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?