Community Energy Schemes

Tuesday 30th November 2021 Westminster Hall

[Mr Clive Betts in the Chair]

14:30

[Mr Clive Betts (in the Chair)]

Before we begin the debate, I remind Members that, in line with the guidance from the House of Commons Commission and the Government, they should wear face coverings except when they are speaking. I also remind Members to take a lateral flow test twice a week, which can be done in the House or at home, and to give other Members and staff room and space when seated as well as when entering or leaving the room.

[Wera Hobhouse (Bath) (LD)]

I beg to move,

That this House has considered the matter of empowering community energy schemes.

It is a pleasure to serve with you in the Chair, Mr Betts. I start by thanking Steve Shaw and Power for People, who have worked tirelessly on the campaign to unblock community energy. I also thank the hon. Member for Wantage (David Johnston), who is promoting the Local Electricity Bill in this Session. I am pleased to see the hon. Members for Waveney (Peter Aldous) and for Ceredigion (Ben Lake), with whom I have worked closely on the campaign, in the Chamber. They are enthusiastic champions for community energy in the House, and I look forward to their contributions.

Imagine a future where people can purchase clean electricity directly from a local supply company or co-operative and where every pound spent on powering our homes or cars is recycled back into the local community, supporting jobs, funding new facilities and services and contributing to renewable energy infrastructure. That is what community energy is about: ensuring that people everywhere support and benefit from the clean energy transition.

Solving the climate crisis and meeting our net zero ambitions will require huge changes that will be seen and felt directly by people everywhere. We need a radical shift in industrial systems, technology and business models, which must be underpinned by strong and decisive Government action and the right policies. However, one of the most crucial requirements is bringing people on board for the transition to net zero, because they have to pay for the transition through their energy bills and taxes, they have to host new infrastructure in their neighbourhoods and on their landscapes, and they need to alter their routines and behaviours.

Unless we bring people on board for the transition to net zero, there is a huge risk that the public will not welcome or even accept the necessary changes. The consequences of that will be that our progress to net zero will be much more lengthy, costly and contested, and it will be less inclusive, equitable and environmentally sustainable. The real strength of community energy is its connection to people and places. It is people who make community energy what it is, and it is people who will see the benefits. That is what we are trying to achieve with the Local Electricity Bill.

Community energy is one of the few tried and tested means of engaging people in energy systems. The Bill would lead to energy market reforms that would empower community-owned and run schemes to sell local renewable energy directly to households and businesses. It would make new community energy businesses viable and, by bypassing large utilities, those businesses would keep significant additional value within local economies.

[Hilary Benn (Leeds Central) (Lab)]

I congratulate my hon. Friend—she is my hon. Friend on this subject—on securing the debate. As I understand it, the Government argue that the means to enable new suppliers to come into the system are available. However, when I recently inquired about how many Licence Lite applications, which are meant to help new energy suppliers enter the market, had been granted by Ofgem, the answer was that three licences have been granted since 2015 and none has been applied for since 2019. Might that not suggest some changes are needed to make it easier for new suppliers to enter the market?

[Wera Hobhouse]

The right hon. Gentleman is absolutely right. Something does not work, and I will come on to why it does not work. The whole system is outdated and does not allow for the changes that we need to make to get to net zero. We have to test what works on the ground. The number of licences that have been granted speaks for itself. We have made no progress, yet the Government accept that community energy is a good thing and we should all support it.

[Caroline Lucas (Brighton, Pavilion) (Green)]

I congratulate the hon. Lady on securing this debate. On the issue of the Government saying it is a good thing, does she agree that the trouble in this country is that community energy is seen as a thing on the side? It is a cherry on the cake, and not the substantial part of the energy mix that it could be, as it is in places such as Germany, where there is a right to sell to the rest of the community. When we have that, we end up with a proliferation of local energy companies, a real diversity and ecology of energy companies, and a much stronger sector as a result.

[Wera Hobhouse]

In other countries there are much more diverse markets for this, and we really have to look at why it does not work in this country. I agree with the hon. Lady—absolutely, it has to be at the core of the transition. It is about power and people, so we are here to make a strong case to the Government to listen and really understand the benefits of local community energy.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I fear that much of the difficulty that we will encounter in promoting this case will be found along Millbank in Ofgem, which has never been an enthusiast for this sort of diversity in the market. In the northern isles, we have the highest rate of fuel poverty anywhere in the country. We already produce more clean electricity from renewable sources than we can use. We do not have the opportunity of exporting that to the transmission grid, so I am happy to offer us up as an early testbed for community energy.

[Wera Hobhouse]

If I were the Government, I would happily take up that offer. It is about the surplus energy that can go back into the community. If we look at the crisis in the energy market and the fact that people will probably face higher prices, anyway, the Government’s argument that there might be unintended consequences, particularly around price, has proven not to be the case. It will ultimately become cheaper if we go along the lines of community energy.

[Jeremy Wright (Kenilworth and Southam) (Con)]

I am grateful to the hon. Lady for giving way and for securing this debate. In dealing with the objections to the course of action that she is setting out, she will know that the Government maintain that the right to local energy already exists. Does she agree that the right way to look at that is the way I look at my right to buy a Ferrari, which already exists, but my financial obstacles to doing so are considerable, and that that is true in the case of community energy too?

[Wera Hobhouse]

I thank the right hon. and learned Gentleman for that analysis. Do we all want Ferraris? Who knows? But we probably all want community energy. The problem is indeed the cost of entry for small local suppliers, and that is what the Government need to look at. As we have already heard from the right hon. Member for Leeds Central (Hilary Benn), it does not work on the ground. When the right exists, fine, but what is the practice? We need to look at what we can do to change the practice and at what is affordable for the small companies that want to enter the market.

[Patrick Grady (Glasgow North) (SNP)]

The hon. Lady is being very generous with her time. As I have said in previous debates, I have local constituent groups who are dead keen on community energy and really want to be able to rise to the opportunity. In addition to rising to climate change targets and reducing emissions, there is an issue about resilience to climate change. We now have people in different parts of the country who have been without power for four or five days because of climate change-related weather storms. If we had local generation, there would be additional resilience in the system that would perhaps protect or shelter people a little bit from some of the damaging consequences of changing weather.

[Wera Hobhouse]

The hon. Gentleman makes a very good point. Lots of small and diverse players are probably the answer to our future energy demands. The Government in the past have always considered bigger is better, economies of scale and all the rest of it, but we need to look much more favourably at smaller, diverse suppliers.

I need to make some progress, so I will remind everybody where we were. The Bill would lead to energy market reform that would empower community-owned and run schemes to sell local renewable energy directly to households, rather than small companies buying energy from bigger companies, then selling it on. It would make new community energy businesses viable and by bypassing large utilities, they would keep significant additional value within local economies. More of the money that we use to pay our electricity bills would circulate back to our local communities to create more skilled local jobs, more viable local businesses, stronger local economies and greater resilience.

Let us take my constituency of Bath as an example. Bath and West Community Energy has delivered 12.35 MW of community-owned solar photovoltaics, in addition to one hydro scheme. Many of these projects have been installed in schools and community buildings across Bath, including Ralph Allen School, Oldfield School, Walcot rugby club, Newbridge Primary School and Lewis House. Bath and West Community Energy systems generate enough electricity to match the annual equivalent of 4,000 homes. They have distributed nearly £300,000 back into local community grants, which go into supporting community action on carbon reduction and fuel poverty, which has been mentioned.

