The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, with permission I shall now repeat a Statement made by my right honourable friend the Secretary of State for Energy and Climate Change about ending new subsidies for onshore wind.
“Mr Speaker, with your permission I would like to make a Statement on ending new subsidies for onshore wind. This Government are committed to meeting objectives on cutting carbon emissions and to continuing to make progress towards the United Kingdom’s 2020 renewable energy targets. The renewable electricity programme aims to deliver at least 30% of the UK’s electricity demand from renewables by 2020. We are on course to achieve this objective. Renewables already make up almost 20% of our electricity generation and there is a strong pipeline to deliver the rest.
As we decarbonise, it is imperative that we manage the costs to consumers. Although renewable energy costs have been coming down, subsidies still form part of people’s energy bills and, as the share of renewables in the mix grows, the impact gets proportionally larger. It is one of this Government’s priorities to bring about the transition to low-carbon generation as cost effectively and securely as possible. The levy control framework, covering the period up to 2020-21, is one of the tools to help achieve this. It limits the impact of support for low-carbon electricity on consumer bills.
We have a responsibility to manage support schemes efficiently within the levy control framework to ensure that we maintain public support for the action we are taking to bring down carbon emissions and combat climate change. Government support is designed to help technologies stand on their own two feet, not to encourage a permanent reliance on subsidy. We must continue to make tough judgments about what new projects get subsidies. Onshore wind has deployed successfully to date and is an important part of our energy mix.
In 2014, onshore wind made up around 5% of electricity generation, supported by around £800 million of subsidies. At the end of April 2015, there were 490 operational onshore wind farms in the United Kingdom, comprising 4,751 turbines in total. These wind farms have an installed capacity of 8.3 gigawatts—enough to power the equivalent of more than 4.5 million homes.
The electricity market reform delivery plan projects that we require between 11 and 13 gigawatts of electricity to be provided by onshore wind by 2020 to meet our 2020 renewable electricity generation objective while remaining within the limits of what is affordable. We now have enough onshore wind in the pipeline, including projects that have planning permission, to meet this requirement comfortably. Without action, we are very likely to deploy beyond this range. We could end up with more onshore wind projects than we can afford, which would lead to either higher bills for consumers or other renewable technologies, such as offshore wind, losing out on support.
We need to continue investing in less mature technologies so that they realise their promise, just as onshore wind has done. It is therefore appropriate to curtail further subsidised deployment of onshore wind, balancing the interests of onshore developers with those of bill payers. This Government were elected with a commitment to end new subsidies for onshore wind and also to change the law so that local people have the final say on onshore wind applications. We are now acting on that commitment.
Alongside proposals outlined within the new energy Bill to devolve decision-making for new onshore wind farms out of Whitehall, my right honourable friend the Secretary of State for Communities and Local Government has set out further considerations to be applied to proposed wind energy development in England so that local people have the final say on onshore wind farm applications.
I set out to Parliament on 18 June proposals to end new subsidies for onshore wind, specifically in relation to the renewables obligation, which will be closed to new onshore wind from 1 April 2016, a year earlier than planned. My department’s analysis indicates that, after taking account of an early closure, onshore wind deployment under the renewables obligation will be in the region of 11.6 gigawatts. With this capacity, and that of onshore wind projects that have received support through the new contracts for difference, we expect around 12.3 gigawatts of onshore wind to be operating in the United Kingdom by 2020, supported by the levy control framework, providing around 10% of electricity generation. This puts us above the middle of the deployment range set out in the EMR delivery plan—our best estimate of what we would need to meet the planned contribution from renewable electricity to our 2020 targets.
I have proposed a grace period which would continue to give access to support under the RO to those projects which, as of 18 June 2015, already have planning consent, a grid connection offer and acceptance, and evidence of land rights for the site on which the projects will be built. We estimate that around 7.1 gigawatts of onshore wind capacity proposed across the United Kingdom will not be eligible for the grace period and are therefore unlikely to go ahead as a result of the announcement of 18 June. That equates to around 250 projects, totalling about 2,500 turbines now unlikely to be built.
