Ozone-Depleting Substances and Fluorinated Greenhouse Gases (Amendment etc.) (EU Exit) Regulations 2019

Debate between Lord Grantchester and Baroness Neville-Rolfe

Wednesday 27th February 2019 Grand Committee

[Baroness Neville-Rolfe (Con)]

I join the noble Baroness in congratulating Defra, both on this regulation and on the very clear Explanatory Memorandum. I know from the useful briefing Defra gave me last summer that it was getting ahead very well with the EU exit regulations, and it is good to see them coming through.

I also wanted to look backwards. In the early 1980s, I was a junior civil servant in what is now Defra, and responsible for research and development in a small way. I went to an interdepartmental meeting to discuss various proposed cuts, one of which was to the British Antarctic Survey. I remember arguing, contrary to my brief, that we should continue to support the survey because I believed in fundamental research and that sometimes you did not just do research near to the final product. Of course, later in my career, history showed that the survey was very important. That is a story I like to tell to youngsters in schools because it shows the importance of R&D.

I was pleased that the Minister described the work Defra had done to look at the impact on business of this regulation. I have just one point of clarification. She mentioned that 100 businesses were being regulated and then said that the estimate was that the cost—I think of the extra administrative system that we have had to bring in because of the transfer—would be £60,000 in aggregate for 50 to 60 companies. I could not understand the difference between the 100 companies that seemed to be affected by the proposal and the cost figure, which, if that is the only cost, seems modest for this important area.

[Lord Grantchester (Lab)]

I thank the Minister for her introduction to the order before the Committee and for undertaking prior discussions with her team. As she said, this order, while not specifically made to cover the scenario where the UK leaves the EU without a deal, nevertheless makes provision for a no-deal exit with the repatriation of authorising authorities and regulators. It also corrects a series of deficiencies in retained EU law on ozone-depleting substances under Part 2 and fluorinated greenhouse gases under Part 3. The order therefore maintains the 79% cut on a UK basis, as for example in F-gases between 2015 and 2030, as the Minister stated, by steadily reducing quotas for companies that operate in this field. The order maintains that it will continue.

Although many of the changes introduced through this order on the transfer of powers currently exercised in Europe to the UK are technical in nature, other minor noteworthy changes could be construed as shifts in policy. Labour certainly does not challenge the order and will approve it today.

Although the order was laid in December and subsequently relaid on 6 February following exchanges with the Joint Committee on Statutory Instruments, I understand that it is essentially the same document. The order has not been flagged by your Lordships’ Secondary Legislation Scrutiny Committee, but it is worth recognising that progress has been made in several areas in which there have been concerns and to which the Minister drew attention. However, there are a few questions around these outcomes, which I will highlight for the Minister.

It is good to note that the UK Government and the devolved Administrations have agreed to the repatriation on the basis of a single UK-wide quota. This quota, following dialogue with the relevant companies on how much they place in the UK market, will be set at 12%, roughly aligned with the size of the UK’s population relative to the EU. That the UK’s usage aligns in this way is certainly interesting. Under paragraph 2.8 of the draft Explanatory Memorandum, it is agreed between the Government and the devolved Administrations that, should an Administration wish to diverge from the protocol in the future, they must consult the others before doing so. Have the Government consulted the Commission on whether the EU has also agreed to the 12% and on whether, should the UK in the future wish to diverge in any way from the process agreed in the 1987 Montreal Protocol, it will consult with the EU and others before undertaking any divergence?

Paragraph 6.2 of the Explanatory Memorandum states that the Environment Act 1995 will be amended to include a charging regime under the authority of the Environment Agency on a UK-wide basis. I certainly join others in saying that good progress is being made, with this having happened, but I note that these changes are on a cost recovery basis. Can the Minister confirm, because it was in some divergence to the £60,000 figure she gave in her introductory remarks, that the total amount costed in the other place was estimated at £500,000 per annum for the administrative costs? I understand that the Government have put this out to consultation regarding cost recovery, so I have a few questions for the Minister regarding the scope of that consultation.

Paragraph 6.2 also states that the EU allocation mechanisms for quotas and the format for company reports will not be replicated in the UK, as different IT systems will be established here. I understand that this IT system has also been completed, and I congratulate the Government on that achievement as well; while not wishing to appear churlish, let us hope that it will continue to operate successfully under stress.

