Report (2nd Day)
Relevant documents: 6th and 7th Reports from the Delegated Powers Committee
Clause 66: Onshore wind power: closure of renewables obligation on 31 March 2016
78B: Clause 66, page 38, line 5, leave out subsection (1)
My Lords, as I discuss the amendments today, I want to remind noble Lords of what has already been achieved. At the end of April 2015 there were 490 operational onshore wind farms in the United Kingdom, with an installed capacity of 8.3 gigawatts—enough to power the equivalent of more than 4.5 million homes. Considering the projects that already had planning permission and so on, there is enough onshore wind in the pipeline to contribute to what is needed to meet our ambition of 30% of electricity from renewables by 2020. This is a significant achievement, made possible only by consumer subsidies. The Government have estimated that in 2015-16, £850 million of support will go towards funding onshore wind across the United Kingdom, with around £520 million, approximately 60%, going towards funding Scottish onshore wind farms.
It is too soon to predict what the best energy mix will be as we move beyond 2020 but, as we continue on our path to a low-carbon economy, it is absolutely right that we also protect the consumer. Government support is designed to help technologies stand on their own two feet, not to encourage reliance on subsidies. This means moving from demand-led schemes to competition-led schemes. Ending support under the renewables obligation early for new onshore wind in Great Britain, with appropriate provision for grace periods, balances the interests of onshore wind developers with those of the wider public. This Government made a commitment to the electorate—no new subsidies for onshore wind, and giving local communities the final say on onshore wind farm applications—and the Government must deliver on this.
I have tabled government Amendments 78B, 78D to 78P, 78R and 82A, which seek to amend and supplement Clause 66 for debate at recommittal on 14 October. I withdrew the amendments to reflect on the points made in the debate, and committed to re-present them on Report today. I thank noble Lords for the useful discussion in last week’s debate. As promised, I have reflected on that discussion and incorporated a number of changes into the clauses that we will be debating today. It is right that we took the time to do that, and I hope that noble Lords will accept that I have listened and reacted.
The substance, however, must remain the same. We are not all going to agree on what is being proposed by these amendments, but they have been developed following extensive engagement with industry and I am confident that they strike the right balance. They provide a grace period to protect investor confidence while protecting the public interest. Early indication from industry is that it welcomes these amendments. Although there will always be projects that just miss out wherever we draw the line, it is clear that the Government have a mandate to act and that is exactly what we are doing.
Before moving on to the detail of these amendments, I shall address the future of contracts for difference, as raised by noble Lords at our last session. The Secretary of State has been clear that we will make an announcement in the autumn relating to the next allocation round for contracts for difference. That position is unchanged; it is as it was. I realise that this is an important issue for all, but I suggest that we have set out a very clear position. The clauses that I present to the House today clearly deliver on the Government’s commitment in relation to onshore wind while protecting investor confidence.
I shall address some of the points that were raised at recommittal stage by the noble and learned Lord, Lord Wallace, and echoed by others, including the noble Baroness, Lady Worthington. During that stage the noble and learned Lord raised a number of interesting points for discussion. I have responded to these in a formal letter to him, and will now respond to them in this forum for the benefit of all noble Lords.
The noble and learned Lord, Lord Wallace, asked for further detail on our reasons for including the provision for appeals in our grace period criteria. We have included these projects because, had the correct planning permission decision been taken in the first place, they would have had planning permission by 18 June. Projects where planning permission was granted on appeal in the circumstances covered by the amendments will have established a legal right to planning permission on or before 18 June and therefore we are including these cases within the approved development grace period criteria. It seems to be the right thing to do.
In the recommittal debate the noble and learned Lord, Lord Wallace, asked about projects that achieve consent after 18 June, following a delay to the decision which exceeded the statutory timeframe. Unless the projects utilised their legal right to challenge the delivery of consent within the statutory timescales, such projects would not fall within the scope of the approved development condition.
The noble and learned Lord, Lord Wallace, also raised the question of amending the grace period criteria to either allow all projects that had applied for planning permission access to the grace period or to consider extending the cut-off date to 8 October—the date on which the Government first tabled the amendments setting out the criteria for the grace period. The government amendments set out the grace period as originally proposed, which would allow those projects which as of 18 June had planning permission, a grid connection and land rights to continue to accredit under the renewables obligation until the original closure date of 31 March 2017. That is a reasonable expectation for them to have, and we have responded to it. Planning permission rather than application has been chosen because the grant of planning permission represents a very significant point in the progression to accreditation under the RO.
The government amendments strike the right balance. They deliver on our manifesto commitment while also seeking to protect investor confidence and the interests of onshore wind developers. For this reason I question the changes proposed by the noble and learned Lord, Lord Wallace. These changes would have a fundamental impact on our ability to deliver on the manifesto pledge and to manage our low-carbon spend. Based on the department’s analysis, allowing all projects with only a planning application in place could mean that anything up to 7.1 gigawatts could accredit under the renewables obligation. This figure represents all projects that had submitted an application but not yet received planning permission as at 18 June.
Furthermore, I also question moving the qualifying date from 18 June to 8 October 2015 as, similarly, this would also serve to potentially increase the number of projects eligible to accredit under the renewables obligation. This would mean that we would remain at risk of deploying beyond the 11 to 13 gigawatts of onshore wind that we project is needed to meet our 2020 targets and what we can afford under our low-carbon spending cap, as well as being inconsistent with our manifesto pledge. This could therefore potentially add more costs to consumer bills. The Government’s position is that projects must have had planning permission on or before 18 June in order to be eligible for the grace period. I hope that noble Lords can see that the line has been drawn here for a crucial reason.
Following questions raised in the recommittal debate I will also take the opportunity to discuss the position on variations. We are aware that projects that had planning permission on or before 18 June may subsequently need to vary that permission and that the Acts provide for this, for example under Sections 96A and 73 of the Town and Country Planning Act 1990 or under Section 36C of the Electricity Act 1989. Where consent is granted for development on or before 18 June and is subsequently varied as provided for by statute, the development will continue to fall within the proposed development condition set out in Section 32LJ.
On projects where a radar objection has been withdrawn, we understand that there are projects in a number of differing scenarios. For example, as the noble and learned Lord, Lord Wallace, stated, a project may have received objections to a planning application on matters such as radar. Where that project has managed to resolve the matter with the objector and subsequently has been granted planning permission on or before 18 June, it of course meets the criteria for the grace period provided that the other conditions are satisfied. If the resolution of those objections pushes the determination past 18 June, unfortunately it will not meet those criteria.
The grid and radar delay condition set out in the amendments maintains the intent of the original, existing grid and radar grace period, as set out in the Renewables Obligation Closure Order 2014. The intention is that projects which are delayed due to delays to work on radar stations or radar equipment, which are outside their control, should be eligible for the additional 12-month grace period.
During the recommittal debate, the noble and learned Lord, Lord Wallace, proposed what he referred to as the “for the avoidance of doubt” amendment relating to this condition. This change would remove the requirement for a developer to show that there had been a delay in completing radar works. However, such a change would widen the scope of the proposed grace period and would be inconsistent with the existing grace period for grid and radar delays set out in the Renewables Obligation Closure Order 2014. Therefore, we would resist that change.
I understand that projects may have anomalies specific to their situation. The treatment of individual projects and their eligibility for the grace period will depend on their factual circumstances, so it is very difficult to react to specific cases. I would not want to compromise the position of those projects, and I hope that noble Lords will accept that this is the right approach.
In relation to the investment freeze condition, some very reasonable points have been made about the definition of “recognised lender”. We are continuing to look at this, as some very valid points have been raised.
The noble and learned Lord, Lord Wallace, raised two additional questions, the first specifically on Section 36 projects and the second on projects where the planning committee was minded to approve a planning application, subject to a Section 75, relating to Scotland, or a Section 106, relating to England, agreement as at 18 June. I will speak to these questions later when I address the non-government amendments, Amendments 78RA, 78RB, 78RC, 78RF and 78RG. I thank the noble and learned Lord, Lord Wallace, for raising these useful questions, and I hope that my responses have clarified many of the questions raised at the recommittal debate.
Turning to the specifics, Amendments 78B, 78D to 78P and 78R would amend the Bill to introduce the proposed grace period criteria for the early closure policy, as outlined in the Secretary of State’s announcement on 18 June. Amendments 78B and 78D to 78P would amend the Bill to make a number of changes to Clause 66, which introduces a new provision into the Electricity Act 1989 to implement the early closure of the policy. These amendments seek to remove the delegated power with a view to setting out the terms of the grace period on the face of the Bill.
Amendment 78R sets out the details of the grace period. The proposal was and—following both industry engagement and the debate at recommittal—remains to offer a grace period to those projects which, as of 18 June 2015, already have relevant planning consents, a grid connection offer and acceptance of that offer or confirmation that no grid connection is required, and access to land rights. In addition, in certain circumstances, projects which have been granted planning permission following a successful appeal will be eligible for the grace period. In particular, those projects which, via a judicial review or an appeal, have had overturned a negative planning decision made on or before 18 June will be eligible for the grace period, subject to satisfying the normal conditions. The reason is that, had the correct decision been made in the first instance, the project would have had planning consent on or prior to the cut-off date of 18 June. These key grace period terms are referred to in proposed new Section 32LJ and are referred to as the “approved development condition”.
At recommittal, a number of noble Lords outlined concerns about the choice of having planning permission on or before 18 June 2015 as a criterion for meeting the approved development condition and the perceived injustice of the projects that fall outside this category. This is undoubtedly difficult but we have to draw the line somewhere and, wherever we draw this line, there will be some projects just the other side of it. Our assessment clearly shows that drawing the line here provides enough onshore wind deployment for us to meet our 2020 targets and protects consumers on affordability grounds.
I now turn to the investment freezing condition and the matter of investor confidence. As I outlined previously, following the announcement in June, the Government have conducted an extensive engagement exercise. We received hundreds of representations, including through face-to-face meetings with myself and the Secretary of State. We have listened to our stakeholders, including the devolved Administrations, developers, the supply chain and investors, who expressed concerns about the impact that legislative uncertainty was having on financiers’ willingness to lend. We saw evidence that certain projects are experiencing difficulty securing funding and we have taken action to resolve this.
To ensure that projects which meet the grace period criteria and would otherwise have been able to commission and accredit under the renewables obligation by 31 March 2017 are not frozen out of the process, we are offering those projects which meet the “approved development condition” additional time to seek accreditation.
My Lords, before the Minister leaves this point, could he tell us, first, what sums are involved in these investment problems at present, how many of them have been prejudiced and how much they were worth in the first place? Secondly, will he give us some idea of the global sums involved in the whole sorry procedure that we are having to go through?
My Lords, obviously much is dependent upon when the legislation goes through, and that is in the hands of this House and another place. Therefore, I think it is impossible to say with any certainty—or even to give an estimate—exactly how much is at stake. It relates to those projects that have already deployed, and so they are being given additional time to deploy. It is for individual projects that suffer from this investment freeze to come forward. We have done this in response to the engagement exercise. It will not deploy any more wind projects and it allows those projects that have deployed, following our proposals under the grace period, an added period within which to bring forward their projects and have the existing position.
My Lords, it is not for me to determine whether the conditions are met. There is a process set out in relation to those projects that would be able to deploy and, if they have suffered a hiatus, for them to come forward with the claim in relation to how much it is. It is not going to cost any additional money, because it just gives them additional time in which to deploy. As I am coming to, it gives them approximately another nine months. It is not an additional amount of deployment; it is some projects that will deploy being allowed additional time to meet the conditions.
My Lords, perhaps I can help the Minister out, if I may. We have had estimates from the independent renewable energy group to say that the projects that have fallen just the other side of this cut-off deadline that the Government have imposed have costs in the region of £350 million.
With respect to the noble Baroness, this is not about those projects that fall just the other side of the line; this is about those projects that can satisfy the conditions being given additional time. This does not bring any more deployment in. That is a quite separate point, if I may say so.
I would like to ask the Minister about the extension of time. I fully understand and think it is fair that there has been an extension of time where planning permission is granted on appeal. However, did I understand the Minister to say that, where permission was refused on appeal, and if there were a judicial review that ultimately granted permission, that would be respected and it would be deemed to have been an appropriate permission? What concerns me is the timescale, if my understanding is correct. How many years down the line are we talking about beyond June 2015? Once we go down that line, for perhaps two years, that might have an impact on meeting the 2019 deadline.
My Lords, I am very happy to respond to that point, but it is a quite separate point from the investment freezing condition, relating, as it does, to the appeals process. The point of the amendments that we are putting forward is to say that if a project should have been given planning permission on or before the cut-off date of 18 June, and the appeals process demonstrates that, whether by an appeal or judicial review, it is reasonable, rational and right that they should be allowed to accredit under these proposals, and that is what would happen. That was done in response to the engagement exercise that we have been through. We have tried to do what is right, in considering very reasonable points. I do not accept that this would drag on indefinitely: I do not think that the legal process is in a Jarndyce v Jarndyce situation. There will, of course, necessarily be some sort of delay, but that is how the judicial process will operate. It is absolutely right to have that provision in relation to the appeals procedure.
To return to the investment freezing condition, the extension available in the circumstances that I have outlined will be approximately nine months—broadly equivalent to the period between the date of the Secretary of State’s announcement and Royal Assent. To be eligible for this extra time, projects must be able to provide evidence that they have been impacted by a lack of investment during the period to Royal Assent.
This “investment freezing condition” has been designed specifically to protect the projects that were intended to be able to access the grace period as proposed on 18 June. It is not an extension of deployment, but an extension of the period for those that are able to deploy within the grace period. This condition is not about increasing the pipeline of onshore wind projects that are able to accredit under the renewables obligation.
Furthermore, as a result of the helpful discussion at recommittal, a drafting change has been made to the amendment. Your Lordships will have seen that in new Section 32LK(4)(a)—some of you may have picked this up—the phrase “as at May 2016” has been replaced by the phrase,
“as at the Royal Assent date”,
following representations made by the noble and learned Lord, Lord Wallace—representations that I think were entirely valid, and which have been echoed by the noble Baroness, Lady Worthington. Similarly, in consequence, new Section 32LK(4)(b) now refers to,
“the date which is 28 days after the Royal Assent date”.
In addition, those provisions have been amended—again, following representations at recommittal—to make it clear that either uncertainty about whether the Bill will receive Royal Assent or uncertainty about the final wording of the Bill will be sufficient for the purposes of meeting the “investment freezing condition”. We have made it absolutely clear in the Bill that it is not necessary to show both. I am grateful to noble Lords for the helpful debate that we have had on these points. I believe that this revised drafting now makes our intent perfectly clear, and has improved the Bill.
In order to provide a consistent approach to all onshore wind projects eligible to accredit under the renewables obligation, we also ensure through these amendments that a pre-existing grid and radar delay grace period will apply here. This condition entitles projects affected by unforeseen grid and/or radar delays to an additional 12-month period in which to accredit. This amendment, too, has been redrafted to provide clarity about when a project may benefit from a grace period for grid and/or radar works delays. The provision is now clear that either grid delays or radar delays, or both, will be sufficient for these purposes. Again, I thank noble Lords for the useful discussion that led to this amendment.
I am confident in the amendments, and in the proposed grace period. I have listened to noble Lords, and I believe that I have responded positively on various issues. Again I thank them for their helpful suggestions which have been incorporated to improve the clarity of the clauses. We have listened actively to stakeholders and worked to ensure that the final policy strikes the right balance between the interests of onshore wind developers and those of the wider public. I hope that your Lordships will agree that these amendments should stand. I beg to move.
My Lords, I think that the noble Baroness, Lady Worthington, will say something about Scotland when she comes to speak to her amendments. As I said in Committee, the onshore wind industry in Scotland directly employs 5,400 people and contributes £9 million per annum in community benefit. I think that the work which I would like to claim my noble friend Lord Stephen and I started when we were in the coalition Government in Edinburgh and which has been carried on by the present Scottish Administration, and the work done by previous Secretaries of State at DECC, has resulted in onshore wind power being an increasingly cheaper source of power. However, the position as I set out in Committee on the Scottish dimension was that if the Scottish Government choose to extend the period, as was first envisaged when it was agreed with them that the renewables obligation would end, that is something that they should be able to do.
On the grace periods, which were the substance of the Minister’s amendments, I first and foremost acknowledge his engagement both before last week’s recommittal and subsequently, in terms both of meetings and phone calls. It might also be fair to acknowledge his private office, because I received an email from it timed at 00:54 on Saturday morning, which is quite remarkable. I know from experience just how hard private offices work.
While I welcome some of the changes which the Minister has referred to, with regard to the investment freezing condition and to making it clear that it was grid or radar and not cumulative, that is as far as the Government have gone, and the rest of the government response has been more than a little disappointing.
My Lords, I think that everyone who has dealt with this Bill would agree that it has not been a satisfactory process. We have had late tabling of amendments; even the amendments before us were tabled only on Monday, meaning that if we wished to table amendments to amendments we were under considerable pressure to do so.
Perhaps I may put in context what we are discussing by drawing to the House’s attention what was said yesterday in the Select Committee on Energy and Climate Change in the other place. My right honourable friend the Member of Parliament for Orkney and Shetland asked the noble Lord’s ministerial colleague, Andrea Leadsom, “So what is the purpose of the grace period, then?” To which she replied, “As I say, to ensure fairness—to ensure that those who have spent money in a significant investment and achieved everything technically to meet the cut-off date, but through reasons beyond their control have not actually made it, are not penalised for reasons beyond their control”. It is with these words in mind that we must examine the Government’s position and the amendments that have been put forward. As the noble Baroness, Lady Worthington, said, an estimated £350 million has been put in to take forward projects which may not now proceed.
