Obviously, the time scales are important, and they are likely to be long. It is not possible to say exactly when the geological repository will be built and up and running, but it will be some time hence. When a proposal is made to build a new nuclear station, the more immediate task—I appreciate the difficulties—is to seek to estimate what would be a reasonable share of decommissioning and of the costs in the geological repository. Because of the uncertainties, we believe it important to go for the fixed price concept, but also to include the risk premium.
I am grateful. The form of words used by the Department has always been “the full cost” of decommissioning and “the full share” of the costs of cleaning up the waste, but the concepts of “full” and “share” seem to be at odds with each other. Either it is a share, or it is the full amount. For the sake of clarity, would it be more precise to refer to the charge as for the full marginal costs?
When it comes to the cost of decommissioning the plant, it is relatively straightforward, although there are all sorts of technical ramifications, but we recognise that we have a duty to clear up our legacy of nuclear waste in any case—hence, as the hon. Gentleman knows, the process to seek a volunteer community for the geological repository. We need a geological repository for the legacy anyway, but with new nuclear reactors, to put it in simple terms, extra space will be needed for new nuclear waste. Our determination is to ensure that the market or the companies pay the full cost of that extra space.
I am trying to distinguish between marginal and average costs. If extra waste is produced because I set up a new nuclear power plant, marginal costs will arise, but am I expected to meet only those marginal costs associated with the disposal of that extra waste or should I also make a contribution to the average fixed costs of the operation?
The operator would also make a contribution to the fixed costs, but let me make some progress.
The risk premium should help ensure that the operator bears the risks associated with uncertainty in waste costs. We believe that it will provide the taxpayer with protection against the eventuality that the actual costs of geological disposal exceed the projected costs.
With respect, may I make a little more progress?
The fixed unit price and risk premium will provide new-build operators with clarity on the maximum amount they would be expected to pay the Government. That cost certainty will enable them to make investment decisions and seek financing for new-build. Should the actual costs of providing the waste disposal service prove lower than expected, those lower cost savings would not be passed on to nuclear operators. Instead, they would accrue to the Government because companies would have forgone any advantage in the form of lower costs in return for certainty in the price of waste disposal. Because the Government have taken on the risk, it is only right that they keep any upside that accrues.
In light of the debate in Committee on the fixed price for waste and the request for greater transparency, we decided to draft the new clause to set out clearly the Government’s policy intentions on the issue. In essence, the new clause translates our existing stated policy on waste disposal set out in the nuclear White Paper and in the draft guidance on nuclear decommissioning programmes into the Bill. I am now happy to give way to my right hon. Friend.
I am grateful to my hon. Friend, who has already addressed some of the risk premium issues that I was contemplating. Will there be a ceiling on what nuclear investors will be expected to pay? Depending on cost overruns or unforeseen costs, which are very likely, they will presumably be charged up to the ceiling on the premium. Is my understanding correct?
There will be a fixed price, which, as I have indicated, will probably not be the same in respect of a station built in the early days as that for one built 10 years later because by then we will know more about the costs of the geological repository. The principle of the fixed price operates in two parts. First, for the purpose of investor confidence, a fixed price will be determined early in the life of the new nuclear reactor so that money going into the given fund will be paid from year one—a key part of the Bill. Secondly, because of the uncertainties about the costs—we appreciate the difficulties in this respect because we may be talking about waste that does not need to be disposed of for 40, 50 or more years—what we are calling a risk premium will be determined. We are adding an extra amount to the fixed price to safeguard the taxpayer.
Before the hon. Gentleman comes in, may I try to give a fuller answer to the question I was asked about the full share of waste costs? As I said, those costs are directly attributable to accepting new-build higher-activity waste into a geological disposal facility. Added to that is a contribution towards the fixed costs of constructing that facility, which the hon. Member for Northavon (Steve Webb) mentioned. That will also involve a significant risk premium to cover uncertainties, and the cost of managing waste pending disposal or transfer for disposal. Separately, operators are also responsible for the full cost of disposing of low-level waste in a disposal facility, and managing that and other waste pending its disposal. We are doing our best to put our principle—that the costs must be paid fully by the operating companies, and that there should be no cost to the taxpayer—into practice.
I want to ask about practice. Why is the Minister confident that the new clause provides a mechanism guaranteeing that the taxpayer will not be landed with an additional bill, given the notorious regularity of that phenomenon in the case of the nuclear industry? Has he consulted, for example, the Centre for Alternative Technology, which has gone to great lengths to examine the costs of nuclear power and disposal? Has he factored in the cost of reprocessing waste, which may become necessary as uranium becomes scarcer? All those elements may involve a significant cost to the taxpayer if the new clause is not robust enough to ensure that the industry covers 100 per cent. of the cost.
That is our intention. We are going into some technical detail, and we are establishing a committee to help us to understand the financial implications and ensure that our intention becomes practice. I know that some people are doubtful about that, pointing to past practice, but we are adamant that there will be no subsidy in this instance—although renewable technology receives a considerable subsidy, and rightly so.
As for consultation, we engaged in one of the widest and most thorough consultations in the history of British public policy. We were given good advice by non-governmental organisations and, indeed, the judiciary, for which we are extremely grateful. The most important part of the process, in my view, was our random selection from electoral registers of 1,000 people to take part in public consultations in some nine city centres. For a day those people were subjected to the arguments for and against, and I considered it a very good example of modern democracy.
The shorter answer is that I am satisfied that everyone has had an opportunity to contribute thoroughly to consultation on this important issue.
I welcome the Minister’s intention of clarifying the issue, although I think that some of his explanations made it slightly more complicated than it needed to be, particularly his reply to the question from the right hon. Member for Scunthorpe (Mr. Morley).
It is vital for taxpayers to know how their interests will be protected, and essential for the companies that are potential investors in new-build nuclear to know exactly what costs they will face before embarking on their investment plans. We need absolute clarity on that issue, because, as both we and the Government have said, we must ensure that there is no public subsidy for new-build nuclear. Our position is clear: we are happy for companies to invest in new-build nuclear as long as there is no subsidy, and as long as they are responsible for the full costs of decommissioning and the full long-term costs of disposal of spent fuel and waste. We think that, in return, they should be given a level playing field when it comes to sorting out the planning problems that they have faced in the past, although we do not agree with the Government about the total loss of local democracy in the measures proposed in the Planning Bill.
We think that there should be site and type approval, so that two of the biggest issues that have delayed developments in the past—the precise type and the precise location of reactors—can be excluded from the debate. We are also keen to reassure investors that any change of Government will not pose a threat to their investments, or fundamentally change the ground rules for the investments that they have been considering. We consider it absolutely right for us to work with the Government to ensure that the right system is introduced.
We are pleased that the new clause gives those who develop new-build nuclear programmes full responsibility for storing the waste on site for a considerable period, potentially as much as 100 years, and for paying their fair share of the long-term disposal costs and some of the infrastructure costs of building nuclear facilities. We also accept the notion of a flat fee and a risk premium, but here the Minister started to make things a little more complicated. The right hon. Member for Scunthorpe asked whether there would be a ceiling for the premium. My understanding is that there will be a fixed cost but also a fixed element that is the risk premium, which means that if the amount is lower than the ceiling, companies will still pay the full fixed premium. In other words, the ceiling is not flexible.
We need much more detail. We know that it cannot be given to us today, but it will be important to our future considerations. Will the fee ultimately be based on the volume of nuclear waste alone, and if so, will it reflect the balance between high-level and intermediate-level waste? Will it take account of radioactivity levels? The extent to which waste needs to be encased may differ according to the level of radioactivity. Building-cost inflation is higher than inflation in general; how will the fee take account of that?
When does the Minister think the repository will be built? What is his best guess? He said that it was difficult to be precise, but we are not asking for precision. Are we looking at three, five, eight or 10 decades? At what point does he think the site for the repository will be identified and earmarked for further investigation? There is a fear that not enough progress has been made in that regard. Does he think that a single repository will be sufficient for the disposal of both legacy waste and all waste from a new-build programme? The Secretary of State said recently that he thought there might be twice as much nuclear power in a few years’ time. Does the Minister believe that, in the event of a massive expansion of nuclear power, all the waste could be incorporated in a single facility, or does he think that we might need two? That would involve huge additional infrastructure costs, which would need to be taken into account.
The Minister explained about lower costs, and said that there would be no repayment of the risk premium. If it becomes clear that the Government miscalculated, that the cost of building a repository will be much greater than they estimated and that the cost will therefore be greater than the total amount charged to the nuclear companies, including the risk premium, will there be any scope for the Government to tell the companies, “We suggested this amount in good faith but we got it wrong, so a supplementary charge will be necessary”? I know that the Government are acting in good faith, but they may end up subsidising the nuclear waste disposal regime, and I know that that is not their intention.
Does the hon. Gentleman share my concern about the opposite risk? Is there not a danger that, because in the early days the Government will go out of their way to ensure that all the costs are covered, the early builders will be quoted a higher fixed charge than the people who come along subsequently? Given that we do not want to discourage people from entering the industry at an early stage, the Government may need to give some thought to the possibility of lowering charges later if it turns out that people are paying too much.
That is a valid point. If the assumption in the early days was that five nuclear power stations would be needed, the cost of road infrastructure and the building of the repository would be very high; but if we ended up with 20, the figure would change dramatically. There must be equity, or the cost will be prejudiced against the early developers, and it is they who will kick-start the programme if it is to happen.
Will the Minister also tell us more about his approach on the reprocessing of spent and used fuels? There is considerable potential for that within the industry. Britain has led the world on it in the past, and will be keen to do so again. It could greatly reduce the volume of waste that needs to be disposed of, particularly for the most radioactive of materials. The Government, however, are being rather coy about their plans on reprocessing. Also, how would this be factored into the costs? If some radioactive material were to be reprocessed and therefore did not require disposal so the volumes were significantly different from those initially estimated, how would that be taken into account in the long-term costs?
In general, we accept the way in which the Government are progressing, but we believe that it is very important to have clarity so far as the industry is concerned, and a lot of detail has still to be sorted out.
I welcome the thrust of the new clause. It is disgraceful that the nuclear sector has over the decades moved a lot of its liabilities and debts on to public liabilities—although I have to say that that has been the case in just about every country where there has been nuclear power, so it is not unique to our sector. If we are to have new nuclear, it is of fundamental importance that there should not be Government subsidies or a liability that falls on the public after private companies have made their profits over a period of time.
I think that the Government are genuine in their approach to this matter, and I know that my hon. Friend the Minister is, but this is a very complex and difficult area, as has been picked up on in the debate. I now understand exactly what the risk premium will be and also the thinking behind what the Minister has said. However, I know that the Committee on Radioactive Waste Management first recommended that there should be an interim site for the storage of waste, and I presume that the cost of that site would have to be factored into the calculations, and then goodness knows when the longer term depository will be built. The costs and technical challenges of that are huge. That is where the problem lies, because it will be difficult for the Department to calculate what that risk premium should be. It is a bit optimistic to think that we could go back to the nuclear industry and say, “We got it wrong, so can we have some more money?” as I assume that it will have signed various contracts on the arrangements, and it might be a little reluctant to agree to such an approach.
Will my hon. Friend the Minister give us some more detail? For example, is it feasible to have an upper and lower range in the risk premium? I accept that if there is investment the investors need to have some certainty and to know what their maximum liabilities could be. That is not unreasonable; I understand it for such investment in major infrastructure. However, it is also not unreasonable to have some protection for the public and the taxpayer.
On the issue of protecting the taxpayer, does the right hon. Gentleman think that there needs to be a further protection against the company becoming financially insolvent and therefore being unable to deliver when the need arises? Should some protection against insolvency be built into the system?
The hon. Gentleman is a mind reader, because that was the second point that I was going to raise. There has been a history of financial instability in the private sector in the nuclear industry. We all know what happened to British Energy, for example; it had to be bailed out by the taxpayer. There was no choice in that, because if we want to keep the lights on, we have to step in and pick up such liabilities.
Will my hon. Friend the Minister clarify the following point? I understood from what he said that the investors in new nuclear will make a regular payment into a fund, year on year, which covers part of my point. However, in order to protect the taxpayer from people walking away from their liabilities by just wrapping up and going into bankruptcy, is there an argument for some protection such as a bond? That is not unprecedented. It is the case in the waste industry, for example; the Government rightly require waste disposal companies to put down a bond that guarantees the future maintenance of sites. Might the Minister like to consider something like that?
It is welcome to have before us a measure that attempts clarification, as the hon. Member for Wealden (Charles Hendry) said, but that is difficult to achieve in this case. Nevertheless, I share the Minister’s intention of trying to clarify matters, as I do his high regard for Greenpeace and its contribution to the process that has brought us to this point—although I suspect my tongue is slightly less in my cheek in saying that.
The Liberal Democrat position on the nuclear question is clear. We think that the safest way to ensure that there is no public subsidy for nuclear new-build is not to build it. I assure any investors who may be watching our debate on the parliamentary channel that their investment will be at risk if we play a part in any future Government, because if we had the chance we would seek to slow down, and if possible to stop, the development of nuclear power.
I understand where the hon. Gentleman is coming from, but will he therefore outline the Liberal Democrats’ position on buying in power from other countries? When there is a need to supplement peak load, would his party oppose buying in from countries that supply power through nuclear power stations?
The hon. Gentleman raises a quite different point that does not relate to the Bill, so I shall pass on. Let me say, however, that energy markets are complex and we cannot always prescribe where the energy will come from, but my ideal would be that we do not in future source nuclear power from any country, because I would not want those countries building nuclear either.
No; I want to make just a little progress.
The context of this issue is the enormous cost of decommissioning and clean-up with which the first generation of nuclear power stations left us. In Committee, we explored the various current costs that the taxpayer is having to pick up from the nuclear installations inspectorate, CoRWM, the potential nuclear financing assurance board, and the big daddy of them all, the Nuclear Decommissioning Authority. The Minister gave assurances that many of those were intended to be covered under the new regime. That is quite a threat to investors, given the cost of the NDA. The net grant-in-aid contribution of the taxpayer to the NDA in 2007-08 is £1.4 billion. That is rising by 8 per cent.—a very good settlement, as many public sector organisations would agree—in 2008-09, and by almost a further 5 per cent. in 2009-10. Therefore, the taxpayer will soon be facing an annual bill of £1.6 billion from the last generation of nuclear power stations. It is brave of the Government to be leading us down the same path a second time. When we listed all the potential costs to the taxpayer, the Minister gave a lot of assurances about which of them were intended to be entirely covered by the regime, but there was one exception: long-term storage and the financial regime covering that, which the new clause addresses.
It has rightly been said that there is, in effect, a ceiling to the risk to the private sector and an ongoing liability and risk to the taxpayer. We discussed at length in Committee the various time-scale problems. The hon. Member for Wealden has again raised a lot of the questions, many of them unanswered, such as about how the costs can be predicted or divided. For instance, although the new generation of nuclear power stations may, should it ever come to pass, produce radioactive waste in smaller volumes, it may well be much more radioactive and therefore pose new technical challenges that are different from those facing the repository for the current generation of nuclear power stations.
There is also the question of whether we are expecting to take in foreign radioactive waste, as we have done in the past. Are we, in effect, to become the nuclear dustbin of the whole of Europe, or countries further afield, by being one of the few countries brave enough to progress with the idea of repositories?
It is tempting to try to apportion proportions of the blank cheque that we think is at risk of being written, but as the Minister has honestly accepted, the problem is that we cannot know the real context in which all this will be decided in 40 or 50 years’ time. We are seriously expected to sign up to licence fees for a repository for radioactive waste that does not exist, in a location that has not been found, for amounts that we cannot calculate, and all for power stations that might never be built and that no sane investor would touch with a barge pole. This is nuclear fairyland, and the Minister has an impossible task in persuading us that he can provide clarity and reassurance on this matter.
We need greater clarity on the position of the hon. Gentleman’s party on this matter. He just made the profoundly important comment that Liberal Democrat involvement in government would put at risk investment in this area, and people who might be seeking to invest billions of pounds in this project will need to know exactly what that means. Is he saying that a condition of the Liberal Democrats’ entering a coalition would be an end to a nuclear new-build programme? If he is not saying that, what does he mean? If he is saying that, is he therefore saying that the Liberal Democrats would compensate the investment made, or would someone be expected to invest now and then find that that money is simply written off by their involvement?
Although I hope that my right hon. Friend the Member for Sheffield, Hallam (Mr. Clegg) has great regard for my opinions, he is unlikely to ask me to determine the basis on which the Liberal Democrats might talk to other parties after a general election by what I say when discussing the Energy Bill.
No, not on that point.
The Minister referred in passing to an advisory committee—the proposed nuclear liabilities financing assurance board—which is mentioned in the White Paper but is strangely absent from the Bill. In Committee, we proposed an amendment that would give statutory force to and statutory reassurance about its role, but that was resisted by the Government. I would not mind hearing the Minister again tell us precisely why the NLFAB was excluded from the Bill and why it is not present in the regime described in the new clause, because that relates to one of the arguments that he is using to assure us on the future financing of the nuclear industry, and the NLFAB surely should have been given legal force.
The risk is that 40 years hence some future Government will find themselves with unexpected problems on decommissioning and disposal—perhaps spiralling financial or political costs. They will say that the situation is nothing to do with them and that it is all the fault of Labour Ministers back in the noughties who made bad decisions in 2008, many decades ago, because they did not know what they were planning. They will ask, “How could those Ministers have landed us with all these problems?” In the end, the taxpayer will have to pick up the bill because, as the right hon. Member for Scunthorpe (Mr. Morley), a former Minister, described in relation to the previous process, there is no way that we can avoid doing so if we become reliant on nuclear energy and we are to keep the lights on.
The chance of this new clause and the Bill being intact in 40 years’ time is virtually nil, and the Government are leading us down a high-risk path given the poisonous legacy of nuclear power and the creation of radioactive waste that will last for millenniums. The new clause and the system that it will help to create involves a high risk for generations of British taxpayers.
There are two sets of contributors to this debate: those who, like me, believe that nuclear energy will play a key part in reducing our carbon emissions in decades to come, and those who want to stop nuclear energy at all costs and want to continue this debate as a way of making it as difficult as possible for people to invest in the industry.
Before I deal with the substantive issue of the new clause, I should like to correct one of the myths that we have heard. My right hon. Friend the Member for Scunthorpe (Mr. Morley) slightly fell into the trap of citing it, but it has clearly been enunciated by Liberal Democrat Members. I am talking about the myth that the legacy cost is a private liability that was imposed on the public sector and the taxpayer. It was not, because almost all that liability was generated by a nationalised industry, and that public liability has been retained by the public sector. We need to devise a new process and a new structure that deals with a new industry, which will involve private investment and needs to be carefully controlled to ensure that it does not impose a liability on the public sector. That is what the Minister has sought to do through this new clause.
I cannot speak for what people were told in the 1950s, but that is a relevant issue, which is why we need to get the approach right now. The hon. Gentleman has told us that not going forward with the nuclear programme would be a condition of the Liberal Democrats’ involvement in a future Government. He has also said, in effect, that were they to get into power, they would tear up the Climate Change Act, because it will require us to commit to ways of reducing our carbon emissions, and that will almost certainly involve a Labour Government—or, perish the thought, a Conservative Government—building new nuclear power stations. The Liberals will come along at some point saying, “We are not going to have these nuclear power stations any more.” They will thus have to tear up their commitment to the Climate Change Bill, and as the Bill will provide for a legal commitment on the Government, the Liberals would be able to do so only by repealing the legislation once it is enacted. They have got themselves into a complete knot on this matter.
The Minister should be congratulated on listening to the concerns expressed in Committee about the need to provide the industry with clarity and on coming back to us today with a new clause that deals with the issue in a clear and straightforward way.
My hon. Friend is a scientist, and he has brought much-needed scientific analysis to the debate that I have thus far heard on the monitors. Does he share my dismay that, in addition to the Liberal Democrat position of deterring billions of pounds of investment in the UK economy, there is a regrettable omission in Opposition Members’ analysis of the costs of the waste that we are discussing and their basis? For instance, I have heard it said that the liability costs were incurred by our first fleet of reactors. Does my hon. Friend agree that the costs were essentially incurred as a result of our military programme?
Although I do not disagree with the points being raised and in particular with what is being said about the motivation for the original nuclear programme coming from the military, I seek clarification. That programme was state-funded, and a lot of those costs fell to the state. Whether we like it or not, we now have a privatised nuclear sector. It was privatised by the Conservative party, and, as with many of its privatisations, debts and liabilities were written off to make what was being sold more attractive to investors. The enormous liabilities that we have come from that period, which is why my hon. Friends and I are anxious that that does not happen again.
