Lindsay Hoyle
Main Page: Lindsay Hoyle (Speaker - Chorley)
Tom Greatrex
I am listening carefully to the hon. Gentleman’s list. He will know that some elements of it are dealt with in later amendments, particularly the one about community energy, which would increase the threshold from 5 MW to 10 MW. Will he support that amendment if we divide on it?
Mr Deputy Speaker (Mr Lindsay Hoyle)
We can bide our time on that until we get to that group of amendments.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We still have four speakers wishing to speak in the debate, as well as Mr Yeo, who I am sure will want to speak briefly again at the end. I call Mike Weir to speak, ideally for four or five minutes.
Mr Weir
I strongly support the amendments in this group. It is imperative to decarbonise the energy sector, and I believe that including a decarbonisation target in the Bill would give a clear and unmistakeable message that we intend to do so. The first reason for adopting such a target is that we must reduce our carbon emissions. The energy sector is a major contributor to carbon emissions and the Committee on Climate Change has made it clear that decarbonising power is the cheapest way of meeting our overall carbon budgets.
There is, at best, a mixed message coming from the Government on how they intend to proceed with the decarbonisation of energy. In the Bill Committee, witnesses told us time and again of the need for a decarbonisation target to ensure that a clear message was sent to those involved in the industry. The mixed message coming from the Government could seriously harm our efforts to attract not only new renewables generation but, crucially, the supply chain that will ensure that we reap the economic benefits and the jobs that go with them. In opposing the decarbonisation target, Ministers have made the point that other nations do not have such a target. That is true, but many of those countries are already ahead of us in creating a supply chain that can supply investment in renewable energy in their territories. We are trying to attract that supply chain here and to ensure that it is established so that we do not simply continue to import the infrastructure that we need to create green energy for the future.
Much was said earlier about the situation in Germany. Although it is true that Germany does not have a decarbonisation target, it recently announced a very ambitious 2030 renewable target, which includes 25 GW of offshore wind and a budget of €23 billion. I understand that France, too, is considering moving towards such a target, so there is movement elsewhere within the EU on such targets, and we should not be left behind.
In the evidence session, Danielle Lane of DONG Energy made it clear that the 2020 target is presently at the cliff edge, and that the industry needs certainty about the direction of travel after 2020—a clear sign that after that date there will continue to be a clear commitment from all parties to continue along the route of decarbonisation.
The issue is very important to Scotland, where the development of green energy is a vital part of the revitalisation of our manufacturing industry. It is interesting to note that the Scottish economy has achieved some growth over the last two quarters, much of it through the energy sector. Scotland’s offshore potential is huge—25% of the entire European potential. If we are able to harness that, we could attract billions of pounds-worth of investment and create tens of thousands of highly skilled and sustainable jobs. Indeed, Scotland’s offshore wind route map outlined the potential for £30 billion-worth of investment with up to 28,000 direct and 20,000 indirect jobs by 2020.
We already have strong offshore experience in the oil and gas industry, particularly in the north-east, and many of these skills could be transferable to new offshore renewable energy developments. I would cite the example of offshore wind, which I believe has a strong vibrant future. There are plans to install up to 10 GW of capacity in Scottish waters over the next decade, including three projects off the coast of my Angus constituency. Many more sites, alongside commercial wave and tidal generation, are being looked at for deployment in the 2020s. We must ensure that we send a clear and unambiguous message that we want these developments, and that we will continue to push for the decarbonisation of the energy sector.
It is important to set the targets now because companies are looking at long-term investment. It will be many years before these investments come on stream, but the decisions affecting 2020 are being looked at in the boardrooms now, and if we delay in putting forward our plans for decarbonisation, we may well lose out on all the potential.
Over the last few years, both private and public investment has been made to help stimulate sustainable, long-term growth in offshore renewables, including developing the technology. The deep waters off Scotland’s shores have specific problems, but many of them have already been tackled by oil and gas development, which might point the way to dealing with offshore wind arrays and onshore development at our ports such as Dundee and, in my own constituency, Montrose. That development, however, is based on the assumption of having a long-term stable market for manufacturers.
