Baroness Jones of Moulsecoomb
That this House regrets, in the light of the worsening climate emergency, that the Feed-in Tariffs (Closure, etc.) Order 2018 will end the export tariff for small-scale renewable energy without any replacement scheme in place; will result in new installations having to export their electricity to the National Grid for free; and will harm jobs and investment in the renewable energy industry (SI 2018/1380).
Relevant document: 12th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
Baroness Jones of Moulsecoomb (GP)
My Lords, my regret Motion is against the Government’s decision to scrap the feed-in and export tariffs for people who install small-scale renewable energy systems in their homes. I should declare that I have already installed solar panels on my house and am therefore not affected by this measure.
I feel so strongly that it is a bad thing to do that I wanted to table a humble address, but the clerks advised me that I would create a constitutional crisis—and we probably have enough of those going on already. I want to emphasise that the word “regret” does not come anywhere close to my feelings on this issue. The Government have behaved with economic illiteracy and I hope that, towards the end of the debate, I will hear from the Minister that they will pause in the scrapping of the tariff until they have at least determined the level and the timing on the export tariff.
The Feed-in Tariffs (Closure, etc.) Order, currently before this House, will cause enormous damage to our fledgling green economy and wreck our already too slow attempts to deal with climate change. Over the past decade, solar panels have steadily been installed on rooftops around the country. People have saved huge amounts of money on their energy bills and made a significant reduction in their personal impact on the planet. Some local authorities, following the lead of Kirklees Green councillor Andrew Cooper, have been able to use the stability of the feed-in tariff to finance mass deployment of solar panels for some of the poorest residents in their boroughs. In the process, they have created thousands of jobs in a high-skilled, well-paid industry.
It is now undeniable that the world is in a state of climate emergency. Scientists have made it clear that we now have less than 12 years to make massive changes if we are to have any hope of avoiding runaway climate change. The switch away from fossil fuels to renewables is one of the essential changes that we have to make.
The Government’s response is that they have steadily cut away at the feed-in tariff scheme and have now finally scrapped it altogether. This is, according to the Government’s impact assessment, so that we can reduce people’s energy bills by £1 per year—I repeat, £1 per year. The Government suggest that this was the plan all along, and that this is just another step towards a market-based system of renewable energy that must compete cost-for-cost with other sources of energy. That sounds perfectly reasonable—except that it is a fallacy that requires us to pretend that other forms of energy do not receive huge subsidies from the taxpayer, society and the environment. The European Commission has recently published research that shows that the UK has the highest level of fossil fuel subsidies in the EU, and more subsidies for fossil fuels than for renewables. That is shameful and certainly not fair—as well as poor economics.
Coal and oil are not new sources of energy, but they still receive enormous tax breaks to keep them in business. Nuclear energy is being paid double the going rate with government price guarantees, despite the fact that it will take decades for new nuclear power stations to be built, and despite the fact that nuclear has lost all credibility with a large proportion of the nation. Fracking, a whole new source of carbon emissions, seems to be granted new tax breaks in every Budget Statement made by the Government.
There is not a single source of energy that is not heavily subsidised—apart from renewables. Why are renewables held to a higher standard as the only energy source that needs to become financially self-sufficient, in a way that would cripple fossil fuels and nuclear power? If the Government want subsidy-free energy, at least create a level playing field and remove the nuclear and fossil fuel subsidies. Perhaps the Minister will explain to the House why renewables are singled out while the Government continue to create favourable tax incentives, easy planning rules and a strong policy commitment for the polluting energy sources. The distortionary effect of all this is enormous—a government-backed guarantee that we will be tied into fossil fuels for decades longer than the planet can handle.
Coming back to the statutory instrument and its justification, the Government are suggesting that this is just a stepping stone between the old system of support and a new system, a “smart export guarantee”, which will be based around new technology and market innovation. Again, it sounds sensible, but none of that new system exists and there is not yet a market for domestically produced green energy. The Government are doing absolutely nothing to ensure that this changes.
The stark reality is that the Government are throwing the domestic renewable industry off a cliff, with the vague promise that an ambitious new system might appear in time to save it. Plus we have no idea of the rate at which this energy will be valued. Can the Minister let us know whether there is any conclusion on that? Why have the Government decided that for an indeterminate amount of time new domestic renewable installations will have no option but to export the energy they produce to the national grid absolutely free? How that can be considered acceptable to anyone is beyond me. It is state theft and cannot be justified.
