Feed-in Tariffs (Amendment) (No. 3) Order 2015
Debate between Graham Stuart and Andrea Leadsom
The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)
The instrument before the Committee and the associated modifications to the standard licence conditions implement the changes set out in last year’s feed-in tariff review. The changes include, among other things, the introduction of a cost-control mechanism in the form of deployment caps, and a revised level of generation tariffs to be paid under the scheme. The changes are necessary to protect bill payers from unacceptable costs in the future and to ensure that support for renewables remains affordable.
In recent years, we have made enormous progress in encouraging the development and deployment of renewable energy and building a successful renewables industry. The feed-in tariff, or FIT, scheme has been a vital part of that achievement. The Government recognise the significant role FIT has played in engaging non-energy professionals in the electricity market and also the role small-scale generation can play in future on a path to subsidy-free deployment.
The scheme now supports more than 861,000 small-scale renewable installations. That figure is far in excess of what was expected to deploy when the scheme was set up in 2010. The Government at the time estimated it would cost £490 million per year by 2020. Those projections are no longer even slightly correct. Without the changes we have introduced, which are set out in the instrument that we are debating, we estimate that by 2020 the FIT scheme would cost more than three times that figure at £1,740 million per year.
The Government are committed to cost-effective decarbonisation of our electricity supply and to protecting consumer bills by controlling costs under the levy control framework, or LCF.
Graham Stuart
The Minister is right to highlight the Government’s record, which is tremendous. In 2010, only Malta and Luxembourg had fewer renewables than this country. The Government truly have been the greenest Government ever. To what extent is the Government’s approach to the LCF and capping informed by an understanding of the merit order effect? That subsidy is not all that it seems. In fact, the costs to the consumer are a great deal less than would be apparent purely looking at the LCF total.
Andrea Leadsom
My hon. Friend makes a good point. He will be aware that the analysis my Department does takes into account the merit order effect. Nevertheless, the levy control framework—the actual sum that gets added to consumer bills by our policy on support for the renewable sector—has to be taken into account. This was not a modest overspend; it was shooting the lights out. It beat all our own assessments over our targets in our electricity market reform analysis. Both the deployment and the cost associated with it have gone massively over what we anticipated. Therefore, it is not fair to consumers simply to say, “Never mind, we won’t even attempt to meet either the target that we set out for renewables or the cost associated with it.”
Graham Stuart
I am grateful to the Minister for giving way again. The wholesale price is so much lower than I think the Government predicted. Perhaps she can confirm that. Therefore, in a sense, the cost to the consumer and the merit order effect are such that the low cost of renewables has dragged down the wholesale price of energy. That is why no one at the moment will put any form of new generation into place, without some sort of support. That is because renewables have lowered the wholesale price. Therefore, one must offset that against the subsidy if one is to have a true picture of what the consumer is paying towards greening our energy supply.
Andrea Leadsom
I say again to my hon. Friend that I completely understand the point he makes. He, too, completely understands the point I am making, which is that in terms of deployment, the management of the system and the transition to a low-carbon energy future, we cannot simply throw all our own estimates, budgets and targets up in the air and suggest that it does not matter what we add to consumer bills. I totally understand the point he makes—please do not get me wrong there. Nevertheless, it is vital that when we set our targets for how we want to manage our transition to a low-carbon future we keep some kind of rein on the deployment levels and the cost that we put on consumer bills as a result.
The Government are committed to cost-effective decarbonisation of our electricity supply and to protecting consumer bills by controlling costs under the levy control framework. The LCF projections published last July showed a significant overspend due to, among other things, demand-led schemes such as the FIT providing unchecked support for the renewables industry, so urgent intervention to manage spend has been necessary. It is important to remember that the FIT scheme is funded by consumer electricity bills—bills that are paid by all regardless of whether they benefit from the scheme. Uncontrolled spending on FITs therefore has a direct impact on the energy bills of consumers, including families and businesses.
Hon. Members will recall that the Government announced a package of cost control measures, including a consultation on the future of the FIT scheme last summer. This proposed a number of measures to meet two core objectives: first, to comply with our EU state aid approval, a review of the support offered by the FIT scheme, which is required every three years; and, secondly, proposals aimed at controlling the cost of the scheme to limit the impact on consumer bills.
It is clear that the scheme in its original form was no longer affordable and needed to be amended to protect consumers. With the changes introduced by this instrument, spending will be more controlled and will be reduced from £1,740 million to £1,300 million a year by 2020. That still allows for very significant support, but it will be provided in a more controlled manner, balancing the interests of bill payers with those of the wider renewables industry. Overall, the changes we are making will save at least £7.6 billion from consumer bills over the next 20 years.