Our amendments relate in one respect to all applications which were in train at the time of the somewhat arbitrary date of 18 June—that was the date that the Secretary of State made a Statement; it has no more magic than that—and which had received planning committee approval. The reason for emphasising committee approval was that, in an earlier clause in the Bill, the Government set great store by the fact of local determination. A local determination means that, after considerable discussion, debate and consultation, the local planning committee has approved a particular proposal. It may just be that it is due to the cycle of planning meetings that the application has not yet gone to the full council for endorsement. I refer back to what the Minister, Ms Leadsom, said about applicants achieving everything technically to meet the cut-off date, but through reasons beyond their control, not actually making it. A lot of developers do not have control over the cycle of meetings of a local authority and it seems very unfair that, if they have passed muster after scrutiny by a planning committee, they fall foul because the full council has not ratified that decision.
Our Amendment 78RA contains a provision that it should refer to planning applications that were in place and had been accepted 16 or more weeks before 18 June. The reason for that is that after 16 weeks it is possible, if the local authority has not made a determination, for the developer to say that there has been a non-determination, so it is a deemed refusal and to appeal to Ministers on that basis. But the noble Lord and others who were at the Committee debate last week will remember that I gave an example from, I think, Tayside where extensive work had been done in terms of discussions between the developers, local communities and the planning authority to try to ensure that concerns had been meet and the opportunities to work with other environmental projects going on in the area were maximised. I believe, along with I am sure most Members of your Lordships’ House, that it is good practice for developers to work alongside the planning authority and try to get an agreement and outcome that is satisfactory to all. And yet, if the developer did that and missed the 18 June cut-off date, it will be penalised for it, whereas those about whom it might be said that they are not using best practice—I would not necessarily say that it was bad practice—might take a slightly legalistic view and say, “Well, it has been 16 weeks, so that is it. We are going to appeal because there has been a deemed refusal”. If that is subsequently granted on appeal, their applications will be satisfied. That does not appear to be a fair way of proceeding. If we are looking for an element of fairness in this, where is the fairness in penalising those who have demonstrated good practice?
Also with regard to Section 75 and Section 106, the Minister said in his letter to me that, where the planning committee could have been minded to approve on or before 18 June subject to Section 75 or Section 106 agreements but no formal consent was granted on or before 18 June, unfortunately, there is no legal consent given that they are minded to approve and we understand that the negotiations can be lengthy and not always successful. People from the industry who have been talking to me find that an unduly legalistic approach. The industry has been working with planning authorities for some 10 years on the Section 75 or Section 106 agreements that emerge in these situations. By and large they are already negotiated, but it may take time to put in place some of the detailed provisions. For example, if it is part of the development that there has to be a new habitat on neighbouring land—not the land on which the development is to take place—it has to be shown that the developer has the right to undertake the building of the habitat on that land. That is part and parcel of what happens and it is both practical and common sense that it should be recognised. Again, reminding us of what the Minister’s colleague said, it is to ensure fairness so that people are not penalised for reasons that are beyond their control.
Perhaps I may also take up what the Minister said on the question of variations. He helpfully stated in his letter to me and then repeated it in the House just a moment ago that, where consent is granted for a development on or before 18 June and is subsequently varied in this way, it will continue to fall within the approved building condition in proposed new Section 32LJ. I raise this because it is helpful that the Minister has now put this on the record, but I have also had representations from those who have taken legal advice that they do not necessarily believe that it does what the Minister says. I would ask him to look at it again. The fact that we have something that could be referred to in a Pepper v Hart way is helpful, but some would find greater reassurance, and it would be clearer to me, if there is something on the face of the Bill.
I refer to Amendments 78RA and 78RB with regard to Section 36 of the Electricity Act 1989. The purpose and effect of these amendments is to address what we believe is an anomaly by applying the principle of proposed new Section 32LJ(4)(b) to an analogous position under the Section 36 regime. Under Section 36 of the 1989 Act, the relevant planning authority is not the decision taker, but it can object to the proposal, after which there must be a public inquiry and then a decision by the Secretary of State. That is closely analogous to refusal under local planning followed by an appeal, and indeed for around half of the affected projects DECC’s renewable energy planning database describes the projects as being at appeal. Indeed, the last time that the people briefing me looked at the DECC website they were described as being at appeal. However, the proposed provisions cover the local planning version of this process but not the Section 36 version. This means that small extensions of larger sites, which have to follow the Section 36 route, are going to be treated less favourably under these grace period provisions than some sub-50 megawatt, stand-alone developments which go ahead under the local planning process. Reverting back to the question of fairness, there should be consistency in the Government’s approach. This amendment seeks to ensure that, and I hope the Minister will think again on it.
I also draw the Minister’s attention to the fact that, because of the Planning Act 2008, which has superseded Section 36 in England and Wales, that section mainly affects plants in Scotland. The functions of the Secretary of State under Section 36 and Schedule 8 are transferred to Scottish Ministers under Article 2 of the Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) Order 1999, so far as they are exercisable in or as regards Scotland. Accordingly, the amendment does not explicitly refer to devolved Ministers. Would the Minister look and see if it is the case that they are not covered? I am sure he would not wish to put Scottish developers in any less favourable position than those in England and Wales.
We have proposed a relatively simple amendment regarding grid works, with a different cut-off date for grid works agreements. In Committee and subsequently, I raised with the Minister a case involving a joint venture between an energy company and a private individual. The energy company carried on the transmission entry capacity for a substation but the joint venture finished and the private individual carried on himself. Transmission entry capacity has therefore been lost and has to be reapplied for. It has had that connection for five years in the past but, crucially, did not have it on 18 June. It seems very unfair that they should lose out in a very bureaucratic process. We tried to find a way to capture that in an amendment and we thought we would do this by putting in a different end date, because you cannot just conjure up a grid connection agreement. It would not have taken any more capacity than was already the case, but this might give some clarity.
In another circumstance which has been drawn to my attention, changes were made. Grid capacity that was for one developer was then to be shared and this required a new agreement to be made. There was a clerical error and the developer sent the agreement back to get this sorted. Unfortunately, it was sent just before 18 June and did not come back until after that date. It would be reassuring to know whether that counts as a variation or whether it could be addressed by extending the period for grid connection.
In the recommittal, I made a point about radar and the problem developers are finding with the length of time it is taking the Ministry of Defence to process applications. The grace period that has been given may, therefore, not be effective because of the time it takes to get agreements reached. One developer who has made representations has said, about a particular mitigation which the MoD is looking for: “There are no guarantees that the work programme will deliver mitigation at this stage. In any event, the current MoD position is that the first part of the variation condition allowing development to commence cannot be discharged before 2018. There are some ongoing discussions between onshore developers and the MoD, seeking to find ways of earlier condition discharge but this is proving problematic. Overall, the costs and timescales of this ATC radar mitigation programme do not fit with any of the onshore projects”. It would be perverse if delay on the part of the Ministry of Defence meant that the grace period which the Government have sought to give does not actually cover these circumstances. This is why we have put in a particular date, though it may be that March 2018 is too early. I hope the Minister will take that serious point about trying to get agreements out of the Ministry of Defence if he wishes to give substance to what he sought to do with the radar works part of his amendment.
I am sorry to take up time but I had a lot of important points. I hope that the Government will move. I do not believe that they have met the letter or the spirit of what Andrea Leadsom said yesterday to the Select Committee in the other place.
My Lords, I did not speak in Committee, although I attended it, partly because I found almost a sense of the ground moving under my feet as all the amendments were produced. This, of course, was a recommittal in Committee under these clauses. At the end of the debate, the clauses were removed. I think that it was the noble Lord, Lord Foulkes, who referred to “liquid legislation”. There is a phenomenon emerging in the Church of England called “liquid worship”. I can only say that when I am told that that is what I am to expect on a Sunday when I go to a parish, my heart does not leap with joy at what might be in prospect for me.
In Committee, I began by thinking that the Government had done a deal with the industry through withdrawing the clauses and bringing them back in the recommitted meeting of the Grand Committee. But then I listened to the noble and learned Lord, Lord Wallace. If Members of the House think that we have just heard a tour de force, they were not there in Committee, which saw an even greater tour de force, complemented in a different style by the noble Lord, Lord Foulkes.
The noble Lord refers to the need to “draw a line”. He mentioned that phrase five or six times in his contribution. The problem is that the line was drawn at March 2017. It is a redrawing of the line by the Government which has put us into this situation and raised the question of how one does it in a way that is reasonably fair all round given the complexities of the planning process, which have been so well described.
At this stage, I simply ask: what are the real benefits of this liquid legislation, which may prove to be even more liquid in the coming weeks and months? What savings will be made by trying to redraw the line from March 2017 to a date somewhat in advance of that? As I understand it, it is a somewhat moving and shifting date. What is the game worth? Given the vast subsidies that are to be paid out over coming years for wind turbines, what will the savings be in comparison with those subsidies that are being paid out?
I must emphasise that I speak as someone who has been critical of that subsidy regime from the beginning. As some noble Lords will know, I was a founding trustee with the noble Lord, Lord Lawson, of the Global Warming Policy Foundation, which seeks to scrutinise policy from that perspective. I sometimes say that my real title here is that I am chaplain to HMS “Lawson”, although I do not speak with the authority of the captain. I would be interested to know what the anticipated saving is and whether the game is really worth the candle, given the complexity that has emerged.
My Lords, I had not thought that what we were dealing with was liquid legislation. I thought we were dealing with piecemeal transitional arrangements dreamt up on the hoof as we go through the process. But I am quite prepared for the right reverend Prelate to give us this liquid legislation definition in perpetuity. It is a rather splendid phrase.
This has been a really unsatisfactory Bill and we must not allow ourselves to see this as an argument about onshore subsidy protectionism. It is not about that at all. I think that everybody in the House recognises that the period of subsidy for onshore wind may well come to an end at some point in the nearish future. It is much more about what it is that we want to try to do to send signals about our climate change intentions and to adhere to our own regulatory principles. I have been a regulator three times on behalf of the Government and on each occasion I have absolutely worked my socks off to make sure that we are as fair as possible to British industry. Fairness means giving clarity of policy and adequate times for industry to adjust, meaning that companies are not caught with their foot on the wrong side of a piece of change and penalised as a result of their previously sensible decisions in line with what previously had been government policy. Even with the very welcome changes to the grace periods that the Minister has laid before us, we are still not there.
The noble and learned Lord, Lord Wallace, talked about the statement made yesterday by the Energy Minister in another place. I was a bit distressed to hear the Minister here say that we have made lots of concessions and we now have enough renewable energy from onshore wind in the pipeline. I do not think that that is the point. The point is, have we dealt fairly with British industry and given anybody who could reasonably consider themselves not to have been fairly dealt with the benefit of the doubt in this circumstance, where, all of a sudden, policy has shifted? The Minister said that there had been extensive consultation with the companies and stakeholders, yet many noble Lords will have been lobbied and briefed by players in the energy business, who, even this morning, have been listing a series of situations where, through no fault of their own, they continue to be penalised by the graceperiod arrangements.
I simply ask the Minister to consider some of the circumstances that the noble and learned Lord, Lord Wallace, aptly summarised in such an eloquent fashion to ensure that the statement made by the Energy Minister yesterday about fairness is adhered to and that we do not continue to see liquid legislation that is simply piecemeal, illogical and very damaging, both to our climate change image in the world and the image in terms of British industry about whether reliable frameworks in which companies can realistically work will continue to come from this Government.
My Lords, I was not going to intervene at this stage, but the right reverend Prelate’s intervention and his association with my noble friend Lord Lawson’s Global Warming Policy Foundation prompted me to pursue the point that he raised. A lot of our discussion has been on the penalties —in other words, the removal of subsidies from people who thought that they had a chance of the subsidy when they started their projects. That is aside from whether the project is environmentally okay or whether they get local government approval for planning reasons and so on; it is simply the question of whether they were caught by various delays and, therefore, would not get the subsidies that they thought they would get when they set out.
We are not in any way trying to stop the development of the very successful parts of the onshore windfarm industry. As the noble and learned Lord, Lord Wallace, reminded us, electricity from wind power is getting cheaper. If it is getting cheaper, it will in due course need less subsidy. Remarks from outside this country—particularly an ill-informed remark by the UN adviser, Professor McGlade, that somehow Britain was putting a stop to its movements towards low-carbonisation by putting a stopper on all wind power and so on—are way out of kilter and far from representing where we stand.
It is no less interesting to work out to what extent these grace periods will help the situation—I thoroughly approve of all the amendments that my noble friend has brought forward with such assiduity. Presumably, as a result of these grace periods, we will see slightly more subsidy paid out, which has to come from the consumer—the industrial consumer in particular—than we would have done before he introduced the amendments. The money that was not going to come from somewhere has to come from somewhere. Somebody will have to pay for it. This is on a day when we are staggering under the colossal redundancies that have been announced throughout the steel industry—including the steel industry in Scotland—which, we are told, are overwhelmingly the result of very high energy costs. Apparently, for electricity, we are paying twice the German level. In turn, of course, energy costs for the steel industry of Europe are leading people to predict that the entire industry will be wiped out. At a time like this, we need to watch with needle sharpness what is happening to the costs that are falling on the industries where all these jobs are being destroyed. How much more of that cost is still going to persist in meeting all the grace period conditions which the noble and learned Lord, Lord Wallace, with his massive legal knowledge and detailed grasp of the situation, has described as being necessary and fair? How much more will this kind of fairness cost in the end in burdens on the electricity users of Scotland and the rest of the United Kingdom in ways which will precipitate even further these appalling redundancies? We need to keep that side of the argument very clearly in our minds.
My Lords, I am grateful to the Minister for introducing the government amendments. I will speak to those and also to Amendment 78C in my name, and in support of the amendments tabled by the noble and learned Lord, Lord Wallace.
As we enter the second day of Report, I do not feel that the Bill has been well handled, as has already been referenced. This may stem from the fact that the Bill was not ready when it was presented to us. Significant areas of policy were still being developed. It was a very fluid situation. In fact, the term “liquid legislation” will probably stay with us for many years to come. It was coined by the noble Lord, Lord Howell, in the recommital stage of Committee and describes very accurately how we have been dealing with a set of moving parts as we have gone through the Bill. Here we are on Report, but it still feels very much like a Committee stage, and that is regrettable. We should not be in this situation where we have so many controversial issues still unresolved.
Throughout the Bill’s passage, I have pressed the Minister to give me a justification and a sound argument why the Government have chosen the route that they have in this Energy Bill of introducing what is now Clause 66 regarding the early closure of a renewables support scheme that was already closing 12 months early—and, in fact, not closing it to everybody but just to one subsection of technology: onshore wind. Why do we find ourselves in a place where the Government appear to have singled out for special treatment a single technology from all the low-carbon technologies available to us, and where that special treatment is so damaging and corrosive to investor confidence? I am afraid that I have not received a suitable answer to that question throughout the passage of the Bill. Now the answer given boils down to a very few words that appeared in the Tory Party manifesto, that the Conservative Party would put an end to—
I am most grateful to the noble Baroness for giving way at that point, which is a very material point. The measure was in a manifesto which was taken to the country and a Conservative Government were elected in May. As the noble Baroness will know, the Salisbury convention has previously indicated that what is in a manifesto is allowed passage through the House of Lords. I value the House of Lords and its traditions and I fear that if we refer in a rather dismissive way to something that was in a party’s manifesto as somehow not being important, in the way that she did, that is a very serious pivotal moment for the House of Lords. I hope that she will consider that.
I am grateful to the Minister for that intervention. Of course I am aware of the Salisbury convention, but in this case we have a very ambiguous set of words which I am sure were thought about with care but certainly were not consulted on and no detail was applied. We are referring to a very short sentence. There are great ambiguities here. The actual phrase is,
“we will end any new public subsidy”,
for onshore wind. The word “public” is interesting because, strictly speaking, the payments come out of bills, not from the public purse. The word “new” is very interesting and open to very great interpretation. This was an existing support scheme and one that was already closing, and one on which, during the passage of the Energy Act 2013, in which I took part, there was a huge amount of consensus built, as well as engagement with industry, proper consultation and pre-legislative scrutiny to arrive at a suitable arrangement for winding-up the RO. That took many weeks and months of deliberation, and arrived at a line being drawn. The Government say that they need to draw the line somewhere. Actually, that line was drawn. It has now been moved and the process by which it was moved did not pay enough tribute to or treat with enough respect the investors in British industry whose confidence this is now undermining. It is for that reason that I do not interpret the Salisbury convention as applying to Clause 66.
We can have that debate when we come to the next amendment because although in this group we are discussing the amendments on the grace periods, when it comes to the next amendment we reserve the right to vote to delete this clause from the legislation for the reasons that I have begun to outline. Throughout the passage of the Bill I have not received an adequate explanation of why this particularly damaging clause has been introduced by the Government in the way that it has, with such little attention to detail and so little public consultation on the implications.
I endorse what my noble friend has said. She is absolutely right. When we come to the next amendment, which she is going to move, I will make it absolutely clear, in endorsing my noble friend, that we have been misled by the Government in relation to the manifesto and the interpretation of the manifesto. The Minister is shaking his head but my noble friend is absolutely right and I will underline that in more detail when we get to the next amendment.
