EU: Energy Governance (EUC Report)
Lord Grantchester Excerpts(8 years, 6 months ago)
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Lord Grantchester (Lab)
My Lords, this has been a very interesting report, reflecting the challenges of integrating a wider EU approach to energy policy, taking into account energy security and decarbonisation plans in response to climate change goals. I am grateful to the noble Baroness, Lady Scott of Needham Market, for her committee’s concise report and for her introduction.
The committee’s recommendations were very much accepted and taken on board in the Government’s response. The policy direction towards greater co-ordination and harmonisation of EU capacity markets, open to cross-border mechanisms such as interconnectors and greater regional integration, underlines the clear conclusion that the UK would certainly benefit from continued membership in the EU following next week’s referendum. I agree with the noble Lord, Lord Teverson, that energy policy is a clear candidate to be developed in a European context.
As the noble Lord, Lord Suri, said, working with Europe enables us to raise ambitions on climate change, not just in the UK and Europe, but throughout the world through our participation in the Paris agreement last year. This is an agreement signed up to by not just the western powers, but all the peoples of the world. From within the European Union we can influence events and set the pace towards a collective goal of building a carbon-neutral global economy in a generation, with all countries agreeing to raise their ambition on clean energy every five years. While the binding commitments made are not yet sufficient to limit temperature rises well below the 2-degree limit, this agreement should take us much closer to climate safety.
It is interesting to reflect that this report, published in December last year, provides an interesting critique of policy actions by the Government since. Several debates on the Energy Bill and renewable energy last Session highlighted the need for the Government to be aware of the effects of their lack of a clear and consistent plan. The recommendation at paragraph 62 reads:
“Rapid and unexpected changes in policies … create policy uncertainty and may undermine investor confidence”.
Paragraph 63 states:
“The UK Government should be clear about its own renewable energy strategy and target for 2030 as part of its decarbonisation and energy security objectives”.
The report continues with a call for the Government and member states,
“to meet the Commission’s deadline for the preparation of the first National Energy and Climate Plans by 2018”.
In their response, the Government give their commitment to meeting the Commission’s deadline and state that work is already under way. This is excellent. On this side, we consider this crucial to mitigate the damage done recently to investor confidence. Will the Minister give the House any further details on workstreams and reports for consideration coming over this winter?
The Paris agreement was secured through close working over several years, identifying that using cleaner and more efficient technologies can bring benefits when co-ordinated across Europe. In the referendum debate we would like to see the Minister and his colleagues in the department clearly promote these benefits. Recommendation 12 at paragraph 63 argues that the Government,
“should be clear about its own renewable energy strategy and target for 2030 as part of its decarbonisation and energy security objectives”.
Does the Minister agree with paragraph 69, which says:
“The UK Government should go to greater lengths to explain to consumers the financial and security benefits of a more integrated EU energy market”?
I am sure that he will endorse the fact that the UK has played a leading role in shaping an energy strategy for the EU and must continue to do so by voting to remain in the referendum.
We support the EU 2030 energy and climate change package, which includes the headline commitment of a 40% reduction in greenhouse gases against 1990 levels. On the EU-wide commitment to 27% of energy coming from renewables by 2030, we agree that there should be clarity to ensure how this is to be achieved. We agree with and welcome the flexibility offered to member states to develop their own plans to meet energy and climate objectives in ways most appropriate to their natural contexts. Consumer interests should not be segregated in energy policy. As the report states,
“the interests of industrial, business and domestic consumers should be considered in energy governance framework discussions”.
Will the Minister outline the Government’s plans to consult consumers and stakeholders during the development of the UK’s national energy and climate plan?
It should be noted that the UK does not have a clear plan ahead to meet the 2020 target, let alone the 2030 target. The UK should meet certain reduction commitments through a balanced mix of low-carbon options, including nuclear, CCS, renewables, storage and greater levels of interconnection and demand management, together with the very important aspect of increased investment in energy efficiency.
The UK could face a 25% shortfall in meeting the 2020 clean energy target. After setting the fifth carbon budget, to be published by the end of 2016—this year—the Government have to present an emissions reductions plan to cover our targets up to 2032. As yet it is unclear how transparent and inclusive this process of developing the plan will be. Following the Paris agreement, what consideration will the Government give in their energy and climate plan to meet the ambition and the timetable set out that member states raise their climate target every five years? What further implications to policies do this Government foresee? In the light of the report does the Minister have plans to integrate proposals in conjunction with other member states?
There are already clear economic benefits of interconnections to EU energy markets, one of the other main recommendations of the report, referred to by my noble friend Lord Hanworth and the noble Lord, Lord Howell. The E3G study concluded that greater interconnection to EU energy markets allows the UK to bring cheaper energy from the continent and balance variable renewable generation across a wider area, which could save the UK £500 million a year by 2020. A 2014 National Grid report estimates that doubling interconnection capacity would bring benefits to every consumer, amounting to £1 billion a year—a saving of £13 a year off household bills.
This report has brought general agreement about the pathway the EU should be taking. The Government have responded positively. All speakers have highlighted important aspects of the report and the noble Viscount, Lord Ullswater, made an interesting contribution with his thoughts on the technology mix of energy sources. This excellent report underlines to the House that there is much work for the Government to do to live up to its expectations and to the hopes of the noble Lord, Lord Howell. We will certainly work with the Government to bring coherence to their plans.
Hinkley Point
Lord Grantchester Excerpts(8 years, 7 months ago)
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Lord Bourne of Aberystwyth
My Lords, standards of nuclear safety are second to none in the United Kingdom. The noble Lord is of course right about small modular reactors, and we are progressing with that, as my right honourable friend the Chancellor announced in the Budget. We have had 38 expressions of interest, which will be written to by the end of May. That is certainly an important part of the energy jigsaw.
The Lord Privy Seal (Baroness Stowell of Beeston) (Con)
My Lords, the noble Lord, Lord Stoddart, is not actually a Cross-Bencher, although he does sit among them, which throws a little complication into whose turn it is next. However, I suggest that we hear from the Labour Front Bench and then go back to my noble friends behind me.
Lord Grantchester
My Lords, further to the noble Lord’s question regarding safety, France’s independent nuclear safety authority has found irregularities in an audit from Areva after it detected a very serious anomaly in a nuclear reactor vessel in the country’s Flamanville European pressurised reactor. Britain is using the same model at Hinkley Point. Has the Minister’s department asked for a report on this from the Office for Nuclear Regulation and whether these irregularities are also present at Hinkley Point? Will any report be published to allay public concerns regarding nuclear safety at Hinkley Point, or indeed any other nuclear reactor in the UK?
Lord Bourne of Aberystwyth
My Lords, I repeat the point I made about the high standards of nuclear safety. We are aware of the alleged defects at the Le Creusot works. We are working on that, and it will not affect the generic design assessment process that is going on at Hinkley Point C.
Energy Bill [HL]
Lord Grantchester Excerpts(8 years, 7 months ago)
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Lord Grantchester
Leave out from “House” to end and insert “do insist on its Amendment 7TB”.
Lord Grantchester (Lab)
My Lords, today, once again your Lordships’ House returns to the Energy Bill.
It is deeply disappointing that the Government are unable to agree an entirely fair, minor adjustment to the grace period concessions that have had to be woven into the Bill following the opportunistic inclusion of the decision on the early closure of the renewables obligation.
