Renewables Obligation Closure (Amendment) Order 2015
Debate between Baroness Verma and Lord Bishop of Chester
Baroness Verma
My Lords, I will continue from where I stopped and get my thread back.
The grace periods are not, however, designed to provide protection against the reductions in support that were set out in the last comprehensive banding review. The first grace period is for operators of generating stations that were granted preliminary accreditation by Ofgem on or before 13 May 2014—the day on which we published our consultation. The second is for generating stations where significant investments had been made on or before 13 May 2014. There was extensive engagement with the industry during the consultation period and we have listened and made changes to the eligibility criteria in response to its views. As a result, the requirements around grid connection, land rights and planning are now more aligned with the practical realities of solar PV project development processes and timelines.
The final grace period is for operators of generating stations that have been subject to grid connection delays that are outside their control. Again, the case for this grace period was made by the industry during consultation to reduce the risks to investments. It has been designed to align with that available to other technologies experiencing grid delays when the scheme closes to new generation in March 2017. This will enable Ofgem to take a consistent approach to the administration of the grace periods.
To benefit from one of those grace periods, the new generating station will need to be commissioned and accredited by 31 March 2016. To reduce the administrative burden, a decision on eligibility for both accreditation and the grace period will be taken at the same time by Ofgem. Similar grace periods for significant investments and grid connection delay will also apply to existing generating stations wishing to add additional capacity.
When the closure comes into force, we believe that there will still be a valuable route to market for large-scale schemes, with developers being able to apply for support under the contracts for difference regime. The announcement last week that five solar projects have successfully competed in the first auction round, all at less than £80 per megawatt hour—far below the support rate under the RO—indicates that the new allocation process can work for solar PV.
Those developers with projects at or below 5 megawatts are not affected by this closure and can continue to apply for accreditation until the scheme closes to all new generating capacity on 31 March 2017. That decision was taken on the basis of the available information, which suggested that they posed less of a risk to the levy control framework. However, consistent with our responsibility for managing RO expenditure under the levy control framework, we are closely monitoring deployment of sub-5 megawatt projects and will consider taking measures to protect it if deployment is growing more rapidly than can be afforded.
I am sure that noble Lords will agree that there is a need to avoid the kind of spending bubble we saw in the feed-in tariff scheme back in 2012, which still costs the levy control framework budget £300 million a year over and above what was originally planned to the solar PV sector. Our current assessment of expected deployment without intervention under the RO would cost up to £400 million a year more than our delivery plan projections and would cause us to exceed the levy control framework cap, putting at risk our commitment to deliver value for money to consumers. It is therefore important that we take steps now to ensure that large-scale solar PV remains affordable in the context of the RO and contracts for difference, not least because without action it is likely there would be little or no money for the early years of new contracts for difference, which has been shown to offer better value for money than the RO.
I commend the order to the House.
The Lord Bishop of Chester
My Lords, may I ask the Minister a general question about the role of solar PV in our energy strategy? Quite large amounts of electricity are being planned and spoken about, as the Minister told us. I assume it is the case that photovoltaic generation is available only during daylight and is negligible after dark. Therefore, I assume that this capacity will not be available when we have peak demand, which occurs after dark, typically in the early hours of darkness. Therefore, are we in a sense subsidising capacity that will not be available when we need electricity most?
Baroness Verma
My Lords, I am extremely grateful to the right reverend Prelate and the noble Baroness for their contributions. The right reverend Prelate raised the wider issue of daylight peak capacity of solar. One has to look at this as a whole, and solar has to be part of the energy mix. We recognise that solar is a successful part of our energy mix. We do not want to see it drop out of the mix, given that we want to increase our usage of renewables as opposed to traditional fuels. While solar may have a downside, in that when there is no sunlight there is no solar production, we should not—I was going to say “excommunicate” but I think that is the wrong word—remove it from the mix simply because it is not a 24-hour supply. As I say, it plays a very important part in the energy mix.