The group supports a wide range of schemes, ranging from community orchards and reuse and repair schemes to fuel poverty advice and even a cycle-to-work scheme using e-bikes. I am delighted that our local electricity distribution network operator, Western Power Distribution, is a registered supporter of the local electricity campaign. However, there are a number of problems facing local suppliers, including those in my constituency. Bath and West Community Energy has identified and is developing nearly 40 MW in a pipeline of projects that will work with communities, commercial developers and site owners, but its ability to commission the pipeline will depend on a number of different factors.

One key factor is grid capacity. This area is currently heavily constrained. Investment is needed in grid improvement, but Bath and West Community Energy must compete with commercial companies with much more resources to secure a grid connection. Smaller operators do not have the financial resources that big commercial operators have. Another factor is partnership with local authorities. There is huge potential, and I am delighted that Bath and North East Somerset Council supports the Local Electricity Bill. Councillors keep telling me how popular community energy projects in their wards are in the consultation stages, but many projects do not make it to reality. There must be stronger support for local authorities to establish joint ventures and utilise local authority finance to invest in local community projects that generate local social and economic benefits on both public estates and in the wider community.

What is the biggest barrier to community energy? It is the right to local supply. Current energy market and licensing rules mean that community energy schemes to build new renewable generation infrastructure and then sell power to local customers face costs that are too high to make the schemes financially viable. A report by the Institute for Public Policy Research states that the financial, technical and operational challenges mean that initial costs exceed £1 million. As the Environmental Audit Committee has said, community energy contributes 278 MW of renewable energy as of 2020. That is less than 0.5% of total UK electricity generation.

Community energy has seen almost no growth in the past six years—a great waste of potential. However, there is a solution. I urge the Minister to add his support to the Local Electricity Bill, which was introduced by the hon. Member for Wantage and is supported by 281 MPs from all parties. The Bill sets out the mechanism that can fix the UK’s local supply problem. Clause 1 states the purpose of the Bill—to enable the local supply of electricity. Clause 2 sets out the aim of smaller-scale renewable generators to supply electricity directly to a local area. Clause 3 gives Ofgem the task of setting up the local supplier licence process. Crucially, it requires that the process ensures that local suppliers face set-up costs and complexity proportionate to the scale of their operations.

[Stephen Hammond (Wimbledon) (Con)]

Is the hon. Lady not right that clause 3 is the nub of this Bill, because all too often in regulation we have a one-size-fits-all approach that is not proportionate to the scale of the operation or the ambition? If a specific duty was placed on Ofgem to ensure that both the regulation and the cost were proportionate to the size of the ambition and the operation of the local generator, we would see that 0.5% figure rise quite dramatically.

[Wera Hobhouse]

Indeed—I completely agree. I urge the Minister to look at clause 3 of the Bill, which would give Ofgem the task of setting up the local supplier licence process, which should be proportionate to the size of the operator.

The Government have said many times that they support community energy; I am grateful for that, as are all of us in the Chamber. In the last debate on community energy, the former science Minister, the hon. Member for Derby North (Amanda Solloway), outlined the Government’s agreement with the broad intentions of the Local Electricity Bill, which was very welcome.

Those who support the Local Electricity Bill accept that it can be improved. We want to work constructively with the Minister and his Department to improve it, so today I will address some of the Government’s concerns. I will take each concern as outlined by the Government in turn.

First, the Government have said that there is already a right to local supply through existing rights and flexibilities, but we have heard why that system probably does not work; Ferrari analysis springs to mind. The existing rights and flexibilities simply do not address the problems faced by local suppliers. The huge potential for more community energy generation is not being realised. Community energy has seen no significant growth in the last six years, standing at a mere 278 MW of electricity generation capacity. No existing community energy group in the UK is licensed to sell its electricity directly to local customers.

Licence Lite, the scheme set up in 2009 to award geographically-based energy supply licences, has resulted in only three such licences being granted since the scheme was established. The key flaw in Licence Lite is the need for local renewable generators to partner with a willing licensed energy utility.

Secondly, the Government say that changing the rules risks distortion in the energy system. The energy markets and the energy system are the result of the rules that govern them. These rules are much as they were when they were introduced for the 1990 privatisation. They might have made sense at that time, but now that there is such huge potential for distributed smaller-scale renewable generation they are now outdated.

Thirdly, the Government say that changing the rules risks increased costs for consumers. The evidence shows the opposite. In 2020, community energy organisations spent nearly £900,000 on energy efficiency upgrades, helping over 45,000 people to reduce their energy bills. A twentyfold increase could be achieved from community energy schemes by 2030.

Fourthly, the Government say that changing the rules risks further unintended consequences. However, they have not really outlined what those unintended consequences are, so I hope that the Minister can say what he thinks they might be. Those of us who support the Bill want to work together with the Government, as I have said.

I draw the Minister’s attention to a recent report from the UK Energy Research Centre, to which academics from Imperial College London have made a significant contribution. It is a very important report, and it identified five different business models that could work together to ensure a thriving community energy sector. It is clear not just about the important role that collaboration between communities and the private sector has to play in community energy but about what the Government must do to support community energy solutions.

The report also says that the Government should set clear and sustained targets for growing the community energy sector, and introduce policies and regulations that allow space for small actors, which we have heard about. That must go hand in hand with sufficient investment in energy efficiency retrofitting, an area where the Government do not have a very good record.

I have three questions for the Minister today. I have sent them to him in advance, so I hope that he has had time to prepare his response to them. My first question is simple: will he commit to including the Local Electricity Bill in future energy legislation? Secondly, he said in recent letters to Members of this House that the Local Electricity Bill risks creating distortions in the energy system and having other unintended consequences—apart from the increased cost, which I have addressed. Can he outline what these distortions and consequences are, because knowing them will allow me and other supporters of the Bill to work on improving it?

Finally, I wrote to the Minister earlier this month, together with the hon. Members for Wantage, for Waveney, for Ceredigion, as well as the hon. Member for Glasgow North (Patrick Grady) and the right hon. Member for Leeds Central, asking him to meet us. We are keen to work constructively with the Government. Will he agree to that meeting? There is a great deal of cross-party support for the Bill, as we can all see in this room. We have an opportunity to do something significant on our path to the net zero transition, building the public consensus we need. Otherwise, we might face significant delays to deliver the necessary changes. Community energy is not just nice to have and it is not just a cherry on the top of a sustainable economy cake; it should be at the heart of what we do to get to net zero.

[Several hon. Members rose—]

[Mr Clive Betts (in the Chair)]

Four hon. Members have submitted a request to speak. We have until 3.30 pm, which is when the Front-Bench spokespersons will start.

14:50

[Selaine Saxby (North Devon) (Con)]

It is a pleasure to serve under your chairmanship, Mr Betts. Congratulations to the hon. Member for Bath (Wera Hobhouse) on securing today’s important debate.

I want hon. Members to imagine a future where they can purchase clean electricity directly from a local supplier that is owned and run by local people. Storm Arwen this weekend certainly demonstrated the power of the elements back home in North Devon. As we transition to net zero, we need to harness more of our renewable energy resources as efficiently and rapidly as possible. Local energy supplies have the additional community benefits that every pound spent powering our homes or cars could support local jobs, help fund new facilities in our communities and contribute to more renewable energy infrastructure. That future is within reach and realising it is vital if we are to ensure that the British public welcome and benefit from our transition to net zero.

