Energy Bill [Lords]

John Redwood Excerpts

Wednesday 20th April 2016 Commons Chamber

[Andrea Leadsom]

The hon. Gentleman will be aware that the amendment is likely to reduce the predicted savings from early closure by something in the region of £10 million per annum, which is a significant figure, given that early closure of the RO is expected to save around £20 million a year in a central scenario, and as much as £270 million a year in the high scenario.

[John Redwood (Wokingham) (Con)]

Does the Minister agree that this was one of the most popular policies in the pretty popular manifesto we put to the electorate? We therefore need to get on with implementing it, and the other place should recognise that this issue arose out of the election.

[Andrea Leadsom]

My right hon. Friend is exactly right: this is a key, popular manifesto commitment, and we are determined to implement it, as we promised the voters of this country we would last May.

Let me turn briefly to amendment 2A, which was agreed in the other place. The amendment simply seeks to ensure that the function of determining whether an oil field project is materially complete can be transferred to the Oil and Gas Authority. That function sits outside chapter 9 of the Corporation Tax Act 2010 but elsewhere within part 8, so it does not fall within the definition of “relevant function” under clause 2(6) of the Bill. It therefore cannot be transferred from the Secretary of State to the OGA by regulations made under clause 2(2). The amendment simply removes the reference to “Chapter 9 of” from the reference to part 8 of the 2010 Act in clause 2(6), ensuring that this important function can be transferred to the OGA. The amendment is purely technical, and seeks to put beyond doubt that all key oil and gas taxation functions can be transferred to the OGA once it becomes a Government company, as we have always intended.

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

The amendments we have received from the other place make a number of changes to the Bill. In most instances, as the Minister mentioned, those relate to the commencement of the closure of the RO. That is essentially because of the Bill’s progress through Parliament and the potential charge of retrospectivity against the Bill. It is good that the issue has been rectified, and that the Government have confirmed that they do not intend to backdate the closure of the RO.

However, those changes point to the issue raised in amendment 7T, with which the Government have a motion to disagree. We need to be clear that the amendment is not saying that changing the closure date for the RO for onshore wind is wrong, although I continue to contend that it is. Contrary to the impression the Minister has given this afternoon, developers of projects did not realise that the closure date would be earlier than previously thought. Indeed, the so-called warnings before the general election, which she mentioned, were not about the early closure of the RO, but about future funding for onshore wind in general. Developers of projects knew that the RO would come to an end in March 2017, and many had spent several years—a long period—in the development process before the warnings were issued, and before the policy was put forward in the manifesto and, subsequently, the Bill. Having planned on the basis of the notion that the RO would come to an end, they found out very late in the day that the goalposts had been arbitrarily moved, and that their investment was lost overnight as a result.

Nor is the amendment in any way contrary to manifesto commitments; it is not about the principle of the early closure of the RO, but about the grace periods that follow from that closure process. It is not saying that there should not be grace period exceptions for schemes that, for various reasons, might fall foul of the new, arbitrary cut-off date. By highlighting a small number of projects that have fallen foul of the cut-off date for very specific reasons, it is saying that grace-period schemes should be built on a reasonable level of equity and fairness, and should work within an understanding of proper reasons for exemption; they should not simply impose a few extended, but nevertheless still arbitrary, cut-off dates for projects.

Lords amendment 7T highlights a particularly egregious inequity in the grace-period scheme. This involves schemes that have, even according to the new guidelines laid down in the Bill process, done the right thing throughout by seeking and securing local support. As the Government said earlier in the passage of the Bill, it was to be the sine qua non of permission for the development of any onshore wind in the future that local communities should have the final say in decisions; schemes, it was said, should obtain support, perhaps through local planning approval, and should not, for example, seek to win an appeal on the basis of national determination, having been turned down at local level.

The schemes covered by the amendment fit exactly that description. They have determinedly gone through the local process and engaged with it, rather than standing back and waiting to progress through an appeal. They have won local community support, in each instance through the granting of a planning decision by the local authority. The only issue is that, having gone through that often lengthy process of local consultation, they find that the successful, locally supported outcome has, at the stroke of a pen, effectively been turned into refusal. That has happened because the final planning certificate has not arrived by the cut-off date because of issues relating not to the permission, but to details of section 106 agreements on community benefit or similar issues, or to section 75 agreements in Scotland—that is, issues that arise not as part of the agreement process, but because the agreement has been reached. As these schemes could not produce a final, formal planning certificate by the arbitrary date of 18 June, the scheme as a whole was lost.

Here is the timetable of one such scheme, the Twentyshilling Hill wind farm in Dumfriesshire. The planning application was initially made on 15 March 2013 —a long time ago. It was approved by a planning committee, subject to a section 75 agreement, on 16 December 2014. It was not the fault of the wind farm applicant that the council took a few months to settle the section 75 application. Even so, the application was agreed on 17 June—again, before the cut-off date. However, despite the agreement being public and on the council website, the final certificate did not arrive until 1 July, making it null and void in the Government’s eyes, as the Minister has stated.

In retrospect, it might have been wiser for those and other developers not to take too much time on, or give too much attention to, local agreement, but to instead precipitate an appeal that they might have won. Indeed, when developers have done just that and the appeal decision has arrived after the cut-off date of 18 June 2015—we heard of such instances during the passage of the Bill—it has been accepted because of a provision relating to the grace period. The projects are deemed to have been okay all along and are allowed to proceed. That is frankly perverse, and it falls seriously short of the test of reasonableness and equity that ought to inform any grace period arrangement.