If the Government had a policy that resulted in the oil and gas industry producing for free, people would complain that we had turned into a communist country. For some reason, the exact same thing is happening with solar and wind power and it is just fine.
It is true that the renewables industry has made incredible progress in bringing down its costs and that we are approaching a point where it will be able to outcompete fossil fuels on its own. However, it is plain wrong to single renewables out as being the only energy source that should not get any subsidies or tax breaks. We need to do the opposite of this; we should be spending billions of pounds on a green new deal to create a million climate jobs and transform our economy.
Will the Minister explain to this House why the Government are not doing all they can to take climate change seriously? I ask her please not to do a Claire Perry and say how we are world leaders, that we are doing on best on emissions and that sort of thing, when we do not even count all our emissions—for example, we do not count aviation and shipping. For all these reasons, I beg to move.
Lord Teverson (LD)
My Lords, I thank the noble Baroness, Lady Jones, for raising this issue and bringing it to the Floor of the House. I commend her passion about the subject; it is completely justified. We should remember that feed-in tariffs have been amazingly successful. As we see from the Explanatory Memorandum and the commentary from the Secondary Legislation Scrutiny Committee, some 800,000 feed-in tariffs have been applied over the period in which they have been in force. One of the great things about them is that they democratise the fight against climate change. Whether they are microschemes or smaller schemes, they allow households, communities, small groups and small businesses to participate in providing renewable energy to the energy system and decarbonising our economy.
I am proud to say that FiTs came in in 2010 and were implemented by the coalition Government as part of the work of the previous Labour Government. The announcement that they would end came in 2015—a dreadful year for climate change—when the Conservative majority Government took over and we had announcements about this, the end of carbon capture and storage experiments, the end of zero-carbon homes and many other examples of decarbonisation and “all that green crap” disappearing from our legislation and our climate change targets.
As was shown during the coalition period, Liberal Democrats agree as much as anybody else that renewables and the public money put into them need to provide value for money. I have no problem with tariffs being brought down to reflect cost levels, as long as that is done in a smooth way that industry can predict, whereby the rate of return remains sensible for investors, whether they are firms or households.
What we have here is the stopping of the system altogether. Once again, it is an example of the green vandalism we have seen so much of in renewables, affecting jobs and green industry. There has been a failure to provide continuity of employment and skills, and no growth of private-sector green businesses. This secondary legislation is an example of that. We have taken away one of the ways in which communities, households and small businesses can participate, resulting in another body blow to the small-scale renewables industry.
The noble Baroness referred to the export tariff. I find it unfathomable. Claire Perry, the Minister for climate change, said that there will be export payments, but there was a major gap between that and the original announcement of this government policy. That meant the industry had a major shock, and only later was that repaired by some very vague references. The consultation period has not ended. We come to the end of FiTs on 31 March, and we are bound to have a gap during which the industry will not know what is happening. I do not know what went through BEIS’s mind as a department. From 1 April—very appropriately—consumers were going to give free energy to major energy companies. This was one of the greatest ironies and a huge political mistake. Yes, the department has decided to change that, but very late and leaving a gap. We still do not know what the change is.
The Lord Bishop of Salisbury
My Lords, I support the noble Baroness’s Motion of regret. It is almost inevitable that a debate such as this will range more widely than the specific issues that the noble Baroness is focused on. I hope your Lordships will forgive me for beginning in Salisbury, my cathedral city, on a day when there has been a considerable amount of reflection about events there a year ago and their significance for the city and internationally.
We were grateful for the Prime Minister’s visit earlier today. I particularly thank the council, Wiltshire Police and the fire and ambulance services, as well as the district hospital, Porton Down and the military, for their commitment through the year. Wiltshire Council has led a programme of recovery. Although business is still badly affected, we are making progress. We are grateful for the involvement of the noble Lord, Lord Henley.
