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Energy: Renewables

Volume 699: debated on Thursday 6 March 2008

asked Her Majesty’s Government what plans they have to develop the production of renewable energy in the United Kingdom so as to reduce the United Kingdom’s vulnerability to global gas and oil price fluctuations.

The noble Lord said: The provision of affordable local and renewable energy is needed by everyone in this country today, and the question is whether this Government are doing enough to that end. The most obvious answer is that they are not doing enough, that there is real fuel poverty in the country and that people are suffering through the inability to access renewable energy supplies on good financial terms. At the moment it is being suggested that if you want renewable energy, you have to have vast wind farms operating on a very large scale. That is not necessary. Local energy is available at a low price for those who take the trouble to seek it out, and here I pay considerable tribute to the London Borough of Merton on its initiative to provide its residents with as much locally available energy as possible. It is no credit to this Government that it has been left to Merton to develop an initiative in this way, and that the borough had to live with considerable insecurity before it realised that it was acting inter vires, which a local authority should not have to do. The good thing is that Merton is now able to carry on with its initiative, helped by a Private Member’s Bill which is going through Parliament at the moment.

Local renewable energy supplies are desperately needed because without them the country will not be able to survive the challenges from abroad. Germany, for instance, has an immense amount of renewable energy, a large quantity of which it relies on, and a very small amount of non-renewable energy. Other countries in Europe and elsewhere also do better than we do. Only two or three very minor countries in Europe do less well than we do in producing renewable energy.

It is therefore with great interest and genuine curiosity that I seek to learn what the Government think that they are doing in this field and how they will be able to meet the needs that are very real and widespread.

I congratulate the noble Lord, Lord Beaumont, on securing this debate on a very interesting subject. Your Lordships have many Questions on renewable energy, some of which the noble Lord, Lord Beaumont, has led or taken part in, and it is good to be able to discuss this subject for a little longer in this debate. I will concentrate most of my remarks on wind energy.

I start by following up a rather interesting answer that I got from my noble friend Lady Taylor on 7 February about the MoD objecting to many wind farm developments. The message that I have been getting from people in the industry is that the MoD tends to object informally to virtually every application that is submitted or every proposal that is discussed with it in advance of putting in a formal planning application. Therefore, it is probably not surprising that my noble friend Lady Taylor said:

“In the past three years we have objected to only 31 applications, and … raised no objection to 352 applications”.—[Official Report, 7/2/08; col. 1165.]

But there is the whole question of the costs of achieving planning permission, which I shall come on to later. If one has spent several years trying to get a decision out of the MoD before you put in a formal application, or if it changes its mind halfway through the process, it costs companies an awful lot of money.

I know that the objections may only be informal, but there seems to be a certain inconsistency about the approach. I am talking primarily about land-based wind farms, but DBERR has produced plans for an enormous increase in wind farms across the North Sea, which seems a most excellent place to put them, and in the Thames Estuary. I find it very difficult to understand what the MoD’s real objections are. Apparently it is to do with the blades turning and causing clutter on radar screens, which means that those operating the radar screens cannot see what is behind the turbines for a fraction of a second if a plane is coming in.

I look at what is on the other side of the North Sea and I see Belgium with rows and rows of wind farms along the coast. I think they have been there for 20 or 30 years. Germany has an enormous number of wind farms. I think that the Netherlands has two and so has Denmark. If the Belgian air force was going to invade us, would it fly over its own windmills, then go along the sea and would the MoD not be able to pick it up for a millisecond? Are we fighting the right war? I suspect that it the MoD could put a little bit of money into upgrading these radar screens—I know that it is very short of money but we could always cancel Trident or a few other things—and try to make it less difficult for these private-sector promoters to get their wind farm proposals through the planning system.