We have made great strides in decarbonising our economy. Our greenhouse gas output is 51% lower today than it was in 1990. Currently, renewable electricity accounts for 14% of our total energy use and that is set to rise significantly as we further decarbonise and build up our energy security. I very much hope that floating offshore wind generated in the Celtic sea will be part of that in the not-too-distant future. Achieving net zero presents the serious challenge of growing our electricity generation at least twofold, so that transport and heating can be decarbonised, and building the renewable generation infrastructure to power it.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

Is that not the key point? We need to increase our renewable generation of electricity, but the reality is that where there are projects, especially in rural areas, there is often a fair bit of opposition, above all when it comes to onshore wind. One way of addressing that concern is that if communities believe they will have ownership of and the benefit from that development, that will bring people with us. To achieve our ambitious targets, we must take people with us, and that is one way of doing so.

[Selaine Saxby]

I agree entirely with the hon. Gentleman’s point. It is an opportunity to bring our communities with us on this journey, which is so vital to the whole purpose of the Bill and its objectives. In the face of soaring international gas prices and global energy pressures, surely we should be welcoming that challenge.

There is remarkable potential for community energy and renewables schemes owned and run by local people in helping us reach net zero on time. As the hon. Member for Bath said, currently community energy generates around 0.5% of our electricity. As the Environmental Audit Committee showed in its recent community energy inquiry, by 2030 community energy could grow by at least 20 times, powering 2.2 million homes and saving 2.5 million tonnes of CO₂ emissions every year. Other countries such as Germany already have more than 1,000 supply companies, compared with just 50 here in the UK. One does wonder what is stopping us doing that already.

Currently, the energy market rules lead to costs—the Ferrari costs—that make doing that impossible. The financial, technical and operational burdens involved in setting up a licensed energy supply company mean that initial costs exceed £1 million. It is like setting up a micro-brewery, planning to deliver beers to local pubs, restaurants and homes, and then being told to pay £1 million in road tax for a delivery van because it is using the national road network. The business would never be started. To realise community energy’s huge potential, we need to enable current and future schemes to sell their power direct to local consumers. That requires making the cost faced in selling power proportionate to the size of an energy business. New community energy schemes would then be financially viable and their enormous potential would be realised.

The Local Electricity Bill, which I am proud to co-sponsor, and which enjoys the support of 282 MPs—another joined this weekend—would do that. The Bill would improve the market rules to allow community energy schemes to flourish alongside larger suppliers. I look forward to working on the Bill, so that it can be another proud stride in our decarbonisation journey and quite literally deliver local power to the people.

14:55

[Caroline Lucas (Brighton, Pavilion) (Green)]

It is a pleasure to serve under your chairship, Mr Betts, and I congratulate the hon. Member for Bath (Wera Hobhouse) on securing this important debate.

It is just two weeks since the conclusion of COP26 in Glasgow and I welcome the focus that the debate places once again on how we practically deliver on the UK’s climate targets. We know that the Government’s recent pledge to decarbonise the UK power system by 2035 will require not just leaving fossil fuels in the ground where they belong, but a significant increase in renewable energy generation. Although progress has been made, with renewables generating 42.9% of electricity generation in the spring of 2020 and the Government committing to 40 GW of offshore wind by 2030, it is clear from everything we have heard this afternoon that community energy generation remains the missing part of the equation.

As we have heard many times, a failure to remove the barriers being faced by local suppliers is what is holding us back. Indeed, while large developers will soon benefit from the contracts for difference scheme, projects smaller than 5 MW continue to be excluded. Yet as the Minister will be aware, the potential for community-scale renewable energy generation is enormous. I am particularly delighted to hear the number of times that a report by the Environmental Audit Committee has been cited in this afternoon’s debate already. As a member of that Committee, I was pleased to sit in the deliberations as we came up with the figures that by 2030 the sector could grow by up to 20 times, powering more than 2 million homes and saving 2.5 million tonnes of CO₂ each year. It is a very powerful report and I commend it to those who have not yet had a chance to look at it.

The report made it clear that the UK’s outdated regulations are unfit for the present, let alone for the future. As things stand, as the hon. Member for Bath reminded us, community energy generation makes up less than 0.5% of the UK’s total electricity generation and there has been almost no growth in the sector in the past six years. Compare that with a country such as Germany, where there are 200 local energy companies, and with energy systems in countries such as Denmark, which are entirely decentralised. In comparison, the UK is an incredibly centralised four-nation country with an incredibly centralised energy system, and local energy companies have been little more than collective purchasing vehicles.

In other countries, local energy systems incorporate all aspects of generation, storage and supply. Households, communities, schools and businesses become joint producers and consumers in the local energy system, with vested interests in generating clean energy as well as consuming it, yet here at home, as Community Energy England has so clearly set out, Government policies have made it more difficult for the sector to flourish. The outdated market that we have largely dates back to the 1990s, when the sector was privatised, and prohibitive costs combined with the complexity of licensing laws are stifling community energy schemes.

[Wera Hobhouse]

Can the hon. Lady outline that the whole idea does not work because the improvements to the grid have not materialised in the way that we had hoped, or rather the way that the Government had hoped, and that we need big grid improvements to deliver net zero?

[Caroline Lucas]

I welcome the hon. Lady’s intervention and she is absolutely right. It feels to me as though this absolute reinforcement of the grid is often the poor cousin in these debates and does not get much of a look-in when we talk about what needs to be done, yet it is absolutely critical. If we do not do that, the rest of what we are discussing will not count for much because it will not be possible for it to be realised if the grid is still in the dilapidated state that it is in now.

Earlier this year, the right hon. Member for Ludlow (Philip Dunne), the Chair of the Environmental Audit Committee, on which I am pleased to serve, wrote to the Secretary of State following our inquiry into community energy and specifically recommended that the Government remove the regulatory barriers to allow community energy projects to sell their energy to local communities. The Secretary of State subsequently promised to publish the Government’s future plans for community energy in the net zero strategy, yet disappointingly that strategy contains neither a plan nor the practical support measures needed and that the Committee had recommended. That is why the Local Electricity Bill, of which I am also a proud co-sponsor, is so important, and why it seeks to remedy successive policy failings, by giving people the right to local electricity generation. As others have said, it would create the right to the local supply of electricity, allowing community generators to become local suppliers, and require Ofgem to establish the local supplier licence process, ensuring that the costs and complexity of becoming a local supplier were proportionate. Other measures to support community energy schemes include expanding and extending the rural community energy fund to include urban, heat, energy-efficiency and retrofit projects.

I want to say a last word about how community energy has a role to play in helping to build thriving, resilient communities. I was struck by the fact that in its final report, Climate Assembly UK placed a strong emphasis on fairness and leadership from Government. Community energy is that chance to deliver on both those fronts. Quite simply, enabling community energy projects means supporting thriving communities, where the profits from generation are reinvested locally. It means that, in transitioning to a zero-carbon economy, we are not simply building a new industry on the same old model, with profits concentrated at the top and communities denied a share of the benefits or unable to access the jobs. We are turning that on its head. We are creating something new and better, delivering decent green jobs and energy, investing at a local level in those resilient local economies. That is what a green new deal worthy of the name looks like in practice.

Community energy projects deliver significantly more social value than commercial models. Although the sector currently relies on volunteers, Power for People estimates that almost 60,000 skilled jobs could be created up to 2030, if policies such as those in the Local Electricity Bill are implemented. As I said, community energy is not just a nice-to-have extra to be excited about—the cherry on the sustainable economy cake. It is a fundamental part of the total energy mix.