Returning to costs and charters, I understand that this set-up cost has been financed through the Government. The Minister in the other place, Dr Coffey, stated:

“Future charges will be for the overall regulation system”.—[Official Report, Commons, Eighth Delegated Legislation Committee, 26/2/19; col. 8.]


Will the Minister clarify what that means for cost recovery? Will there be an element of repayment of capital included in running cost recovery of fees from operating companies? That is, will companies ultimately be charged for this set-up cost?

The Government will also continue paying into the Montreal Protocol assistance fund to help developing nations across the world move to less harmful gases. Can the Minister confirm whether industry will be re-charged any of these contributions? It would be good to understand whether the Government have included either of these potential costs as possible cost recovery items out for consultation.

The final concern in this regard is about impact assessment. While the Government are satisfied that the cost is de minimis, as the Minister explained, have they assessed whether the new charges could impact on companies’ costs in a way that will affect whether they continue to operate in the UK? Several companies operate across the UK and in the EU, and their quotas will come from both in future. Are the Government satisfied that any disruption will not detrimentally impact on these companies continuing in the UK in such a way that the Government may have to use their new powers of increasing quotas to make up for a closure of any company’s shortfall to maintain the UK in a steady state? In their dialogue with companies when undertaking these regulations, can the Government confirm that companies operating across borders are generally satisfied with the outcome? One element behind this question on reciprocity—mentioned by the noble Baroness, Lady Miller—is whether UK trading certificates and authorisations will be accepted in the EU after exit in the same way, replicating the recognition of EU certificates in the UK.

I am sure that all contributors to this order will agree that these regulations are vital to the safeguarding of the environment across the world. Can the Minister confirm that, despite abiding by the increasing quota restrictions since 2015, these have been effective in reducing emissions? That is, are they working as envisaged, without loopholes appearing such as displacements on to other gases not specified in the protocols?

While these regulations appear technical, they will certainly be important to companies operating in the UK and the EU, especially given the lack of coherent data on how they may be reapportioned in individual quotas. Can the Minister confirm that, through the Government’s discussions, all the operators essentially agree with the regulations and their individual outcomes, and that any potential disputes can be reconciled via due process through the Environment Agency?

Contracts for Difference (Allocation) (Excluded Sites) Amendment Regulations 2016

Debate between Lord Grantchester and Baroness Neville-Rolfe

Tuesday 22nd November 2016 Lords Chamber

[Lord Grantchester (Lab)]

My Lords, I thank the Minister for her introduction of these regulations, which are limited in scope and technical in nature. As she says, they will deter non-delivery of contract projects by excluding participants from taking part in future periodic allocation rounds should they not fulfil certain aspects of their projects. I am happy to agree to the regulations today as they would deter applicants to the CfD scheme from making speculative bids for projects that are unlikely to be delivered, thereby tying up parts of the budget for the scheme so that it cannot be delivered. As allocation rounds are being run less frequently than originally anticipated, this would ensure greater delivery of the wider objectives of investment in power-sector decarbonisation.

The Minister has already spoken of some of the effects in the first round but perhaps she could clarify a little further why these measures are being introduced. Can she explain the overall difficulties seen in the evidence from the non-delivery of projects in the first round of contracts for difference allocation? Has there been a certain amount of “hogging” or poor fulfilment of the projects by some participants in the first round? The Explanatory Memorandum was relatively quiet on the consultation outcome and reported generally supportive responses.

I am grateful to the Minister for confirmation that the sum coming forward to support renewable investments in the second round will be the one that has been widely reported. Is she satisfied that there is an adequate appeals process should the applicant consider that he or she has been unfairly treated? Are there adequate provisions for genuine non-compliance should circumstances out of the applicant’s control result in poor fulfilment? Is she satisfied from the experience of the first allocation round that interpretations of what it means not to have delivered are adequately defined?

I would like to follow up on one further aspect of these regulations. What happens to projects that make slow progress or are even abandoned? Can that part of the budget be reallocated to a later round, or are there some residual rights of the applicant to fulfil the project? It is not clear from the memorandum whether the CfD is terminated as a consequence such that it could not be recycled in an orderly manner. The impact assessment considers the overall CfD scheme, objectives and process without considering these regulations specifically. Is there a risk that exclusions to future bidding rounds could give rise to a series of legal actions that could undermine the allocation process more generally?