Then you have to look at the North Sea, which has a large number of oil and gas rigs, as we all know. They have motors that go round and round. One would think that they would also show up on radar screens. Surely the difference between a wind turbine and an enemy aircraft is that the wind turbine is fixed in one spot, although it is going round, whereas an enemy aircraft is flying rather fast. One has to question whether there is a significant problem here or whether the MoD does not have the relevant resources. I am told by people who know much more about this than I do that its real problem is technical and procedural and concerns resources. One has to question whether it is using the proper analytical tools to assess wind farms. It is very difficult when it says, “That’s all right. We think this farm will be all right”, but when the project is in its first or second year of development it suddenly says, “Sorry, we’ve changed our mind. It’s not all right and you’d better go somewhere else”. A lot of money will have been spent by then.

I hope that my noble friend’s reply will encourage the MoD to develop a better, more consistent process for dealing not just with formal applications, because it is probably too late by then, but with some of the informal approaches that always have to come first. That will require resources but a policy direction is needed. I was very pleased that my noble friend said in reply to my Oral Question that the MoD was fully in favour of wind farms. Therefore, I hope that this matter can be resolved quickly. If it is not, we shall not meet our targets; that is quite clear. A large number of companies are waiting to invest in these wind farms. The offshore visual intrusion is very small. The costs involved are a bit higher but it seems that we should push ahead with these structures—DBERR wants to proceed with all speed—as they would help to increase our proportion of renewable energy. Therefore, I hope that my noble friend will give me comfort that government will work collectively towards achieving this growth and that the MoD will be helped to come up with a consistent policy.

The British Wind Energy Association very much welcomes draft PPS22, the planning guidelines, which are designed to bring consistency into the process. When you read that 50 per cent of applications in England are approved compared with 94 per cent in Scotland, you realise that that is a very big difference. When I find that Devon and Lancashire have rejected every application whereas Yorkshire has accepted 100 per cent of them, I think there is something wrong. I hope that PPS22, when approved, will move things forward so that we can have a consistent process for constructing these wind farms. The costs would then come down and that would benefit everyone.

I have one last question for my noble friend. Something that worries me about renewable energy is the related price of oil. From her time at the Treasury, she will know that the price of oil in the Treasury forecasts is something like $57, whereas in Germany and France, the government think tanks are talking about $200. They cannot both be right. I realise that forecasting is always wrong, but I worry that the UK appears to be totally out of line with those two countries, our next-door neighbours. I do not know who is right, but it will affect just about everything we do in this country and it would be nice to know why the difference and whether the Treasury is rethinking it.

I am grateful to the noble Lord, Lord Beaumont, for giving us an opportunity to debate this subject. I very much agree with him that there is a dilemma about what is affordable and also renewable. It is a feature of quite a large proportion of the renewable options that they are not easily affordable. I am not going to follow the noble Lord, Lord Berkeley, down the wind avenue. I remind the Committee that quite a lot of people like to find a way to fly below the radar.

I will concentrate on the renewable transport fuel obligation as it relates to biodiesel. It also relates to bioethanol, and they both have the same targets. Those targets are set at 2.5 per cent of the total diesel supply from next month, rising to five per cent in 2010.

Back in November 2006, a Committee of your Lordships' House stated:

“It seems highly unlikely that the biofuels directive in its current form can provide the necessary impetus for the EU to reach the 2010 target of 5.75 per cent market share”,

which is what the target was and still is for quite a lot of members, but there is discretion to set it at a different figure. At that time, an equivalence was worked out of about $80 a barrel as being the price at which biodiesel could reasonably compete with fossil fuel oil. Since then, the fuel oil price has risen and so have the prices of the feedstocks for biodiesel. So it is a moving target—that is very much along the lines of the point made by the noble Lord, Lord Berkeley.

Biodiesel has not yet been produced economically; it has always needed subsidy. I go back a long way with biodiesel. I remember, when operating for the Commonwealth Development Corporation, looking at experiments in Malaysia of firing agricultural tractors on 100 per cent palm oil-derived biodiesel. It worked perfectly well. If I remember rightly, at that time the oil price equivalent needed to be $40 a barrel, but in fact was around $15.