I, too, will not repeat all the arguments used two weeks ago when your Lordships’ House agreed to ask the Government in the Commons to reconsider. By bringing this measure back again, the Government have hardly won the argument on the issue. Yes, the Conservatives won the election and had included in their manifesto a commitment not to undertake new subsidies for onshore wind. However that may be interpreted, it cannot really mean that voters—especially the little over a third of the electorate who voted Conservative at the last election—thought that they were voting for disruptive, arbitrary decisions regarding schemes with local backing that were nearing implementation. That the Government understood that there had to be a grace period with reasonable conditions to allow an orderly process to scheme completion must at least be recognised and congratulated. That a line must be drawn in these circumstances is saying the obvious. However, it behoves the Government to be equitable, consistent, logical and proportionate with where the line is drawn.
To allow through schemes where they meet approved development conditions, where they can demonstrate financing arrangements were disrupted due to legislative uncertainty, and where there were unforeseen grid or radar problems—all this can be applauded. However, where a scheme has only a three-month delay due to a Section 75/106 agreement and is being ruled out, while another was initially denied planning approval but subsequently won on appeal after the cut-off date, we must draw this to the attention of the House and ask the Government to reconsider their unfair, illogical concessions.
The concession promoted by this amendment was the very minimum, limited case put to your Lordships’ House and supported. Many other cases promoted by the noble and learned Lord, Lord Wallace, and my noble friend Lord Foulkes are well worth considering. But this amendment whittles the merits of all those cases down to this obvious anomaly. Limiting these few schemes caught by how the Government have drawn their line down to four seems highly reasonable and a fair compromise. By turning this down, the Conservative Government are following an ideological belligerence against onshore wind farms that enjoy local support and offer value for money, while simultaneously defending generous handouts to fund more expensive alternatives.
Your Lordships’ House has returned this Bill twice to the Commons for reconsideration. We now have to recognise the constitutional position we are in, with two days to Prorogation. The Minister has given a clear view that the Government are emphatic, even if that view was won by only a small majority in the Commons. This side of the House recognises that the House has looked carefully at the Bill and proposed common-sense amendments to the Government. Naturally, we are disappointed that the Government continue with their disagreement.
Before I finish, I should reflect that on this minor point we are contesting wider issues to which this gives rise. This Energy Bill is concerned primarily with setting up the Oil and Gas Authority. That the Government are willing to hold up, and even put at risk, support for our struggling North Sea industries underlines the extent to which they are prepared to go to block these few popular schemes from going ahead. Blocking projects with local support that have done everything correctly regarding planning consents before an arbitrary cut-off date shows how ideological the Government now are. As has been said and underlined, the litany of actions taken by the Government is generating uncertainty and putting up household energy bills, such that the House of Commons departmental Energy Committee conducted an inquiry into investor confidence in the energy sector, highlighting that policy inconsistencies and contradictory approaches have sent mixed messages to the investment community. Today is another example of the Government claiming to want to decarbonise at lowest cost while simultaneously halting onshore wind.
A study by the Royal Academy of Engineering reported that replacing a single onshore wind turbine with offshore wind power would cost UK taxpayers an extra £300,000 a year in subsidies. The Institute for Public Policy Research, among others, has warned that ruling out onshore wind—the cheapest energy option—could put up energy bills by millions of pounds. Today, Ernst & Young published the Renewable Energy Country Attractiveness Index, showing that the UK has slipped to an all-time low of 13th place among the 40 most attractive renewable energy markets globally, primarily due to the Government’s decision to opt for gas and nuclear rather than be technology-neutral. This approach goes against the grain of almost universal global support for renewables and obstructs a growing energy imperative, as ageing power plants are retired, given the UK’s strong natural resources and efficient and effective capital markets.
Today the Government may get their way but tomorrow the UK will start paying the price. I beg to move.
Lord Bourne of Aberystwyth
As the noble and learned Lord knows, those provisions were not there when the Bill was introduced. They were introduced subsequently, after consultation with industry. I accept that they were not subsequently altered but there was consultation, as he will recall, about what was fair on the grace periods. I think many people recognise that these amendments from the original position were fairer and more just. That is the position. They were not amended subsequently—he is quite right on that.
We have been round the circuit on this so many times that I will not delay the House any further. The view of the other place is clear. We do not want to hold up this legislation with its vital Oil and Gas Authority provisions. I beg to move the original Motion.
Lord Grantchester
I am very grateful to noble Lords who have responded on my behalf to the Government’s stance regarding the position we are now in, and to the Minister for the way he has replied. I may well have been injudicious in the words I used regarding the Minister’s motives. However, I am disappointed that I still find his remarks less than convincing. I am not entirely satisfied with his response and I am not happy with the lack of movement towards a compromise.
This issue will not go away. It goes beyond the few cases in the amendment. It concerns the lack of inclusion and the ability of the wind industry to take part in the future bidding rounds for contracts for difference. There is a concern that the Government are not being technology-neutral. It also concerns jobs and investment in Scotland. We remain as determined as ever that we will return to this, but we accept where we are now with the Government—they are not listening and they will not concede. Indeed, it could well be the end of the parliamentary road. Reluctantly, I beg leave to withdraw the Motion.
Nuclear Installations (Liability for Damage) Order 2016
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Lord Grantchester (Lab)
My Lords, before I begin my remarks on the order before the Committee today, I should like to start by congratulating the Minister on his visit to New York last week to sign the Paris agreement on climate change on behalf of the United Kingdom. I trust that it was a wonderful experience as well as an honour to sign on our behalf, and I am sure that he will not mind me reminding him of this from time to time during our debates in future. Regarding the signing, perhaps I may ask him whether there are further legal requirements to make the Paris agreement operational. Is there a need for formal parliamentary ratification or, indeed, for possible amendments to the Climate Change Act down the line?
However, returning to more normal events, I thank the Minister for his introductory explanation today. The order is a lengthy document, and he has given the Committee an excellent summary. The instrument amends the Nuclear Installations Act 1965 in order to update and extend changes following the Paris agreement, as he has mentioned, and the Brussels supplementary convention, to both of which the UK is a signatory. The order covers the aspects of insurance liabilities for nuclear operating companies and how they are changing. As the Minister said, the powers to make the order come from the Energy Act 2004.
In the other place, questions focused on the decision to phase in higher levels of cover, from €700 million to €1,200 million, over five years, and whether that should be speeded up. The questions also covered the higher and lower aspects of the transport risks of materials and the pricing costs around the Hinkley Point deal. These were very helpful, and I understand the responses made by the Minister there, especially on the problems with pricing mechanisms where there is little or no track record of claims dealing with low-probability outcomes. The fact that any outcome could have high impact adds to the complexity.
At this point, I should declare my interests as a dairy farmer in Cheshire as I reflect that my reading of the order was made poignant by remembering the effects on farmers in north Wales at the time of the Chernobyl accident in the Soviet Union, when rain from the east deposited radioactive sediment on grass consumed by livestock in that area. At the time, there were thoughts that the land might be contaminated for several decades. Therefore, in noting the new category of,
“Loss of income deriving from a direct economic interest in any use or enjoyment of the environment”,
for which the example of “fishermen and cockle-pickers” is cited, I assume that this would also apply to farmers who have grazing on common land. Are there any definitions around “insignificant” in paragraph 7.14 of the Explanatory Memorandum, which states that,
“the impairment must not be ‘insignificant’”?
Any comments that the Minister could make on that would be helpful.
Following on from that, I also note the new category “Costs of preventive measures”, in paragraphs 7.15 and 7.16 of the Explanatory Memorandum, to mitigate the damage that might result from an incident. Here I could envisage a situation where the contamination of a large area could lead to food retailers refusing to take supplies of agricultural produce as a precaution, even though certain products could be said to be uncontaminated. Can the Minister say whether this situation would be compensatable?
