Renewables Obligation (Amendment) Order 2011

Lord Teverson Excerpts

Wednesday 23rd March 2011 Grand Committee

[Lord Reay]

I shall say a word or two about this order. In itself, it is not very significant or pernicious and, given that these subsidies for offshore wind-generating stations are going to be paid in any case, I have no objection to them being paid in phases as the order provides. However, I strongly object to the underlying policy requiring these subsidies to be paid in the first place. Mostly, I find myself in opposition to onshore wind farms, which are of course ferociously opposed from one end of the country to the other—not by the noble Lord, Lord Teverson, but by many others. Besides ruining the lives of some who live in close proximity to them, they do irreparable damage to our wonderful rural landscapes.

Offshore wind is obviously less offensive in both those respects, although I sometimes feel that Turner, for example, would not be too pleased to see how some of the estuaries and wild foreshores he lovingly painted have been desecrated and had their romance and natural appeal, as in the Solway Firth, systematically degraded by this industrial intrusion. However, the factors I wish to emphasise are their uselessness and expense.

As a result of the harsh weather we have experienced in recent winters, it has been brought home to virtually everyone in the country that when the demand for electricity is at its very highest, the contribution from wind power is at its lowest. In fact, it may be close to zero for days at a time. Therefore, we must always be able to supply all the electricity we might ever require—it is required at the moment—by other means. Nor is the contribution from offshore wind produced more efficiently than that from onshore wind; far from it.

Last year, the load factor for offshore wind—the percentage of installed capacity that is generating over the year—fell, at 26 per cent, just below that for onshore wind. So much for the fatuous claim, which is sometimes made by Ministers when attempting to justify their scheme of surrounding these islands with a ring of turbines, that wind is one of our great natural assets. I calculate from the Digest of United Kingdom Energy Statistics that wind power contributed somewhat less than 3 per cent of the electricity generated last year in the UK. I should think not much more than 1 per cent was from offshore wind. Perhaps my noble friend the Minister could confirm or correct that figure, as it does not seem to be separated off in that digest of statistics.

Moreover, that miserable achievement is only possible thanks to the subsidies for offshore wind, which have now been raised to twice the level paid for onshore wind. That requirement is hardly surprising, given the obviously far greater difficulties in constructing and maintaining turbines in deep salt water rather than on land. The effect of the subsidy, paid for ultimately by the electricity consumer, is that the offshore electricity producer receives no less than three times the market rate for all the electricity he produces, and is guaranteed that rate for 20 years. What is the installed capacity of all existing commissioned and/or accredited wind turbines today, and what amount of subsidy are they guaranteed for the rest of their lives, in aggregate, assuming that current load factors continue? If my noble friend is not able to answer that question this afternoon, I shall table it as a Written Question.

I have recently read the renewables obligation annual report for 2009-10. It is an interesting document, but I can hardly recommend it to noble Lords for light reading. The ROC system is one of the most sublimely complex and opaque subsidy systems ever devised by the bureaucratic mind. No doubt that very fact gives it a certain political value. From it and from ministerial answers to Written Questions, I think I have gleaned that the cost of the ROC system last year was approximately £1.4 billion and that the share in that of offshore wind amounted to approaching £200 million. Could my noble friend confirm those figures? If so, could he say what he expects them to be this year?

One thing is for sure, that the intention of Her Majesty’s Government—hell-bent as they are on achieving their impossible renewable energy targets—is that these figures should expand massively in the years to come. In answer to a Written Question in this House in January, the Minister gave his department's estimate that by 2020 the subsidy cost for the ROC scheme would be more than £5 billion a year. I believe that the Government should do what the Dutch Government have announced they intend to do, which is to remove all subsidies from offshore wind and, in so doing, abandon their previous renewable energy target. By contrast, our Government still pursue a policy which will ensure that more of our industry departs overseas, that ever more people sadly plunge into fuel poverty and that the return to the age of freezing in the dark is brought closer. For those reasons, it is with a heavy heart that I witness the adoption of this ostensibly harmless amendment order.

[Lord Teverson]

My Lords, I do not think I will reply to the noble Lord, Lord Reay, but I agree with him profoundly that wind turbines are fantastic and are a great asset to much of the countryside for visitors to Cornwall. However, there are issues for those who live near them which we must recognise, although once they are there I do not think people notice them too much.