Finally, I pay tribute to Brighton and Hove Energy Services Co-op—BHESCO—an award-winning social enterprise in my constituency, which since 2015 has completed 58 community energy projects, estimated to reduce CO₂ emissions by more than 7,000 tonnes over their operational lifetime. They have told me clearly that they could do so much more if the rules were changed and they were allowed to fulfil their potential. All they are asking for is a fair playing field for community energy projects that now struggle to make a business case, so that they could do the practical local projects that involve people and communities in inventing and adopting climate solutions, which bring huge social and community benefits.

15:02

[Peter Aldous (Waveney) (Con)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate the hon. Member for Bath (Wera Hobhouse) on securing the debate. It appears that debates on community energy are synchronised in the parliamentary timetable to take place every six months. On the one hand, that illustrates the groundswell of support from communities all around the UK to come forward with their own bespoke schemes. On the other hand, the fact that we are turning up every six months would suggest that we are not getting anywhere.

The rationale for empowering community energy schemes is compelling. To decarbonise our energy supply, our transport system and our heating networks we need a shedload of electricity. We need to be firing on all cylinders. Communities around the UK want to do their bit, to play their role in getting to net zero. Imposing a wind farm, solar farm or hydro scheme on a community might well run into resistance, but a community working up its own plans is more likely to get somewhere. Community energy schemes can also play a key role in revitalising local economies, creating sustainable, long-term jobs and promoting a truly circular economy.

To enable community energy to play that full role, regulatory barriers need to come down. Work on doing that needs to start straightaway. Last year, deployment was at a record low. At a local level, local authorities are developing their own climate action plans, and they want to get on with putting them into practice. The one-size-fits-all supply licensing regime—even if there can be regional demarcation—the complexity of the electricity market and the costs of entry are stifling community development. Local price signals are also heavily dampened, and are thereby out of sync with the Government’s stated desire to encourage flexibility at all levels.

There is a need for regulatory reform. I suggest that the following issues need to be addressed. First, it should be made possible to grant derogations from standard licence conditions and to grant supply licences for specific geographical areas or premises types. Secondly, the Department for Business, Energy and Industrial Strategy should ask Ofgem to provide guidance on the steps needed to support community energy and to establish a right to supply. Thirdly, Ofgem itself should give full consideration to the provision of a local supply licence. Fourthly, the reform of the supplier-hub model should be fully investigated. Finally, careful thought should be given to the effectiveness of the smart export guarantee scheme. That should include looking at the range, nature and uptake of SEG tariffs and considering what steps must be taken to improve the route to market for community energy projects.

Although having such consensual debates provides pleasant respite, we need to get on with making meaningful and significant progress on the road to net zero. Local communities have a significant role to play and, to ensure that they can do so, we need to remove those regulatory barriers. I acknowledge that in many respects that is complicated, and there is perhaps a tendency to put it in the “too difficult to do” column. However, there is very limited, if any, political resistance and, in fact, as we are hearing, a groundswell of grassroots support from all around the four nations. I thus request that the Minister ask his team to work with Ofgem to produce a strategy for removing those hurdles, so that, when we next debate community energy, perhaps in six months’ time, it will be when he is making a statement in the main Chamber setting out the steps that he is taking to unleash a wave of community energy projects.

15:07

[Jim Shannon (Strangford) (DUP)]

Thank you, Mr Betts, for giving me the chance to speak. I thank the hon. Member for Bath (Wera Hobhouse) for setting the scene for us all, and I praise the hon. Lady for her sterling efforts in bringing the community energy debate to the Hall. The fact that so many have turned up is an indication of the interest in the topic. I spoke in the Westminster Hall debate on enabling community energy that she secured in July, which was chaired by the late Sir David Amess, and I am pleased to be back here to reiterate the benefits of community energy schemes. I thank all right hon. and hon. Members for their contributions, whether interventions or speeches. I am also particularly pleased to see the hon. Member for Ceredigion (Ben Lake) in his place. He had an Adjournment debate on this very issue, which was well attended as well. If he is going to make a contribution, I look forward to it. I hope to be, as we often are, on the same page.

I want to emphasise the importance of allowing local communities the opportunity to advance their own electricity strategies. Perhaps those come at a cost, but a community approach should be at the forefront of any decarbonisation effort. That is where the initiative and inventiveness comes from, and a community approach has the potential to drastically increase renewable energy provision. It may be of interest that currently there is no strategy to target the enabling of community energy. Brief overviews have been discussed, but if we want to focus our efforts on empowering community energy, surely we must have a sustainable plan to do so. I look forward to the Minister’s response, because he always gives us something to hang on to—we look forward to that contribution.

I mentioned in the previous debate that the United Kingdom has witnessed the emergence of 424 community energy organisations. It saddens me to say that Northern Ireland has only two, which is very disappointing. The opportunity for that simply has not been within our reach. There is a reason for that. Community Energy NI and the Fermanagh Trust do much-needed work raising awareness of the benefits of community energy. Their website states:

“Community energy projects also offer an opportunity to help secure the long term financial sustainability of community organisations.”

That is crucial, given that many community organisations have a high dependency on grant funding.

In my office, and I am sure those of all Members, there is massive interest in clean energy, net-zero carbon targets and the need for a better future for our children and grandchildren. Those are the things that motivate us. My mailbag and email accounts are full of such requests and suggestions. We need to have a sustainable plan in place, so that we can move forward. It is safe to say that cost is a huge factor in putting energy companies off investing in localised schemes. Green Alliance has stated that the number of new community energy projects in England, Wales and Northern Ireland has fallen dramatically since 2015, with only one in 2017. I think the right hon. Member for Leeds Central (Hilary Benn) said that there were none at all in 2019.

We are also falling behind most European countries in terms of community energy. If our colleagues and friends in the rest of Europe are doing it there may be something that we can learn from that, and perhaps we can add that expertise to our process. A recent survey showed that 11 million households could be producing or storing their own energy in the UK by 2030, compared with only 1 million today. That is a big target to meet, but it is achievable. Returning to my earlier point, that cannot be done without support from our Government and the Minister, and the availability of grants, to get the idea brought together—the kernel of thought—and make it physically happen.

On regulation, the Local Electricity Bill establishes a right to local supply, ensuring that local energy is financially viable and creates local economic resilience across the United Kingdom of Great Britain and Northern Ireland. However, the Bill, as I mentioned in July, does not extend to Northern Ireland. I know that the Minister is always keen to encourage us in Northern Ireland, so perhaps he could give us some idea of what we can do to make that happen. I encourage him to engage with his counterparts in Northern Ireland—the Economy Minister, Gordon Lyons, and in more rural instances the Minister in the Department of Agriculture, Environment and Rural Affairs, Edwin Poots, both of whom represented Northern Ireland in the recent COP26 talks, where they made a significant contribution. It is important that we are part of that.

I am encouraged that more elected representatives are being lobbied by their constituents to get involved in the energy debate. That is exactly what has happened in my mailbag and the contacts that I have had. I welcome the opening remarks of the hon. Member for Bath. We must ensure that the correct funding for community energy schemes is allocated accordingly, and that all regions of the United Kingdom of Great Britain and Northern Ireland can benefit. Such strategies ultimately pave our way to future economic success. Not only do they inspire organisations and individuals to engage with smaller localised companies as opposed to larger and more populated financial and energy firms, but they have a role to play, which we need to encourage, and I look to the Minister to do just that.

