Renewables Obligation Closure Etc. (Amendment) Order 2016

Lord Bishop of Salisbury Excerpts

Wednesday 16th March 2016 Lords Chamber

Damaged investor confidence drives out investment, raises the cost of capital and increases customers’ bills. If the Government are focusing on the levy control framework as the determining factor in low-carbon energy technologies, it is vital that the framework becomes coherent with the utmost urgency. That they have not done so is of the greatest regret.

[The Lord Bishop of Salisbury]

My Lords, it is curious to rehearse the same arguments so soon after the recent debate on feed-in tariffs. It is very disappointing in the wake of the success in Paris of COP 21, and the enthusiasm engendered from that about a new level of ambition in response to human-caused climate change. I feel as though the Minister is in a position of defending the indefensible. The noble Baroness, Lady Byford, made a very good point about the place of subsidies and pump-priming. Therefore, it is disappointing that the Government are not working more effectively with the renewable energy sector to build on the considerable success of that industry.

In its analysis of the impact of the changes to feed-in tariffs, DECC estimated that there could be a loss of 18,700 jobs. There is no equivalent analysis in relation to the impact of the withdrawal of renewable obligations, but going towards no subsidy will undermine a sector that is moving rapidly to a position of needing less subsidy. The House’s Secondary Legislation Scrutiny Committee has been critical of the analysis of this in the EM by not highlighting the level of opposition to, or the paucity of support for, the proposed changes, or acknowledging the concerns expressed by a large number of respondents about the methodology used by DECC to justify its proposals. The desire for increasingly competitive pricing would be a good deal more compelling if this were a feature of the whole electricity market, but last week the Government’s Competition and Markets Authority drew attention to the highly uncompetitive features of the market, dominated as it is by the big six companies.

The desire to cap the levy control framework has introduced two thought errors into the Government’s proposals. The first is that, if the costs of decarbonisation are not to fall on already hard-pressed consumers, further support will be needed in addition to the LCF. However, as has already been pointed out in this debate, the additional cost to the consumer is estimated to be less than £1 per annum. This does not feel like the right way to address this issue. The second point is something that I have referred to before. The desire not to exceed the LCF cap means that we are content with hitting mid-range targets, whereas we ought to be seeking to exceed them on renewable energy in order to escalate the process towards decarbonisation. Many Members of the House want the Government to go back and think about this again. The issue is one of creating a strategy for energy that addresses the need, which was identified in Paris, to move rapidly towards a low-carbon economy.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords for their participation in this debate. I will of course address some of the points that have been raised but, before doing so, perhaps I may just clarify one or two issues.

First, the Government are of course committed to combating climate change, as the right reverend Prelate kindly acknowledged, through our participation in Paris and the marvellous result achieved there. However, we want to do so in the most cost-effective way for bill payers.

The solar industry in the United Kingdom has been a success story and has seen significant cost reductions. The noble Baroness, in opening, did not talk about the Liberal Democrat position on subsidies. The noble Lord, Lord Teverson, sought to clarify that, but I think the opponents of what we are seeking to do need to set out what level of subsidy they regard as acceptable at this stage, because, crucially, the costs have come down: so much so that the largest solar developer in the United Kingdom, Lightsource Renewable Energy, has said publicly—it is on its website—that it will be building subsidy-free sites this year. This order does not end solar and, if we can get solar deployment without the subsidy, that raises the question of why we are subsidising it. This Government believe that when the costs of deploying come down—as they have—so should support. This statutory instrument is a necessary step to protect bill payers and to end subsidies where they are not needed.

Before looking at some of the specifics raised in the debate, I want to set out what the costs of the renewables obligation and indeed other renewable policies, such as feed-in tariffs and CFDs, will be over the lifetime of this Government. There seems to be a feeling that we are cutting off all renewable subsidies. That is not the case. The cost on the levy control framework goes up every single year in this Government, and that is after the action we are hoping will be taken today. The total cost in 2015-16 is £5.23 billion. Next year it will be more than £6 billion. In the succeeding year it will be more than £7 billion. In 2018-19 it will be over £8 billion. In 2019-20 it will be £10 billion, and in 2020-21 it will be nearly £11 billion. So to those who suggest that somehow we are turning our face against renewables and ending subsidies, I can say that that is not remotely the case.

