Energy BILL [ Lords ] (Fifth sitting)

Jonathan Reynolds Excerpts

Tuesday 2nd February 2016 Public Bill Committees

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

I am excited to hear the question of the hon. Member for Southampton, Test. I had not anticipated that it would be that, simply on the grounds that, as I, my right hon. Friend the Secretary of State and many Members in Committee and on Second Reading have made absolutely clear, our manifesto commitment was to end subsidies for onshore wind early. I therefore say philosophically to the hon. Gentleman that, had we meant new subsidies we would have said “new subsidy schemes”, which is the interpretation I think he wants to put on our manifesto commitment.

Let me be clear: the Government were elected with a clear manifesto commitment to end new subsidies for onshore wind and to ensure that local people have the final say on where onshore wind is built. I hope that hon. Members will accept that it is for the Government to agree what their manifesto commitments are. We have gone to great lengths to assure all hon. Members that what we meant was to close the subsidy early; we are not referring to new subsidy schemes. Had we meant schemes, we would have said schemes.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I am curious about the relationship between the two parts of the Conservative pledge that the hon. Lady has just described—ending subsidy early but also making sure that local people have the final say on projects. Of course, the wording of the amendment means that those two positions are contradictory, because any local project that receives planning consent before 18 June under the proposed grace period could not go ahead. In other words, people have approved certain projects, but they will not go ahead because of the narrowness of the grace period in the amendment. Are those two positions not contradictory?

[Andrea Leadsom]

I welcome the hon. Gentleman. I think this is the first sitting of the Committee that he has been able to attend and it is good to see him here. He will appreciate that grace periods have to be set and a line has to be drawn somewhere. We have tried to accommodate the need for investor certainty and to be fair both to the businesses building onshore wind and to the consumers who are paying for them. We will get on to that in due course.

The first part of our manifesto commitment is now well on its way: clause 79, together with supporting secondary legislation, will ensure that the Secretary of State is no longer the primary decision maker for any onshore wind applications in England and Wales. New planning guidance for England, issued by my right hon. Friend the Minister for Communities and Local Government, complements this change by ensuring that local people have the final say on new onshore wind planning applications.

It is imperative that we deliver the second part of our manifesto commitment—to end new subsidies for onshore wind—to protect consumer bills and manage spending under the levy control framework. These amendments will ensure that we do exactly that by reinstating the provisions that were removed in the other place. We are committed to delivering our manifesto commitment while protecting investor confidence. It is my view that these provisions, including our grace period proposals, strike a fair balance between the public interest—including protecting consumer bills and ensuring the right mix of energy—and the interests of onshore wind developers and the wider industry.

At the end of April 2015, there were already 490 operational onshore wind farms in the UK, with an installed capacity of more than 8 GW—enough to power the equivalent of more than 4.5 million homes when the wind is blowing. That significant achievement was made possible only by providing consumer-funded subsidies. The Government estimate that in 2015-16, £850 million of support will go towards funding onshore wind across the UK, of which about £520 million, or approximately 60%, will fund Scottish onshore wind farms.

Recent levy control framework forecasts indicate that spending on low-carbon generation in 2020 will be £9.1 billion in 2012 prices. The Government previously set a limit of £7.6 billion, so the current forecast is already £1.5 billion above that, and additional costs would need to be met through increases to consumer energy bills. As my right hon. Friend the Secretary of State for Energy and Climate Change said on 18 January,

“New, clean technologies will be sustainable at the scale we need only if they are cheap enough.”—[Official Report, 18 January 2016; Vol. 604, c. 1152.]

When costs come down, as they have for onshore wind and solar, consumer-funded support should, too.

Let me reassure all Committee members that we already have enough onshore wind in the pipeline to meet the projected 11 to 13 GW needed to meet our ambition of generating 30% of electricity from renewables by 2020. That 11 to 13 GW is the deployment range clearly set out in the electricity market reform delivery plan. It is our best estimate of what we need to meet our 2020 targets, compared with what we can afford under our low-carbon spending cap.

