The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, perhaps I may deal first with the so-called extra day in Committee and, for the first time, I thank the noble Baroness for getting back to me. I hope she accepts that twice over the weekend I tried to contact her and left a message. It would have been good to hear from her that the situation is fine—only now am I am hearing for the first time that it is.
Baroness Worthington
I communicated through our Whips this morning that it was acceptable. They are in communication with the noble Lord’s Whips. Therefore, I have gone through the normal channels.
Lord Bourne of Aberystwyth
We had corresponded directly earlier but I accept that the situation is fine. Technically it is not another day in Committee, which I believe is causing the clerks consternation; it is a day for recommital in the Moses Room, and I think that that is understood. I hope that noble Lords will accept that we have endeavoured to accommodate people’s wishes in relation to the subsidies that we will be looking at.
It is very good to see the noble Baroness still in her place. I suspect that she and I will be agreeing much more than she will be agreeing with her leader, and we will perhaps come to that later. We will come on to decarbonisation in relation to nuclear policy. It is important that we have a responsible Opposition because they are an alternative Government, so we will come on to that and it is absolutely right that we do.
Lord Foulkes of Cumnock (Lab)
I wonder whether the Minister can tell us how that relates to Clause 59.
Lord Bourne of Aberystwyth
The noble Lord has made a fair point but I am coming on to Clause 59 and will happily do so. Of course it has an effect on energy policy across the board.
I thank noble Lords who have participated in this debate and I will seek to answer their points, which have properly been raised. The issue obviously affects the energy mix that helps us to reach our decarbonisation targets. I should say that there is no way that we will reach them if we do not have new nuclear, so my point certainly is relevant.
Clause 59 seeks to amend Section 36 of the Electricity Act 1989 by removing the obligation to obtain consent from the Secretary of State for Energy and Climate Change to construct, extend or operate an onshore wind farm in England or Wales. To be clear, this requirement relates to new wind farms with a capacity greater than 50 megawatts. Smaller wind farms, including those owned by the community, are already consented by the relevant local planning authority.
The change, alongside further proposals to make secondary legislation amending the Planning Act 2008 and the Electricity Act 1989, will have the combined effect of removing the requirement for planning consent to be obtained from the Secretary of State for the construction of new onshore wind farms. Instead, developers will need to apply for planning permission under the Town and Country Planning Act 1990, where the primary decision-maker is the local planning authority.
The Government were elected with a clear commitment to give local people the final say on whether to have a wind farm in their area. This should not have taken anyone by surprise. These changes help deliver just that, as was stated in our manifesto. This is important. The majority of the population do not live in the vicinity of a wind farm. For those who do, we have seen many examples of local community groups vigorously opposing wind farm developments because of local impacts relating to noise, amenity and visual changes. It is against that background that the proposal appeared in the manifesto. By transferring decisions to the local level, we are putting local communities in the driving seat. Onshore wind farms should get the go-ahead only when local people have said they want them, and where. That said, onshore wind will continue to be important to help us deliver our renewables targets. It will certainly not disappear and we anticipate that there will be new onshore wind farms—community wind farms and so on.
I turn to some of the specific points raised. The noble Lord, Lord Teverson, mentioned paragraph 130 of the memorandum. It remains the case that all electricity applications are caught by the policy. I believe that all existing Electricity Act 1989 applications have been decided, and the issue should therefore not arise. If I am wrong, I will write to the noble Lord, Lord Teverson, and to the other noble Lords opposite. We will consider this issue soon when the Electricity Act order comes before us.
The noble Lord, Lord Teverson, and the noble Baroness, Lady Young, also raised the issue of planning authority and neighbourhood plans. There is a transitional arrangement for when a valid planning application for a wind energy development has already been submitted to a local planning authority and the development plan does not identify suitable sites. In such instances, local planning authorities can find the proposal acceptable if, following consultation, they are satisfied that it has addressed the planning impacts identified by local communities and therefore has their backing. This is set out in the ministerial Statement made by my right honourable friend the Secretary of State for Communities and Local Government in another place, and I will make sure that it is circulated to noble Lords so that they are aware of it. That should cover the point.
My noble friend Lord Howell made some powerful arguments on onshore wind, the ongoing situation and the potential—or almost certain—overdeployment of onshore wind, even following this action, in terms of both the budget and the plans for onshore wind. Onshore wind is becoming cheaper. My right honourable friend the Secretary of State for Energy and Climate Change has met with some developers who are happy to carry on deploying without the subsidies. I appreciate that we are not being specific about this at the moment, but we anticipate the continuing importance of onshore wind. However, it is important to look at the whole range of renewables, not just onshore wind.
It would be interesting to know the Opposition’s position on fracking. It is legitimate to ask that because the issue has been raised. We are obviously trying to encourage new energy sources in order to reduce costs and increase energy security. However, local communities, across the range, must be fully involved in planning decisions—be it shale or onshore wind—and we proceed on that basis. There should and will be a full public consultation for both. On that basis, I believe that Clause 59 should stand part of the Bill.
Lord Teverson
My Lords, I thank the Minister and everybody else who has taken part in this debate.
First of all, I absolutely agree with the noble Lord, Lord Howell, that where subsidy—whether it be through tax breaks, ROCs or whatever—starts to be excessive, we must cut that back. Indeed, when he was Secretary of State, Ed Davey took a number of very tough decisions around solar and wind energy that did exactly that. None of us, certainly on these Benches, want profiteering from this area. That is not really what we are getting at in this debate. Clearly, value for money is important; the more that we can make it competitive, the better.