15:09

[Hilary Benn (Leeds Central) (Lab)]

In view of the fact that there is a bit of time left, I thought I would say one or two things. I have come to learn about the Local Electricity Bill. I congratulate the hon. Member for Bath (Wera Hobhouse) once again on securing the debate, and thank all the Members who have supported it. To be honest, I find it a bit frustrating that people who want to do things that will contribute to helping to address the great challenge that we face, which is to change the way in which we produce and consume energy, find difficulties in their way.

I, too, look forward to listening with great interest to what the Minister has to say, because I thought the example that the hon. Member for North Devon (Selaine Saxby) gave of the £1 million and the microbrewery really made the case that it is disproportionate. I would have thought that any Government in such circumstances would be reaching out their arms to embrace those who wish to contribute to generating energy rather than allowing there to be obstacles in the way. We know that connecting to the grid is a problem even for quite large producers. There are a number of new offshore renewable projects, and when we ask how they are getting on, the answer is, “Well, there’s a problem about plugging the wire in when it comes ashore.” Of course, there are a lot of very important technical issues to do with the capacity of the grid and so on, but if we look at this historically, we will see that our energy generation system has relied for a very long time on big places making the energy—it used to be via coal, gas and nuclear—and sending that electricity down wires to all the homes in the country.

The community energy Bill is saying that there is a different model that could help us to reach our goals. I am struck when I hear colleagues talk about the success of community energy in countries such as Germany. I know nothing about the generating and distribution system in Germany, but it gives rise to the question: if they can do it there, can someone please explain to me one more time why we find it so difficult to do it here? The reason I quoted earlier the Licence Lite application figures I had sought was that they suggest to me that this is complex and difficult when we ought to be making it a lot easier.

We can envisage a future in which there are two other benefits. First, we know that getting infrastructure constructed in this country can lead to a lot of objections and difficulties. If the idea of localised nuclear generating facilities, which Rolls-Royce has been talking about, comes to pass at some time in the future, I have no doubt that there will be a lively debate, because it is a much more devolved system of manufacture and distribution of electricity. However, experience surely teaches us that if we give people a stake, they are more likely to agree to the infrastructure being constructed.

I remember from my time as the Environment Secretary hearing from a community that had put up a wind turbine. We know that onshore wind turbines are very unpopular indeed in some parts of the country. That is part of the reason why we have so much offshore wind. However, that community had no trouble getting approval from the village, because people understood the benefits that would flow from electricity generation, and they knew that the money from the feed-in tariff would go towards supporting the local community hall.

When he replies, I hope that the Minister will not only give encouragement but set out the practical steps that the Government are willing to take to make it easier for that to happen. The hon. Member for Bath says that she has requested a meeting, and I join her in that request. It would help all of us who are campaigning—I freely acknowledge that I have come late to this—to understand what the problems are. In the fight against dangerous climate change, the fight to change the way we produce, distribute and use our energy, nobody is afraid of trying to get to grips with the practical changes that are required. We want to support the Government to make the necessary changes.

[Paul Girvan (South Antrim) (DUP)]

The problem in Northern Ireland is that if everybody were to convert to electric vehicles, as we are trying to do in relation to net zero, our grid would collapse. With everyone coming home at 6 o’clock at night and plugging in, the grid would collapse. The only way to deal with that is local generation for charging networks, as has happened in some communities in Israel and America. That approach has worked and is working.

[Hilary Benn]

The hon. Gentleman raises a really interesting example, because the future will require a huge increase in renewable electricity generation, whether for heat pumps for homes, for cars or for other things. Electric vehicles are an interesting example of thinking about energy in a different way. For example, if the car arrives home and is parked up at 7 o’clock in the evening, and that is when people go indoors to put on the kettle and the TV, we could say, given that there will be loads of car batteries being used, “Between 7 and 11, part of our generating capacity will be the batteries in all those cars. We will draw them into the system, and then when we have gone to bed, hopefully at a reasonable hour, the battery can be charged up to take us to wherever we want to go the following morning.” That is such a good example of how we can think differently about energy generation and distribution, and it is a powerful argument for the Bill, which so many hon. Members are here to support.

[Mr Clive Betts (in the Chair)]

We move on to the Front Benchers, who have at least 10 minutes. They can have a bit longer if they want, as long as they leave a couple of minutes at the end for the mover of the motion to respond.

15:20

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts. Like other hon. Members, I commend the hon. Member for Bath (Wera Hobhouse) for bringing forward the debate. She set out clearly the benefits of community energy and how it would help on the path to net zero and to empower local communities. She also, importantly, set out the current barriers to setting up community energy companies. That was further illustrated by examples in the contributions of the hon. Members for North Devon (Selaine Saxby), for Brighton, Pavilion (Caroline Lucas), for Waveney (Peter Aldous) and for Strangford (Jim Shannon), and the right hon. Member for Leeds Central (Hilary Benn).

One barrier seems to be that it could cost upwards of £1 million to get set up for a generation licence. We have heard that the Licence Lite option under Ofgem simply is not working, so we need alternatives, and the Government must update rules that date back to the electricity network privatisation back at the end of the ’80s and the early ’90s. The hon. Member for Bath made important comments about bringing people on board. We need everybody to buy into the actions that we need to take to tackle climate change. If people get additional community benefits along the way, that is clearly a bonus.

[Ben Lake (Ceredigion) (PC)]

On that point, as my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) has alluded to, not only do we need that community buy-in to allow for measures but, for too long, the energy system’s centralised nature has led to a disconnect between the consumer and the generation. By bringing them closer together, we may find that the typical consumer gains an appreciation of what is entailed in energy generation, which may bring beneficial behavioural changes on top of everything else.

[Alan Brown]

I completely agree. Actually, that touches on the point made by the hon. Member for Leeds Central that we have a grid system and a grid charging system still fundamentally based on where coal-fired power stations or nuclear power stations are sited. That needs a complete overhaul. I may touch on that a wee bit later.

[Jim Shannon]

Strangford Lough Wildfowlers and Conservation Association in Newtownards came up with a small tidal scheme, which, with a small grant, generated some electricity for its use. The scheme has allowed the club to reduce its costs and keep running. That same process could be used in many cases across the whole of the United Kingdom. Has the hon. Gentleman got any similar examples?

[Alan Brown]

The hon. Member gives a good example. I do not have any specific ones to hand, although I will touch later on how some community energy projects have been held back because of the removal of the feed-in tariff.

It is clear that hon. Members are agreed on the importance of community energy generation, and I am sure that the Minister will stand up and say that he agrees with it as well. The key thing is not just agreeing with the principle but taking action to facilitate the growth of community energy projects.

I, too, am a signatory to the Local Electricity Bill, and I pay tribute to Steve Shaw for his campaigning, dedication and ability to get so many local authorities on board behind the Bill, as well as 282 MPs and 77 national organisations, including the Energy Saving Trust, Good Energy, Forum for the Future, the New Economics Foundation, ResPublica, Solar Energy UK, the British Hydropower Association, Triodos bank, the Transition Network, the Royal Society for the Protection of Birds, Friends of the Earth, the Wildlife Fund for Nature, Greenpeace and ClientEarth. That in itself suggests that the Bill is a good thing and should be implemented.

If we look at the energy retail market, we see how badly it is struggling. We just saw Bulb—the seventh largest company, with 1.7 million customers—go bust, so it is clear that we need alternative solutions for the provision of electricity. Clearly, local powering will not replace an organisation such as Bulb overnight, but, as I say, it is logical to try to facilitate local community-based renewable energy where possible.