I shall address some of the specific points that were raised. As I said, the noble Baroness, Lady Featherstone, did not talk about the position of the Liberal Democrats in relation to subsidy, but I remind the Liberal Democrats that the coalition Government—after all, it was a department led by a Liberal Democrat Minister—recognised the need to revisit the 5 megawatt and below solar subsidies if we had overdeployment, or if overdeployment were projected. Overdeployment is projected by a ratio of 1:4, so it really needs to be addressed, and this is quite consistent with what the Liberal Democrats said when they were in government. We are taking this action for two reasons. It is not just about the levy control framework; it is also about the subsidy. We do not believe that we should be paying subsidies where they are not needed. The evidence is— I quoted the largest developer—that they are not needed.

The noble Baroness raised the issue of roof-top solar. We do not accept that the feed-in tariffs have been set too low to support commercial roof-top solar. Almost 8 megawatts of installations over 50 kilowatts have secured a feed-in tariff since the scheme reopened in February. That is significant and demonstrates that there is ample opportunity under the existing FIT scheme to do just that.

Feed-in Tariffs (Amendment) (No. 3) Order 2015

Lord Bishop of Salisbury Excerpts

Tuesday 2nd February 2016 Lords Chamber

[Baroness Worthington (Lab)]

My Lords, I follow the comments of the noble Lord, Lord Deben, by saying that, obviously, the most important thing we have to focus on is finding the lowest-cost ways to decarbonise our economy. As someone who worked very hard on the Climate Change Act to make it a flexible and technology-neutral approach to tackling climate change, I think it is very important that we focus on the things that really matter: greenhouse gas emissions and carbon intensity, which we do not talk about enough, because renewables help us only in so far as they reduce the carbon intensity of the electricity we use. That is something we need to keep focusing on. Therefore, although I completely understand the sentiment behind the approach the Liberal Democrats are taking today, in my view the fatal Motion goes a little too far. That is not to say, however, that there is not a very important job that this new Government need to do, which is to restore investor confidence, because a whole host of their policies have severely damaged that confidence.

I totally understand the sentiment behind some of the actions taken: the desire to make sure that we get the best value for money and do not put costs on people who cannot afford to bear them. However, we have behaved in a rather cavalier manner in our interaction with the renewables sector, which is an important sector for this country; its growth is bucking trends in other parts of the economy. Noble Lords may say that that is purely to do with subsidy but it is not true: it is growing because there is an urgent need to find a cleaner and better way of powering our homes and businesses. The renewables sector and other clean technologies have a big role to play in moving us to an energy system that is fit for this century. The Government must deal with that industry seriously and give it all due respect when they introduce changes and try to manage the transition from a system that relies on subsidy to one that can stand on its own two feet and compete in the marketplace.

I want to pick up on something the noble Lord, Lord Deben, said about carbon budgets. We have had conversations about this and I declare an interest in having helped to bring these about. He said that the carbon budgets, though brilliant, have a fatal flaw in their interpretation to date: emissions in the electricity sector are based not on actual emissions in the UK, but on a traded allowance that is calculated from a European system. That has to change. Noble Lords will remember that we passed an amendment to the Energy Bill that changed the counting system for carbon budgets, from the fifth carbon budget on, to one that counts actual emissions in this country. That is a very important principle.

I know the Government are not persuaded that they should keep that amendment. However, I urge all noble Lords who consider that climate change is real and that we need to do something about it, but who are also concerned about cost-effective ways of doing this and technology-neutral approaches, to accept that carbon budgets are our friend but will work only if they are full carbon budgets. If they are half-budgets, with half being set by Europe, they do not do the job for us and do not give the clarity that investors need to invest in decarbonising our electricity sector beyond 2020. That is really important, as 2020 is fast approaching. We will have no more European legal targets for renewables beyond that date. I happen to think that is a good thing, but we need something that replaces that and that gives confidence. The carbon budget could be it, but only if we change the counting rules, as we successfully did during our debates on the Energy Bill. I look forward to returning to this issue, and I hope that between now and then we can persuade the Government that this is the right approach.