From those ghastly events that began to unfold a year ago, we have learned not just about the need to recover but about using a crisis as an opportunity to rethink what sort of city Salisbury can be. The same is true of the environmental crisis we face. Wiltshire Council recognised last week that this climate emergency is such that it committed to make Wiltshire carbon neutral by 2030. There is a real sense of urgency locally about what this means. For the Lords spiritual, this is about the care of God’s creation and living out of reverence for life with a spirituality that addresses the issues of the day. Species depletion, pollution, soil degradation and climate change are all strongly caused by us—human beings.
The UK gave strong leadership at the Paris summit in 2015. There are areas where we have led strongly. There are huge business opportunities as we develop new technology to support a carbon-neutral future. Rather than seeing this as a burden, it is a much more attractive possibility to see that we are doing this for the love of creation and life. There are opportunities for development and growth within this. A different sort of future is being glimpsed. The urgency is such that we do not know whether we are too late. However, the implications are severe. We therefore sense the urgency of those who talk about extinction rebellion and the more apocalyptic scenarios presented to us on a regular basis.
The purpose of biblical apocalyptic is not to paralyse but to encourage a radical change of life. It draws on past experience to understand present circumstance, and reveals truth in such a way as to change behaviour: to encourage good action with faith, strong values and creative purpose. We need both vision and purpose. A task without a vision is a drudge, and a vision without a task is an illusion; but a vision with a task is the hope of the world. The task of this House is both to help envision the future and to work out practical policy, in reality. What steps do we need to take to move from where we are to where we need to be?
There is a huge amount happening. At the climate change summit in San Francisco in September, Christiana Figueres, who chaired the Paris summit, said that the response to climate change is happening at a pace that few of us could have hoped for 10 years ago. She said that we are making progress through good climate leadership, market forces and the digital revolution. At that summit the glass was very much half-full, but there are days when it feels less positive. By the Government’s own admission, the very sharp decline in feed-in tariffs last year removed 18,000 jobs from the economy. There is a very subtle balance between supporting new technology, enabling public engagement and creating a fair marketplace in which people who want to do the right thing are enabled to do so with some ease.
Energy is subsidised in a variety of ways. The noble Baroness said in her opening remarks that all energy sources are subsidised. We need to develop a range of resources, but we need to focus now on developing carbon-neutral, sustainable energy supplies in which solar, wind and tidal will play an increasing part. The development of solar energy still has some way to go.
The climate change committee is doing some work on what is needed for the UK to contribute to the global target of no more than 1.5 degrees centigrade warming on pre-industrial levels. A lot of quick wins need to be made. New houses should be built to the highest environmental standards; retrofitting them is more expensive and less satisfactory than building really energy-efficient homes with good insulation. Similarly, we need to develop micro solar projects: the sorts of things that have been developed on many houses. They depend on a simple relationship between consumption and production, and the feed-in tariffs recognised this. The gap that has opened between people producing solar energy in their homes and contributing to the national grid but not being paid for it seems quite extraordinary. We need to encourage people to do the right things with their own homes, and to develop good local micro-projects.
The purpose of this debate must be to point out the inconsistency of government approach between vision and reality. I am grateful to the noble Baroness for securing the debate. I add my voice to those who ask the Government to review their actions so as to connect vison and reality in ways that will encourage all of us to do the right thing at a local level.
Lord Grantchester (Lab)
I thank the noble Baroness, Lady Jones of Moulsecoomb, for bringing the attention of the House to this negative SI. I have always found the designation of instruments as affirmative or negative rather arcane, and either can be the case following substantial changes in government policy. I thank your Lordships’ Secondary Legislation Scrutiny Committee for recommending that the order be brought to the public interest; otherwise, it would have become operable without comment or scrutiny under the negative procedure. It certainly follows the Conservative Government’s pattern of behaviour to cut, curtail, restrain and restrict sensible, positive climate change policies.
In 2015 the new Conservative Government announced that they were going to scrap green taxes and levies in general, and in particular that the tariff for the generation of renewable energy to new entrants under the FIT scheme would end in March 2019. With so many policy swings, the result is that the UK is no longer on course to meet the fourth and fifth carbon budgets recommended by the Committee on Climate Change; wind and solar deployment have been severely curtailed, resulting in a severe recession in the industry; and policy reversals have shattered investor confidence. Many important projects, such as CCS, have also been cancelled and scrapped. All this is at a time when the Intergovernmental Panel on Climate Change has come forward with updated warnings about global temperatures by 2050.