With regard to the noble Baroness’s comments, we have to recognise that past mistakes enable us to learn lessons. However, we should celebrate the fact that solar has become a successful part of our energy mix and we are seeing costs come down. We are working closely with the solar industry to ensure that we do not impose great difficulties in this area, but at the same time we need to respond to the costs that will be imposed on the consumer. As with all these things, compromises need to be made and these are hard balancing acts to achieve. However, the noble Baroness is absolutely right that we should constantly review our responses to technologies that were new but are now maturing and are very much part of our framework.
However, the bigger issue is that we need to have greater consistency in what we mean by energy policy because our energy policy needs to instil confidence. Investors need to know that politically there will be no dramatic changes, so it is very important that we work towards a long-term consensus on what we want to deliver. It is true that over the past four years or so we have seen record amounts of investment coming to the UK renewables sector. We should celebrate the fact that investors want to invest and generate jobs in the long term, and that they view the UK as a good place to invest. However, that needs to be viewed against the backdrop of ensuring that the political landscape aligns itself with not uprooting very sensible policies when they are put in place, and we have a role to play in that. Overall, though, the fact that the noble Baroness has acknowledged that this is a good thing to do and that the right reverend Prelate by and large recognises—
The Lord Bishop of Chester
I wonder whether I can come back briefly. I would not want to excommunicate any form of renewable energy, or burn it at the stake for that matter. I would not want to sell indulgences either at too high a price, though, especially if we are selling them to generate electricity at times when it will not be available when we are facing peak demand. I have anxieties that two or three years down the line we may suddenly get exceptional winter weather and no electricity will be available from the continent at the level that typically comes in. I take the view that such indulgences as we sell—subsidies—should be available for electricity that will be available when we most need it. Is the Minister confirming that solar PV is not part of our calculation as to how we meet peak demand?
Baroness Verma
I do not want my views to be taken out of context. It is important to see solar as part of our energy mix. The capacity markets and auctions are there to ensure that we have the balance: when we need peak, other means of energy generation are available to us, but when we have tight periods we do not run the risk of the lights going out.
We need to be clear that we have a number of targets that we need to meet. Part of that is our carbon emissions, part is trying to strengthen the renewable sector and part is to ensure that there is not an unreasonable cost to the consumer when those technologies are maturing. The steps that we are taking recognise that. We will find technologies that, just as we are trying to displace coal, may one day displace some of the technologies that we see today as being far more effective. I hope I have allayed the fears of the right reverend Prelate, although I think not.
The Lord Bishop of Chester
I am a simple soul in a complicated world and, no doubt, speak as a fool. Still, there is a syllogism that solar PV is not available after dark but peak demand arises after dark, so solar PV capacity is not available at times of peak demand. It is a relatively simple logical proposition, and I wonder whether the Minister is denying or agreeing with it.
Electricity Generation
Debate between Baroness Verma and Lord Bishop of Chester
The Lord Bishop of Chester
To ask Her Majesty’s Government what proportion of United Kingdom electricity consumption was generated abroad in the last year for which statistics are available.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, between October 2013 and September 2014, electricity imported into the United Kingdom was 7% of total electricity consumption. Electricity interconnection strengthens our security of supply and can lead to lower bills. Its flexibility supports renewable electricity generation. Greater interconnection means we can export excess power and import at times of stress.
The Lord Bishop of Chester
I thank the noble Baroness for that reply, although 7% seems quite a large figure. What assumptions are made for the availability of imported electricity to meet our peak demand? What contractual agreements are in place to undergird the availability of that supply?
Baroness Verma
My Lords, the right reverend Prelate raises an important issue about making sure that we have supply available all the time. The investment framework we have introduced means that we are getting on board two new interconnectors. They will make their final investment decisions this March. We realise that we need to do much more and that is why we have looked at the interconnectors as part of a programme that enables energy supply when it is needed most.
Energy: Action on Bills
Debate between Baroness Verma and Lord Bishop of Chester
Baroness Verma
My Lords, I fear I shall not be able to answer the noble Lord straightaway. If he will allow me, I shall write to him. I suspect that this will not have a direct impact, but I shall clarify that rather than a make a statement that fails.
The Lord Bishop of Chester
My Lords, there is much in the Statement that I welcome, particularly a point that has not been commented on directly. The move in support for the social aspects of the programme from energy bills to general taxation will have some impact on the poorest and on fuel poverty and is entirely to be welcomed. The renewables obligation payments are still going to be collected through energy bills. When will the expected increases in those precepts on bills eat up the £50 which has been announced today?