[The Lord Bishop of Salisbury]

My Lords, I am very grateful for this debate. When I joined this House last year, I was really struck by how it was possible to work with Members from all parts of the House in preparation for Paris and by the strong sense of common purpose with which we could work together. I am grateful for the contribution from the noble Lord, Lord Deben, in terms of what now happens, post-Paris, and how we move on. However, I am unable to support a fatal Motion. On the other hand, it is really important that the House discusses where the Government are with their energy policy, and that is what this debate is able to do.

My contribution is simple: I have two points. There is an extraordinary gap between rhetoric and reality in what is happening at the moment with government policy, and there is no consistent overall strategic energy policy. Both those things need to be addressed. As reported by the Hastings and St Leonards Observer in May 2015—presumably just after the election and her appointment as Secretary of State—Amber Rudd said:

“I want to unleash a new solar revolution”.

In February 2015, the Prime Minister pledged to,

“accelerate the transition to a competitive, energy efficient low carbon economy”.

In Paris, he brilliantly said that we are going to be judged by what our grandchildren will say to us when we are asked what we did at this stage in our history, in response to what we knew about climate change.

The noble Baroness, Lady Featherstone, quoted DECC’s own figures about the impact of cuts in feed-in tariffs. She cited the loss of jobs in a successful industry. Renewable energy is crucial to the present and the future. We are at a transitional stage in technology; things are changing very fast. However, it is still an industry that requires support. On its own assessment, the feed-in tariffs could be phased out within the life of this Government, but the speed of change has undermined its success. I do not agree with the noble Lords behind me that this is about rewarding the rich at the cost of the poor. The average household saving from this cut in feed-in tariffs will be £6 per year. That is not a huge amount on something which we agree is an important goal. Surely it is not good enough to meet targets in this area: it would be really good to overshoot them. However, the concern is the Secretary of State’s own admission that it looks as though, by 2020, we will be 3.5% below the aim of 15% renewables which is our responsibility.

There were a pretty extraordinary number of responses to the DECC consultation on feed-in tariffs—over 54,000. The Church of England’s own Shrinking the Footprint project fed in one of those responses. We have 400 churches with solar panels at the moment: three of them are carbon neutral. Many churches are taking a holistic approach to energy use and efficiency, but churches are just an example of people’s commitment. However, this is made out of an understanding that there is a consistent, reliable policy approach which allows one to make longer-term, costly investments. I would have thought that the solar panels feed-in tariff initiative had produced a very successful public/private partnership, one which needs to be incentivised at the front end and then reduced gradually as it becomes more successful, the technology becomes cheaper and more people use it.

[Lord Vinson (Con)]

Perhaps the right reverend Prelate was not here earlier, but the noble Viscount, Lord Ridley, made the point that solar panels are currently reducing CO₂ output by only 1% in this country alone. That is an even tinier fraction of the world’s CO₂ and we are talking about a world problem, not just the UK’s CO₂ level. Even if the number of solar panels were tripled, it still reduces our CO₂ output by only 3%. Perhaps we are pushing at the wrong solutions. That is the point the noble Viscount was trying to make. Perhaps the right reverend Prelate should consider it.

[The Lord Bishop of Salisbury]

I thank the noble Lord for his contribution. Of course, I have been here through the whole debate and I did hear what was said at each stage. I agree with the noble Lord, Lord Deben, about the need to focus on the larger picture as well. But the information that was given was a particular description of the problem, as the noble Lord, Lord Deben, pointed out.

In addition to my points about the importance of the rather more gradual change in feed-in tariff reductions and the gap between rhetoric and reality that is emerging in what we are seeing of government policy, there is also a problem with the Government’s strategic approach. It is not clear how all these individual decisions fit within an overall energy policy framework. There are very different approaches being taken to continuing the use and extraction of fossil fuels; shale gas and fracking; nuclear; and renewables. There is no indication yet as to what will be in the national energy-efficiency policy. So this debate is a really good opportunity post-Paris for us to gather again and try to hold the Government to account, when there are some very mixed messages being given by a variety of initiatives, and to ask that we begin to see more clearly the strategic energy policy which would help us all have more confidence in the way in which we can engage with this.