The first generation of biodiesel has, to date, depended primarily on palm oil, which is a tropical oil; soya oil derived from soya beans, which is a semi-tropical to hot temperate crop and cannot be grown in the UK; and oilseed rape, which can be and is grown here. It is the only crop which might go some way to meeting the aim of the noble Lord, Lord Beaumont. A further small source in the UK is to be found in tallow and spent cooking oil, and indeed it seems that it is being used pretty efficiently. Some buses in Scotland, no doubt having had their engines modified, are running on 100 per cent biodiesel made from tallow and spent cooking oil. However, production is necessarily limited to very small quantities.

The problem at the moment is price. Since November 2006 when the House of Lords committee reported on this, the prices of the three chosen feedstocks for biodiesel in the first generation have more than doubled. The price of fossil fuel oil has also gone up, of course, but not by nearly as much. Palm oil and soya bean oil prices have been reaching new highs in the past few weeks. In November 2006 palm oil cost around $500 per tonne, while today it is achieving around $1,300. The point is that these prices are being driven up by the demand for food products, not by the demand for biodiesel, although it has been recognised in recent reports from the Department for Transport that it does add a little to the price pressure. So, given the relative price levels and the very high price of the best feedstock for biodiesel in the first generation, which is undoubtedly palm oil because it provides a much higher yield of oil per hectare than either soya or rapeseed, all three sources are uneconomic under the present UK regime because it allows for only a 20p reduction in the 47p duty.

I am not suggesting that we should subsidise biodiesel to any great extent; rather I am pointing out the dilemma here and I do not want to be particularly critical because it is simply a reality. Indeed, the European Union website on the issue of biofuels is remarkably silent at the moment. Not much on it has been produced recently. It could be that someone is saying that unless and until we reach around $150 a barrel for oil, biodiesel is almost hopelessly uncompetitive. There are imports from the United States of America of a blend called B99. However, rather surprisingly, the US subsidises its biodiesel production from soya beans to a much greater extent than we subsidise ours.

Where are we going with this? At the moment, we are looking forward to the second generation. We are being promised results from the jatropha plant, which produces an oil-bearing nut. The nut is inedible and the plant grows in India in hot, barren areas on not particularly fertile land. But it will be five years or even more before any major commercial exploitation of jatropha can be made.

This leads to questions, which follow up on one of the opening remarks of the noble Lord, Lord Beaumont; namely, that the United Kingdom is very far down the league of producers of renewable energy and far down the league of producers of biodiesel, which again is led by the Germans using, in the main, very large quantities of rapeseed.

My first question is: what is the current production of biodiesel in the United Kingdom? Secondly, what percentage of installed capacity is that production? My information is that there are plants working at well under capacity and one plant that perhaps is not working at all. Thirdly, what is the level of imports? Fourthly, what is the best estimate of the percentage of biodiesel use which the UK will achieve in 2008? I think that it will be well below 2.5 per cent. Finally, are we aiming at the right target? If so, what plans do the Government have to meet it?

I, too, thank my noble friend Lord Beaumont of Whitley for initiating this debate on using less oil and gas through replacement with renewables. Climate change has not been mentioned a great deal. Of course, a large number of Peers have used the Committee stage of the Climate Change Bill to make Second Reading speeches. I speak as someone who has sat on the Front Bench and has listened to the many interesting contributions.

It is very clear from the Climate Change Bill that, although we lost the amendment on 60 per cent to 80 per cent, with the Government saying that the 80 per cent would be initiated by the Committee on Climate Change by 2050, there is a massive hill to climb if we are to meet those targets. I have a real issue with that because the target is almost aspirational and will be incredibly difficult to achieve. We are not short on aspirations. In November, the Prime Minister said:

“Globally, the overall value added of the low carbon energy sector could be as high as $3 trillion per year worldwide by 2050. It could employ more than 25 million people in jobs. If Britain maintains its share of this growth there could be over a million people employed here in our environmental industries within the next 2 decades”.