Baroness Verma
The right reverend Prelate asks a really important question. The point is that whatever measures we are taking, they have to be taken in the round with other measures that we are also taking. It is not just the £50 that will, on average, come off a bill. It will be all the other measures that work alongside this. While the right reverend Prelate is right to ask the question, he needs to accept that there are several measures in place that will address a number of outstanding issues, such as making sure that the most vulnerable pensioners get the help they need during the coldest periods of the year. Let us look at the picture in the round rather than identify one measure.
Energy Bill
Debate between Baroness Verma and Lord Bishop of Chester
Baroness Verma
My Lords, this group of amendments has the effect of giving the Secretary of State the power to require energy suppliers to provide a breakdown of costs to consumers. This includes both information about their costs in supplying domestic customers and costs passed on to domestic consumers through the Government’s environmental and social programmes. It also enables the Secretary of State to set out the categories of costs to be included and to determine the frequency with which this information must be provided. I am grateful to my noble friend Lord Forsyth, who sadly is not in his place today, and to other noble Lords who raised this matter on Report. I listened very carefully to the views expressed and the Government have brought forward this amendment in response.
The Government are in complete agreement on the importance of providing clear information on the costs that contribute to consumers’ energy bills, including the costs of government policies. Indeed, that is why the Government publish each year a detailed assessment of the impact of our policies in the Estimated Impacts of Energy and Climate Change Policies on Energy Prices and Bills. However, I recognise the strength of feeling on this issue and that is why we will now go one step further and ensure that this information is provided directly to consumers. We will be working with consumer groups, including Which? and Consumer Futures, to take this forward. Four of the largest suppliers already provide a breakdown of their costs on consumer bills. As a first step, I will be seeking a voluntary agreement with other suppliers to ensure that they also provide a breakdown of their costs to consumers.
It is right that we should first pursue a voluntary agreement, as this is the quickest and most cost-effective route to getting this information out to consumers. In the event that the Government are unable to reach agreement to a voluntary approach, the Secretary of State will exercise this power. We need to strike a balance between providing sufficient detail on the costs associated with supplying gas and electricity, and significantly increasing suppliers’ costs, which would inevitably end up being passed on to consumers.
I will explain the types of costs about which suppliers might be required to provide information. I expect to see costs broken down into the following types of categories: wholesale energy costs, network and distribution costs, costs of complying with government environmental programmes, VAT, operating costs and profit. How suppliers display these costs should be left for them to decide, provided they include these categories. I believe the approach we are taking strikes the right balance by providing transparency to consumers on the costs incurred by suppliers without imposing significant additional burdens. I beg to move.
The Lord Bishop of Chester
My Lords, I welcome this amendment, which began its life, I think, in an interchange between the noble Baroness and me in Grand Committee. She has pretty much supplied everything that I asked for then, and I am very pleased. The only point that I will make now is that the Government rightly want to make it easy for consumers to switch suppliers. That is a good thing and it is very helpful that this information will be made available one way or another on bills. However, it needs to be made available consistently, in the same form, by different suppliers, so that if you are comparing a bill from one supplier with a bill from another, the information is supplied in the same form on each bill. The noble Baroness did not quite make that point in what she said. I hope that she can assure us that these costs will be disclosed—either voluntarily or by the exercise of the power that she is taking—not only transparently but consistently and comparably by different suppliers.
Energy Bill
Debate between Baroness Verma and Lord Bishop of Chester
The Lord Bishop of Chester
I raised a specific point about the extent to which existing capacity, which may get as high as 12 gigawatts, is taken into account in energy security. To what extent is the Government’s strategy on energy security dependent on the interconnection?
Baroness Verma
I apologise. I had a note for the right reverend Prelate the Bishop of Chester, but I forgot to allude to it. The loss of supply from interconnection, like other forms of capacity, would be handled by the system operator in the same way as additional capacity would be sought through the National Grid’s balancing services. There would be a mechanism in place.
