Draft Renewables Obligation (Amendment) Order 2026
(1 day, 8 hours ago)
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The Minister for Energy (Michael Shanks)
I beg to move,
That the Committee has considered the draft Renewables Obligation (Amendment) Order 2026.
It is a pleasure to serve under your chairship, Mrs Barker. The draft order was laid before the House on 2 February, under the affirmative procedure.
We are all acutely aware, particularly at this moment in time, that households and businesses across the country are feeling the effects of global energy volatility. That is why the Government remain absolutely focused on finding sensible and targeted efficiencies to reduce the costs of the UK energy system, while ensuring that we maintain the investor confidence that is critical to building the system we need for the future.
The order changes how we uprate the cost of the renewables obligation scheme, switching from the retail price index to the consumer price index from 1 April. CPI offers a more accurate reflection of real-world price changes than RPI, which tends to overstate the rate of inflation. In simple terms, that means that the costs of operating the scheme will grow more slowly in the years ahead, easing pressure on the consumers who pay for it through their energy bills. The change forms part of wider efforts to generate efficiencies across the energy system, reduce costs for businesses and ease the pressure on domestic bills.
This change follows a joint public consultation undertaken by the UK Government with the Scottish Government and the Northern Ireland Executive, who operate their own renewables obligation schemes. The consultation closed in December and a response was published in January. We recognise that the proposed options generated significant concern and much disagreement from renewables obligation stakeholders. We understand the points raised about the need for policy stability and to ensure that we have strong investor confidence in the UK.
But it is precisely because the renewables obligation scheme has been such a success—it now supports over 30% of the UK’s energy generation—that we must ensure its costs remain proportionate and sustainable as it continues to operate. The scheme has been instrumental in building the renewable capacity that we rely on, and we want it to keep doing that, but without placing unnecessary burdens on bill payers.
By implementing the change in time for the new compliance year in April, we can secure estimated savings of £1.9 billion over the remaining lifetime of the scheme, which works out at around £180 million a year for the next 11 years. These are meaningful savings for consumers, delivered through a sensible and reasonable change to the electricity generation scheme.
Our approach is one of balance: it reduces the cost pressures on households and businesses, but continues to provide the stable environment for long-term investment in the renewable sector. As we all know, the world around us is becoming increasingly unstable. The only sustainable way to shield hard-working people around the UK from global energy shocks is to accelerate our transition to clean, home-grown energy. That means not only deploying new renewable capacity, but ensuring that every part of the existing system is as fair, efficient and affordable as possible.
The order before us is a small but extremely important step in that direction. It reflects a pragmatic, consumer-focused approach that underpins our energy strategy: looking for opportunities to make the system better for British people, while maintaining the confidence of the investors who are so important for building the infrastructure of the future. Subject to the will of Parliament, the arrangements will come into force the day after the regulations are made. I commend the draft order to the Committee.
Claire Coutinho (East Surrey) (Con)
For those who do not understand how renewables obligations work, let me bring Members up to speed. Three quarters of our wind and solar power is generated through renewables obligation subsidies. That means that every time electricity is generated, suppliers get the wholesale price plus a massive subsidy on top. Every time the wind blows, some wind farms get up to three times the market price of electricity. If wholesale electricity prices are £80 per MWh—which they roughly were before the crisis—wind farms are getting two renewables obligation certificates on top, at around £70 each. That means they have been getting £220 per MWh, which is almost three times the market price for electricity.
For years the public have been told that the energy we get from the wind and the sun is free, but nothing could be further from the truth when we look at the deals. Labour likes to say that gas is the problem, and in the last week the price of gas power has been high, at around £120 per MWH, but here is what they are not telling us: the renewables on the scheme will always get more than the gas price. Right now, there are wind farms getting £270 per MWh, because they get whatever the wholesale price is plus the subsidies on top.
The renewables obligations deals last for 20 years, so let me be crystal clear: the wind and solar farms on the scheme are not cheap. They can never be cheap. No matter what the gas price is or the wholesale cost of electricity is, they will always be much, much more expensive—and the subsidy goes up year after year. The Government are trying to address that today, but it is the subsidy itself, not the incremental inflation change, that does the real damage.