My right hon. Friend brings me to the point that I wanted to make about the new clause. By introducing it, the Minister has tried to provide the industry with complete clarity about what it will have to pay in order to contribute a fair share of the cost of decommissioning, cleaning up and storing the new capacity that is generated. He has even made it clear that a risk premium will be imposed on the industry, so it will be clear about that. My concern, which I have expressed in a couple of interventions, is that to ensure that he is 100 per cent. confident that the public sector will not face a new liability in the future, he will have to be cautious in estimating the future costs. He will probably also have to be cautious in estimating the number of nuclear power stations that will be built.
As the need to build more nuclear power stations to provide us with energy security and to attack our carbon emissions in the decades to come becomes clearer and clearer, I suspect we will end up building more nuclear power stations than we initially estimated and the Minister’s initial estimates of the costs involved will turn out to have been far too high. I am concerned that we should be able to reassure potential investors that, if it becomes clear in five, 10 or 20 years that they have been charged too much, there will be some process for reducing their costs.
If we can provide such reassurance, it will encourage people to come forward early, even though they are bound to be cautious about potential investments, especially if they hear irresponsible comments such as those made by the Liberal Democrats today threatening to overturn a policy that will have been instituted. Investors are bound to be cautious, but we could tell them that we will do the best we can to estimate the costs and, if it turns out that we have completely overestimated them—although there will be a risk premium—we would consider reducing the cost to the investors of storage and decommissioning in the future.
We have had a detailed discussion and I am happy to follow the authoritative speech by my hon. Friend the Member for South Thanet (Dr. Ladyman). I thank him for his contribution.
I shall try to deal with the specific questions that have arisen, but I wish to acknowledge that I am aware of the difficulties we face in the quest to put principle into practice. Technically, this is a complex issue and the time scales are very long. I hope to convince the House that we will use our best endeavours to set up processes and advisory services to get this right.
I was asked whether the risk premium has a ceiling. In a sense it does, because there will be a fixed price and a risk premium on top of that. That will not vary up or down. I listened to my hon. Friend, but if the Government make some money out of this—which is not the intention—and the risk premium turns out to have been too high, that is the quid pro quo for the investor having confidence in the costs through the fixed price.
I was asked whether one geological repository would be enough. That is certainly our intention. We are at the early stages of thinking on the repository, the volunteer principle and so on, but that is our intention. If, generations hence, people return to this issue, that will be a matter for them.
I was also asked what would happen if costs for the geological disposal facility overran. We will do our utmost to be rigorous in project management, although it is more likely that cost overruns will occur in relation to the fixed costs of designing, researching and building the repository rather than in relation to incremental costs that are directly attributable to the cost of disposing of new-build waste. The Government would have to incur the costs of designing, researching and building the repository with proper project management. For each station built a fixed unit price will be set above the central estimate of costs, because of the risk premium provision.
Does the Minister agree that one of the other issues that we need to bear in mind when considering potential cost overruns is the savings that the establishment of a repository will make, not only for the NDA but for the UK taxpayer, by slashing the decommissioning costs that we now face? The current nuclear liability costs are estimated at £78 billion, but the sooner we have a repository in place, the sooner we can whittle those costs right down.
My hon. Friend is a humble optimist—[Interruption.] Apparently there are other contenders.
The fixed unit price will be based on the best available cost information at the time an operator requests a fixed price, with uncertainty factored in when determining the appropriate risk premium. Consequently, dependent on the date of the nuclear power station’s construction, operators of different power stations may be set different fixed unit prices for waste disposal. A road map, published alongside the consultation on the draft guidance, sets out further detail of when we expect to be in a position to publish the methodology we will use to determine the appropriate level for the fixed unit price.
I was asked a difficult question about my best guess on when the repository would be available. We are pursuing an approach to the siting of the geological disposal facility based on voluntarism and partnership. An important part of the process will be to agree an indicative timetable with the volunteer community. Therefore it is not possible to give a firm indication now. However, the “Managing Radioactive Waste Safely” White Paper will include more information and will be published shortly.
I was also asked what would happen if a company or operator went bankrupt. If a nuclear operator were to become insolvent, we would expect that in most circumstances it would be economic to continue running the plant, as the additional costs of operation are likely to be less than the revenue earned from generating electricity. That would make the acquisition of a power station attractive to an alternative nuclear operator. Additionally, moneys in the fund have to be secure in the event of insolvency, and the operator is required to have back-up protection in place to top up an insufficient fund.
The hon. Member for Wealden (Charles Hendry) asked me about radioactivity versus volume and the effect on the price. That is work that is ongoing, and we will publish a methodology and model in due course.
I was asked about reprocessing, and specifically whether the fixed unit price would include possible reprocessing. The fixed unit price will be based on the Government’s current policy for waste disposal, as set out in the nuclear White Paper. We consider that spent fuel from new nuclear power stations will not be reprocessed, but will be disposed of in the geological disposal facility. That is not to say that we are closing the door on the idea of reprocessing, but we have to make some assumptions. The fixed unit price will be based on the expected costs of geological disposal of spent fuel, not on any assumption of reprocessing.
I was asked by the hon. Member for Cheltenham (Martin Horwood) whether we will take on foreign waste, as we have in the past. I remind the hon. Gentleman of the international conventions governing the movement and disposal of radioactive waste. Those would need to be taken into account when considering any proposals to dispose of foreign waste in the geological disposal facility.
I turn now to how the fund will be monitored. Operators will be required to have in place arrangements for monitoring both the expected costs and the performance of the fund, which will be at arm’s length from the company of course. Arrangements would include annual reviews by the operator and the fund managers, which would be submitted to the Secretary of State; in-depth quinquennial reviews conducted by the operators and fund managers and submitted to the Secretary of State; notification of changes, such as operational or technical changes that materially increase the operator’s liabilities; and other specific events, including a change of control or ownership of the operator, or a change in the credit rating of the operator or parent company. Ministers may also obtain information if required. They may call on the expert advice of the board that we are establishing, the NLFAB, and of independent third parties.
I should say that by creating the new board as an advisory body we are ensuring that the Secretary of State retains overall responsibility for the approval of the funded decommissioning programme. That enables the Secretary of State to take a view not only of the advice of the board on the suitability of the funding arrangements, but of any advice from environmental and health and safety regulators. We can argue, as we have, that this approach is more cost-effective than creating a statutory board that would require further consultations and a permanent body of members.
My ambitions today are twofold. First, with the leave of the House, I want to see Report and Third Reading safely through the Chamber. Secondly, I want to watch the football this evening. It is not my ambition to enter into jests with those on the Liberal Benches, but I heard the hon. Member for Cheltenham say that future investors could have no confidence that a Liberal Government would maintain a nuclear programme. I regret that, of course, because responsibility in government is important. I note that British Energy has a base in Gloucester and employs about 1,000 people. I imagine that some of them reside in the hon. Gentleman’s constituency and will have listened to him with great care. I do not know whether he has any further message for the Liberal Democrats who are hoping to hold on to their seats in Barnwood ward, where British Energy resides, and it may be that a change of policy is afoot.
Indeed. Anyone would think that there were elections coming up later in the week, would they not, Mr. Deputy Speaker?
That was exactly where I wanted to draw the line—on a trivial note. I hope that I have done enough to satisfy colleagues that our amendment should be accepted.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
New Clause 8
Power to amend licence conditions: smart meters
‘(1) The Secretary of State may modify—
(a) a condition of a particular licence under section 6(1)(c) or (d) of the Electricity Act 1989 (c. 29) (distribution and supply licences);
(b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act;
(c) a condition of a particular licence under section 7 or 7A of the Gas Act 1986 (c. 44) (transporter, supply and shipping licences);
(d) the standard conditions incorporated in licences under those provisions by virtue of section 8 of that Act;
(e) a document maintained in accordance with the conditions of licences under section 6(1) of the Electricity Act 1989 or section 7 or 7A of the Gas Act 1986, or an agreement that gives effect to a document so maintained.
(2) The Secretary of State may exercise the power in subsection (1) for the purpose only of—
(a) requiring the holder of a licence to provide or install, or facilitate the provision, installation or operation of, meters of a particular kind, or
(b) requiring the holder of a licence to make arrangements related to the matters mentioned in paragraph (a).
(3) Modifications made by virtue of subsection (1) may include—
(a) technical specifications for meters (including specifications in respect of matters relevant to the ability to obtain remote access to meters);
(b) a prohibition on the supply of gas or electricity through a meter other than a meter which complies with a technical specification under paragraph (a);
(c) provision about the installation of meters which comply with a technical specification under paragraph (a) (including provision about the replacement of existing meters);
(d) provision about electricity generated by a customer;
(e) provision about the circumstances in which any pre-payment facilities of a meter may be utilised;
(f) provision about the use of a meter remotely to disconnect a customer’s premises;
(g) provision about the protection of consumers;
(h) provision about access to, and the use of, an electricity distribution system or part of an electricity distribution system for communication in connection with a meter;
(i) provision about access to information from meters (including provision enabling a customer, or a person acting on a customer’s behalf, to have access to information about the customer’s consumption of gas or electricity);
(j) provision about communication of information by or to meters (including provision about its onward communication) and about the use of such information;
(k) provision requiring the holder of the licence to enter (or refrain from entering) into an agreement of a specified kind, or with a specified person;
(l) provision specifying, or enabling the determination of, a date from which a modification is to take effect.
(4) The power conferred by subsection (1)—
(a) may be exercised to make different provision in relation to different classes of customer;
(b) may be exercised generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as specified conditions are satisfied);
(c) may be exercised differently in different cases or circumstances;
(d) includes a power to make incidental, supplementary, consequential or transitional modifications.
(5) The power conferred by subsection (1) may not be exercised after the end of the period of 5 years beginning with the day on which that subsection comes into force.
(6) Provision included in a licence by virtue of that power—
(a) need not relate to the activities authorised by the licence;
(b) in the case of a licence under section 7 or 7A of the Gas Act 1986 (c. 44), may do any of the things authorised by section 7B(5) of that Act (which apply to the Gas and Electricity Market Authority’s power with respect to licence conditions under section 7B(4)(a));
(c) in the case of a licence under section 6(1)(c) or (d) of the Electricity Act 1989 (c. 29), may do any of the things authorised by section 7(2) to (4) of that Act (which apply to that Authority’s power with respect to licence conditions under section 7(1)(a)).
(7) In this section a reference to a meter includes a reference to a visual display unit, or any other device, associated with or ancillary to a meter.’.—[Malcolm Wicks.]
Brought up, and read the First time.
With this it will be convenient to discuss the following:
Government new clause 9—Power to amend licence conditions: procedure.
Government new clause 10—Smart meters: supplemental.
New clause 1—Implementation of new metering arrangements—
‘(1) The relevant licensees for the purposes of this Part are—
(a) gas suppliers and gas transporters within the meaning of Part 1 of the Gas Act 1986 (c. 44); and
(b) electricity suppliers and electricity distributors within the meaning of Part 1 of the Electricity Act 1989 (c. 29).
(2) The effective date for the purposes of this Part is the date which is 10 years after the date on which section 79 comes into force.
(3) Expressions used in this Part have the same meaning as in the Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.
(4) As from the effective date, a relevant licensee must not supply gas or electricity to any premises that is not subject to the provisions of this section.
(5) The Secretary of State may exempt any relevant licensee from the prohibition imposed by subsection (4) in relation to such premises, for such period of time, and subject to such conditions as he considers appropriate in all the circumstances of the case.
(6) References in this Part to new metering arrangements are to arrangements (including the provision and operation of any necessary communications and data-handling infrastructure) designed to ensure that, by the effective date, all premises supplied with gas or electricity in Great Britain will continue to be so supplied through a meter that conforms to the following three requirements—
(a) that the meter must record and be able to store measured consumption data for multiple time periods;
(b) that the meter, either on its own or with an ancillary device, must facilitate remote access to such data; and
(c) that the meter must meet any specifications that may be set out in any regulations made by the Secretary of State under this Part, pursuant to his duties under Part 1 of the Gas Act 1986 and Part 1 of the Electricity Act 1989, for the purposes of facilitating the introduction of new metering arrangements.
(7) This section may not be brought into force before 1st January 2010.
(8) The Secretary of State may, in accordance with this section, modify—
(a) the conditions of a particular licence held under section 7(1) or 7A(1) or (2) of the Gas Act 1986 or under section 6(1) of the Electricity Act 1989;
(b) the standard conditions of licences of any type mentioned in those subsections
if he considers it necessary or expedient to do so for the purpose of securing the implementation of the provisions of this section.
(9) The power to make modifications under paragraph (a) or (b) of subsection (8) includes powers—
(a) to make modifications requiring licence holders, or classes of licence holder, to cooperate together, under arrangements approved by the Authority;
(b) to make modifications requiring any relevant licensee to take or refrain from taking any specified action, whether in relation to premises supplied with gas or electricity or otherwise;
(c) to make modifications relating to the operation of access to, or use of pipe-line systems and distribution systems; and
(d) to make incidental, consequential, or transitional modifications.
(10) Before making modifications under this section, the Secretary of State must consult the Authority, the holder of any licence being modified, and such other persons as he considers appropriate.
(11) Subsection (10) may be satisfied by consultation undertaken before, as well as by consultation undertaken after, the commencement of this section.
(12) Any modification under subsection (8)(b) of part of a standard condition of a licence shall not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.
(13) Where the Secretary of State modifies the standard conditions of licences of any type under subsection (8)(b), the Authority must make the same modifications of those standard conditions for the purposes of their incorporation into licences of that type granted after that time.
(14) The Secretary of State must publish any modifications under this section in such manner as he considers appropriate.
(15) The power of the Secretary of State under this section may not be exercised after the end of the period of five years beginning with the passing of this Act.’.
New clause 3—Regulations on new meters—
‘Where the Secretary of State makes regulations in connection with new metering arrangements under—
(a) this Act;
(b) Part 1 of the Gas Act 1986; or
(c) Part 1 of the Electricity Act 1989,
such regulations must require that such meters have the facility to use the data that they collect on gas or electricity consumption for the purpose of assisting the householder to select the gas or electricity tariff which is most to the householder’s advantage.’.
New clause 16—Information on carbon dioxide emissions—
‘The Secretary of State shall, within 12 months of the passing of this Act, make regulations requiring companies supplying gas or electricity to specify on consumers’ energy bills the volume of carbon dioxide emitted in generating the energy supplied in the period to which the bill relates.’.
Government amendments Nos. 50, 58 and 59.
It is good to get on to something smart, namely smart meters. The issue was of significant interest during our discussions in Committee and in the slightly wider world. I know that many Members of the House have a keen interest in it.
During our discussions in Committee, it was clear that both sides of the House were in agreement about the potential benefits of smart meters for both consumers and energy suppliers. The benefits include giving consumers better information to help manage their energy use, providing accurate bills and, potentially, providing easier access to a wider range of tariffs. Smart meters also have the potential to contribute to the future development of the energy services market that many of us hope will be forthcoming.
Of course, smart meters can also facilitate the export of electricity from microgeneration to the grid. For suppliers, the benefits include reduced costs, for example through remote meter reading, accurate billing and the potential to switch consumers between tariffs. All that will in turn translate into an improved level of customer service. However, Members also recognised that a roll-out of smart meters to all energy consumers would be a complex and highly challenging project, which would entail significant costs as well as the significant benefits I have already outlined.
There is clearly a lot of uncertainty about cost. The figures that the industry comes up with and those that the Government use vary hugely, perhaps by a factor of three. The key source that the Government seem to use is a report by Mott MacDonald. If that has not already been placed in the Library, would the Minister be willing to ensure that it is?
The Government published our response to the billing and metering consultation yesterday. I know that yesterday was only yesterday, but I made efforts to ensure that certain colleagues knew about that publication so that they might be able to glance at the report. Last week, we published detailed economic impact assessments of the costs and benefits of a domestic and small business smart meter roll-out, having previously published an impact assessment for a roll-out to medium-sized businesses.
Before I turn to the Government amendments on smart metering, it would be helpful if I reiterated the Government’s policy intentions as set out in our response to the consultation. Our policy is most easily explained by examining our proposed approach in each of the three customer segments that we have identified: medium-sized business, small business and domestic consumers. Hon. Members who have had the opportunity to study the impact assessments that we published will be aware that there is a positive cost-benefit analysis for proceeding with smart metering for the medium-sized business sector and that the Government have therefore already announced in the 2008 Budget our intention to mandate a roll-out of smart meters to the sector over the next five years. That decision will see about 170,000 electricity and 40,000 gas meters being updated with more advanced technology, delivering carbon savings of around 140,000 tonnes of carbon per annum by 2020—a small contribution to our carbon targets.
Based on our analysis to date, I believe there is also a good case for a roll-out of smart meters to small businesses. However, that analysis needs further testing to ensure that our assumptions fully reflect the complexities of the small business sector. As such, we will be undertaking further work with stakeholders to ensure that our initial positive findings are accurate before making final policy decisions on a small business roll-out.
A roll-out of smart meters to the domestic sector is, of course, a far larger and much more complex project. It would involve replacing some 47 million electricity and gas meters in every home in Great Britain. Current estimated costs to the economy are potentially between £8 billion and £14 billion over 20 years.
The domestic roll-out is important. Smart meters must be compatible with different suppliers, so a roll-out should perhaps be done all at one time to make sure that we do not get an issue with different types of smart meters that prevent switching between suppliers.
I understand those points. Of course, when it comes to the roll-out of smart meters there are a lot of important issues of that kind to determine.
In answer to the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), I am advised that approximately 5 per cent. of total meter stock per annum is replaced. I can see where the hon. Gentleman was coming from—there is an ongoing investment and we clearly need to factor that in to any cost-benefit analysis.
I think Ofgem estimates that 8 per cent. of the meter stock is changed every year, and that is not far from the 10 per cent. that is being recommended. In Committee, the Minister said that the costs could be between £10 billion and £20 billion, and he has now brought that down to between £8 billion and £14 billion. That shows great progress. Ofgem also estimates that the meters would cost between £70 and £90 each, so 47 million would cost about £4.5 billion. Does the Minister think that he might be able to get his costs down a little further on that point, too?
Well, costs can go up as well as down, as the advertisements say. We are trying to refine the analysis and we need to go further, as all sorts of factors are in play. I said that our current estimates put the costs at between £8 billion and £14 billion, and I have conceded that we need to do more work to refine those figures. That is something that we need to discuss with industry, but our present analysis does not suggest that there is a net positive business case for proceeding. However, the figures are the result of our initial analysis, and are by no means our final word on the subject. Many of the estimated future costs carry a high degree of uncertainty, and some of the anticipated benefits are challenging to quantify in monetary terms.
I wonder whether I might make some progress. Just occasionally, I answer a question in advance. It happened once, 10 years ago, but it could just happen again.
As I was saying, the figures are based on our initial analysis, and we need to do more work. For example, we anticipate potential benefits to households as a result of better information, leading to reduced energy usage and, as such, lower energy bills and related carbon savings. We also anticipate benefits for energy suppliers and, in the longer term, for distribution networks. However, analysing in detail the full extent of those benefits and quantifying them is extremely difficult and depends on a number of variables that require further investigation. I suppose that shows that we need more than the back of an envelope to do the calculations on—
They have very large envelopes at Ofgem; I have seen them.
The first stage of impact assessment work has been valuable in demonstrating the range of complex issues involved in a domestic smart meter roll-out, and some of them will need further in-depth analysis over the coming months. We therefore intend to take forward a further phase of work in consultation with stakeholders. Our aim will be to ensure that we have the best possible assessment of costs and benefits before taking any final policy decisions on a small business and domestic roll-out.
Before I give way to the hon. Member for Montgomeryshire (Lembit Öpik), I should say that our intention is to report our work on these analyses to the House by the end of the year.
May I report to the House that, for the second time in 10 years, the Minister has answered a question in advance? He anticipated my question, and caused me to convert my intervention into a brief word of praise for him.
The Minister will know that the cost of carbon is a very important consideration when the value of smart meters and other technology is being worked out. In the further consultation that will be held, I hope that he will work through the calculations based on different carbon costs. I hope too that he will consider the benefits of smart meters in respect of the feed-in tariffs that will be vital in promoting microgeneration. I know that we will deal with that point shortly, and I look forward to hearing his views.
As the hon. Gentleman says, we will discuss feed-in tariffs later, but I thank him for his congratulations. My endeavour now is to answer a question that even he has not yet formulated in his mind.
I turn now to Government new clauses 8, 9 and 10, and the consequential amendments Nos. 50, 58 and 59. I want to explain why we believe that they provide the most appropriate legislative route forward, given the context that I have just outlined.
New clause 8 allows the Secretary of State to modify relevant electricity and gas licences, or other documents made under licence conditions, to require or facilitate the installation of smart meters. As I have indicated, our intention is that this power will underpin the roll-out of smart meters to medium-sized business in the first instance.