I am grateful to my noble friend for his support. The concerns that I have raised consistently throughout the passage of the Bill relate to the Government’s analysis which concludes that we simply do not need any more onshore wind. This is based on false projections of how we are doing in relation to our legally binding EU renewable energy targets. Those targets relate to power, heat and transport. It is true that we are doing reasonably well on power but we are not on track for delivery of our targets on transport or heat. The projections that the department is now having to produce to pretend that it will get to those targets stretch credibility. There is a hockey stick of deployment expected in the other two sectors which is simply not credible. We are tying our hands behind our back, removing from our low-carbon armoury one of the cheapest, safest and most easily deliverable technologies—onshore wind.
I almost feel that I ought to be presenting a eulogy for the wind industry in the UK because it deserves respect. It has a 25-year history. The House almost certainly knows that it was first supported by Margaret Thatcher in 1990. The first support mechanisms were brought in for wind around that time. She recognised the science of climate change and she knew that we needed to address it. She also knew that it would be sensible for the UK to make the most use of its assets. We happen to be one of the windiest countries in Europe, something we should celebrate. In fact, we have been one of the best markets for wind technologies. Our shores have seen innovations and the development of new technologies that we can be very proud of. We have seen investment in jobs and infrastructure, particularly in those parts of the country that need inward investment—I am referring to Scotland and Wales—a great pouring-in of interest and money that has helped to generate jobs at a time when they are sorely needed.
I am not saying that wind farms need to be put everywhere and that everyone should accept them. I actually think that the Government’s other manifesto commitment that local people should have a say in them is a sensible measure. That is something that the Government have sought to introduce through planning. The closure of the support mechanism has to be taken in the context of the other things the Government have done to stop onshore wind, including quite significant changes to planning.
Before the noble Baroness gets to the end of her eulogy for the wind industry, will she confirm that this is the new Corbyn Labour Party’s policy—to eulogise an industry that is particularly good at rewarding rich people, including landowners, by loading the bills that hurt poor people most?
We can debate who benefits most from our low-carbon agenda—possibly it is the Chinese at this particular juncture. However, in the context of closing the RO early, it is some of the smaller schemes—the independent developers and the independent renewable companies—that are suffering the most, and it is the larger companies that seem to be getting the grace period amendments that they need. It is the smaller guys who are losing out. This is not about rewarding the richest or the most powerful lobbyists—that is not what we are seeking to do.
As the noble Baroness, Lady Young, pointed out, this is about fairness and a common-sense test of whether, when you read those words in a manifesto in May, you then think, “Ah yes, I know what that means; it means that in about the middle of June, I will see an announcement from the Government that closes a scheme in which I have invested hundreds of millions of pounds, which is already closing with no consultation”. I hesitate to say that that passes the common-sense test, as I do not think it does. Indeed, we know it does not, because we have had a large number of investors come to us to say that this is not the way that they should be dealt with.
Normally, a consultation exercise is undertaken and then the results of that consultation are published. In this case, because we have been racing since 18 June to get everything ready in order to close the scheme early, even though it is closing anyway, we have not had a proper public consultation or publication of the results of any consultation. Therefore we are flying blind and having to work with large numbers of people contacting us to express their concern and dismay at being handled in this way by the Government.
The specific issue raised under Amendment 78C is another important one. As I have said before, I do not think this House will discuss this, but it will certainly be discussed, with far greater passion potentially, when it moves to the other place. Amendment 78C would simply repatriate the closure of the RO to Scottish Ministers. The reason for this is that during the passage of the Energy Bill in 2013, the Government had to take a power to repatriate the renewables obligation back to Westminster. We were told at the time that this would be a technical amendment and that this had to be done simply to make the closure easier, tidier and more efficient. However, we now see that this was not the case: this was a cynical move that gave the Government the power to close a scheme for Scotland without due consultation with Scottish interests. It flies against the spirit of the Smith commission agreement, which is seeking to repatriate more powers to Scotland and allow Scottish people to determine what they want to see built to provide them with clean energy in the future.
That brings me on to the question of fairness and whether the Government’s amendments, and their proposals for grace periods, are fit for purpose. It should be noted that although the announcement was made on 18 June—and a very hard guillotine introduced at that point—and some details were provided about potential grace periods, it was not until 8 October that we were given the full detail of the proposals. That is not a long period for us to consider them, and they are incredibly complex—I am very grateful to the noble and learned Lord, Lord Wallace, for his forensic and expert deconstruction of some of these issues. It is not appropriate for us to have to wait four months before we see the detail and, when we do see it, for it to be so substandard. This is a cause of great concern. It was of course quite a heated debate in Committee in the Moses Room the other week. That resulted in the withdrawal of the amendments, for which we were grateful. We hoped then that that would result in a bit of reflection and some clearer amendments coming forward.
I am grateful to the Minister for presenting the changes that were incorporated. By and large they were merely technical issues of clarification, but the biggest one, about planning and when you deem planning consent to have been given, remains unresolved. This is what is so strange about these grace periods. The anomaly here could not be more strange: because of the way the Government are interpreting this and putting it into legislation, if you are refused planning permission—if the local council signals that it is not content—and you then appeal and win that appeal, you will be able to get a subsidy. However, if you had consent from the local committee and it was clear that the community wished to see the development, but you were waiting for various formalities to be concluded which then came after the artificial 18 June deadline, you would not be eligible. That seems to fly in the face of the Government’s manifesto commitment—they are evidently keen on their manifesto commitments, as I am sure is right and proper—which is that they want local people to have the final say. There are clearly still weaknesses and great anomalies within the grace periods. The provisions already run to many pages, but we still need the department to go back to think again and come forward with something workable.
I do not want anything that I have said today to be interpreted as our desire to see endless subsidies for particular technologies continuing indefinitely. That is absolutely not the case. As I have said on previous occasions, the issue we should look at on which the Government have refused to give any clarity is what is happening with the new form of support, the contracts for difference, which replace the RO. That is the pertinent question, but whenever I have asked it, I am told that the Government will make a Statement in the autumn. It is not a good answer for an industry with 25 long years of history to be proud of to be told, “We will tell you your fate in our own good time at some point”—presumably, after the Bill has passed its crucial stages. It is not appropriate to be closing one scheme and not giving any clarity over what is to replace it.
My final concern is that the Government have left us little choice but to object to the provision. It demonstrates a Government who put ideology ahead of evidence. There is no place for ideology in energy policy. If the Government have set their mind against onshore wind, as they are demonstrating—that is evident from all that they have done—they are no better than those who take an ideological principle against fracking or nuclear. We should not be singling out technologies; we need every technology to play its part. Some technologies are better than others in certain circumstances, but there is no reason to decide that we should cease to support one over another, especially when it turns out to be cheaper than many of the alternatives, has a proven track record of delivery and is sustaining investment in our country.
I look forward to hearing from the Minister, but I doubt that he will be able to reassure me on those points, and it is for that reason that I reserve the right to press the amendment that follows.
My Lords, first, a rare moment of agreement: I suspect that I will not be able to satisfy the noble Baroness with the points that I am about to make. Nevertheless, I thank noble Lords who have participated in this part of the debate on the Bill.
Perhaps I may deal first with the Scottish issue, as it were—the amendment relating to Scotland, which I think only the noble Baroness spoke to. We are keen to do what is fair for Scotland—but no more, no less. That is a fair position. I reassure noble Lords that we are committed to implementing the recommendations of the Smith agreement and are doing so through the Scotland Bill. As agreed during the drafting of that Bill, the Government have and will continue to engage with the Scottish Government, as we do on a regular basis on energy issues, in line with the spirit of the Smith agreement, on all changes to the renewables obligation. That does not mean that we will agree; often we will not, sometimes we will. However, transferring legal authority to close the renewables obligation in Scotland to Scottish Ministers goes considerably further than Smith. That is nothing to do with the spirit of Smith; it is to do with the letter of Smith. As I see it, there was no suggestion that that should happen, but that debate—if there is a debate to be had—can no doubt happen on the Scotland Bill.
I turn to the issues raised other than the specific point on Scotland. As noble Lords have kindly acknowledged, I have sought to move on some of the issues. I thank the noble and learned Lord, Lord Wallace, for what he said—particularly in relation to my office. I can tell the noble Lord, Lord Foulkes, that my office often works those late hours, even when it is not dealing with the Energy Bill, as my staff will gladly tell you. I am very grateful for the massive efforts that they have made on the Bill and many other matters.
There seem to be two key differences between those on the Government and Opposition Benches. One is about subsidy. I noted what the noble Baroness, Lady Worthington, said about not believing in subsidy, but this is about subsidy. If she has not got that attachment to subsidy, that is the essence of this debate. It took considerable chutzpah to attack us for ideology on the Government’s energy policy. Her leader is against new nuclear and, I believe, against fracking.
I do not wish the debate to descend into party politics, but since the Minister has raised it, it may well be the case that our leader is personally anti-nuclear and anti-fracking, but that does not mean that that is translated into a change in the position of our shadow DECC team. It would probably be sensible to discuss this with my honourable friend in the other place, Lisa Nandy, who is now the shadow Secretary of State and consult her on these matters. Jeremy’s style of leadership is not that he would impose that on departments.
It is ideological to single out a single technology on no evidence and treat it in the way that the Government are doing. I remind the Minister that being in government is not the same as being a political party and that drafting manifestos is very different from drafting the law of the land.
I note what the noble Baroness says, but this comes back to leadership. If its leader has materially different views, it would be good to know the Labour Party position on those issues. On ideology, I reassure her that we are not against wind. We have wind deployed offshore, and I hope we will continue to have wind deployed onshore. It will just be without subsidy. That is rather different from saying “No new nuclear” and “No fracking”. It is saying “No subsidy”, which is very different.
Perhaps the Minister can clarify something that appears in the Conservative Party manifesto: that there will be new nuclear without subsidy. Does that mean that contracts for difference are not subsidy, in which case contracts for difference can presumably be applied to onshore wind?
I have made the position on contracts for difference very clear, as I think the noble Baroness appreciates. We will set out the position on contracts for difference this autumn, not at an unspecified date in the future as she suggested in her contribution. That is not long to wait. We are in the autumn now, so I hope that she accepts that an announcement on that will be forthcoming shortly.
I do not want to go over old ground again. We have a cut-off date. I accept that cut-off dates are arbitrary. In Committee on recommital and today, the noble and learned Lord, Lord Wallace, made telling contributions, but he suggested that we were taking a legalistic approach to this. It is likely that we will. As he will appreciate, this is legislation. We want it to be certain and for businesses and others to know where we are on this. I accept that dates will be arbitrary, but we have selected a date. Noble Lords have been indicating that they want certainty. We are delivering certainty. We have a basic difference of opinion on these issues. I do not think it is capable of resolution, as it was on the Oil and Gas Authority where we had a basic unity of view. We have a different view on onshore wind. We believe that the Salisbury convention applies here. I disagree with the suggestion that there is something ambiguous about the position in the manifesto. It was made very clear and nobody should have been taken by surprise by this, so I differ materially from what I am sure is the opinion honestly held by the noble Baroness, Lady Worthington, but I cannot see that we can resolve some of these issues because of the basic difference between us.
My Lords, I realise that this is Report, but I would like to press the question I put in my intervention. When all is done and dusted—leaving aside the allegations of ideology on all sides—in relation to all the subsidies that are likely to be paid out for wind turbines in the next 25 years, what proportion of that will be saved by this activity?
My Lords, I do not know the proportion, but I know that the upper end of the limit is £270 million over the period. That might seem like a small amount, but it is not a small amount to me and I am not sure it would be to anyone else. We have this basic difference, and with that I oppose these amendments.
First, I did not raise the issue of the definition of the recognised lenders because the noble Lord did not deal with it when he moved his own amendment. Did he give a commitment to go away and come back with a better definition that included, for example, organisations such as the Green Investment Bank? My second point, although there are many others that I could make, is this: does he accept that with regard to radar issues, what the Government give the Government might also take away? Will he undertake to talk to the Ministry of Defence to see if it can ensure that whatever provision is made by this grace period for radar is not actually defeated by the tardiness of the MoD?
My Lords, on his last point first, I am very happy to speak to the MoD in the way that the noble and learned Lord suggests. On the former of the two points that he raised relating to the recognised lenders, I have indicated that we will look at this issue. I have not made any commitment about what the result of looking at it will be but I recognise, based on information given by the noble and learned Lord and others, that there is a case to look at it. I hope that is helpful.
Amendment 78B agreed.
Amendment 78C not moved.
Amendments 78D to 78P
78D: Clause 66, page 38, line 6, at beginning insert “In Part 1 of the Electricity Act 1989 (electricity supply),”
78E: Clause 66, page 38, line 10, leave out “which is accredited after that date”
78F: Clause 66, page 38, line 11, at end insert—
“(1A) Subsection (1) does not apply to electricity generated in the circumstances set out in any one or more of sections 32LD to 32LL.”
78G: Clause 66, page 38, line 12, leave out “subsection (1)” and insert “this section and sections 32LD to 32LL”
78H: Clause 66, page 38, leave out lines 13 to 15
78J: Clause 66, page 38, leave out lines 22 and 23
78K: Clause 66, page 38, line 29, leave out “regulations under this section” and insert “sections 32LD to 32LL”
78L: Clause 66, page 38, leave out lines 34 to 36
78M: Clause 66, page 38, line 37, leave out subsection (3)
78N: Clause 66, page 39, line 7, leave out “accredited after 31st March 2016”
78P: Clause 66, page 39, line 9, leave out “accredited after 31st March 2016”
Amendments 78D to 78P agreed.
78Q: Clause 66, leave out Clause 66
My Lords, I am sure that people will be very pleased to hear that I do not intend to repeat the speech that I made in the previous debate. As noble Lords will be aware, we have tabled an amendment to delete Clause 66 from the Bill. The reason for this is that we do not believe this legislation is ready or has had the right consultation applied to it to ensure that it is fair. We do not find it satisfactory to be told that we will hear about the replacement mechanism in the autumn; it is the autumn now, and in the course of the Bill we should have information about what the Government are planning. As I have said, we have detailed concerns about the grace period.
I want to pick up on the issue of costs, which has been raised by the right reverend Prelate the Bishop of Chester and the noble Lord, Lord Howell. To be clear, in the Government’s impact assessment the overall estimation of what the measure will save is 30p for a household for a year. The sum that the Minister was kind enough to present us with was £270 million overall, which is a tiny proportion of the amount of money that we are going to have to spend to decarbonise and renew our energy system. It is certainly less than the £350 million in capital that has been sunk into projects that are now falling foul of the artificial grace period. Overall, then, Clause 66 does not deliver a great deal of value to the country as a whole—certainly not to the wind industry, but it does not serve UK plc’s purposes either.
Turning to the point made by the noble Lord, Lord Howell, about the steel industry, I completely accept that the situation is now very grave. The answer to the steel problem is about enabling it to invest in new, cleaner infrastructure. Not only is there a vast global oversupply of steel but we ourselves also have an ageing and inefficient infrastructure. We need reinvestment, and I believe that the way to do that is by helping the industry to invest in green infrastructure and carbon capture and storage. It will actually be through more green measures, not fewer, that we save ourselves. The steel industry’s electricity bills are a tiny proportion compared with its process emissions; in fact, it is true to say that for nearly all the green measures that apply to electricity the steel industry receives compensation. Please let no one be under any illusion that anything we are doing today will help to bring about the demise of the steel industry—far from it.
I am grateful to the noble Baroness for allowing me to intervene again. She and I have had an exchange on Twitter about this and now I am bringing it forward to this House. Is she aware of the comments made in July this year by Karl-Ulrich Köhler, the European head of Tata Steel, when commenting on European green emissions policies? He said,
“it is very difficult for the colleagues”,
“to understand why Europe’s politicians undermine the competitiveness of their steelmakers”.
I sometimes also wonder about the European policy and in particular why we have not moved further and faster on carbon capture and storage. It makes sense to me that that should be the technology that will enable us to have steel and still meet our climate change targets. As with many things in Europe, it all boils down to what Germany thinks, and unfortunately, Germany has set its mind against carbon capture and storage. We do not need to, thankfully, and we should press ahead.
To return to another form of low-carbon energy which has an important role to play—onshore wind—I have made it quite clear that I do not believe that this is good legislation, and I have not been reassured why it is being pursued other than it seems to be quite a political move by the Government. The costs certainly should not be a reason for us to consider that this should be brought through. As regards meeting the EU targets, it is simply not true that there is no more room for onshore wind and that we should be throttling back.
We have greatly destabilised investment in the UK, which used to be one of the leading destinations for investment. The hasty, rash and poorly thought-through policies of this Government in their early months in government have produced shock waves. Many other people are also saying this, such as John Cridland at the CBI, and the Government’s funder, Dennis Clark, has sounded an alarm that the Government’s policy now appears to be having very little positive effect and a great deal of negative effect on investor confidence.
For all those reasons and for the reasons I have outlined with regard to it being inappropriate to proceed with this poor legislation, I suggest that we delete it, give the Government more time to consider this in the other place, where I am sure the debate will continue. I beg to move.
My Lords, I have been wondering during the entire consideration of this debate why there has been such undue haste. This is a very important technical measure, yet great suggestions put forward by the noble Lord, Lord Oxburgh, and others that we might have pre-legislative scrutiny and bring some experts together to look at aspects of it have all been cast aside. This is being rushed and pushed through because of some ideological desire which the party opposite seems to have.
The Minister mentioned the manifesto again and again in his speech. I notice, because I was just checking earlier on, that Norman Smith of the BBC has been saying that this is another area where the Lords might challenge the Government on something in their manifesto, and the Salisbury convention is being held up and waved at us.