The Explanatory Memorandum also explains the concept of an “occurrence” and cites the Magnohard case. Paragraph 7.31 explains that the order makes specific provision to address the point and that,
“the court took an expansive view of the meaning of ‘occurrence’ … The Order … does not adopt as broad an approach”.
Is the Minister able to explain why and what is the effect of this? The memorandum is silent on this point.
Lastly, I have a simpler question. The order requires that nuclear operators assume full responsibility for any breach, that insurance cover is to rise to new levels and that liability is extended to 30 years for claims for personal injury. The Explanatory Memorandum states:
“The Government will, subject to any EU or UK legal requirements such as state aid … fill any gap in cover”.
It is understood that such a gap may exist regarding extension to 30 years for claims for personal injury. Given that personal conditions and physical reactions can take several years to develop and can be severe and costly, will the Minister confirm that the Government will be providing the shortfall of cover in these circumstances? This will be a matter of prime public interest.
The UK has one of the strongest nuclear regulatory regimes in the world. Even as new reactor designs are developed, we can be confident that regulatory regimes will continue to maintain and improve all aspects of safety at nuclear installations. I am happy to approve the order before the Committee today.
Lord Bourne of Aberystwyth
My Lords, I am very grateful to noble Lords who have contributed to this debate and thank them for their general support. I reiterate that the United Kingdom has a very strong record both on nuclear safety and on protection in the event of a nuclear accident. I shall try to deal with the various points that have been raised by noble Lords.
First, I thank the noble Earl, Lord Kinnoull, for his comments and general support. I am most grateful for that. I reiterate that we have very strong performance in the London insurance markets—and, indeed, internationally, as this is not limited to just the United Kingdom—and he is right that the competitive element, not just in the UK but internationally, will help to ensure that standards are even better than before. On the noble Earl’s precise question on Article 37, I confess that I am not nearly as expert as him in these areas of the London closing exchange rate. I shall endeavour to find out and provide him with a more precise answer than the one I am now giving, but I would anticipate that either it is custom and practice that there is a particular exchange rate closure on a particular day or that there is a definition elsewhere that is cross-referred in the order. We are definitely checking that and the team will provide me with an answer. I shall write to the noble Earl and copy in the noble Lord, Lord Grantchester.
I thank the noble Lord, Lord Grantchester, very much for his typically kind and generous comments about signing the Paris agreement. It was indeed a great privilege to be there signing the agreement for the United Kingdom. I am conscious of the amount of hard work that has been done by many people, not just within the United Kingdom, but clearly within the United Kingdom cross-party—and, indeed, beyond party—that made all that possible, building on the success at Paris. The most challenging part of the whole ceremony was avoiding Zimbabwe—sitting straight behind us in the shape of Robert Mugabe. That apart, it was a very enjoyable and significant occasion.
The noble Lord asked whether the signing had a particular impact and when the agreement will come into place. It will come into place when 55 states have ratified, out of the 185 that concluded the agreement in Paris. I should say that 175 countries signed on day one, but they have to go through their internal ratification procedures, so it is 55 states representing 55% of emissions worldwide. As he and other noble Lords will know, the European Union made a joint statement on the position with regard to meeting the targets. Therefore, because the United Kingdom is part of the European Union, our position on ratification is that we will not ratify—and therefore the European Union will not ratify, because it depends on unanimity—until we have agreement on the effort share among the 28 member states. Work on that has begun.
The noble Lord referred to the coverage of the order. As he rightly said, it also covers Hinkley and is designed to cover potential new sites, as I think I said initially. He mentioned Chernobyl. Of course, there have been two major international nuclear incidents, of which Chernobyl was one; Fukushima was the other. The impact of Chernobyl, as he rightly said, was felt in north Wales—as I know—Cumbria and parts of Scotland. The increased protection that we have here will not help in that regard because Ukraine is not a party to this convention. We would be thrown back on to international law because Ukraine is not a party to the other major treaty either, the Vienna treaty, which has a less generous compensation regime.
The noble Lord asked why we are saying that it has to be something “significant” and therefore ruling out incidents that are “insignificant”. This is a fairly common legal practice—a de minimis situation to stop something that is so minor—to prevent vexatious litigation. I think that is the thinking behind it. He also asked whether this would allow claims by the likes of grocery shops, butchers and so on if there were a nuclear incident like Chernobyl in a member state of the convention. I think there would be an issue—I am treading very carefully because the noble Lord, Lord Faulks, is sitting close by—about the remoteness of damage and how far down the chain you can go in such a situation, but I will write to the noble Lord.
Lord Grantchester
I may be able to help the noble Lord, in so far as I think that third-party traders may not be affected. I meant the produce from that area may be affected, even though it could not be said to be contaminated, because of a general ban on products from that area getting into the food supply chain.
Lord Bourne of Aberystwyth
I thank the noble Lord for that clarification. I think there are two issues in relation to that. One is indeed the remoteness: it would be a question of how far down the chain you could go in terms of liability. I did refer the noble Lord and other noble Lords to the fact that this new protection allows for the costs of preventive measures where there is a grave and imminent threat of nuclear damage and consequential compensation. I think that might cover it. The noble Lord raised a specific issue about Magnohard. I will write to him on that to give him a definitive answer.
I am grateful for noble Lords’ help and their broad acceptance and approval of the order. This is a more generous system. It is widely welcomed. It provides added protection and characterises our approach to nuclear energy.
Lord Grantchester
Has the Minister had confirmation from the officials behind him that the Government will be picking up any gaps regarding personal injury claims being extended to 30 years?
Lord Bourne of Aberystwyth
I thank the noble Lord. I had written that down in my notes but I missed it. Yes, we will. I covered that in my introduction, I think. I said that we will fill that gap until the commercial market is able to take over. We will be making a commercial charge to cover that, but we will certainly fill that gap.
I commend the order to the Committee.
Energy Bill [HL]
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Lord Grantchester (Lab)
My Lords, I shall speak to Motion A4, which contains my proposed Amendment 7TD.
Today, once again, your Lordships’ House returns to the Energy Bill. How deeply damaging the actions of the Government have been is evidenced again, at this late stage of the Bill between the two Houses, by the booklet produced with four amendments relating to the Government’s refusal to accept the considered amendment in your Lordships’ House a fortnight ago. All four amendments are targeted once again on the original two clauses relating to onshore wind that the Government inserted into the Bill following the success of the Conservative Party at the general election.
Let us not forget what was said a fortnight ago. Yes, the Conservative Party won the election. Yes, the party had an ambiguous passage in its manifesto regarding the end of subsidies to onshore wind. Whatever may be contended from the passage, the renewables obligation for onshore wind was drawing to a close in any case by 31 March 2017. By aggressively—some may say vindictively—bringing this forward to 18 June 2015, the Conservative Government were, at the stroke of an announcement, creating their own mess. Government must be an orderly process, not dogma followed by diktat.
Lord Cormack (Con)
My Lords, could the noble Lord not just reflect that the Conservative Government were doing no such thing? They were responding to demands and requests from all over the country.
Lord Grantchester
I well understand the words of the noble Lord, but my contention is that the Conservative Party was responding to the voice of UKIP.
Government must be an orderly process, not dogma followed by diktat. Under their own endeavours, following due process and local planning procedures, investors knew where they were and had to complete by 31 March 2017. By drawing the line somewhere with their grace periods, as we were ready to concede last week, the Government have arbitrarily cut a swathe across the many excellent schemes that were drawn up in good faith, with money invested and local backing, all to do their bit to decarbonise the UK’s energy sector.