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[Andrea Leadsom]

I guess that the hon. Gentleman makes the reasonable point that one could be traded for another, but the object of our renewables policy is not merely to avoid getting fined by the EU. I am quite sure that he does not mean to imply that that is the case. The idea is to decarbonise the UK economy. Yes, we could decide to take one route only and therefore not worry about other sectors such as transport and heat, but I am quite sure that the hon. Gentleman is not seriously suggesting that. Even if he were, it is absolutely still the case for the renewables sector that if we continue to offer generous billpayer subsidies, costs to consumers will continue to rise.

The policy was well thought through and had deployment ranges that forecast the achievement that we sought against our legally binding targets. We believe that we are in a position to meet the target with onshore wind. Simply saying, “We should carry on with it because we can do more than we set out to do,” is not a way to run anything, so I cannot agree with the hon. Gentleman that it would make sense to continue with subsidies at the expense of billpayers. This is not free money. We frequently discuss in the Chamber the problem of people being in fuel poverty and those are the people who will have to keep paying for subsidies if we choose to deploy beyond the level that we have already set for ourselves.

[Jonathan Reynolds]

The Minister’s representation of the points is incorrect. The argument is not that we are doing well and should therefore do more; it is that there is an overall renewables target for the UK that comprises certain percentages of electricity, heat and transport and we are nowhere near the heat or transport targets. If we are doing better on electricity, doing more is essential in order to hit our legally binding target. It is not about voluntarily doing more; it is about recognising that there will have to be compensation in other sectors if we are behind on heat and transport, which is a fact under our EU target.

[Andrea Leadsom]

I remind the hon. Gentleman that, in making progress towards our 2020 renewables target of 15%, we have surpassed our interim target for 2013 and 2014 with an average 6.3% of final energy consumption coming from renewable sources over those two years against a target of 5.4%. The contribution of renewables to energy generation is increasing across heat, electricity and transport. Heat from renewable sources increased by 4.6% during 2014. As hon. Members have pointed out, a record 19.1% of electricity generation came from renewables in 2014. Renewable biofuels for transport also rose by 14% during 2014.

I can again say to the Committee that we have targets for each of our energy sectors, and it is simply not realistic to say that just because onshore wind benefits from a generous subsidy and other projects could come forward, we should change our deployment target aspirations, putting the ensuing costs on to consumers’ bills at a time when we are already comfortably meeting our targets.

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[Chris Heaton-Harris]

There are communities out there now that are directly affected by amplitude modulation from wind turbines. I can cite Cotton farm in South Cambridgeshire. That constituency is on the border between two local authorities, both of which have passed motions in the council chamber and written to the Government asking for stronger guidance on these points.

Noise is monitored on a regular basis by a set-up in the community to scientific standards. When an onshore scheme is mooted, noise readings are taken using the same equipment, verified by a third party. Because we can predict when amplitude modulation is likely to occur—it depends on atmospheric conditions, meteorological patterns and wind speed—and can see all those factors happening in front of us, we can predict where the noise will fall. The developer can therefore be asked to shut the turbines down so that they do not cause harm, as has happened in Cotton farm a couple of times. I can absolutely see myself campaigning with other communities up and down the country to ensure that the amplitude modulation from turbines that are already up does not cause undue concern in local communities.

Initially, 10 or 15 years ago, the equipment required to set these up was very expensive. Now, it can be done for about £3,000. Most communities, and certainly a number of developers, could afford that, which would possibly take this problem away. I am trying to make the point to the hon. Member for Norwich South that there are, as my nan would say, many ways of skinning a cat.

The Government have been particularly slow to implement these provisions. I would like them to go further. I am pretty sure I could get together a decent-sized political caucus to do that. If we seriously intend to argue against part of the Bill falling under the auspices of the Salisbury doctrine, and if we are going down the line of dancing on the head of a pin over these issues, the consequences further down the line for this industry will be a lot worse than if we accepted that the Government had a clear manifesto pledge that they are effecting today.

[Jonathan Reynolds]

It is a pleasure, Mr Bailey, to be on the Committee. I had not intended to make a speech about the group of amendments but, as ever, Government Members’ contributions have led me to get to my feet. Many of their arguments have not been robust enough; many of the positions advanced have, quite frankly, been flawed and deserve further attention.