I therefore took the elementary step of going back, as my noble friend did and mentioned earlier, to what is included in the Conservative manifesto. Do all noble Lords opposite know exactly what was included? I wonder if they really do. It said:
“Onshore wind … makes a meaningful contribution to our energy mix and has been part of the necessary increase in renewable capacity”.
That is a very positive statement. It continues:
“Onshore windfarms often fail to win public support, however”—
well, if they do not get public support, and are not supported by the local planning authority, they do not go ahead—
“and are unable by themselves to provide the firm capacity that a stable energy system requires”.
No one is suggesting that “by themselves” they provide a firm capacity for a stable energy system—they contribute towards a diverse energy capacity. It goes on:
“As a result, we will end any new public subsidy for them”—
as my noble friend said—
“and change the law so that local people have the final say on windfarm applications”,
which I agree with. But is it a new public subsidy? I argue that it is not. It is a public subsidy which we all knew about and which the investors understood was going to continue until the end of October 2017. It is not new. Presumably it was budgeted for by the right honourable Chancellor of the Exchequer. Presumably it was all taken account of in the department’s budget and the department knew that it was happening, so it is not a new public subsidy. The Conservative manifesto is quite clear and our amendment to remove Clause 66 does not in any way go against it.
No. If we have a diverse energy supply, with nuclear, wind and a whole range of other ways of producing our electricity, we do not need to double up. When the wind is blowing, we take advantage of that; when it is not blowing, we do not need to take advantage of it. However, that is part of a much wider discussion. I am saying that the amendment does not in any way go against the Conservative manifesto.
In the House of Commons, a few Tory Back-Benchers got really agitated about wind farms, for one reason or another, and in the last Parliament a Private Member’s Bill was introduced to abolish subsidies for wind farms in England and Wales only. Yet we are talking about abolishing subsidies for the whole of the United Kingdom when two-thirds of the proposed wind farms are in Scotland. As my noble friend on the Front Bench said earlier, Scotland is going to suffer immeasurably and disproportionately from what this Government are proposing. The Minister said that he listened to the devolved Administrations. Yes, he listened to them but he paid no attention to what they said; he did the opposite of what they said. That may be listening but it is not acting on what was said.
In an earlier intervention, the noble Viscount, Lord Ridley, said that this is all going to help the big landowners. I know that he speaks on behalf of the big landowners. Of course, if you want to deal with land ownership, that is another matter. I would support a major change in land ownership, and indeed that is being proposed in Scotland, although, as far as I am concerned, it does not go far enough. I would support such a change so that big landowners did not benefit from this. However, as my noble friend said, some of the schemes in Scotland, such as the one that we have had representations about from Skye, do not involve big landowners; there are community schemes that are also very important.
I hope that this House will exercise its judgment in relation to this matter by removing Clause 66 and, quoting from a well-known Scottish anthem, sending the noble Lord, Lord Bourne, and his Government “homeward tae think again”. I hope that on Report or in the House of Commons they come up with something that takes account not of their political dogma but of the real needs and the real situation in the country.
My Lords, in declaring my interests at the start, I reassure the noble Lord, Lord Foulkes, that my family benefits from one wind turbine but that I give the money away to charity. I thought that he might like to know that.
This is a manifesto commitment and I have never heard such extraordinary legal sophistry from the Opposition on this question. Under the “Foulkes convention”, as we may have to call it, at the next election we will have to have a negotiation between lawyers representing both parties to get the exact wording of manifestos agreed or nothing will be able to get through the House of Lords. That is essentially what is being argued. It is a perfectly common-sense statement that was in the manifesto and we are committing to it—and we are facing a potential constitutional crisis in the way that the Opposition are treating the Salisbury convention.
It is an astonishing suggestion to hear that reducing a subsidy to an industry is an ideological objection to that industry. My objection to the wind industry is not ideological: it is economic and scientific. Wind is making a trivial contribution to our energy supplies—it supplied 4% of our total energy use last year—and an even smaller contribution to carbon dioxide reductions. At Second Reading, the noble and learned Lord, Lord Wallace, responded to my question about how much carbon dioxide emissions have actually been reduced by the wind power industry by very kindly sending me a link to a calculation that 1,800 tonnes of carbon dioxide emissions are displaced or reduced by each 2 megawatt wind turbine. Well, do the maths on that. That means that with 10,000 turbines of roughly that size in this country, 20 million tonnes or so would be reduced. But that is out of 700 million tonnes of emissions, so it is a reduction in carbon dioxide emissions of less than 3%—and that assumes that it is displacing grid average emissions, which it is not: it is mostly displacing gas. Nor does it take into account the intermittency or back-up—the point made by my noble friend Lord Spicer—which means that our total wind fleet that we have built up over 25 years, hugely subsidised, is giving us a reduction in emissions of about 2%. That is lost in the statistics. It is an Asterix—sorry, I mean an asterisk—and it comes at a huge cost. Wind subsidies cost this country about £4 billion a year. For that money, one could buy an extra 25% of electricity at the wholesale price, which is an enormous amount.
As I said earlier, in subsidising wind farms we are robbing the poor to pay the rich. It is a regressive subsidy. It hits poor people harder than rich people and rewards rich people more than poor people—not just landowners, but investors of other kinds. We are also killing jobs. We know that the high cost of electricity has killed a number of energy-intensive industries: for example, the aluminium smelter at Lynemouth, in Northumberland, to which I drew attention a number of years ago in this House.
I am grateful to the noble Viscount for giving way. He makes a lovely speech, but actually we are debating the impacts of Clause 66, which, as I have pointed out, saves 30p on a household’s bill. We can have a lovely debate about the role of CFDs and replacement subsidies, but we are here, on Report, looking at Clause 66, which is a very specific intervention that has destabilised investor confidence.
I do not know where I was five or 10 minutes ago then, when I was listening to a lot of very wide-ranging remarks about whether our opposition to the wind industry was ideological.
I find it odd that the parties opposite are so keen to defend one particular industry—one that is really good at taking money from poor people and giving it to rich people while doing the square root of nothing to reduce emissions, killing eagles, hurting tourism, spoiling landscapes and killing jobs.
The noble Lord is probably going to move on to it being conducive to falling arches and making children more delinquent. We are talking about correcting an administrative lash-up. Yesterday, I looked briefly at the words that the Government put forth on the consultation on the renewables obligation cessation and the transfer to contracts for difference. That was aimed at making a smooth, seam-free transition between the two subsidy schemes. What we are talking about here is the fact that the transition that came as a result of earlier closure is far from seam-free and smooth; that is all that we are talking about.
On the other hand, I cannot, while on my feet, not challenge the noble Lord on his assertions that any of the environmental or carbon reduction measures are the primary cause of a lack of competitiveness in some of our energy-intensive industries. Our energy-intensive industries have been helped, quite rightly, with the burden that has been placed on them by carbon reduction measures. However, if one looks at the range of factors that makes us competitive in the world compared with other countries, particularly the emerging economies, one will see that labour costs by far and away outweigh any impact that carbon reduction could have.
I had actually pretty well come to the end of my remarks anyway—but on the subject of energy-intensive users, we have good evidence from all sorts of people, including what we heard on the news last night from the head of Tata UK. He said that energy was a huge contributor to its decision. The cost of energy in this country is crucial. As I said before, if this is really just about a minor adjustment to the timing of the introduction of the measure, why are we arguing about the whole industry?
I did not want to make an intervention on an intervention, but may I say something now? I agree that we are talking about whether Clause 66 should stand, but the argument has constantly been widened, and the noble Baroness who just intervened raised again the question of what all this does to energy costs, and whether energy costs are important. The noble Baroness, Lady Worthington, made some comments about that as well. The facts are the facts. The director of the Energy Intensive Users Group has said that,
“a third of the cost of industrial electricity bills in Britain is being spent on green energy taxes, such as the two-year-old carbon price floor support mechanism … and this would rise to about half of all bills by 2020”.
The director of UK Steel has said that,
“rising energy costs were a critical reason for the crisis afflicting the industry, which also led to the collapse of the SSI steel plant in Redcar last month”.
And so it goes, on and on. We cannot just dismiss all this. It cannot be pushed away. I agree that it should not be the central issue in the debate on this clause, but some of the remarks that have been made cannot be allowed to stand unchallenged, because they are just not true.
My Lords, I strongly support the wise words of my noble friend Lord Ridley. I am one of those who believes that certain types of power are uneconomic, unreliable and unsightly. It is because of the latter point as much as anything else that the Prime Minister made a commitment during the general election campaign, which was given force in the manifesto, that we would not fly in the face of local opinion, as we often have in the past, and build wind farms where they were not wanted. The manifesto commitment is entirely clear, and it is indeed flouting the Salisbury convention to seek to delete it. I very much hope that your Lordships will not do that. We have a duty to examine and scrutinise legislation, and when we believe it is wrong, to ask the other place to think again—but here we are seeking to delete a fundamental part of the Bill.
I am a great admirer of the noble Baroness, Lady Worthington; I hope that does not embarrass her. She brings real distinction to our debates, and she speaks from true knowledge—but, by Jove, she was fishing around this afternoon. I was somewhat amused when she tried to call in aid Lady Thatcher; I am not sure that Lady Thatcher would have entirely endorsed her remarks. She then made a lovely remark about Mr Corbyn, saying that he probably did not agree with fracking or nuclear power—but that didn’t matter, because it was not going to be reflected in Labour Party policy. We are clearly in a period of political anarchy at the moment, and it will be interesting to see how long Mr Corbyn lasts, and how long his party lasts with him—but that is not what we are debating this afternoon.
What we are debating is a narrow issue. We do not need to fish around for strange arguments. I believe that we have a commitment, which was expressed in the manifesto. It was commented on during the election campaign by the Prime Minister and other members of the Conservative Party. I happened to be the president of the Protect Nocton Fen campaign in Lincolnshire. We were threatened with 20 wind turbines, twice the height of Lincoln Cathedral and within six miles of it. I campaigned vigorously and I hope that it played a small part in persuading the Prime Minister and others to ensure that the manifesto said what it said. I raised that issue many times on the Floor of your Lordships’ House and we had unanimity among the Lincolnshire MPs on it, yet it would have been entirely possible for the local will to be overridden and now it cannot be, which is very important. The fact that the promoters, Vattenfall, a Swedish firm, have now withdrawn their proposal brought enormous joy to people. They do not like their countryside to be defaced in that way. They do not want centuries-old views of one of the greatest buildings in Europe to be ruined or obscured. What we are talking about today is paying some regard to the will of local people, and I very much hope that that argument will prevail if we are obliged to vote on this amendment.
It is a bit rich, this casting aside of planning legislation and saying that what local authorities’ planning committees come to decisions on are somehow an affront to democracy. Equally rich is the Panglossian view that has just been expressed—or perhaps it is the reverse of Pangloss—that any windmill will be an offence to the eye and should not be allowed. There are a number of windmills, of the 10,000 that we have already spoken of today, which help the businesses on whose land they are located. These are not big landowners—I realise that Members on the other side of the House probably have closer knowledge of those individuals than do the ex-peasants on this side. In a number of instances, particularly in Scotland and particularly for hill farmers, were it not for the presence of the so-called subsidy to get the kit running, such farms would not be able to survive. In my own former constituency, in the Ochil hills, there is a big debate about windmills and their subsidisation, but the quality of the walking there, the attractiveness of the hills and the husbandry of those areas are down to the hill farmers. They depend on other subsidies, but they are never sufficient for them to make anything like a reasonable living. It has been said it is only the big, fat-cat landowners who benefit. Obviously, they will get their share and that is reprehensible; there might be other means of dealing with them in the future—Corbyn notwithstanding, I hasten to add. But it is a very one-sided argument to say that we should cast aside local democracy and ignore the economic benefit to vulnerable businesses engaged in agrarian activities.
I am sorry. I realise that we are moving towards a vote and I do not wish to take much more of the House’s time. All I want to say is this. It is very dangerous for people, first, to reinterpret manifestos once they have been the substance of electoral victory; and, secondly, to use that as an excuse to undermine elected representatives and local government who have a sensible and fair means of determining the priorities of the planning requirements for all of the communities they represent.
My Lords, I do not wish to detain the House for long. When we engaged after the debate on recommital late last week, we hoped that the Government might have moved a lot further than they did. I acknowledge the amendments that have been made, but they do not go to the heart of many of the concerns of the industry. In fact, there is still a blatant unfairness for those who have observed good practice and have tried to work with local planning authorities.
On the point made by the noble Lord, Lord Cormack, that local democracy matters, developers have worked alongside communities and planning authorities, but because they did not take the route of having a deemed refusal, they are falling foul of this.
One of the things we have to bear in mind is that a number of wind farms were granted permission not by local authorities, but by being overruled from the top. Indeed, Lincolnshire County Council was against a number of wind farms that have been thrust upon the county.
I think that the noble Lord almost makes my point because, as far as I understand what is being proposed by the Government, local authorities which have refused an application before 18 June, but which was subsequently appealed successfully on a decision taken by Ministers, will actually qualify. But an agreement reached by locally elected people and a locally elected planning committee after debate, consideration and engagement with the local community, but where the subsequent consent as part of that route due to the cycle of meetings was not given until after 18 June will not qualify. Perhaps he has done so inadvertently, but the noble Lord, Lord Cormack, profoundly makes the point that we are making. There is an inconsistency and an unfairness in what the Government are proposing. There is inconsistency between Section 36 applications for smaller developments added on to existing developments and those which do not need Section 36 applications. I do not believe that the Government have made out the case for fairness of treatment, given the test which their own Minister articulated yesterday.
I am sure that we will debate the Salisbury convention at some stage, and I hope that we will take note of the report of the House of Lords and House of Commons Joint Committee on Conventions, which sat around 10 years ago. My noble friend Lord Wallace of Saltaire, who was then the deputy leader of my party in your Lordships’ House, emphasised the Liberal Democrats’ view that,
“‘the Salisbury-Addison Convention was an historical negotiation between the Labour Party in the Commons and the Conservative Party in the Lords’ and therefore not relevant to current circumstances”.
We articulated that position almost 10 years ago, and I think that the report itself accepted that things had moved on.
The noble Baroness, Lady Worthington, said that it was an opportunity for the Government to think again. We certainly want to engage with them in thinking again, because I do not believe that what we have at the moment is fair to developers who had a reasonable expectation that a system which was due to close in March 2017 has been brought forward by a year. In the end, as the Government’s own impact assessment states, the central estimate is around 30p on the electricity bill of the average household. Given the potential damage to the industry and the damage that this is doing to investor confidence in other areas of the renewable industry, it is important that the Government should think again. They have not been able to come up with satisfactory ways of addressing some of the many legitimate complaints that the industry has expressed.
My Lords, I also want to draw attention to the fact that this legislation is unfair. Contrary to the statement of the Minister in the other place referred to by the noble and learned Lord, Lord Wallace of Tankerness, I would point out that the noble Lord, Lord Foulkes, mentioned an example on the Isle of Skye. Perhaps I may give the House some more detail about it. There is a development on Skye called the Glen Ullinish wind farm which was granted planning consent in March 2015. That was before the general election and may even have been before the manifesto, and it was certainly well within the current deadline. The local community, with one exception, supported this proposal. The developers, Kilmac Construction, have had a grid connection contract in place since 2011 and have been making annual contributions to the grid to secure their position. They would otherwise have constructed the site and made connection to the grid before the deadline of December 2018, but they are not able to do so through no fault of their own. The connection date has been given as 2021 and the reason for the delay is that, to secure the supply in the west of Scotland, it is necessary to reinforce and upgrade 124 kilometres of line in the Highlands, which this project will facilitate. If the infrastructure had existed, the wind farm would have been constructed and connected in time.
These developers have invested over £1 million and a considerable amount of time and effort in securing the necessary planning permission, grid connection contract and land ownership permissions to ensure that they can comply with government deadlines. They have only been prevented from doing so by the grid infrastructure problem. The Secretary of State for Energy and Climate Change has been aware of this case since 1 September 2015, when the developers wrote to her explaining the circumstances in full. Will the Minister tell the House that the Government will extend the period of grace in this very exceptional case, where the developer is unable to comply with the timescale through no fault of its own? If he is unable to give assurance on this, the appropriate course would be, in the interests of fairness, to remove Clause 66 at this stage, to allow the Government time to reflect on this anomaly and introduce an amendment in the House of Commons, if they wish. This would not, as has been suggested, wreck the Bill. It passes it on to the Commons, where proper consideration can be given to this matter which is so important for the people of Skye.
My Lords, as I listened to this debate, I had one of those “Doctor Who” moments. You go into the TARDIS and it looks like a describable area, but it becomes bigger and bigger—each time someone speaks, you go into another room. There is a narrower issue about Clause 66 and that is fairness. I am one of those who regret that the level of subsidy for wind turbines has been as big as it has, and I am keen to get it closed as soon as possible. I am with the Government on that, but they have moved the deadline from March 2017 to March 2016 and then only given way to some extent. The noble and learned Lord, Lord Wallace, said that those who had expended significant amounts of money when the deadline was March 2017 had a reasonable or legitimate expectation. If the legislation goes through as it is now, will there be the possibility of judicial review for those who have spent considerable amounts of money but whose legitimate expectations were not fulfilled because the Government changed their mind? I would like reassurance that there is no legal problem in moving the goal posts when people have expended money under the old drawing-out of the pitch.