Changing the regulations to make new community renewable energy businesses viable allows communities to bypass the large utility companies. It means significant additional value for local economies and, as we have heard already from other hon. Members, more money will then circulate in the local economy, leading to more skilled jobs, more viable local businesses and stronger local economies. As I touched on earlier, it empowers local people and companies to be part of the green revolution and part of the pathway to net zero. That can only help to focus minds and create the general buy-in for the need for collective action to tackle climate change.

Evidence suggests that community energy generation currently accounts for less than 0.5% of the UK total. It has been suggested that it has the potential to increase tenfold over a six-year period. As we have heard, figures from the Environmental Audit Committee suggest it could be a twentyfold increase by 2030. That would more than offset the need for new nuclear power generation, and it is something that the Government need to consider.

The Scottish Government have made strong progress towards community energy, but their efforts have been undermined by UK Government cuts. The Scottish Government had a target for 500 MW of community and locally-owned energy by 2020, which was exceeded and then increased to 1 GW by 2020. They have now doubled the target to 2 GW for 2030. Progress towards the bigger target has been positive, but, as I touched on in response to the intervention from the hon. Member for Strangford, the removal of feed-in tariffs has hindered the growth of those projects. There is a project in my constituency that never got off the ground because of the removal of the feed-in tariffs. By taking away those tariffs, the Government are blocking community energy projects, and they are not doing enough to help facilitate them in a different way so as to allow the sale of energy. That is why urgent action is needed.

The Scottish Government published an updated local energy policy statement in January. Of course, community energy projects in Scotland are further hampered at the moment by Scotland having the highest grid charges in Europe. Lucy Whitford, managing director of Renewable Energy Systems UK and Ireland, has said that

“it doesn’t feel as if charging is fit for purpose anymore for us to deliver net zero. We have worked up some examples of network costs. The additional cost per annum of a 22 MW wind farm in Argyll versus one in Essex could be £500,000. Continuing in the current direction of travel on charging reforms could add another £120,000 per year to a project, so it is very significant.”

That is why I have been calling for reform of the grid charging system.

At the moment we have the cost of living crisis, and the energy cap will increase by between £400 and £600 in April. We have the retail energy market in crisis, with 23 companies going bust since August. In 2018 there were more than 70 companies in the market, but now there are fewer than 30, so Government action is needed to reform the sector.

Meanwhile, the Tories have managed to find £1.7 billion to further develop proposals at Sizewell C, and they want to commit bill payers to a regulated asset base payment contract that will last for 60 years on top of the 10 to 15-year construction period. That is madness. The money would be much better spent on community energy growth, as we have discussed. The Local Electricity Bill is an alternative that will not cost the taxpayer or the consumer any money. In fact, it is intended to help create lower local energy costs. Like other hon. Members, I urge the Government to consider supporting the Local Electricity Bill and, if need be, work on a cross-party basis to improve the Bill and get it to a place where everybody is happy with it.

15:28

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I congratulate the hon. Member for Bath (Wera Hobhouse) on obtaining the debate this afternoon and on putting forward the case for local energy, particularly for a community energy Bill, in such a succinct and complete way. That means I do not have to say all the things that I was going to say about a local community energy Bill, other than to say that we on the Opposition Benches thoroughly support such a Bill. We think it would make a tremendous difference to the way that local energy can move forward.

At its heart, it has a simple proposition, which is that people should be able to sell the energy they produce to their neighbours, their friends, the people down the road, their local industry and shops. As we can envisage, that sort of environment would not only make a tremendous change in how people relate to their own energy, but would potentially be a great step forward in the appreciation of what we need to do, as far as energy is concerned, in the low carbon environment we will have in the future. Energy is something that people do, rather than something they simply receive. That seems to be the essence behind the idea that people can sell the energy they produce to their local community.

It is a simple proposition and we know what a difference it would make, so why not just do it tomorrow? What are the barriers in the face of the proposal? To go to the point made by the hon. Member for Waveney (Peter Aldous), we seem to have been here on a number of occasions. He has a similarly long pedigree in talking about the same issues that I have raised, both on the Environmental Audit Committee and elsewhere. He is right that we seem to turn up in the House talking about this issue on a fairly regular basis, and nothing whatsoever changes.

My particular involvement in the issue goes back to a 2013 Energy and Climate Change Committee inquiry on local energy, which I chaired, that looked at the barriers to how local energy can go forward, remarked that there was not a great deal of local energy going on and talked about the potential for local energy. We have heard this afternoon about the potential from now on, but at the time we were saying we could have perhaps 3 GW of local energy overall in this country by 2020. What have we got today? About 270 MW, something like that.

If we look at the various projects have contributed to that 278 MW, we have heard mention of a number of the co-operatives and organisations that have actually produced local energy, but pretty much to a project—I have seen a lot of projects in my time—they have been carried out with heroic dedication, overcoming tremendous obstacles and, in some instances, have failed at great cost to themselves and other people. It would be so easy just to make it possible for those schemes to happen. I congratulate and commend all those people who have generated the 278 MW of local energy that we have so far. The fact that we have any at all is a remarkable tribute to them, not to the system we have.

That is where we need to be very clear. The obstacles in the way of local energy are very much about the question of local supply, but there are a lot of other obstacles as well, which hon. Members have mentioned this afternoon. The idea is that people are trying to set up a local scheme to produce a pretty modest amount of energy for local consumption, important though all those local schemes are in terms of aggregation across the country. However, people have many obstacles to overcome and are required by the planning system to get permission in place. They need to spend perhaps a million pounds per project just to get a modest scheme going. If the rules were different, people would be able to put that million pounds into the development of the project and not throw it away on a possibly unsuccessful scheme in the first instance.

         The hon. Member for North Devon (Selaine Saxby) gave the example of the local brewery getting its cars on the road. People might think that is a fanciful example, but it is absolutely how the grid system works at the moment. There is an assumption that every single electron that is produced goes literally from Land’s End to John O’Groats and back again before going into a lightbulb and that it is charged as such, even if it had come from two doors down the road. That is the assumption. The introduction of local energy into the system is often regarded as a tremendous nuisance and loss of load. We cannot actually see where it is, and it is not easy to balance in the grid. That means that the last to get connections into the distributing grid are the local energy schemes. The charging regime for those schemes, once in operation, assumes that they are national schemes, just locally based.

[Wera Hobhouse]

I listened very carefully to the hon. Gentleman’s explanations about the complexities of the grid. Does he agree that, when thinking about licensing for a new devolved scheme, we need to look at things such as liabilities when there are outages, for example? It is not impossible to overcome these difficulties.

[Dr Whitehead]

The hon. Member is absolutely right. It is not particularly difficult to overcome these problems. I am emphasising this deep mindset of how the grid works that has been with us for a long time. The hon. Members for Strangford (Jim Shannon) and for Kilmarnock and Loudoun (Alan Brown) mentioned the fact that the grid was designed for a bunch of providers to produce x amount of energy, which would go through the grid until it got to a lightbulb. The world is completely different these days, but the grid still operates as if that were the case. That is inimical to the success of local energy projects.

As the hon. Member for Bath says, it would not be difficult to fix that, but there is a problem. Ofgem and, to some extent, the Department are particularly concerned that if we start dismantling the grid in its old system and localise it to enable the development of local energy in the way we have discussed, there could be distortions in that original system. I suspect the Minister will talk about some of those distortions, but let us be clear: they are distortions to an old system that does not work. We actually need those distortions to come into place to make the new, low-carbon overall renewable system work in the first instance. Making local energy work in that context is a very important change we need to make.

