Renewable Energy

Charles Hendry Excerpts

Wednesday 29th February 2012 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

It is a privilege and a pleasure to serve under your chairmanship, Mr Owen. I thank my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) and congratulate her on securing the debate. She has given us an excellent summary of the benefits that such technologies can bring and a clear understanding of where she sees the barrier to their deployment. I want to go through where we see the opportunities and to say what we are doing to remove the barriers.

My hon. Friend has not been alone in the debate. I welcome the contributions of my hon. Friends the Members for Elmet and Rothwell (Alec Shelbrooke), for Redcar (Ian Swales) and for Gillingham and Rainham (Rehman Chishti) and of the hon. Member for Strangford (Jim Shannon), which all showed the understanding, depth of knowledge and interest in the issue that is present throughout the country.

I have already had the chance for a brief conversation with some of the people involved in SEaB. I am delighted with the opportunity to visit in the future and to see on the ground the work that they are doing in the constituency of my hon. Friend the Member for Romsey and Southampton North, but it is also important to put our discussion in the context of the wider energy debate, and that is how I wish to begin. She is absolutely right, however, to highlight the untapped potential of the sector, and part of our objective as a Government is to realise that potential in the most effective way that we can.

As my hon. Friend outlined, renewable energy has a vital role in our low-carbon future. By the end of the decade we must cut our carbon emissions by 35% on 1990 levels, and by the end of the next decade they must have halved. We also have the EU renewable energy target, which means that we must generate 15% of our energy from renewables by 2020. In order to meet that target, about 30% of our electricity and 12% of our heat will need to come from renewable sources. That is not only about meeting targets, because it is also the right thing to do, and we need to reduce our dependency on imported fossil fuels. Home-grown renewable energy can enhance our energy security and give us a greater degree of energy independence, helping to shield us from global fossil fuel price fluctuation, which seems to be in only one direction at the moment, as we see high prices for oil and gas. She also touched on the immense economic potential in renewable energy, and the sector could provide opportunities for up to 500,000 jobs.

In the Department of Energy and Climate Change, we have been working with the renewables sector to understand more effectively how much renewable energy can be deployed by 2020, and to identify the current constraints that must be addressed.

[Rehman Chishti]

The Minister knows that 6.7 million tonnes of food waste are being discarded each year. Are there any plans to ban completely food waste going into landfill? If so, what is the time frame?

[Charles Hendry]

My hon. Friend is aware that what we have been seeking to do is to give local authorities more say in how they should manage their affairs, rather than a top-down, Government approach. For many of us with landfill or land-raise issues in our constituencies, it seems absurd to put food waste into such facilities. At the end of the day, however, we want the local authorities to be the driving force in resolving such issues. In his own case, Kent is a beacon authority in looking at how to manage its waste issues.

[Ian Swales]

I thank the Minister for investing DECC money into an anaerobic digestion facility at the Centre for Process Innovation in my constituency. He is referring a lot to renewable energy, but does the way in which waste is treated under all our policies throughout the various Departments satisfy the renewable energy criteria and meet the simplicity requirements mentioned by my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes)?

[Charles Hendry]

My hon. Friend raises an important issue. For the first time, we are now moving towards a clear, cross-Department strategy on waste. That means looking at the hierarchy and at where we reuse and recycle, but also seeing that as part of that process there is residual waste, and getting an energy source from that is better than putting it into landfill and land raise.

[Jim Shannon]

Will the Minister give way?

[Charles Hendry]

I will give way briefly to the hon. Gentleman, but then must get on to the comments of my hon. Friend.

[Jim Shannon]

I recognise the Minister’s passion for the subject. He mentioned a Government strategy: will that include the regions such as Northern Ireland, Scotland and Wales as well, so that it is uniform and UK-wide?

[Charles Hendry]

We seek to work with the devolved Administrations but, clearly, different rules apply in different parts of the United Kingdom, where the different Governments have responsibility for such matters. If we have central control in Westminster over different aspects, we have the influence, but we obviously wish to work with the devolved Administrations to ensure that the strategy is as holistic as possible. The more that we can remove the barriers and have an integrated and holistic approach, the more effectively we can attract investment into the sector.