The noble and learned Lord, Lord Hardie, and the right reverend Prelate have focused on the issue of fairness. My only excuse for intervening briefly in this debate is that I have been asked to open a new centre for research and development of water power in my old constituency on Friday. I had never applied my mind to the issues of renewable energy until now. In the Bill, I find reference to wind power and solar power and I know that the Government have been encouraging these. For example, the wind scheme on Gigha was a great community effort which was crucial to the restoration of that island’s economy. It is the suddenness of this measure that we are objecting to. My question, which I ask quite simply out of ignorance, is this: why do we devote money to sun energy and wind energy but not water energy? I cannot understand that. The old mills in my constituency used to be powered by water. This week, I visited two small schemes on the River Ettrick, which make their small contribution, as do these other sources of energy. It seems to me that we should be encouraging the development of water power, particularly in Scotland where we have plenty of rain. When there is no wind, there is no generation; when there is no sun at night, there is no generation; but water continues all the time, especially in the winter when the demand for energy is so high.
My Lords, I support the point made by the noble and learned Lord, Lord Hardie, about the situation in Skye, where the implementation of the arrangements already in place has been postponed simply because of the need for the connection. There is no point in having the development until the connection is in place. This was all set up before this Bill was put forward. It requires a degree of special attention. All I want is to be assured that it will have that.
My Lords, this has been a very wide-ranging debate, taking in issues which are beyond the scope of the Bill. Nevertheless, they are important issues. I hope that I can do justice to the quality of the debate and respond to the points made. I shall come back to the noble Baroness, Lady Worthington, at the end because her comments perhaps symbolise the crux of the difference. In no particular order, except that it is present in my mind, first, I say to the noble Lord, Lord Steel, that I will take up the point about water and write to him on that specifically. As he indicated, it is not within the Bill but I am very happy to look at that and respond to him by letter.
I will probably stand corrected on this but I do not think that solar comes into this legislation either. If it does, I will regret that comment. It could in passing but this Bill basically is concerned about oil and gas, and the onshore wind position. I say to my noble and learned friend Lord Mackay of Clashfern and the noble and learned Lord, Lord Hardie, that I will write to them on their specific point on Skye. I do not know the particular position, so, without commitment, if I can write to them ahead of Third Reading I will certainly do so.
The debate has exhibited a very clear difference of position in relation to onshore wind. I shall come to the Salisbury convention later. I remind noble Lords that it is the responsibility of the Government and the department to do three important things. We have to ensure that we have a supply of electricity that is affordable; that we have a supply of energy that is secure; and that we decarbonise. There is a danger that today this debate has focused on just one of those elements, almost to the exclusion of the other two. They are all important and attention is required to deal with those three, as I am sure noble Lords will appreciate. I will come back to the steel issue later.
The noble Lord, Lord Foulkes, suggested that we cast aside suggestions from the noble Lord, Lord Oxburgh, who is not in his place. That has certainly been far from the case. As regards the part of the legislation in which he was taking a particular interest and giving his experience on oil and gas, we have taken up a lot of his suggestions, as noble Lords will know. I have also ensured that he will head a committee, or perhaps an advisory group, which will report to the Secretary of State on CCS policy going forward. I must correct that point as it is not true.
Clearly, there is a difference of view in this debate. Perhaps I may come to the Salisbury convention. The noble Lord, Lord O’Neill, suggested that we were casting aside planning law. We are not. The grace period makes it very clear that if you have planning permission plus grid connection plus ownership rights, you qualify for the grace period. Therefore, we are far from doing that.
I come to the political point and the points made by the noble Baroness, Lady Worthington, who comes with particular knowledge and commitment. I understand all that. She said at one stage that this is political. It is; I plead guilty to that. It is political in the sense that we believe that this is very clear in the manifesto and that it is protected by the Salisbury convention. To find a bit of wriggle room to oppose this while saying that you are upholding the Salisbury convention is not the way forward.
I also regret suggestions from the Liberal Democrats that they do not regard the Salisbury convention as important at all. They have gone a stage further. That is not a desirable place for this House to be in. As I said, I have been here a relatively short period of time, but I value the institutions of this House. I would say the same if a Conservative Opposition were opposing a different political party in government, which will happen at one stage. If we really wish to maintain the traditions of this House and the important role that we fulfil, we have to move very carefully in the territory that we are in. We have a very clear manifesto commitment. People know and understand that. It should be upheld.
On the question of the Salisbury convention, I confess that I have not included recently the Conservative manifesto in my bedtime reading, but what does the Minister say to the point of substance raised by my noble friend Lord Foulkes? The commitment in the manifesto was to avoid or to reject any new subsidies, whereas we are talking about getting rid of existing subsidies. The noble and learned Lord who spoke about the legal issues involved said that these were legal niceties. They are not; it is the English language. Will the Minister tell us how it is that “new” in English has come to include “pre-existing”? If he cannot tell us that, then it is not a breach of the Salisbury convention because the promise was to end new subsidies, not to get rid of existing subsidies that had a preordained timeline.
The noble Lord is right on the wording—actually, it is “new public subsidy”, but he is stressing “new”. The point is that those already in receipt of subsidy will continue to have the subsidy. This is for people who have not yet got or applied for the subsidy. It is certainly new to them in a new Parliament. It is absolutely clear that that is within the Salisbury convention. Clearly we will disagree on this. I argue that we are in dangerous territory and that the Salisbury convention should apply.
I omitted to do so earlier because I wanted to finish on the Salisbury convention, but I will say something on affordability and steel. The noble Baroness made some relevant points on that. She said that electricity was a small part of their costs; it is not for all steel companies. If it is a blast furnace it is 3% of the costs; if it is an arc furnace, as it is for Celsa in Cardiff South, a Labour-held constituency, it is 12% of the cost. That is not insignificant. That point was made forcefully at the steel summit by many Labour MPs, as well as by other people. We have to take that on board. It is a complex issue. It is not just about electricity costs, but they certainly are a valid consideration from some steel companies.
With that, there clearly is a disagreement but, as I said, this is dangerous territory for the House. In my belief and the Government’s belief, this is firmly protected by the Salisbury convention and I urge noble Lords to reject the amendment.
Before the Minister sits down—I asked a specific question and I would like to encourage an answer. The noble and learned Lord, Lord Wallace, spoke of those who incurred expenditure under the March 2017 deadline who had, I think he said, a legitimate expectation that their investment could be carried through. Is the Minister saying that they do not have a legitimate expectation any more and that that can be changed by the legislation, or is it simply that the Government are legislating in the face of what might be regarded as a legitimate expectation?
It is neither of those, if I may say so. We have had an engagement exercise with industry, the devolved Administrations and others to look at those who would be prejudiced by the proposal as set out on 18 June. In consequence of that, the grace period that we have put forward—which I think we have agreed to as it stands—is that if you have a planning permission, a grid connection and land rights as at 18 June, you have additional time. We have also moved in relation to the investment freeze condition and appeals to try to achieve that. So, following the engagement exercise launched after the decision which was taken on 18 June, we have catered for those with a legitimate expectation of being able to deploy in this regard.
My Lords, I am grateful to the Minister for his response and, indeed, to all noble Lords who have participated in this debate. We always knew that it would be a very interesting debate and it certainly has been wide-ranging. I must start by apologising for not referring to Lady Thatcher by her proper title. I think that may be due to the fact that I was not here during her great tenure.
I do not propose to detain the House for very much longer. It is absolutely clear that we have a difference of opinion. Manifestos are brief, do not contain detail and therefore are open to interpretation, and opinion therefore plays an important role. We are not doing anything that we believe contravenes the Salisbury convention. I have read the Conservative manifesto and I am afraid that it is not that clear. There are some inconsistencies. It says that the Government support wind, which may come as terrible news to the noble Lord, Lord Cormack, and the noble Viscount, Lord Ridley. However, the manifesto says in black and white that the Conservatives think that it plays a valuable role. It also says that the Conservatives will deliver nuclear without subsidy. That is a very interesting phrase. I do not understand how that will work. The manifesto also says that the Conservatives are committed to least-cost decarbonisation and that they will stop new subsidies.
Noble Lords have said very eloquently that the nub of the issue is: does it pass the common-sense test that, if you read the manifesto commitment before the election you would read those words and think, “Ah, yes, that will mean the RO is closing a year early”? You would not think that. That is not a common-sense response to reading those words. Had the Government been clear-minded and knew what they were about to do, why did they not simply say in the manifesto, “We propose to close the renewables obligation for onshore wind a year early”? That would have been very easily understood and everyone would have known where they were. However, that was not what was said. One could put a wide range of interpretations on what was said. Again, I come back to what is happening with the contracts for difference. We have heard nothing from the Government on this. In light of that, how weak this legislation is, and the concerns that have been raised on all sides of the House, I propose to press this amendment and wish to test the opinion of the House.
78R: After Clause 66, insert the following new Clause—
“Onshore wind power: circumstances in which certificates may be issued after 31 March 2016
(1) Part 1 of the Electricity Act 1989 (electricity supply) is amended as follows.
(2) After section 32LC (inserted by section 66) insert—
“32LD Onshore wind generating stations accredited, or additional capacity added, on or before 31 March 2016
The circumstances set out in this section are where the electricity is—(a) generated by an onshore wind generating station which was accredited on or before 31 March 2016, and(b) generated using—(i) the original capacity of the station, or(ii) additional capacity which in the Authority’s view first formed part of the station on or before 31 March 2016.32LE Onshore wind generating stations accredited, or additional capacity added, between 1 April 2016 and 31 March 2017: grid or radar delay condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited during the period beginning with 1 April 2016 and ending with 31 March 2017, and(ii) in respect of which the grid or radar delay condition is met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016, (ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 April 2016 and ending with 31 March 2017, and(iii) the grid or radar delay condition is met in respect of the additional capacity.32LF Onshore wind generating stations accredited, or additional capacity added, on or before 31 March 2017: approved development condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited on or before 31 March 2017, and(ii) in respect of which the approved development condition is met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016,(ii) in the Authority’s view, the additional capacity first formed part of the station on or before 31 March 2017, and(iii) the approved development condition is met in respect of the additional capacity.32LG Onshore wind generating stations accredited, or additional capacity added, between 1 April 2017 and 31 March 2018: grid or radar delay condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited during the period beginning with 1 April 2017 and ending with 31 March 2018,(ii) in respect of which the approved development condition is met, and(iii) in respect of which the grid or radar delay condition is met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016,(ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 April 2017 and ending with 31 March 2018,(iii) the approved development condition is met in respect of the additional capacity, and(iv) the grid or radar delay condition is met in respect of the additional capacity.32LH Onshore wind generating stations accredited, or additional capacity added, between 1 April 2017 and 31 December 2017: investment freezing condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited during the period beginning with 1 April 2017 and ending with 31 December 2017, and(ii) in respect of which both the approved development condition and the investment freezing condition are met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016, (ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 April 2017 and ending with 31 December 2017, and(iii) both the approved development condition and the investment freezing condition are met in respect of the additional capacity.32LI Onshore wind generating stations accredited, or additional capacity added, between 1 January 2018 and 31 December 2018: grid or radar delay condition met
The circumstances set out in this section are where the electricity is—(a) generated using the original capacity of an onshore wind generating station—(i) which was accredited during the period beginning with 1 January 2018 and ending with 31 December 2018,(ii) in respect of which both the approved development condition and the investment freezing condition are met, and(iii) in respect of which the grid or radar delay condition is met, or(b) generated using additional capacity of an onshore wind generating station, where—(i) the station was accredited on or before 31 March 2016,(ii) in the Authority’s view, the additional capacity first formed part of the station during the period beginning with 1 January 2018 and ending with 31 December 2018,(iii) both the approved development condition and the investment freezing condition are met in respect of the additional capacity, and(iv) the grid or radar delay condition is met in respect of the additional capacity.32LJ The approved development condition
(1) This section applies for the purposes of sections 32LF to 32LI.
(2) The approved development condition is met in respect of an onshore wind generating station if the documents specified in subsections (4), (5) and (6) were provided to the Authority with the application for accreditation of the station.
(3) The approved development condition is met in respect of additional capacity if the documents specified in subsections (4), (5) and (6) were provided to the Authority on or before the date on which the Authority made its decision that the additional capacity could form part of an onshore wind generating station.
(4) The documents specified in this subsection are—
(a) evidence that—(i) planning permission for the station or additional capacity was granted on or before 18 June 2015, and(ii) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached,(b) evidence that—(i) planning permission for the station or additional capacity was refused on or before 18 June 2015, but granted after that date following an appeal or judicial review, and(ii) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached,(c) evidence that—(i) an application for 1990 Act permission or 1997 Act permission was made on or before 18 June 2015 for the station or additional capacity, (ii) the period allowed under section 78(2) of the 1990 Act or (as the case may be) section 47(2) of the 1997 Act ended on or before 18 June 2015 without any of the things mentioned in section 78(2)(a) to (b) of the 1990 Act or section 47(2)(a) to (c) of the 1997 Act being done in respect of the application,(iii) the application was not referred to the Secretary of State, Welsh Ministers or Scottish Ministers in accordance with directions given under section 77 of the 1990 Act or section 46 of the 1997 Act,(iv) 1990 Act permission or 1997 Act permission was granted after 18 June 2015 following an appeal, and(v) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached, or(d) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, planning permission is not required for the station or additional capacity.(5) The documents specified in this subsection are—
(a) a copy of an offer from a licensed network operator made on or before 18 June 2015 to carry out grid works in relation to the station or additional capacity, and evidence that the offer was accepted on or before that date (whether or not the acceptance was subject to any conditions or other terms), or(b) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, no grid works were required to be carried out by a licensed network operator in order to enable the station to be commissioned or the additional capacity to form part of the station.(6) The documents specified in this subsection are a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, as at 18 June 2015 a relevant developer of the station or additional capacity (or a person connected, within the meaning of section 1122 of the Corporation Tax Act 2010, with a relevant developer of the station or additional capacity)—
(a) was an owner or lessee of the land on which the station or additional capacity is situated,(b) had entered into an agreement to lease the land on which the station or additional capacity is situated,(c) had an option to purchase or to lease the land on which the station or additional capacity is situated, or(d) was a party to an exclusivity agreement in relation to the land on which the station or additional capacity is situated.(7) In this section—
“the 1990 Act” means the Town and Country Planning Act 1990;“1990 Act permission” means planning permission under the 1990 Act (except outline planning permission, within the meaning of section 92 of that Act);“the 1997 Act” means the Town and Country Planning (Scotland) Act 1997;“1997 Act permission” means planning permission under the 1997 Act (except planning permission in principle, within the meaning of section 59 of that Act);“exclusivity agreement”, in relation to land, means an agreement by the owner or a lessee of the land not to permit any person (other than the persons identified in the agreement) to construct an onshore wind generating station on the land;“planning permission” means—(a) consent under section 36 of this Act,(b) 1990 Act permission,(c) 1997 Act permission, or(d) development consent under the Planning Act 2008. 32LK The investment freezing condition
(1) This section applies for the purposes of sections 32LH and 32LI.
(2) The investment freezing condition is met in respect of an onshore wind generating station if the documents specified in subsection (4) were provided to the Authority with the application for accreditation of the station.
(3) The investment freezing condition is met in respect of additional capacity if the documents specified in subsection (4) were provided to the Authority on or before the date on which the Authority made its decision that the additional capacity could form part of an onshore wind generating station.
(4) The documents specified in this subsection are—
(a) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, as at the Royal Assent date—(i) the relevant developer required funding from a recognised lender before the station could be commissioned or additional capacity could form part of the station,(ii) a recognised lender was not prepared to provide that funding until enactment of the Energy Act 2016, because of uncertainty over whether the Act would be enacted or its wording if enacted, and(iii) the station would have been commissioned, or the additional capacity would have formed part of the station, on or before 31 March 2017 if the funding had been provided before the Royal Assent date, and(b) a letter or other document, dated on or before the date which is 28 days after the Royal Assent date, from a recognised lender confirming (whether or not the confirmation is subject to any conditions or other terms) that the lender was not prepared to provide funding in respect of the station or additional capacity until enactment of the Energy Act 2016, because of uncertainty over whether the Act would be enacted or its wording if enacted.(5) In this section—
“recognised lender” means a provider of debt finance which has been issued with an investment grade credit rating by a registered credit rating agency;“the Royal Assent date” means the date on which the Energy Act 2016 is passed.(6) For the purposes of the definition of “recognised lender” in subsection (5)—
“investment grade credit rating” means a credit rating commonly understood by registered credit rating agencies to be investment grade;“registered credit rating agency” means a credit rating agency registered in accordance with Regulation (EC) No 1060/2009 of the European Parliament and the Council of 16 September 2009 on credit rating agencies.32LL The grid or radar delay condition
(1) This section applies for the purposes of sections 32LE, 32LG and 32LI.