The Lord Bishop of Chester
The noble Baroness may want to write to me rather than answer now, but if supply gets tight under the scenario that Ofgem has said is possible—although we hope it will not come to that—does continuation of the Government’s current strategy at that point depend on the availability of electricity at a level between the current 4 gigawatts and the prospective 12 gigawatts?
Baroness Verma
My Lords, it might be wise for me to write in detail to the right reverend Prelate and the Committee with a fuller answer.
Energy Bill
Debate between Baroness Verma and Lord Bishop of Chester(11 years, 4 months ago)
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Lord Whitty
My Lords, I have two issues. First, I support the clarity referred to by the noble Lord, Lord Teverson, that is promoted by the amendment proposed by the noble Baroness, Lady Maddock. Secondly, there are issues relating to the cost of carbon, and so forth, which need to be reflected in energy bills, but I am not sure that I would agree with what the right reverend Prelate says in how we present that. There is a cost to all of us of carbon and to isolate it separately in a crude way would not necessarily improve understanding. The Government would have difficulties in that respect.
On the consumer issue, I would just mention the survey about unit pricing that I referred to under the earlier group of amendments. On the question of percentages, the public do not understand APRs when they take out loans, so they will not understand TCRs in relation to this operation. The Which? survey shows that three out of 10 people using the tariff comparison rate found the cheapest rate whereas more than 80% found the best comparison when they were demonstrated by unit prices. So the use of clear figures but not necessarily percentages will help in that regard, and I support the noble Baroness, Lady Maddock.
The Lord Bishop of Chester
Can I just come back on this point? What I wanted was for the government obligations to be listed. One justification for these green taxes is that it saves money in the long run because of this, that or other theory. However, when the Government themselves impose a financial tax or precept, or whatever you want to call it, we should all surely want a degree of transparency about it. Then there is an argument about whether it is justified because of other long-term savings. The danger is that if you hide these things away you cause the lack of confidence in consumers that the amendments that we have discussed are precisely about.
Baroness Verma
My Lords, noble Lords must forgive me for trying to step in before the noble Lord, Lord Whitty. I am extremely grateful to my noble friends Lady Maddock and Lord Roper for their amendment. This is a follow-on from our previous discussion. My noble friend Lord Caithness rightly then ensured—and continues to ensure—that this debate around simplification and clarity is high on the agenda. The amendment proposed by the noble Baroness tries to lay that out in simple terms, saying that the information provided as part of a message on bills, annual statements and other communications detailing the suppliers’ cheapest tariff must be provided in a clear and easily understandable format.
Ensuring that consumers are provided with clear and simple information regarding their existing tariff and others available to them is one of the key aims of the powers in question and Ofgem’s retail market review. A power to require suppliers to provide consumers with personalised details of the expected cost of a given tariff and information on the supplier’s cheapest tariff for them is one of the means by which this will be achieved. That consumers should receive information about tariffs in a clear and understandable way is something that we have made plain to suppliers as being central to our proposals. Should it become necessary to use these powers, we expect to set this out explicitly within the actual amendments to suppliers’ licence conditions. Indeed, Ofgem’s proposed changes to suppliers’ licence conditions to implement the RMR already include such provisions. Standard licence condition 31E, once amended, will set out specific plain and intelligible language and presentation requirements for information provided to customers. We have always been clear that we expect suppliers to provide information to consumers that is clear and understandable. However, if noble Lords feel that we have not been clear enough then we are happy to consider this matter further and return to it on Report.
In response to the concerns of the right reverend Prelate the Bishop of Chester, I sincerely understand his desire to see clarity on bills, but that is up to suppliers to do. Ofgem can direct, but it is actually for suppliers to do it. Somewhere I have a note on this that I have now conveniently lost. Ofgem is producing factsheets that provide a breakdown of the costs that make up a typical energy bill. We are aware that some suppliers are already providing this, and the right reverend Prelate mentioned that there may be one that he would not mention by name. We do not hold comprehensive data on each individual supplier’s approach. Maybe that is something that Ofgem needs to look at. Given that I am taking this matter away to consider it further, perhaps this is something else that I may reflect on. I hope that my noble friends will find my explanation reassuring and withdraw the amendment.