We have identified eight technologies that we believe will bring us closest to delivering those 2020 targets cost-effectively and sustainably. They are onshore and offshore wind, marine energy, biomass heat and electricity, ground source and air source heat pumps, and renewable transport. Biomass heat and power includes energy from waste technologies, such as anaerobic digestion, waste combustion and the new, advanced technologies of gasification and pyrolysis. We believe that those eight technologies collectively are capable of delivering more than 90% of the renewable energy we need for 2020.

Instead of just having targets, we are determined to show how we meet our objectives. It is easy for Governments to have targets, but then to leave them to a future Government to explain why they were not met. We are determined to put in place a clear road map that shows what barriers exist, and how we intend to overcome them so that we can be more effectively held to account in the process.

Last year, we published the UK renewable energy road map, which shows where we are now on those eight technologies, how deployment may develop up to 2020, and the actions that will need to be taken now to overcome the barriers to deployment. Although our evidence shows that we can meet our target of 15% renewables by 2020, we are clear that we need a rapid increase in deployment. At the end of 2010, renewable energy accounted for 3.3% of UK energy consumption, so there is a significant way to go.

Renewable electricity and heat technologies are generally more expensive than fossil fuel generation, and require subsidy to boost deployment, just as every previous new energy technology has done. Support is available under the renewables obligation, the feed-in tariffs scheme, the renewable heat incentive, and the renewable transport fuel obligation.

[Julian Sturdy (York Outer) (Con)]

The Minister talks about eight key technologies and delivering them affordably. I entirely agree with that, but will the road map be flexible enough to change if technologies advance with time? If one technology becomes more prevalent in delivering the green energy that we need, will changes be made to cover that ?

[Charles Hendry]

My hon. Friend makes a crucial point. We have set out in the road map the high, medium and low trajectories for each technology. A key element that may change is the cost of delivering them. For example, we are working with the industry on offshore wind to bring down the cost by 40% over this decade, and that is critical to the extent of its deployment. If the costs cannot be brought down, we must make choices on behalf of consumers to show that we are trying to deliver those renewable objectives at the least cost to consumers. Flexibility is an integral part of that process.

Despite the undoubted benefits of renewable energy, it must be cost-effective and affordable compared with low carbon alternatives. I acknowledge the valid point that my hon. Friend the Member for Romsey and Southampton North made in her introduction that the renewables industry and investors need stability to plan ahead. Uncertainty is often the greatest enemy of investment. I also appreciate that recent changes, particularly to the support for solar photovoltaic installations under the feed-in tariffs scheme, may have temporarily affected industry and investor confidence, although we are now seeing strong growth again in the number of PV installations. We are committed to delivering our goals in a way that minimises the impact on consumers’ bills.

In our measures to reform the support mechanisms, we have three objectives. They are designed to make the budget go as far as possible, and to maximise the number of people who can benefit from schemes. They will provide greater certainty for the industries concerned on the rates of return that they will receive up to 2020, and they will ensure value for money to consumers who pay the bills.

I understand that the scheduled banding review for the renewables obligation has caused some concern. Banding reviews ensure that as market conditions and innovation within sectors change and evolve—this point is directly in response to that made by my hon. Friend the Member for York Outer (Julian Sturdy)—developers continue to receive the appropriate level of support necessary to maintain investment. We have studied how much subsidy different technologies need. When new technologies need help to reach the market—for example, wave and tidal energy, which are emerging technologies—we have proposed increasing support, but when market costs have come down or will come down, we propose reducing the subsidy accordingly. That proposal will result in a lower impact on consumers’ bills than keeping the existing bandings, and will drive a higher level of deployment. Setting the bands for the period to 2017 also provides the industry with the certainty needed to make investment decisions now. The public consultation on the banding review has closed, and we will issue the Government’s response in the spring, confirming the banding levels moving forward. Legislation setting the new bands in law will come into effect on 1 April 2013.