I say that the targets are aspirational because, if we are to achieve this, there have to be enormous moves now. The first moves that have to take place are in the regulatory sector, which is where I have a real issue. I am no stranger to trying to prod the Government and I introduced a Private Member’s Bill a number of years ago, which then became Mark Lazarowicz’s Climate Change Bill in another place and the Government added a large number of clauses. I remember going to the DTI and my researcher saying that trying to get the clauses accepted by the DTI was like head-butting a swamp. It was very hard work and very messy. You felt slightly degraded at the end of the process and you did not think that you had got anywhere at all.

I now realise that everything has changed and there is a great deal of movement. During the Private Member’s Climate Change Bill, there was talk about permitted development orders being changed. I thought that we had won this battle. However, perhaps the Minister would write to me on that because it is unfair to spring it on her at this stage. There was a proposal to deliver from DCLG in the Changes to Permitted Development: Consultation Paper 1—Permitted Development Rights for Householder Microgeneration, which stated:

“A revised system would deliver a more permissive regime than exists at present and remove the need for planning applications for many householders”.

We thought that that was an excellent application.

However, we are looking now at an amended situation—this comes from the Renewable Energy Association which is particularly concerned about this. I thought that under permitted development orders we could do just about anything as long as long as they meet commitments. But it referred to:

“A height level which is set so low as to prove impossible for approximately 50 per cent of solar thermal panels and installation brackets. A mere increase of 50mm would solve that problem”.

I very much hope that this is not the case, because it seems utterly ridiculous that such a small planning application would knock out half the whole solar/thermal industry, which would have a devastating impact.

Another issue is noise levels. With no evidence base to support the Government’s assertion, noise levels have been reduced to, we believe, 40 decibels. This would mean that the noise produced by small microgeneration turbines would have to be almost less than background noise. It seems ridiculous that we should not go back to the World Health Organisation limit of 45 decibels. I speak on this issue particularly as I fought through the planning process to install a small wind turbine. It was a 6.2 kilowatt turbine, which you would not have heard from 5 metres away; yet everyone said that it would be heard from miles away. It is very difficult to get these things through. Microgeneration takes a lot of effort to bring about. If this reduction proves to be the case—I very much hope that the Minister can give some guidance on this—it is yet one more step backwards for the microgeneration industry, which has suffered. It will also mean that the Prime Minister’s assertion that we will get this wonderful expansion in the economy of microgeneration will not be met.

We have that problem not only with microgeneration. At a conference recently, I talked to an investment banker who invests in large-scale renewables. His point was that we have a real issue here. It is very easy to say that we should put turbines not onshore but offshore, and that that will solve the problem. The problem is that we never got into the turbines market, and Denmark leads the field in that. The noble Lord, Lord Berkeley, mentioned the MoD. I have always wondered whether Denmark is totally safe because it is surrounded by turbines, or is indefensible. It does not seem to be too worried about that, but that is a side point. We live in a global market, and there are only a certain number of turbines. We have very large aspirations. The London Array turbine field will be the largest turbine field in the world. It will be rather disappointing if we have this aspiration to build this but we cannot supply the turbines because of the planning difficulties and the hold-up. The people who produce the turbines are quite happy to sell them to other countries, and the market has rocketed up, especially in the United States. Onshore turbines in the US are a very rapidly growing area. It is much easier to produce and deliver those turbines there without the cost associations. We could find ourselves with great aspirations without being able to meet them.

I very much share some of the concerns expressed by the noble Viscount, Lord Eccles, about biofuels. I have severe issues with biodiesel. Indeed, I sat on a Select Committee on Science and Technology some 10 years ago—I cannot remember exactly when. The committee looked at the whole issue and discovered that you would have to plant up all the agricultural land in the country to meet this country’s diesel requirement. There is a real problem with saying that we will try to attach biofuels to all this and skew the economics of the market. I have a real difficulty with the Americans looking at corn ethanol, which does not make sense financially or in emissions terms because it produces far more carbon.