I am afraid it is the Secretary of State who started all this. Back in 2008, he was the one who effectively doubled the subsidy that got us into this position. It was a bad deal. He was paying through the nose because, ideologically, he thinks renewables are better, even when they are more expensive. At the same time, the public have been told that renewables are cheap, which is a fundamentally dishonest position. That is why our position is simple. If we argue that renewables are cheap, and truly want them to be so, we have to take these eye-watering deals out of the system. Rather than just tinkering around the edges, which is what the Labour party plans to do today, we should end the rip-off subsidies for good.
Will the Minister explain why, in the event of an energy crisis, he thinks our constituents should pay wind farms three times the market price for electricity? It has not cost them any more to produce their power, yet they are currently getting a huge increase in profits at the expense of our constituents’ bills. Should we not be doing everything we can to improve the cost of living? When prices are high, as they are now, how can we justify baking in paying some wind and solar farms double or triple the price? How on earth can people who are worried about their constituents paying £120 per MWh for their gas power justify paying three quarters of our wind and solar farms up to £270 for their power? Our cheap power plan would scrap the subsidies and put more money in people’s pockets.
Labour have tried to move the costs on to people’s tax bills. Ordinary working people who are facing higher taxes on their income, pensions, small businesses and student loans will be paying for the subsidies. It is in the Minister’s gift to change the subsidy arrangements, as this statutory instrument shows. There is no legal barrier to scrapping them, or we would not be able to make the changes we are making today. If the Government keep the rip-off subsidies in place, they will be making it clear to all their constituents that they are prioritising the profits of wind developers over the energy bills of ordinary people.
If the Government want people to use electricity to heat their home or drive their car, they need to make electricity cheap. Instead, as even Martin Lewis has pointed out, the Secretary of State has spent the last two years piling cost after cost on to electricity bills. When it comes to security of supply, the Government are choosing to shut down the North sea, only to import dirtier gas from halfway around the world. We have fewer jobs, higher bills and more carbon in the atmosphere. It is simply mad. The Government have got this backward. They need to maximise UK production from the North sea and make electricity cheap.
The British public are not stupid. They can see that the Government’s energy policy is not serious. Although we will support the order, we urge the Government to go much further, end the subsidies for good and put cutting people’s bills first.
Pippa Heylings (South Cambridgeshire) (LD)
The Liberal Democrats have long called on the Government to reform and reconsider the UK’s renewables obligation contracts, which were replaced in 2017 by the contracts for difference scheme set up by the Liberal Democrats when we were in government. We all know that CfDs are a more effective and affordable way to create investment in our net zero economy, which continues to grow, and has to grow for us to be able to decouple the cost of electricity from gas. And it is growing, despite attempts from other parties to talk it down.
Adjusting the inflation indexation from RPI to CPI, and therefore reducing the buy-out price for the contracts, will reduce the costs of this outdated scheme. That is always welcome news to households across the UK. However, as the Minister said, there are valid concerns from the renewable energy sector about midway changes to investment plans, particularly if the changes are piecemeal. RenewableUK and others were broadly against the change, and voiced that repeatedly in the Government’s consultation and beyond.
The UK’s reputation as a safe and predictable place for investment in vital new renewable energy capacity has been hard won, and must be retained to keep costs as low as possible for bill payers. The way that policy changes matters. Having listened to the sector, the Liberal Democrats believe the Government are miscalculating by not going further to make wholesale changes to the renewables obligation scheme, as we have called for. By drawing out the changes, they are only adding uncertainty for investment, so I call on the Minister to seriously consider our calls to move 85% of renewables obligation contracts on to the CfD scheme, as part of a single, coherent package. That way, renewable energy projects can continue to produce the green energy that the UK desperately needs, while also ensuring that generators can benefit from a new long-term contract that is fair and equitable for generators and consumers alike.
In times like this, when we see volatile oil and gas prices soar, consumers need and deserve to feel the benefits of the lower costs of renewable energy, rather than the unintended repercussions of the Government’s multiple fragmented changes.
Michael Shanks
I always welcome unanimous support from the House for the Government’s energy policy, and it sounds like we will have that this afternoon, which I appreciate.
I always thank the shadow Secretary of State, the right hon. Member for East Surrey, for her lessons, although they often do not involve her own time in the Government, or the Conservatives’ 14 years in government. If it was so important to reform the renewables obligation, she had a number of years in which she might have done that, but she did not. It is now, after being Government, that this is all suddenly coming forward.