My starting point is that anyone considering the needs of our energy system right now has to admit that the most pressing priority is to ensure that our credentials for investability are maintained and strengthened. Our energy system requires billions and billions of pounds of investment, partly because so much of our generating capacity is going off line in the next few years, at the end of its natural life; partly because the capacity market has not worked as well as was hoped in incentivising new gas; partly because Hinkley C is in as much trouble as it was always going to be—we do not know whether it will ever be there when we need it—and also because we need to take coal out of the system, as a clear priority shared by all political parties. The need, therefore, to ensure that our energy structure is an attractive jurisdiction in which to invest must absolutely be maintained.

Much of the argument that has been advanced has been about the changes to onshore wind being clearly signposted in the Tory manifesto—indeed, demanded by the windy caucus, which is a wonderful new term to add to our political discourse. I do not dispute that; ideological opposition to onshore wind has been a part of the modern Conservative party for some time. I do not disagree with the legitimacy of the move any more than I disagree with the legitimacy of all the other bad things the Conservative Government are doing to the UK, but my point is that there is surely a duty on the Government to ensure that the decision is taken in such a way as not to damage the UK’s overall credentials as a jurisdiction in which to invest.

[Oliver Dowden]

The hon. Gentleman says that he accepts the legitimacy of the Government’s pursuing the measure, given that it was in the Conservative manifesto. Does he therefore accept the illegitimacy of Members of the House of Lords—Labour and Liberal Democrat Members who lost the general election—seeking to remove the provisions from the Bill, against the will of the electorate, as expressed less than a year ago?

[Jonathan Reynolds]

The hon. Gentleman essentially asks whether I agree with the illegitimacy of parliamentary democracy, and I have to tell him that I am afraid I do not.

[Oliver Dowden]

Does the hon. Gentleman not accept the Salisbury convention, which is that if something is contained in a party’s manifesto and that party wins a majority, the other place should respect the will of the elected Chamber?

[Jonathan Reynolds]

That is not what I believe has happened; indeed, a small section of my comments will address that. I believe that two positions are advanced in the Conservative manifesto and the Bill: one is that the RO should close early for onshore wind and the other is that local communities should have the final say in the projects. When I get on to that section I will tell the hon. Gentleman why I believe that those two objectives are in competition and have led to contradictions in the Bill.

Our electricity system figures for the past 24 hours show that wind has contributed something like 14% of our overall electricity need, which is just 1% less than our traditional coal-generating capacity. The issue is not, therefore, insignificant. It is hugely important; right now, wind is keeping the lights on.

[Chris Heaton-Harris]

I do not want to be pedantic and I hope that the hon. Gentleman takes this point in the way in which it is meant. On Second Reading, we did not have Storm Henry passing through and wind was therefore producing just about 1% of our energy. At any one time, the figure flexes between 0% and, I believe, up to 18%, but it always needs gas turbines churning in the background as a back-up.

[Jonathan Reynolds]

We are straying a bit beyond the narrow remit of the Bill, but the point is an important one. On Second Reading—the hon. Gentleman and I were there—the overall figure was 5%, not 1%. It was 1% at the specific moment that the hon. Gentleman spoke—I will give him that—but in that 24-hour period it was running at about a quarter of the energy produced by our entire nuclear fleet, which is not a small contribution.

I recommend that all hon. Members take the time to go to National Grid’s control centre to see the multitude of different generating assets that can be turned on, or brought off the system, as required to keep the system in balance. That is not done as a short-term response to the current level of wind. National Grid’s weather planning system tells it exactly what it will need on certain days, and it is tremendously effective. I do not agree with the simplistic point that every megawatt of wind energy will have to have a corresponding megawatt of traditional gas generating capacity to back it up. Frankly, the people who are skilled at running our entire network do not tell me that that is the case, and I am willing to believe them given how successful they are at running the overall system.

[Rishi Sunak]

The hon. Gentleman is well versed in these matters, so can he point me in the right direction? My understanding is that Ofgem gives guidance to the grid about ensuring system security and ensuring that there is enough capacity at peak times of the day. Ofgem’s recommendation is that wind is considered to have the equivalent firm capacity of 20% of a thermal plant. That Ofgem recommendation clearly states that wind is not as efficient as a thermal plant, and when it is considering system security, there must be back-up. Does he disagree with Ofgem on that point?