I would be grateful if the Minister could clarify those aspects of how the regulations might work in practice so that the operation of CfDs will continue to bring forward schemes at least cost to the electricity consumer over the longer term.

[Baroness Neville-Rolfe]

I thank the noble Lord for his helpful remarks and his welcome for these regulations. As I said earlier, the contracts for difference scheme is designed to incentivise the significant investment we require in our electricity infrastructure to keep our energy supply secure, to keep costs affordable for consumers and to help meet our climate change targets. The instrument being debated today enables us to maximise the effectiveness of future CfD allocation rounds by increasing disincentives for non-delivery and preventing those who have failed to deliver a project in the past from gaming the system.

In my opening remarks I ran through the reasons for the failure of the two small solar projects and the other two projects that failed to meet the milestone requirements of the LCCC. I am satisfied in general that the contractual details and exemptions before us are fit for purpose, especially as amended by these regulations.

The noble Lord asked about using up proceeds of frozen CfDs. We always keep under review the total budget allocated to CfD projects. If any projects that are successful in the next auction fail to sign their contracts or have their contracts terminated we will consider—I think this is probably what the noble Lord wants to hear—the possibility of recycling budget to future auctions. This decision will, however, depend on factors including the pipeline and what will ensure the best value for bill payers. We do not expect this to be significant. In the first auction, as I have said, there were the two small solar projects that failed to sign their contracts and the two projects that had their contracts terminated out of a total of 25. I think I explained last time that there was an overspend against the levy control framework for that period so there was no scope for recycling on that occasion.

On legal action—which is always something I am rather cautious about commenting on—complaints can be made to the LCCC. Ultimately, judicial review would be the legal remedy and there is normally an appropriate and narrow window for this.

As I think we are agreed, this is another step—a small but important technical milestone—towards getting the next CfD auction going. I look forward to the work on the supply chain in the new year and to the auction commencing in April. In the meantime, I commend these regulations to the House.

Solar Panels: Business Rate Exemption

Debate between Lord Grantchester and Baroness Neville-Rolfe

Thursday 27th October 2016 Lords Chamber

[Baroness Neville-Rolfe]

I think the noble Baroness should take comfort from the signing of the agreement in Paris, the statements we have made and the comments I have made about the carbon budgets that will be put forward in due course. This Government and the last one have made enormous investments in renewables, but nobody could fault us now for looking properly at affordability and at where things can be affordable. Innovation—for instance, on solar—is making things less expensive, and then the subsidy regimes should change. However, of course we understand the need for investor confidence.

[Lord Grantchester (Lab)]

My Lords, solar PV has taken the brunt of corrective measures taken by the Government, as in their analysis it is the key reason for the overspend on renewables. In fact, the National Audit Office report shows that solar accounted for only 6% of this overspend. The technology is so popular and affordable. What steps will the Minister and her department take to review this overcorrection, encourage further solar deployment and restore confidence to the sector?

[Baroness Neville-Rolfe]

The noble Lord is right that solar has been a success. We have over 11 gigawatts now installed, with 49% of EU investment in solar, so we have strength. We have had to bring down the subsidies for that, although feed-in tariffs and so on continue. My own view is that solar is an important part of the mix, particularly internationally, because there is more sun and less intermittency, which helps us with our climate change targets. However, the noble Lord can be reassured that we are looking carefully at solar, and a lot of our innovation budget is going toward solar and storage to see whether, going forward, we can take those two together and make the technology even more cost effective.

Fuel Poverty

Debate between Lord Grantchester and Baroness Neville-Rolfe

Tuesday 25th October 2016 Lords Chamber

[Baroness Neville-Rolfe]

The right reverend Prelate is entirely right to say that there are special problems in rural areas. There has been a succession of schemes promoting renewables, some of which are particularly important in rural areas. I would like to talk to him further about the issues that he has encountered in this area so that we can make sure that, going forward, we focus on those as well.

[Lord Grantchester (Lab)]

My Lords, the UK energy system needs to digitise, just like TV and mobile phones. The building blocks for this revolution are smart meters, which create better opportunities for demand-side response measures to have a significant impact on fuel poverty. Will the Minister update the House on the introduction of the better markets Bill that could provide an effective start, such as a protective tariff for pre-payment customers? Are these measures a priority for the Government?