There is an important point about the lessons learned from crisis like this, and this is a moment for us to learn the right lessons. Only four years after the price spikes caused by the Russian invasion of Ukraine, when the fossil fuel market did broadly what it is doing now, the lesson is to move even faster away from gas, but the Conservative party is doubling down and saying that now is the time to invest even more in gas. That is the wrong lesson to learn from this crisis. Hoping that, at some point in the future, the wholesale price will come down to a point that justifies that argument is not what we should be doing with the bills of our constituents and businesses across the country. We should be building a system that protects us from volatility, and that is what we are doing.
The Liberal Democrat spokesperson, the hon. Member for South Cambridgeshire, made the point well that the UK benefits from having a safe and predictable environment for investors. That is really important, because if that changes, we will see the tens of billions that have been invested in this country in the past 18 months go somewhere else, and will also see the cost of capital—of building the infrastructure we need—go up, which goes on consumers’ bills.
A stable regulatory environment in which people can be confident that a contract means what it says is one of the strong fundamentals of this country’s economy, and why people choose to do business here. If we start ripping up contracts, we lose that credibility, so I do not think that plan is serious or credible. If it was, it surely would have been introduced after 2022, when we had the same lessons that we have now. But it was not.
On the point about costs, it is important to reiterate that the renewables obligation scheme will come to an end in 2037. A number of projects will come off the scheme between 2027 and 2037, so the cost will come down. We made a conscious decision in the Budget to increase taxes on the wealthiest in order to pay to bring down the bills of some of most hard-working and less well-off people across the country, and we stand by it. That is why, in April, in the midst of a price crisis, the price of energy in this country will be capped and bills will go down by more than £100, because of the decisions this Government have chosen to take. By the sound of it, the Conservatives would not have taken those decisions, leaving consumers exposed.
This order is an important step. I recognise that it does not do everything that Members want but, as I said in my introductory speech, it is about being pragmatic. It takes a step that is still unwelcome, understandably, for those who have renewables obligations, but it is a pragmatic way to make sure that we get the best deal for consumers without shaking the foundation of the investment we need to build the clean energy system of the future. We think this is the right approach. We stand ready to take further action on the cost of living and energy bills, and we are doing that work, but this is a really important step. I commend the draft order to the Committee.
Question put and agreed to.
Draft Procurement (Amendment) Regulations 2026
(1 day, 8 hours ago)
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The Parliamentary Secretary, Cabinet Office (Chris Ward)
I beg to move,
That the Committee has considered the draft Procurement (Amendment) Regulations 2026.
It is a pleasure to serve under your chairship, Mr Twigg. The Procurement Act 2023, which was introduced under the last Government and passed with cross-party support, is a step forward in making public procurement simpler, more transparent and more trustworthy. It is not the whole journey, of course: we will be setting out further reforms shortly to ensure that our procurement budget goes further and does more to support jobs and growth and to reduce unnecessary burdens on businesses. The Act does deliver progress, however, and reflects a clear expectation from the public that procurement should be open to scrutiny, that spending should stand up to challenge and that public money should always deliver value.
The public rightly want to know what the Government are buying, who we are buying it from and what we are paying. That is the gap that the draft regulations will fill. They will not change how contracts are awarded, but they will complete a key element of the Procurement Act’s transparency framework by making it possible to follow significant payments under public contracts, and on a single central platform. That will strengthen confidence in the system, support better contract management and drive better value for money. It will benefit contracting authorities and suppliers, and the taxpayer too, by tightening fraud prevention and ensuring proper scrutiny of how our money is spent.
This statutory instrument will implement section 70 of the Act by amending the Procurement Regulations 2024 to set out what payment information must be published for payments of more than £30,000 under public contracts, and how it must be published on the central digital platform. It is designed to be proportionate and manageable, requiring quarterly reporting and applying only to contracts procured from 1 April 2026.
The draft regulations also include a small number of connected measures that will make the transparency system work properly across the market. They will ensure that, where a supplier is awarded a notifiable below-threshold contract, which is generally more than £12,000 for central Government and £30,000 for non-central government, they are registered on the central platform. That will close a significant transparency gap, while improving the visibility of small and medium-sized enterprise and voluntary, community and social enterprise participation in public procurement.
The draft regulations will also require contracting authorities to state in below-threshold tender notices when a competition is reserved for SMEs and/or VCSEs. That will make sure that when an opportunity is reserved for SMEs or VCSEs, it is clearly flagged up front so that it is easy to find, bid for and, hopefully, win.