I end with a couple of other points. This debate gives us the opportunity to say that the Energy Bill will come to your Lordships’ House. I followed a number of amendments with great interest in another place, although unfortunately they did not get anywhere. I am happy to see from the Conservative manifesto that we and the Official Opposition have a great deal in common on this, and the Government may receive a reasonably rough ride if they are not a little more accommodating. These are basic issues, and we will have problems meeting our targets on renewables if we do not address them.

Our first approach should be to adopt the EU renewable electricity directive priority access provisions. That involves the whole thorny issues of feed-in tariffs, which is an important point where the electricity companies are going to have to agree to this, so that microgeneration makes some economic sense. The second issue would be to change Ofgem’s primary remit to align it to national policy. In the past, Ofgem has had two main gods in its pantheon, reliability and cost, but a third has to be added now—I know that Ofgem has gone a great deal further in the past few years to meeting it—namely, reducing carbon emissions.

The third approach involves enabling powers to bring in a production tariff for on-site renewables. It is unfortunate that that was rejected, because it is a major difficulty. Merton was mentioned by the noble Lord, Lord Beaumont. This is a hindrance to on-site renewables. The last one, which was in the papers today, is the ability to feed renewable biogas into the natural gas network. This could be a massive source of income for the dairy industry, which could get rid of its slurry and pump it into the national grid. I know that there are certain problems with that, but it would be rather nice if you could heat your milk in the morning, if you wanted hot milk, using the gas coming from the cows that produced the milk.

Whether or not one accepts that the emission of carbon and other gases is the major cause of global warming, to which the noble Lord, Lord Redesdale, referred—the case is pretty compelling, despite the fudged evidence—the sceptics miss two further key points. First, pollution is a major risk to public health; the incidence of asthma, for instance, particularly among children, is extremely high in the world’s most polluted cities. Secondly, we in Britain face a serious energy security risk. So I join other noble Lords in congratulating the noble Lord, Lord Beaumont of Whitley, on obtaining this timely debate, which is helpful in that it specifically links the benefits of renewable energy in reducing emissions to the major risk area of energy security.

One year ago this month, the Government signed up to an EU target of generating 20 per cent of all energy from renewables by 2020, but they are already reported to be wavering. At present, we get just 2 per cent from renewables, so that target is little more than a pipe dream. Another of Labour’s targets was to reduce carbon emissions by 20 per cent below 1990 levels by 2010, but that target will now not be met either. So the true answer to the noble Lord’s Question of what plans the Government have is, at least until the Energy Bill, “None”. They have had targets, but targets are not plans. Targets that are not delivered on are, as the noble Lord, Lord Redesdale, said, worthless. The Climate Change Bill sets more targets, but why should we believe in them?

On the other hand, approximately 30 per cent of our existing generating capacity will be shut over the next 20 years, leaving a significant capacity gap. Until quite recently, we were a net exporter of oil and gas, but have now become a net importer of both. Our gas production peaked in 2000, and from now on the decline is accelerating. The Government have admitted that our reserves have also declined faster than they expected. There was a gas and electricity price shock in the winter of 2005, as a result of the tightness of the margin between supply and demand. Then, in February 2006, there was a fire at the Rough gas storage facility. By March that year, a cold snap across Europe and insufficient gas flow through the interconnector further exacerbated problems. Last summer there were price cuts; then in the new year most of the suppliers increased their prices. So we continue to be exposed to considerable price volatility, highlighting the concerns of the noble Lord, Lord Beaumont.

Clearly, we have a problem. Could this at least in part be solved by renewables? My noble friend Lord Eccles, importantly, also referred to the conundrum of whether this can be done affordably, though in part that will depend on how fossil fuel prices move in the future.