(2) The grid or radar delay condition is met in respect of an onshore wind generating station if, on or before the date on which the Authority made its decision to accredit the station, the documents specified in subsection (4), (5) or (6) were—
(a) submitted by the operator of the station, and(b) received by the Authority.(3) The grid or radar delay condition is met in respect of additional capacity if, on or before the date on which the Authority made its decision that the additional capacity could form part of an onshore wind generating station, the documents specified in subsection (4), (5) or (6) were—
(a) submitted by the operator of the station, and(b) received by the Authority. (4) The documents specified in this subsection are—
(a) evidence of an agreement with a network operator (“the relevant network operator”) to carry out grid works in relation to the station or additional capacity (“the relevant grid works”);(b) a copy of a document written by, or on behalf of, the relevant network operator which estimated or set a date for completion of the relevant grid works (“the planned grid works completion date”) which was no later than the primary date;(c) a letter from the relevant network operator confirming (whether or not such confirmation is subject to any conditions or other terms) that—(i) the relevant grid works were completed after the planned grid works completion date, and(ii) in the relevant network operator’s opinion, the failure to complete the relevant grid works on or before the planned grid works completion date was not due to any breach by a generating station developer of any agreement with the relevant network operator; and(d) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, the station would have been commissioned, or the additional capacity would have formed part of the station, on or before the primary date if the relevant grid works had been completed on or before the planned grid works completion date.(5) The documents specified in this subsection are—
(a) evidence of an agreement between a generating station developer and a person who is not a generating station developer (“the radar works agreement”) for the carrying out of radar works (“the relevant radar works”);(b) a copy of a document written by, or on behalf of, a party to the radar works agreement (other than a generating station developer) which estimated or set a date for completion of the relevant radar works (“the planned radar works completion date”) which was no later than the primary date;(c) a letter from a party to the radar works agreement (other than a generating station developer) confirming, whether or not such confirmation is subject to any conditions or other terms, that—(i) the relevant radar works were completed after the planned radar works completion date, and(ii) in that party’s opinion, the failure to complete the relevant radar works on or before the planned radar works completion date was not due to any breach of the radar works agreement by a generating station developer; and(d) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, the station would have been commissioned, or the additional capacity would have formed part of the station, on or before the primary date if the relevant radar works had been completed on or before the planned radar works completion date.(6) The documents specified in this subsection are—
(a) the documents specified in subsection (4)(a), (b) and (c);(b) the documents specified in subsection (5)(a), (b) and (c); and(c) a declaration by the operator of the station that, to the best of the operator’s knowledge and belief, the station would have been commissioned, or the additional capacity would have formed part of the station, on or before the primary date if—(i) the relevant grid works had been completed on or before the planned grid works completion date, and(ii) the relevant radar works had been completed on or before the planned radar works completion date. (7) In this section “the primary date” means—
(a) in a case within section 32LE(a)(i) or (b)(i) and (ii), 31 March 2016;(b) in a case within section 32LG(a)(i) and (ii) or (b)(i) to (iii), 31 March 2017;(c) in a case within section 32LI(a)(i) and (ii) or (b)(i) to (iii), 31 December 2017.”(3) In section 32M (interpretation of sections 32 to 32M)—
(a) in subsection (1), for “32LB” substitute “32LL”;(b) at the appropriate places insert the following definitions—““accredited”, in relation to an onshore wind generating station, means accredited by the Authority as a generating station which is capable of generating electricity from renewable sources; and “accredit” and “accreditation” are to be construed accordingly;”;
““additional capacity”, in relation to an onshore wind generating station, means any generating capacity which does not form part of the original capacity of the station;”;
““commissioned”, in relation to an onshore wind generating station, means having completed such procedures and tests in relation to the station as constitute, at the time they are undertaken, the usual industry standards and practices for commissioning that type of generating station in order to demonstrate that it is capable of commercial operation;”;
““generating station developer”, in relation to an onshore wind generating station or additional capacity, means—
(a) the operator of the station, or(b) a person who arranged for the construction of the station or additional capacity;”;““grid works”, in relation to an onshore wind generating station, means—
(a) the construction of a connection between the station and a transmission or distribution system for the purpose of enabling electricity to be conveyed from the station to the system, or(b) the carrying out of modifications to a connection between the station and a transmission or distribution system for the purpose of enabling an increase in the amount of electricity that can be conveyed over that connection from the station to the system;”;““licensed network operator” means a distribution licence holder or a transmission licence holder;”;
““network operator” means a distribution exemption holder, a distribution licence holder or a transmission licence holder;”;
““onshore wind generating station” has the meaning given by section 32LC(2);”;
““original capacity”, in relation to an onshore wind generating station, means the generating capacity of the station as accredited;”;
““radar works” means—
(a) the construction of a radar station,(b) the installation of radar equipment,(c) the carrying out of modifications to a radar station or radar equipment, or(d) the testing of a radar station or radar equipment;”;““relevant developer”, in relation to an onshore wind generating station or additional capacity, means a person who—
(a) applied for planning permission for the station or additional capacity,(b) arranged for grid works to be carried out in relation to the station or additional capacity,(c) arranged for the construction of any part of the station or additional capacity,(d) constructed any part of the station or additional capacity, or(e) operates, or proposes to operate, the station;”.”
My Lords, we have already debated this. I think that Amendment 78RA would improve Amendment 78R, so I would wish to test the opinion of the House, but perhaps the Minister would clarify. Is he still insisting on his Amendment 78R, or is our amendment otiose?
My understanding is that Amendment 78R contains the new clause to embrace the grace periods. As Clause 66 has fallen, I am not sure whether he wants to insist on it. If he does, I will want to press our Amendment 78RA, but I want clarification, because there is no point dividing the House if he does not insist on his new clause, which incorporates the grace periods.
Amendments 78RA to 78RG, as amendments to Amendment 78R, not moved.
Amendment 78R not moved.
78S: After Clause 66, insert the following new Clause—
(1) Within six months of the coming into force of this Act, the Secretary of State must bring forward regulations for a “decarbonisation obligation”.
(2) A “decarbonisation obligation” means the level of carbon intensity of electricity generation in the United Kingdom that a relevant supplier may not exceed in respect of the total kilowatt hours of electricity that it supplies to customers in England and Wales during a given year.
(3) In setting a decarbonisation obligation, the Secretary of State must first obtain and take account of advice from the Committee on Climate Change.
(4) Under this section, a “relevant supplier” refers to electricity suppliers supplying electricity in the United Kingdom.”
My Lords, in this group of amendments we are considering the wider implications of the Government’s energy policy as set out in the Bill. We are again touching on issues to do with investor confidence. The amendments in this group relate to the need to preserve investor confidence in the UK’s energy system and energy infrastructure so that we can continue to see the good work we have seen over the past few decades of reinvestment in modern clean energy systems that will propel us into the remaining years of this century and clean up the energy system in view of our climate change obligations.
During the passage of this Bill and during the passage of the Energy Bill 2013, we had many debates about the right way to incentivise investment in clean technology. As noble Lords are aware, the current policy is that contracts for difference administered by the Secretary of State are granted to contract owners to enable them to have a stable income. They have the wholesale price topped up to a strike price. That policy was put in place in the Energy Act 2013.
The first part of that Act relates to the setting of a decarbonisation target, which was seen as the clearest signal we could give that we will continue to move towards a cleaner energy system after 2020. The period after 2020 is important because until then we are propelled forward by EU targets, including specifically for renewable energy. In the consideration of energy policy beyond 2020, the European Union was persuaded, partly by Ministers from the UK Government, that it should no longer pursue renewables-only targets, and I supported the Government in that argument. We believed that we still needed to see decarbonisation in the power sector but that it was no longer necessary to state that it must be through a group of technologies classed as renewables and that a wider range of technologies could play a part. That is the situation we find ourselves in.
In the EU 2030 climate and energy package, there is no legally binding renewables target for member states from 2020. That leaves open what guidance there is that would give investors confidence that there will be a market or support for technologies that are not yet able to stand fully on their own two feet in competing in the market. The reason they are not able to stand fully on their own two feet is partly to do with the failure of another EU policy: the EU Emissions Trading Scheme. For many reasons which I will not bore the House with, the EU Emissions Trading Scheme has failings and has not been sending a strong enough carbon price signal to enable low-carbon technologies to compete with the more emitting technologies. So we have a potential signal in the form of the EU Emissions Trading Scheme, but that signal is not sufficient or stable enough to give investors confidence—hence the need for domestic policy and the UK Energy Act 2013 to supplement it.
We need something that supplements the contracts for difference process because it is held by the Secretary of State. One person administers oversight of the contracts that are awarded and the timing of the auctions of those contracts, and the department, in conjunction with the national grid, has to try to arrive at a set of technologies that it thinks will deliver our climate change targets. The problem is that it is very difficult to predict the future. Having spent time as a civil servant, I can say with confidence that it is very hard for the Civil Service to keep pace with all the information out there in the energy market, and that it would be far more sensible if we allowed the market to play more of a role in determining the mix of our energy.
I am a fervent believer in least-cost decarbonisation, and at the moment we run the risk of having a centralised system that is too political. There are too many levers in the hands of the Secretary of State and not enough in the private sector, which ultimately will have to raise the finance and do the projects. The Government are not doing that; they are simply governing the number of auctions they make available.
The amendments in this group attempt to address the problem of insufficient investor confidence in the period 2020 to 2030 in the light of the change in EU policy. Amendment 78S revisits an idea we looked at in Committee. I have retabled it because I believe it is a very important principle, and I hope that the Government are beginning to see its merit and take it seriously. It is that rather than have the administratively burdensome process of contracts for difference and the mechanisms underneath it, we should move to a simpler system where supply companies are responsible for delivering decarbonisation. They interface with customers and provide us with the electricity that keeps our businesses and homes powered, so they should take on the responsibility for selecting projects that will help decarbonise at least cost and do so through a framework in which they are given a target to reduce the carbon intensity of the power that they supply.
I think that this idea might be coming of age. Recently, OVO Energy, a welcome new entrant in the market, has declared itself to be coal free. I think that is probably the first example of a tariff that is structured to demonstrate a commitment to climate change by eliminating coal from the mix. OVO Energy has done that through the use of certificates that it purchases from gas stations. Through the certificates it can show that it is purchasing only gas and therefore keeping coal out of the mix and giving customers a low-cost option for demonstrating their concern about climate change. That announcement is based on the same principle as in Amendment 78S, which is that suppliers are able, through their choice of who they purchase from, to drive markets. They can support gas and perhaps disfavour unabated coal through the use of market mechanisms.
I hope that the Government will fully support this, because it is completely in keeping with their principle of having the private sector play more of a role in decarbonisation. Time has gone by. We have all, in a rather amusing way, reflected on how odd it was that the Energy Act 2013 oversaw almost the full renationalisation of energy policy—not quite, but it felt like that at times—under a Conservative Government. I am hoping that as the Government get into their stride in their current role, they will see the merit of shifting to a more market-based system. Then we will be able to avoid the kind of arguments that we have just had to endure over Clause 66, which is symptomatic of the fact that the Government are now in the driving seat and that it is not a really comfortable place to be. I think that the Minister may agree.
I am hoping to hear from the Minister some words of encouragement and reassurance that the idea in Amendment 78S is being considered seriously by the department, because I think it offers a good solution to our dilemma over how to achieve the things we want—reducing our carbon emissions and making sure that the lights stay on. The suppliers could play an important role here.
Amendment 78T relates to the concerns that I expressed in a previous debate—so I will not reiterate them—that at the moment contracts for difference are suspended. “Suspended” may be a strong word but there has been no auction this year for contracts for difference, despite the fact that we would have anticipated that there would have been by now if we had followed the pattern of previous years. We are left with something of a hiatus. We do not yet know whether the contract for difference auctions will be scheduled. I am sorry to keep asking this of the Minister, and I know I will get the same response, but it is important to have clarity on this. I hope that by the time the Bill reaches the other place we will have clarity, and certainly before it leaves that place I strongly encourage the Government to provide that clarity over what is happening to the contracts for difference regime.
Amendment 78T would require that auctions were held at least annually for as long as the carbon intensity of electricity was more than 100 grams per kilowatt hour. That is for as long as the contracts for difference regime continues: I am aware that should we adopt Amendment 78S, we would not very much need to carry on with Amendment 78T. This is designed to say that if we continued with the contracts for difference process, we would hold those auctions annually so that there would be certainty for investors and we would have a regular process by which people could plan—and that the guiding principle would be that we are trying to get our carbon intensity down to 100 grams. The reason for that, as noble Lords may know, is that our carbon intensity remains fairly stubbornly high at around 400 grams per kilowatt hour, despite all our good efforts in supporting renewable energy.
Renewable energy has actually made a considerable difference in displacing thermal power and reducing emissions—but instead, while that has been happening, we have burned more coal because coal prices have reduced relative to gas. That has meant that for every step we take forward on renewables we see ourselves taking a step back, because we are switching from gas, which is a phenomenally valuable and clean fuel that I am sure we will be using for some time, back to using inefficient old coal stations for prolonged periods. I am happy to say that the economics are shifting again and we are seeing coal playing much less of a role. That is partly to do with the introduction of the carbon price floor, which is helping gas to compete, but the truth of the matter is that we still have stubbornly high carbon intensity and we need to see it reducing. The reason why we need power in particular to reduce is that we need to have clean power in order to then power our vehicles and maybe provide heat to our homes in a low-carbon way. There is no point electrifying transport if our power remains dirty. It therefore seems logical and sensible that we should pursue power sector decarbonisation in a faster way and get that carbon intensity down to the point where electrification in those other sectors will then make complete sense.
I turn to Amendment 78UA. I must explain that this is a manuscript amendment, for which I apologise to the House. The reason is that we had tabled an original version in a previous Marshalled List but had been advised to change the wording. On reflection late last night, however—this has been one of those Bills on which we have been putting in rather late hours—we reverted to the original wording because I felt that the original wording should stand.
My apologies to the House if I descend into what may seem to be a level of detail that might perhaps not be of great interest to everybody. I suspect that I should declare that I was partly involved in the drafting of the Climate Change Act as a civil servant in the Department for Energy and Climate Change, so this is an area that I know in some detail and feel quite strongly about. I shall attempt to explain what we are trying to do here in a way that I hope will hold people’s interest.
The Climate Change Act, as we know, is a world-leading piece of legislation that I am immensely proud to have played a small part in. I am delighted that it received cross-party support when it was signed into law. At that period, the UK was at its best in demonstrating the degree of cross-party support for tackling climate change, and for the role that the UK could play in demonstrating leadership. The rationale we gave at the time was, “If we don’t lead, who will?”, and, “If we lead, others will follow”. That is exactly what happened: we passed our Act and, I am glad to say, over 100 countries have subsequently passed their own versions of climate change legislation. Not all of them have followed our model exactly, and some have been much more partial in the issues that they have taken on, but climate change legislation is now proliferating around the world and that is in large part to do with the UK. I pay tribute to all noble Lords and Members of the other House who helped the UK to display that leadership; it has been having a big impact.
The Climate Change Act as envisaged creates carbon budgets in order to manage our emissions. The reason why it does so is that we were very keen on trying to convey the fact that in many ways, just as Governments and Treasuries try to balance the books financially for public spending in terms of income and outgoings, carbon emissions are very similar: you could give yourself an allowance to emit, and then you could use sound budgetary principles to ensure that you stayed within that allotted amount. It was the area under the curve of the emissions that we were hoping would be managed well by the Government. The carbon budgets were created for a five-year period, and three carbon budgets were then to be set in law at any given period. We have now set the fourth carbon budget and are about to set the fifth.
As we drafted the Act we were very aware that it does not really matter where carbon dioxide is emitted—it could be emitted anywhere in the world and it would have the same effect—so if you reduce carbon dioxide anywhere in the world, you can make a difference. Hence trading in carbon emission reductions has been an accepted part of climate policy. We were mindful of this and ensured that the Climate Change Act as a whole incorporated an element of trading to allow the Government flexibility to meet their targets.
That was how I left the situation when I left the draft Bill team, and subsequently it has been enacted and implemented. Along the way, an interpretation of the legislation has been accepted that says that, for just less than half of our emissions, that flexibility should translate into not actually counting our emissions in terms of what is emitted from the smoke-stack. It is actually the contribution that power and heavy industry make that is counted in relation to an EU scheme. Essentially, we are not required to reduce emissions at home as a result of carbon budgets; we can simply emit what we like and then settle the difference through the trading scheme at company level. This means that carbon budgets, while incredibly welcome, and they certainly provide confidence, do not actually have any influence over power sector decarbonisation in this country. That is a fact that few people properly understand; very often I get people coming up to me and saying, “Well, the Government can’t do that, can they, because of our carbon budgets”. If it relates to the power sector, I am afraid that the answer is yes, the Government can; strictly, the Government can do whatever they like because it is not the actual emissions that we emit that count towards our budgets.
I am sure that noble Lords will be glad to know that I am now getting to the point. Amendment 78UA seeks to turn the fifth carbon budget into a much more useful guide for investors, and certainly a much more useful guide for investors in the power sector, by making it no longer the case that those trading emissions from Europe count towards the meeting of our domestic targets. In doing so, we would be moving towards the system that other countries in Europe adopt, which is to measure our actual emissions. That would provide the backdrop and the backstop that we need to ensure that we continue from 2020 to 2030 in our efforts to decarbonise the power sector. This is, therefore, a simple surgical change in legislation, but it would have the effect of shoring up investor confidence and making sure that we decarbonise the power sector.
For those reasons—its simplicity, and that in this instance I feel confident that the Government will not say that it falls foul of their manifesto commitments, because it is not a new target on the power sector, as it is simply an accounting procedure within the existing Climate Change Act regulations—this is something we could come together on and agree. We could do so now because we will see the fifth carbon budget recommendations being made later in the year, before the end of the year, and next spring we will have the debate on the fifth carbon budget. It is therefore right and proper that we now consider on what basis we want that fifth carbon budget to be made. That budget covers exactly that 2018 to 2032 period, which is so crucial for investor confidence. This is, therefore, a timely moment for us to consider this.
I have also tabled this because I, like many people, I think, assumed that we might see with the fifth carbon budget the setting of a decarbonisation target as was set out in the Energy Act 2013. However, in the course of the Bill, it has become clear—I am grateful to the Minister for clarifying—that the Government do not intend to set the decarbonisation target for the power sector for 2030. The Government are perfectly within their right to choose to do so. However, here is another way of creating that investor certainty, solving some quite difficult accounting issues that the Committee on Climate Change has to do to do this net accounting—it is not an easy job to work out what the EU portion of our trading budget should be; it is a bit of a headache. With Amendment 78UA, we have the opportunity to do something quite precise but impactful, which would have the effect, as I say, of creating a much higher degree of investor confidence. This is certainly the right time to think about this, before we go on to debate the level of the fifth carbon budget.