As is common practice with technical issues in the energy sector, the intention is to specify the detail of the requirements being placed on licensees, and other relevant arrangements, through modifications of licence conditions or other relevant industry documents rather than including that detail on the face of the enabling legislation. Examples of the type of detail that I am referring to would include the specification of the meter, or the speed of a roll-out.
At this stage, we need to maintain flexibility in defining those details, as they could have significant cost implications. Small changes to the assumptions that we make can have significant impacts on the overall costs, as well as on the potential benefits. We need the flexibility to specify these issues in modifications so that we can identify the optimum, most cost-effective roll-out.
The new clause also recognises that smart metering is an issue of significant interest to Parliament. It is also potentially one of major national importance, with direct implications for business and consumers. Usually, the Secretary of State would make this type of modification without further recourse to Parliament. The new clause proposes going further by providing a mechanism for additional parliamentary scrutiny.
More specifically—in addition to the usual requirements for the Secretary of State to consult relevant licensees, Ofgem and any other appropriate persons—new clause 9 requires the Secretary of State to lay the draft modifications in Parliament and allow a period of 40 days in which either House of Parliament may reject them. I believe that that additional parliamentary scrutiny is appropriate and that it will be welcomed.
Our amendments will allow the Government to move forward now with smart metering for medium-sized business and, subject to further analysis and informal consultation, to be in a position to act as quickly as possible to roll out smart meters to the small business and domestic sectors, should our final analysis support that. That is the most sensible approach, given the inherent flexibility needed in developing and implementing the licensing and other arrangements in this evolving regulatory area.
I suspect that the Minister is coming to the end of his speech, and I have been waiting for the answer to the question that I have wanted to ask. Will he say something about visual display units? There has been a lot of discussion about VDUs, and some parts of Government are very keen on them, but it makes no sense to introduce them if domestic customers are going to have access to smart metering in the relatively near future. What is the present view on VDUs?
I thank my hon. Friend for that question. We have listened to many people outside the House, and they believe that the main thrust must be the development of the more sophisticated smart meter technology. However, there will be voluntary agreements with the supply companies in respect of VDUs.
It is also worth noting that, as part of finalising our decision on a roll-out to domestic consumers, we would also like the opportunity to take account of the smart metering trials that will produce initial results later this year. I believe that these amendments will successfully enable the roll-out of smart meters. They are an important step forward in fulfilling our ambition, set out in the 2007 energy White Paper, to improve the information that energy customers receive about their energy use.
I therefore hope that colleagues in the House will lend their support to these Government amendments.
I thank the Minister for bringing forward these amendments. They are not everything that we asked for, but they show progress from where we were in Committee. We welcome with great enthusiasm any sinner who repents.
The case for smart meters is as strong as ever. Their introduction is supported by the industry, and overwhelmingly by consumer groups, as smart meters will get rid of prepayment meters and estimates forever. There is also great support from the environmental groups, thanks to the important contribution that smart meters can make to tackling energy inefficiency.
We think that the Government should have gone further. We would have liked them to insert a specified time scale of 10 years for the introduction of smart meters across the whole country. However, the fall-back position adopted in Committee was that the Government should table an amendment with permissive powers to avoid the need for primary legislation in due course. They have done that, so perhaps we should give the Minister not three cheers, or two, but one and a half cheers for what he has achieved.
One day in Committee, the Minister told us that he would be going home to fit his own electronic display device. He said that the EDD was in its box in the cupboard, and that we had shamed him into going home and fitting it that very weekend. We expressed our concern that he might electrocute himself in the process, and we are obviously delighted that he did not do so. Nevertheless, did he summon up the courage to fit it, and has he found the device useful? Many of us share the concern of the hon. Member for Sherwood (Paddy Tipping) that VDUs are often almost worse than useless and that they distract from what is a very important debate.
Our view that the Government should have gone further and put in place a time scale is supported by many others. The Energy Saving Trust’s briefing to us states:
“We welcome the amendments put down by the Government to facilitate this, but believe the Government needs to go further. Without Government mandating of full smart metering, the carbon saving potential of these devices will not be fully realised.”
The Government’s policy has changed. In Committee, the Minister made it clear that he was not persuaded that the overall benefits of smart meters outweighed the disadvantages, as he saw them. He could not tell us whether primary or secondary legislation would be required. It is thus clear that there has been a change in the Government’s thinking, which we are pleased about.
In November 2007, the Prime Minister said:
“For every household over the next decade there will be the offer of a smart meter that will allow two-way communication between the supplier and customer, giving more accurate bills of course and making it easier for people to generate their own energy through micro generation and sell it on to the grid.”
That is not what the Minister is talking about today. That was clearly not the EDD, because that does not allow two-way communication. What did the Prime Minister mean when he made that statement? The Minister seems to be rowing back from the 10-year commitment.
It is clear from those in the industry and others that if this is going to happen, there must be a clear mandate from the Government. The Energy Retail Association’s advice to us stated:
“If the ambition to have all homes in Britain fitted with smart meters is to be achieved, the process of planning needs to begin sooner rather than later. In order to achieve the Government’s stated expectation that smart meters will be rolled out to every British home within ten years, the industry needs a mandate…It must commit now to a clear timetable and ensure that a decision is made quickly to grant the mandate.”
There is concern about the Government’s lack of leadership. This morning, about an hour or so before we entered the Chamber, we received the response to the consultation document—I suppose it is better to have it at that stage than not at all. There are areas in the response where we would have looked for more leadership from the Government, rather than just suggestions about a need for further consultation. Indeed, the opening paragraphs of the document suggest that the Government have moved the goalposts since the Prime Minister’s suggestion last November, because they say:
“Views were also invited on the Government’s expectation that over the next ten years, all domestic gas and electricity customers will be given smart meters with visual displays and on how smart metering could be delivered to smaller businesses.”
That was not what the Prime Minister said. He said that this would be delivered to domestic consumers within 10 years.
Does the hon. Gentleman agree that the industry wants leadership, a mandate and clarity from the Government so that it can implement the introduction of smart meters on a level playing field and ensure that the meters are usable by all suppliers, and thus do not act as a barrier to the market? He might have heard that the industry estimates that this could save domestic consumers about £4 billion a year. Does he agree it is important that the industry is heard and provided with the direction that it requests from the Government, which would be at no cost to the Government but of great benefit to consumers and the environment?
I agree with the hon. Gentleman. Not only the industry but consumer groups believe that there could be big savings for consumers. Environmental groups believe that smart metering would represent good environmental practice. There is overwhelming support for smart metering as the right way forward, so we need greater leadership from the Government.
The consultation document shows that there was overwhelming support for introducing smart metering for larger and medium-sized businesses. The Government have taken on board that support and say, under the heading “Next steps”:
“The Government intends to…undertake a further short consultation in May”.
Having got overwhelming support, they will consult further on the detail.
As we know, there was strong support among smaller businesses and domestic users. The Government say:
“Exercising these powers in relation to small businesses and the domestic sector will be dependent on the outcome of further analysis and impact assessment work.”
That was what we thought this process was about, and we need further progress.
The document also says:
“Further discussions with stakeholders on the consultation impact assessment and in the areas identified above will take place over the next few months to further refine the impact assessment and define the policy options moving forward.”
Ministers do not seem to understand that we do not have time on our side. If we have to wait until the end of this year, a further year will have been lost during which a range of households could have benefited and reductions in carbon emissions could have been brought about through better informed household choices. It is disappointing that the programme is being put off.
Does the hon. Gentleman accept that smart meters could play an important role in dealing with fuel poverty, for example by ending overcharging because of prepayment meters and dealing with back-charging through changing tariffs because of the way in which smart meters work? Perhaps that is a further imperative in support of early adoption.
Will the hon. Gentleman comment on the sunset provision in new clause 8 that requires changes under subsection (1) of the new clause to take place before five years are up? Will he suggest to the Minister that that could be considered as some sort of time scale for ensuring that consultations on the implementation of such a programme end urgently and early?
I said earlier that one of the great advantages of the programme was that it could lead to the end of prepayment meters. One of the reasons that it is so strongly supported by Energywatch is that it could make a massive improvement to the service offered to domestic consumers, especially those in fuel poverty. I should say, as an aside, that it is very sad that the Bill does not address fuel poverty. Although the Bill gives us the perfect opportunity to do so, fuel poverty has been excluded completely.
The hon. Gentleman refers to a sunset provision. We need progress within those five years. That is not the time scale in which we will see action, but that in which the Government need to make a decision, and that is an enormous way off. We do not have time on our side, if we are to stand any chance of meeting our 2020 commitments, so we need the programme to move forward more quickly. That is why we support the view of the industry and others that 10 years would have been a sensible time scale. The Government are giving us the smack of firm consultation, but we need decision making and progress. We accept that the new clause represents movement in the right direction, but it is still disappointing that the Minister has not gone further.
New clause 16 is one of several measures that we tabled—sadly, it was the only one selected—that would give consumers more information so that they were able to make better choices. I am certain that consumers want to do more.
I was rather hoping that the hon. Gentleman was going to address the costs of smart meters. It is not unreasonable for the Government, when faced with the indubitable advantages and benefits of smart meters, nevertheless to address costs seriously. As I said, we need to refine the costs, and we will discuss them with the industry, which will have different ideas. This is clearly a costly national project, so does he not agree that it would be irresponsible for the Government not to pay heed to the costs, not least at a time when our constituents are worried about rising energy bills?
Of course we have to pay heed to the costs, but what is frustrating is the speed at which that is being done. The issue has been addressed in the House on many occasions. On Second Reading, I think that every single Member who spoke talked about smart meters and the need for progress. We find that the next consultation will not conclude until the end of the year, but we simply do not have time on our side.
Yes, there is a debate to be had. Centrica’s submission to us cited research carried out by Frontier Economics showing that there was a positive cost-benefit to the consumer through the roll-out of smart meters of £3.5 billion by 2020 owing to the energy savings that would be made. The figures are out there and views have been formed. It should now be quite simple for the Minister, in a short space of time, to reach a decision rather than simply knock the issue into the long grass. That is why the frustration arises. I would not wish to disappoint the Minister by not addressing issues that he would like me to consider, but it behoves the Government to speed up the process.
The purpose of new clause 16 is to help consumers to make better informed choices. They want to do more, but they often feel disempowered because they do not know enough and do not have enough information on which to base decisions. We have argued that they should have more information about how much of their energy bill goes on environmental taxes and charges, so that they know what proportion of their bill relates to renewables obligation certificates, the carbon emissions reduction target and the European emissions trading scheme. The Government blocked an amendment that would have allowed that, and we remain disappointed that they do not seem to want consumers to have more information.
New clause 16 is on a separate issue: it would require energy companies to state on people’s energy bills the volume of CO2 emitted in generating the energy for the consumer in the period in question. If the consumer bought green electricity only, the figure would be zero, but if the electricity was generated from coal-fired power stations or came from elsewhere, a much higher figure would be given. That would enable the consumer to say to their supplier, “I want to switch to a company that will produce less CO2.” The figure will, almost by definition, be a bit of an approximation, as we cannot expect the amount to be worked out to the hour for every consumer, but it would mean that suppliers consulted the people who generated the energy, and looked at the sources from which the power was generated over a period. They would then produce a total figure, which could be divided by the number of consumers. That would give the consumer information enabling them to make an informed choice.
Of course, if the measure were taken forward, there are issues that would need to be addressed. For example, how would nuclear be assessed? Would the whole lifetime carbon costs of any construction be considered, or would we consider only the carbon produced in the course of generation? How would energy transported to this country through the French interconnector be assessed? However, those questions do not detract from the valuable contribution that the measure would make to enabling people to make informed choices. We want people to tackle waste and improve the energy efficiency of their homes. We should actively seek to make people do more in those respects, and to make them switch to less polluting electricity suppliers, but at the moment, unless they have a purely green supplier, they simply have no idea of how that is to be done. New clause 16 is a simple measure that would make such a switch possible.
We should not say that the measure is too complicated, because Tesco announced yesterday that it would set out the carbon footprint for 30 of its products as a prelude to doing so much more widely. If that can be done for a packet of beans, a punnet of strawberries or whatever is on the Minister’s shopping list for when he sits down to watch the football match tonight, it can be done for electricity bills, too. I hope that the Minister takes that point. On smart meters, I give him one and a half cheers for recognising that a provision addressing the issue should be included in the Bill, but there is still disappointment about the fact that he has not gone further.
I will not detain the House long. The hon. Member for Wealden (Charles Hendry) is being a little churlish in offering only one and a half cheers; I think that my hon. Friend the Minister listened very carefully to our debate in Committee and has responded far more fully than I expected him to, so he should get more than one and a half cheers.
I want to reiterate a point that I made in Committee. A smart meter will certainly allow a person to choose between tariffs by providing them with the information that they need if they are to make that choice, but because of the way in which the electricity and gas retailing industry works, they would be making a choice between the tariffs offered by a particular company. If someone wants to change companies, they have to work out who has the cheapest tariff. They may have to go online to the website of a company such as uSwitch and enter their details and information about their energy usage; uSwitch will then tell them which the cheapest energy supplier would be, and the person could then sign up with that company. I do not want to do that in future; I want a smart meter that does it for me.
I want a smart meter that I can hand over to a company such as uSwitch, so that it could monitor the energy retailing industry for me and change my tariff and supplier every week or month, or whenever appropriate. I do not want to have to do the work any longer. Why should I, when I have a computer built into my energy meter that should be doing that work for me? My question to my hon. Friend is whether the amendments before us go so far as to make that practicable, so that companies such as uSwitch can decide to step into the market and extend their range of products. According to my reading of the amendments, they probably do allow that to happen, but I would like confirmation from my hon. Friend that my reading is accurate, and I would also like confirmation that when the consultation takes place over the next few months, the need for such a service will be taken into account so that energy retailers are not allowed to block the entry into the market of companies that can provide us with such a service.
I think that the hon. Gentleman’s reading is right; new clause 3, which is in the group of amendments that we are considering, and which I hope the Government will accept, provides that the regulations on smart meters must include a provision allowing a smart meter to be a friend in the cupboard, or on the mantelpiece, that facilitates switching for the consumer. The hon. Gentleman might have heard a lengthy advocacy of that exact principle in Committee, and I am delighted to hear that point reflected in today’s debate; I welcome that.
Along with others who have spoken, we very much welcome the Government’s new clause 8. As the numbering of the new clauses suggests, we had already tabled new clause 1, which tries to do very much the same thing as new clause 8. We are not too worried about the finer points of the drafting differences between the two. As new clause 8 has the Minister’s imprimatur, we are happy to defer to him, and not to pursue new clause 1, with one reservation: as the amendment paper shows, when we tabled new clause 1, we included a time scale. That point has already been touched on. The five-year time scale referred to in Government new clause 8 means that there will be five years before the starting whistle is blown, and before things might start to happen. The idea that the clock is ticking is important in the context of climate change. If we are shortly to have binding targets for reaching our 2020 and 2050 climate change goals, another year or two, or five, matters. It is the lack of urgency that disturbs us. Let me read a statement of the Government’s policy:
“Following our consultation on billing and metering, the Government intends to roll forward a package of measures in Great Britain which will change the way in which energy use is communicated to customers.”
One might assume that that came out this week, but in fact it was said a year ago in the energy White Paper of May 2007. The consultation on billing and metering referred to is the previous consultation, and not the most recent consultation or the next consultation. We feel that a line has to be drawn.
I accept that the Government have a trial under way, and there is an argument for saying that we should let the trial finish. However, the statement of May 2007 was written when the trial had barely begun, so it is hard to argue that we need extra time for the trial to run when, over a year ago, before the Government had any clues about how the trial was going, they were already giving undertakings. The Minister cannot have it both ways.
As the hon. Member for Wealden (Charles Hendry) said, the document that was circulated today—we appreciate the help given by the Minister’s office in that regard—says that, in summary, the Government’s plan, in response to the consultation, is
“to complete further economic assessment work and consultation to finalise policy position”.
One wonders what the Government are waiting for. What do they think that they will find out after another six or nine months of dithering that they could not find out in the previous 12 months of dithering? What is the delay? The conclusion of the response to the consultation says:
“Given the complexity of the issues and the number of variables involved, the Government wishes to discuss further…We have therefore published…a consultation impact assessment”—
that is a new one to me—
“on a roll out…and invite comments”.
I wonder whether there will be a Government response to the consultation impact assessment, which was the Government’s response to the consultation, which followed another consultation. Perhaps then there will be a period of public engagement, reflection and consideration. Can we not just get on with it?
I have been trying to work out why the Government do not want to get on with it, and whether the Minister has caught the ditheritis that comes from the top of Government. I looked back to our deliberations in Committee on 11 March, which was the last time that I challenged the Minister to get on with it. He intervened on me to ask, apropos of smart meters,
“Does he not recognise that by rushing the process”—
rushing? Chance would be a fine thing—
“there is a danger that we could to install the wrong technology”?––[Official Report, Energy Public Bill Committee, 11 March 2008; c. 581.]
I do not know whether the Minister has ever bought a computer; I sense that he may never have done so. There is always a danger of buying the wrong technology, and that something better will come round the corner.
Surely there are plenty of examples of working technology out there. It is not staggeringly new. We have a rough idea of how it would all work. The fact that the Government have had a trial of smart meters going for well over a year suggests that it is not cutting edge, alien technology. It is in use in other countries as well, so the technology is not—
Although I go along with the hon. Gentleman in his suggestion that it is important that rapid progress is made between the consultation and the implementation of smart meter technology, his computer analogy assumes that a choice is made within a common operating system. Does he accept that one of the issues in smart meter roll-out must be to ensure that meters are interoperable and interchangeable, and are not the creature of the company that installed them? It is therefore necessary to get that process right.
I agree that we need interoperability and that we need to get the process right, but I do not see why another 12 months, 18 months or any other period of consultation and dithering will make that any more likely. We know that now and we knew it 12 months ago, so let us get on with setting the common standards to which all companies would have to adhere. Why was Ofgem not asked to do that 12 months ago? I agree with the hon. Gentleman on the goal. I do not understand the delay.
Why is it so important that we get on with the task? We have heard some of the advantages of smart meters, but probably not all of them. One that has been understated so far in the debate is the potential for load shifting. If we are thinking about the difficult question of our future energy supply and security, and a structure that will match the peaks of demand that occur, and potentially thinking about a future when we might, for example, be charging up our cars overnight, the importance of load shifting will become greater and greater.
If we can use smart meter technology to ensure that we do not need quite so much total capacity in the system because of a very small number of very high peaks—if we can do something about the peaks—that will have a profound public benefit for the infrastructure that we need. The cost-benefit analysis of smart meters should take that into account. The benefit would not just be private and personal; the entire public infrastructure would benefit from much greater incentives for load shifting. That has not been factored in sufficiently.
We heard mention of fuel poverty. Certainly, we do not want people in fuel poverty to get estimated bills, especially when those are overestimated. The hon. Member for Wealden suggested that smart meters would bring an end to prepayment meters. That is not my understanding. Some consumers choose prepayment because that is the way they prefer to budget and, as I understand it, that method of payment would continue. The meters would not have slots, like the old fashioned ones had, but charging up a plastic card to obtain credit will still be an option when smart meters are up and running.
The key is to ensure that the tariffs are right. A set of the fuel poor or vulnerable households or a similar category of people could be identified, and smart metering technology could be used to ensure that they were automatically on the best tariff that the given company offered, or the best tariff. That comes back to the point about switching, to which I shall return.
Another aspect of fuel poverty and smart metering that we have not thought about is one of the arguments advanced by the companies. When they are told to target the vulnerable, they do not know who the vulnerable are. The Government know who the vulnerable are, and I have suggested in the past that the Government might once a year send a letter to everyone on pension credit, for example, with a certificate that they could show to their energy supplier to claim entitlement to its best tariff.
In the world of smart metering we could go one better. Central Government could simply issue to the smart meter the eligibility switch. In other words, there could be a mechanism whereby, since the meters can receive data as well as send data, they could receive information that the householder was entitled to the social tariff, whatever it happened to be. It is another way in which the fuel poor could be targeted, which we struggle to do at present.
The companies are certainly not paying a fair share at present, so that is an interesting suggestion.
We have seen the potential of smart meters for load shifting and for alleviating fuel poverty. The climate change potential through CO2 savings has been mentioned, although it is possible to overstate those savings. There is some evidence that there is a one-off shift, but it is slightly less clear that the effect is ongoing. Whatever sort of smart metering we have, we clearly need a visual display that is compatible with a smart meter, rather than a clip-on device, so that people have the best possible and most accessible information about their consumption and about the CO2 emissions to encourage them to think harder about cutting back.
I have a killer fourth point in my notes, which I cannot read. I shall come back to it.
