Clean Energy Investment

John McNally Excerpts

Wednesday 25th November 2015 Westminster Hall

[Julie Elliott (Sunderland Central) (Lab)]

As ever, it is a pleasure to serve under your chairmanship, Mr Bailey. I congratulate my right hon. Friend the Member for Don Valley (Caroline Flint) on securing this timely and important debate. It should surprise no one in the House that she has continued to throw her considerable energy and expertise into this area, both as a Back Bencher and as chair of Labour’s Back-Bench energy and climate change committee.

The Secretary of State for Energy and Climate Change will no doubt have hoped to prop up investor confidence in her “reset” speech last week. She was right to hope for such a response, because clean energy developers are going bankrupt and investors are fleeing the UK. However, I suspect that she may have been disappointed. As my right hon. Friend said, EY’s most recent renewable energy country attractiveness index, published in September, is a damning indictment of this Government’s record on clean energy and the power that they have unleashed to scare off investment and the jobs that come with it. In November 2013, the UK was fourth in the world for investor confidence. In February 2014, we fell to fifth; in May 2014, to sixth; in September 2014, to seventh; in March 2015, to eighth; and two months ago, we fell to 11th—outside the top 10 for the first time in a decade. I can see why the Secretary of State was hoping for a reset.

Boosting investor confidence and achieving clean energy security will require more than warm words. Rhetoric does of course matter, and this Government have thrown their fair share against renewables, but investors pay attention to policy. They put their money where they believe there is a stable regulatory framework. That cannot be said of the UK market at the moment. Wave after wave of policies have deterred investors and confused consumers. The Government claim that affordability is king, yet the main focus of their attacks has been on onshore wind and solar—the two cheapest large-scale renewable technologies. EY calls that

“policy-making in a vacuum, with no rationale or clear intent.”

That lack of confidence does not exist in isolation. It seeps into other sectors, such as CCS and offshore wind. Investors will naturally think, “If the most cost-effective and proven technologies are being attacked, surely we will be next.”

[John Mc Nally (Falkirk) (SNP)]

On the point about renewable energy, I think, coming from the background of what is happening in Scotland, where we are pursuing a clean and green energy policy, that the short-term approach to policy that is causing uncertainty among investors needs to go. We need a long-term policy to be agreed across the House, perhaps by means of an all-party parliamentary group. That would reassure investors for the long term that the money that they invest will be secure. We need to get rid of the repair and maintenance that we seem to be so intent on delivering at the moment.

[Julie Elliott]

I thank the hon. Gentleman for his intervention. Of course the key to good, stable energy policy is to have a long-term framework. Energy policy needs to last through more than one Government. Governments change every four or five years. Energy policy should be agreed and set out for the long term, to attract investment and so that we can regain our place as the world leader in this industry.

Uncertainty is this Government’s watchword. We have no idea what the size of the levy control framework will be post-2021. If we are relying on offshore projects with lead times of eight years or so, how can we expect people to invest when they do not know the size of the pot beyond 2021?

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[John Mc Nally (Falkirk) (SNP)]

I was not expecting to speak, Mr Bailey.

[Mr Adrian Bailey (in the Chair)]

I have you on my speakers list, but feel free to sit down if you do not wish to speak.

[John Mc Nally]

I am quite happy to speak. I am very good at speaking. I spent 40 years as a hairdresser, so I can talk about any subject on the planet.

I was very interested in the speech made by the hon. Member for Warrington South (David Mowat). I recently had a meeting on this subject with Senator Kevin de León, who is over here. He is the leader of the Senate in California, which is spending vast amounts of money on renewable investment—California is the seventh richest economy in the world—and investment has followed that policy into renewable energy.

We have heard about France and various other countries, but there is a lesson to be learned from California. We are doing well in Scotland on our clean and green image, and we want to keep that image at all costs. We are extremely concerned about where the policy of the green investment bank is going, and we need to keep a hand on the tail of that dog—in fact, the tail is now a stump.

Storing renewable energy is the missing link in this debate. Compressed air energy storage needs to be addressed by this country. I would call this country’s policy a traffic light—we have a green, an amber and a red—and it is more red than amber. We are going nowhere, and the policy uncertainty does not make sense. We were going in the great direction of following green, renewable, clean energy and clean air, and we now seem to be moving in the opposition direction from the way we want to go. I am unhappy with that, and I think most of this country’s taxpayers, who were mentioned earlier, are unhappy with the direction of travel. We need to get back to a firm policy.