I press the Minister to tell us the challenge there still is to get neighbourhood plans across England, so we can understand; perhaps he will not be able to come back on it now. Whether this mechanism decided on by the Government works or not, I would still be very interested to hear where we are on it. Only by that being effective can even this system, as revised by the Government, really work. I would be pleased to get further feedback on that.
Clearly it is not appropriate to have a vote here, but I am very concerned that we have government policy going in one direction on one form of energy and in completely the opposite direction on another. That means inconsistency and a lack of confidence nationally and internationally in terms of finance. However, based on the Minister’s reply, I withdraw my opposition to the clause.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Worthington, for moving the amendment and noble Lords who have participated in the debate.
First, I shall set out the Government’s position and then deal with the points raised by noble Lords. The purpose of the amendment is to enable Scottish Ministers, rather than the United Kingdom Government, to close the renewables obligation in Scotland in relation to onshore wind.
For background, the legal powers for the Government to close this, as has been rightly said, were included in the Energy Act 2013. The reason for that was to ensure that consumers and the industry had clarity on the closure arrangements associated with the renewables obligation as part of the transition to the contracts for difference regime, and the confidence that closure would take place consistently across Great Britain during this process of transition—a point made by my noble friend Lord Ridley. The energy situation is on a GB basis and it is best that we move on that basis. These reasons still hold firm today.
Furthermore, energy policy across Great Britain is reserved to the United Kingdom Government. We are committed to implementing the recommendations of the Smith agreement, which are forthcoming in the Scotland Bill, and we are doing that throughout that Bill. We are doing it based on the Smith agreement and the agreement within that process of the five political parties of Scotland—the Conservative Party, the Labour Party, the Scottish National Party, the Liberal Democrats and the Greens. However, transferring legal authority to close the renewables obligation in Scotland to Scottish Ministers goes considerably further than this. My department has engaged and will continue to engage with Scottish Ministers and officials, as I do, throughout the development of this policy, in line with the spirit of the Smith agreement.
Finally, this proposed change could prevent the United Kingdom delivering on its ambition to end new subsidies for onshore wind. I appreciate that this is not popular throughout the House but it is, after all, based on a change of Government and on policy enshrined in the manifesto at the other side of a general election. It could also have wider impacts on the management of low carbon spend with possible increases to consumer energy bills.
To deal with the points made on the history of this, I appreciate that they were made absolutely correctly by the noble Baroness, Lady Worthington. I thank the noble Lord, Lord Foulkes, of whom I am a considerable disciple on devolution issues, as he knows. The noble Lord was at his disarming best, which is considerable, and I appreciate what he was saying about the need to keep Scottish Ministers involved. I also thank the noble and learned Lord, Lord Wallace of Tankerness, for his kind words on consultation and what he said about the need to keep the Scottish Government involved. It is common ground between the Scottish Government and the United Kingdom Government that the currently integrated GB-wide energy arrangements are in the interests of everybody, with Scotland being a net beneficiary of that. That is very much at the forefront of our thinking on this issue and it influences our thinking.
I take seriously the points made absolutely correctly by my noble friend Lord Ridley—I am very pleased that he is here today—on the importance of acting on a United Kingdom basis. That is what is behind this amendment. It is certainly not to do down Scotland—far from it. As noble Lords appreciate, this party—as are others here—is very much committed to ensuring that Scotland gets more than a fair deal within the United Kingdom. That is clearly important. With that, I respectfully ask the noble Baroness if she will withdraw her amendment.
Baroness Worthington
My Lords, I am grateful to the Minister for his response, and for the contributions from other noble Lords in this debate.
This is an issue that will not go away; it will come back and be debated with different amendments. As I said, this is a probing amendment, which is designed to enable us to have this debate. It is a very important debate. I know that the noble Viscount, Lord Ridley, has well-known views on this, but surely it is a matter of some subjectivity whether one considers the landscape to be ruined. Perhaps we should be weighing that against the economy being ruined by destabilising a very important, growing industry in a country that desperately needs inward investment and jobs. Comments were made, but it is the job of government to run the country in a way that tries to enable a good and sound policy environment that people can understand and act on in good faith.
We will spend the rest of the afternoon discussing these clauses—there is plenty to get at—so I will not make some of the points that I will make later, but I will flag in particular that the Minister has talked about a transition. I have sufficient concern that we are transitioning to something very uncertain. We do not know when the next round of CFD auctions will be held. We have seen a departure from the expected schedule already, very soon into the new Government. That will cause considerable concern and we will come to it.
The justification is that this is about an orderly transition. That masks the political nature of these clauses. As my noble friend Lord Foulkes said, this is quite a political amendment and quite a political part of the Bill. I do not think the Government will be able simply to brush this off and say that it is all for the good of the UK. Clearly, we have the Scottish Parliament for a reason. When it comes to these matters, where it has had powers in the past, it seems to go completely against the trend that there should be no concession from the Government on the Scottish Parliament having some say in this, particularly in this case, where the Government have taken the Salisbury convention and stretched it to its maximum. It is true that there is nothing specific in the Government’s manifesto about the sudden alteration of a policy that was discussed at length following a great deal of consultation not that long ago.
On the basis that we will return to this, I am happy to withdraw the amendment at this stage.