[Lord Haskins (CB)]

My Lords, as chairman of the Humber Local Enterprise Partnership, I am very interested in this debate because the Humber area generates 25% of the country’s electricity and provides 25% of the country’s oil and petrol. We have every type of energy activity short of nuclear and hydro. We are very diverse. It is a very important part of our history—and future.

In the past 10 years we have had considerable support from the Government in moving towards a change in the nature of our industry away from coal towards renewables. In the past six months, however, partly because of the volatility of the markets, the Government have appeared to be a little less sure about where they are going than they were a few months ago. My particular interest is offshore wind, where, thanks to the Government, a huge investment from Siemens is now under way to produce substantial quantities of offshore wind for the nation.

There is a hiccup at present because people are not too sure where they are going. The plan, for Siemens and for all of us, is that by 2024-25 offshore wind will be competitive with any other form of energy. But for that to happen, we need undertakings that the support will be given during that period and a commitment from the industry that substantial research and development will take place to lower those costs. It is very important from our point of view that there is clarity about the Government’s energy policy going forward so that people who are sitting on their hands at the moment waiting to invest can have the confidence to invest in the future, which they want to do.

Paris Climate Change Conference

Lord Bishop of Salisbury Excerpts

Thursday 17th December 2015 Lords Chamber

[The Lord Bishop of Salisbury]

My Lords, I thank the noble Baroness, Lady Miller, for this debate and congratulate the noble Baroness, Lady Sheehan, on her maiden speech. What a great debate in which to make a maiden speech, when we are looking so much towards the future.

On Tuesday, we congratulated the Government, the Minister, the officials from DECC and some Members of this House on the contributions that they made in Paris. Many people will feel that this is an agreement for which they hoped and prayed. Someone said, “I can’t really comment. It was near miraculous”. I think that that might be true. It is particularly significant in the wake of the terrorism in Paris on 13 November. Terrorism seeks to divide us and creates fear. This agreement of nearly all the world acting together gives hope, which feels to be a very important statement. I have said before that I am particularly grateful for the creation of a predictable framework of $100 billion of climate finance for poor countries. That is particularly significant at a time when questions are being asked about overseas aid. This is an important contribution to that debate.

Among the faith communities, there has been a striking convergence of views about the environment. A Greek Orthodox theologian commenting on the Pope’s encyclical said that this is an issue that relativises all our other differences. Therefore, all people of faith and of no faith are able to act together in the care of our common home. All commentators have said that the key to Paris is its implementation.

It is very exciting to see how many things have been initiated this week and in the weeks preceding Paris which are already organising responses in institutions and organisations. We seem to be at a tipping point towards a low-carbon economy. It is really important that this impacts across the whole of government policy and that the Treasury understands it. This morning’s announcement about feed-in tariffs and solar energy is relatively good news—there will be a 64% reduction in the feed-in tariff rather than the proposed 87%.

In preparation for Paris, I went to a conference of European churches in Westphalia, a relatively poor part of Germany. Seven people were walking from Flensburg, on the Danish border, to Paris. On the day I was with them, 150 of us were walking, and at a town meeting in the evening there were about 400 people. The region had realised that 90% of its costs of energy were leaving the region. Therefore, there was huge enthusiasm for onshore wind and community energy schemes as a way of retaining money within the region.

Markets do not exist in a vacuum; they are created or made. It is really important that the Government think hard about how to create markets in which community energy becomes a more obvious way of creating renewable energy. If the Government are rightly concerned about subsidies of the way in which energy is produced, in addition to thinking about the subsidies of renewable energy, ending fossil fuel subsidies is a first step in speeding the renewable transition. It would create a triple win of enhancing energy security, reducing emissions of greenhouse gases and bringing improved fiscal space for governments. It seems an obvious thing to work towards—and quickly.

We asked for an ambitious deal in Paris, and I think that we got it. We also need to go much further. The noble Lord, Lord Giddens, was right. The desire to pursue further efforts to bring global warming to 1.5 degrees centigrade is creating a lot of discussion about how realistic that is, but it is a good thing to have high ambitious and to try to do the right thing. I applaud the ambition and I applaud in particular the role played by the Marshall Islands in this. It is good when small countries make a big difference in raising our ambitions through the “high ambition coalition”.