Lords amendment 7T relates to a small number of cases and seeks to restore a semblance of equity to the process. It is based on the principle that the Government themselves promoted as the basis for decisions on onshore wind applications. It is a principle for the future that, incidentally, Labour supports.

I shall explain the equity. If a local planning committee found in favour of a planning decision before 18 June, and the decision was arrived at via a process of consultation and community acceptance of the application, it should be covered by the grace period provisions. This small amendment would affect only about half a dozen schemes. In the overall scheme of things, it would make an insignificant inroad into levy control framework financial provisions, as far as the RO is concerned. It would, however, place a much-needed patch of equity on the grace period structure, and perhaps point the way to addressing seriously a future issue. That issue is this: are the Government intent on ensuring that onshore wind will be built in the future—it is, after all, the cheapest and most cost-effective renewable available—if local communities support the proposals, or do they intend to use national clout to override local wishes in pursuit of an overall closure of onshore wind, at least in England?

Accepting the amendment and finalising the Bill in this way would go a long way to restoring a principle that was supposedly central to the process for the future, and it would demonstrate to local communities that they really will be able to decide and not have their local wishes snuffed out by a fiat from the centre.

[John Redwood]

I hope that the other place will not delay this Bill further, because many people and parties in this House, and in the other place, wish it to go through to provide measures to help our oil and gas industry, which is struggling with the collapse in the world oil price and the consequent threat to jobs and prosperity that we would like to help alleviate.

I have two main reasons for strongly supporting the Government. First, they are absolutely right to say that our energy is too dear and that their measures are a contribution to tackling the problem of very expensive energy. A tragedy is unfolding in several of our industries, most recently in the steel industry, where the consequences of very high energy costs compared with those of our competitors around the world are manifest, especially the impact on output, profit, loss and loss of jobs. We desperately need to do more to tackle the problem of very expensive energy, so I admire the Government’s urgency in tackling one of its sources. The subsidy withdrawal is entirely appropriate.

One of the problems with wind energy—this makes it a very high-cost way of offering generating capacity—is that back-up capacity needs to be built to generate the power by some other means, because there will be times of the day, days of the week and weeks of the year when there is no wind. At such times, we are entirely reliant on the back-up power, and that requires a full range of back-up. There will always be extra costs involved with such an unreliable renewable source of energy.

On cost grounds, it is vital that we make rapid progress. I think that good notice was given—the election was notice enough, I would have thought. It was a prominent and popular policy. None of us was shy about debating it and we got a lot of support from many people.

The second main reason why I think the Government are right to take this action is that wind is so intermittent and unreliable. Therefore, if there is too much wind, the problems of managing and balancing the system become that much greater. As the Member of Parliament who represents the control centre on Bearwood Road in Wokingham, I am only too well aware of how its task is made much more expensive and complicated the more interruptible and unreliable energy there is on the system. The Government’s measure will be a welcome check on that. It will help it to manage the system better and to provide more reliable power for industry.

If there is too much unreliable power on the system and that power goes down, it is industry and commerce that will take the hit. They will be asked to forgo the use of power when there is no wind, but when we are desperately trying to compete in a very competitive world, surely it is important not just to keep the lights on in people’s households, but to keep the factories turning over.

--- Later in debate ---

[Graham Stuart]

It is a pleasure to take part in this debate, in which there have been interesting speeches by Members on both sides of the House. On ending the subsidy for onshore wind, the whole aim of subsidy regimes for renewable technologies is to encourage costs to fall and to drive them down over time to the point at which they no longer need a subsidy. The Government put that in their manifesto.

I think a lot of this is down to Labour Members, because they would not listen to communities, such as my own, which felt that wind farms were being imposed on them that blighted their view of the landscape. The sense of a loss of control, even more than the imposition of the turbines themselves, created a great deal of resentment. We have ended up in a position in which the party that won a majority at the general election stood on a manifesto promise to end this subsidy.

The Government have made provision to ensure that onshore wind, where it goes ahead, has the support of the local community. I have said previously in the House, so I will not go on about it at too much length, that that issue should have been sorted out. If it had been sorted out sooner, we might not have had the backlash that has found its form—not least through the agency of my hon. Friend the Member for Daventry (Chris Heaton-Harris)—in saying, “We feel that this subsidy regime is imposing these turbines on us.” The permissions, not the subsidy per se, was the central issue, but we are where we are.

Further to my intervention on my hon. Friend the Member for Wells (James Heappey), I want to make this point. Given that we now have an energy market in which the price producers charge for energy is far less than that at which anyone can afford to commission new production, we have a rather artificial market. I hope and expect we will make sure—I know Ministers are looking at this—that future regimes, for contracts for difference or whatever else, do not artificially block onshore wind from getting access to the market because of how pricing within that market operates. It is perfectly possible to ensure that there is no subsidy for onshore wind while ensuring that onshore wind alone is not deprived of access to the mechanisms that drive new commissioning for every other technology. I hope that Members on both sides of the House can agree to that. As long as communities have the final say on whether new wind farm capacity is brought into their area, and as long as onshore wind is treated no differently from other technologies, including fossil fuels such as gas, that is the situation we need to bring about.

[John Redwood]

Does my hon. Friend agree that it is quite difficult to attribute cost to stand-by power for wind? Wind uniquely needs such a power in a way that other forms of energy do not.