The renewables obligation is the Government's main mechanism to provide financial support to renewable energy technologies. Provision is made in the Energy Bill to alter the renewables obligation to try to stimulate more rapid development. Offshore wind—the noble Lord, Lord Berkeley, spoke about wind—wave and tidal technologies are given especial encouragement by the introduction of banding. Connection of large-scale offshore renewables to the electricity network will be encouraged. Microgenerators are also to be given further support. However, the Bill was published before the new EU renewables targets were demonstrating a regrettable lack of co-ordination.

My noble friend Lord Eccles and the noble Lord, Lord Redesdale, spoke about biofuel, especially biodiesel. We are now just three years away from a 5 per cent biofuels target that will not, as my noble friend said, be met without significant imports, especially of palm oil. To achieve it, the Government will need to do more to stimulate competitive local production of biofuels, while guaranteeing that that does not threaten our food security and that any necessary imports do not lead to further destruction of rainforests—a crucial carbon sink.

No debate on energy security can ignore fuel poverty, and the noble Lord, Lord Beaumont, spoke of that. Britain is embarrassingly high up the list of European culprits for what is known as excess winter mortality. The Energy Minister told the “Today” programme that his hands were tied when it came to increased spending on fuel poverty, but that he was,

“sure the Treasury are listening”.

Is it appropriate for government departments to communicate with each other via national radio on issues as important as this? The Government have set a target to eliminate fuel poverty in vulnerable households, but Ministers have been forced to admit that the total number of vulnerable households in fuel poverty is likely to have risen by about a million households in England between 2003 and 2006. That is a serious problem and we will be grateful for the noble Baroness's explanation as to how the Government plan to deal with it.

Although the marine, Climate Change and Planning Bills are all part of the Government's attempt to secure Britain's long-term energy supply and climate change strategy, much of the strategy on energy is contained in the Energy Bill. Although we welcome much of it, I join the noble Lord, Lord Redesdale, in saying that we think that they could do better. Perhaps I may give some brief examples.

First, underpinning all policies in the Bill should be an effective carbon regime, but it is absent. The EU Emissions Trading Scheme does not currently provide that effective system, so we can unfortunately expect to continue to see wild fluctuations in the carbon price. Secondly, the Government should be committing to develop more gas storage capacity, but I can find nothing in the Bill that will promote that. Thirdly, although the Bill establishes the regulatory framework to explore the potential of carbon capture and storage, CCS is not included in the renewables obligation, the source fuel not actually being renewable. But the process captures carbon, which contributes towards achieving the same objective. That, and delays, have forced BP to pull out of the Peterhead CCS project, undoubtedly setting back the development of CCS by several years.

A number of companies have proposals for more advanced and cleaner pre-combustion CCS projects, which are in jeopardy because of the Government's preference for post-combustion technology. Moreover, it is not clear that the Bill establishes provision for liabilities. The safety of the carbon dioxide stored in a geological reservoir must be monitored for leakage. So there are a number of issues here.

Fourthly, the Bill aims to improve the effectiveness of the renewables obligation by banding the technologies depending on the respective levels of investment, but more than half of renewables electricity sourced under the renewables obligation has been biofuels, while almost a third has been from onshore wind. Wind, of course, has a part to play but, since it generates electricity only when the wind blows, it must be used as an appropriate proportion of total renewables. The renewables obligation would have a much greater impact if it was more broadly spread and if it provided better support for technologies for which there was less public resistance.

Fifthly—the noble Lord, Lord Redesdale, referred to this—the Bill inadequately addresses feed-in tariffs, despite support from the Prime Minister’s own guru, Sir Nicholas Stern. The renewables obligation excludes microgeneration and technologies, about which the noble Lord, Lord Redesdale, spoke, and technologies to harness excess heat and to generate electricity from waste, for example. Feed-in tariffs provide a potent response, and the Government’s position is as yet equivocal.