We need to make these changes to the system as a whole. We need to get the grid on to a much more friendly basis for local energy. We need to make the possibility of local energy much more real in terms of the hurdles it needs to overcome before it can get going. We need to have positive Government support for the development of expertise and the assistance and support that local energy schemes need to go ahead. That particular area, with the preponderance of volunteers in the local energy system, would be really good to have as a draw-down arrangement for local energy for the future.

Yet again we are meeting with the idea that the future for local energy could be really bright, but I fear that we will be here in a few months’ time talking about the bright future that has not quite emerged, but may in the future. We have not got time any more to keep going round the houses before we get to a decent settlement that will allow local energy to proceed. Local energy is so important, as we have heard this afternoon, for the future of low-carbon renewable energy.

I was delighted that the Local Electricity Bill has been amended to ensure that local energy is low carbon and renewable, so that we do not have diesel reciprocators coming in and providing local energy as a result of the ability to get a local licence. That is a very good amendment, and adds further to the Bill’s force.

I have questions for the Minister that are similar to the three questions asked by the hon. Member for Bath. I hope that he can give us some reassurances about the Government’s earnestness to bring about changes to the grid arrangements that can underpin local energy, and that they will be treated as a move forward as opposed to a distortion of the system. The answer to one of the questions posed by my right hon. Friend the Member for Leeds Central (Hilary Benn) about the German system is that cities in Germany, in many instances, own their own grids—and are doing so in increasing numbers. Germany does not have the grid system, a system that is regarded as just common sense in the UK. We have to turn that common sense around and start from the bottom up, with grid and district-grid management, rather than assuming that we should work from the top down. If we do that, then there will be a fundamental turning of the tide in favour of local energy for the future. I look forward to what the Minister has to say. I hope he will be fully supportive of the local community energy Bill, but I hope he will also be understanding of what differences need to be made to the system to allow local energy to come into its own.

15:42

[The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)]

Let me begin by congratulating the hon. Member for Bath (Wera Hobhouse) on securing this important debate, and for pre-submitting the three questions that I will answer during the course of my speech. I will, however, return to them at the end to make doubly sure that I have answered them to her satisfaction. I realise that this is the first debate on the topic since I took on my new role in September; I think the previous one was on 1 July. I welcome the debate, and it is fantastic to see so much enthusiasm for community energy from all parties, nations and regions of the UK—it is very heartening to see.

I will start by reassuring the House that the Government recognise the role community and locally owned renewable energy schemes can and do play in supporting the UK’s national net zero targets. Since the last debate we published, on 19 October the net zero strategy, which has already been referred to and sets out our road map of how we will get to net zero by 2050 and the staging posts in between. We understand that the value of community energy is not just in delivering energy projects that stimulate clean growth. Projects such as the community energy cafés run in south-east London support the most vulnerable in society by providing impartial domestic energy advice. Community groups can also act as the catalyst for raising awareness of both the energy system and wider environmental issues. They can be a catalyst in the promotion of behaviour change, which we all know is vital to reaching net zero.

I know Members will agree with me that there is already some excellent work under way in the community energy sector. We have heard many examples today, but I will add one: Swaffham Prior is an off-grid gas village of around 300 homes in east Cambridgeshire that is being supported by its community land trust to bring renewable energy to the village through installing a heat network. This will make it one of the first villages in the UK to do so.

I mentioned the net zero strategy, but we have also heard about a lot of different fantastic schemes from across the United Kingdom. As a Government, we fund the rural community energy fund. Delivered through local net zero hubs, this £10 million scheme supports rural communities in England to develop renewable energy projects that provide economic and social benefits to the community. Since its launch in 2019, the fund has received 1,668 enquiries, 203 applications and awarded millions of pounds worth of grants to projects focusing on a variety of technologies, including solar, wind, low-carbon heating and electric vehicle charging. It includes funding for the constituency of the hon. Member for Bath. She referred earlier to Bath and West Community Energy, which has received more than £92,000 from the rural community energy fund for feasibility grants to develop three community solar projects.

Ofgem also supports community energy projects and, following a consultation process, has announced that from February 2022 it plans to welcome applications from community-interest groups, co-operative societies and community-benefit societies to the industry voluntary redress scheme. That will allow groups to apply for funds to deliver energy-related projects that support energy consumers in vulnerable situations, support decarbonisation and will benefit people in England, Scotland and Wales.

More widely, through the introduction of UK-wide growth funding schemes, such as the community renewal fund, levelling-up fund and the towns fund—all very important new funds—the Government are enabling local areas to tackle net zero goals in ways that best suit their needs. I am aware that those schemes may be used to support the development of community energy schemes, which I highlight for all right hon. and hon. Members. For example, the towns fund has awarded more than £23.6 million to Glastonbury town, including to the Glastonbury clean energy project, which aims to generate renewable energy for use by many of the other projects in the plan, as well as other local businesses and residents.

To take forward the vital work on community energy, we committed in the net zero strategy to reintroduce the community energy contact group. That group will provide a single, dedicated forum for community energy groups to engage and co-operate with Government on key policy issues. That could obviously include discussion of the recommendations already referred to, made by the Environmental Audit Committee’s inquiry into community energy. I hope that group will strengthen outcomes for both the sector and the Government.

Turning to the Local Electricity Bill, which has been mentioned frequently in the debate, a right to local supply would allow electricity generators to sell their power directly to local consumers. As we know, the Local Electricity Bill seeks to establish that right by enabling electricity generators to become local suppliers, and to ensure that the costs and complexity of becoming a local energy supplier are proportionate.

Although the Government agree with the broad intentions of the Bill, we do not support the Bill as the means to enable local energy supply. However, I make a commitment today. I am about to write to my hon. Friend the Member for Wantage (David Johnston) to set up a meeting with him. I will leave it up to him which other Members he wishes to pull into that meeting to discuss the Bill and how we can work together, particularly on some of the obstacles to it.

I will take interventions shortly, but I want to lay out some of those obstacles. There is existing flexibility in how Ofgem regulates energy supply to allow for local suppliers. Ofgem has powers to award supply licences—a point raised by the right hon. Member for Leeds Central (Hilary Benn)—that are restricted to specified geographies and/or specified types of premises. However, many hon. Members have observed that, although the right to local supply exists, the costs of becoming a supplier act as a barrier to entering the market.

Making more substantial changes to the licensing framework to suit specific business models may create wider distortions elsewhere in the energy system. Artificially reducing network costs for local energy suppliers, as the Bill appears to imply, is likely to be distortive. It would mean higher costs falling on other consumers, which would increase as more local suppliers enter the market. It is important, therefore, that we take a broad view. I notice there is a Division in the main Chamber, Mr Betts.

[Mr Clive Betts (in the Chair)]

Order. I was letting you finish your sentence—we can now suspend the sitting for 15 minutes.

15:49

Sitting suspended for a Division in the House.

16:17

On resuming—

[Mr Clive Betts (in the Chair)]

The Minister will now resume his speech. We have 11 minutes to go; we will finish at 4.28 pm. I should just say that Alan Brown has courteously given me his apologies, because he is in the main Chamber for the next debate.

[Greg Hands]

Thank you, Mr Betts; let me carry on. It is important that we take a broad view of all consumers when making changes to the energy markets. That includes consumer protection measures, which form an important part of the supply licence. Suppliers play a key role in providing support to customers, particularly the vulnerable. For example, the energy company obligation requires suppliers to install energy efficiency measures in the homes of vulnerable people. The warm home discount applies a reduction to the bills of vulnerable households, and the price cap protects households from poor-value tariffs. The priority services register is used by suppliers to identify consumers who may need additional support with their energy supply. Of course, suppliers sometimes fail, but we have vital safety nets to ensure supply—as we have seen since the last debate—through the supplier of last resort, or SoLR, process. I would be concerned about the deliverability of such protections under a local electricity supply regime.