Therefore, by closing the RO to onshore wind early, we are ensuring that we meet our renewable electricity objectives, while managing the impact on consumer bills and ensuring that other renewables technologies continue to develop and reduce their costs. Consumer bills will not rise because of this change. Indeed, those onshore wind projects unlikely now to go ahead would have cost hundreds of millions of pounds. I believe that this draws the line in the right place.
In advance of this announcement, I and other Ministers and officials have been discussing these proposals with the devolved Administrations in Wales, Northern Ireland and Scotland. I now want to hear the further views from devolved Administrations, and also industry and other stakeholders. This is just the beginning of the process and we will continue to consult them as we move towards implementation.
The changes to the renewables obligation do not affect remote island wind proposals, which would not have been in a position to receive RO subsidy even under previous timelines. I will say more about how future CfD projects will be treated in due course. But I am particularly conscious of the fact that 68% of the onshore wind pipeline relates to projects in Scotland. I will continue to consult colleagues in the Scottish Government. Indeed, I am meeting the Scottish Energy Minister, Fergus Ewing, on Wednesday. By implementing these changes through primary legislation, they will be subject to full parliamentary scrutiny, including from Members representing Scottish constituencies.
With regard to contracts for difference, we have the tools available to implement our manifesto commitments on onshore wind and will set out how we will do so when announcing plans in relation to further CfD allocations. I will also shortly be considering options for future support for community onshore wind projects that might represent one or two turbines through the feed-in tariffs—FITs—as part of the review that my department is conducting this year. I do not wish to stand in the way of local communities coming together to generate low-carbon electricity in a manner that is acceptable to them, including through small-scale wind capacity. However, that action must be affordable as well as acceptable.
Clean energy does not begin and end with onshore wind. Onshore wind is an important part of our current and future low-carbon energy mix, but we are reaching the limits of what is affordable and what the public are prepared to accept. We are committed to meeting our decarbonisation objectives. The changes that I have outlined to Parliament will not change this. I look forward to having meaningful discussions with industry, with other stakeholders and with colleagues in the House and in Scotland, Wales and Northern Ireland on how we move forward”.
Lord Purvis of Tweed (LD)
My Lords, I eagerly anticipate what the Minister will say after our contributions. There is no doubt that the Conservatives, now governing alone, are sending very poor signals to the renewable energy sector. Therefore, although it is regrettable, I thank him for making that very clear at the beginning of this Administration.
The repeated Statement does not include the text that the Secretary of State added at the Dispatch Box, in which he paid tribute to the Conservative MPs who have been the most vociferous about onshore wind—a part of the energy mix that receives less support than Hinkley Point but is part of an accelerating part of our whole renewable energy generation mix.
The Government say that they were elected with a commitment to end new subsidies, but surely not to do so prematurely and without consultation, creating confusion among the investor community and industry, causing concern among those whose jobs may be now at risk, and putting in doubt our carbon reduction ambition. Niall Stuart of Scottish Renewables—where, as the Statement says, 68% of those in the pipeline are located—is right to say that the Government’s actions are bad for jobs and for investment.
Given that the Government plan for this to be implemented by primary legislation, what exactly do they want to hear as part of the consultation? It seems very obvious that they have made up their mind, not only on the policy but also on how it will be delivered. How can it be the “beginning of the process”, as the Statement said, when the Government seem to have a closed mind? What if Parliament believes that there is too much confusion in the grace period, and that before making the announcement there should have been consultation with the stakeholders and others involved who potentially could lose their jobs and their income? What if Parliament believes that this should be implemented only after Royal Assent—and when is that anticipated, because it is not clear?
The Secretary of State’s Statement in another place stated that any developer or investor now needs to contact the department to find out if they may be part of the estimated 250 projects. I hope that noble Lords will appreciate that I read that with a degree of incredulity. How on earth can it be good government policy to announce it, state how many they estimate are in the pipeline, and even say that more than two-thirds of those are in Scotland, and that any investor or developer who wishes to know if they are part of this now needs to contact the department to find out whether it will indicate whether they are to be in the grace period? The Secretary of State said that this may take some time. Can the Minister say how long it will be before we get clarity and when the list of sites will be published?