I hope that I have explained this, and not gone on for too long. The three amendments here are all designed to enable us to have a debate about the bigger picture of how we will proceed in helping investors to plan for the future. I look forward to the Minister’s response, but certainly on Amendment 78UA we should seize the moment, because now is a good time for us to do this.
My Lords, I congratulate the noble Baroness on the ingenuity of the proposals in this amendment; they are fascinating and make one think very hard, because these are hugely complex issues. Perhaps I may put two questions to her and perhaps also to my noble friend.
First, will this switch to this way of trying to achieve our carbon obligations and decarbonisation lead to cheaper power in the power sector? That must be an important question. We discussed earlier the problems in the power sector and the fact that pushing it too far and too fast may not necessarily help decarbonisation but will have to be paid for in lost jobs. That is bound to be on people’s minds when looking at this kind of amendment.
The second and even more obvious question is whether these arrangements will get the combined-cycle gas turbines built. At present speed, under the contracts for difference regime, and the capacity payments auction and so on, will they get them built in time? We are now entering a very worrying period, with a very low margin of safety in our electricity system—I believe that it will be down to 1.2 gigawatts. When I had some responsibility for these matters, years ago, it was 17 gigawatts. That gives noble Lords an idea of how far we have come down thanks to the rapid closure of many coal-fired stations and so on. Will this pattern lead to that result? These may be layman’s questions addressed to a very complex issue but I would be interested to know the answers. If the implication is the other way, we will have additional costs on power and get further out of line with our competitors. We always have to remember that in the Climate Change Act—behind which the noble Baroness was one of the founding figures and driving forces—there was the reservation that we should not get too far out of line with our competitors. In some areas, we clearly have done; we are out of line. In the steel industry, as we were saying earlier, we have energy charges that fall on at least parts of that industry at twice the level of charges in Germany and, in turn, are far higher than those throughout Europe. I saw one figure showing that they are 10 times the levels in China—which might account for our present woes in the steel industry. In examining this, can we please be guided on whether this will deliver the goods? That is my question.
My Lords, I particularly wish to speak to Amendment 78UA, to which I have added my name, but I will start with Amendment 78S, which is the decarbonisation debate. I was certainly very disappointed that the Minister confirmed—he was very clear, and I welcome clarity—that the Government will not take advantage of the opportunities opened to them under the previous Energy Act and declare a decarbonisation target. We have had a lot of discussion about the Conservative manifesto, and in fact the Minister referred to it in the context of saying why that would not happen. However, the words of the Conservative manifesto were completely clear. They suggest that a decarbonisation target would meet both the Government’s objectives. The manifesto says:
“We will cut emissions as cost-effectively as possible, and will not support additional distorting and expensive power sector targets”.
That is very clear.
The point about a decarbonisation target—exactly as the noble Baroness, Lady Worthington, said—is that it moves on from the distorting targets that we had for renewables in terms of decarbonising our energy sector. In fact, because it brings in proper mechanisms in terms of markets and all of that, it is actually less expensive. So, it seems that a decarbonisation target will not only help us very specifically meet our Climate Change Act targets—which the Conservative manifesto fully supports—but provide a route for those targets to be met with a non-distorting and less expensive method than we had under the renewable targets under the EU’s 2020 system and so on. This is therefore a very good and logical amendment. It is almost a vital amendment that the Government should be able to accept to fulfil their own manifesto commitments. I do not say that to make a clever lawyer’s argument; I say it because it is how I read it. It is in plain English in the manifesto.
I move on to Amendment 78UA, to which I have put my name. I pay credit to the noble Baroness, Lady Worthington, for the great role that she played in bringing the Climate Change Act into being. I played a much more modest role in those days on the Front Bench of the Liberal Democrats in opposition—strangely, we are back in opposition again; but there we are. I was going to mention the noble Lord, Lord Taylor of Holbeach, and the fantastic work that he did with me and the noble Lord, Lord Rooker. We helped to deliver, right across the House, together with the Cross Benches, the fantastic Climate Change Act. The noble Lord, Lord Taylor, did a great piece of work.
One of the things that I did then was to try to bring to the attention of the Bill team and Ministers the fact that although those carbon budgets were great, they excluded 50% of the country’s emissions because they took into account the EU ETS trading. So, in effect, government policy only controlled, or had an effect on, about 50% of UK emissions. The Bill team did not seem to understand this—albeit that at the time the department was not DECC but Defra—and nor did the Ministers particularly take an interest in it. I think that the trouble was that, once those in the Treasury understood it—at least, they certainly understood it well ahead of anybody else—they decided that they did not want this at all. Ironically, that was under a Labour Government. However, as the noble Baroness said, the Climate Change Act was a great thing.
This amendment provides an opportunity to put right something that was wrong then. As I see it, it aligns our international obligations with how we measure our own carbon budgets and our own Climate Change Act targets. They come into one in that they mean what everybody would understand them to mean—that is, what the emissions of UK plc are. It would get rid of all those strange accounting distortions and bring us back to common-sense accounting and what people would understand carbon budgets and our own carbon emissions to be.
That is why I am delighted that the amendment has been brought forward. It concerns a matter that I have felt strongly about since 2008, when the Climate Change Bill became an Act and, at the time, was a world leader. This gives us an opportunity to cement that leadership in this area, even if, unfortunately, we are rather backtracking in others.
My Lords, I thank noble Lords who have participated in the debate on this part of the Bill. I shall take the amendments in the order that they are marshalled.
With regard to Amendment 78S, we are committed to ensuring that the UK continues to do its part to tackle climate change, in line with the Climate Change Act, but we want to do so as cost-effectively as possible to make sure that our energy is secure and affordable, as well as lower carbon. We believe that locking ourselves into an expensive and inflexible target for the power sector is not the way to do that. There are just too many things that we cannot predict about how the energy system will develop up to 2030, and the costs of getting it wrong would be picked up by consumers for many years to come.
The amendment would, in effect, require the Government to introduce an additional power sector target in the form of an obligation on electricity suppliers in the United Kingdom. As has been referred to, the Conservative manifesto, upon which this Government were elected, stated that we will not support additional distorting and expensive power sector targets, but it is our belief that this is what the amendment would lead to.
Noble Lords will know that setting a decarbonisation target for the power sector, which would be the effect of the amendment, was debated in this House during the passage of the then Energy Bill 2013, which has been referred to, and the then Infrastructure Bill 2015. The topic of power sector decarbonisation targets was also discussed during the Committee stage of this Bill. In that discussion, I set out the Government’s intention not to set a power sector decarbonisation target, following that manifesto pledge. As has been confirmed, I also wrote to noble Lords after that further reiteration of the position, explaining that, instead, the Government have already committed to set out totals for the levy control framework beyond 2020, providing a basis for electricity investment into the next decade. I shall not restate the position on contracts for difference, as I think it is already clear that we are committed to making a statement on that this autumn. Therefore, I know that noble Lords will be familiar with the arguments against setting a target such as this.
We have an extensive range of targets at the domestic, EU and international levels. These require action across the economy to meet targets in 2020, 2030 and 2050 on carbon, renewables and energy efficiency. Domestically, we have a legally binding target to reduce greenhouse gas emissions by 80% by 2050. We have carbon budgets setting out targets to 2027 and will be setting a further budget next year, covering the period to 2032. We are also subject to EU targets on carbon, which cover 2020 and 2030. On renewables, these run to 2020 and include interim milestones along the way. Internationally, we are subject to the requirements of the Kyoto Protocol and the compliance periods that these set up.
These targets are comprehensive, far-reaching, and mutually reinforcing. What makes the United Kingdom unusual by comparison with our European partners is the fact that we have a carbon budget system with comprehensive reporting and independent scrutiny. Investors want to know that we have clear, credible and affordable plans. The CBI has said that clarity on future financial support for low-carbon electricity will be more important than targets in driving investment. That is why we have said that we will set out totals for the levy control framework beyond 2020, providing a basis for electricity investment into the next decade, as well as setting out plans in the autumn in respect of future contract for difference allocation rounds.
In relation to Amendment 78T, I acknowledge that it is important that developers and investors have some foresight as to the frequency of CFD allocation rounds. However, this must be balanced with LCF budget availability, which, as noble Lords know, is funded by a levy on consumer bills. The function of the levy control framework is to limit the amount paid by consumers. It is therefore crucial that the Government are able to take decisions in the light of the latest evidence around deployment projections and costs.
The United Kingdom is continuing to make progress towards the 2020 renewables target of 15% of final energy consumption from renewable sources, with provisional 2014 figures showing that we are on target to meet the 2020 target. No carbon intensity targets for electricity generation have been set in order that we retain flexibility around how we achieve our 2050 target. Committing to annual CFD allocations, even only in certain circumstances, would inhibit the Government’s ability to respond to evidence around levels of deployment in renewable electricity generation, costs to consumers and opportunities in other sectors, such as heat and transport.
The noble Baroness’s amendment would unnecessarily commit the Government to a course of action that would neither benefit the consumer nor provide any certainty to renewable energy generators or investors. We are committed to our energy targets and continue to make progress towards meeting them. For this reason, I do not accept the amendment.
Amendment 78UA seeks to make a fundamental change to the Climate Change Act which—as, in fairness, I think the noble Baroness acknowledged—runs contrary to how the carbon budget regime was designed and implemented by the last Labour Government. The noble Baroness played a significant part in that, I know. I think that this is much more than a small, technical amendment and it has huge implications for the Climate Change Act. It changes the focus of the United Kingdom’s approach to decarbonisation and, I believe, sends a wrong message about our faith in the EU emissions trading system. I may have misquoted the noble Baroness in terms of it being a radical change. If I did, I apologise. I think that it is a radical change. She is shaking her head, so I have misinterpreted her position and I apologise for that.
We believe that the amendment would make a fundamental change to the basis of carbon budgets and, if it were accepted, it is likely that we would need to revisit the levels of all current budgets. It would be an unnecessarily and overly burdensome process, as carbon budgets reflect the EU ETS.
Instead, we want to focus on driving the action to deliver decarbonisation at least cost. We are committed to ensuring that the United Kingdom continues to do its part to tackle climate change in line with the Climate Change Act and international obligations. However, we want to do this as cost-effectively as possible to make sure that our energy is secure and affordable, as well as lower carbon.
The EU emissions trading system is a central component of the United Kingdom Government’s policy for delivering emissions reductions in the UK and further afield in a cost-effective and technologically neutral way. The EU emissions trading system is designed to deliver least-cost decarbonisation of particular sectors across the EU, and we are supportive of this approach. We are also supportive of international efforts to price carbon, such as the EU emissions trading system, which is the first, and largest, cap-and-trade system of allowances for emitting greenhouse gases in the world.
We recognise that the EU emissions trading system requires reform, and the United Kingdom has been one of the leading advocates of measures to strengthen the scheme, such as negotiating the market stability reserve. However, on what is, I think, at the very least a significant change, we need to beware of throwing out the baby with the bath-water. We do not want to imply a loss of faith in the EU emissions trading system as a means of achieving least-cost decarbonisation by decoupling our carbon budget regime from it. Instead, we are focused on continuing to work with other member states to strengthen the EU emissions trading system.
Finally, it must be noted that our approach is in line with the Committee on Climate Change’s advice on the use of emissions trading system allowances. It renewed its advice in 2013 that we should include emissions trading system allowances in the net carbon account and proposed an approach for doing so, which the then Government broadly accepted.
My noble friend Lord Howell made significant points during the debate about ensuring that we keep energy affordable. I think that this would jeopardise that, at the very least.
In the light of those comments, I hope that the noble Baroness and the noble Lord have found my explanation reassuring and will not press their amendments.
My Lords, I am grateful to the Minister for his response and to the noble Lord, Lord Teverson, for his support for this amendment and for lending his name to it.
I am afraid that I am not reassured. I have listened to and understood the argument. However, it is not a radical change but an important change—there is a distinction there.
In answer to the specific question from the noble Lord, Lord Howell, about whether it will be cheaper to do it this way, I honestly believe that, for UK plc, it will be. At present, the way the budgets work is that, essentially, we pay other people to decarbonise and then we import the certificates. That can be done for a while, and it makes economic sense to do so. In fact, for the first three carbon budgets, while the system has been bedding down, it probably made sense to use a traded system—the rules and the allocations from Europe were clearer and we were all finding our way to see whether the EU ETS would deliver. The closer that we get to our 2050 target, the more that that approach starts to be a false economy. We find then that, potentially, we are repeatedly paying other countries to decarbonise and not investing in our own country.
I can follow the argument that the noble Baroness is making very clearly. However, does she not agree that the great danger with the proposal is that it takes away the flexibility of being able to use the trading system? At the moment, it does not have to be used but it can be used if it is appropriate. If we were to go down this path, we would be throwing away that tool.
I am grateful to the Minister for that question. However, that is not the case. There are two versions of flexibility in the Climate Change Act: there is an overarching flexibility created by the budget system, and there is a flexibility that the Government maintain to settle their accounts using credits that they can then take from the EU budget that they are given, by simply not auctioning them, or purchase from offsets that are relatively cheap. There is always a limited amount of offsetting that the Government are able to do if they find themselves out of an account. This would not change that; it simply changes how we count emissions and what counts towards the budget. In this sense, we are saying that actual emissions—what happens in our territorial waters —is what we count. Then, we do the settling up, using credits, to a certain extent, as the budget management system. That is an important point and I hope that people can follow it.
As to whether this would take us out of step with other countries, as I have said, other countries use actual accounts for their targets. Germany is the most obvious example, where there are domestic climate change targets that go beyond European targets. There is a reason for that: Germany is investing in business, infrastructure, companies and enterprise that will be future proofed and provide an export market long into the future. Germany has been very smart about that. We, on the other hand, have a slightly more liberalised market view. In this case, because the ETS is not working as it was meant to, that is potentially damaging our ability to stay within our targets, to do so cost-effectively and to drive investment here. We want to see jobs here and money flowing here, not necessarily pass money overseas for the abatement that someone else has invested in.
For those reasons, I believe that this is an important but not radical move that squares the circle. In response to Amendment 78S, the Minister said that we do not want to set any more distorting new targets in the power sector. I am happy to concede that point. However, this is a very good way of doing what we all agree that we need to do, which is to create investor certainty that this is an enterprise that we remain committed to. As we get closer and closer to that 2050 target, we need to start looking not just at what is happening Europe-wide but at what is happening in the UK economy, so that we are benefitting from the supply chains, the investment and the projects happening here.
I hope that I have made it quite clear why I think this is important, why it is timely and why it has arisen in the course of this Bill. I am encouraged by the support that I have seen from the House. I feel confident that I can answer the question from the noble Lord, Lord Howell: this will be cheaper in the long run; it will be cheaper for UK plc to do this in a way that enables us to drive investment here. For those reasons, I am minded to test the opinion of the House on Amendment 78UA.
Amendment 78S withdrawn.
Amendments 78T not moved.
Amendment 78U withdrawn.
Amendment 78UA (in substitution for Amendment 78U)
78UA: After Clause 66, insert the following new Clause—
“Emissions trading: United Kingdom carbon account
In section 27 (net UK carbon account) of the Climate Change Act 2008, after subsection (2) insert—“No carbon units deriving from the operation of the EU Emissions Trading System may be credited to or debited from the net United Kingdom carbon account for any period commencing after 31 December 2027.””
78V: After Clause 66, insert the following new Clause—
Fossil fuelled generating plant granted 15 year capacity contracts under the capacity mechanism established under the Energy Act 2013 shall be subject to—(a) a carbon price;(b) a requirement to fit best available technologies to mitigate air pollutants; and(c) the Emissions Performance Standard as established in the Energy Act 2013.”
My Lords, I reassure the Minister that this is not a matter on which I intend to seek the opinion of the House. It is an issue which I believe we need to discuss in the context of an energy Bill, but I hope that a discussion can be had outside the Chamber. I just wanted to alert the House to the issue because it is materially relevant to the energy policy as it is being played out.
One pillar of the Energy Act 2013 was the introduction of a new support mechanism to help fund extra capacity in the market, designed to complement the contracts being signed for low carbon. It is a very detailed policy with many aspects.
It has come to my attention that the annual auctions of new capacity under the capacity mechanism are bringing forward rather a lot of applications for 15-year contracts from distributed, very small-scale generating plant. Many of those plants are diesel-powered and many others are open-cycle gas turbines of a small scale which are much less efficient than the full-scale CCGTs that are normally built for capacity.
The amendment was tabled to enable us to have a debate on the Floor of the House on an issue which is time-critical, because the next auction will take place in December. Three gigawatts’ worth of small generating plant are prequalified. That is on top of a number of megawatts that were granted in the previous auction that took place last year. So my fear is that, over time, we are starting to see a substantial amount of distributed thermal energy coming forward under the capacity mechanism. Of course, the capacity mechanism creates an incentive to new-build. Having read the Government’s gas strategy, I believe that the Government intended those 15-year contracts to be made available to larger-scale, very efficient, state-of-the-art gas turbines to be there as back-up and to provide us with base-load power. Instead of that, we are seeing coming forward, as a result of significant market distortion, investment in much smaller kit that is far less efficient and much more polluting. The danger is that this drift towards distributed diesel generators and open-cycle gas will significantly affect our ability to decarbonise.