Baroness Byford
I fully understood what the noble and learned Lord said and I took it on board, because clearly one wants to avoid that if we can. Nobody wants to end up there—not only because of the litigation but because of the delays it incurs, which other noble Lords have spoken to.
At the moment, I have slightly mixed feelings on this. In principle, I am quite supportive of what the Government are trying to do. In considering whether the approach should be different, in that a Scottish Minister should be able to decide, we should note that three out of four of these onshore wind farms are based in Scotland, so three-quarters of that money would be coming from England to support what Scottish Ministers might or might not decide to do. That is another debate we could have, but I hope the Minister can tell us more about the grace periods and when we are to receive more information.
I suspect that, like me, other noble Lords—and the Minister and his department—have found it difficult dealing with the Bill after the Recess in what is not the formal, long period for debate. We deserve greater clarification and, if the Minister cannot give it to us tonight, I hope it will be provided quickly in another of his wonderful letters that have kept us up to date with government thinking.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Worthington, for moving the amendment. I hope to explain a bit about the Government’s thinking on this area and then to address the points reasonably raised by noble Lords.
Clause 60 introduces a provision to close the renewables obligation to new onshore wind farms in Great Britain from 1 April 2016—a year earlier than originally planned. There are two key reasons why I believe that that is the right approach. First and foremost, I and the department are committed to delivering the Government’s ambition to end any new subsidies for onshore wind while continuing to combat climate change. I appreciate that that is not something that all political parties or all noble Lords want, but I return to the point that there has been an election. I accept that things were said under the previous Government, but they were a different Government. It may be that the transition is more difficult because they were a coalition Government, but it should not have taken noble Lords entirely by surprise that this Government sought to make a change in this area. Secondly, the Government are committed to keeping domestic energy bills as low as possible.
With that context in mind, let me turn to the amendments. Their purpose is to clarify the terms of the grace period applying to the closure of the renewables obligation to onshore wind, specifically allowing those projects which had applied for planning permission as at 18 June—the date of the policy announcement—to continue to be able to accredit until the original renewables obligation closure date of 31 March 2017. In addition, the amendments would provide further detail about how the grace period would operate in certain planning scenarios and propose extra time for projects that have encountered difficulties in securing financing.
When my right honourable friend the Secretary of State announced the early closure of the renewables obligation to onshore wind, she also proposed a grace period to protect investor confidence, as I think noble Lords are aware. The proposal was 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.
At the time of her announcement, the Secretary of State also said that she wanted to hear the views of industry and other stakeholders before framing the terms of the legislation. As such, my department has been conducting an engagement exercise to understand whether our proposed grace period draws the line in the right place. This means balancing the interests of onshore wind developers with those of the wider public. That is what we are considering at the moment. We are still reviewing the feedback and evidence provided by stakeholders in order to inform our final policy position.
I am not in a position today to frame the final terms of the grace period, and it is not right that I should trail a running commentary on where we are, as I have been invited to do by noble Lords who, as I can understand, want to hear more. I must wait until the final terms of the grace period are fully thought through, following the conclusion of the department’s analysis.
I appreciate the understandable wish that all this had happened earlier. The noble Baroness, Lady Worthington, the noble and learned Lord, Lord Wallace, the noble Lord, Lord Cameron, my noble friend Lady Byford and the noble Lord, Lord Foulkes, all expressed frustration at the fact that we do not know what the grace period proposals will be. I understand why I am being pressed on this, and I will ensure that the House has reasonable notice of the Government amendments.
I agree that 48 hours is insufficient and hope and believe that we can do better than that. If I may, I will provide a commentary on where we are on this by the usual letters if there is any difficulty with bringing the amendments forward in a timely way. I quite understand that the House wants to know exactly what the Government are doing or seek to do in this area. I confirm that we will endeavour to give appropriate, reasonable notice of the amendments ahead of the day and recommittal in the Moses Room.
Baroness Worthington
My Lords, I am grateful to the Minister for his comments and for the contributions from other noble Lords. As I said, we will have the opportunity in the next debate to discuss the principle of this clause. Here, though I am tempted not to, I will keep my comments to the grace period issues. I am very grateful to the Minister for giving us an assurance that he will give us sight of those amendments with more than 48 hours’ notice. That would be absolutely correct. The noble Lord may find it annoying to keep us posted with a running commentary but it is not as annoying as we find having to respond to huge amounts of information that is very delayed and late.
Lord Bourne of Aberystwyth
I hope I did not give the impression that I find it irritating to give a running commentary. I do not. It is absolutely appropriate that I should and, as I indicated, I am very happy to do so on where we are on the grace periods. I indicated that I will seek to ensure that the House has reasonable notice of those amendments. Furthermore, I will give an indication that we are or are not on course for that. I hope it will be the former case.
Baroness Worthington
I thank the noble Lord. The grace period is incredibly important. We are talking about sunk costs of hundreds of millions of pounds that people have put in, in good faith, on the back of the Energy Act 2013, which has been changed rather intemperately with very little notice and no consultation. You can see why people are concerned about getting the detail and getting it early. We have had two months since the Bill was introduced in which to have these amendments come forward, and it is regrettable that we still do not have them.
As I said, the next debate will give us the opportunity to discuss the broader context and particularly the impact assessment and what it tells us about the logic and rationale for this more generally. Given that we will have the opportunity to discuss these amendments in the Moses Room after we come back from recess, and that we will have good early sight of them, I am happy to withdraw this amendment.