I like to be kind. The hon. Gentleman will no doubt think of the fourth point. Whether it turns out to be a killer point or not will be for the House to judge.
May I ask the hon. Gentleman, as I asked the hon. Member for Wealden (Charles Hendry), to address the issue of costs? I know that opposition is the art of rhetoric and eloquence unencumbered by economics, but there are serious cost issues involved. We are talking about a major roll-out to every householder. We want that to happen, but I do not apologise for the fact that the Government must consider the cost issues. Even the Liberal Democrats must consider cost issues.
I am grateful to the Minister for paying tribute to my eloquence. That is very decent of him. As an economist, I have never been accused of being unencumbered by economics—au contraire.
We heard from the hon. Member for Wealden that for individual smart meters the costs are modest, relative to the potential savings to the consumer. So the consumer gets a benefit, the companies clearly get a substantial benefit on billing and so forth, society gets a benefit in terms of CO2 emissions, load shifting and microgeneration—my crucial fourth point, to which I shall return. Bringing that all together, it is hard to see why the Government’s cost-benefit analysis is so at variance with everybody else’s. Given that Government money is not involved, I do not understand what the agenda is or the internal DBERR politics.
I assume that if there are net costs, as I believe there will be, they will be passed on to the consumer. It may not be public spending, but at a time of rising energy costs we must have regard to that. I am a supporter of smart meters and I predict that they will be rolled out for householders, but we need to refine the costs and see what the difference is between ourselves and industry on those cost estimates. Many of the advantages are, in a sense, hypotheses. We hope behaviour will follow those, but we must ground it in some estimate of net costs.
Indeed, we need to be realistic about costs. Climate change and fuel poverty are urgent imperatives, and because of the delay, industry is wasting huge amounts of money and passing that on to consumers. The Minister told my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) that over 2 million meters—roughly 5 per cent.—are replaced each year. The further delay between now, when we hoped for a decision, and Christmas, when we might get one, means that another 2 million meters will quickly be obsolete. That is waste as well, which has to be paid for by consumers. I doubt whether the Government’s cost-benefit analysis factors that in. There is a net benefit to the companies, the consumer and the wider society, and the sooner we get to that point, the better.
The fourth advantage relates to microgeneration, which we will deal with more fully in the next group of amendments. The ability to measure accurately what has been generated on a micro scale, exported to the grid and so on is integral to some of the issues that will be covered in the next group of amendments. All that is on hold while we dither about smart metering.
New clause 3 deals with what I call “your friend on the mantelpiece”. We know that there are sets of consumers who switch. We know that, on average, they are the IT literate and the better off. The people least likely to switch are the fuel poor, the urban poor, the very elderly and frail—people who do not get on with technology. Now that the Government have accepted that they will be making regulations about what smart meters must do, new clause 3 proposes that one of those should be to do the shopping around for the consumer. That is what I suggested in Committee and I am delighted that the Minister accepts that principle.
I am happy to discuss the fine detail of how that works, whether it involves switching every second or every quarter, and the way that that is finessed. However, the principle of relying on consumers, even with display units, to take the information to the internet seems one step too many for the most vulnerable. The Minister asked me whether the technology was feasible when we debated this issue in Committee. The technology seems self-evidently integral to smart metering; the meters can receive and send data. Once there is interoperability—an essential prerequisite—that will be done in a standard format. The smart meter should be able to go to the internet and check, on the basis of the person’s individual consumption, for the best package and tariff. That seems to be a win-win situation.
Rather than there being regulators investigating the industry to see whether it is competitive, why do we not just make it competitive? Why do we not put every consumer in charge? What I suggest is the ultimate in putting consumers in charge and making the companies respond. The companies would have to innovate, because those out of line on tariffs would lose custom dramatically. There would be opportunity for niche marketing, because each smart meter would base its choice on the individual consumer’s actual consumption patterns and firms would have an incentive to match tariffs to people’s actual consumption patterns. That could revolutionise the industry.
It is the paucity of vision in new clause 8 that bothers me. We could do this thing in a completely different way, and we are missing that opportunity. Through new clause 3, we are seeking the Minister’s assurances that when specifications for what smart meters have to do are set out, they will include the proposals in our new clause.
New clause 3 mentions the
“tariff which is most to the householder’s advantage.”
What constitutes an “advantage” might be interpreted in a variety of ways; some might want to use the smart meter to find the best green tariff, for example. However, the point would be that the digital divide in respect of the poor would cease to apply. That is one of the big problems with the whole presumption that one of the answers to fuel poverty is that poor people should switch. We know that, in general, poor people do not switch. They do not have the information. I still find my fuel bills baffling, and I regard myself as moderately sophisticated on such matters. It is unrealistic to expect the fuel poor to tackle fuel poverty by constantly shopping around online or by any other means. The smart meters could do that for them—and the sooner that they are in place, the better.
I was somewhat alarmed by the image, put forward by the hon. Member for South Thanet (Dr. Ladyman), of meters that switched regularly between suppliers and got people the best tariff. That sounds wonderful in theory, but the hon. Gentleman’s experience of switching might be different from mine. I am not sure that I would like my meter to change my direct debit or credit card charges. That is the big problem with what the hon. Member for Northavon (Steve Webb) has suggested.
If a meter switches regularly by the second or minute, how would we deal with the billing? The fuel poor do not switch because, as the hon. Gentleman said, they are not familiar with the technology, but if someone is getting a blizzard of different bills from different companies for different sections of their energy use, that would make matters worse. We should not be looking for a brave new world of smart meters that goes beyond what is realistic in respect of what people can deal with. We must bring the issue back to that position.
The hon. Gentleman is making a good point. It is exactly why I used as an exemplar an agent such as uSwitch, which is not an energy retailer but acts on behalf of the individual purchaser. In other words, the consumer would pay some money through such an agent, which would deal with such things; their bank account details would not be switched.
I am looking for the legislation to be permissive, so that when the details get worked out, the necessary agents are in place and the mechanisms for doing the switching are devised, it will be possible, through this legislation, to make those things happen. I do not want us to have to say, “Well, we could do this now, but the primary legislation does not allow it and we will have to wait for another energy Bill to come along.”
I take the hon. Gentleman’s point, although I am not sure that putting a middle man in the energy market will necessarily make things better. I merely make the point that we should be considering what can realistically be done. I do not often say this, but I agree with the Minister’s approach on this issue. New clause 8 gives a permissive power for the meters to be installed; importantly, subsection (3) gives the power for the technical specifications of meters to be included. That was the point that I made in my earlier intervention—it is vital that, as the hon. Member for Southampton, Test (Dr. Whitehead) said, the meters should be interoperative and that different companies do not run different meters that cannot easily switch.
I notice that all the energy companies support smart meters. I have been to many demonstrations of smart meters and seen many press releases and other papers from the energy companies demanding that the Government show leadership on the issue. I understand that there has to be a national roll-out, but the cynical part of me wonders whether the energy companies are seeking to pin the blame on someone else for the associated increased costs. We should be careful about that: smart meters should be a way of helping people, not of raising costs and pinning the blame on politicians for rising energy costs. There is a danger that that could happen.
Having said that, I support smart meters and their roll-out. There is a difference between electricity and gas smart meters. I understand that it is much easier to have an electricity smart meter than a gas one, and I wonder whether we should concentrate on electricity in the first roll-out to get the policy moving and show that the system works. The issue is important because of the many things that smart meters can do.
Energywatch gave a briefing for this debate that called for a swift roll-out of smart meters. It made the point that such meters would mean that
“suppliers no longer have any excuses for charging the 5.8 million prepayment meter…customers more for their energy than consumers paying by other methods.”
The briefing notes that
“PPM customers are paying on average £215 a year more than customers who can access cheaper online tariffs and, in the most extreme case some consumers could find themselves paying as much as £452 extra each year.”
Such a sum is very substantial to someone in fuel poverty. Energywatch also says that
“In the last year alone more than 63 per cent. of the total PPMs installed were put in by companies to recover energy debt…At present 1,000 PPMs are being installed every day to recover a debt, meaning consumers are repaying debt at the highest rates.”
Anything that smart meters can do to deal with that problem would be very welcome.
Smart meters would also mean an end to estimated billing. That is interesting; sometimes, I wonder why the energy companies are so keen on that. I pay for my energy by direct debit, and the company comes along every year and says that for the next year, my payments will be x or y. Obviously, I am out most of the day and there are a lot of estimated readings. We phone the companies or go online to tell them the correct reading; in my experience, whether they take note of that or not is another matter.
None the less, the companies come along every year and try to up the direct debits, despite the fact that in my experience people are mostly in credit at the end of the year. That comes back to the need for consumers to show great care in looking at their energy bills and what the energy companies are doing. Basically, there is a lot of overcharging by various means on the part of the energy companies. I would love a smart meter to deal with all those problems and ensure that we pay only for the energy that we use, and at the cheapest possible tariff. However, I have to be realistic. I understand that the roll-out will take time. It is more important that we get the issue right than get it quickly, although we should get it as quickly as possible. Interoperability is the one thing that we must ensure is present when we roll out the system.
I am grateful to hon. Members for their new clauses. This has been a useful debate which has teased out some of the crucial issues and raised some interesting and novel ideas.
The Government new clause on smart metering represents the most appropriate way forward. Following the guarded support of the hon. Member for Wealden (Charles Hendry) for where we are, I now have one and a half reasons to be cheerful. I am grateful for that as progress of sorts. We are all in agreement about the wide range of potential benefits for energy suppliers and business and domestic customers. We would also agree that in principle we would want those benefits to be delivered as soon as possible. However, we also recognise that a roll-out of smart meters to all energy consumers would be a complex and highly challenging project, and with one opportunity to get the legislative framework right. Although the Government intend to move forward with smart metering for medium-sized business, we need to undertake further work with stakeholders fully to understand the costs and benefits of smart meter roll-out to small businesses and the crucial domestic sector before coming to a final view.
In the context of the policy approach to smart meters that I have described, I must resist new clauses 1 and 3, which seek to specify in the Bill some of the technical details, including the timing of a roll-out and the functions of a meter. At this stage, we need to maintain flexibility in defining some of the details while we complete our analysis and work with stakeholders to identify the optimum, most cost-effective roll-out. I make no apology for being worried about cost-effectiveness. I believe that this is the best approach as we develop our understanding of this evolving regulatory arena. That is one of the key differences in our approach and one of the reasons why I am resisting hon. Members’ new clauses.
The additional parliamentary scrutiny provided for in new clause 9 is another important difference between Government amendments and those tabled by hon. Members, although I am sure that they agree that our scrutiny is important. The Government new clause means that we can move forward with smart metering for medium-sized businesses now and, subject to further analysis and informal consultation, be in a position to act as quickly as possible to roll out smart meters to the small business and domestic sector should our final analysis support that, as I hope that it will.
My hon. Friend the Member for South Thanet (Dr. Ladyman), very much in agreement with the Liberal Democrat spokesman, had some intriguing ideas about how the smart meter could become the smartest of meters and the smartest of friends to the consumer in identifying, whether on a minute-by-minute or a daily basis, the best option for the householder.
My hon. Friend missed my resolution not to be mean to the Liberal Democrats today. I was slightly mean earlier, but I think that I got away with it.
We are not aware of approaches or technologies that would allow for quite the sort of approach suggested, but I will make further inquiries. The hon. Member for Northavon (Steve Webb) wondered why, technically, it could not be possible. I wondered at one stage whether it could mean that at one time we all got our electricity from one company and half an hour later we got it from another company. We have heard about different niche markets, but I am not sure what the market implications of that might be. However, it is an interesting idea and I will consider it further.
Hon. Members have talked about our approach, and I have noticed that “dithering” seems to be a favourite word in the Opposition’s political vocabulary. I do not recognise that. Since the energy White Paper, we have undertaken a consultation and published a significant body of impact assessment work. We have tabled an amendment to the Bill, which we are discussing, and we have already announced our intention to move forward for medium-sized businesses. I make no apology for considering the cost-effectiveness of the measure as well as the benefits. I therefore hope that hon. Members will feel able to support the Government new clause and will not press theirs to a vote.
New clause 16, in the name of the hon. Member for Wealden, seeks to increase transparency for consumers by requiring energy suppliers to specify on a consumer’s bill the amount of carbon dioxide that has been emitted in the production of the energy attributed to that bill. As the problem of climate change is now a global one, we all—consumers, business and Government—have a role to play. Indeed, much of today’s debate is about how we enable the citizen to become more active in tackling global warming; it is a feature of the next debate, too. A key element of our strategy to tackle climate change is promoting energy efficiency and crucially, as part of that, engaging the individual. Important examples of the Government’s work are the “Act on CO2” campaign by the Department for Environment, Food and Rural Affairs and the fact that two thirds of the estimated savings in the 2007 energy White Paper were as a result of energy efficiency measures. However, we must continue to take action to help consumers to understand the choices that they can make about using cleaner energy and reducing the energy they use.
I support the notions behind new clause 16, but I shall resist it because it would duplicate existing statutory requirements that achieve the same outcome. It might be helpful if we consider this in two parts—electricity and gas—as they are covered by different statutory requirements. Looking first at electricity, in transposing the electricity directive 2003/54/EC the Government laid the Electricity (Fuel Mix Disclosure) Regulations 2005. I am sure that hon. Members remember those quite intimately. Those regulations inserted a new condition into electricity supply licences requiring suppliers to provide information on or with the consumer’s energy bill, and in promotional materials, about the environmental impact of the electricity supplied in terms of carbon dioxide emissions. I hope that hon. Members will therefore accept that the requirement for suppliers to provide the specified information in relation to electricity is already accounted for.
The issue of carbon dioxide emissions from gas is somewhat different. Carbon emissions from electricity supplied should result in greater awareness of the relative carbon intensity of different generating technologies, which in turn might incentivise switching among consumers. However, information on carbon emissions from gas supplied would not have the same effect, because gas supplied will have the same carbon emissions regardless of who supplies it—that is, 0.185 kg of CO2 per kilowatt hour of gas consumed. The information could incentivise more efficient use of energy by consumers. However, there is already a statutory requirement that has the same effect—the requirement for energy suppliers to provide historical information on consumers’ bills to help them to understand how much energy they have used. Since we published the energy White Paper last year, the six major energy suppliers have included historical energy usage data on all consumers’ bills. That shows consumers, in graphical form, the amount of energy that they have used compared with the same period in the previous year—something that the hon. Member for Angus (Mr. Weir) might study at his leisure.
I am pleased to confirm to the House that having laid the Electricity and Gas (Billing) Regulations 2008 before Parliament earlier this year, we are in the process of cementing that voluntary arrangement in statute. Provisions in those regulations, alongside requirements under the 2005 regulations, mean that I am confident that we have the right statutory requirements on suppliers to enable increased consumer awareness and to incentivise action at an individual level.
Having said that, I listened with great care to the case put again by the hon. Member for Wealden following our discussions in Committee. I have thought through the issues and, notwithstanding my confidence in what I have just said, I wonder whether we should be doing more. I do not think that we need to do more in the Bill, but I would like to discuss these issues with the supply companies to see whether the material that we get in our bills deals with the issues that the hon. Gentleman has raised so well. I rather suspect that we can go further in a cost-effective way, not by trying to itemise CO2 for every constituency, but by sending the consumer general material about carbon emissions, and perhaps reminding them that, as we tackle carbon emissions, extra costs will be incurred through such things as the renewables obligation.
Given what I have said, I am not sure that we are in the right place. We could go further in voluntary agreements, and we will take into account the way in which the hon. Member for Wealden has spoken to his new clause, as I am sure will the supply companies. Having said that, I hope that the hon. Gentleman will consider not pressing the motion, which we have discussed thoroughly, to a Division.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
New Clause 9
Power to amend licence conditions: procedure
‘(1) Before making a modification, the Secretary of State must consult—
(a) the holder of any licence being modified,
(b) the Gas and Electricity Markets Authority, and
(c) such other persons as the Secretary of State considers appropriate.
(2) Subsection (1) may be satisfied by consultation before, as well as by consultation after, the passing of this Act.
(3) Before making modifications, the Secretary of State must lay a draft of the modifications before Parliament.
(4) If, within the 40-day period, either House of Parliament resolves not to approve the draft, the Secretary of State may not take any further steps in relation to the proposed modifications.
(5) If no such resolution is made within that period, the Secretary of State may make the modifications in the form of the draft.
(6) Subsection (4) does not prevent a new draft of proposed modifications being laid before Parliament.
(7) The Secretary of State must publish details of any modifications as soon as reasonably practicable after they are made.
(8) In this section “40-day period”, in relation to a draft of proposed modifications, means the period of 40 days beginning with the day on which the draft is laid before Parliament (or, if it is not laid before each House of Parliament on the same day, the later of the two days on which it is laid).
(9) For the purposes of calculating the 40-day period, no account is to be taken of any period during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.
(10) In this section “modification” means a modification under section [Power to amend licence conditions: smart meters].’.—[Malcolm Wicks.]
Brought up, read the First and Second time, and added to the Bill.
New Clause 10
Smart meters: supplemental
‘(1) A modification under section [Power to amend licence conditions: smart meters] of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986 (c. 44) or Part 1 of the Electricity Act 1989 (c. 29).
(2) Where the Secretary of State makes modifications under section [Power to amend licence conditions: smart meters](1)(b) or (d) of the standard conditions of a licence of any type, the Gas and Electricity Markets Authority must—
(a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and
(b) publish the modification.
(3) The Secretary of State may by order make such modifications of provision made by or under an Act or an Act of the Scottish Parliament (whenever passed or made) as the Secretary of State considers appropriate in consequence of provision made under section [Power to amend licence conditions: smart meters].’.—[Malcolm Wicks.]
Brought up, read the First and Second time, and added to the Bill.
New Clause 4
Tariffs for renewable energy
‘(1) The Secretary of State shall make regulations within one year of the passing of this Act with the purpose of requiring designated energy suppliers to introduce a renewable energy tariff for specified producers of renewable energy.
(2) In this section—
“renewable energy tariff” means the reward level for each kilowatt hour of energy produced by the renewable source;
“renewable source” has the same meaning as in the Utilities Act 2000 (c.27);
“renewable energy” means energy from renewable sources;
“renewables obligation” means the obligation specified in section 32 of the Electricity Act 1989 (c.29);
“specified” means specified in the regulations.
(3) The renewable energy tariff shall set the reward level for each kilowatt hour of energy produced by the renewable source and may—
(a) be set at different levels for different levels for different types of renewable source;
(b) apply to metered energy produced or to metered energy exported onto public gas or electricity networks;
(c) apply to sizes of renewable sources specified in the regulations;
(d) be varied at different times as prescribed in the order or in successive orders;
(e) make provision for the payment and incidence of the costs of connection of small-scale generators to public networks.
(4) The descriptions of energy supplier upon which an order may impose the payment of a renewable energy tariff are those supplying electricity or gas—
(a) in Great Britain;
(b) in England and Wales;
(c) in Scotland; or
(d) in Northern Ireland
excluding such categories of supplier as are specified.
(5) The regulations shall specify—
(a) the renewable sources in respect of which renewable energy tariffs shall apply;
(b) the tariff applicable to each renewable source;
(c) the maximum level of electricity generation in respect of which the renewable energy tariff shall apply;
(d) which persons and installations generating from renewable sources shall be eligible for the renewable energy tariff, and any provisions to exclude installations accredited under the renewables obligation;
(e) the terms and duration of the renewable energy tariff arrangements;
(f) how the amount of energy produced and upon which the renewable energy tariff is payable shall be measured, determined or deemed;
(g) provisions for the regulation of renewable energy tariff arrangements by a designated body;
(h) provision for the Secretary of State to report periodically on the effectiveness of the regulations made hereunder;
(i) any necessary amendment to distribution licences or supply licences held by any person; and
(j) such other provisions as may be required for the efficient, cost-effective and transparent operation of the renewable energy tariff.
(6) Before making regulations under this section, the Secretary of State must consult—
(a) the Authority;
(b) the energy suppliers to whom the proposed order may apply;
(c) representatives of renewable energy producers to whom the proposed order would apply; and
(d) such other persons, if any, as he considers appropriate.
(7) Regulations under this section shall not be made unless a draft of the instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.’.—[Alan Simpson.]
Brought up, and read the First time.
With this it will be convenient to discuss the following:
New clause 11—Electricity from hydro-microgeneration
‘(1) The Secretary of State shall, within one year of the passing of this Act, make regulations with the purpose of encouraging renewable energy generation by means of hydro-microgeneration.
(2) In this section—
“hydro-microgeneration” means the generation of electricity by means of a hydro-turbine of less than 100kW capacity;
“microgeneration plant” has the same meaning given in section 7(6) of the Climate Change and Sustainable Energy Act 2006 (c. 19).