Finally, the Secretary of State was also unable to say—and I regret that the Minister has not indicated in the repeat, either, of course—whether a jobs and supply-chain sector impact assessment was carried out before this decision was made. Surely this must have been done. The Government cannot make such a decision without doing some form of impact assessment about the effect on people’s livelihoods, on reputation within the investor community and on the 68% of those in the pipeline that are in Scotland. If an assessment has not been carried out, it is an astonishing piece of work from this Government. Will the Minister confirm whether an assessment has been carried out and will he publish it?
Lord Bourne of Aberystwyth
My Lords, I thank the two contributors, the noble Baroness, Lady Worthington, and the noble Lord, Lord Purvis, from their respective Front Benches. I will try to deal with the points they made. In essence they seemed to be making the same point: that they had been taken by surprise by this announcement. I cannot imagine why. The policy was in the manifesto. It was not a dog-whistle policy, as the noble Baroness suggested. We are not in the business of rerunning the general election; we will be doing that in five years’ time—with the inevitable same result if nothing is learnt by the parties opposite. This should not be a surprise to anybody.
To deal with some of the specifics, this will not hit investor confidence. Some £42 billion has been invested in renewables, nuclear and CCS since 2010. I send out the message that renewables are a vital part of the mix of our energy supply and will be into the future. As I said, this policy was in our manifesto and I do not think that anybody should be surprised by it. In terms of industry, you only have to look at Siemens investing money in Hull in the offshore wind industry to know that industry is very well aware of the commitment of this Government to renewables and indeed to the agenda in Paris on climate change.
The noble Baroness said that this could be decided at local level. This is exactly what is happening. There will be further discussion with the devolved Administrations; discussion has already been going on. It is true to say that Scotland is, in terms of the percentage, affected more than the rest of the United Kingdom, as it has been from the benefits—61% of wind energy has been deployed in Scotland, so it represents roughly the same amount. Again, that should not come as a surprise to anybody.
This decision that we have made—the Statement presented in the other place by my right honourable friend the Secretary of State—represents an important way of tackling the fact that if we do not take this action it will result in higher bills and/or other renewables not being brought on stream. In terms of investor impact, there will be new jobs with other renewables—and if we had not taken this action, we would not have been investing in the other renewables.
In relation to contracts for difference, the Secretary of State made it clear that we would be bringing a Statement forward on that. It has been extremely successful in terms of value for money, as I think noble Lords across the House will be well aware.
Viscount Hanworth (Lab)
My Lords, this strikes me as a most deceptive announcement. The deceit lies in the fact that rather than being aimed at reducing the cost to consumers—as it proposes to be—the announcement is in truth aimed at appeasing, as we have heard, a Back-Bench Conservative lobby averse to what it regards as unsightly wind farms. The cost of offshore wind-generated electricity is reckoned to be £120 per megawatt hour, whereas the cost of onshore electricity is reckoned to be £80 per megawatt hour. Clearly, the interests of economic efficiency would be best served by preserving the subsidy for onshore power and reducing that for offshore power. The interests of the environment would be best served by preserving the subsidies for both. Could the Minister tell us how our electricity demand can possibly be met in the absence of onshore power being fostered in the way that we all assumed it would be?
Lord Bourne of Aberystwyth
My Lords, first of all, the noble Viscount makes the same point about this being a response to Back-Bench opinion. This is actually in response to the country’s opinion, as reflected in the Conservative manifesto, which was voted upon at the general election.
The noble Viscount is right about the current cost of offshore wind being more expensive than onshore, although I notice that that difference in cost has sometimes been exaggerated. The cost of offshore wind is falling. Certainly, it is important we realise that, for some of these new technologies, the costs will fall further. Therefore, I am bound to say that this is the reason we have made this decision. It is important that we balance the interests of the bill payer and the interests of new technologies against the fact that onshore wind has been highly successful and will continue to be so. These contracts are on a 20-year basis, so it is not as though wind farms and the contribution that they make will suddenly disappear.
Lord Forsyth of Drumlean (Con)
My Lords, I congratulate my noble friend on this announcement. To the noble Baroness, Lady Worthington, who suggested that he did not understand what was happening in the rest of the United Kingdom, I gently point out that her party was reduced to one seat.