Lord Bourne of Aberystwyth
I thank the noble Baroness, at least for her very last point about how she is looking forward to my response. I thank the noble and learned Lord, Lord Wallace, for tabling his opposition to the clause, as it provides me with the opportunity to explain why Clause 60 should stand part of the Bill. I will then turn to specific points made by noble Lords during the debate.
Clause 60 would close the renewables obligation to new onshore wind projects in Great Britain a year earlier than originally planned. On the one hand, we had some noble Lords saying that it is only a year; on the other hand, we had some talking about it as though it were the end of civilisation as we know it. Therefore, there is something of an inconsistency in some of the arguments being deployed.
There are two key reasons why I believe that closing the RO is the right approach. I should say, first, that onshore wind will remain important and will remain massively deployed. We will spend more on onshore wind next year than we are spending this year, so, again, that needs to be accepted. Jobs are, and will continue to be, provided by that industry. Perhaps I may pick up on one point about jobs uncertainty. It is because we are still considering the situation in relation to the grace period that we are unable to say with any degree of certainty what the jobs position will be.
First and foremost, I am committed to delivering on the Government’s ambition to halt the spread of onshore wind while continuing to combat climate change. Secondly, it is essential that the Government keep domestic energy bills as low as possible for consumers and act when necessary to ensure that costs are contained and remain within our low-carbon spending cap. That is not to say that the Government do not recognise the need to strike the right balance in taking developers’ interests into account when implementing this policy. I have indicated what we are doing in relation to the grace period and the engagement exercise that my right honourable friend the Secretary of State is engaged in. I will explain this further in due course.
Let me set out why the Government are taking the necessary steps to close the renewables obligation to new onshore wind projects. The Government’s ambition for onshore wind was made very clear within our manifesto. I know that many noble Lords understandably regret the outcome of the general election, but there was a general election; it was a manifesto commitment and, of course, we remain committed to implementing it. That is what democracy is about. The essence of that is choice and people made their decision. As such, we now have the mandate to halt the spread of subsidised onshore wind. Clause 60 aims to deliver part of this pledge by closing the renewables obligation to new onshore wind from 1 April 2016—a year earlier than originally planned.
I would like to provide reassurance to noble Lords that by taking this step, the Government are not shying away from their commitment to tackle climate change. We are confident that we can meet our 30% renewable electricity ambition by 2020 without additional onshore wind, other than that already deployed. Indeed, we are running ahead of the projections.
Baroness Worthington
We will consider this matter later but it is simply not true that we are ahead of our European renewables target. That target relates to all energy and we are not on track in regard to it.
Lord Bourne of Aberystwyth
I hope the noble Baroness will agree that we are on track in relation to the electricity ambition.
Lord Teverson
The obligation relates not to electricity but to energy. There is no electricity obligation of any kind.
Lord Bourne of Aberystwyth
My Lords, onshore wind has deployed successfully to date and is an important part of our energy mix. Our analysis demonstrates that when we take early closure of the renewables obligation into account we still expect total UK deployment of onshore wind to fall within our Electricity Market Reform Delivery Plan projections of between 11 and 13 gigawatts by 2020. This is our best estimate of what we would need to meet our 2020 targets and what we can afford under our low-carbon spending cap. In fact, the department’s projections relating to the 18 June announcement estimated that by 2020 onshore wind deployment, in the absence of intervention, could be between 12 and 15 gigawatts. The upper end of this range is significantly higher than the 11 to 13 gigawatts set out at the time of the delivery plan. Without any action, we could deploy beyond this range. As the 18 June announcement made clear, we therefore considered it appropriate to curtail further deployment of onshore wind, thereby balancing the interests of onshore wind developers with those of the wider public.
This takes us on to my second point: affordability. My noble friend Lord Ridley referred to the trilemma and the fact that the Government are seeking three things, as the previous Government did: to ensure affordability, security and carbon-free. That very much remains the aim. Tackling climate change must be done in a cost-effective way. We want to ensure that consumer energy bills are kept as low as possible while we cut carbon emissions.
The Government have provided vital financial support to the renewables sector, which has helped new and innovative technologies, reduced our emissions and increased the amount of low-carbon electricity that powers homes and businesses across the United Kingdom. In short, subsidy is necessary to give some impetus to development, and that is what we have done, but we have to keep the costs under review and control.
However, the Office for Budget Responsibility’s latest projections show that subsidies raised from consumer bills are currently set to be higher than expected when the schemes were set up under our low-carbon spending cap, the levy control framework. This is due to a number of uncontrollable factors, including lower than expected wholesale prices and greater than expected renewable generation. The revised levy control framework forecasts indicate that spending in 2020 is projected to be £9.1 billion in 2012 prices for low-carbon generation. The Government set a limit of £7.6 billion. As such, the current forecast is £1.5 billion above that limit. These additional costs could be met through increases in consumer energy bills. It is therefore only right that we now look at ways to protect value for money and affordability under the levy control framework. My department has announced a package of measures to deal with the projected overallocation of renewable energy subsidies. The onshore wind measures are therefore part of a co-ordinated approach to managing spend under the levy control framework.