The order takes advantage of the timed scrapping of the tariff for the generation of renewable energy under the FiT scheme and adds to it by scrapping the export tariff on surplus small-scale generated electricity to the grid, so that both coincide. The Government knew there would be serious concerns about this decision because they consulted on it, with the result that a massive 91% of responses opposed the plans, but they carried on anyway. That such a large proportion of representations against the change were ignored raises the question of why industry and the public should bother engaging with the Government. What can the Minister say to convince the public that it is worth their while to engage in consultations in future? Will their expertise be listened to?
As the Motion points out, future entrants to small-scale generation will have to provide surplus electricity to the grid for free. Respondents to the consultation are correct that this change of policy is incompatible with the Government’s climate change targets and responsibilities. It can have only a destabilising effect on the renewables sector and jobs. It denies a route to market for small-scale generators that encourages everyone to do their bit to alleviate climate change. Of course, as technology develops the costs of low-carbon generation decline and over time there will be less of a need for support, but it must also be pointed out that this is consumer support, not government support. Of course costs on households must be kept to a minimum, but what are these costs? The impact assessment points to an estimated cost saving from scrapping this scheme of £45 million a year from 2021—a whole £1 per year to the average household. Is that material for this disruption?
Yet the Government admit that there is still a need for a scheme to encourage small-scale generation. It is indeed still necessary. The Minister for Energy and Clean Growth, Claire Perry, recently said that,
“nobody should be providing energy to the grid for free”.—[Official Report, Commons, 8/1/19; col. 159.]
The Government agree that new entrants will still be needed but they have no replacement. They are consulting on their new scheme—the smart exports guarantee, or SEG—in recognition that the small-scale low-carbon generation electricity market is not yet fully developed and support is still required. It is still a fledgling market and a scheme is still needed but the Government admit that they have not got it ready, so why scrap the existing scheme prematurely? The scheme could continue with less disruption, still with value for money, while the consultation was completed and a new scheme drawn up. How long do the Government expect to take between the end of this consultation and having a smart exports guarantee scheme ready?
The order includes an element of levelisation—charges on suppliers for costs—and the Government would wish to build on suppliers providing remuneration to small-scale low-carbon generators under their new SEG scheme. However, the Solar Trade Association is lobbying for a minimum floor price set at a fair market rate. What guarantee can the Minister give that small-scale generators will not be left in a vulnerable position under these government plans and will be provided with a fair and competitive price? Why not gain experience of this levelisation scheme, continue with the current policies to prevent a clear gap opening up in the market and withdraw the order? Why rush to close the FiT scheme?
The consultation has been damaging to the reputation of the Minister’s department. Yes, cost-control measures need to be developed to be effective and proportionate from an administrative perspective, but the scheme has not run its course. The simple question to the Government is: why do you want to do this now?
The noble Lord, Lord Teverson, reminded the House of the Smart Meters Act, which highlighted the Government’s turmoil on that matter. We offered the Government more time to get it right. He will remember that the Government foolishly rejected that offer. The turmoil continues.
Baroness Vere of Norbiton (Con)
My Lords, I thank the noble Baroness, Lady Jones of Moulsecoomb, for securing this timely and important debate on the future of small-scale low-carbon generation. I also thank the right reverend Prelate the Bishop of Salisbury for his measured, thought-provoking and sometimes hopeful speech. It was certainly a very welcome contribution.
By way of context, the UK is a world leader in cutting emissions while creating wealth. Between 1990 and 2017, the UK reduced its emissions by over 40% while growing the economy by more than two-thirds—the best performance in the G7 on a per-person basis. According to PwC, the UK has decarbonised its economy at the fastest rate of any G20 country since 2000.
The feed-in tariffs scheme, introduced in 2010, alongside other government schemes, has been instrumental in enabling the UK to build a successful renewables industry in support of this rapid decarbonisation effort. Indeed, renewables accounted for 33.1% of generation in Q3 2018—the highest ever share—and the UK achieved a record 76 hours of continuous coal-free electricity generation in April 2018. Through partnerships with business, we are both tackling climate change and moving to a smart, low-carbon energy system.
