Solar Power (Feed-in Tariff)
Debate between Andrew Percy and Chris Huhne
Chris Huhne
I shall explain what we are trying to do later in my speech, but let me reassure my hon. Friend that the returns that the new scheme will provide—if, indeed, we proceed with it following what is a genuine consultation—will be very similar to the returns that were originally intended when the scheme was announced by the Leader of the Opposition in April 2010. As with some of the Opposition’s other achievements, the intention was right but the execution was definitely not, so it falls to this Government to attempt to clear up the mess.
We want to secure the continued success of feed-in tariffs through sustainable growth, rather than boom and bust. That is why we are consulting on new tariffs for solar PV installations. As the climate change Minister, my hon. Friend the Member for Bexhill and Battle (Gregory Barker), just pointed out to the House, they are now in line with those being offered in Germany. If the former Secretary of State, the right hon. Member for Doncaster North, had bothered to find out how the Germans operated this scheme, we would never have been in this position in the first place.
Chris Huhne
Before I give way again, let me address this key point. To wait any longer would put at risk the entire feed-in tariff scheme. Anything that slows this process will substantially increase the risk that the scheme will run out of money. Each week of delay in changing the tariffs leads to additional annual subsidy costs of £4 million, but this is a 25-year scheme, and the figure over the spending review period is £14 million, or £87 million to £110 million over the 25-year tariff lifetime. A very small delay in tackling this problem will therefore result in substantial costs for electricity consumers over a 25-year period.
My experience tells me that when we face such a problem, we should not follow the advice of the right hon. Member for Don Valley and attempt to run away from it by pretending it does not exist. Instead, we must grapple with this problem, and deal with it quickly so the scheme can be put on a sustainable basis that will give the industry the opportunity to grow and prosper.
Chris Huhne
The Duke of Edinburgh was not, I think, talking about solar panels, and I dread to think what his views are on them. He certainly made his views on wind pretty clear. I do not agree with my hon. Friend on the issue of distortions to the market because, curiously, solar photovoltaics are a clear example of a highly successful world market. The right hon. Member for Don Valley was talking about Sharp Solar as though it was dependent on the UK, but more than three quarters of the production in Wrexham goes overseas to the rest of Europe. We have already heard that the funding is exactly in line with that in Germany. The Chinese are exporting dramatic amounts of solar panels and what is fascinating, exciting and positive about the industry is the fact that in the long run—
Chris Huhne
I shall give way to my hon. Friend, who has been very patient.
The key point I want to make, which was drawn to my attention by the US Energy Secretary Steve Chu, is that almost uniquely among the renewable energy forms, solar panels are reducing in price by an average of 6% a year. As a result of that technological trend, which is a bit like the fall in the cost of computer memory that many of us will be familiar with, this area will have enormous potential in the long run. The argument for putting the industry on a more sustainable basis so that it can grow solidly and reliably with a tariff that reflects the fall in the underlying costs means that we will be in a position, when the costs of solar fall to grid parity, to make major and substantial increases in solar installation. I do not agree with my hon. Friend the Member for Gainsborough (Mr Leigh) that this is a waste of time. The world market is working, but the scheme has been thrown out by the fact that we have had a dramatic fall in the costs of solar panels in the past 18 months. Unfortunately, the scheme introduced by the previous Labour Government did not have the automatic reduction that it should have done.
At this point, I shall give way to my very patient and hon. Friend the Member for Brigg and Goole (Andrew Percy).
Andrew Percy
I am almost too tired to stand up now, Mr Deputy Speaker, but I thank the Secretary of State for giving way. It is precisely because of the arguments he has outlined that the Labour Government in New South Wales in Australia cut their tariff by two thirds.
I want to put a question to the Secretary of State on behalf of my constituents at Alexander Electrical Services. They support change and have said very clearly that they accept there has to be change, but one thing they want from the Secretary of State is more of an explanation about the December cut-off date.
Chris Huhne
I come back to the point that if we had not acted quickly on this we would have had a situation in which every installation at the old tariff rate would have meant two fewer installations at the new tariff rate. That would have meant massively over-subsidising when we could have got the deployment at the new tariff rate. There is no doubt about that. We have had many e-mails from reliable, long-standing solar installers who recognise that the scheme needed to be changed. They—particularly the reliable installers—want it to be put on a sustainable basis that will give them the ability to grow sustainably.
Electricity Market Reform
Debate between Andrew Percy and Chris Huhne
Chris Huhne
It is inevitable that, given that we need the new investment that we have been discussing today, there will be a cost. The energy companies are not the Salvation Army. They do not do things out of altruism; they do them because they are going to reach a rate of return on capital. However, I can assure the hon. Gentleman of this: if he looks at the detail in the White Paper, he will see that our proposals will reduce costs to the consumer compared to leaving the market as it is. Central to our ambition is ensuring that we have affordable, low-cost electricity and that we protect British consumers from the vagaries of past years—with the 30% increase in gas prices and a corresponding increase in electricity prices.
Andrew Percy (Brigg and Goole) (Con)
My right hon. Friend will be aware of the successful Pulse Tidal project in the Humber. Will he assure the House that, as the Government move forward, tidal will remain a key priority for them and that funding will be secured for investment so that that investment does not go overseas?
Chris Huhne
Tidal power is exciting and has great prospects. We have some enormously important potential sites for tidal stream—for example, the area around the Severn barrage—and I am confident that as the technology progresses it will play an important part in our energy mix.