Baroness Worthington
I am sorry to interrupt but this is an important part of the Bill. Can the Minister explain how it will be possible to spend less under the levy control framework by removing the ability for more and cheaper renewables to come forward? Either we miss our European targets or we will be using more expensive renewables to hit our targets, which will run through the levy control framework even faster. I simply do not understand how one can use the framework as a reason to remove one of the cheaper forms of renewables. If affordability is our goal—which I agree it should be—then surely we should enable technologies to compete fairly on price and not rule out some of the cheapest versions.
Lord Bourne of Aberystwyth
On that specific point, the noble Baroness will know that the costs of deploying some renewable technologies is falling. That is certainly true of onshore wind; it is also true of solar. It is important but I have to say to the noble Baroness that, in reaching our decarbonisation targets, nuclear remains a vital part of the mix. I see that she agrees and it would therefore be interesting to hear at some stage whether the Opposition are committed to backing the Government in relation to that important point, as they have done previously.
That brings me to the issue of investor confidence. It is a fair point to make. I can understand that there is a need for certainty but it must be balanced against the need to get it right in relation to the grace period. That is why we have taken somewhat longer than expected and why we are to have recommittal to a fourth day in the Moses Room to consider that issue. We cannot rush engagement on the grace period and get the intention right in relation to investor confidence. I come back to the point that no one should have been taken by surprise that the Government were going to alter the position in relation to onshore wind; it was in the manifesto. I do not therefore accept the uncertainty argument that somehow people are taken by surprise. I have indicated that we will bring forward amendments on grace periods and will ensure that noble Lords receive them in a timely manner, ahead of the recommittal stage in the Moses Room.
I shall seek to deal with some of the points made by noble Lords. The noble and learned Lord, Lord Wallace, rightly said that business confidence was an important part. I agree and I hope that I have dealt with how we regard that as important, but we want to get it correct.
My noble friend Lord Ridley made telling points about how we have to balance interests in relation to the trilemma and our commitment in the manifesto. He reminded us of the fact that there are sometimes no easy ways in which to deliver, even in relation to onshore wind. As he said, there are carbon costs and costs in relation to the manufacture of turbines and so on. There are no easy answers.
My noble friend Lord Howell correctly reminded us of the need for back-up facilities, which takes us back to nuclear. Many renewables are intermittent in nature and we therefore need back-up to them. That point was well made.
The noble Lord, Lord Teverson, correctly said that there were things to be done on the demand side that were not in the Bill. I accept that but I can reassure him that work is continuing in the department on innovation, improvements in white goods and regulation. The important programme of smart meters, which started under the previous Government, is continuing apace. All these are important points that we take on board.
I accept the point that the noble Baroness made: this is a political position—there is no doubt of that. It was a difference between parties in their manifestos. On that basis, I remind noble Lords that it was in the manifesto and therefore respectfully beg that this clause should stand part of the Bill.
Lord Wallace of Tankerness
The Minister has indicated that a justification for the position is to reduce domestic consumer bills. That is not an unreasonable thing to try to do. However, I just want to make sure that I understand the impact assessment. On the second page, it says:
“Reduced risk to LCF from over-allocation of renewable energy subsidies, and benefit to consumers from reductions in consumer energy bills (in 2016/17 average household electricity bills could be up to £3.40 (0.6%) lower, with a central estimate of around £0.30 (0.05%), compared to the Do Nothing option) (2014 prices)”.
I am more than ready to stand corrected, but am I right in thinking that the central estimate of the Government in this is that this measure will save 30p in an annual domestic electricity bill?
Lord Bourne of Aberystwyth
The noble and learned Lord has correctly identified the part of the impact assessment that deals with this. It could be a saving of up to £3.40. I accept that that is not a massive amount, but it has to be taken account of in the context of the fact that we are seeking to keep within the deployment estimates that we put forward. I do not think it should be sniffed at: this does not appear, on the face of it, to be a massive amount, but it makes quite a considerable difference to some consumers that we are reducing bills by that amount. That is what we are seeking to do and I make no apology for it. However, that is only part of the consideration.
Baroness Worthington
As I said, the impact assessment is really rather lacking in detail. It may make those assumptions, but it does not give any detail as to what the ingoing parameters are on those numbers. If instead of onshore wind we build offshore wind to compensate for the lack of delivery on the target, there will be a net increase to customers’ bills under this clause.
Lord Bourne of Aberystwyth
I accept that obviously there is a question about what is used instead. However, I remind the noble Baroness and the House that, even with this action, we are well above the deployment estimates that were made in relation to onshore wind.
Lord Wallace of Tankerness
My Lords, I am very grateful to all noble Lords who took part in this debate and, indeed, to the Minister for his response. He has set out the position that the Government are coming from.
It is important that we look at this clause in detail. Like the noble Baroness, Lady Worthington, when I saw that there would be no new public subsidy, I took it to mean that there would be no “new” subsidy, as opposed to an old one—ROCs are certainly quite old. However, I hear the interpretation that the Minister and his Conservative colleagues place on it. One can only speculate as to whether they ever thought they would have to deliver this policy.
The noble Lord, Lord Howell, with wonderful understatement, thanked the Minister because he thought that we were hearing an evolution in government thinking. The noble Baroness, Lady Worthington, said that it was like building an aeroplane as it was taking off along the runway. Some might say that it is making it up as you go along. The lack of clarity in some areas of the impact assessment and the fact that we do not yet know what will happen with the grace periods gives some indication that perhaps this was a policy that had not quite been fully thought through, if I can just leave it at that. However, some concerns continue.