(3) Regulations under this section may prescribe—
(a) the treatment of hydro-microgeneration under sections 32 to 32M of the Electricity Act 1989 (c. 29);
(b) licensing for the use of water in a water-course for the purpose of hydro-microgeneration;
(c) that any requirement for abstraction, transfer or impoundment licences under the
(i) Water Resources Act 1991 (c. 57),
(ii) Environment Act 1995 (c. 25), or
(iii) Water Act 2003 (c. 37)
is repealed in respect of a hydro-microgeneration plant, provided that no water is removed from the watercourse in the process of generation;
(d) that any requirement to ensure the safety and welfare of fish in a watercourse on which a hydro-microgeneration plant is situated is proportional to the risk of detriment to the safety and welfare of fish.
(4) Any reference to the generation of electricity under this or any other act which applies to hydro-microgeneration shall apply as though the reference was to the generation of electricity by means of any hydro-turbine of less than 100kW capacity.
(5) Regulations under this section shall not be made unless a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, each House of Parliament.’.
New clause 17—Promotion of renewable energy
‘In section 7(2) of the Sustainable Energy Act 2003 (c. 30), for “60,000,000” substitute “250,000,000”.’.
New clause 20—Access for renewable energy to the electricity and gas grids
‘(1) After section 3A of the 1989 Electricity Act (c.29) there is inserted—
“3B Access for renewable energy to the electricity networks
(1) In carrying out their respective functions, the Secretary of State and the Authority shall ensure that—
(a) transmission system operators and distribution system operators guarantee the transmission and distribution of electricity produced from renewable energy sources, without prejudice to the maintenance of the reliability and safety of the grid;
(b) transmission system operators and distribution system operators provide for priority access to the grid system for electricity produced from renewable energy sources;
(c) when dispatching electricity generating installations, transmission system operators shall give priority to generating installations using renewable energy sources insofar as the security of the national electricity system permits;
(d) transmission system operators and distribution system operators are required to set up and publish their standard rules relating to the bearing and sharing of costs of technical adaptations, including grid connections and grid reinforcements, which are necessary in order to integrate new producers feeding electricity produced from renewable energy sources into the interconnected grid, and that such rules—
(i) shall be based on objective, transparent and non-discriminatory criteria taking particular account of all the costs and benefits associated with the connection of these producers to the grid and of the particular circumstances of producers located in peripheral regions and in regions of low population density,
(ii) may provide for different types of connection, and
(iii) shall provide for the sharing of costs to be enforced by a mechanism based on objective, transparent and non-discriminatory criteria taking into account the benefits which initially and subsequently connected producers as well as transmission system operators and distribution system operators derive from connections;
(e) transmission system operators and distribution system operators are required to provide any new producer wishing to be connected to the system with a comprehensive and detailed estimate of the costs associated with the connection;
(f) the charging of transmission and distribution fees does not discriminate against electricity from renewable energy sources, including in particular electricity from renewable energy sources produced in peripheral regions, such as island regions, and in regions of low population density;
(g) fees charged by transmission system operators and distribution system operators for the transmission and distribution of electricity from plants using renewable energy sources reflect realisable cost benefits resulting from the plant’s connection to the network.
(2) The Secretary of State shall review and take the necessary measures to improve the frameworks and rules for bearing and sharing of costs referred to in paragraph (d) by 30th June 2011 at the latest, and every two years thereafter, in order to ensure the integration of new producers.
(2) After section 4AA of the Gas Act 1986 (c.44) there is inserted—
“4AB Access for renewable gas to the gas networks
(1) In carrying out their respective functions, the Secretary of State and the Authority shall ensure that—
(a) gas network operators guarantee the transport of gas produced from renewable energy sources, without prejudice to the maintenance of the reliability and safety of the gas networks;
(b) gas network operators provide for priority access to the gas networks system for gas produced from renewable energy sources;
(c) when dispatching gas, network operators shall give priority to renewable energy sources insofar as the security of the national gas system permits;
(d) gas network operators are required to set up and publish their standard rules relating to the bearing and sharing of costs of technical adaptations, such as gas network connections and gas network upgrades, which are necessary in order to integrate new producers feeding gas produced from renewable energy sources in to the interconnected gas networks, and that such rules—
(i) shall be based on objective, transparent and non-discriminatory criteria taking particular account of all the costs and benefits associated with the connection of these producers to the gas networks and of the particular circumstances of producers located in peripheral regions and in regions of low population density,
(ii) may provide for different types of connection, and
(iii) shall provide for the sharing of costs to be enforced by a mechanism based on objective, transparent and non-discriminatory criteria taking into account the benefits which initially and subsequently connected producers as well as gas network operators derive from the connections;
(e) gas network operators are required to provide any new producer wishing to be connected to the system with a comprehensive and detailed estimate of the costs associated with the connection;
(f) the charging of transport fees does not discriminate against gas from renewable energy sources, including in particular gas from renewable energy sources produced in peripheral regions, such as island regions, and in regions of low population density; and
(g) fees charged by gas network operators for the transport of gas from plants using renewable energy sources reflect realisable cost benefits resulting from the plant’s connection to the network.
(2) The Secretary of State shall review and take the necessary measures to improve the frameworks and rules for bearing and sharing of costs referred to in paragraph (d) by 30th June 2011 at the latest, and every two years thereafter, in order to ensure the integration of new producers.”’.
New clause 21—Adjustment of transmission charges
‘(1) Section 185 of the Energy Act 2004 (c. 20) (Adjustment of transmission charges) is amended as follows.
(2) In subsection (1)(a) for first ‘a’ substitute ‘any’.
(3) Omit subsections (10), (11) and (12).’.
Amendment No. 1, in clause 36, page 24, line 44, leave out subsections (4) and (5).
Amendment No. 65, page 69, line 16, leave out clause 78.
The Minister for Energy just made the point that we want to empower citizens to take a more active lead in addressing the challenge of climate change and the shift to renewable energy systems. In many ways, new clause 4 specifically addresses that challenge. Internationally, it is arguable that the mechanism it deals with is by far the most effective one for engaging citizens and delivering a dynamic sense of change.
In presenting this new clause, I begin by giving credit to those who have given enormous support, in the House and outside, to the principle behind it and the commitments we are asking the House to enter into today. There is an astonishing array of supporters of the new clause, including the House Builders Federation, the Institution of Civil Engineers, the Institution of Mechanical Engineers, the Federation of Master Builders, the National Farmers Union, the WWF, the Royal Society for the Protection of Birds, the Trades Union Congress, Greenpeace, the Country Land and Business Association, the UK Green Building Council, Energywatch, the Energy Saving Trust, the Co-op Group—which has clad its own headquarters in solar panels—Sharp UK, Solarcentury, National Energy Action, the Solar Trade Association, the Ground Source Heat Pumps Association, and interestingly enough, Lily Allen and The Premises studios.
In these days of celebrity, it almost becomes obligatory to have a celebrity on board when arguing a worthy cause, but Lily Allen has a fair claim to be recognised as part of that list. She and the company that she is part of in The Premises studios in Hackney, London, have installed an array of about 18 solar panels on the roof—similar to the array on my home—which generate the electricity that powers the studios. I know that she has written to all of my parliamentary colleagues to say that such action should not just be the prerogative of those in a position to do it as a matter of principle. The Government should reach out actively to promote it in order to make citizens the drivers of dynamic change.
In this House, we have to ask how we begin to bridge the gap between UK undertakings and where we need to be by 2020, and how we bridge the gap between where the UK is now and the position of many of our international comparator countries. The international picture is this: almost 50 countries have introduced some sort of feed-in tariff legislation. As a result, most of those countries are well ahead of the UK in delivering a proportion of energy from renewable sources. The UK currently delivers about 2 per cent. of its energy from renewable sources. According to the aspirations that have been teased out from the Bill, it is clear that, at best, the UK will reach a position where it might be delivering 5 per cent. of our energy from renewable sources by 2020. We have entered into an EU commitment to deliver 15 per cent. of our energy from renewable sources by that time. It is quite clear, therefore, that we will need a quantum shift in the policy framework to allow the UK to deliver 15 per cent. of our energy from renewable sources by 2020.
The hon. Gentleman makes a powerful case, but is it not a source of national embarrassment that in order to get an EU average of 20 per cent., the UK has been set a target of only 15 per cent., because we are starting so late and from so far behind? Does that not reinforce his point?
It is an embarrassment, and those who have read the Lily Allen letter will recall that it is described as a “national disgrace”. However, we need to remember that 10 years ago Germany started from a similar position and already, this year, it has exceeded its 2010 targets. It now delivers more than 14 per cent. of its energy from renewable sources, and it has made a step-change transition within the same sort of period that we will have to make one. None of those achievements is outside our reach; the question is whether the achievements are outside our vision. Do we have the political will to make the shift?
I fully support new clause 4. I wonder whether my hon. Friend agrees that Germany has gone down that road not just because of climate change or for environmental reasons, but because it wanted a new industrial strategy for creating jobs, wealth and exports without breaching EU state aid rules. Has it not squared the circle?
It has squared the circle. When we address costs, it is important that we recognise the phenomenal savings associated with a shift to a feed-in tariff system, and the economic gains that come with it. Germany is an astonishing exemplar of that.
I paid tribute to organisations outside this House for their support for the new clause. I also want to pay tribute to support that I have had from within the House. More than 100 of my Labour colleagues have added their names to early-day motion 890, which stands in my name. The collaboration on this matter involves all the Opposition parties, including the minority parties. Every single party has come together behind this new clause—it has the blessing of an almost unanimous House.
I say “almost” because we come to the stumbling block: the Department for Business, Enterprise and Regulatory Reform. So far, we have been unable to persuade the Minister or the civil servants to take the revolutionary step of returning to the House within one year of the passage of this Bill with proposals for feed-in tariff regulations that relate to renewable electricity, heat and gas. I find that sad, because the Government will have it do it anyway. There is a commitment to conduct a review of the microgeneration strategy, and that must report back in six months. During the French presidency, the UK’s 15 per cent. target will be defined. Britain will not be allowed to pay someone else to do the job for us—we must do it ourselves. The matter will be forced back on our agenda, and we must determine the policy mechanisms that will allow us to deliver.
The principal objections that I have heard so far to the new clause are fairly spurious. It is claimed that feed-in tariffs are expensive and that their adoption would somehow mess up the success of the renewables obligation, which Britain introduced six years ago. I shall try to deal with those objections.
First, those who have been involved in discussions with the German Government do not understand the claims that the feed-in tariff system is expensive. It is less expensive than the intervention measures that the UK Government introduced and are currently in place but which have delivered little. The figures from the German Government for feed-in tariff costs last year show that they contribute approximately €35—about £25—to the average German household energy bill. If we total the current UK intervention measures—the climate change levy, climate change agreements, the renewables obligation, the carbon emissions reduction target, contributions from the energy industry and the emissions trading scheme—they add more than £150 to the average UK household energy bill and deliver next to nothing.
The claims that the new clause will mess up the renewables obligation do not stand up either. We could continue with it and the Minister would be free to return in a year with a scheme that did not intrude on support for developing offshore wind, but allowed for a much more imaginative feed-in tariff system relating to a series of initiatives for decentralised energy provision, without which we almost certainly cannot deliver our eco town or eco city aspirations. None is deliverable without a more serious engagement with decentralised energy and a feed-in tariff system.
The renewables obligation needs to be judged on its record. The Minister sent a letter to parliamentary colleagues spelling out how, within six years of its introduction, the renewables obligation has been responsible for generating capacity of 2 GWe. That is the same amount as Germany delivers every year from its onshore wind installations alone. Our record is not one of dynamic achievement and growth. Indeed, the international assessment and that of the Audit Commission suggests that the renewables obligation has historically been an expensive mechanism for delivering little apart from big subsidies to existing energy companies. To break out of that trap, we need to engage with mechanisms that have a track record of working.
My hon. Friend and colleague the Member for Morley and Rothwell (Colin Challen) pointed out that the Germans have not taken action simply to be ecologically pure, but have also been driven by clear economic self-interest. One of the architects of the German scheme, a politician called Herman Scheer, has twice been to the House of Commons to try to discuss the precise economics with parliamentarians. One can summarise it simply: since the introduction of the feed-in tariff legislation nearly four years ago, Germany has created 250,000 new jobs in the renewable energy sector. That industry has a turnover of almost £25 billion. Germany is considering setting its own targets, which double the 2020 commitments of 20 per cent. of energy coming from renewable sources because it is already well ahead of the game.
Far from the feed-in tariff system costing the German Exchequer money, reports to the federal Government last December pointed out the huge gains through the sector’s driving reductions of energy charges into the system.
Moreover, talking to German citizens makes one realise that a momentum has been unleashed that we would do well to understand and encourage here. I have visited several German cities to examine the operation of feed-in tariff systems. When I asked the mayors what their biggest problem was, they replied, “Keeping up with citizens’ demand.” Such is the momentum that, in the previous German elections, not one political party would countenance revoking feed-in tariff legislation because that would have been an act of political suicide. The current joke is that Germans will put a solar panel on anything that does not move. If a dog is asleep in a garden for half an hour, it will wake up with a solar panel on its back.
In Munich alone, there are 1,200 citizens’ solar clubs. The momentum gains pace, driving down the unit cost of solar installations and driving up the proportion of energy that renewable sources provide.
I discussed the matter in last year’s Budget debate with my right hon. Friend the Member for East Ham (Mr. Timms) when he was a Treasury Minister, and it was suggested that the scheme was contentious and unpopular in Germany. I asked the German Government whether that was the case and they said that it was not unpopular with the public or the political parties but that there had been some trouble with the energy companies. In the previous year, the federal Government or municipal government had to take energy companies to court on approximately 150 occasions for failure to comply with the law. On each occasion, the public won and the energy companies lost. Energy company interests were the most contentious part of the programme. That is a lesson for us in the UK. We have found ourselves too deeply enmeshed in the large-scale corporate interests of a feeding system for the big energy companies, which has not necessarily fed the momentum for change to renewable energy systems throughout the UK.
Fortunately, none of the challenges in Germany about state aid and market distortion was upheld by the courts. The European Court ruled that the feed-in tariff system constituted a perfectly legitimate way to create a dynamic market with a different competitor base. I believe that we must make that intellectual shift.
However, the debate goes beyond traditional terms. The focus has mainly been on electricity generation. Friends of the Earth, the Renewable Energy Association and other non-governmental organisations put a wonderful advert in the national newspapers last week. It tried to capture the contrasts between the UK and Germany through a different perception of our traditional Anglo-German rivalry. It depicted a mythical Euro solar league, with a shoot-out. There was a goal with lots of footballs in the back, an England goalkeeper in a state of despair and a scoreboard that read, “Germany 200, England 1”. That is the ratio—200:1—of installed solar generating capacity between the two countries. [Interruption.] Yes, there was mention of 1966.
If we widen the focus, the comparisons are even starker. We do just as badly in other aspects of the renewable energy sectors. By the end of 2007, the UK had installed approximately 80,000 solar thermal energy units; in contrast, Germany had more than 1 million. By the end of 2007, the UK had installed approximately 1,000 heat pumps, while Germany installed 44,000 heat pumps in 2006 alone. The contrast in solar photovoltaic energy is between around 2,500 solar roofs in this country and 300,000 in Germany. The UK has 150 wood pellet boilers and Germany has 70,000, while the UK has 17 biogas plants and Germany has 3,800. All that has happened relatively recently, in the past three to four years.
I want to widen the focus of the debate from just electricity to what we do about renewable heat and renewable biogas. We had a public meeting on that last night. Some interest was generated when it was announced that BERR had a team on heat. [Laughter.] Eyes watered and people made discreet inquiries about what exactly that meant. That team is looking into the issue.
Let me address the practicalities of what is already done through feed-in tariff regulations in Germany in those 3,800 biogas plants. Essentially, in our system in the UK, the only way someone trying to reclaim methane from waste—whether it be food, farm or animal waste, or sewage—can receive any assistance or recognition is if the waste is converted into energy at the plant. That means that the producers of the energy are left with heat at a remote location and huge infrastructure costs in transmitting heat back into the towns or cities where the waste came from.
The Germans said, “Why waste all that effort in creating the ducting for heat? Why don’t we just put it back into the system as gas and allow people to take the credit at the point at which they convert the gas back into energy?” The Germans allow that process to take place at combined heat and power plants that are located in the communities that provide the waste in the first place.
The scope for that process is vast. To put it in context, half the food currently produced in the UK ends up as food waste. A study conducted in Germany at the end of last year calculated that if, at the European level, we used food, farm and animal waste, and perhaps even sewage, for the production of biomethane that we then fed back into our gas systems, by 2020 the entire EU could be economically non-dependent on Russian gas. That is the scale of what is possible. However, we have to make the shift, by changing the rules in order to provide the incentives that will at least allow that to happen.
At a time when Centrica is already telling us that it will not be able to control future gas prices, because we now have to buy gas on an international market, which drives prices up, German companies can offer their customers gas prices that will not rise other than by the retail prices index, because that gas is being generated from their waste.
It has also been pointed out that two forms of waste come out of the biogas production process. One is a solid fuel waste, which is a farm-grade fertiliser, which the companies are supplying back to the farms. Again, we should bear in mind that fertiliser prices doubled for UK farmers last year alone. The ability to supply fertiliser back to our farmers has an economic virtue in itself. The second form of waste is a liquid waste, which turns out to be a biofuel. The Germans are using that biofuel to drive the vehicles to collect the waste from people’s houses in the first place.
That is the sort of virtuous circle that is unleashed as a result of making that shift. The sense of empowerment in the process is driven by that community involvement. Hermann Scheer made an additional point, to which the Minister and the Treasury ought to show some sensitivity. More than 90 per cent. of investment in the renewables process in Germany comes from individuals, communities, public authorities and the business sector. Why? Because they can all be stakeholders in the process and because they receive payments from it.
We have locked ourselves into a system in which those who are willing to go down that path refuse to do so without Government subsidy. However, the Germans and almost 50 other countries are showing that it is possible to make the change in a completely different way—one that makes little or no impact on the Exchequer and delivers huge savings and growth in the economy as a whole.
As my hon. Friend knows, I raised this issue in Committee. The Government’s response was twofold: first, that there is a pressure problem in feeding biogas into the British mains system; secondly, that biogas has impurities that have to be removed. Has he studied those two issues in the German context, and what can he tell our hon. Friend the Minister about them?
I have indeed looked into the problem. The German biogas plants have said that they need over 91 per cent. purity to meet the purity standards for biomethane. However, they are delivering methane into the system at 95 per cent. purity, so purity is just not an issue. Accessing the system is a relatively minor technical problem. The greater problem is a political problem and concerns whether we should require the system to be open to inputs in the way that the German system is. The key is an acceptance of the need for a progressive shift to decentralised energy systems.
The economic arguments against feed-in tariffs do not stack up. I have repeatedly asked the Minister and the Departments to come up with the figures to justify that. I am happy to have them tested against other, international experience of doing what we are told is not possible in Britain. So far I have not had that evidence, but if we are making a claim, we ought to stand it up to be tested.
Is my hon. Friend aware that utility companies such as Anglian Water in my constituency, which has a sewerage plant outside the constituency, are taking steps of the kind that he describes, which are making a difference? However, Anglian Water feels that the renewables obligation certificates system, current arrangements and incentives work against its developing in that way, and that it would need some kind of incentive, of the type described in the new clause, to take that work forward. Such companies, which operate at a bigger level than microgeneration, need some form of incentive to encourage that kind of work, which they want to do.
I understand that. The problem is that such companies would lose their entitlements to ROCs if they were to put the gas back into the system and take it out where it is needed, yet that is the most coherent way of doing this. There has to be a change of rules.
It is important that the House understands that the potential gains apply far more widely than just to the big energy generators. We brought some of the German companies across to talk to communities in the UK. Some of them are able to say, in relation to some areas, “Not only will we build the biodigester plant for free, in exchange for a 10 or 15-year contract to reprocess the waste, but we will enter into partnership agreements with the citizens who are our customers. If they supply the waste, we will pay them for it and convert it back into energy.” That is what the feed-in tariff allows them to do. It allows citizens to become the drivers of the agenda for change. What is more, it delivers change on a scale to which the UK does not even aspire. In Germany, last year, that measure alone delivered 97 million tonnes of carbon savings. That is 10 times the UK’s aspirational target, which we are nowhere near delivering. Perhaps we do not have big enough dreams.
Does my hon. Friend accept that different forms of incentive are needed to ensure that renewable gas is either put into the system—which I think is the right way forward—or used in a way other than indirectly to get ROCs by generating electricity? Such incentives either already exist under the current RO system or could easily be organised using a feed-in tariff that would apply primarily to microgeneration. Does he think that either a renewable gas obligation or some form of obligation concerning the efficient use of heat would be appropriate?