I have mentioned the eight existing technologies that we have focused on in the UK’s renewable energy road map. Anaerobic digestion has, without doubt, an important role to play in both biomass heat and electricity generation. The United Kingdom produces about 100 million tonnes of food waste, manure, slurry and sewage sludge that is suitable for treatment by anaerobic digestion. When the coalition was formed in 2010, we stated our commitment to developing energy from waste through anaerobic digestion. I assure my hon. Friend the Member for Romsey and Southampton North and other hon. Members who have spoken that we remain absolutely committed to delivering on that commitment.

Last June, the Department for Environment, Food and Rural Affairs and the Department of Energy and Climate Change jointly published the anaerobic digestion strategy and action plan. It sets out our vision for anaerobic digestion, with an estimate of potential that could reach between 3 and 5 TW hours of electricity by 2020. Currently, there are only 172 MW of installed anaerobic digestion capacity in the UK, processing more than 5 million tonnes of material, and generating more than 1 TW hours per year. More is coming through the system. Just last week, Tamar Energy announced plans to develop 40 AD plants in the UK, with an installed capacity of 100 MW. In addition, we know of more than 100 plants that have received planning permission, and a further 80 that are going through the process.

It is clear that momentum is building and support for the technology is growing, but we recognise that significant barriers must be overcome for the sector to reach its potential. The anaerobic digestion strategy and action plan also sets out a joint Government and industry programme of work with 56 actions to tackle the key barriers to deployment. You will be grateful, Mr Owen, that I will not go through all those this morning. However, work is progressing on a range of actions, including disseminating information, particularly on regulatory controls; providing guidance on the costs and benefits of AD and best practice projects; developing skills and training for AD operators; building markets for digestate; and understanding the barriers to the use of biomethane as a transport fuel. Those pick up on most of the issues that my hon. Friend raised. An annual progress report on how we are moving to meet those actions will be published in the summer.

Our commitment to anaerobic digestion is also clear through the financial incentives that we offer. Anaerobic digestion is the only biomass technology supported under the feed-in tariffs scheme, which is aimed at smaller scale projects under 5 MW. Larger-scale projects are eligible for support under the renewables obligation. The renewable heat incentive supports biogas combustion below 200 kW thermal and the injection of biomethane at all scales into the national gas grid.

In addition, a £10 million loan fund is available from the Waste and Resources Action Programme to support the development of new AD capacity to divert 300,000 tonnes of food waste from landfill. WRAP is jointly administering, with the Technology Strategy Board, a fund designed to drive innovation in AD systems to bring down the cost of capital. Waste, including anaerobic digestion, is one sector likely to be eligible for initial intervention by the Green investment bank. In the meantime, a new team within the Department for Business, Innovation and Skills—UK Green Investments—has £100 million to invest in smaller green infrastructure projects, including AD, on a fully commercial basis. I hope that that reassures my hon. Friend that significant support is coming through, and that we have identified the issues.

I share my hon. Friend’s enthusiasm for smaller, more local plants. That is backed up by the study by consultants for the renewables obligation banding review that suggested that anaerobic digestion potential lies in stations with less than 5 MW of capacity. That ties in with our commitment to localism, which was raised during the debate, and is why, as part of the rural economy growth review, the Government have announced that they will promote the development of community-scale renewable energy projects in England through the establishment of a £15 million rural community renewable energy fund.

I also share my hon. Friend’s concern about the difficulties that anaerobic digestion operators experience in trying to sell their digestate as fertiliser. It is a valuable biofertiliser that can be used as a renewable source of critical plant nutrients, such as nitrogen and phosphorus. Although the UK has long-term experience with digested sewage, digestate derived from food wastes and other inputs is often regarded as novel by the market. There is a reluctance to accept it until evidence of its quality and benefits can be provided. The anaerobic digestion action plan contains a number of actions to build confidence, and I hope that my hon. Friend will continue to work with WRAP to ensure that the identified challenges are understood.