I can understand why the Minister said at the outset of his remarks that, on the one hand, people say it is just a year but, on the other hand, people say it is the end of civilisation as we know it. I take the political point that the Government won an election, but to change an important policy less than a year—just over 10 months—from when it will come into effect is causing considerable concern in the industry and calls into question whether such a change could take place in other spheres of renewable policy.
I have always supported the idea that there should be a balance; a mix of different renewable sources. If one source is seriously challenged because there is a sudden change of policy, it begs the question as to whether others will follow.
I cannot quite yet get my head round the cost. I do not quibble with the fact that, for some people, 30p a year, or just over half a penny a week, might make all the difference—although I find it difficult to buy that. However, the other part of the equation that I cannot quite follow is this: if renewable onshore electricity generation is not going to qualify and therefore its future is more under question, and the others, including nuclear, are going to be more expensive, how can that lead to benefits in the longer term for the domestic consumer? The noble Baroness made that point in her final intervention. That has not yet been explained to us, and perhaps a reworking of part of the impact assessment might highlight some of these issues.
The noble Viscount, Lord Ridley, asked whether any use of onshore wind had led to carbon emissions. I just look at the Government’s impact assessment—I may have been slightly critical of it but I will now use it. Paragraph 4.26, on environmental issues, says that option 2, which is the proposal,
“will lead to lower levels of onshore wind deployment and hence increased carbon emissions within the UK power sector relative to the Do Nothing option”.
So the Government themselves believe that it will lead to increased carbon emissions by having lower levels. The impact assessment goes on to say that,
“these will be offset by decreases in emissions elsewhere in the EU within the capped EU-ETS traded emissions sector”.
We must polish up this sentence. Here, the Government say that what they are doing will actually increase carbon emissions but that Europe is going to come to their aid. It is not very often we see a Conservative document saying that the European Union is going to come to our aid. It is probably worth it just for that.
I will share with the noble Viscount, Lord Ridley, figures that come, I think, from a briefing by the RSPB and which make reference to this. I saw this only this afternoon and have not had a chance to check out the reference, but it suggests that a modern wind turbine has a capacity of 2 megawatts and is expected to avoid emissions of over 1,880 tonnes of carbon dioxide in an average year. I will share that reference with him and, as with all these things, we will trade statistics. However, that and the Government’s own impact assessment suggest that there will be a reduction.
I am not going to press this, but it has been useful to flush out some of the Government’s thinking on this. No doubt we will return to some of these issues when we come to look at periods of grace.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lords, Lord Grantchester and Lord Whitty, for proposing this amendment, and the noble Lord, Lord Teverson, for his timely comments, which I will come to. I found some of the contribution of the noble Lord, Lord Grantchester, reassuring in that he is pushing us on the Hinkley state aid issue. I hope he is in a position to confirm that it is still the Opposition’s policy to encourage new nuclear because that is what it sounds like to me. I am able to give him the reassurance that we remain confident that the commission’s decision that Hinckley is compliant with state aid rules is legally robust. But of course, on decarbonisation in general, I return to the point that new nuclear is a vital part of the mix. Without it, we would be nowhere near achieving our goals. Therefore, I hope we can get some sense of what the Official Opposition’s policy is on new nuclear—and on new coal. Some things that the new leader has said indicate that he is in favour of regeneration of the coal industry in the United Kingdom, which would undermine what we seek to do. Some clarity on that would certainly be welcome.
The Government are already obliged and will report in the coming months on their progress towards decarbonisation of the energy supply, the development of renewables and the development of energy efficiency. We have obligations under the Climate Change Act, the EU renewable energy directive and the EU energy efficiency directive to report on these topics in the coming months. Therefore, the Government cannot support the amendment, which could lead to unnecessary duplication. You do not fatten a pig by continuously weighing it and we already have these three obligations, which I will refer to in more length.
The Committee on Climate Change reports annually on the Government’s progress towards meeting carbon budgets, which includes an assessment of progress towards decarbonisation of the energy supply. Under Section 37 of the Climate Change Act, we are obliged to respond to the Committee on Climate Change’s annual progress report by 15 October each year. That remains true this year. We will publish our response to the Committee on Climate Change’s 2015 progress report by that date, and that will specifically address progress towards decarbonising the energy supply.
On renewables, the 2013 Electricity Market Reform Delivery Plan—which I think is what the noble Lord, Lord Teverson, was referring to—set out our ambition of achieving at least 30% of electricity from renewables in 2020. We are on course to achieve that, with renewables representing almost 20% of generation in 2014. We will also report by the end of this year on progress against our 2013-14 interim targets as part of the EU renewable energy directive.
Finally, we are committed to energy efficiency as a vital element of meeting our statutory goals on fuel poverty and climate change. We set out our strategy in 2012 and updated it in 2013. We will report by the end of April 2016 on progress achieved towards national energy efficiency targets, as part of the EU energy efficiency directive. In the light of those already substantial obligations and the reassurance that I have given, as well as the work that is done in the department, which takes considerable time, I hope that the noble Lord proposing the amendment will feel able to withdraw it.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord, Lord Whitty, for moving the amendment, but perhaps I may turn first to the opening comments of the noble Baroness, Lady Worthington. Although I am, as she will know, her great admirer in the area of climate change, I cannot allow the allegation to go unchecked and unanswered that we are in the business of nationalising the energy supply. It shows considerable chutzpah to come up with such an argument in view of what happened at the weekend. It is far from the truth. The area is certainly highly regulated but I make no apology for that. It needs to be so.