That is a legitimate point to address. One of the great virtues of the new clause is that it gives the Minister and the Government a year in which to address the specifics. There is nothing to bind the Minister to a particular scheme or set of thresholds. Indeed, it invites him to explore as widely as possible what are the most appropriate ways of dealing with renewable electricity, heat and gas. It is an invitation to come up with the most appropriate schemes. I cannot see why there is a reluctance to engage with that, given that the only commitment that is required is to say that we will come back within a year with something that will deliver change, rather than continually consult on the process.
In his suggestion, will my hon. Friend make it clear that his definition of biofuels involves the use of food waste, farm waste and other forms of waste to generate gas with which to generate energy, rather than crop-related biofuels, which are very damaging to food supplies in general?
Absolutely. It is important to recognise that we should not go down such a damaging path. The displacement of food production from agricultural land for fuel-based production would be disastrous. We can address the issue by managing our waste. For those who have missed that dimension of the issue, it is worth pointing out that when the 2010 EU directive on landfill comes into effect, the UK could end up with a daily bill of £300,000 under our current waste framework, because we have not come up with solutions to deal with our present waste levels. The proposal offers all sorts of ways out of the problem.
On that very point, does the hon. Gentleman agree that there is some confusion among the agricultural community? At one point they were encouraged to grow alternative crops in order to feed the fuel need, but they are now being told that that is the wrong thing to do. I appreciate that the hon. Gentleman is talking about something marginally different, but this is a very significant point, because the agricultural community is now in limbo, not knowing whether to grow those crops or not.
That is a perfectly valid point, but again I would draw colleagues’ attention back to the comparison with Germany, where the farmers are part of this process. Some farmers grow crops and have solar panels; some farmers rear livestock and have solar panels; some have set-aside and solar panels. Huge amounts of renewable energy from the sun are thus coming from the farms and farmers of Germany. If we are examining the dynamics of a rural agenda to address both food and energy security, all the lessons in how to do so are there within the feed-in tariff structure that is already in place in Germany.
Let me finish with this point. The great message that I want the Minister to hear is that all parties throughout the House have stood solidly alongside each other on this issue, inviting the Government and the Minister to take hold of the reins and give a lead in the knowledge that there will be no political division. There should be no political division, particularly around an issue that the Government will in any case be forced to accept within a year. My concern is that I want to be part of a Labour Government who do not have to be dragged kicking and screaming into the present, let alone the future. That is why I ask the Minister yet again to take over the ownership of the new clause and incorporate it into the Bill, to continue the process of taking forward an issue that unites the whole House, and probably the whole country, in a real dynamic that will give us a sustainable energy future.
I begin by paying tribute to the hon. Member for Nottingham, South (Alan Simpson) both for tabling the new clause and for the immensely authoritative way in which he introduced it. He spoke about the importance of having Lily Allen and other celebrity endorsement. For many people, however, he is the star of this debate—[Hon. Members: “Hear, hear.”] He has been the driving force, putting the issue on the agenda so that it is no longer peripheral but absolutely mainstream to the whole energy debate.
As the hon. Gentleman said, we need to see the issue against the background of the immense challenge we face. If we are to come close to the European target of getting 20 per cent. of our energy from renewables by 2020, it translates into securing about 40 per cent. of our electricity generation from renewables. That is an immense challenge, but given our overall needs for renewable energy, not just electricity, it is a huge mountain that we have to climb. If we are to succeed, we need every bit of help we can get. It means having onshore and offshore wind; it means exploring the potential of the Severn barrage.
On Monday, I was looking at the barrage in La Rance in France to see what lessons we can learn from it. We need to look into biomass, solar, thermal and ground sources, air source and heat pumps, and we need to look fundamentally at microgeneration. Our vision should be to make as many households as possible not consumers but generators of electricity. That is the nub of the whole debate.
Ten years ago, the UK and Germany started from the same low base in respect of generating electricity from renewables. Today, whereas we get 2 per cent. of our energy from renewables, Germany gets 8.5 per cent. That was a 1 per cent. increase in just one year in the amount of energy Germany gets from renewables—the same amount that we got over a 10-year period. The key to Germany’s success was the adoption of feed-in tariffs, which helped to drive the programme forward. There should be no doubt that the issue is of interest to more people than just politicians. There is widespread political interest in it, but all the experts in the sector looking at the issue from outside are also pushing in this direction. Today, Terry Barker, director of the Cambridge centre for climate change, which is engaged in mitigation research, and other experts published a letter in the Financial Times. It says:
“The policies of the UK government to support the development of renewable energy have seen it become one of the worst-performing countries in Europe and stand no chance of getting the UK to meeting its share of the EU target.
We urge the government to adopt a feed-in tariff policy, which has proved so successful in other countries.”
The Energy Saving Trust, set up by the Government, has said:
“We would welcome enabling measures in the Bill to introduce a feed in tariff and signal the Government’s positive approach to encouraging domestic microgeneration.”
Solarcentury, which has campaigned effectively on the issue, has said:
“Throughout Europe, renewable energy feed-in tariffs are a proven and cost effective measure for promoting the rapid uptake of wind, solar, biomass and other technologies. Feed-in tariffs are the principal support mechanism for renewable energy in 22 European countries.”
The National Farmers Union has also given us advice and support.
The key point is that the new clause does not adopt a prescriptive approach. It is an enabling measure which allows the fundamental decisions to be made elsewhere, and by the Minister in due course. A submission that we received from the Renewable Energy Association states:
“At this stage Clause 4 only commits the Secretary of State to the establishment of a reward scheme for metered renewable energy and to do so within one year. The Clause leaves open until after consultation the detail of how a metered UK tariff would work, which scale and types of renewable technology would qualify and the level of any Tariff.
It is intended that the Tariff works alongside the Renewable Obligation”,
so we need not be specific at this stage.
Will my hon. Friend confirm that given that flexibility, it would be possible to devise incentives for both microgeneration and bigger renewable schemes? I think we wish to encourage both, but they may require slightly different balances or packages.
My right hon. Friend is absolutely right. There is no specific provision in the new clause requiring that distinction to be made. Some would argue that a feed-in tariff would be appropriate for larger-scale generation. I think that the renewables obligation works well to encourage both kinds of generation and that we could run the two systems side by side, but nothing in the new clause requires such a decision to be made. The aim must be to achieve the optimal combination from different sources of power. In Germany, private individuals and investors are responsible for 90 per cent. of the investment in renewables, and just 10 per cent. of the investment comes from the major energy companies. In this country, the situation is not reversed; it is even worse than that.
Someone who erected four 10 m high wind turbines at a capital cost of £35,000 could put 16,000 kW back into the grid and receive an annual payback of £500 a year. There is no incentive inherent in that. Does my hon. Friend agree that if we genuinely want everyone to attempt to produce energy from renewable sources, we must move towards the German, or continental, model and provide incentives? Otherwise people will simply give up.
The current system provides no incentive, although there is tremendous enthusiasm. At a meeting that I attended in my constituency recently, about 50 people were asked how many of them generated their own heat and electricity. About three hands went up. When they were asked how many would be interested in doing so, every hand went up. There is an enormous appetite for renewable generation. What is holding people back is the lack of the predictable income stream that could be achieved through feed-in tariffs.
I am conscious of the time and I know that others wish to speak, so I shall not prolong the debate. However, I want the hon. Member for Nottingham, South to know that we strongly support his new clause and will vote for it if he pushes it to a Division, because we consider it a crucial part of our attempt to enable this aspect of the energy debate to take off.
I have tabled a new clause and an amendment. New clause 17 concerns the way in which moneys are looked after. Before the renewables obligation, renewable developments were funded under contract to the Non-Fossil Purchasing Agency. The NFPA continues to operate contracts for existing developments. It auctions the renewables obligation certificates and renewables levy exemption certificates that arise from them, and uses the proceeds to service the contracts.
Over time a surplus has built up, as the value of the ROCs and LECs has exceeded the cost of managing the contracts. Clearly that surplus has been contributed by customers for the purpose of renewables development. At present, however, that money simply sits on the Chancellor’s balance sheet as yet another stealth tax. That was recognised in the Sustainable Energy Act 2003, which provided for £60 million of the surplus to be spent on renewable energy. That funded the grants for round 1 of offshore wind and it has been fully spent. However, some £180 million is currently sitting unused in the surplus account. It could be used to help to develop renewables, especially from market technologies that are further away from development at present, such as marine. The measure I propose would remove the statutory bar that prevents that money from being spent for the purposes for which consumers paid it. It gives the Government an option, but not a duty, to direct that that money is spent rather than treated as a hidden reserve. I hope the Minister will accept it as a step in the right direction.
Amendment No. 65—which we will return to, particularly in another place—addresses the Government’s responsibilities to report. The Bill as it stands proposes a reduction in such Government responsibilities in these areas. If it is enacted, the Government will no longer need to report on the following: what is being done on a range of specified energy sources, particularly renewables and microgeneration; measures being taken to ensure that the necessary expertise is available; and what is being done to achieve their energy efficiency aims, as required under the 2003 Act.
The Bill also gives scope for changing the reporting periods. In future, reports might cover not a whole year but more than or less than a year. At a time when we are trying to get people more involved in these issues, reducing the reporting requirement on the Government is a step in the wrong direction. We want people to have more information and a better understanding of the issues.
The Government are currently trying to take matters in the wrong direction. They have resisted our attempts to get more information on gas storage availability, which is a crucial part of our energy security. They have resisted our attempts to make sure we have a better understanding of the skills base, which is particularly needed in order to build new-build nuclear power stations. They have resisted our attempts to make sure that there is a better understanding of what is being done to tackle fuel poverty. They have resisted measures for consumers to be told how much of their money is going on environmental taxes. We will pursue this matter further.
The key issue in this entire Report stage is feed-in tariffs. The hon. Member for Nottingham, South set that out extremely eloquently in introducing his new clause. We will support him today. It is crucial that we push this forward as a way of making microgeneration not just an aspiration in this country but a reality—and one that we can deliver now, so that we do not end up asking in 10 years’ time, “Why didn’t we start that earlier?”
I support the idea of having a feed-in tariff, particularly for microgeneration, because it is important to distinguish between different forms of incentive for various kinds of generation—large and small generation and microgeneration. As this debate progresses—with increasing urgency, I hope— questions must also be asked about incentives to make sure that heat is used efficiently and that biogas comes on stream as a substantial element of our power mix.
In Committee, I moved a new clause on feed-in tariffs, which I particularly wanted to be considered in the context of microgeneration. I did not press it to a Division, in part because of the response that was received in Committee.
On feed-in tariffs, it is important to be clear about what we want to do in future concerning incentives for microgeneration—which, as my hon. Friend the Member for Nottingham, South (Alan Simpson) mentioned, will inevitably be an increasingly important part of our energy mix. Indeed, the Energy Saving Trust suggested that by 2050 some 30 per cent. of our total electricity supply could be provided, in one way or another, by smaller-scale generation or microgeneration: by individuals or communities placing the surplus that they have gained from generation in their homes or communities in the grid, thereby adding to the total amount of power available to the general population. We must consider what kind of incentive is the most useful and important in securing that move forward. What will ensure that large amount of renewable generation at all levels, which will ensure that input across a more distributed electricity grid?
I have some experience in this area because I am in the process of installing a solar photovoltaic roof on my house. I hope that it will generate 3 kW of electricity. I mentioned in Committee that I had not gone down the grant route, but I am delighted to tell the House that I subsequently applied for a grant and it was instantly accepted, in what was one of the most speedy turnarounds of any piece of Government bureaucracy that I have ever encountered: within a day of my applying for the grant, I received a message on my computer telling me that my application had been accepted. Even so, the grant will subsidise only a small proportion of the total cost of my solar photovoltaic installation.
I may receive a renewables obligation certificate for my generation, but I want to know what I will get for the surplus that I export from my house now. That is a different form of motivation from the one that large energy generators thinking of investing in renewables will have at the front of their minds. They will want to know what the market will be like by the time they have considered and completed their investment and taken part in the build, and their investment, whatever it might be, is ready to produce for the market. They will also want to know what the market will be like during the life of that particular investment. Thus, they will want to know, among other things, that the market will be stable over a considerable period of time.
That is one of the key considerations in ensuring that renewables obligations have the right banding in terms of generation. We have discussed that issue during the passage of the Bill and there was no disagreement about it in Committee from any side. We must also consider over what period that obligation exists and, indeed, what headroom will exist in respect of the obligation to ensure that the pull through continues. That matter was also discussed in Committee.
Large generators will take considerable cognisance of all those issues. There is considerable evidence to suggest that although the emplacement of large-scale renewables facilities has lagged in this country for particular historical reasons, the installation of large-scale offshore wind facilities is proceeding rapidly. That is due, at least in part, to the security that the renewables obligation gives those installations and to the idea that they will therefore be able to export their product over a considerable period of time with the support of the renewables obligation behind them. As far as large-scale generation is concerned, it appears to me that the renewables obligation has begun to have a considerable effect.
Why during its first six years did the renewables obligation not encourage large-scale offshore wind power? Nothing has changed in the North sea and nothing has changed in the renewables obligation, so what has happened suddenly, after six years? Why is it such an ineffective mechanism that it took six years to have an impact? That has to be compared with the rapid progress that has been made in Germany.
The hon. Gentleman makes a valid point about the progress of the installation of larger-scale renewable generation, but the picture in the UK is complex. It relates partly to incentives and partly to planning permission. The record of several authorities—I shall not mention which party is in control in those areas because that would be otiose as far as this debate is concerned—for uncertainty when it comes to planning applications has been a factor in the rate of progress of installations.
Another substantial factor, which I attempted to address in Committee, is the issue of connections to the grid. At the moment, there is a substantial delay to projects that already have investment agreement and, in some cases, planning agreement because they do not have a reliable time for connection to the grid and, therefore, they do not have the ability to make money from the electricity they are exporting.
The Government have now been in power for 10 years. Does the hon. Gentleman agree that if they had wanted to be at the forefront of this change they would have overcome all these hurdles of connectivity to the grid, planning permission and other issues, as have other European countries such as Germany? We have had a complete absence of leadership on this and we are now beginning to pay the price.
Moving as rapidly as we would want from the position that the UK was in, for particular reasons relating to the source of its energy supplies and the choices that it made historically about those sources—and therefore the mechanism by which those supplies would be delivered—to where we know we have to get to in the near future with regard to the proportion of energy supply that comes from renewables sources, has been a considerable challenge, and will remain so. It is true that the planning environment has not helped in that process. The Planning Bill will address some of the issues of larger-scale renewable power stations and the Marine Bill, which will be introduced later this year, will provide a single permission regime for offshore generation. So things are changing, and so will the circumstances in which large-scale renewable sources operate.
It is true that if we take all the investment proposals for both onshore and offshore installations that are in the pipeline, that are consented but awaiting build, or that have everything in place but no date yet for connection, the total amount of electricity generation represented is getting on towards filling the gap in power supply that we need to fill over the next few years. That represents a substantial change in large-scale electricity supply.
There are therefore several different factors affecting the development of large-scale renewable installations, one of which is the nature of the incentive for investment in the first place. The renewables obligation has generally worked relatively well to bring those investment decisions forward. However, the renewables obligation has barely touched microgeneration. As I have demonstrated, it is not a particular incentive for those who are developing microgeneration. A feed-in tariff would be a much better incentive in that area. The issue that we would then have to address, which is central to my concerns, is that we are not in a position to build incentives on a tabula rasa. We have a series of existing arrangements for developing power and the importation of renewable electricity that are based on the renewables obligation. If we chucked all those arrangements out of the window and went for a universal feed-in tariff tomorrow, that would fundamentally disrupt a number of the investment decisions on larger-scale electricity generation. In fact, large-scale electricity generation would be put in reverse.
It is important not only to get the feed-in tariff right, but to get the tariff’s application right. If we are thinking along the lines of introducing such a tariff, it is important to get its nature right, particularly as regards microgeneration. Should a feed-in tariff be based on the total production undertaken by a microgenerator? Should it be a net tariff based on what the microgenerator exports? Should it be an estimated tariff as a proportion of the total invested? A number of different instruments could be used depending on what is decided.
The way in which the feed-in tariff works in Germany has led to a few perverse consequences, although I agree with my hon. Friend the Member for Nottingham, South that it has been immensely positive in terms of drawing through microgeneration. However, those who install solar photovoltaic panels export all the electricity generated from those panels into the grid, take a feed-in tariff for that and then buy all their domestic electricity from the grid. The perverse consequence of that is the lack of interchange between what those people produce from the panels on their roof and what they consume in their houses.
It seems to me that one of the purposes of engaging in the development of microgeneration, particularly microgeneration that is locally sourced and distributed, is that there should be a relationship between the electricity consumed in the house and that produced by the roof panels. If the system does not connect the two, part of the purpose of such microgeneration is missed. That might be an accidental consequence, but it results from the design and operation of the feed-in tariff.
It is important that we get any feed-in tariff right, because I agree with my hon. Friend the Member for Nottingham, South that such a tariff is almost inevitable. It seems that there is no better way to move microgeneration to the next phase of implementation than some form of feed-in tariff. However, we need to consider different incentives, for example on renewable heat and gas, and to be clear about how they apply.
After I moved my clause in Committee, I was encouraged to hear my hon. Friend the Minister suggest that the idea of a microgeneration feed-in tariff in particular would be one of the subjects of a review this summer. It is fair to say that he has developed that policy since the Committee sat. The question for the House, as it was in Committee, is whether the amendment or a similar one should be left on the table or whether we should go for a vote. In order to ensure that we get things right and undertake the consultation over this summer that was suggested by my hon. Friend, the amendment should remain on the table—it should not be withdrawn and never heard of again. There should be an understanding that we will have to go in this direction, so it is important that we get that direction right, that the review is completed quickly and that the mechanism for getting microgeneration right in the UK is implemented.
I hope that the review will be the subject of a further energy Bill next year, as has been widely suggested. That Bill should deal with questions such as how we obligate and implement action on renewable heat and make sure that the present escape into the air of heat that has no energy output is covered by an obligation system. Energy companies should be obliged to do something with that heat, or suffer a penalty for not doing so.
I should like to join in the congratulations to the hon. Member for Nottingham, South (Alan Simpson) on bringing forward new clause 4, and on the elegant and persuasive way in which he proposed it. I am happy and honoured to be one of the new clause’s co-signatories.
The hon. Member for Nottingham, South has gathered an extraordinary coalition to support new clause 4. At the last count, 276 hon. Members had signed the early-day motion, and the hon. Gentleman has managed to unite the right hon. Member for Wokingham (Mr. Redwood) at one extreme with the hon. Member for Bethnal Green and Bow (Mr. Galloway) at the other—something that must be virtually unique. He has also brought the National Farmers Union together with Greenpeace, and the TUC with the Country Land and Business Association, and he has generated wide support in the renewable energy sector.
For me personally, though, the icing on the cake is that the hon. Member for Nottingham, South has got the support of Lily Allen. That is extremely welcome: I am sure that he will agree that “All Right Still” is a work of genius, and that “Lily and Friends” is a much underrated show. If the Minister were to accept new clause 4, I am sure that the hon. Gentleman would put in a good word, so it is possible that we will see the Minister on Lily’s sofa before too long. That would be great.
More seriously, the Government’s direction of travel on this matter has been positive, but once again it seems to be leading us towards more consultation, and possibly yet another energy Bill. The Government seem reluctant to accept even the modest and flexible powers set out in new clause 4. Oppositions are quick enough to criticise Ministers who want to take on too much power, but this Minister should seize this opportunity to be praised from all sides of the House for taking on at least some powers that we all want him to have.
More delay would be a serious concern, as it would mean that we would drift on with this matter into 2009 or 2010, with further primary or secondary legislation—perhaps both—needing to be discussed. The question is why would we need to delay further, when so much work has been done already?
The Government commissioned a world-leading piece of work to analyse policies for climate change mitigation in detail. It is called the Stern report, and it addresses the question of feed-in tariffs in some detail. Stern says:
“Comparisons between deployment support through tradable quotas—
in other words, the sort that we have already—
“and feed-in tariff price support suggest that feed-in mechanisms achieve larger deployment at lower costs. Central to this is the assurance of long-term price guarantees…the levels of deployment are much greater in the German scheme and the prices are lower than comparable tradable support mechanisms”.
Stern goes on to say:
“Contrary to criticisms of the feed-in tariff, analysis suggests that competition is greater than in the UK Renewable Obligations Certificate scheme. These benefits are logical as…uncertainty…discourages investment and increases the cost of capital as the risks associated with the uncertain rewards require greater rewards.”