One argument that will be made will be that such generators are there just to catch the peaks and will not operate more than that. However, there is nothing in government policy or legislation that prevents them operating for far longer periods. My fear is that, because of the scale of these plants, they will not be paying a carbon price: they are not subject to the EU carbon price, nor are they subject to the Government’s carbon price support mechanism, which tops up the EU price. That is a significant distortion that we should be mindful of. Markets are nothing if not efficient and nothing if not good at finding loopholes. It will be an unintended consequence of the capacity mechanism rules as they are currently drafted that this will be the market’s answer to our capacity issues.
I visit my mother-in-law in India. Building an energy system in which diesel generators are providing back-up is not a modern-economy solution. There are many other ways to provide safe and reliable power. We should not rely on diesel generation, which is much more what you would find in developing countries that have fewer options and are not able to deliver secure and stable supplies of electricity. We have been doing that for decades and have a world-class grid that enables us to do it. So we are concerned that while we are not letting contracts for clean power, we are continuing to let contracts for traditional fossil-fuelled power, and that there is this loophole in the capacity mechanism rules which allows a far greater volume than anyone would have anticipated of small distributed diesel generators.
In addition to paying no carbon price, such generators also have very loose air-quality standards applied to them—far looser than are applied to larger plant. I do not need to bring the House’s attention to the fact that we have had a rather high-profile problem with diesel in the past few months. “Dieselgate” and VW’s cheating on the standards is a serious issue which helps to explain why we might be struggling to hit our legally binding air-quality standards in the European Union, because if everyone is cheating it is no wonder that our emissions are higher than we thought they should be according to our inventory calculations. So we have an air-quality issue; in fact, the Government have been taken to court over their failure to comply with those air-quality standards. Having a large number of distributed diesel generators operating potentially for long periods through the winter months will not do anything to alleviate our air-quality problems. There is a definite correlation between exposure to the particulates that emerge from diesel and ill-health, especially in younger and older people. So, not just for climate reasons but for air-quality reasons, we should not allow a huge proliferation of this very inefficient and very polluting smaller generating plant—and that we should be giving them 15-year contracts really concerns me.
We know that all Governments in the UK hold as sacrosanct the fact that if you sign a contract with the private sector, you will not then go back on it. That is a tenet that we hold dear in order to preserve our investor credibility. Once those contracts are signed, there will be nothing we can do for 15 years, which worries me greatly. I am not expecting a full and detailed response from the Minister today; I hope that I can just convey the reason for my concern. I hope that I will hear some reassurance that the department is alive to this problem, that it is indeed seen as an unintended consequence and a loophole, and that we are not simply saying, “Ah, well, that’s what the market’s delivering”. That is not sufficient, especially as there are distortions in relation to carbon and not paying the carbon price, and especially in relation to air quality.
Amendment 78V would therefore require that any fossil fuel-generating plant granted a 15-year capacity contract under the capacity mechanism created under the Energy Act 2013 would be subject to a carbon price, so that the Government would apply a taxation policy to such plant; that such plant would be required to fit best-available technology to mitigate air pollutants; and that the Government’s emissions performance standard as was introduced in the Act would apply as well, which would act as a constraint and a break on the number of hours that such stations could run—it would not be a full answer to the problem because it would still allow them to run for considerable periods, but certainly it would not allow them to run unimpeded for an entire year.
Given the position of leadership that the UK rightly enjoys in terms of our sensible policies for decarbonisation and our Climate Change Act, the idea that the energy policy in front of us should lead to us relying on diesel generators fills me with alarm. I hope that we can do something collectively, across all sides of the House, to address this issue before the contracts are signed in December. I think that I have said enough. I do not wish to detain the House any further and I look forward to hearing a response from the Government.
My Lords, I shall not detain the House very long. I am not sure that the amendment as written is precisely right, but the important principle that comes out of it—I come back to what I said briefly at Second Reading—is that, at the end of the day, the UK economy has to crowd out coal by other generating fuels. Before the election, the Prime Minister, the then Deputy Prime Minister and the then leader of the Opposition together bravely pledged that coal should come out of UK generating capacity. For whatever reason, after the election only one of those people is left in office—the Prime Minister—so on his shoulders rests that responsibility as our Prime Minister to achieve that pledge.
I do not see a great deal of movement from the Government in fulfilling it. It needs to be addressed and this amendment goes some way towards that. But it is a much larger issue which we could solve so easily, probably by using an active emissions performance standard rather than one that is fixed, as it is at the moment, in primary legislation. I hope that the Government—indeed, the Prime Minister and the Cabinet Office—will bring forward proposals to deliver this. In Scotland, they talk about vows; I see this as a vow that is fundamental to our climate change obligation not just to the UK but to the rest of the world.
My Lords, I thank all noble Lords who have participated in the debate on Amendment 78V and the noble Baroness, Lady Worthington, for introducing it. We missed each other late last night to discuss this amendment, but I am grateful that she rang before breakfast this morning so that we could discuss it then. That is how seriously we both take our jobs. Again, I am grateful to the noble Baroness because otherwise it would have taken us on the blind side that the amendment was coming up today. I am also grateful to the noble Baroness for what she has said in relation to this issue and for confirming that she will not push it to a vote. The comments made by the noble Lord, Lord Teverson, are right, but as framed there would be difficulties with the amendment anyway.
Perhaps I may say something about the purpose of the capacity market for the benefit of the House and then say something about the particular issue that has been raised. The purpose of the capacity market is to ensure security of electricity supply by providing all forms of capacity with the right incentives to be on the system and to deliver energy when it is needed. The first capacity market auction was successfully concluded in December 2014, contracting 49.3 gigawatts of capacity at a clearing price of £19.40 per kilowatt—and with that I have addressed the particular and very valid point raised by the right reverend Prelate. The outcome was great news for consumers, as fierce competition between participants drives down costs. The results will ensure that enough of our existing capacity will remain open at the end of the decade, as well as unlocking new investment.
I accept that there is an issue about emissions. Other government policies that were referred to by the noble Baroness, Lady Worthington, including the emissions performance standard and the carbon price floor, limit potential emissions from thermal plant for larger producers in keeping with our aims of decarbonising the power sector. For example, the emissions performance standard for larger generators limits carbon emissions to around half of that produced by unabated coal. The carbon price floor obviously provides an incentive for investment in low-carbon electricity generation. I accept that, as things stand, small generators are not covered by that. The department is aware of the issue, but we believe that the EPS represents the best way of looking at the smallest generators, perhaps within the review cycle for the EPS rather than in the context of the capacity market alone because that clearly seeks to ensure that the capacity we need is delivered. I am happy to discuss this further outside the Chamber. It is worth recognising that, at least at present, most of the small generators in the capacity market run for only a limited number of hours per year, but I appreciate that there is no guarantee on that. However, I recognise that this is an issue.
I turn now to what might have been the point that, given his background, the noble Lord, Lord Teverson, was referring to. There is not a state aid issue here. The capacity market state aid clearance is based on the current design of the mechanism, including the concept of technology neutrality, so accepting the amendment in its present form would have required state aid renotification, which as we know typically takes nine months or longer. That would have introduced uncertainty into the market and would have caused problems. But I am happy to continue a discussion on how to tackle what is a very real issue, and I thank the noble Baroness for her comments.
I thank the Minister for his response, and our conversation was welcome just so that this did not come completely out of the blue. I am reassured by his comments and I think that this is something we can work on together to try to find a solution. I am certain that the wording I came up with was not perfect.
I would just say that state aid absolutely does require technology neutrality, and it is something that we need to think about in general for the whole of the EMR Bill. State aid clearance was on the basis of technology neutrality and that relates to the CFDs that we let as much as the capacity mechanism. I am grateful to the noble Lord for indicating that we can continue to work on this, and I am happy to withdraw the amendment.
Amendment 78V withdrawn.
Clause 67: Regulations
Amendments 79 to 82
79: Clause 67, page 39, line 24, leave out paragraph (b)
80: Clause 67, page 39, line 25, at end insert “or
( ) regulations under section (Disclosure permitted after specified period)(1),”
81: Clause 67, page 39, line 25, at end insert—
“( ) regulations under section (Disclosure by OGA to certain persons)(6),”
82: After Clause 67, insert the following new Clause—
“Regulations and orders: disapplication of requirements to consult the OGA
(1) This section applies where the Secretary of State is required by this Act, the Petroleum Act 1998 or the Energy Act 2008 to consult the OGA before exercising a power to make regulations or an order.
(2) The requirement does not apply in relation to the first exercise of the power in the period of one year beginning with the date on which section 1 comes into force.”
Amendments 79 to 82 agreed.
Clause 68: Commencement
82A: Clause 68, page 39, line 34, leave out “This Part comes” and insert “Sections 66, (Onshore wind power: circumstances in which certificates may be issued after 31 March 2016) and this Part come”
Amendment 82A not moved.
Amendment 82B not moved.
Clause 69: Short title and extent
83: Clause 69, page 40, line 3, after “amendment” insert “(other than an amendment of Part 1A of the Petroleum Act 1998)”
Amendment 83 agreed.
After the Schedule
84: After the Schedule, insert the following new Schedule—
“ScheduleAbandonment of offshore installationsPetroleum Act 19981 Part 4 of the Petroleum Act 1998 (abandonment of offshore installations) is amended as follows.
2 Before section 29 insert—
“28A Restriction on abandonment
(1) A person to whom a notice may be given under section 29(1) in relation to an offshore installation or submarine pipeline may not abandon, or begin or continue the decommissioning of, the installation or pipeline unless an abandonment programme approved by the Secretary of State has effect in relation to the installation or pipeline.
(2) A person who without reasonable excuse contravenes subsection (1) is guilty of an offence.”
3 (1) Section 29 (preparation of programmes) is amended as follows.
(2) After subsection (1) insert—
“(1A) The power to give a notice under subsection (1) is exercisable—
(a) on the Secretary of State’s own motion, or(b) at the request of any person to whom the notice may be given (whether or not the notice is given to that person).”(3) After subsection (2) insert—
“(2A) A person to whom a notice under subsection (1) is given—
(a) must consult the OGA before submitting the abandonment programme to the Secretary of State, and(b) must frame the programme so as to ensure (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) that the cost of carrying it out is kept to the minimum that is reasonably practicable in the circumstances.(2B) When consulted under paragraph (a) of subsection (2A) the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) how to comply with paragraph (b) of that subsection.”(4) In subsection (3), after “such” insert “other”.
4 (1) Section 32 (approval of programmes) is amended as follows.
(2) After subsection (2) insert—
“(2A) The modifications or conditions may (in particular) include modifications or conditions—
(a) which are intended (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) to reduce the total cost of carrying out the programme, provided that they do not increase the total costs to be met by any person who is to be subject to obligations under the programme or under any other abandonment programme;(b) requiring the persons who submitted the programme to carry out and publish or make available to the Secretary of State and the OGA a review of the programme and its implementation including, where relevant, recommendations as to the contents and implementation of future abandonment programmes.”(3) At the end insert—
“(6) Before reaching a decision under this section the Secretary of State must—
(a) consult the OGA, and(b) take into account the cost of carrying out the programme that has been submitted and whether it is possible to reduce that cost by modifying the programme or making it subject to conditions.(7) When consulted under subsection (6)(a), the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) whether section 29(2A)(b) has been complied with and, if it has not been, modifications or conditions that would enable it to be complied with.”5 In section 33 (failure to submit programme), after subsection (3) insert—
“(3A) When preparing an abandonment programme under this section the Secretary of State must—
(a) consult the OGA, and(b) frame the programme so as to ensure (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) that the cost of carrying it out is kept to the minimum that is reasonably practicable in the circumstances.(3B) When consulted under paragraph (a) of subsection (3A), the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) how to comply with the requirement in paragraph (b) of that subsection.”6 (1) Section 34 (revision of programmes) is amended as follows.
(2) After subsection (4) insert—
“(4A) A person who makes a proposal under subsection (1) that is likely to have an effect on the cost of carrying out the programme must frame it so as to ensure (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) that the cost of carrying out the programme as proposed to be altered is kept to the minimum that is reasonably practicable in the circumstances.
(4B) Where the Secretary of State makes a proposal under subsection (1)(a) the purpose of which is to reduce the total cost of carrying out a programme, the proposal may not increase the total costs to be met by any person who is to be subject to obligations under the programme or under any other abandonment programme.”
(3) After subsection (7) insert—
“(7A) If it appears to the Secretary of State that what is proposed under subsection (1) is likely to have an effect on the cost of carrying out the programme, the Secretary of State must, before making a determination under subsection (7)—
(a) consult the OGA, and(b) take that effect into account.(7B) When consulted under subsection (7A)(a) the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) whether subsection (4A) applies and, if so, whether it has been complied with.”7 After section 34 insert—
“34A Amendment of programmes
(1) This section applies where an abandonment programme approved by the Secretary of State includes provision by virtue of which the programme may be amended.
(2) A person who proposes to make an amendment under such a provision that is likely to have an effect on the cost of carrying out the programme must frame the amendment so as to ensure (whether by means of the timing of the measures proposed, the inclusion of provision for collaboration with other persons, or otherwise) that the cost of carrying out the programme as proposed to be amended is kept to the minimum that is reasonably practicable in the circumstances.
(3) If it appears to the person who proposes to make the amendment that subsection (2) applies, the person must consult the OGA before making the amendment.
(4) When consulted under subsection (3) the OGA must (in particular) consider and advise on—
(a) alternatives to abandoning or decommissioning the installation or pipeline, such as re-using or preserving it, and(b) whether subsection (2) applies and, if so, whether it has been complied with.(5) Any person who has the function of approving amendments made under a provision mentioned in subsection (1) must, when exercising the function, take into account the effect of the proposed amendment on the cost of carrying out the programme.”
8 After section 36 insert—
“36A Reduction of costs of carrying out programmes
(1) This section applies where an abandonment programme approved by the Secretary of State has effect in relation to an installation or pipeline.
(2) The Secretary of State may, for the purpose of reducing the total cost of carrying out the programme, by written notice require any person who submitted the programme to take, or refrain from taking, action of a description specified in the notice.
(3) The notice may, in particular, require—
(a) changes to the times at which the measures proposed in the programme are to be carried out;(b) the persons who are under a duty to secure that the programme is carried out to collaborate with other persons.(4) The programme, and any condition to which it is subject, has effect subject to any notice given under this section.
(5) A notice given under this section may not increase the total costs to be met by any person who is to be subject to obligations under the programme or under any other abandonment programme.
(6) The Secretary of State may not give a notice to a person under this section without first giving the person an opportunity to make written representation as to whether the notice should be given.
(7) A person to whom a notice is given under this section who without reasonable excuse fails to comply with the notice is guilty of an offence.
(8) If a notice under this section is not complied with, the Secretary of State may—
(a) do anything necessary to give effect to the notice, and(b) recover from the person to whom the notice was given any expenditure incurred under paragraph (a).(9) A person liable to pay any sum to the Secretary of State by virtue of subsection (8) must also pay interest on that sum for the period beginning with the day on which the Secretary of State notified the person of the sum payable and ending with the date of payment.
(10) The rate of interest payable in accordance with subsection (9) is a rate determined by the Secretary of State as comparable with commercial rates.”
9 In section 37 (default in carrying out programmes), after subsection (1) insert—
“(1A) If it appears to the Secretary of State that the proposed remedial action is likely to have an effect on the cost of carrying out the programme, the Secretary of State must—
(a) consult the OGA before giving a notice under subsection (1), and(b) take that effect into account when deciding whether to give the notice.(1B) When consulted under subsection (1A)(a), the OGA must consider and advise on the likely effect of the proposed remedial action on the cost of carrying out the programme.”
10 In section 40 (offences: penalties)—
(a) after “section” insert “28A,”, and(b) after “33,” insert “36A,”.11 (1) Section 41 (offences: general) is amended as follows.
(2) In subsection (1)—
(a) after “section” insert “28A,”, and(b) after “33,” insert “36A,”.(3) In subsection (2)—
(a) after “section” insert “28A,”, and(b) after “33,” insert “36A,”.(4) In subsection (3)—
(a) after “section” insert “28A,”, and(b) after “33,” insert “36A,”.(5) In subsection (5), after “section” insert “28A, 36A or”.
12 (1) Section 42 (validity of Secretary of State’s acts) is amended as follows.
(2) In subsection (2), after paragraph (e) insert—
“(ea) the giving of a notice under section 36A(2);”.(3) In subsection (5), after paragraph (e) insert—
“(ea) in relation to the giving of a notice under section 36A(2), means the requirements of section 36A(6);”.Energy Act 200813 (1) Section 30 of the Energy Act 2008 (abandonment of carbon storage installations) is amended as follows.
(2) In subsection (1), after “subsections” insert “(1A),”.
(3) After that subsection insert—
“(1A) For the purposes of subsection (1), the amendments made to Part 4 of the 1998 Act by Schedule (Abandonment of offshore installations) to the Energy Act 2016 are to be disregarded.”
(4) For subsection (4A) substitute—
“(4A) The power in subsection (4)—
(a) may (in particular) be exercised to make modifications corresponding to the amendments made by Schedule (Abandonment of offshore installations) to the Energy Act 2016, and(b) is subject to section 30A.””
Amendment 84 agreed.
In the Title
Amendments 85 to 87
85 line 2, after “infrastructure;” insert “to make provision about the abandonment of offshore installations, submarine pipelines and upstream petroleum infrastructure;”
86 line 2, after “infrastructure;” insert “to extend Part 1A of the Petroleum Act 1998 to Northern Ireland;”
87 line 2, after “infrastructure;” insert “to make provision about the disclosure of information for the purposes of international agreements;”
Amendments 85 to 87 agreed.