Let me turn to the three questions that the hon. Member for Bath asked specifically. I think that I have answered the question on future energy legislation. I have outlined, I think, some of the difficulties with the current Bill as proposed. Also, I think that I have gone into the distortions to the energy system just now and before in some detail. And will I meet her? As I have mentioned, I have an existing commitment to my hon. Friend the Member for Wantage, but I am happy for people to come together. That was the commitment that I made to him—to meet Members with an interest in this area.

[Wera Hobhouse]

I was originally a little disappointed that the Minister’s invitation went only to his colleague the hon. Member for Wantage (David Johnston), but if he has already fixed a meeting and he is opening it out, may I ask whether there is already a fixed date for it that he can share with us?

[Greg Hands]

I appreciate the hon. Lady’s line of questioning. I replied specifically to a letter from my hon. Friend the Member for Wantage seeking a meeting. I think the best thing to do would be for me to speak to my hon. Friend or for her to approach him—it would effectively be his meeting—to find the best way forward. I am keen to be as accommodating as possible to Members across the Chamber, but I responded to the letter that my hon. Friend the Member for Wantage sent me, which I think was on behalf of a group of Members. [Interruption.] In that case, I think the best thing to do would be for the hon. Member for Bath to approach, first, my hon. Friend the Member for Wantage.

On the question of the cost to consumers, though costs are reduced for the few in the scheme, that avoids market costs, which fall on those not in the local scheme. That often includes the fuel-poor, who cannot buy into such schemes.

Germany was mentioned many times. Without going off and setting up my own separate Adjournment debate, there are reasons why Germany works well, and less well, in this space. Germany’s grid, for example, makes it very difficult to get renewable energy from the North sea down to Bavaria. Its grid is not set up in the same way that ours is, on a national basis. That can have advantages and disadvantages. I also point out Germany’s reliance on imported gas from abroad. That again stresses some of the difficulties in scaling up; even in Germany, which has been praised for community energy, it does not necessarily offer a scalable solution in that same way.

The hon. Member for Brighton, Pavilion (Caroline Lucas) asked about the continuing expansion of the rural community energy fund. I will look at the options for funding as part of Department-wide planning.

My hon. Friend the Member for Waveney (Peter Aldous) asked five questions; I will try to deal with them as quickly as possible. First, derogation is possible; Ofgem consulted previously on widening the use and geographic premises licences are possible. Secondly, the right to supply is possible; BEIS will work with Ofgem on retail market reform. Thirdly, this is really a matter for Ofgem, which can do a local supply licence, but we can set out why we do not agree with a local supply licence. Fourthly, we are looking at the supply hub model as part of the retail market reform. It is a complex issue, which, of course, has implications for things such as the smart meter roll-out, and so on. Fifthly, I think we have already covered the smart export guarantee scheme.

The hon. Member for Strangford (Jim Shannon) asked about Northern Ireland. As he and I well know, it is a unique energy market. I am having a meeting with Gordon Lyons, the Northern Ireland Economy Minister, on wider issues tomorrow, and I will try to feed this into a conversation with him. The meeting is with the three devolved Administrations, but I will find an appropriate time to ask him about how we can work together on community energy schemes.

Mr Betts, I think you said we were finishing at four—

[Mr Clive Betts (in the Chair)]

Twenty-eight minutes past.

[Greg Hands]

Fantastic. I will leave some time for the hon. Member for Bath to reply.

Finally, earlier this year, we jointly published with Ofgem our new smart systems and flexibility plan and the UK’s first energy digitisation strategy, which was also developed with Innovate UK. Many of the actions set out in those documents aim to improve locational signals and help to enable smart local energy solutions, such as facilitating further growth of local flexibility markets.

In addition, Ofgem’s access and forward-looking charging review seeks to deliver more efficient choices about where users locate on the networks, and how they use the networks on an ongoing basis. The introduction of better price signals is important in ensuring that local generation is rewarded for the benefits it can bring to the system. It is recognised that, in some parts of the country, the costs of connecting to the grid can itself act as a barrier. Ofgem has therefore proposed to reduce connection costs for generation connections, such as community energy, by socialising more of the network reinforcement element of connection charges. Any changes are expected to come into effect from April 2023.

Many Members have argued in favour of local energy suppliers as an option to mitigate global gas price impacts, which I have already referred to, but risks would continue to exist. For example, local energy suppliers are likely still to need to be connected to the grid during periods of low generation. The failure of a local energy supplier without a grid connection would also leave customers without energy supply in the absence of an effective safety net.

The Government continue to support the development of new business models to supply energy consumers and help achieve our net-zero ambitions. In response to the unprecedented rise in energy prices this year, we are working closely with Ofgem to consider broader reforms to the overall energy retail market regulatory framework. We want a market that will support the longer-term transition to net zero, recognising the need for continued competition and innovation while also ensuring that suppliers have sustainable and resilient business models. That includes Ofgem exploring a move towards a more prudential regulatory regime, recognising that energy suppliers are managing complex financial risks and ensuring that the energy sector is resilient against a wide range of future scenarios, including prices rising further or falling sharply.

This debate is testament to the fact that there is clearly extensive cross-party support for the community energy sector, which we very much welcome. Just as importantly, there is a wealth of innovative schemes—

[Peter Aldous]

I am most grateful to the Minister for setting out so clearly the obstacles that need to be overcome to mobilise community energy schemes. Can he confirm that he and the Government are committed to overcoming those obstacles and removing those barriers so that, when we come back in a few months’ time, we can say that we have achieved tangible progress?

[Greg Hands]

I am certainly committed to examining the obstacles and speaking to my hon. Friend; I know his long-standing interest in this, as indeed in all energy questions—he is the Mr Energy of East Anglia. I am very happy to continue to engage with hon. Members, to look at the obstacles and to see what can be overcome, ameliorated or worked around. I am very keen to meet and continue the engagement with hon. Members. It is a little difficult for me to agree to remove the obstacles until we have scoped them out. The Department is well aware of the obstacles, but if my hon. Friend has suggestions for how to overcome some of them, I am interested in working with him and like-minded hon. Members.

Just as importantly, there is a wealth of innovative schemes across the country, run by passionate people who are committed to creating a cleaner and greener future for us all. I close by thanking the hon. Member for Bath once again for securing the debate.

16:26

[Wera Hobhouse]

I thank all right hon. and hon. Members for contributing to the debate. It shows the Government that there is cross-party, cross-region and cross-nation support for the Local Electricity Bill and for overcoming the obstacles in the electricity market and the barriers to local electricity supply.

I thank the Minister for offering to meet us and have that engagement. I am a little disappointed that he has still not quite understood what we all think: that the current system does not work because it is too centralised, and that the Government must face the brave new world of decentralisation to set free the power of local electricity. As we have heard, community energy schemes currently account for 0.5% of the UK’s electricity supply; 20 times that would bring 10% of the energy market to the table —clean, renewable energy. We have heard today that the most important thing is that we fire on all cylinders, and it is surprising that the Government do not take up that opportunity for that extra 10% of local electricity supply—setting free people and power. I hope that we will receive a more positive reply when we come back to debate this topic, yet again, in this Chamber or the main Chamber.

Question put and agreed to.

Resolved,

That this House has considered the matter of empowering community energy schemes.