Oral Answers to Questions
Debate between Graham Stuart and Andrea Leadsom(9 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text
Andrea Leadsom
My right hon. Friend points out exactly correctly that there are limitations to intermittent renewables technologies, and that there are costs associated with ensuring energy security when we become over-reliant on renewables. That is an absolute case in point. On the subsidy-free CfD, he is also right that we must take into account all the various costs. We are looking at the matter very closely. I am not making any promises here, but, alongside other subsidies and other CfDs, we are looking carefully at the proposition.
Graham Stuart (Beverley and Holderness) (Con)
May I follow the previous comments by suggesting that we introduce subsidy-free CfDs as quickly as possible? The most important thing that was needed in relation to onshore wind was to make sure that local communities did not have it imposed on them. The Government have rightly done that. What can the Minister do to ensure that where communities do want it, we get as much onshore wind as we can at the lowest possible price?
Energy Bill [Lords]
Debate between Graham Stuart and Andrea Leadsom
Andrea Leadsom
Well, I don’t know where to start! I completely disagree with the hon. Lady.
We are acting to control the costs of renewable energy by ending new subsidies for onshore wind and providing local people with the final say on new applications. Members who spoke about renewables included my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), who gave us a spanking good speech on the importance of keeping costs lower for consumers, and my hon. Friend the Member for Beverley and Holderness (Graham Stuart), who rightly raised the need to deal with intermittency. I can tell him that, since 2012, my Department has invested £18 million in innovative support for energy storage.
The hon. Members for Sunderland Central (Julie Elliott) and for Greenwich and Woolwich (Matthew Pennycook) again criticised the early closure of onshore wind subsidies. I find it extraordinary that Labour Members seem to equate the deployment of renewables with decarbonisation. That is simply not the case. They fail to recognise that fuel poverty and endless renewables subsidies go hand in hand. They need to recognise that.
Graham Stuart
The hon. Member for Brighton, Pavilion (Caroline Lucas) asked where to start. We need to start by getting rid of the most noxious of the current fuels, which is coal. Does my hon. Friend the Minister agree that if other Governments followed our example in replacing coal with gas and then with other technologies as they develop, it would make a bigger contribution than almost anything else?
Andrea Leadsom
My hon. Friend is absolutely right. We are the first developed country to talk about getting rid of coal and moving to gas, which will be the best thing we can do for decarbonisation in the near term.
My hon. Friend the Member for York Outer (Julian Sturdy) spoke up strongly for the right of communities to decide on the location of wind farms. I want to pay a real personal tribute to my hon. Friend the Member for Daventry (Chris Heaton-Harris), who has done much to support communities and had a big impact on our policy relating to our manifesto commitment on onshore wind. I was glad to hear my hon. Friends the Members for Hertsmere (Oliver Dowden) and for Thornbury and Yate (Luke Hall) highlight the plight of the bill payer as a result of the renewables obligation subsidy. On this we have a clear manifesto commitment to get costs down.
The right hon. Member for Doncaster North (Edward Miliband) is owed a great deal of gratitude from Members across the Chamber for his personal work and commitment to the climate change agenda. He made a proposal for a zero carbon emissions strategy, with the Climate Change Committee deciding on the appropriate date, but as things stand, we are committed to meeting our legally binding commitments for 2050, and that is where our focus lies. I am sorry to disappoint him on that.
The hon. Members for Stalybridge and Hyde (Jonathan Reynolds) and for Aberavon (Stephen Kinnock) criticised the Government for not being green, but I can tell them that, since 2010, we have reduced the UK’s greenhouse gas emissions by 15%, which is the biggest reduction in a single Parliament. We are over-delivering against our first three carbon budgets, and according to the Climate Action Network, the UK is the second best country in the world for tackling climate change, second only to Denmark. This Government have done so much! My hon. Friends the Members for North Dorset (Simon Hoare) and for Bath (Ben Howlett) pointed out that the Opposition did not equate subsidies with fuel poverty, but they need to do so. They need to understand that the more we subsidise technologies, the more we add to fuel poverty.
In finishing, I wish to pay tribute to my hon. Friend the Member for Fareham (Suella Fernandes), who gave a knowledgeable and supportive speech on the importance of supporting both the OGA and our manifesto commitments. I am grateful to all hon. Members for their contributions, and I commend this Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Energy Bill [Lords] (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Energy Bill [Lords]:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 9 February 2016.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed.—(Charlie Elphicke.)
Question agreed to.
Energy Bill [Lords] (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Energy Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of:
(a) expenditure incurred under or by virtue of the Act by the Secretary of State; and
(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Charlie Elphicke..)
Question agreed to.
Energy Bill [Lords] (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Energy Bill [Lords], it is expedient to authorise:
(1) the charging of fees;
(2) the imposition of a levy under the Act;
(3) the imposition of financial penalties under the Act;
(4) the increase of charges in connection with trading schemes; and
(5) the payment of sums into the Consolidated Fund.—(Charlie Elphicke.)
Question agreed to.