The draft regulations will also make a limited set of practical and technical amendments to keep the regime functioning as intended. That includes flexibility for direct awards in scenarios in which it is urgent to protect life, public order or safety, or where the central platform is unavailable. Additionally, they incorporate minor corrections and consequential amendments; notably, they will facilitate the move away from the old Contracts Finder system. That is intended to remove duplication and ensure that the new Find a Tender service is the single place to publish and find information.
The draft regulations will generally apply to all of the UK, but in Scotland and Wales they would not be applicable if the procurement were carried out by devolved Scottish or Welsh contracting authorities, unless they were using a reserved procurement arrangement. The Government have obtained agreement from the relevant Northern Ireland Department in respect of provisions that apply to procurements regulated by Northern Ireland Ministers. Those are limited to the corrections and technical amendments and do not include the implementation of section 70 or the amendments relating to below-threshold contracts.
In conclusion, the statutory instrument will complete an important part of the Procurement Act’s transparency offer. It will make payment publication meaningful by linking payments to contracts, it will close transparency gaps, and it will keep the system coherent and workable.
Mike Wood (Kingswinford and South Staffordshire) (Con)
You can never have too many procurement SIs in a week, but for those who did not have the pleasure of Monday afternoon’s Committee, I will spare them some of the background information and just say that the Opposition support the draft regulations. As the Minister says, they will give effect to important provisions introduced by the previous Government’s Procurement Act 2023. The details required to be published for contracts over £30,000 are particularly important, as are the measures to ensure transparency for some sub-threshold contracts.
Understandably, the Government have again not produced a separate impact assessment for the draft regulations, relying instead on the broader impact assessment that accompanied the Procurement Act and the associated reforms in 2022-23. Although many of the provisions are technical in nature, they will nevertheless shape how the new procurement framework operates in practice. It would therefore be helpful if the Minister could provide reassurance that the central digital platform is ready to support the expanded responsibilities under the regulations, and that the contracting authorities and suppliers, particularly smaller organisations and enterprises, have been given sufficient guidance to adapt to these changes. I look forward to the Minister’s response.
Lisa Smart (Hazel Grove) (LD)
It is a pleasure to see you in the Chair, Mr Twigg. Steps to improve transparency around public procurement are, of course, welcome. The granting of the federated data platform contract to Palantir and the scandalous covid personal protective equipment contract under the previous Conservative Government have undermined confidence in public procurement in recent years. Members of the public, doctors and even whole NHS trusts are questioning the fairness of some NHS contracts, so steps to improve the transparency of the contracts, along with public procurement more broadly, must be welcomed.
We also welcome steps to modernise public procurement systems and to phase out legacy systems such as Contracts Finder in favour of a modern, unified platform. My reading of the regulations is that a Minister has to consent or be notified before an NHS body cancels a contract on national security grounds. Will the Minister set out what this specific change is trying to deliver and why now is the right time? Is it the Government’s understanding that there are any current contracts that are a national security concern? If so, will the Minister share with us which contracts? Or is this a change that stops trusts cancelling a given contract on the grounds of security?
Chris Ward
I thank the hon. Members for Kingswinford and South Staffordshire and for Hazel Grove for the tone of their contributions. I welcome their cross-party support; as the draft regulations follow the Procurement Act introduced by the last Government, I would have been surprised not to get it, but it is still nice to hear it.
In answer to the question about the central digital platform, it is fully operational. The final phase is to implement the last legislative requirements, which will be rolled out later this year, in time for the requirements coming into force. On the timetable, the technical amendments in the SI will come into force the day after they are made; others will come in on 1 April, and the changes related to Contracts Finder will come in on 1 October.
On the points raised by the Liberal Democrat spokesperson, the hon. Member for Hazel Grove, there are no national security concerns that I am aware of, but I will write to her if anything further comes in on that. I am glad to have her support.
The core of the draft regulations is simple: the public should always be able to follow significant payments under public contracts in a way that is meaningful, joined up and transparent. The regulations will help them to do that by linking payments to contracts and suppliers on one platform.
I thank Cabinet Office officials for all their work on this SI and to implement the Act: a lot of work has gone on. I am grateful to colleagues across Government Departments and the local authorities that we have been closely working with. The hon. Member for Kingswinford and South Staffordshire mentioned work with contracting authorities; we have worked very closely to get people ready for this measure and to make sure that it works properly. I thank everyone for their work and engagement. I hope that Members will join me in supporting the regulations, which I commend to the Committee.
Question put and agreed to.