Sixthly, there is still no clear statement on the disposal of nuclear waste, which is essential. Lastly, the Bill is also missing the key element of energy efficiency. There is no mandate for smart meters, which would not only make people, especially the millions in fuel poverty, more aware of the levels of energy which they are consuming, but would give much better information to suppliers to manage the peaks and troughs.

I look forward to the Minister’s reaction to these points and others made by noble Lords; they will no doubt be brought up again when we debate the Energy Bill.

I am very grateful to the noble Lord, Lord Beaumont of Whitley, for securing the debate.

We face two major energy policy challenges: tackling climate change and ensuring energy security. The noble Lord, Lord De Mauley, asked a number of detailed questions about the Energy Bill, and I will endeavour in the time allowed to answer those and many of the other questions that have been asked. Given the opportunity to debate the Energy Bill, perhaps some of those questions could be answered then. I will write to noble Lords in response to any specific questions that the noble Lord may have.

Renewables have an important contribution to make, but the link with security of supply is not simple. The Government are absolutely committed to renewable energy as a key contributor to meeting climate change goals. If, for example, we raised the level of renewable energy to the 20 per cent of UK electricity generation proposed, we would reduce our total carbon emissions by 10 per cent.

The noble Lord, Lord Beaumont, referred to the relatively low levels of the UK’s deployment of renewables compared with some of our European colleagues. The UK has traditionally relied on secure sources of domestically produced oil and gas, so our sources of renewables, such as wind power, are relatively expensive. Other member states have used other energy sources, such as biomass and hydropower, so they have higher renewable levels than the UK for historic reasons.

The noble Lord also talked about the local generation of renewable sources. The Department for Communities and Local Government recently published PPS1, which requires local authorities to consider climate change and renewables in local planning frameworks. We also provide grants for low-carbon building programmes.

At the end of last year, we launched a strategic environmental assessment on a plan for up to 25 gigawatts of new offshore wind development rights in UK waters. This plan could increase the potential for offshore wind by 2020 from 8 gigawatts to 33 gigawatts, which is enough power for the equivalent of all UK homes. This year we will overtake Denmark as the country with the highest operating offshore wind capacity in the world. We are rated No. 1 as an investment location for offshore wind by KPMG.

We have also launched a feasibility study into a possible tidal power generation scheme on the River Severn—a project with the potential to provide 5 per cent of the UK’s electricity needs. We are introducing measures to strengthen the renewables obligation to allow renewables to compete fairly with lower cost, fossil-fuel-based electricity generation. Members of the Committee have discussed feed-in tariffs extensively, but will be aware that we will look at all options, including feed-in tariffs for microgeneration, as part of the consultation on the new renewables energy strategy.

In April, we will introduce a renewable transport fuel obligation and reforms for the planning regime, which will remove some of the main barriers to renewable deployment. But I undertake to discuss with the DCLG the specific issues that have been raised by the noble Lord about planning and noise levels. Under current measures, we expect that by 2015 we will have tripled the amount of electricity that we can get from renewable sources and by 2010 we will have increased renewable transport fuel fivefold.

The noble Viscount, Lord Eccles, asked about biofuels and biodiesel. The bulk of biodiesel is sourced from eastern Europe and the prices are suppressed, which has led to the mothballing and dramatic cuts in production of UK plants to which he referred. Current biofuel production capacity in the UK is 1,000 kilotonnes per annum. We have concerns about the sustainability of biofuels. Changes in land use and the impact on food prices are a major concern. As a result, it is anticipated that crude oil will provide a significant portion of this.

On 21 February, we announced that the Renewable Fuels Agency will review the emerging evidence of the indirect impacts of biofuel production. The initial analysis will be provided to Ministers as soon as possible with a full report to follow during the summer, which I am sure will be available. It will take into account in particular those indirect impacts, including deforestation and the conversion of permanent pasture, which are a concern.