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, which, of course, has legal backing and legal obligations. As I indicated earlier, we will respond to the progress report; as the noble Lord, Lord Deben, mentioned, we will do so by 15 October, as we do annually.
Decarbonisation remains a clear goal of the Government. Emissions from carbon intensity fell by 12% in 2014, according to the Committee on Climate Change, and we are very much wedded to that. The noble Lord, Lord Teverson, referred to the commitment of the Prime Minister and our obligations in relation to unabated coal. I agree with the noble Baroness, Lady Worthington, when she said that there is a part for all forms of energy except unabated coal. That is certainly right and I would not dissent from it. We must do this as cost effectively as possible to ensure that our energy is secure and affordable as well as low carbon, as I indicated previously.
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. The costs of getting it wrong would be picked up by consumers for decades to come. The amendment as set out would, in effect, require the Government to introduce an additional power sector target, in the form of an obligation on electricity suppliers in England and Wales. The manifesto on which the Government were elected clearly stated that we will not support additional power sector targets.
Noble Lords will know that the subject of setting a decarbonisation target has previously been debated in this House, as has been indicated, on at least two occasions: during the passage of the Energy Bill in 2013 and of the Infrastructure Bill in 2015. I therefore know that noble Lords will be familiar with the arguments against setting a target such as this. I agree that investors want to know that we have clear, credible and affordable plans. However, the CBI has said that clarity on future financial support for low-carbon electricity will be more important in driving investment than targets. 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. That is why we have also said that we will set out plans in the autumn on future contracts for difference allocation rounds.
For those reasons I cannot accept the amendment. I hope that the noble Lord will withdraw it.
Lord Teverson
The Minister will forgive me if I did not catch this properly, but are the Government saying that they will not undertake the clause in the Energy Act 2013 that says that the Secretary of State “may”—with the presumption that the Secretary of State “would”—set a decarbonisation target for the electricity sector for 2030? Did he say that the Government will not do that?
Lord Bourne of Aberystwyth
No, my Lords. I was saying that we would not support additional power sector targets. As I understand it, that target is already in existence.
Baroness Worthington
The target is not in existence. The power was created in the Energy Act to allow the Secretary of State to set a target, but it prevents the Government setting a target until 2016. That is the only thing on the statute book. I encourage the Minister to be very precise in his wording. I will have to read back over Hansard. The expectation is that the Government will set a target, but they certainly are not required to. We would like clarity on what the intention is.
Lord Bourne of Aberystwyth
My Lords, I appreciate that point. On the clause as set out, I have made it clear that we will not come forward with this additional obligation. The manifesto is absolutely clear that there will be no power sector target. That is the position of the Government.
Lord Whitty
My Lords, if I understand that right it is very disappointing. I can understand the objection, or at least the querying by the noble Lord, Lord Deben, as to whether we need a detailed mechanism for setting carbon intensity coefficients by supply, but he argued very persuasively, and has done before, for a decarbonisation target for 2030. That is why that was written into the 2013 Act and why there was an expectation and general indication from the Minister’s predecessors that there would be a target set in 2016, but only in the context of the carbon budget, which they are obliged by the Climate Change Act to come forward with. I did not accept that argument, but I understood it in terms of the timing. There was some considerable debate about that during what became the passage of the 2013 Act.
It is very disappointing, not only to us in this House but to the various industry operators, including the supply companies, that there seems to be an abandonment of that commitment in what the Minister has interpreted from the Conservative Party manifesto. As I well know, manifestos are pretty flexible things. I hope that he can consult with his colleagues as to whether it actually meant that, or whether there was some more room—
Lord Whitty
My Lords, I am not quite such a conscientious and diligent reader of the manifestos of various parties—even my own—as the noble Lord, Lord Teverson. The best thing we can ask the Minister to do is to go back and talk to his colleagues—whether it was in the manifesto or not—about whether they are definitely now not going ahead with what was allowed for in the 2013 Act. If that is the case, there are ramifications. I understand why the Minister is opposed to the mechanism proposed in the amendment. I would have thought that having set the 2030 target for decarbonisation would be a useful addition to the armoury, as the Committee on Climate Change and the noble Lord, Lord Deben, advocated. If the Minister feels that that would be too much interference in the market mechanisms, I understand that. It would still be up to the supply companies how they met that obligation and what kind of technologies and contracts they entered into. The market is still operating there. I understand and accept that the Minister is not prepared to go along with that.
Lord Bourne of Aberystwyth
To be helpful, in view of the fact that there is a degree of uncertainty about what the manifesto says specifically—not least with me—I am happy to go back and have a look at it. We can come back to it on Report to ensure that I have understood the position correctly. I undertake to do that and we can pick it up on Report if that is helpful.