We are working with industry to develop an ambitious sector deal for offshore wind, which could result in 10 gigawatts of new capacity, with the opportunity for additional deployment, if this is cost-effective, being built in the 2020s. We have also supported the deployment of new renewable technologies by investing up to £557 million in contracts for difference. Alongside this, and irrespective of the closure of the FiT scheme to new entrants, which was announced in 2015 and comes into force on 1 April 2019, installations already on the scheme will continue to receive support in accordance with the terms they received on joining. We recognise the need to go further, building on our remarkable progress in cutting emissions from electricity. The Clean Growth Strategy sets out our plans through to 2032, including ambitious proposals on smart systems, housing, business, transport, the natural environment and green finance.
We are delivering a smart and resilient energy system fit for the 21st century that will benefit every home and business. Small-scale generation and battery storage can play a crucial role in cutting carbon emissions as part of this smart, flexible and efficient system, both reducing local demand and providing clean power into the grid when it is needed. But, as the Secretary of State for Business, Energy and Industrial Strategy set out in his lecture “After the trilemma—4 principles for the power sector”, consumers of all types should pay a fair share of system costs. While government must be prepared to intervene to provide insurance and optionality, wherever possible we must use market mechanisms to take full advantage of innovation and competition.
In this context, it is worth reflecting on the success of the feed-in tariffs scheme and the reasons it is no longer aligned with the Government’s vision for a smarter, flexible energy system that minimises support costs to consumers. The scheme has made an important contribution to renewable generation and it outstripped predictions. It generates enough electricity to power 2 million homes. Since 2010, the scheme has supported over 830,000 installations and been instrumental in helping to grow the small-scale low-carbon sector. Our support has contributed to lowering the cost of renewable energy significantly. However, to date over £5.9 billion has been spent through FiTs to support small-scale renewables, and over £30 billion is expected to be spent in continuing to support the existing installations over the scheme’s lifetime. All bill payers share these costs, and the FiT scheme currently adds £14 a year to the average household energy bill, at a time when the focus is also on reducing average bills.
This consumer-funded subsidy model does not align with the wider government approach to minimising support costs on consumers. Take solar as an example: 99% of FiT schemes are solar PV. The support these installations receive comes directly from consumer bills; as hardware costs fall, it is vital that we control the impact on bills and move towards subsidy-free solar deployment.
Furthermore, looking specifically at the FiT export tariff, it is a flat-rate tariff that does not reflect the actual value of the electricity at the time of export, and is mainly issued on estimated exports to the grid, rather than actual measured values. It may be that payments are being made for electricity that has not been generated and fed into the grid. This stifles innovation in export tariff design and in technical solutions to track or shift time of export in a way that would provide whole-system benefits. Therefore, as this successful scheme closes to new entrants—new, not existing—we need to develop a market that sends the right signals to incentivise investment in local generation and storage, in a way that makes sense for a smarter system.
The Government have recognised that green power will likely be the cheapest power by the mid-2020s, and the prospect of subsidy-free solar PV is becoming increasingly realistic for developers. Two such sites have already deployed in the UK and the planned construction of two more large-scale subsidy-free solar projects has recently been announced. Alongside this, a range of emerging technologies, including electric vehicles, smart appliances and battery storage, are being developed that can work alongside solar and help to decarbonise our economy. For example, while the cost of solar cells has fallen by 80% since 2008, the cost of lithium-ion batteries has also fallen by over 70% since 2010 and is expected to halve again by 2030, according to industry experts. Companies in the UK, such as Moixa, are taking advantage of this reduction in costs and installing their battery systems in homes and businesses in the UK and abroad.
Increasingly, business investment in renewable projects and smart energy technologies will unlock growth in the UK solar industry. This market-led innovation in energy is absolutely key to our modern industrial strategy and our clean growth strategy. If we deploy smart, flexible technologies, we could save the UK between £17 billion and £40 billion by 2050, and this would benefit both consumers and the environment.
Turning to the smart export guarantee, we recognise the need to ensure that while these smart innovations are developed, consumers do not give away the power they have generated for free simply because suppliers are not yet ready to provide payment for their export. That is why we are consulting on a smart export guarantee. It provides a guaranteed route to market for small-scale low-carbon generation. We expect to see suppliers bidding competitively for electricity to give exporters the best market price, while providing the local grid with more clean, green energy.