Gas is short term; I believe it is all built on the extraction on shale from this country. I can speak for everybody in the country of Scotland: we do not want to go there until it is totally proven to be a safe, efficient method of providing heat. I do not think any of us is convinced. The Minister needs to address compressed air energy storage and the salt caverns underneath this country that run down through England. We need a policy statement if we are to invest money in storage, and then we can start looking at how we produce more investment in the renewables industry.

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[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship this morning, Mr Bailey. I congratulate my right hon. Friend the Member for Don Valley (Caroline Flint) on obtaining this important debate and on how she put forward the case that, so far as the future of this country is concerned, the recent attacks on renewable and low-carbon energy have created a difficult set of circumstances for future investment and have reduced Britain’s standing in the world as a good place for renewable investment. That is an extremely important point to make, because renewable energy has enormous potential, and the recent investment in it has started to release that, particularly with solar photovoltaics and onshore wind. As a result of support and assistance, those technologies are coming close to market parity, but the rug is being pulled from under them. The subsidy was not permanent and was decreasing, but, as my hon. Friend the Member for Sunderland Central (Julie Elliott) said, the Government have made it a cliff edge. At the very least, that is being extremely reckless with future investment in renewables in this country.

My right hon. Friend the Member for Don Valley set out a number of the changes that have taken place, and it might be useful to set them out again briefly. We have had the early closure of the renewables obligation to onshore and large-scale solar; planning rules changed to restrict the deployment of onshore wind; the announcement of the end of the feed-in tariff for small-scale solar; the scrapping of pre-accreditation for small-scale renewables; investment tax relief removed for community renewables; the scrapping of the zero-carbon homes target; future rounds of the contracts for difference under the levy control framework delayed; the scrapping of the green deal, as my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) mentioned; and the extending of the climate change levy to renewable energy, effectively placing an additional carbon tax on the purchase of renewable electricity.

My right hon. Friend the Member for Don Valley said that the ending of that exemption represented a grab by the Treasury. Indeed, it can be described no less starkly than that. It also comes close to retrospectivity, as those who benefited from the exemption for the climate change levy expected it to be phased out by the early 2020s. As my right hon. Friend set out, the sudden change now has led to serious difficulties for a number of the companies involved, including Drax and Infinis.

Just the ending of the exemption may have been sufficient evidence for investors to decide that it was probably not a good idea to continue investing in the UK. However, when that measure is combined with all the other measures that I mentioned, it cannot fail but produce a bleak outlook for investors in renewable energy in the UK. As we know, because we are enjoined in the UK to export our renewable investments, it works the other way round; investors are not necessarily looking at coming to the UK only. They can go to invest in other places, and all the evidence is that that is beginning to happen. My hon. Friend the Member for Sunderland Central pointed out that we have now fallen out of the attractiveness index top 10 for the first time since the list began, with a serious decline in our country’s renewable energy attractiveness.

The case is compounded by the fact that not only have events of the past three months weakened investment, but the Government are simply not taking decisions on various schemes for the next period. If the decisions were taken, we could enhance greatly the certainty for investment in renewables and low carbon energy. There is no certainty on the future of the levy control framework, as several hon. Members have pointed out. Not only is there no certainty on the future of that framework post-2020, but the opaque figures we are presented with at the moment for the levy control framework prior to 2020 mean that it is very uncertain whether there will be further auctions of low carbon energy over the next period, and, even if there are auctions, whether the content of those auctions will be sufficiently large to present any serious opportunities for investors to take part in.

My hon. Friend the Member for Stalybridge and Hyde mentioned the Government’s heat policy shambles and the complete uncertainty over the future of the renewable heat incentive. Like him, I fear we may hear further bad news about that incentive this afternoon. As my hon. Friend also pointed out, there is no certainty on the future of the energy company obligation post-2017, and the green deal has been taken out and shot with apparently nothing to take its place over the next period. So that adds up to a really shambolic picture.

[John Mc Nally]

I should have mentioned it earlier, but I have to declare a family interest in the solar panel business. The right hon. Member for Delyn (Mr Hanson) mentioned that nobody turned up at an official opening. In my own constituency of Falkirk, in Denny, we have the world’s first Difgen, which generates electricity from a natural water source. I opened it with another couple of nonentities: Lord Colin Moynihan and Nicola Sturgeon. The significant difference is that they attended and turned up at meetings and official openings. Although it was a small-scale turbine, it was the world’s first. That signals the step-change that this Government should follow.

[Dr Whitehead]

I thank the hon. Gentleman for that intervention. That comes under the category of the signals that the Government are giving out, which are almost wholly negative as far as renewable and low carbon investment are concerned.