Security of supply is about reliability and affordability. Renewables could play a key role in reducing or increasing dependence on imported fossil fuels. At times of high demand, they can reduce the use of more expensive fossil fuel plant in the generation mix and result in lower annual average energy prices, as well as lower carbon emissions. But renewable energy is neither cheaper nor more reliable at this point. As we have discussed, the prices of biofuel and biomass are volatile and may not be domestically sourced. Other renewable sources, such as wind and solar, have zero fuel costs, but they are currently expensive to install.

Intermittent renewal sources, such as wind and wave power, display some regenerating capacity, but not on a like-for-like basis. We will need both other forms of low-carbon base-load capacity to be sure that we have sufficient responsive generation to deal with the effects of intermittency. These issues will be particularly relevant at the levels of renewables needed to meet the EU 2020 target and they become particularly pressing.

I assure my noble friend Lord Berkeley that we are in discussions with the Ministry of Defence about their objections related to interference with radar systems in air traffic controls and defence radar. We are working with MoD air defence to identify mitigation solutions and evaluate replacement radar in order to minimise objections to wind farm developments. The MoD will be in a position to confirm or not whether the new air defence radar technology works in mitigating the interference from wind farms by the end of 2008 after the first new such radar has been installed at one of the east coast radar installations.

Renewable energy has a part to play, but does not entirely solve the security of supply issue. Our energy policy therefore focuses on promoting energy efficiency, ensuring security of supply by allowing the most diverse energy mix possible and promoting open and liberalised markets. The starting point of any sensible energy policy is to save energy, which is one of the most cost-effective ways to reduce carbon emissions. So we are introducing measures which are expected to reduce carbon by 2.3 million tonnes a year by 2020. Alongside increasing energy efficiency we are ensuring a diverse energy mix. By 2020 we will be importing at least 60 per cent of our gas. It is clearly in our interest to ensure that we do not become over-dependent on any one region of the world for our supplies.

In addition to a range of geographical sources, we need a range of low-carbon technologies, and to operate in a competitive energy market. With an independent regulator, we can ensure that energy prices continue to remain competitive, although I acknowledge that at times they are higher than consumers would like. That means that there has to be a place for nuclear, for carbon capture and storage and for necessary new investment in fossil fuel plants, as well as renewable sources.

The noble Lord, Lord Beaumont, referred to fluctuations in oil and gas prices. There are of course legitimate concerns about volatility. In the past five years, wholesale oil prices have ranged from $22 to $98 per barrel—I have not yet seen the $200 per barrel figure—and gas prices have ranged from about 1.5p per therm to £1.80. That is not atypical for traded commodities. Nickel prices have ranged from $8,000 to $50,000 per tonne in the same period. We expect a certain degree of volatility and expect that trend to continue in future. That said, UK retail gas prices are still very low compared with the European average. After the price rises in January and February this year, UK domestic gas prices for medium customers are estimated to be 33 per cent lower than the EU median, 39 per cent lower than Germany and 20 per cent lower than France.

UK wholesale gas prices are driven higher because they are linked to gas prices in the rest of Europe, and wholesale gas prices on the Continent are strongly linked to the price of oil. Along with that linkage, the predominance of rigid long-term gas supply contracts means that European gas markets are less responsive than the UK’s to gas flows and do not always respond to price signals—as we found a couple of winters ago, as the noble Lord, Lord De Mauley, mentioned.

We strongly support the European Commission’s proposed legislation to develop transparent, well regulated EU gas markets, bringing benefits to consumers throughout the EU. We as a Government remain completely committed to the EU's 2020 renewables target. I refute any suggestions that that commitment has been wavering; we are firmly committed to meeting our fair share of that target. Over the summer, we will consult on the most cost-effective way to meet the UK’s share, and we will introduce a new renewables strategy next spring, showing our continued commitment to renewables as a part of a coherent energy policy.

I am conscious of the time and I will come back on any questions that I have not managed to answer in writing or in debate on the Energy Bill.

[The Sitting was suspended from 3.57 to 4 pm.]