My noble friend said that Scotland had benefited from this onshore wind subsidy, but I have seen the industrialisation of the countryside in Scotland take place, in a country that is absolutely dependent on tourism. That is not just because of the windmills but because of the huge electricity pylons that are required to convey this electricity across the country. This Statement will be very much welcomed.
The other thing that I would like to point out to my noble friend is that, in removing this subsidy, he is ending what has been the biggest transfer of wealth from the poorest in Scotland to the richest in Scotland because of the fact that these subsidies, which are being paid to large landowners, are reflected in the bills of the people who have to meet the cost and are undisclosed. Therefore, I believe that this is a great step forward.
I urge my noble friend to look at the next racket, which is biomass, where people are being paid huge subsidies and given large interest-free loans, again at the expense of ordinary people who cannot afford these capital investments and who have to pay the bills. I hope that this is the first step in a process that sees people in Scotland and in the United Kingdom being treated fairly in this issue of renewables.
Lord Bourne of Aberystwyth
My Lords, I thank my noble friend for that contribution. It is right to say, as he has done, that opinion in Scotland certainly is not all one way and there are split views on the usefulness and so on of onshore wind.
In relation to his more general comment about renewables, the Government are committed to making sure that we have a balance of interests between affordability, security and clean energy. That remains the case. Renewables are very important going forward to ensure that we meet those three aims, as a department and a government.
Lord Campbell-Savours (Lab)
My Lords, there is something that I cannot quite understand. The Minister said that he was going to consult the Scottish Government. What is he consulting on if the decisions have already been taken?
Lord Bourne of Aberystwyth
My Lords, the Secretary of State in another place made it very clear that discussions have been going on with the devolved Administrations about the rollout of the policy, and that will remain the case. On Wednesday, she is meeting Fergus Ewing, the Minister for Energy in the Scottish Parliament, to further those discussions. In relation to one or two comments that have been made about consultation, I should also say that there is a dialogue with industry and interested parties—not consultation but a dialogue—about the rollout in relation to the grace period.
Lord Birt (CB)
My Lords, I declare an interest as a long-term adviser to a fund that invests in many sectors but also in renewable energy.
I can assure the Minister that this will be very damaging to investor confidence. I spend a lot of my time talking to global investors in renewable energy who have been frightened by a number of things. The Minister will know what happened recently in Italy, where the Italian Government retroactively changed the solar regime. A few years previously, something similar happened in Spain. I am asked over and again whether investors can have confidence in the British Government in relation to grandfathering rights and showing consistency in this area, and I am afraid that this will rattle investor confidence in renewables. As the Minister will know, wind farms take a long time—typically eight, nine or 10 years—to go through the process. The announcement today will severely undermine the economics of many companies that have already invested a great deal in wind farms going forward and cannot recoup that investment.
Secondly, can the Minister explain the rationale for picking on this particular form of renewable energy when, as a number of other speakers have made clear, it is by far the cheapest form of renewable energy?
Finally, what is the rationale for allowing local people to have the final say in respect of onshore wind and have that apply here but not in respect of other strategic infrastructure or other kinds of power plants?
Lord Bourne of Aberystwyth
My Lords, in relation to investor confidence, I can only repeat the point that over £42 billion has been invested in renewables since 2010 along with nuclear and CCS. There has been a massive investment of £11.4 billion in two years in the solar PV sector and it remains the case that we are committed to renewables. I cannot speak for the retroactive action in Italy; this is not retroactive.
On the second point made by the noble Lord, he will be aware from mid-Wales just how unpopular these large wind farms can be. That was very much a feature of the last election. That is why it was singled out in the way that it was.
With regard to costs, it is true that the cost of onshore wind is cheaper, but one reason for that is that it was the first in the field and so it is a more developed technology. That is why we are looking at other technologies, and the costs of offshore wind and other costs—solar and so on—are coming down as well.
Lord Kirkwood of Kirkhope (LD)
My Lords, I confirm what my noble friend Lord Purvis of Tweed said earlier—I concur with him in his interpretation of how this will be seen in Scotland from a political point of view. The question is: what assessment was made before this decision was taken about that subject as well as the investment implications?