In other words, the price guarantee delivered by feed-in tariffs offers a better environment for investment. The investment that has been delivered in Germany is striking, as it has engaged a far wider array of investors than the traditional energy companies. The Renewable Energy Association has pointed out that just 10 per cent. of investment in the German feed-in tariff scheme has come from the major energy companies, while 90 per cent. has come from private individuals, private investors and municipal energy companies.
That is a remarkable opportunity and a key part of the success of the German scheme. That is why the German Federal Environment Ministry expects the scheme to save 52 millions tonnes of CO2 in 2010 alone, and why Germany has 10 times more wind power than us, according to Greenpeace, and 300 times more solar power. That is why Germany benefits from 170,000 people working in the renewable energy sector, which is worth €8.7 billion to its economy.
If Stern is not enough, there is further Government-commissioned advice. Their specialist low-carbon technology agency, the Carbon Trust, has also addressed feed-in tariffs. Its July 2006 report said:
“The most efficient solution in terms of cost per unit of energy and achieving maximum offshore wind capacity by 2015 involves moving away from the current RO towards a fixed mechanism… Feed-in tariffs have been proven to be successful elsewhere (Spain and Germany) in generating significant deployment of low-cost renewable energy. The analysis suggests that a Renewable Development Premium”—
a feed-in tariff—
“in the UK will result in 8.8GW of additional wind capacity by 2015, when combined with additional funding… This is c.3.5GW more wind capacity than the base case representing the current RO policy”.
If all the work, the views of the agencies and the consultations are not enough, will the Minister listen to the Secretary of State? On Second Reading, he said:
“Germany has benefited from a consistently supportive policy for renewables since the early 1990s, and it is paying dividends. That clarity and consistency of approach has been a big part of Germany’s success, which we celebrate with our German colleagues…UK renewables investors have highlighted certainty and consistency as two of the factors that will be crucial to continued and rapid growth and development of renewables in the UK.”—[Official Report, 22 January 2008; Vol. 470, c. 1368.]
There are differences between the German and British energy markets; for example, we have a more deregulated and liberalised market. However, if the hon. Gentleman is suggesting that we should move towards the German model much more quickly, I entirely agree.
I give due credit to the Minister because, in Committee, he seemed to be moving in the direction of feed-in tariffs. However, in the words of the hon. Member for Nottingham, South, we need quickly to unleash much greater momentum. I am afraid that the Minister must move considerably faster, and new clause 4 is the method by which he can do that.
The hon. Gentleman is right that the Minister was encouraging in Committee about feed-in tariffs. However, does he agree that the renewable obligation and feed-in tariffs can work in tandem? Given that, surely careful thought is needed about how they can be introduced so that those things work together effectively.
I agree absolutely. During the Committee’s evidence sessions, we specifically asked several expert witnesses whether the renewables obligation could continue alongside the introduction of feed-in tariffs, and the consistent view was that it could. Care must be taken with the introduction of such tariffs, but that is why the hon. Member for Nottingham, South has wisely included a provision in the new clause for a 12-month lead-in time. If that is not enough, we are doing something fundamentally wrong. If the Minister accepts new clause 4, he can really start to put his foot on the accelerator, if that is not an inappropriate phrase for a low-carbon debate.
Let me touch on several other measures in the group. New clause 11 was tabled by my hon. Friend the Member for Somerton and Frome (Mr. Heath) and my neighbour, the hon. Member for Stroud (Mr. Drew), who has been a controversial figure today, although he can make many welcome contributions to the green debate. New clause 11 highlights a problem with not only hydro-microgeneration, but the 50 kW definition for microgeneration, which is causing arguments in the wind energy sector. We need a flexible and adaptable approach to renewable energy that recognises real opportunities such as those offered by micro-hydro. It would be wonderful to see a traditional and highly environmentally-friendly form of energy coming back into wider use in a new and modern form, so I welcome new clause 11.
I also welcome the Conservatives’ new clause 17, which, as I understand it, would raise the cap on the amount that the Government can spend on promoting renewable energy. That reflects the fact that surplus funds are building up at the Non-Fossil Purchasing Agency. Amendment No. 1, tabled by the hon. Member for Angus (Mr. Weir), touches on an important issue raised by my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso). There is genuine concern that innovative businesses in renewable energy may be put in an impossible financial situation. I am sympathetic to the issues raised by my hon. Friend and the hon. Member for Angus.
New clauses 20 and 21 and amendment No. 65 are welcome improvements to the Bill, and we would happily support them. Indeed, amendment No. 65 appears to be modelled on a Liberal Democrat amendment tabled in Committee. The amendment is designed, as the hon. Member for Wealden (Charles Hendry) rightly pointed out, to keep Government reporting to fixed timetables, and to ensure that reporting is clearly focused on the Government’s progress in supporting renewable energy. That is needed more than ever. Renewable energy offers us the opportunity to have many new, clean sources of power, to have a more efficient, decentralised and resilient energy system, and to make an important contribution to the battle against climate change.
The Government need to grasp the urgency of the situation. I would love to quote a lyric from the Lily Allen song “Alfie” that sums up exactly what is needed, but it would certainly be unparliamentary language. The gist of it is that there is an urgent need to dismiss distractions and get on with what really needs to be done. I agree with the hon. Member for Wealden that new clause 4 is the single most important opportunity to ensure that that happens that we are being offered today.
I will not detain the House long. I have been struck by the fact that, as I am opposed to nuclear power being developed, I face the discipline of having to consider all the other forms of energy that might make up an efficient energy mix in future. I have considered what my hon. Friend the Member for Nottingham, South (Alan Simpson) said about feed-in tariffs; he explained better than I could that they are efficient, help to ensure security of supply, and help to produce a plurality in the energy market that would otherwise not be there.
I am also struck by the idea that if we are not careful we will construct a process that is very much in the hands of big power, whether that is nuclear power or any of the array of providers that will be in place. The process that my hon. Friend outlined involves a democratisation of the argument; I wish that he had said a bit more about that. New clause 4 would bring local people into the process in a different way, and would produce a plurality in the market that could generate efficiency. To people who are interested in competition, I add that it would create greater, better and efficient competition.
Some of my hon. Friends are concerned about how the measures fit with the other obligations. As I understand it, new clause 4 says, “Go and consider the issue for 12 months, and come up with mechanisms that produce not conflict but co-operation and collaboration that results in the best of both worlds.” I would have thought that the term, “a third way”, might have been tempting for some Labour Members. The new clause also does other things: it imposes a discipline on us to ensure that what I have outlined happens. I say to my hon. Friends that the review in the summer and the other measures mentioned are necessary—in fact, they should happen in any event; they are just matters of efficiency—but if the new clause is added to the Bill, it will provide the discipline that will ensure that things happen in a structured way. It will give the House the capacity to understand, monitor and control the process, so that it comes back to us.
Let me reinforce the point that the new clause is one way of ensuring that, in future, individuals can understand where they are, in terms of the consumption, supply and generation of electricity, because it allows communities to get involved, as well as individuals. It allows collective capacity; it is not just about an individual putting a windmill on their roof. The measure is about communities, planning, consent, and co-operation. To me, the democracy argument is as important as the efficiency argument.
I support new clause 4, which was so ably introduced by the hon. Member for Nottingham, South (Alan Simpson). He said more about it than I could ever say, so I shall move on to my amendment No. 1, which is much more technical and deals with the interaction between research and development grants and renewables obligation certificates for certain projects.
There is a concern that efforts to avoid giving projects double help may put in doubt the future of some projects. That was suggested to me by those who were involved in the DOWNVInD programme, which I am told is one of the largest renewable energy research and technology development programmes in Europe. The project is funded by Talisman Energy and Scottish and Southern Energy, with significant contributions in kind from many of its 18 other participants from seven EU countries.
I understand that in addition to private capital, the project received research funding from the European Commission’s sixth framework research and technology development programme, the then Department of Trade and Industry’s new and renewable energy programme, and the Scottish Government’s science and technology development programme. The public sector support for the project was predicated on the observation that offshore wind was an emerging technology confined to shallow near-shore waters.
The DOWNVInD programme was essential to move the offshore wind technology to deeper waters more distant from shore, and was obviously looking to the future of offshore wind. That was noted in the then DTI’s grant offer letter, which stated that
“the project is high risk, and does present an opportunity to better understand the economic and technical prospects for offshore deepwater windfarms”.
The problem is that, because of the way the subsections that I am seeking to delete from the Bill are written, as the project has received public sector grants, it might not be able to take up the new banded ROCs. Special arrangements will apply to projects in receipt of capital grants, but that would mean that if projects qualified for up-banding, they would have to pay back some of the research grant, as proposed new section 32E(5)(a) sets out:
“if the grant or any part of it has been paid, to repay to the Secretary of State the whole or a specified part of the grant or part before the repayment date”.
The result of that would be that projects that received ROCs would have to repay grants.
I am told that the proposal was originally aimed at post-demonstration projects in receipt of capital grant, such as the round 1 offshore wind projects. However, the wording means that projects such as DOWNVInD would become subject to the regulations and would no longer be able to get ROCs. They would never be able to move beyond the demonstration stage because they would be unable to produce energy and get the benefit of ROCs.
Indeed. Onshore wind is now a mature technology, and that is recognised in the proposals for the new ROC bandings, where it will remain at one ROC. We need to incentivise emerging technologies such as deep-water offshore wind—but not only wind technologies. The hon. Member for Cheltenham (Martin Horwood) mentioned the concerns of his hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) about tidal projects in the Pentland firth, which have huge potential but need the capital funds for research and development in the first stage. If they are to produce electricity, they need access to the ROC procedure. However, under the provisions as written, that would not happen. I ask the Minister to reconsider that point and not to put at risk projects such as DOWNVInD and the tidal and wave development project in the Pentland firth. Such projects require the grants to get off the ground in the first instance, but they also need the support of ROCs, as do those involving other renewable technologies.
I turn briefly to new clause 20, which is in the name of the hon. Member for Brighton, Kemptown (Dr. Turner). It refers to transmission charges. It would not do for an Energy Bill to pass without my talking about such charges; I seem to have been doing that for years in this place. I support what the hon. Gentleman is trying to do. I shall be interested in what he says about the new clause; if I read it correctly, it seeks to end the discrimination in transmission charges. That has been a matter of huge concern to many of us in Scotland for many years.
Although Scotland has huge potential for renewable development, there is a problem with the transmission charges and how Ofgem has developed them. It means that there is discrimination against projects in remoter rural areas; it is considerably more expensive to transmit energy from such projects than it is from developments in, say, the south-east of England. If the intention behind the new clause is to do away with that discrimination—and I think that it is—I wholeheartedly support it. I hope that the Minister will take it on board and finally deal with the matter, so that I no longer have to stand here and talk about transmission charges and I can move on to something else.
I must confess to a grave feeling of personal disappointment with the Bill, because it is being published at a time when Parliament has thoroughly recognised the vital importance of combating climate change and, I hope, of promoting renewable energy, which is one of our most potent weapons for fighting climate change. I am disappointed because this legislative vehicle has nothing to promote renewable energy, with the exception of the banded renewables obligation certificates, which are welcome. However, that is only one measure, and we need a comprehensive policy framework. New clauses 4, 20 and 21 form part of a proposed comprehensive framework. Clause 19 would have been another part of it had it been selected by Mr. Speaker.
I should like to express my support for new clause 4. The banding of ROCs goes some way towards doing what feed-in tariffs do in Germany. However, the ROCs are still expensive to administer and still provide uncertain value; the redemption value of a ROC is not fixed, so there is still investment uncertainty. It is still worth considering feed-in tariffs not only for microgeneration, for which they are clearly the only workable approach, but as a parallel mechanism for larger, commercial-scale generation. Existing generators could elect to stay with ROCs and new generators could have the option of going either with ROCs or a new feed-in tariff system. There is no need for conflict. Another great advantage to feed-in tariffs is that they do not cost the Treasury a bean, whereas operating the ROC system is very expensive to the public purse.
I thank the hon. Gentleman for his suggestion. I was going to put that point to my hon. Friend in almost the same words when I finish.
It does not matter whether we have feed-in tariffs or ROCs, as this is not the only policy instrument that is necessary if we are to get the large-scale and rapid deployment of renewable energy that we need. That is not the sole secret of Germany’s success—it is just one measure contained in the German Renewable Energy Sources Act, which also contains many other vital provisions. New clause 20 would carry out the proposed EU renewable energy directive, which is itself based on the German Act. The two most important provisions concern grid access. In this country, we have the bizarre situation whereby 15 GW of totally approved wind generation cannot get access to the grid, and will not get access for many years. That is a totally unacceptable situation that we must do something about if we are getting serious. New clause 20 proposes that there should be guaranteed access to the grid for renewable generators. If that means that the grid needs to be strengthened or reinforced or to have new lines laid, then so be it—the grid operators would have to do that. They would have to raise the capital in the normal commercial way, and Ofgem would have to approve it. That is what happens in Germany, and it works. The grid operators may grumble, but they do it.
It is no good if the generator is installed and connected if its output is not maximally used. If we want to maximise renewable energy, the output of a renewable generator should have a priority call on the grid whenever it is generating. That is the provision in the renewable energy directive and the provision that holds good in Germany under the Renewable Energy Sources Act, and that is what new clause 20 would provide. Whichever financial incentive mechanism we use, whether multi-banded ROCs or feed-in tariffs, if we do not have the facility to take the electricity and use it, it is of no value. We need a comprehensive framework.
New clause 21 is drafted with the Scottish situation in mind, as I am sure the hon. Member for Angus (Mr. Weir)—I am delighted to have his support—will remember from remarks made in the Committee considering the previous Energy Bill. When the British electricity trading and transmission arrangements were introduced in the Energy Act 2004, we got zonal transmission charges. The effect of zonal transmission charges is that a generator is penalised for its distance from a notional centre of consumption in the system. The further away the generator is, the more it pays in transmission charges. We are talking about incentives, and the incentivisation under that system would be to concentrate generation at some notional point about 50 miles north of Birmingham, where renewable resources are not at their strongest. I do not think that it is to be recommended.
The most potent bits of our magnificent renewable resources, such as offshore wind, wave and tidal stream, happen to be geographically located a long way from a central point north of Birmingham. They are also technologies that at the moment are commercially difficult because they are expensive, because of their situation and, in the case of wave and tidal stream, because they are emerging new technologies—the first commercial tidal stream machinery has only just been installed. Naturally, such technologies cannot match the cost of other generating technologies at this time. Investment decisions, therefore, will have to be finely balanced. To add 2p or 3p per kW extra in transmission charges could be the straw that breaks the camel’s back, and such investment does not happen.
There is a real disincentive built in to the BETTA system. There is a mechanism for dealing with the matter in section 185 of the Energy Act, and new clause 21 would amend that. Section 185 provides for a power to cap transmission charges and the Secretary of State can do that by nominating one—only one, as the Act is currently drafted—specific zone for the production of renewable energy. However, it may be necessary to have more than one. Subsection (2) of the new clause would replace “a” with “any” so that the Secretary of State has freedom of choice. He can select any of several, or more, suitable areas to which to apply the capping powers. The other deficiency in section 185 is that it contains sunset provisions. The import of three of its subsections is that the capping protection cannot last for more than 10 years. That will not give investors any confidence in commercial stability either. I found that provision difficult to understand at the time, and equally difficult now.
Exactly. That is why I said a maximum of 10 years’ protection. I see no justification for the sunset provisions at all, in all logic, so I wish to remove them. We would then have a reasonable protective measure that would fulfil what the Government probably intended when they drafted section 185 of the 2004 Act.
I submit to my hon. Friend the Minister that there is no reason for delay in legislating to get rapid deployment of renewable energy. We need a comprehensive set of measures; new clauses 4 and 20 are clearly central to that process. Without new clause 20, new clause 4 will not be fully effective. New clause 21 is a further addition, and new clause 19 was not selected but refers to Ofgem’s responsibilities. Ofgem plays a pivotal role and if its primary responsibility is sustainability, it will make a huge difference. I will not expand on that because new clause 19 was not selected, but its purpose needs to be kept firmly in mind.
I appeal to my hon. Friend the Minister to recognise that the Government’s best course is to accept new clauses 4, 20, 21 and others. There is no question of party advantage, but potential for great advantage for the country. I therefore strongly urge my hon. Friend to accept the new clause.
I want to speak about new clause 11, which deals with hydro-microgeneration. Before doing so, let me express my enthusiastic support for the new clause and the remarks of the hon. Member for Nottingham, South (Alan Simpson). If the new clause were accepted, it would do some of what I am trying to achieve in stimulating the growth of hydro-microgeneration.
It is frustrating that we appear to spend so much time in this country hugging ourselves, congratulating ourselves and telling ourselves how wonderfully wise, green and environmentally friendly we are and that we are world beaters, when much of the outside world passes us by and gets ahead of us through mechanisms that are available to us if only we would use them. I say to the hon. Member for Southampton, Test (Dr. Whitehead) that I see no purpose in agreeing with an amendment and then letting it lie on the table. It should not lie on the table; it should be activated. The Minister would be advised to accept the new clause today.
I do not pretend that hydro-microgeneration is the answer to all our renewable energy problems—of course it is not. It is a small part of the portfolio of renewables that we need. Patently, not everybody has a house on a river with a mill. Hydro-microgeneration will not therefore be a huge contributor, but it is part of the process. I am a great believer in decentralisation and finding small solutions and putting them together to make a big difference.
Hydro-microgeneration represents a small but significant part of the renewables market. I had the great pleasure of helping to open a new facility in my constituency last year. Tellisford mill is an old water mill in a beautiful place. Anthony Battersby and his wife Rachel have done a wonderful job in investing in a new water turbine in the mill. They not only provide energy from a renewable source but are socially and environmentally aware in being good neighbours. The mill is not like some renewable energy sources, with which people have a problem. We are considering an old mill, which is being used for the same purpose for which it was used 200 years ago, and that is good. It produces renewable energy for 65 houses, which is good news.
The Mendip Power Group has a series of mills along the River Frome. When they are fully operational, they will provide 2,100 MWh, which is a significant contribution. The Mendip Power Group is one of three such groups in my immediate area. We also have the South Somerset Hydropower Group and the Stour and Vale Hydro Group, which is based in Dorset. Between Somerset and Dorset, more than 100 water turbines provide renewable energy. However, everyone involved in the process says that the difficulty of getting past the existing bureaucracy is such a disincentive that they often feel as though they are banging their heads against a brick wall. I want to illustrate and address those frustrations in my remarks.
I am pleased to co-sponsor new clause 11. Does the hon. Gentleman agree that another issue that we should examine closely is flood prevention? Much as we need to generate electricity—that is the point of new clause 11—if we get that right, we will also remove the flood risks that will inevitably follow if we do not manage the water properly.
The hon. Gentleman is right. A sensible community would manage a whole river basin in a much more sustainable way than we do now. We are trying to do that in Somerset and some other parts of the country, but that means taking energy from the river, using appropriate storage of water to prevent flooding and using the entire ecosystem in a water basin in the most effective way, so the hon. Gentleman is right.
What are the current difficulties? The Minister knows what they are, because I have written to him, as have those who operate the mills, who have also had meetings with his Department and tried to explain the issues. The principal issue is the definition of microgeneration for hydro power. We have mixed definitions of the maximum allowable in microgeneration, but the most effective one, including in respect of the renewables obligation certificate, is a maximum of 50 kW. However, a great number of water turbines generate between 50 kW and 100 kW. I accept that 50 kW is a perfectly viable maximum for many renewable sources; one would need quite a large photovoltaic array on top of one’s house to reach 50 kW. However, that is not a large figure for a water turbine. Indeed, at its best, the technology used in the new water turbines generally produces more than 50 kW.
We conducted a survey of the 100 or so mill installations that I have mentioned in Somerset and Dorset. That survey could be taken as proving the Government’s point. The majority of those mills—89 of them—generated less than 50 kW and only 13 generated more. However, those 13 generated more electricity than the other 89 put together. If we are interested in getting the maximum yield of renewable electricity, the 50 kW cut-off is absurd.
Because 50 kW is the cut-off for the double ROC, those who have installed such facilities or who intend to do so have a strange decision: either they run their installation at less than full capacity, in order to keep within the double ROC maximum, or they take a financial loss. What sort of policy nonsense is it to have renewable capacity, but run it at less than full capacity? There is of course an extra financial loss, because the 50 kW maximum is also used for the income tax exemption, so there is a double hit.
The other financial difficulty that many people face concerns the grid connection, which has already been mentioned. I am told that a 400 m connection can cost £16,500. That is a lot of money on top of the initial capital outlay already required. Oddly enough, mills are usually on rivers and are not normally very close to communities; therefore, there is an inherent cost in providing the infrastructure required to run a renewable installation.