Of course, any scheme falling on the wrong side of the line will be hurt. The amendments before your Lordships’ House contend that fairness and decency are still not in evidence within the Government’s concessions. The noble and learned Lord, Lord Wallace of Tankerness, may well be right in his assertions under Amendment 7TC to allow Section 36 projects. Certainly, they are very similar to cases won on appeal after 18 June 2015 but refused planning permission prior to 18 June 2015, a situation allowable under the Government’s concessions. I pay tribute to him for the dedication he has committed to getting this situation resolved and I thank him for his introductory remarks today.
My noble friend Lord Foulkes of Cumnock also makes a compelling case for specific projects in Scotland. When noble Lords have received industry briefings covering a wide range of seemingly genuine cases, it underlines the huge damage the Conservative Government have created and unleashed in the renewables sector, especially in Scotland, with many jobs and livelihoods of hard-working farmers and others at stake.
My noble friend Lord Foulkes mentions the case of Sorbie, which, although called in by the Scottish Government, who subsequently withdrew any objection, was granted on appeal in November 2015. Can the Minister say why this is not covered by the concession to allow projects to proceed that were won on appeal? Has the Minister consulted with the Scottish Government on this case? I press the Minister to agree when he comes to reply that this case taken up by my noble friend is allowable.
On Amendment A1, in the name of the noble and learned Lord, Lord Wallace, Amendment 7T is the one in my name which was accepted by your Lordships’ House a fortnight ago. I argued then that this was logically compatible with the concessions already accepted by the Government. The local planning authority had—I stress—indicated relevant planning consents, although written notice was delayed, due to a Section 75 or Section 106 agreement being needed, until after 18 June 2015. This cannot be said to be against Conservative Party policy. It is widely considered that the decision made by a democratically elected local planning committee embodies the principle of giving local people the final say. To deny these cases where written consent was made after 18 June 2015 is to deny and prevent local people having the final say on onshore wind applications due to a pedantic technicality, as the final say had effectively been made prior to that date. The projects have, arguably, a stronger case than those originally refused local consent before 18 June but subsequently won on appeal after that date. I am grateful that these arguments won the backing of your Lordships’ House a fortnight ago.
This amendment was judged to include all the cases—a total of seven—that could be argued to be a minimum of unfair treatments needing to be rectified. They amounted to 90 megawatts. The wider onshore industry has come to a consensus to support this single, narrow extension to the Government’s proposed grace period criteria. It is hugely frustrating to find your Lordships’ fair compromise rejected by the Government in the Commons.
Labour wants to stand up for Scotland. Six of these seven schemes affected by this extension are based in Scotland. The Government have gone against the general consensus to devolve to the Scottish people the power to resolve their own issues by claiming back to the Westminster Parliament the issuing of renewable obligation certificates, which are to be solely under the jurisdiction of the UK Parliament. I thank my noble friend Lady Worthington for her wider remarks regarding the same situation under CFDs.
Labour is standing up for jobs in Scotland. The Minister in the other place, Andrea Leadsom, accused Labour of adding costs to consumer bills through the £10 million extra these schemes, totalling 90 megawatts, would add to consumer bills. However, analysis by the Independent Renewable Energy Generators Group shows that, had the Government accepted this amendment, it would have actually saved consumers over £10 million a year, as renewable technologies other than onshore wind could cost £20 million a year—being more expensive than onshore wind—given the necessity to reform the UK’s electricity system and decarbonise the economy. Instead, these schemes will be mothballed in Scotland and could cost jobs there.
(e) evidence that—
(i) an application for 1990 Act permission or 1997 Act permission was made on or before 18 June 2015 for the station or for additional capacity,
(ii) a grant of planning permission was resolved by the relevant planning authority on or before 18 June 2015,
(iii) planning permission was granted no later than three months after 18 June 2015, and
(iv) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached.””
Energy Bill [HL]
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Lord Grantchester (Lab)
My Lords, I shall speak to Amendment 7AB, tabled in my name. The Energy Bill started in your Lordships’ House shortly after the generally unexpected Conservative majority in the general election last year. It focuses primarily on the setting-up of the Oil and Gas Authority. Into the Bill, the new Conservative Government thrust two new clauses on onshore wind, closing down early, to a date of 18 June, the renewables obligation. Hurriedly, the Government agreed to consider exceptions, as grace periods, to allow schemes to complete as they had travelled a long way through the development stage, in good faith and at considerable cost.
While understanding that the Government have to draw a new line somewhere to give effect to this measure, your Lordships’ House was not content that sufficient logic had been applied and passed the Bill to the Commons with these two clauses omitted from it. These clauses now return to your Lordships’ House but without material amendment having being made in the Commons to these grace period proposals.
Amendment 7AB proposes a logical, consistent, clear, honest and fair extension to the exceptions agreed by the Government. The wider onshore wind industry has come to a consensus and supports this single, narrow extension to the existing renewables grace period criteria. The proposed change is for projects that have achieved democratic local consent for their development at a planning committee on or before 18 June 2015 but received Section 75 in Scotland and Section 106 in England and Wales agreement after that date. At present they are excluded.
This cannot be said to be against Conservative Party policy. It is widely considered that a decision made by a democratically elected local planning committee embodies the principle of giving local people the final say. To deny this extension is to deny and prevent local people having the final say on wind farm applications.
The publication of a resolution to grant permission is considered by both developers and local authorities to be a procedural step and that planning permission is to follow—in effect, agreement is all but made. The industry is not aware of any commercial project that received local community consent at planning committee and was not awarded a written decision because of a failure to complete a Section 75/106 agreement. Continuing to proceed on the basis that planning consent is secured, developers have greater sunk costs at this stage. Formal notice is expected because a resolution by a planning committee is a real and substantial commitment.
The lack of logic in the Government’s position arises from the concession they have granted to projects refused permission at 18 June but subsequently agreed on appeal. Projects refused on 18 June, although overturned, can qualify, whereas agreements resolved on 18 June and subsequently fulfilled cannot. This is a bizarre interpretation. The legal advice that the industry has received categorically states that there is as much “legal right” to a planning permission resolved at local level as there is to a permission subsequently granted on appeal following a refusal by a planning committee. As I have said, the Government are content to allow these successful appeals to proceed.
Grace period concessions for anomalies and complexities around the criteria should allow for projects which have local consent but missed the cut-off date due to the time needed for a planning authority to complete a Section 75/106 agreement and issue a decision notice. It would comply with Conservative policy that locally approved wind farms be enabled to go ahead.
To allow this concession will not open—I will not say floodgates—a gale of projects coming forward. I understand the industry has put forward a list of projects that received resolution for approval but where formal permission was issued after 18 June. The list totals seven projects—six in Scotland and one in England. This totals just under 90 megawatts. To put this into context, 90 megawatts would power 50,000 households—a mere fifth of 1% of more than 26 million households and about 1% of the present onshore wind capacity of over 8,500 megawatts. Surely the Minister cannot contend this to be a major concession.
As to the amendments tabled by the noble and learned Lord, Lord Wallace of Tankerness, he has worked tirelessly on trying to get a fair outcome for projects started in good faith by people who have committed substantial time and assets to bring forward onshore wind developments—which, after all, will be the least-cost technology providing low-carbon power. He has worked extensively, engaging with industry and the Government, to get a resolution that does the decent thing by these developers.