Firms such as Gamesa, Areva, Mitsubishi and Samsung have indicated an intention to establish manufacturing plant in Scotland in order to meet the expected opportunities for offshore wind development. The difficulty we face with this Bill, however, is that we can be sure of funding only up to 2020—and then, as DONG Energy says, we face the “cliff edge” of uncertainty. Many of those who are considering investments do not feel that there is sufficient reassurance of a long-term market for their products beyond that date, which could lead them to reconsider or delay any decisions on investment. Such delays could lead to a significant loss to the economy and check ambitions to create a new greener manufacturing base, especially when, if companies decide to go ahead within the compressed time that is certain, there would be a considerable shortfall in the ability of UK-based manufacturers to meet the demand for turbines, which will inevitably lead to the importation of much of the infrastructure, creating jobs elsewhere but not in Scotland.
I finish on the point that decarbonisation is important not just for climate change benefits, but for the real economic benefit of creating sustainable jobs for the future.
The Minister of State, Department of Energy and Climate Change (Gregory Barker)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
Government new clause 12—Pilot scheme for electricity demand reduction.
New clause 2—Strategy for electricity demand reduction—
‘(1) The Secretary of State must within 12 months of the passing of this Act publish a strategy setting out policies to achieve a reduction in demand for electricity of at least 103 TWh by 2020 and 154 TWh by 2030.
(2) The strategy must include an assessment of the cost effectiveness of the policies included in it.
(3) Before publishing the strategy the Secretary of State must consult such persons as in his opinion may have information that will assist him in drawing up the strategy.
(4) The Secretary of State must—
(a) implement the strategy; and
(b) report to Parliament every year on progress.’.
Amendment (a) to new clause 2, at end add—
‘(5) Nothing in the strategy shall rely upon the use of the price mechanism to reduce demand.’.
Amendment 1, in clause 10, page 8, line 8, at end insert—
‘( ) Section 41(4)(a) of the Energy Act 2008 (“specified maximum capacity”) is amended as follows: “Specified maximum capacity” means the capacity specified by the Secretary of State by order, which must not be less than 10 megawatts.’.
Amendment 42, page 8, line 8, at end insert—
‘( ) Regulations must—
(a) place a duty on the Secretary of State and the Authority to promote new generation capacity from distributed generation schemes; and
(b) define “distributed generation schemes”.’.
Amendment 43, page 8, line 8, at end insert—
‘( ) In section 41(2)(a) of the Energy Act 2008, at end insert—
“() establishing, or making arrangements for the administration of, a scheme of financial incentives to encourage the distributed generation of electricity;”.’.
Amendment 44, page 8, line 8, at end insert— In section 41(2)(b) of the Energy Act 2008, at end insert—
“() requiring or enabling the holder of a distribution licence to make arrangements for the distribution of electricity generated by distributed generation;”.’.
Amendment 45, page 8, line 8, at end insert—
‘( ) In section 41(2)(c) of the Energy Act 2008, at end insert—
“() requiring the holder of a licence to make arrangements related to the matters mentioned in paragraph () or ().”.’.
Amendment 46, page 8, line 8, at end insert—
‘( ) Section 41(4)(a) of the Energy Act 2008 (“specified maximum capacity”) is amended as follows—
“specified maximum capacity” means the capacity specified by the Secretary of State by order, which must not exceed 50 megawatts.’.
Amendment 47, in clause 15, page 10, line 13, at end insert—
‘(d) conferring on the Secretary of State the power to establish an auction market (the “green power auction market”) in which generators are entitled to offer, and holders of supply licences are entitled to bid for, electricity generated from renewable sources.
(e) the the Secretary of State must exercise the powers in subsection (d), and take such other steps as they consider necessary, for the purposes of ensuring that—
(i) the green power auction market begins to operate when the first CFD is made and does not cease to operate until expiry of the last CFD that has been made; and
(ii) the reference price under a CFD entered into by a generator who is a party to any agreement made through the green power auction market is based on the price payable to the generator under that agreement,
(iii) in this section, “supply license” means a licence under the section 6(1)(d) of the Energy Act 1989.’.
Amendment 34, in clause 21, page 12, line 41, leave out ‘this section’ and insert ‘subsection (1)’.
Government amendment 100.