[Jonathan Reynolds]

The hon. Gentleman is making a different point from his colleague, but for every generating asset on the system there will be a corresponding back-up percentage. Some of the greatest intermittency problems come from routine cases where things such as nuclear generating assets have to be taken off line for maintenance. All those decisions therefore have a corresponding back-up ratio, which is nothing new. One of the most frustrating things in debates about energy with the modern Conservative party is that a certain set of arguments is often applied to the renewable asset that is currently not in vogue in the Conservative party—there is a pretence that all the complexities of the energy system, whether it is strike payments or back-up capacity, only apply to things such as onshore wind, but obviously they apply to every generating asset.

[Rishi Sunak]

Looking at the numbers, does the hon. Gentleman at least agree that most other generating capacity back-ups are in the 80% to 90% range and that wind is an outlier, and considerably lower, at 20%? Is it at least true that wind is considerably less reliable than those other forms of generation?

[Jonathan Reynolds]

I do not agree at all.

[Dr Whitehead]

My hon. Friend might like to think about two points. First, the relative capacity margin of different forms of energy takes into account theoretical running time relative to downtime, and other factors, and therefore the figures should not be remotely near 80% or 90%. Secondly, will he speculate for a moment on the question of ramping down and ramping up? Wind is particularly good at that as far as balancing the system is concerned.

[Jonathan Reynolds]

Absolutely. There is an obsession in the Conservative party with onshore wind, and often with other types of renewables, too. Arguments are applied to onshore wind that are often illogical. I simply ask hon. Members to spend some time going to see how the system is run and how all these issues apply to different assets on the grid. If they did that, some of their fears might be allayed.

[Andrea Leadsom]

The hon. Gentleman is being extraordinarily patronising. I have been to see National Grid operations. Does he have the app through which the National Grid provides real-time data? During Second Reading, 1% of our electricity was supplied by wind. Does he not accept that there are times when the wind is simply not blowing? Furthermore, does he agree that, although it is true that, in its balancing, National Grid considers the forecast for outage times, for planned outages and for wind, those forecasts are often wrong? Does he accept that it is therefore not possible to be absolutely certain how much electricity wind will contribute at any one time? He must surely accept that.

[Jonathan Reynolds]

I accept that sometimes the wind does not blow—that is a reasonable point. On Second Reading, the figure was 5%, not 1%, as I said to the hon. Member for Daventry, if we take the 24-hour period in which the Bill had its Second Reading. I simply say that all generating assets have intermittency problems and require back-up. If we look at many other countries across the world, we are not the only country with an onshore wind contribution to our electricity system. Every other country in the world is investing in this in large numbers. The Minister sometimes has to respond to her own Back Benchers when they are being unfair when talking about onshore wind. Some issues are not being treated reasonably by the Government and by Conservative Back Benchers.

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[Philip Boswell]

The hon. Gentleman makes a good point. Moreover from his excellent point, the sunk costs incurred, for example, on Twentyshilling Hill, currently sit at £3.5 million plus further commitments and the sunk costs incurred on Binn Eco Park wind farm currently sit at £1.5 million. That needs to be considered.

[Jonathan Reynolds]

Some interesting points are being raised, which the Government would do well to treat fairly.

The Minister mentioned the overperformance of onshore wind and our 2020 renewables target. I must stress this point clearly: there is a legally binding overall 2020 renewables target, but it is made up of a road map of targets for electricity, heat and transport, which are not binding but form our contribution to the overall renewables target. The target is for 30% of electricity generation, 12% of heat generation and 10% of transport to be renewable by 2020. When conceding that point, the Minister said that the problem is that the subsidies required for electricity and things such as onshore wind are such that we could not possibly try to overperform and that, frankly, we are not hitting our heat and transport targets.

If the Minister is worried about the impact of electricity subsidies on billpayers, she must get the briefing on how we will hit the heat target. To do so through the renewable heat incentive alone would require a budget in excess of the entire budget for the Department of Energy and Climate Change. The Minister will not save money by cutting back on this important area. She will almost certainly incur a much bigger liability for the taxpayer unless she can tell us that we are on track for our heat and transport targets, but we all know that we are not.