This measure closing down the renewable obligation has been one of the many taken by this Government that has done severe damage to investor confidence and led to a Commons departmental committee issuing a report on investor confidence in the UK energy sector.
I do not doubt that the amendments the noble and learned Lord has tabled are thought through with good intentions. However, I have targeted this side of the House’s focus specifically on the very minimum that could be considered reasonable, given that onshore wind developments are likely to be coming to an end in any case. His Amendment 7X, in part, supports my case. Yes, we want to be fair where we can, considering that the provision can be said to be in the Conservative Party manifesto, and the Commons has expressed its decision. We ask the Government to think again on the small measure I propose, at the very least, and show some consistency
I thank my noble friend Lord Hain for bringing this situation and his amendment to the attention of the House today. It allows me to underline just how destructive the Government’s arbitrary cut-off date of projects has been. A great amount of uncertainty now exists throughout the renewables sector and I urge the Minister and his department to open a dialogue with their Welsh counterparts to resolve this anomaly as quickly as possible.
I turn now to the amendments in the name of my noble friend Lord Foulkes of Cumnock and supported by my noble friend Lady Liddell and others. My noble friend’s Amendment 7Y, in part, also supports the case that I have made. Unfortunately, he includes other provisions that go beyond the small, narrow extension to the Government’s concessions. The fact that six of the seven projects arising from this extension are in Scotland shows the importance of wind power for jobs and enterprise there. He has identified the effect on schemes locally in Scotland in his remarks. It is unfortunate that the Government have brought back the renewables obligation scheme to be solely under the reserve of the Westminster Parliament by withdrawing it from being a devolved matter.
From the amendments that have come forward, I consider it reasonable to press ahead with the amendments that I propose.
Lord Bourne of Aberystwyth
My Lords, we have had a wide-ranging debate on the opposition amendments which I shall try to cover in my response. I shall take the speeches in the order in which they were made.
I acknowledge the great efforts that have been made by the noble and learned Lord, Lord Wallace, the noble Lords, Lord Foulkes, Lord Grantchester and Lord Hain, and the noble Earl, Lord Lindsay, and I thank them for their comprehensive suggestions and the detailed drafting of the amendments. I also thank them for their hard work and forensic skill—particularly that of the noble and learned Lord, Lord Wallace—in putting them forward.
I understand the points that are being made. There is, by and large, a doctrinal difference in attitudes to onshore wind between the Opposition and the Government. Hence it was in our manifesto and not in those of other parties. That should be our starting point.
I should make one thing clear that I hope I do not need to make clear. There were many references to my right honourable friend the Secretary of State for Scotland and projects being in his constituency and I hope no one was suggesting that there should be special treatment in that regard. Let me make it clear that there will not be—nor would the right honourable member for Dumfriesshire, Clydesdale and Tweeddale expect such.
I thank the noble Lord, Lord Foulkes, for his unusual, unprecedented and almost unique accolades. We go back a long way on devolution and, as he knows, I have the greatest respect for him. I am about to damage him with his Benches in the same way as he damaged me with mine but I thank him for his contribution. I contest the point he is making about these being mere technicalities—they are much more than that.
As noble Lords will appreciate, I cannot respond to all of the detailed projects because I do not have knowledge of every single one. Of those I do, I will endeavour to say what I can on them, but I cannot specifically carry the knowledge of where we are on them all. I certainly would encourage noble Lords and the developers to be in touch with the department because officials are keen to engage, to be helpful, and to give clarity in relation to these different projects.
I pay tribute to the noble Lord, who I know makes great efforts on behalf of his part of Scotland and the area he used to represent, and he has put forward a powerful case. I shall pick up on a point made by the noble Baroness, Lady Quin, and say that of course there would be an impact on deployment. Obviously if we alter the law it will not be just in relation to Scotland, it will apply to the whole of the country. It will not be laser-like on a particular area, so it will increase deployment, as the noble Lord, Lord Grantchester, indicated in his remarks. His figure was higher than that suggested by my noble friend Lord Lindsay. Further, as has been indicated, we have undertaken extensive consultation.
I turn to the points made by the noble Lord, Lord Hain, and I thank him very much indeed for making me aware of what he was going to say in relation to Llynfi Afan in the Afan Valley and the Gamesa project there. As he knows, DECC officials have already been engaged with the developer and they are happy to continue to do that. I am also certainly happy to write to Gamesa, as he indicated. From what I gather, this is not a difficulty with the Welsh Government, as has just been suggested. I do not think that that is the case at all. This project has planning permission so we will certainly take a close look at it and clarify the position. If I can help in that regard, of course I will.
I turn to the points made by the noble and learned Lord, Lord Hardie, on the issue of the grid and radar delay as set out in the letter that we sent to him. If I can, I will get officials to contact him again in case there is a lack of clarity on that or if there is an ambiguity; I do not think there is. I know that it is an issue that matters to other noble Lords as well.
I turn to the noble and learned Lord, Lord Wallace, who raised many points with forensic skill, as he does. As he has been around the legal block a bit he will know that cut-off dates are always a problem. It can be suggested that they are capricious or arbitrary, but virtually all legislation has cut-off points in it, and there will always be someone on the other side of them who you wish you could help. But in reality a cut-off point has to be set, and that is what we have done. I can understand that it does not appeal to some people, but of course it is arbitrary only in the sense that any date is arbitrary, so even if we moved in the way he has suggested, there would be other projects that would fall just the other side of the line.
I think that the noble and learned Lord’s ultimate conclusion was that there is no hybridity in this Bill. If that was his conclusion, I agree with him; this is not an issue about hybridity. Scottish developers are subject to Scottish planning law and those in England and Wales are subject to English and Welsh planning law. It is not unusual for differences in law to arise on either side of the border these days, and indeed it is now happening more and more in relation to Wales as well, producing different practical results. I do not think that that causes hybridity unless a specific private interest is affected, but I do not see that being the case here. So, with regret, I do not think that I can move on any of the points he has raised. We have made our position very clear.
Perhaps I may just say in response to some of the matters that have been brought up in relation to Scotland—I understand the particular interest in Scotland because of the massive deployment there; it has benefited massively, there is no doubt about that—that it was not a significant issue in the House of Commons. I did not think it was and so I double-checked it. That is not to say that it is not a matter that needs to be addressed, but it is interesting to note that it did not seem to be a massive issue in another place.
The noble Baroness, Lady Worthington, set out a position in relation to CFDs and the Scottish Government. We have set the rules for CFDs and we have said that they will not be considered for the round of CFDs in this year, but I am very willing to ensure that we engage with the Scottish Government, as we do on energy issues, to see if there is anything that we can do in relation to future CFD rounds. I will take that away and look at it.
The noble and learned Lord, Lord Wallace, raised an issue about what he saw as the improved clarity set out in the letter that I sent to him. That is the correct position, and we will ensure that the letter is circulated to noble Lords who have participated in the debate and we will make use of it too if it is helpful to developers, as indeed we do. The correct position is set out in it, so I will be happy to do that.
The noble Lord, Lord Grantchester, spoke kindly about our unexpected election victory as he saw it, and he also said quite rightly, for which I thank him, that one has to draw the line somewhere. That is a very realistic position. We can take different views as to where the line should be drawn. He talked about democratic control, but I would make the point that this does not stop wind farms deploying onshore, it ends the subsidy. People need to grasp that. The position is that we do not want to carry on subsidising where there is no continued need for subsidy. That is the basis on which we are moving and one of the prime reasons for this provision.