Amendment 35, in clause 21, page 13, line 6, at end insert—
‘(4A) The Secretary of State must within one year of the passing of this Act make regulations establishing a scheme or schemes to make payments for the purpose of rewarding the installation of energy saving measures.
(4B) Regulations under subsection (4A) are referred to in this Chapter as “demand reduction regulations”.
(4C) Prior to the making of regulations under subsection (4A), the Secretary of State must publish a report setting out the total potential for energy demand reduction and the extent to which this potential will be achieved by Government policies including—
(a) the scheme or schemes, and
(b) other relevant programmes, regulation or expenditure.’.
Amendment 36, in clause 22, page 13, line 13, at end insert—
‘(1A) Demand reduction regulations must make provision about demand reduction payments.’.
Amendment 37, page 13, line 21, at end insert—
‘(2A) Subject to any further provision made under this Chapter, a demand reduction payment is an instrument by virtue of which—
(a) an energy user is paid for reducing the demand for energy or investing in a technology which can be shown to reduce the demand for energy either permanently or for a specified period;
(b) all electricity suppliers may be required to make payments (“demand reduction payments”) to or for the benefit of these users.’.
Amendment 38, page 13, line 23, at end insert—
‘(3A) Provision included in regulations of demand reduction payments for the purposes of subsection (2A) may make provision about the meaning of “energy user”.’.
Amendment 39, page 13, line 41, at end insert—
‘(4A) Provision included in regulations of demand reduction payments by virtue of subsection (2A) may include provision about—
(a) the terms of a demand reduction payment;
(b) the circumstances in which, and the process by which, a demand reduction payment may or must be made;
(c) the persons who may be paid;
(d) the circumstances in which and technologies for which payments may be made;
(e) the number and size of payments;
(f) the means by which demand reduction payments are to be calculated;
(g) a person or body who is to administer the settlement of demand reduction payments (“a settlement body”);
(h) the enforcement of the terms relating to demand reduction payments;
(i) the resolution of disputes relating to a demand reduction payment payment;
(j) the circumstances in which a demand reduction payment may be terminated or reclaimed or varied;
(k) the circumstances in which a demand reduction payment may be assigned or traded;
(l) the means for monitoring and verifying the energy reduction for which demand reduction payments are made.’.
Amendment 40, page 14, line 6, at end insert—
‘(5A) Provision falling within subsection (4A) includes provision—
(a) conferring on the national system operator the function of issuing demand reduction payments;
(b) about any conditions that must be satisfied by or in relation to a person before that person may receive a demand reduction payment;
(c) about any matters in relation to which a person must satisfy the national system operator before the person receives a demand reduction payment.’.
Amendment 41, page 14, line 9, at end insert—
‘(6A) Provision made by virtue of this section may include provision requiring a person to consent to the inspection of plant or premises, either before or after that person receives a demand reduction payment.
(6B) Subject to the provisions in section 24, the Secretary of State must within six months of the making of demand reduction regulations establish a fund drawn from capacity payments for the purpose of issuing demand reduction payments.’.
Government amendment 135.
Gregory Barker
We now turn to the topics of electricity demand reduction and route to market. I shall speak in favour of the new clauses and amendments in the name of the Secretary of State and I thank hon. Members for tabling the other new clauses and amendments in this group, prompting debate on this vital set of issues.
I will start by setting out the Government’s approach to electricity demand reduction. Making good my pledge in Committee, the Government have brought forward new clauses 11 and 12 and amendments 100 and 135, which, for the very first time in our energy history, would allow energy saving projects to compete for new investment on an equal footing with power stations. It has long been recognised that in many cases it is cheaper, as well as greener, to save electricity rather than generate it. However, the coalition’s radical legislative proposals for large-scale energy efficiency are a double win—a win not only for the green agenda, but for hard-pressed consumers worried about rising bills.
The fact is that successive Governments have failed to grab the opportunity to get units of saved power, or “negawatts” as they are sometimes called, to compete with traditional megawatts. Thanks to this reforming Energy Bill, the era of negawatts has finally arrived. We already have a number of important policies aimed at driving greater efficiency, but these measures mean that we can go further. As I said to the Financial Times way back in September 2010, we need to create new markets for electricity efficiency projects to bring in the scale of new investment needed that is commensurate with the challenges and opportunities.
