Renewable Heat Incentive Scheme Regulations 2011

Baroness Worthington Excerpts

Tuesday 22nd November 2011 Grand Committee

[Baroness Worthington]

I, too, am very pleased to be here. I am sorry that I missed the debate earlier in the year, as I was still on maternity leave. I want to open with some general remarks. It was possibly more than 10 years ago, while I was working at Friends of the Earth, that the suggestion of an incentive for renewable heat was first put forward by the NGOs. Part of the motivation for that was that it is much more efficient to take biomass energy and convert it directly into heat. If you use it to generate electricity, about two-thirds of the energy goes up cooling towers. Therefore, it is very welcome, if a little late, that this initiative is now being introduced.

I shall try to keep my comments brief as I do not want to delay approval of the regulations any further. It is very important that the initiative starts as quickly as possible. I echo the noble Lord’s comments about the need for clarity at the domestic level of the scheme. I hope that there will be great interest in the scheme from house owners, because we are all faced with high energy prices as a result of higher oil and gas prices. Therefore, I think that the update will be good and I hope that we will have clarity over the date of introduction.

One consequence of the delay is that the Government are now introducing this instrument in the eye of the storm around the solar FITs debate. I hope that we will take some lessons from that debate. Perhaps most pressing is that, if reviews are undertaken, a minimum notice period should be given to the industry before such changes are introduced. Six weeks’ notice is simply not acceptable for an industry that has to plan for the longer term. We expect there to be reviews of this instrument but the industry must be given fair notice of the changes, and I ask whether that is being considered.

I also echo my noble friend’s comments about the principle of how this is being paid for. It is significant that it is coming out of general taxation. I think that that helps to avoid the kind of furore that we are seeing over consumer bills. Let us be honest about the fact that general taxation is currently being boosted by various revenues from the European Emissions Trading Scheme. Therefore, this money is being generated from the climate change initiative and is being recycled on other work to further our aims on climate change. That is a very good principle and I should like to see more such measures being brought out of general taxation, given that we now have this big input of money from the ETS auctions.

Finally, I hope that this initiative will be very successful. I hope that we will have sufficient flexibility so as not to be hidebound by our modelling. All modelling is vulnerable—it is very hard to predict the future—but if this should turn out to be a very successful initiative and we end up getting through the budget more quickly, let us not pull the rug out from under an industry that is successful but look to spend more. We should have flexibility in how we reach our ultimate goals, which is to achieve 20 per cent of all energy from renewable sources. If renewable heat turns out to be a great success, let us have the flexibility to keep backing winners and not keep pulling the rug out from under an industry that starts to produce good results.

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My noble friend Lord Teverson, and perhaps others, asked about the timing of the expected launch of phase 1. As I said earlier on, as a result of the changes required by the European Commission, we are reviewing the timetable for introducing phase 2. We will be in a position to confirm the exact timing early in the new year but I cannot give it to him now. He also sought an assurance that we would not create a situation in which people were burning heat in order to receive incentives. We believe that the tariff structure and the eligibility requirements prevent people from generating heat just for incentives. Once the scheme begins, of course, we will monitor it closely for any signs of such behaviour.

[Baroness Worthington]

Could I ask specifically about the notice period, which has been such an issue with the solar feed-in tariffs? The Minister mentioned it but I am seeking an assurance that any changes are not introduced with too short a time period for the industry. A minimum of three to four months is necessary for the industry to adjust its order books and supply chain. Can the Minister assure me that there will not be changes posted that will be enacted within six weeks? That is a significant issue for investor confidence.

[Baroness Stowell of Beeston]

I understand the point that the noble Baroness makes. However, the way in which we have constructed the scheme means that I would not expect the sort of change that we have experienced with the feed-in tariffs for solar PVs to be repeated in this context. We would ensure, through our mechanisms for cost control within the department, that we are monitoring progress very transparently and that we would avoid that kind of emergency change that she refers to. It is unnecessary to give a specific commitment on a timetable as such because of what I have said, but I absolutely understand and appreciate her point.

Turning to the points raised by my noble friend the Duke of Montrose about large-scale biomass, the renewables obligation certificates and RHI, it is possible for new projects to receive the renewables obligation for the electricity generated in a CHP plant and the RHI for heat generated by that plant. A plant cannot claim the higher awards for CHP under the RO and the RHI. Does that make sense to my noble friend? I am glad if it does. My noble friend also asked whether the Scottish Government could award ROCs. The decisions regarding the details of renewables obligations, including the setting of banding levels, are for the Scottish Government. A separate consultation on their support of renewables obligation certificates was published on 21 October.