Lord Grantchester
(e) evidence that—
(i) an application for 1990 Act permission or 1997 Act permission was made on or before 18 June 2015 for the station or for additional capacity,
(ii) a grant of planning permission was resolved by the relevant planning authority on or before 18 June 2015,
(iii) planning permission was granted after 18 June 2015, and
(iv) any conditions as to the time period within which the development to which the permission relates must be begun have not been breached.”
Lord Grantchester
As an amendment to the Motion that this House do agree with the Commons in their Amendment 9, at end insert “, and do propose Amendments 9A to 9D in lieu of the words so left out of the Bill”.
Review of calculation of net UK carbon account
(1) The Secretary of State must carry out a review of whether it is appropriate for the calculation of the net UK carbon account for the 2028—2032 budgetary period, and subsequent budgetary periods, to take into account the crediting and debiting of carbon units as a result of the operation of—
(a) the European Union Emissions Trading Scheme, or
(b) any amendment of, or replacement for, that scheme that the Secretary of State considers may have effect for the budgetary periods to which the review relates.
(2) When carrying out the review the Secretary of State must take into account—
(a) any representations made by the other national authorities,
(b) scientific knowledge about climate change,
(c) technology relevant to climate change,
(d) economic circumstances,
(e) fiscal circumstances,
(f) social circumstances,
(g) energy policy, and
(h) circumstances at European and international level.
(3) Nothing in subsection (2) is to be read as restricting the matters that the Secretary of State may take into account.
(4) The review must be published, in such manner as the Secretary of State considers appropriate, no later than 31 December 2016.
(5) In this section “European Union Emissions Trading Scheme” means the scheme established under Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, as implemented by the Greenhouse Gas Emissions Trading Scheme Regulations 2012 (S.I. 2012/3038).
(6) Expressions used in this section and in Part 1 of the Climate Change Act 2008 have the same meanings as in that Part.”
Lord Grantchester
My Lords, I will speak to Amendments 9A to 9D in my name, regarding the UK carbon account. A clause on carbon accounting was added to the Bill under consideration in your Lordships’ House before passing to the other place. This was reversed and the clause deleted by votes on Report in the other place. I had thought to retable the amendment on the Bill’s return to your Lordship’s House. However, in view of the fact that this would have been opposed by the Government, consideration has been given to how best to present this long-term issue so that a serious assessment would be made of it.
There is no doubt that climate change is the single most important long-term threat to be faced across the world. Its importance, and the need to get positive responses from the world’s governments, was highlighted at the Paris conference. Yet there is a weakness in the way carbon budgets are assessed and, therefore, how measures to combat climate change will be implemented. If the UK is to continue to be at the forefront of global efforts to reduce greenhouse gas emissions, the UK needs carbon budgets that are clear and certain and which drive emissions reductions in all sectors of the economy. At present, they do not meet this standard, as they can be misleading about what emissions are covered. They impose targets in the traded sector of the EU emissions trading scheme, which mean very little, and in the non-traded sector, which are subject to arbitrary change.
In June this year, the Government must set the UK’s fifth carbon budget for emissions for the years 2028 to 2032. These proposed new clauses ask the Government to commit to a review to reassess the accounting rules and to critically examine the issue, especially as the Committee on Climate Change has commented that it will provide new advice on the appropriate level of the fifth carbon budget should the rules be changed to take account of the improvements which Labour has proposed.
Currently, the carbon accounting regulations allow the Government to ignore emissions from the electricity sector and heavy industry, which are covered by the EU ETS, while determining whether the carbon budgets have been met. This makes the Government responsible for only half the carbon budgets: those residual parts not under the scope of the EU ETS, such as transport and heat. The Committee on Climate Change has expressed its dissatisfaction with the current accounting rules. The UK’s carbon budgets fail to provide a framework that offers investors confidence in the UK power sector that the necessary measures to decarbonise will be put in place.
The amendment proposes that the Government now seriously undertake their own assessment and report back by the end of this year. It is drafted to bring forward views that need to be taken into account from as wide an audience as possible.
Finally, Amendment 12A is consequential and merely amends the Long Title to include this in the provisions of the Bill. I beg to move.
Lord Bourne of Aberystwyth
It is perfectly in order for me to have discussions with other Members. I have indicated that there is some sympathy for looking at the accounting principles—but not, as I indicated in my speech, at this time. I have indicated that the timetable is unrealistic. I hope that in the future we can look at these issues, but the Government do not feel it is timely to do it in the way suggested. That is something that has been shared with other Members: there is no great secrecy about that.
Lord Grantchester
I thank all noble Lords who have spoken this afternoon and thank the Minister for the considered way he has responded to issues. On reflection, following the wider debate, I conclude it would be best to press the Government more strongly to be more certain about the outcome of the review. I will therefore not press the amendment in my name, but instead support the amendment in the name of my noble friend Lady Worthington. She is a recognised expert on climate change and a very forceful advocate that the UK must take strong, decisive action to reduce emissions to mitigate its effects.
Renewables Obligation Closure Etc. (Amendment) Order 2016
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Lord Teverson (LD)
My Lords, I will be extremely brief. Perhaps I may reply to the noble Baroness, Lady Byford—whose expertise in all these areas I admire greatly —as well as comment on one of the Minister’s remarks.
First, these Benches absolutely want to reduce renewable tariffs and subsidies as the costs come down. That is a fundamental point. We have a track record of doing that, and that is what we do. However, we are not into executing a particular technology. The way that this has worked is that the Government—interestingly, a Conservative Government—have been moving down the road of choosing technologies. The whole strategy of the energy market reform was to move gradually to a more market-based, less technology-specific situation as time went on—but we are doing the opposite.
We absolutely agree on the levy control framework and lowering costs to the consumer, but what have the Government decided to do? They have decided to invest in the two most expensive low-carbon technologies, offshore wind and nuclear, both of which are hugely more expensive than onshore wind and solar, the technologies that cost the least. So I say to both the Minister and the noble Baroness that if that is what the Government want, they need to change the strategy. They can achieve another strategy at the same time as meeting the carbon emissions target and lowering costs to consumers. That is the way it works—it is arithmetic. So, please, let us go for that.
I return very briefly to the issue of investor confidence. As noble Lords will know, the Select Committee on Energy and Climate Change in the other place recently looked at investor confidence in the energy sector. I hate round numbers, because one often does not believe them, but DECC itself estimates that we need some £100 billion of investment up to 2020, not just in generation but in the distribution system as well. As my noble friend said, to achieve that we need real investor confidence. What was the Select Committee’s conclusion? It said:
“It is clear that the confidence of many investors has been dented by the Government’s actions since the election. The sudden, unexpected nature of many of the announcements has unsettled investors who had been used to receiving more forewarning of policy changes. There is a high risk that a hiatus in new developments has been created, pending further clarity on short- and longer-term policy. The Government removed support for renewables due to concerns about costs for consumers. But they have not set out the evidence base for this conclusion or for other decisions, and engagement with the investment community has been poor”.
That is an all-party conclusion in a report on the Government’s action in this area, and the conclusion is to condemn it. The need for investment is huge. We need to make sure that investment is right and that subsidies are low—and we are absolutely for reducing subsidies—but it has led to a hiatus. We no longer have carbon capture and storage or appear to have nuclear, and as far as I can see we do not have a workable strategy to bring in gas—so we have a huge energy problem. We need those investors but we have thrown away their confidence, and through the decisions we have made on renewable energy, by picking expensive winners, we have ensured higher energy costs for the future.
Lord Grantchester (Lab)
My Lords, it is becoming an all too familiar situation on energy policy that once more there is another order before your Lordships’ House that severely limits the UK’s renewables industry, the mishandling of which, once more, has left confidence among investors in the sector further damaged.