Following our consultation on options to promote electricity demand reduction, we concluded that a new financial incentive would be the most effective way of delivering a step change in the efficient use of electricity. The most cost-effective way to achieve this, without cannibalising the budget for renewables, is to include demand reduction in our proposed capacity market, and that is achieved through Government amendment 100. Hon. Members and their constituents can now be reassured that while we have a massive, multi-billion pound, low-carbon infrastructure programme ahead of us, we will not be building expensive new energy plants unnecessarily where cheaper alternatives for energy efficiency are available.
Delivering EDR through the capacity market will let us achieve three key objectives: targeting reductions at more expensive peak times; securing value for money because it will set megawatts against potentially cheaper “negawatts”; and bringing permanent demand reduction projects into line with shorter-term demand-side response measures to enable more effective, joined-up delivery of energy efficiency across the board. The approach of delivering EDR through a capacity market is proven—it is already being done in the United States of America—but our approach is more visionary and will certainly be much more ambitious. Government new clause 12 will provide a spending power to enable our approach to be tested via a large pilot, or pilots, to better understand, among other things, the complexity of the issue and the scale of the potential. Government new clause 11 and Government amendment 135 allow the Secretary of State to appoint and make payments to an alternative delivery body to National Grid for the capacity market. If it is decided that National Grid is not best placed to carry out the EDR elements of the scheme, then we will have this legislation ready.
I am most grateful to the hon. Members for Southampton, Test (Dr Whitehead) and for Brighton, Pavilion (Caroline Lucas) for their thoughtful amendments, which were tabled prior to the Government’s amendments. I am also grateful for their consistent and constructive, as well as passionate, advocacy of this agenda. I particularly thank the hon. Member for Southampton Test. He and I have long been proponents of action in this area, but his expertise in and technical understanding of these issues are, I think, universally acknowledged to be unsurpassed in this House. I hope that the House will join me in recognising his contribution. Amendments 34 to 41 seek to include demand reduction in a capacity market. In the light of the amendments that I have tabled, which achieve that objective, I hope that hon. Members will feel comfortable withdrawing their amendments.
New clause 2, with its amendment, would require the Secretary of State to publish a strategy to reduce a stated amount of electricity demand by 2020 and 2030 while requiring no use of the price mechanism to reduce demand. I welcome the principle behind the proposal. However, let me point out that as well as establishing the first ever Energy Efficiency Deployment Office within my Department, the Government have published a number of seminal documents, including the first ever comprehensive Government energy efficiency strategy, which will be updated again later this year. We have also published DECC’s energy and emissions projections and, most recently, the Government response to our EDR consultation. These documents provide a comprehensive view of the Government’s approach, which was encapsulated at the launch by the Prime Minister of the first ever energy efficiency mission earlier this year.
Caroline Lucas
Obviously, I am not deeply acquainted with the brickwork of the hon. Gentleman home, but I find it slightly surprising that the justification that he advanced would be responsible for such a dramatic reduction. I cannot believe that quite so many cavity wall insulations, down from 40,000 last year to just over 1,000 this year, could be as a result of its having been done badly in the past. There might have been an element of that, but there are some real concerns about the take-up of the green deal and the way in which it replaced some pretty good schemes instead of building on them.
New clause 3 is about community rights to priority access to local power generation and local grid ownership.
Caroline Lucas
I apologise, I thought they were all wrapped up together in one happy family.
I am delighted that amendments 42 to 46 are supported by the hon. Member for Hove (Mike Weatherley), so in recognition of that I will call them the amendments from Brighton and Hove. They are basically about decentralised energy, which was another area where the Minister said that he appreciated the direction but did not feel that action was necessary. I quote from “Power to the People—the Decentralised Energy Revolution”, a document from the Prime Minister himself:
“In other countries low carbon energy sources have led a process of decentralisation—in the Netherlands, for instance, in little more than a decade, combined heat and power (CHP) became the single largest supplier of the country’s energy needs.
I want to see a similar revolution happen in Britain.”
I want that too, but I do not see it happening unless we put the means in place. It is a real shame that that vision has gone the same way as the abandoned huskies—once hugged, now hated. Distributed generation is about producing and using energy locally.