I agree with the noble Lord, Lord Birt, that it is nonsense to say that this will not affect investor confidence in the future—that is complete nonsense. Wise people such as Keith Anderson of Scottish Power make it perfectly clear what the consequences will be. The Government should have listened to him before they took this decision. To what extent will this decision expose Her Majesty’s Government to compensation claims or judicial review?
Lord Bourne of Aberystwyth
My Lords, I remind the noble Lord—he will know as well as anyone else—of the importance that we attach, as do the people of Scotland, to having a single energy market.
Sorry, I am afraid that I have lost sight of the particular point that the noble Lord made.
Lord Bourne of Aberystwyth
My Lords, the important point about the grace period is that my right honourable friend the Secretary of State has set out what we think is the right balance between the change of policy and shift of emphasis, and the interests of the consumer and the bill payer. We believe that those projects which have planning permission, have a grid connection which has been accepted and have a right of ownership are in a special position, while others are not. My right honourable friend has said in another place that she is happy to enter into a dialogue with the industry, and that is ongoing. It is about getting the balance right, and we feel we have done that. That is one reason why we have not rushed this announcement because we have spent some time on it.
Lord Howell of Guildford (Con)
My Lords, this is welcome in the interests of future energy balance, but can my noble friend clarify exactly which subsidies are to be ended next April? Are they just the RO subsidies, or are we talking about subsidies for back-up power stations—which of course are necessary to make the whole system run—energy access roads, transmission lines, switching stations and grid connections? Or are they merely the RO subsidies rather than the other ones?
Lord Cormack (Con)
My Lords, I must declare an interest as the president of Protect Nocton Fen, a group which has been set up in Lincolnshire to protect us from 20 turbines, each one of which would be twice the height of the cathedral, which is just seven miles away. I thank my noble friend for the Statement, but I would ask him if I can go back to my supporters in Lincolnshire at the weekend and tell them that the tremendous threat to some of the most historic views in the whole of Europe will now be removed.
Lord Bourne of Aberystwyth
I am grateful to my noble friend for that contribution. The interests of consumers and those of people who are concerned about the impact on the landscape have certainly informed the discussions. It is important that we take people with us on energy policy. He is right to cite the example of Lincoln Cathedral, which I think was once the tallest building in the world. However, the reason this is being done is not solely because it was part of the manifesto. It was in the manifesto because we are already delivering in terms of people’s needs in relation to onshore wind; it is already delivering significantly. The costs next year will be more than £1 billion in terms of what will be paid out in subsidy, and that will be going on for the lifetime of the programme. It is not as if onshore wind will not be a significant part of the mix, and of course there is the importance of other renewables. But yes, we have very much in mind the interests of people throughout the country who are concerned about the growth of onshore wind.
The Lord Bishop of Chester
My Lords, if and when the new subsidies are ended, we will have 6,000 or 7,000 subsidised windmills. Can the Minister remind the House for how long the subsidies for these thousands of wind turbines are going to be guaranteed, and what the total cost will be over their lifetime? If the figures are not available, could the Minister write to me?
Lord Bourne of Aberystwyth
The right reverend Prelate makes an important point. I do not have the specific figure, but it is certainly billions of pounds, and the typical lifetime of a contract or a subsidy in relation to a wind farm is 20 years. But I would remind the House that this is for an important purpose. It is in order that we can reach our decarbonisation targets, and we are determined to do that by getting the mix right. This is about balancing the interests of the consumer and keeping bills down—which I think we would all want to ensure as much as possible—with the interests of ensuring that we have clean and secure energy. As I say, it is about getting the mix right, and I believe we have done that.
Lord Donoughue (Lab)
My Lords, will the Minister confirm that from the Government’s own projections the cost to consumers of these subsidies for windmills and solar, which I believe are currently running at 5% of household energy expenditure, will treble to 15% by 2030? Does he agree with the left-leaning Institute for Public Policy Research, a greatly respected body, that such green taxes are deeply regressive and by 2030 will amount to £226 per household? That constitutes a heavy burden on the ordinary householder.