The draft instrument today contains severe restrictions on the deployment of solar schemes of 5 megawatts or less under the RO regime. For solar it is another blow on top of the 65% cut to the rate of feed-in tariffs that your Lordships debated barely a month ago. As was said then, in the wake of the Paris agreement on climate change, the Government are sending out a terrible mixed message with another sudden and severe policy change, risking cutting off the sector at its knees rather than supporting its gradual glide path to being subsidy-free.
Today we will join the noble Baroness, Lady Featherstone, in her amendment to the Motion on the order. She is of course correct in her appraisals. Today the Government are not being technology-neutral as regards solar power. Having closed the RO to schemes above 5 megawatts on 31 March 2015, the extension to close the RO to 5 megawatt schemes and below, yet without access to the contracts for difference auction system, means that solar projects above 1 megawatt are now in effect without support, with no route to market.
Electricity Supplier Payments (Amendment) Regulations 2016
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The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, this instrument amends regulations concerning the contracts for difference scheme and the capacity market. As noble Lords will be aware, these schemes were introduced as part of the electricity market reform programme introduced in the previous Parliament.
Specifically, a series of technical amendments will be made to the CFD supplier obligation, which is levied on all licensed electricity suppliers in Great Britain to meet the costs of CFDs, in order to improve its efficiency and transparency. Separately, the instrument will amend the levies that fund the bodies responsible for managing CFD contracts and for managing settlement under the capacity market, which I shall outline to noble Lords now.
The first of these schemes, contracts for difference, or CFDs, encourages investment in low-carbon generation at a lower cost of capital due to the long-term price stabilisation provided under the contracts, which reduce overall costs to consumers of transitioning to a low-carbon generation mix. Then, through the capacity market, regular payments are provided in return for reliable capacity being available when needed, to ensure that sufficient capacity is available to meet demand. A fundamental aspect of both schemes is the competitive auction process for awarding contracts, which drives down costs to consumers.
As noble Lords may be aware, the first CFD allocation round in October 2014 resulted in 25 renewable generation projects being awarded CFDs at a significantly lower cost than would have been achieved through the renewables obligation scheme, which is being phased out. The capacity market auctions were held in 2014 and 2015, with the latest auction securing 46 gigawatts of capacity at a price of £18 per kilowatt per year. A recent transitional auction for demand-side response was also held earlier this year.
Noble Lords will have seen that the Government made an announcement yesterday of a number of changes to the capacity market framework to ensure that it remains fit for purpose to meet our security of supply needs, including bringing forward delivery by holding a new early auction for delivery in winter 2017-18. We have now launched a consultation on these changes, and in due course will be taking final decisions and will present revised regulations.
However, the regulations we are considering today have a different purpose, and in them the Government are simply looking to make several minor amendments to the payment arrangements in order to improve the efficiency with which CFD costs are recovered from electricity suppliers, which will ultimately reduce costs to consumers, and to set the rates for the operational levies relating to both schemes. In order to implement these amendments, three sets of regulations will need to be amended by this instrument. Subject to the will of Parliament, these changes are due to come into force by 1 April 2016.
Before we commence the debate, I will describe these amendments briefly. First, the Electricity Supplier Payments (Amendments) Regulations 2016 amend the instrument that established the CFD supplier obligation mechanism in order to improve its efficiency. As I outlined earlier, the CFD supplier obligation is levied on all licensed electricity suppliers in Great Britain to meet the costs of CFDs. It is set on a quarterly basis by the Low Carbon Contracts Company, a government-owned company that acts as the counterparty to CFD contracts. The supplier obligation is comprised of a levy which is paid on every unit of supply, and a reserve amount. The levy and reserve amount are calculated based on forecasts of payments to CFD generators. These supplier payments are then reconciled against actual payments following the end of every quarter.
This instrument makes a number of minor and technical amendments to improve the efficiency and transparency of the supplier obligation. They are designed to minimise costs both to suppliers and ultimately to consumers. The most significant of these amendments amend, first, the calculation of the levy that is paid by electricity suppliers so that it is a better estimate of suppliers’ actual liabilities. Secondly, they allow this levy to be reduced without notice in circumstances where the Low Carbon Contracts Company considers that electricity suppliers are likely to pay significantly more than they need to. Thirdly, they improve the transparency of CFD costs in the future by requiring the Low Carbon Contracts Company to forecast CFD costs for at least 12 months ahead and to publish the date that each generator is expected to start receiving CFD payments.
These changes were the subject of a public consultation and received a largely favourable response. We estimate that when combined with further regulations that the Government intend to lay in due course, they will reduce the costs to consumers of CFDs by approximately £38 million over the period 2016 to 2020. The Government intend to lay further regulations in due course as not all of the proposals consulted on are being implemented by this instrument due to cost and their impact on the CFD settlement system.
The second objective to be delivered through this instrument is to set a revised operational cost levy for the Low Carbon Contracts Company and to set a revised settlement costs levy for the Electricity Settlements Company, the company responsible for transactions relating to the capacity market. The increases to the budgets of both companies reflect the operational requirements and objectives of the Low Carbon Contracts Company and the Electricity Settlements Company in 2016-17. Both levies were subject to public consultation, allowing the opportunity for scrutiny of the key assumptions in the budgets and, importantly, to ensure that they continue to represent value for money for consumers.
Finally, before we start the debate, I would like to assure noble Lords that the Government will continue to evaluate and monitor the measures introduced under electricity market reform to ensure that they remain effective and continue to represent value for money. I beg to move.
Lord Grantchester (Lab)
I thank the Minister for his introduction to the regulations. As he rightly says, they are mostly technical in nature and do not impact on policy to any large degree. The ESO regulations around the CFD counterparty to raise funds are largely operational and, quite understandably, are likely to be subject to amendment through operational experience in order to improve efficiency and increase transparency with a view to reducing the costs of the scheme for suppliers and their consumers.
All the amendments included in the regulations appear sensible and come with a very large acceptance on the part of stakeholders, both through consultation responses and through discussions at a stakeholder event in October last year. The main amendments are largely financial and will lead to changes between the balance of funding moving more towards the interim levy and away from the reserve payments. Notice periods for changing the interim levy rate will become more flexible, deadlines will become more helpful, and generally information, data and recognition of commercial sensitivities will improve the scheme’s operations. Within the structure of the scheme, that is commendable.
However, seeing the details of its workings, the CFD counterparty mechanism struck me as somewhat cumbersome. While I am sure that there are unlikely to be major changes to the structure, nevertheless the Minister might enlighten the Committee about why the scheme is set up with quarterly contributions to reserve funds and a yearly operational costs levy for the capacity market settlement body.
I understand the reasoning behind setting up the CFD counterparty in relation to Treasury implications and as the mechanism through which CFDs will be administered and paid, but I understand that suppliers strongly urged the Government to allow the CFD counterparty to operate a working capital model for funding cash flow and building reserves as a more commercial way to operate. Surplus levies could then be rolled into subsequent levy periods to smooth out volatility of payment. Can the Minister confirm whether reserves and operational cash flow costs are to be reconciled to suppliers every year and balanced?
In the reconsiderations of the scheme, did the Minister’s department put any thought into whether working capital arrangements at a marginal cost to public borrowing requirements could be less cumbersome and less costly to operate? In trying to widen and increase the pool of supply participants, are the Government confident that the costs on small independent suppliers are not constraining their participation? I am sure that the Minister will confirm that the CFD counterparty body will be audited, but are there other operational cost checks on the operation of the body?