The second issue that I want to raise is the licensing regime. It seems that the Environment Agency has never talked to the energy Department, in whatever form it has taken, about what is needed. If one tries to get a water abstraction licence for one’s water mill, one might be told that one needs an abstraction licence, an impoundment licence or a transfer licence—one might even be told to get all three. All that for water that never leaves the river. It goes into a leat, is used by the turbine and is returned to the river. It is nonsense to call that an abstraction, yet all those licences are obligations, dealt with by the Environment Agency, that have to be paid for. One has to apply for them and go through all the bureaucracy that comes with that.
There is no consistency in the way that the system is applied. I have two mills in my constituency, one of which I have mentioned. Tellisford has an impoundment licence, while Stowford, which is a little further down the stream, has an abstraction licence. The mills do the same thing, but the Environment Agency is determined that they need different licences, whereas another mill on the same river, Lullington, needs all three licences. Surely, it is not beyond the wit of the Government to devise a single licensing regime for hydro-microgeneration that obviates what I describe, particularly given that water is not being abstracted.
Not only does one need a licence, but one has to report daily on abstraction. No water is leaving the watercourse, but one still has to report to the Environment Agency every day about how much water has been abstracted from the stream into the leat, and how much has passed back from the leat into the river. It is the same amount on either side. That is also nonsense. Each year, from every mill, 365 flow readings go to the Environment Agency, which I doubt is desperate for more work, but that achieves nothing because the same water is going in and out.
Another issue that the Environment Agency is very concerned about is reserved flow, but for all the reasons that I have given, there is no consequence from a mill stream taking water into a loop and then feeding it back into the main watercourse. The stream has probably done that for hundreds of years. That is not a new thing; it was there before the water turbine and will be there after it, but the Environment Agency thinks it an important thing to measure. Interestingly, an Environment Agency officer said to Mr. Battersby, who gave me this information:
“We are very good at measuring change, but absolute rubbish at deciding if it matters or not.”
That sums up the regime in which those officers are working.
The final subject that I want to talk about is fish. I do not want to be unkind to fish. They are very important, and I do not want to do anything that would be detrimental to the safety or health of the various species. The Environment Agency considers water turbines to be a major hazard to fish, even in a stream that has no migrating species. I understand the need to put facilities in a stream along which salmon or trout migrate and need a passage through a weir or need to bypass a turbine, but not if there are no migrating species. If the weir has been there for hundreds of years, the fish, if they have any species memory, will presumably know that it is there by now, and will use the main river course instead, rather than bump into the weir and hurt their snouts. That is not a serious issue. Why, then, does the Environment Agency expand it to become a major obstacle to the production of energy from this source?
I do not wish to detain the House any longer, but I want the Minister to understand that many people are desperate to invest in renewable energy and they have the means to do so in a way that is socially and environmentally responsible. They can make a real contribution—not the biggest contribution in the world, but a real contribution nevertheless—to providing energy into the system. Obstacles and impediments are in their way, which could be avoided if only the Department and the Environment Agency would take these concerns seriously.
I do not intend to press my new clause to a Division, but rather like that put forward by the hon. Member for Nottingham, South, mine provides a year for the Government to get their house in order and provide the necessary changes to regulation in order to accomplish what we all want. I hope that the Minister will not tell me just what is technically wrong with the new clause. I am sure that he can find something wrong with it, but that is not the point. My intention was to stimulate debate about one small sector of renewable energy that we could encourage to a much greater extent if we avoided the obstacles and made the fiscal arrangements more appropriate than they are now.
I would love it if the Minister were to stand up and declare that he supports the feed-in tariff proposal, and if he will not, I hope that the House will persuade him to change his mind. In the same breath, I hope that he will also look seriously at the issues in my new clause, and put in the necessary changes in order to stimulate this small but important sector of microgeneration.
This group of amendments covers a wide range of renewables issues, so I hope the House will forgive me if I am on my feet for some time trying to answer all the points raised. I would like to try to do justice to them and address as many of them as possible. I would like first to deal with the renewables obligation-related amending provisions; secondly, with issues related to transmission; thirdly, with the Government’s reporting on energy; and, finally, with the issue of feed-in tariffs.
The intention behind new clause 11 is, as we have just heard, to encourage the deployment of hydro-microgeneration. It proposes exempting micro-hydro installations from the licensing requirements set out by the Environment Agency. Those requirements were put in place for the purpose of protecting our rivers and wildlife. However, there is always a balance to be struck and I am aware of the micro-hydro sector’s concerns around the burdens that the regulations place on it. Those impacts are not always easy to assess, which is why I believe it is right to pursue a route to better co-operation between the industry and the regulator, rather than to disapply regulatory protections.
My officials are aware of the issue and they are keen to find a way forward, if possible, with the Environment Agency. For example, my Department has funded a project between the industry and the Environment Agency to develop a good practice guide on the environmental impact of micro-hydro schemes.
The new clause also proposes changes to the treatment of micro-hydro under the renewables obligation. The detail of how it is implemented is already set out in the Renewables Obligation Order 2006, which takes account of relevant differences between technologies, including hydro-generation. I believe it would be inappropriate—not to mention increasingly complex—for microgenerators to have separate regulations, as seems to be suggested, dealing just with hydro-microgeneration for the purposes of the renewables obligation.
Specifically on the definition of hydro-microgeneration, the bands for all technologies will be set out in the order and there is no need for either separate secondary legislation or a definition in primary legislation to deal with the issue. All the changes to the order, including the thresholds for support levels, will be subject to statutory consultation before introduction. My officials have met representatives of the industry to discuss these issues and have committed to consider them further in the light of a study that the British Hydro Association is carrying out on the scope for micro-hydro, so I believe that the right place for the industry and others to voice their concerns is as part of that consultation and not through this Bill.
Very little reassurance, but the Minister has said that consultations will continue, which is welcome. May I point out to him that on his own Department’s website a micro-hydro plant is defined as being below 100 kW, not below 50 kW? I hope he will bear that in mind.
The issue at stake is how that relates to the renewables obligation, but I hope I have given the hon. Gentleman the reassurances that he wanted.
New clause 17 amends the Sustainable Energy Act 2003 to increase the money available for spending on the promotion of renewables that is available from the non-fossil fuel obligation levy fund. That money arises from transitional arrangements introduced when the support system for renewable electricity generation moved from the non-fossil fuel obligation to the renewables obligation. Through the Sustainable Energy Act, we have already made available £60 million of the money arising from the NFFO transitional arrangements for spending on renewables.
I understand what hon. Members are trying to achieve in seeking to increase Government expenditure on renewables, but I think we should focus on the bigger picture and the Government’s existing wide range of support for renewables. Public sector funding for renewables and low-carbon technology innovation is increasing steadily, both in the UK and more generally in the European Union.
Research councils’ expenditure on energy-related basic, strategic and applied research is planned to reach £300 million over the current comprehensive spending review period. The Energy Technologies Institute, a new public-private partnership designed to co-ordinate research on and development funding for low-carbon energy technologies, currently has a budget of £600 million over the next 10 years, with the potential to increase to £1 billion with the addition of new partners. The Technology Strategy Board has a total budget of more than £1 billion over the current CSR period, which will include funding for energy development technologies. The UK element of the environmental transformation fund has £400 million over the next CSR period to invest in low-carbon and energy efficiency demonstration technologies.
Most important of all, we must not forget the substantial support that is available through the renewables obligation. Along with exemptions from the climate change levy, the RO will provide around £1 billion of support each year by 2010. Moreover, we will be considering a full range of policy options for supporting a step change in the deployment of renewable energy as part of our renewable energy strategy. Any decisions on additional funding will be made in the context of future spending settlements.
In the light of the assurances that I have given, I hope that the new clause will not be pressed to a Division.
Before I deal with amendment No. 1, let me explain the purpose of the subsections that the amendment seeks to remove. Because of the importance of getting our reforms of the RO right, it has taken some time for the Government—consulting industry and others—to develop the proposals. To ensure that developers continued to contribute new investment in the interim, we made a commitment to allow any projects becoming operational after 11 July 2006, before the banding proposals come into effect, to benefit from the greater levels of support afforded through banding. A tidal power station coming on stream tomorrow would receive two ROCs per MWh when banding comes into effect. There was a significant risk that, without such a commitment, developers would hold back vital investment in renewables while waiting for the increased levels of support to kick in. That would not have been an acceptable outcome.
However, some of the existing projects that will become eligible for a higher level of support once banding is introduced will also be in receipt of grant funding. The grants will have been notified to the European Commission as state aid, and will have been assessed on the basis that the generators will receive one ROC per MWh. We therefore need a mechanism to ensure that we do not find ourselves in breach of state aid rules through generators’ accumulating subsidies from different support mechanisms beyond the allowable thresholds.
The amendment proposes to remove the power for the order to allow generators in receipt of a grant to choose between receiving the new higher band for ROCs but surrendering the grant, and retaining the grant and continuing to receive one ROC per MWh. Ultimately that will be a commercial decision for generators, but it allows them the option of “banding up” when they could otherwise be barred from doing so by state aid rules. It is important for that power to remain in the Bill so that when a banded RO is introduced generators can make a commercial decision on the path that they prefer, while ensuring both that state aid rules are not infringed and that consumers and taxpayers are given value for money. I hope that the amendment will not be pressed to a vote.
I do not quite understand that point; I will be happy to discuss it with the hon. Gentleman outside the Chamber. We have got substantial support for research and development, but our purpose is to try to avoid double subsidy, not just because of state aid principles but because that would not be a proper use of money.
The Minister just said that this was not about state aid rules alone. If it were just about state aid rules, could there not be flexibility so that if the project truly needed the double ROCs and the initial grant to overcome the start-up costs, the issue could be revisited to see that it still complied with state aid rules?
This is more a matter of not subsidising something twice when that was never the intention; that would be a perverse consequence.
New clause 20 seeks to provide priority access to the electricity and gas transmission and distribution systems to electricity and gas produced from renewable energy sources. The text of the first part of this amendment, which relates to electricity, comes from the draft EU renewables directive. Before I start analysing the provisions further, I should make it clear that once the Commission’s proposals for priority access are finished and the directive agreed, these proposals could be implemented in the UK in a number of ways, not all of them involving primary legislation. We need to be careful not to implement something now just because we have the legislative opportunity.
Turning to the substance of the amendment, the first issue is that there is no current definition of priority access. Without a clear meaning of priority access, it would be difficult to avoid uncertainty, which would impact on existing generators and those planning future investments. That could discourage investments and would have serious repercussions on the meeting of our energy needs and targets.
The next issue is whether priority access is both consistent with our wider energy policy goals and the best route to accelerate the growth in renewable generation. It is important to have conventional generation alongside renewables, but it is essential that the access regime encourage new investment in reserve capacity. Without that, we could have serious difficulties in maintaining a reliable electricity system. In this context, we are considering reforms to grid access arrangements as part of the transmission access review with Ofgem, to ensure that the regulatory framework remains fit for purpose in the medium and long term, and to speed up the connection of renewable generation. It is clear from this work that there are ways in which we could significantly improve the connection opportunities for renewable generation. We will set out that analysis when the final report of the review is published in May. However, it is important also to remember that from the perspective of a renewable developer, connection in a reasonable time consistent with the development programme for their project timetable is likely to be more important than whether they have been treated more favourably than other technologies.
On the second part of the new clause, which is not part of the EU directive I mentioned earlier, let me reiterate what I said in Committee: the Government are keen to support and investigate the cost-effective potential of renewable gas to contribute to the UK share of the EU target to achieve 20 per cent. of the EU’s energy from renewables by 2020. Renewable gas, or biogas, is produced by feeding organic material such as food waste, sewage sludge, animal slurries or energy crops into an anaerobic digestion plant, or from the decomposition of organic matter in landfill sites. It is important to remember that through this Bill anaerobic digestion—the biomethane it produces—will achieve two ROCs under the revised and reformed RO procedure.
By removing the carbon dioxide and other impurities, biogas can also be used to make biomethane. Theoretically, it is possible to inject biomethane directly on to the gas network in the UK, provided that the biomethane can meet the gas quality standards and pressure requirements of the national grid. The “Heat Call for Evidence” invited contributions on the potential of biomethane, the barriers to its deployment, and how best to tackle these. We will be feeding these considerations into our broader work on the renewable energy strategy. Until we have reviewed the evidence about the costs and processes involved in upgrading biogas to biomethane and injecting it into the gas system, we cannot judge what potential unintended or undesirable consequences might flow from the changes to the duties of the Secretary of State and the authority that are being proposed.
Moreover, we need to look at this matter in the round. We need to assess how biomethane fits with the ongoing work to develop a new renewable energy strategy by spring 2009. That will include looking at all renewable heat technologies and potential support mechanisms, rather than focusing on a single technology, as the new clause does. The kind of market enablement that it would provide thus seems entirely premature, and I ask hon. Members not to press it to a Division.
New clause 21 proposes changing section 185 of the Energy Act 2004. Section 185 was introduced as a transitional provision to ease the implementation of cost-reflective transmission in Scotland. It allows the Secretary of State to adjust transmission charges in a particular area of the country to help to mitigate any material hindrance to renewables development caused by the charges.
The new clause proposes the following changes to expand the scope of section 185: removing the provisions that set time limits on the duration of a scheme adjusting transmission charges, and removing the requirement that only one scheme can be in force under section 185 at any one time. We are in the process of analysing whether there is a case for adjusting transmission charges on the Scottish islands under section 185. Renewable developers also face other practical issues, and that fact, along with section 185’s narrow focus on transmission charges, makes me believe that it is not the right instrument for supporting the development of renewables for the country as a whole.
Moreover, as we have just discussed, negotiations are under way at a European level to grant renewables priority access to the grid, and I have also made it clear that transmission will be one of the issues that will be closely examined in this summer’s consultation on our renewable energy strategy. I therefore ask hon. Members not to press the new clause to a Division.
On amendment No. 65, I would like to remind hon. Members of why we have included clause 78 in the Bill. We did so, first, to introduce flexibility in the timing of our annual energy report and, secondly, to remove statutory requirements that are either replicated elsewhere or are over-prescriptive. I believe it is right that we streamline our reporting requirements to ensure that our report is topical. We need reporting to be sufficiently flexible so as to allow us to exclude less relevant technologies and to include more relevant ones as developments dictate. Our changes facilitate that and, as such, we should retain them as part of the Bill.
There was some concern in Committee that we were repealing the requirement to report on energy efficiency. Let me reassure hon. Members that that important issue will still be covered in a number of reports produced by Government: under the Housing Act 2004, we are required to report on energy efficiency targets in residential accommodation; we produce the UK energy efficiency action plan, which we will regularly update as required under the EU services directive; and we would also expect to capture energy efficiency issues as part of our reporting on carbon emissions in the annual sustainable energy report.
I hope I can also reassure the House that we will still be reporting on the important issue of security of supply through the energy markets outlook, which is a commitment from the 2007 energy White Paper, and as a result of the duties to report under two EU directives relating to supply of gas and electricity. I remain convinced that those reports will cover the practical information on security of supply in which Parliament and wider stakeholders would be interested.
Our proposals to create some flexibility in the reporting period and cycle were designed to ensure that we could publish a report that was as relevant as possible by timing its publication around the availability of the most recent data. Such an approach would also allow us to join up with the reporting cycle proposed in the Climate Change Bill. I therefore listened with interest to the concerns being raised in Committee that our proposal to introduce flexibility on the reporting period and publication date could raise the spectre of the Government being tempted to use that flexibility to take the opportunity to delay publication of our report in order to obscure bad news. That was never our intention. The Government take the issue of reporting progress very seriously.
Even so, I have reflected on those concerns and considered whether there was an alternative way to allow the Government to produce a more relevant and up-to-date report while meeting the concerns about flexibility. In view of that, I have asked my officials to review whether we should consider a specific reporting period or specifying a publication date. The Government will return to the issue in due course, and I therefore hope that the amendment will be withdrawn.
Finally, I deal with feed-in tariffs and new clause 4, which I know are of some interest to the House. For those who take an interest in contemporary Labour history, it is interesting to note that this time my hon. Friend the Member for Nottingham, South (Alan Simpson) is supporting new clause 4.
I am not surprised that we are again revisiting this issue and that there is considerable cross-party support for a feed-in tariff for microgeneration. Although I can appreciate the desire to ensure that we have the right incentives and mechanisms in place to increase the deployment of renewable energy, especially in the light of our EU 2020 target, I cannot—for reasons that I hope to convince the House of—support this particular new clause. It seeks to require the Secretary of State to introduce a feed-in tariff, but it does not specify the size of generation it covers. It could cover all sizes of energy generation, large as well as small. If adopted, that could have a potentially serious effect on investor confidence.
Perhaps the hon. Gentleman will allow me to proceed with my argument.
I turn to the effect that amending the Bill in the way suggested would have on large-scale generation. The renewables obligation has been hugely successful since its implementation in 2002, adding some 2 GW of new renewable capacity. Hon. Members sometimes underestimate the momentum now behind renewables in this country and therefore inadvertently talk down the great efforts that have been made by that sector. In addition to the 2 GW that we now have, the renewables obligation has also been the major incentive for the 1.5 GW of renewables capacity that is now under construction, the 6.5 GW that has been consented and is awaiting construction and the 10 GW that is now in the planning process. That amounts to an additional 18 GW of pipeline projects in just six years of operation.
Most weeks, a couple of hon. Members approach me to urge that I not go ahead with a wind farm in their constituency. If we were not doing some of the right things, I would not be getting those representations, although that is not to say that we will always agree to every project.
It is also important to recognise that later this year the UK will probably overtake Denmark as the world’s leading nation in offshore wind generation. I am also pleased to remind the House that some months ago we gave planning consent to the biomass plant in Port Talbot, which will be the world’s largest. I do not accept the criticism that we have stalled or are moving slowly on this issue. We started from a low base, and Opposition Members can explain that, because it did not occur under our stewardship—although that is rarely recognised in speeches. We started from a low base, but there is now a great deal of momentum.
Much has been said about the success of feed-in tariffs in other countries, particularly Germany. We should remember that Germany has benefited from a consistent supportive policy, as the Secretary of State reminded us, since the early 1990s—a period when I had no responsibility for such matters. The consistency of that approach has been a big part of Germany’s success, giving investors a solid base in which to invest. Consistency is important in relation to the renewables obligation, which is why I mention it. Whatever the merits of feed-in tariffs in other countries, we need to consider what will work best in the UK. I know that it is sometimes tempting to go to a country such as Germany and say that everything looks greener, but we need to beware of simple comparisons.
Feed-in tariffs and the renewables obligation are simply different methods of providing support to renewables projects. There should be no theology about this. We are talking about different mechanisms and which mechanisms might be fit for purpose in the UK.
I am not saying that. I want to continue with my argument. We have things to learn from one another when it comes to climate change and carbon emissions. Maybe Germany can learn something from us about the need for a major demonstration project on carbon capture and storage in Germany—another way of cutting carbon emissions. I refuse to believe that somehow things are altogether better in another country than they are in the UK.
Not just yet, although it is nice to see the hon. Gentleman.
People sometimes talk about feed-in tariffs as though they were cost-free. That is not the case. We need to look at the costs as well as the benefits. As the International Energy Agency’s 2007 report on the German system recognises:
“The country’s feed-in tariff for renewables has resulted in rapid deployment of new electricity capacity, but has done so at a high cost.”
The IEA report estimates that the German feed-in tariff regime between 2000 and 2012 will result in payments of €68 billion, of which some €30 billion to €36 billion will be the additional costs of renewables. It is important to point those facts out. By 2012, the annual cost would be between €8 billion and €9.5 billion.
It is also worth reporting the IEA’s finding that solar PV would provide some 4.5 per cent. of Germany’s electricity while taking some 20 per cent. of the potential payments. When we compare systems, it is important that we look at the costs as well as the benefits.
I apologise that I was unable to be present to hear all the Minister’s comments. As I left my office, I heard on the monitor some of his arguments against new clause 4 and they seemed reminiscent of those used by the Department on the subject of agency workers: we ought not to do anything here, because it might scupper our efforts in Europe. In fact, Britain was not playing ball with Europe in the most progressive way.
I am grateful for the Minister’s comments on the cost, but does he also accept that we need to take on board, in full, the German Government’s report on costs and on economic savings that come out of their commitment to renewables? Their figures show clearly that they can deliver savings of up to €5 billion a year, and the economic benefits of 250,000 new jobs generate spending in the economy. Meeting their own energy needs rather than having to buy from external sources is an enormous cost saving as well as a huge boost to their energy security.
The hon. Member for Nottingham, South (Alan Simpson) is right to suggest that we need leadership from the Minister and the Government, because we are simply not getting it. The Minister says that he is weighing up the costs and the benefits, but I can tell him that the costs are the subsidies involved, and that the benefit is that microproducers will be encouraged to take energy production seriously. The Government need to lead on this, because otherwise we will fall behind other countries just as we have already fallen behind Germany.