The Lord Bishop of Chester
May I probe the Minister’s position in this way? Can she give the Committee any reason why there should not be a requirement on energy companies to provide a line that simply says what the Government’s tax or obligations are? I cannot see a reason why that should not be done. As she says, some suppliers do it but some seem to change their policies. Given that the amounts are already significant and will be even more significant before long, the bottom line, as the noble Lord, Lord Whitty, began his speech by saying, is that the most important thing to people outside this Room is how much this costs.
Baroness Verma
As I have said to the right reverend Prelate and to the Committee, suppliers are not obliged. Still, I will take this away and reflect on how we can make bills easier and simpler for consumers to understand.
Electricity Generation
Debate between Baroness Verma and Lord Bishop of Chester
Baroness Verma
My Lords, I reassure the noble Lord and the House that we have enough capacity to ensure that the lights do not go out. We have been in this place before. As noble Lords will know, in the last decade we had a similar prediction that we would have a drop in supply, but of course the lights remained on. We are working with all our efforts to ensure that, through renewables, gas and coal, those lights stay on.
The Lord Bishop of Chester
My Lords, could the Minister tell the House to what extent we already depend on the interconnectors with France and the Netherlands? What potential is there to go cap in hand to our European friends for more supplies in the years to come?
Baroness Verma
The right reverend Prelate raises a point of which I am sure noble Lords are aware, which is that we have a very good relationship with our European friends, particularly with Norway. We are focused on ensuring that our renewable marketplace will assist us to be self-sufficient and have our own security of energy. We will do that through our energy Bill. However, these issues are of long standing. This Government have taken a very proactive, positive step to ensure that we address these issues.
International Aid Reviews: Conclusions
Debate between Baroness Verma and Lord Bishop of Chester(13 years, 8 months ago)
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Baroness Verma
The noble Lord maybe missed the part of the speech that said that the Secretary of State has committed to supporting regional programmes. As he absolutely rightly points out, some of the smaller countries will have greater responses from their regional areas than from bilateral programmes, which are smaller and less able to reach widely. We support the regional programmes very much.
I come back to the point about Burundi and Lesotho, which I keep pronouncing wrongly. We believe that they have comparative partners that are far better placed than us to deliver aid. Therefore, we will help them through the regional programmes.
In response to the noble Baroness, Lady Kinnock, I should say that our regional integration work, which is managed by TradeMark East Africa, which has an established office in Bujumbura, will provide support for Angola and Burundi, so that is covered well. We will not just leave them out there and we are not suddenly going to stop—the process will phase down by 2016.
The noble Lord is absolutely right that we have a keen focus on agriculture, which is really important for food security, not only for that area but for us, too. We have pledged from 2009, when the Opposition were in government, £1.1 billion over three years. We are therefore taking agriculture sustainability very seriously. We are committed to food security and agriculture and are working with the FAO as well as other multilaterals, including the International Fund for Agricultural Development and the World Food Programme, to ensure that we have a strong programme in place.
The Lord Bishop of Chester
My Lords, I press the Minister on an aspect of the Statement that has not featured in the questions so far—the point that,
“it is critical that the UK increases its focus on helping countries to build open and responsive political systems”.
In the conclusions there is simply a reference to holding “freer and fairer elections”, but building democracies is about more than just helping countries to hold elections; it is about helping to build institutions in a society that support democracy. Could the Minister say a bit more about that?
Baroness Verma
I thank the right reverend Prelate for that question. Of course this is about more than just fairer elections; it is about making sure that the institutions in countries where there has been corruption and where unstable Governments have held office are removed or strengthened. Therefore, DfID, through its programmes of technical support and assistance, can ensure that we help Governments who want our help to train people in place to be able to hold Governments and funded institutions to account. We will not tolerate corruption; we want corruption to be eradicated. Therefore, we take all allegations of corruption and of misappropriation of funds very seriously, and we will work very strongly with Governments to ensure, with their assistance, that we put in place stronger good governance in the political systems. However, this is not about freer and fairer elections—I understand that; it is about giving people at grass-roots level the ability to hold the politicians representing them to account.
We have also put into place a watchdog that will monitor all our aid—where it is spent, how it is spent and what the outcomes and results are—so that people across the world can just log on and see for themselves. If that aid is not reaching them, they have a place to come back to and ask for recourse.