Climate change is, in many ways, the big challenge that we face. It requires new thinking and provides new opportunities. This is an area in which being satisfied with meeting mid-range goals is not right. We must set our sights higher to exceed our ambitions.

Paris Climate Change Conference

Lord Bishop of Salisbury Excerpts

Tuesday 15th December 2015 Lords Chamber

[Lord Bourne of Aberystwyth]

I thank the noble Lord, Lord Stern, for his kind words, and I am certainly happy to accept the compliment. I welcome very much the role he has played. Indeed, when I last saw him on the television, he was featured not only with the French delegation but also with the former Vice-President of the United States, Al Gore. The noble Lord has done seminal work which demonstrates that we can have falling emissions and economic growth, and I think that that is now widely accepted. It was an absolutely prescient report.

It is true that the position we play in relation to overseas aid is crucial. It gives us a powerful means of talking to many other countries and seeking to be as helpful as possible. I mentioned earlier the small island developing states and the particular challenges they face. The legal framework we work within is also important. Finally, the last point he made about private sector leadership is vitally important. The Governor of the Bank of England spoke powerfully at the Paris conference, which is not something that has happened previously. The private sector demonstrated leadership, particularly when Michael Bloomberg, Paul Polman and many others said that this is an agreement which they warmly welcome. It is not just about non-governmental organisations and politicians, it is very much about the business world as well. Again, I thank the noble Lord for the role he played at the conference, which I know was considerable.

[The Lord Bishop of Salisbury]

My Lords, I, too, congratulate the Minister on the achievements in Paris and the part that the UK Government played. The faith communities organised, among those from the wider public sphere, to gather in Paris. Forty-four pilgrims walked from London; seven walked from the Danish-German border; and 22 cycled from Copenhagen. As they travelled on the journey to Paris, they gathered with them the support of the communities through which they travelled and in which meetings were held. This culminated last week with the presentation of a petition, with signatures from 1.83 million people, to Christiana Figueres and President Hollande by 20 of us in the faith communities. This is a deal that many people wanted. Ban Ki-moon, Secretary-General of the UN, said that it was the most complex and largest talks he had ever been part of. The sense of achievement is therefore very great in having pulled off the Paris agreement. The UK’s contribution through climate finance was particularly significant.

However, over these last months, the Government have given mixed signals about the commitment to renewable energy. Therefore, there is a question about how the Paris agreement will be implemented domestically. That which was hard fought and hard won now needs to be hard wired. I would like to ask the Minister how, over these next few months, he sees the Government acting across the areas of public policy in order to make sure that this agreement is hard wired into all our thinking and acting across the whole area, not just within DECC and those involved in the environment and climate change. What steps will be taken to ratchet up the UK’s ambition in the way that the Paris agreement envisages so that we become more ambitious about what we are trying to achieve?

[Lord Bourne of Aberystwyth]

I thank the right reverend Prelate very much for his kind words and note, in particular, the lead that he has given through the Lambeth declaration and the fact that that pulled together people of many faiths. There was also a massive role of the Muslim climate group in supporting this. The participation of faith in all this, not least from His Holiness the Pope, was significant. I thank him also for what he said about climate finance. The contribution that this was able to make to the debate, and speaking to people, certainly was significant. Obviously, it is important for developing countries, particularly the most vulnerable countries, because there are degrees, as we are all aware, of poverty. Some small island states in particular need an awful lot of assistance on adaptation as well as mitigation.

The right reverend Prelate asked about the domestic agenda. Again, I refer him to what I said previously about falling costs, which is certainly true. The costs, particularly of solar, are spiralling down very quickly. Given the very clear signal that has been sent out worldwide, we can expect that to continue. The Paris agreement is significant in many respects. It is significant that the world has come together in the positive way in which it did but, on the specific, it is very important that it signals the end of the carbon economy. It is only a question of when. That message going out worldwide to business and being welcomed by business will mean that costs fall.

What are we doing within DECC? First, many DECC officials are taking a little bit of a break, having been up around the clock for the past couple of weeks. That said, work is already going on to see how this is delivered but, of course, the work had started before. We are already looking across government at what we need to do on cars and housing to meet our carbon targets. That work will continue but it is important that this is not just a one-nation issue; this is across the whole world. Hence, the importance of the five-year stock takes and the five-year reviews.