Lord Whitty
My Lords, that was very generous of the Minister. I thank him very much, as I think the Committee will as a whole. Before I withdraw the amendment, I will just comment on something that the Minister said on markets and nationalisation. When the then Energy Bill of 2013 first came before us, the noble Lord’s colleague, the noble Lord, Lord Lawson of Blaby, described it as “Gosplan”. There is something in that. There is nothing from any element in the Labour Party that goes as far as that. I beg to ask leave to withdraw the amendment.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Worthington, for moving this amendment. She is right: we are continuing to make progress towards the 2020 renewables target of 15% of final energy consumption from renewable sources. The provisional figure released on 25 June showed 6.3% of final energy consumption for 2013 and 2014 came from renewable sources, against a target level of 5.4%. The Government set out their plan to meet the target in 2010. We are on track to meet the next interim milestone. In fact, as I say, the provisional figure indicates that we are ahead of it. We have a clear plan for meeting the target. I wish to say something about the specific areas of heat and transport which the noble Baroness mentioned, where there certainly are challenges. First, in relation to heat, under existing schemes the Government have supported almost 33,000 homes and 10,000 businesses, schools, farms and other organisations with new renewable heating systems. That is on top of the generation of 3.4 terawatt hours of eligible heat—enough to heat the equivalent of more than 225,000 United Kingdom homes for a year.
On transport, the Government are investing more than £500 million over the next five years in making ultra-low emission vehicles more accessible to families and businesses across the country. I think our record on this bears comparison with other EU countries, and across government departments we are putting in a lot of effort on this. As noble Lords will appreciate, the lead department on ultra-low emission vehicles is the Department for Transport but the Department of Energy and Climate Change is, of course, represented in that process and we are pushing forward with it.
We have a clear plan for meeting the target and already have many reporting requirements. I cannot accept the amendment and I hope that the noble Baroness will withdraw it.
Baroness Worthington
My Lords, I am grateful to the noble Lord for his response although I do not believe that it adequately addressed the points that I raised, particularly on vehicles and fuel which are obviously two separate things when it comes to energy. We can have as many zero-carbon vehicles as we like but if they are powered by electricity that is generated at 400 grams per kilowatt hour, that is not a solution. Equally, it is true that the escalator is frozen. I heard nothing about whether or not that will be lifted in order for us to hit the 10% figure. I hope the Minister will write to me giving a detailed response to the points that I made. I do not believe that I got the detail I sought.
Lord Bourne of Aberystwyth
I will certainly write to the noble Baroness on those points.
Baroness Worthington
I thank the Minister. On the basis that we will continue this discussion and I will be in touch on the impact assessment and the absence of detail within it, I am happy to withdraw the amendment at this stage.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Worthington, for moving this amendment. She will know that, as I indicated by my letter of 6 September, we are looking at decommissioning on Report, so there may be an opportunity to look at some of the specific points that she raises then. I am certainly happy to do that.
In relation to Amendment 35C, I acknowledge that it is important that developers and investors have some foresight as to the frequency of contracts for difference allocation rounds. However, this must be balanced with the levy control framework budget available, which, as noble Lords know, is funded by a levy on consumer bills. The United Kingdom continues to make progress towards the renewables target, but the interaction of those two is important.
Committing to annual contracts for difference allocations rounds, even only in certain circumstances, would inhibit the Government’s ability to respond to evidence on levels of deployment in renewable electricity generation, costs to consumers and opportunities in other sectors. That said, as the noble Baroness rightly said, we are committed to a statement in the autumn, so that decisions on any future allocations of contracts for difference will be taken in due course. On the specific point on state aid approval, we remain consistent with the contracts for difference state aid approval. If our future plans should have an impact on our state aid clearance, we would seek an early discussion with the European Commission. However, as I understand it, that is not the case at the moment.
The noble Baroness’s amendment would unnecessarily commit the Government to a course of action which would neither benefit the consumer nor provide any certainty to renewable energy generators or investors. I have indicated that I am happy for us to look at the specific point about decommissioning on Report. We are committed to our energy targets and continue to make strong progress towards meeting them. I do not know the specific date of the statement we will be making in the autumn—indeed, I do not think it has been fixed at this stage—but I hope that gives reassurance that we will be making a statement about the contracts for difference regime. Our intention is to set out plans in the autumn in respect of the next contracts for difference allocation round, but we do not believe that an annual round is necessarily appropriate.
For those reasons, I am unable to accept the amendment and respectfully ask the noble Baroness, Lady Worthington, to withdraw it.
Baroness Worthington
I thank the Minister. I find it quite curious that an amendment asking for greater certainty in CFD allocations is described as creating more uncertainty yet the Minister’s statement, which contains no information at all about when we might expect another round of allocation, supposedly increases certainty. I just do not understand how that works. The autumn is arguably already upon us. I hope that the Government’s interpretation of “autumn” does not mean 31 December and that we will see the information come to us while we are still considering the Bill, in the autumn. That statement needs to be made in respect of and is highly relevant to the Bill.
I am grateful to the Minister for picking up on the point about decommissioning. However, given that we now have an extra day in which we will recommit to Grand Committee in the Moses Room, I wonder whether we could have those amendments in time for then. It will be only a matter of days before Report. If those decommissioning amendments could at least be made available for that day, it would certainly help to alleviate some of the pressure on Report. I feel that we are stacking up quite a lot of issues for Report.
Lord Bourne of Aberystwyth
On that point, I am happy to endeavour to make the amendments available. What I cannot do, and I had given due notice to Peers who participated in the debate, is undertake that they are debated on that day. That was not in the agreement we have in relation to the recommittal day. I will of course endeavour to table the amendments as soon as possible.
Baroness Worthington
Given that the Minister has been so excellent in communicating with us in Committee, I am happy to take it in good faith that he will do his very best. I am sure that will produce results and on that basis, and on the basis that we will revisit this after Recess, I am happy to withdraw my amendment.
“(aa) regulations under section 27(8), or”