I am sure noble Lords will appreciate a little more detail on the smart export guarantee. The Government are proposing to mandate that larger electricity suppliers—those with over 250,000 customers—offer small-scale generators a price per kilowatt hour which is exported to the grid. The remuneration will be available to all the technologies currently eligible for the FiT scheme—up to 5 megawatts. Suppliers will be obligated to provide at least one tariff. The consultation proposed five possible options for tariff design, and when we see the results of the consultation we will be able to bring forward further details. We are also guaranteeing that remuneration must be greater than zero, even at times when negative pricing would be in effect.
The noble Lord, Lord Grantchester, asked about the timing of this and, as I am sure he knows, the consultation closes tomorrow. We will analyse the responses to the consultation very quickly. We propose to bring forward proposals in this area as soon as possible; we do not want to see a significant hiatus between the closure of the FiT scheme and the SEG scheme coming into force. Of course, after any installation of capacity between the two schemes, that capacity would then be able to sign up for the SEG scheme when it is operational.
On the point about £1 a year made by the noble Baroness, Lady Jones, and the noble Lord, Lord Grantchester, it is true that that is for the export tariff, but I have already discussed this and why it does not represent good value for money for anybody. I also mentioned that it is £14 a year for consumers—that is all consumers, including the most vulnerable. That is a really important point that we sometimes forget: often, the people benefiting most from the FiT scheme are those who have the capacity and the agency to get solar panels fitted on to their very large houses, which is not necessarily the case for those who live in slightly smaller houses.
The noble Lord, Lord Teverson, asked about smart meters, a topic close to his heart, and indeed mine because we debated that Bill earlier. We are not aware of any technological reasons why smart meters cannot be installed in premises with generating facilities. Certainly, I will investigate further and respond to him because he asked for more detail about SMETS 1 and SMETS 2, so I will have to find some more information about that.
The right reverend Prelate the Bishop of Salisbury expressed concerns about jobs in this sector. Certainly, this is a highly skilled sector. While we expect that some people will have to shift jobs—it is very difficult to quantify the impact across the different technologies, capacity sizes and regions—we have not been able to quantify the job losses, if any.
The noble Baroness, Lady Jones, talked about a wide range of issues, going far beyond the FiT scheme we are discussing today. It is a topic worthy of a much longer debate. It is the Government’s position that we do not provide subsidies for the production of fossil fuels—the noble Baroness is looking at me aghast. We would never be able to do the issue justice in the very short time we have today, drilling down into the necessary detail.
Building on the considerable success of the feed-in tariff scheme, the smart export guarantee will ensure that small-scale, low-carbon generators do not export their electricity to the grid for free while also protecting consumers from unfair cost burdens. The SEG would provide space for innovative market solutions to come forward, reinforcing our vision for smarter, cleaner and more flexible energy systems. As a reminder, the consultation on these proposals remains open until tomorrow and I encourage all noble Lords to engage in the wider conversation around delivering this vision.
Lord Teverson
My Lords, may I be clear on what the Minister is saying? I thought she was quite positive in some areas. Was she saying that the Government intend that there will not be a gap when the exports finish—not a guarantee, but an intention? If there was a gap, would there be a reimbursement during that time? That is what I heard.
Baroness Vere of Norbiton
I am afraid that the noble Lord heard incorrectly and I apologise if that was what was understood from my description of what will happen. The consultation closes tomorrow; we will look at the consultation responses as soon as we possibly can. It is our intention to bring forward the new scheme as soon as possible, but we recognise that there will be a hiatus between the two schemes. However, anybody installing generating capacity between the two schemes will, of course, be able to sign up to the SEG when it becomes available. Installing generating capacity also means that they can take advantage of their own home-generated energy, so it has many advantages.
Baroness Jones of Moulsecoomb
My Lords, I thank all noble Lords who have contributed to this debate. I am always impressed by the ability of the noble Lord, Lord Teverson, to speak without notes, which I am afraid I can never do for that long. It was very good to hear from the right reverend Prelate the Bishop of Salisbury, who expanded on the climate change aspect, which I tend not to do in this Chamber because I think people will get bored by my saying it, so I am delighted that he did. I thank the noble Lord, Lord Grantchester, who talked about a sensible climate change policy, which clearly this Government do not have.