The Bill is needed to legislate for the Conservative party’s manifesto position, but the Government should recognise the UK’s pressing situation regarding investability. There are anomalies in the way that the Government’s objectives have been drawn up in the Bill and it is reasonable to correct them at this stage. Most of all, this group of amendments strikes the right balance between the Government’s objectives, investability and the national interest. I hope that the amendments will be considered properly.

[Simon Hoare]

It is a pleasure to serve under your chairmanship, Mr Bailey.

I was slightly anxious when my hon. Friend the Member for Daventry began his remarks with a clear US feel in talking about caucuses and the like. The Committee will know that today is groundhog day in the United States and listening to some of the speeches of Opposition Members, it did feel a bit like groundhog day today. Google is good for some things. [Interruption.] Trump that, as my hon. Friend says.

My heart sank when listening to an erudite but certainly groundhog day speech from the hon. Member for Norwich South, with all those surveys where this association says that and that association says the other, while 37% do such and such. As we all know, surveys can be made to say all sorts of things. “Bears prefer woods to bathrooms,” says one survey, “Turkeys don’t endorse Christmas as an annual event,” says another. The one survey that the Opposition parties seemed to neglect was the survey at the general election. That was a survey in which the British people said very clearly, among other things––particularly, though not exclusively, in rural England––that enough was enough. The survey at the ballot box demonstrated that this is an incredibly popular policy.

I have a fundamental support for how the Government are proposing to tackle the issue. My hon. Friend the Member for Daventry alluded to it. It would have been entirely within the purview of the Department––had it so wished, based on the election result––to say, “There we are. We’ve won. Any form of financial support or subsidy is going. You’ve got 12 hours to prepare and that’s it.” [Interruption.] For an Opposition Member to say that something the Government might do is very stupid takes a little brass neck. The hon. Member for Stalybridge and Hyde exhorted us all to take front and centre our duties to ensure that the investment markets had confidence in Britain. I look forward to the leaked transcripts of parliamentary Labour party meetings where he makes those points to his leader and the shadow Chancellor because I am not entirely sure that their policies do much to support confidence for investment in UK plc.

The stance that the Government have taken is to have a realistic timeframe whereby the industry, which must have been the most myopic ostrich if it did not see this coming, has time to rethink existing plans and, if it so wishes, seek alternative funding from the market. It is indicative that the Opposition say that this sector must always be subsidised. When David Davies of Llandinam literally sold the family silver––and almost the shoes on his feet––to pay the workers who were digging for coal in the south Wales valleys because he realised that there would be a market for coal to fuel the industrial revolution of which we were on the cusp, I doubt he sat down and thought, “Do you know what? I just wish there was a Government subsidy to support me doing this.” No, he realised that there was a market opportunity with profit attached to it and he went and did it. He did not need a subsidy and I do not believe wind should have one.

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[Simon Hoare]

No, I do not, with the greatest of respect. I can recall in my own commercial career working on a project for at least 11 years, where the client had spent somewhere in the region of £8.2 million propounding a planning proposal and still was not in sight of securing a consent. This is the point that I make. If someone is in the commercial development sector—the energy sector or whatever—there are risks attached.

[Jonathan Reynolds]

There is a point that has to be stressed here. Onshore wind developers are not arguing against the closure of the RO. They are not arguing for anything that might be unreasonable in terms of the risks that they knew were involved in the planning system. They are asking for the Government’s promises on sunk costs to be honoured. That is what the group of amendments does. They are not about demanding subsidy for ever or about asking for compensation for reasonable risks that were known to be there. It is about the Government honouring their promise on sunk costs.

[Simon Hoare]

I hear what the hon. Gentleman says. He obviously has a little more faith—I will be charitable and say faith—because I am not entirely convinced that any sector that is so sated by subsidy would ever turn round at any point and say, “Do you know what? Now is a really good time to end the subsidy.” There will always be a reason. We heard it from the solar sector: “Give us another 10 more years because we are on the cusp of doing something quite exciting with storage batteries.” Why they did not think about that when the sector was nascent, I do not know. People who receive a subsidy will always find an argument for the maintenance of the status quo.