I want to concentrate on something completely different. I welcome the efforts by the Government and by the Minister to ensure that the issue of sustainability of biomass fuels is taken on board and is concentrated on. Two or three years ago, we found that biofuels in the transport area were the great salvation for decarbonising our economy but because of the many valid issues around food security and rising food prices, the substitution of fuels for food became a lot more contentious. Although I believe that biofuels are an important part of the future, they have to be seen to be sustainable, otherwise what is the point?

The importance of the order is that we get in front of the curve in this area and assure the public that, with the increasing use of biomass, they are sustainable. I have two wood-burning stoves in my house which I hope are sustainable; they appear to be and I am told they are, although they come from Somerset and are trucked down to Cornwall rather than produced locally. We have to be careful as the public perception of what is sustainable in regard to biomass, particularly wood, is not always what it should be. Strange as it may seem, sometimes it can make sense to bulk-ship wood in the right condition across oceans rather than cut down local forests. In terms of transport solutions to carbon production, that can sometimes be best. I am sure that that is taken into account but I welcome this order.

[Lord Grantchester]

Once again, I thank the Minister for introducing the renewables obligation order today. It is an extremely important order as the renewables obligation is crucial in driving forward the development of renewable electricity generation through various support mechanisms. We are in broad agreement with the order. The provisions concerning the phased development of offshore wind generation are sensible and build on Labour’s legacy in laying the foundations and ensuring that the ROCs cover the whole lifespan of a project.

The situation at Dogger Bank, where there may be some 2,000 turbines, requires phasing so that the early capacity can be rewarded while the later development can still qualify for the full 20-year payment period permitted to receive ROCs. As wind power is at the vanguard of renewable technologies, will we need similar orders to encourage investment in other technologies, such as wave and tidal generation?

This part of the order is to be welcomed. Set against wider electricity market reform, signals to facilitate cost-effective investment in all forms of low-carbon generation must be supported. It is a complex balance reviewing the roles that a carbon price, an emissions performance standard, a revised renewables obligation, feed-in tariffs, capacity mechanisms and other interventions should play in achieving our goals.

The challenge in the order today relates to the sustainability criteria for biomass and bioliquids. Deliberations between Defra and DECC will have been informative in assessing whether we have the balance right in defining the sustainability criteria. We must ensure that we do not produce negative adverse implications for land use management or for the transfer from food production into biofuels or biomass oil, and that must be the case both domestically in the UK and internationally. There are several options for the Minister to consider when looking at how to achieve that balance, and the question for the Committee to consider is whether we have that balance right.

The issue of cost efficiency is key and the provisions will not satisfy everybody. Some organisations will say that we must go much further and put sustainability criteria at a higher level. Of course, that will have implications, and not only for the UK. If all we do is transfer the problem to other EU nations, that will simply drive our greenhouse gas problems abroad. I hope that the Minister will elaborate a little on the representations that he has heard during the 12-week consultation both within DECC and in discussions with Defra Ministers and other organisations. Will he tell us who is broadly content with the proposals, who thinks that they should go further and who thinks they have gone too far? Who thinks that the burdens are too great? That will help us to decide whether we have the balance right.

The Minister said that this order will be subject to endorsement by the devolved Administrations. Will he illuminate the Committee about whether there have been any differences of opinion among the devolved Ministers in terms of input into the formulation of the sustainability criteria? Were the Welsh, Scottish or Northern Ireland departments in a different position? What was the nature of the discussions that have brought us to this point today, or was there broad consensus from the outset that the right balance was achieved between avoiding the imposition of undue burdens on businesses, the regulatory framework and delivering legally sourced, sustainable biomass and bioliquid crops?

Earlier, I mentioned marine and tidal power and asked whether a similar approach can be adopted. Paragraph 7.6 of the Explanatory Memorandum states how that could work. I can see the sense in that. The 50 kilowatt exemption is eminently sensible. We do not want to drive new or smaller investors from this potential market. It is right to exempt essentially domestic installations. However, in the intervening time, will the Minister also consult with those industries which are not directly involved in biomass generation and so on, and which have an interest in what happens with the ROCs regime and the development of this industry?