Lord Bourne of Aberystwyth
My Lords, I am entering dangerous territory when I am asked to agree with a left-wing organisation. What I will say to the noble Lord is that the cost is immense, but the cost of doing nothing is even more immense. We are determined to get the balance right so that we have clean energy and we are protecting the planet, but at the same time bills have to be affordable—we are very conscious of the fact that some people struggle with their bills—and we have to have security of energy supply.
Lord Marlesford (Con)
My Lords, first, I congratulate the Government on making this announcement. Does the Minister agree that the beauty of rural Britain is one of our great national assets, and that the march of wind turbines has in certain respects in certain areas greatly damaged that beauty for a long time—a generation in many cases? More important, does the Minister agree that there is plenty of industrial land on which wind farms can be erected? I drove today through Dagenham, where there are three very large turbines, and where there is room for another dozen or so easily. Does he agree that, rather like building land, where there is plenty of brown land—according to the noble Lord, Lord Rogers of Riverside, there is enough brown land to build 1 million houses—we should focus wind farms in areas where they do not cause an adverse impact on our national beauty?
Lord Bourne of Aberystwyth
My noble friend makes an important point about the beauty of our country and our landscape. I do not want to enter into a dispute about different parts of the country. I remind noble Lords of the importance of taking public opinion with us. Clearly, in terms of future wind farms, the number will now be restricted by the Statement. Other renewables, of course, do not have the same impact, and it is very important that we carry those forward into our energy mix, ensuring three things of which I remind the House: affordability, security and clean energy.
Lord Kilclooney (CB)
The Minister said that one of the reasons for this decision is a commitment in the Conservative Party manifesto. Was that manifesto supported by the voters in Scotland?
Lord Williams of Elvel (Lab)
Does the noble Lord agree that it would be wise to stop talking about subsidies? Subsidies come from the taxpayer. What comes from wind farms is for the consumer, not the taxpayer. This is in fact a tax, and should we not refer to it honestly as such?
Lord Bourne of Aberystwyth
My Lords, the noble Lord makes an interesting point. It is, indeed, a transfer of tax—a subsidy—from the bill payer rather than from the normal taxpayer of income tax, and so on. We all know what we mean. It is a subsidy but I remind noble Lords that it is there for an important purpose because we need to ensure that we hit our renewable targets—I hope exceed them—and make a contribution to the climate change agenda that is coming forward in Paris.
Lord Sanderson of Bowden (Con)
When my noble friend’s right honourable friend speaks to the Scottish Government on Wednesday will she remind them that nuclear power is very important in the overall scheme of things for energy? Just because the Scottish Government refuse, through their planning powers, to renew Hunterston and Torness, surely that is a retrograde step.
Lord Bourne of Aberystwyth
My Lords, I very much agree with my noble friend. Nuclear is an important part of the mix which we rely on throughout the country, and we will continue to do so. There is no hope of meeting our targets without the contribution of nuclear throughout these islands.
Lord Berkeley of Knighton (CB)
My Lords, I wonder whether the Minister would agree that there is another reason why this move is to be welcomed. He talked about democracy and giving more regard to local people’s opinion, and the amount of subsidy has a direct bearing on that. I have some experience of this. Local people trying to fight one of these wind farms—in my case, overlooking Offa’s Dyke and a grade 1 Humphry Repton landscape—have seen such financial benefits to developers that it is very hard for them, standing on their own, to raise the money to fight developers and landowners who have a huge financial vested interest. Apart from anything else, this will at least level the playing field.
Lord Bourne of Aberystwyth
My Lords, I know that the noble Lord has taken a great interest in this from a mid-Wales perspective over a period of time. Strangely, he comes to it with a different angle from that of the noble Lord, Lord Birt. It is important that we are conscious that it is very often difficult to take on, in a David-and-Goliath way, a large energy supplier. That is true across government: we need to be conscious that it is sometimes difficult for people to challenge decisions. I remind the House once again that I believe this represents the correct balance of honouring our manifesto and ensuring that we have a balanced answer to the question of energy supply—that it is affordable, secure and clean.