Perhaps I may widen my remarks beyond the supplier obligation to CFDs in general for a moment. I take the opportunity today to ask the Minister whether the Government will set any technology requirements or specific exclusions for participants in the next auction. I am thinking here of onshore wind and solar technologies. Can the Minister confirm that they will still be allowed to participate so that these technologies can develop and generators will have a continuing route to market for returns on their investments? With the challenge of climate change and the changes required of the UK energy market, we wish to be technology neutral.
Lord Deben (Con)
My Lords, I declare an interest as chairman of the Committee on Climate Change, and I want to comment on these documents.
It is extremely helpful to have had the Minister’s clear explanation. Of course, congratulating a Minister means that you are then going to use the word “but”, and that I intend to do. One problem is that the public find all these matters impenetrable. I recognise that they are technically very complex, but I ask the Minister to seek better ways of explaining the system to a wider range of people. I spend a lot of my time doing that, and I hope that I get it right, but one of our difficulties in trying to convince people of the battle that we face on climate change is that many of the arguments are not easy to understand. Therefore, a constant desire to try to explain what we are doing and how it works in language which normal people can understand is very important. I do not expect, and I am sure that no one here would say, that the statutory instruments here will advance that cause. However, I do not want us to miss the opportunity of saying that what the Minister has so clearly said really needs to be said more widely, because there are many for whom difficulty arises simply because they do not understand.
Oil and Gas: UK Continental Shelf
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Lord Grantchester (Lab)
My Lords, when Sir Ian Wood published his recommendations two years ago, oil was indeed trading at a much higher price than it is today, with the price now dipping to below $30 a barrel. Will the Minister inform the House what effect the Government think this has had on the strength of the recommendation of the Wood review report?
Lord Bourne of Aberystwyth
My Lords, the noble Lord will be aware that the Government have given high priority to ensuring that the recommendations of the Wood report are taken through into law. That is now happening through the Energy Bill, as the noble Lord is aware, so I think that indicates our clear commitment. He is absolutely right; this is a global problem but we are doing what we can domestically to ensure that the UK industry has all the support necessary.
Infrastructure Planning (Onshore Wind Generating Stations) Order 2016
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Lord Teverson (LD)
My Lords, I thank the Minister for his brief introduction. I fear that I will show a lot of my own personal ignorance about the subject in my questions because, as he said, it is one part of a jigsaw; the question is how it fits in.
Perhaps I am being naive but I expect the Explanatory Memorandum to be fairly objective. Paragraph 7.1 states:
“Local communities are often opposed to onshore wind farm development, arguing that they have direct noise and detrimental impacts on their communities”.
Yes, it is true to a degree that some are opposed but, on the whole, they are not. It is usually a vociferous number of people who object to them and make planners’ and local councillors’ lives very difficult. It is up to them to stand up to that sort of pressure and make the right decision. That does not represent the majority.
Paragraph 7.3 states:
“Such reviews help to strike the right balance between keeping consumers’ bills as low as possible, while reducing emissions in the most cost effective way and ensuring public acceptability of particular technologies”.
As we know, wind power, as shown by the ROC rates and everything else, is one of the cheapest renewable sources of energy, so I am not sure how that paragraph fits in.
Part 10 of the Explanatory Memorandum concerns the impact. I have not read the impact assessment: I think that there was a problem in that it originally referred to the wrong one, but the memorandum states:
“There is no impact on business, charities … voluntary bodies”,
or,
“the public sector”.
Then what is the point of it? I can see the point, but if there is no impact whatsoever, that is rather strange.
I actually welcome the order in principle. The Minister is absolutely right: local communities should have much more say over their local areas and decisions such as these. Placing them back into the local authority planning process is the right thing to do, so I welcome that.
What I want to understand—this is where my ignorance comes out—is how it interacts with the National Planning Policy Framework, which specifically uses the phrase “a golden thread” of sustainable development: that there should be acceptance that schemes should go ahead if they promote sustainable development. Does that still apply when local authority planning decisions are questioned further up the decision tree on appeal?
Paragraph 97 of the National Planning Policy Framework states:
“To help increase the use and supply of renewable and low carbon energy, local planning authorities should recognise the responsibility on all communities to contribute to energy generation from renewable or low carbon sources”.
Then it goes through a list of bullet points of things they ought to do. How do those obligations on local planning authorities tie in with this secondary legislation and the other areas that the Minister mentioned around it?
The Explanatory Memorandum also says that local authorities’ planners have to take account of neighbourhood plans or local plans. I want to understand whether that is a “both” or an “either/or”, because a lot of local plans have renewable energy and wind farms in them. What happens if this is not included in the neighbourhood plan but is included in a local plan, for instance? I suspect that that will often be the case given that neighbourhood plans still do not cover large proportions of areas that local planning committees take an interest in.
I have a couple of other quick things for the Minister. Five-megawatt wind farms are pretty large, and I would be interested to know how many applications for such wind farms there have been over the last five years or so. I do not need a specific answer but perhaps the Minister could give an idea of the kind of scale we are talking about. Also, are there other areas where local authorities do not have control over less than 30 megawatts? A number of parallels have been made with shale gas—which I am not against—where there is a big push the other way in terms of trying to put pressure on local authorities to give permission or to call the decisions in if they do not. I would be interested to hear how the Minister reconciles the two opposite directions that energy policy seems to be going in at present.
Lord Grantchester (Lab)
I thank the Minister for his explanation to the Committee today. The order seems to be primarily technical in that it changes the planning consent process from one where the Secretary of State is included to one where the local planning authorities make the decisions on an application concerning onshore wind-generating stations over 50 megawatts—that is, from the Planning Act 2008 to the Town and Country Planning Act 1990. This is in the context of the Conservative Party’s manifesto for the 2015 election and will make the procedure for consent for stations that generate above 50 megawatts consistent with that governing those that generate less than 50 megawatts. Perhaps to underline the simple policy objective sought here, can the Minister confirm that, apart from changing the ultimate determining authority from the Secretary of State to local planning authorities, no other feature will be affected by this change and that there is no other difference between the two processes for onshore generating stations above and below 50 megawatts?
We are content to support this SI. Indeed, we support the right of local authorities to decide onshore wind power applications so that they can decide on the case made in terms of them supporting jobs, providing energy stability, cutting energy bills and contributing to action to mitigate possible global warming. This change is also reflected in Clause 79 of the Energy Bill, which is currently undergoing scrutiny in the other place. During consideration of the Bill, it has been noted that the Conservative Government judge local authorities effective to rule on onshore wind applications, yet will not allow local authorities to assess applications regarding fracking. We consider that communities should be allowed a pertinent voice in both situations.
Your Lordships’ Secondary Legislation Scrutiny Committee drew attention to the lack of a wider impact assessment on the UK’s generating power. The noble Lord, Lord Teverson, drew attention to the wider impact on the national infrastructure framework. I support him in asking the Minister whether he will report to Parliament six months after the passage of the present Energy Bill to update Parliament on the effect of this SI, especially in relation to the carbon impact and the Energy Bill.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords for their contributions and for their general support. I turn first to questions posed by the noble Lord, Lord Teverson, on the Explanatory Memorandum. He is absolutely right that with this policy we are emphasising the importance of the local say for communities—that is the predominant factor in this legislation. The noble Lord quoted from the Explanatory Memorandum and suggested that it was tilted in favour of one particular view of onshore wind. I recognise, as has become very apparent from the Energy Bill and contributions in other debates, that opinions vary on onshore wind.