The hon. Member for Southampton, Test, who leads for the Opposition, is about to burst a blood vessel unless I let him in. Having listened to him for the past two and a half days, I am loth to do so, but of course I will let him in.

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[Andrea Leadsom]

I thank all members of the Committee for what has been an entertaining, informative and feisty discussion. Hon. Members of all parties share the desire to see fairness, so I take on board the comments of the hon. Member for Southampton, Test about grace periods. We have looked at them carefully. He will have heard my hon. Friends the Members for North Dorset and for Daventry saying that we could have come in on 6 May and said, “Right, you’ve got 12 hours,” but we were absolutely determined to have a measured response, and 18 June was roughly five or six weeks. We consulted widely. Although it was not a formal consultation, I can provide Members with a link—I do not have it to hand—to some of the feedback in the consultation with industry, which was carefully done to ensure that we got the balance right.

I congratulate my hon. Friend the Member for Daventry, who has done so much work. I like the 101 dalmatians. I would have been one of them, but I think I was probably Cruella de Vil. I was certainly one of the signatories to his letter, and as his neighbour in Northamptonshire, I was very much aware of the grave concern of communities who felt that they were not being listened to. It was a great pleasure for me, as a new Minister in the Department, to be able to implement our manifesto pledge. Both my hon. Friend and I can assure Members that this is exactly what we meant by it. All colleagues on the Government Benches understand that closing the RO early was a clear manifesto commitment—no ifs, no buts.

I also congratulate my hon. Friend on his excellent work on amplitude modulation. He came and talked to me about it with a number of experts. We are determined to address and find a solution to the problem. He reminds me frequently that I need to come back to him with an answer, but the Department is taking independent advice on the matter. We hope to make some progress on that.

The hon. Member for Stalybridge and Hyde raised a number of points that I welcomed. He talked about fairness to investors and sunk costs. Equally, he must recognise that we, as the Government, must manage the potential upside risk of deploying up to a further 7 GW and more of onshore wind, which we know is in the planning system. As I said earlier, our deployment range in our electricity market reform estimation was between 11 and 13 GW of wind, and we believe that we will still be able to be within that range.

Developers build risk into their decision making. Even before the changes were introduced, there was never a guarantee that the projects will build out. There are all sorts of risks involving planning permission— access to grid and issues with military radar. There are all sorts of reasons why projects do not come to fruition. Equally, the Government have been clear that our absolute No. 1 priority is energy security, and then decarbonising at the lowest possible cost to consumers. That means that we need to get the balance right between the costs on bills and our decarbonisation targets, to which we remain absolutely committed.

[Jonathan Reynolds]

Of course there are risks in any field that must be built in, but our point is that the greater those risks—and the Government are making those risks greater—and the higher the cost of capital, the less investment will come to the UK. It is as straightforward as that.

[Andrea Leadsom]

I am sure, then, that the hon. Gentleman will be delighted about our commitment to further deployment of offshore wind and to the new nuclear programme, both of which are a low-carbon future for the UK. Targets for decarbonisation and new gas, and a big decarbonisation away from coal and into gas, are the bridge to a low-carbon future. I am sure that he will welcome the certainty that we have given investors with that, and the opportunity for UK plc to get more jobs, more growth and more business in the supply chain as a result of our changes in policy.

I will come specifically to the amendments tabled by the hon. Member for Coatbridge, Chryston and Bellshill, whom I thank for his excellent portrayal of the intention behind them. I hope to give him some reassurance on some of those points. My hon. Friend the Member for North Dorset is absolutely right to point out that the survey of the ballot box, which is the best survey, has entirely supported our policy on wind. He raised the question of appeals and judicial reviews. The appeals process is still in place for onshore wind. However, any appeal in England on a decision taken after 18 June will need to take into account the clear statement made by the Secretary of State for Communities and Local Government on 18 June, which sets out the new considerations to be applied to proposals so that local people have the final say on wind farm applications, fulfilling the commitment made in the Conservative election manifesto. Importantly, it also makes it clear that planning permission should be granted only if the development site has the support of the local community and that it can be demonstrated that any planning impacts identified by affected local communities have been fully addressed. My hon. Friend is right to raise that point and I hope he is reassured.