Lord Bourne of Aberystwyth
Main Page: Lord Bourne of Aberystwyth (Conservative - Life peer)Department Debates - View all Lord Bourne of Aberystwyth's debates with the Wales Office
(9 years ago)
Lords ChamberMy Lords, as I discuss the amendments today, I want to remind noble Lords of what has already been achieved. At the end of April 2015 there were 490 operational onshore wind farms in the United Kingdom, with an installed capacity of 8.3 gigawatts—enough to power the equivalent of more than 4.5 million homes. Considering the projects that already had planning permission and so on, there is enough onshore wind in the pipeline to contribute to what is needed to meet our ambition of 30% of electricity from renewables by 2020. This is a significant achievement, made possible only by consumer subsidies. The Government have estimated that in 2015-16, £850 million of support will go towards funding onshore wind across the United Kingdom, with around £520 million, approximately 60%, going towards funding Scottish onshore wind farms.
It is too soon to predict what the best energy mix will be as we move beyond 2020 but, as we continue on our path to a low-carbon economy, it is absolutely right that we also protect the consumer. Government support is designed to help technologies stand on their own two feet, not to encourage reliance on subsidies. This means moving from demand-led schemes to competition-led schemes. Ending support under the renewables obligation early for new onshore wind in Great Britain, with appropriate provision for grace periods, balances the interests of onshore wind developers with those of the wider public. This Government made a commitment to the electorate—no new subsidies for onshore wind, and giving local communities the final say on onshore wind farm applications—and the Government must deliver on this.
I have tabled government Amendments 78B, 78D to 78P, 78R and 82A, which seek to amend and supplement Clause 66 for debate at recommittal on 14 October. I withdrew the amendments to reflect on the points made in the debate, and committed to re-present them on Report today. I thank noble Lords for the useful discussion in last week’s debate. As promised, I have reflected on that discussion and incorporated a number of changes into the clauses that we will be debating today. It is right that we took the time to do that, and I hope that noble Lords will accept that I have listened and reacted.
The substance, however, must remain the same. We are not all going to agree on what is being proposed by these amendments, but they have been developed following extensive engagement with industry and I am confident that they strike the right balance. They provide a grace period to protect investor confidence while protecting the public interest. Early indication from industry is that it welcomes these amendments. Although there will always be projects that just miss out wherever we draw the line, it is clear that the Government have a mandate to act and that is exactly what we are doing.
Before moving on to the detail of these amendments, I shall address the future of contracts for difference, as raised by noble Lords at our last session. The Secretary of State has been clear that we will make an announcement in the autumn relating to the next allocation round for contracts for difference. That position is unchanged; it is as it was. I realise that this is an important issue for all, but I suggest that we have set out a very clear position. The clauses that I present to the House today clearly deliver on the Government’s commitment in relation to onshore wind while protecting investor confidence.
I shall address some of the points that were raised at recommittal stage by the noble and learned Lord, Lord Wallace, and echoed by others, including the noble Baroness, Lady Worthington. During that stage the noble and learned Lord raised a number of interesting points for discussion. I have responded to these in a formal letter to him, and will now respond to them in this forum for the benefit of all noble Lords.
The noble and learned Lord, Lord Wallace, asked for further detail on our reasons for including the provision for appeals in our grace period criteria. We have included these projects because, had the correct planning permission decision been taken in the first place, they would have had planning permission by 18 June. Projects where planning permission was granted on appeal in the circumstances covered by the amendments will have established a legal right to planning permission on or before 18 June and therefore we are including these cases within the approved development grace period criteria. It seems to be the right thing to do.
In the recommittal debate the noble and learned Lord, Lord Wallace, asked about projects that achieve consent after 18 June, following a delay to the decision which exceeded the statutory timeframe. Unless the projects utilised their legal right to challenge the delivery of consent within the statutory timescales, such projects would not fall within the scope of the approved development condition.
The noble and learned Lord, Lord Wallace, also raised the question of amending the grace period criteria to either allow all projects that had applied for planning permission access to the grace period or to consider extending the cut-off date to 8 October—the date on which the Government first tabled the amendments setting out the criteria for the grace period. The government amendments set out the grace period as originally proposed, which would allow those projects which as of 18 June had planning permission, a grid connection and land rights to continue to accredit under the renewables obligation until the original closure date of 31 March 2017. That is a reasonable expectation for them to have, and we have responded to it. Planning permission rather than application has been chosen because the grant of planning permission represents a very significant point in the progression to accreditation under the RO.
The government amendments strike the right balance. They deliver on our manifesto commitment while also seeking to protect investor confidence and the interests of onshore wind developers. For this reason I question the changes proposed by the noble and learned Lord, Lord Wallace. These changes would have a fundamental impact on our ability to deliver on the manifesto pledge and to manage our low-carbon spend. Based on the department’s analysis, allowing all projects with only a planning application in place could mean that anything up to 7.1 gigawatts could accredit under the renewables obligation. This figure represents all projects that had submitted an application but not yet received planning permission as at 18 June.
Furthermore, I also question moving the qualifying date from 18 June to 8 October 2015 as, similarly, this would also serve to potentially increase the number of projects eligible to accredit under the renewables obligation. This would mean that we would remain at risk of deploying beyond the 11 to 13 gigawatts of onshore wind that we project is needed to meet our 2020 targets and what we can afford under our low-carbon spending cap, as well as being inconsistent with our manifesto pledge. This could therefore potentially add more costs to consumer bills. The Government’s position is that projects must have had planning permission on or before 18 June in order to be eligible for the grace period. I hope that noble Lords can see that the line has been drawn here for a crucial reason.
Following questions raised in the recommittal debate I will also take the opportunity to discuss the position on variations. We are aware that projects that had planning permission on or before 18 June may subsequently need to vary that permission and that the Acts provide for this, for example under Sections 96A and 73 of the Town and Country Planning Act 1990 or under Section 36C of the Electricity Act 1989. Where consent is granted for development on or before 18 June and is subsequently varied as provided for by statute, the development will continue to fall within the proposed development condition set out in Section 32LJ.
On projects where a radar objection has been withdrawn, we understand that there are projects in a number of differing scenarios. For example, as the noble and learned Lord, Lord Wallace, stated, a project may have received objections to a planning application on matters such as radar. Where that project has managed to resolve the matter with the objector and subsequently has been granted planning permission on or before 18 June, it of course meets the criteria for the grace period provided that the other conditions are satisfied. If the resolution of those objections pushes the determination past 18 June, unfortunately it will not meet those criteria.
The grid and radar delay condition set out in the amendments maintains the intent of the original, existing grid and radar grace period, as set out in the Renewables Obligation Closure Order 2014. The intention is that projects which are delayed due to delays to work on radar stations or radar equipment, which are outside their control, should be eligible for the additional 12-month grace period.
My Lords, before the Minister leaves this point, could he tell us, first, what sums are involved in these investment problems at present, how many of them have been prejudiced and how much they were worth in the first place? Secondly, will he give us some idea of the global sums involved in the whole sorry procedure that we are having to go through?
My Lords, obviously much is dependent upon when the legislation goes through, and that is in the hands of this House and another place. Therefore, I think it is impossible to say with any certainty—or even to give an estimate—exactly how much is at stake. It relates to those projects that have already deployed, and so they are being given additional time to deploy. It is for individual projects that suffer from this investment freeze to come forward. We have done this in response to the engagement exercise. It will not deploy any more wind projects and it allows those projects that have deployed, following our proposals under the grace period, an added period within which to bring forward their projects and have the existing position.
I take it then that the Minister is unaware of the financial implications of what he is asking us to support this afternoon.
My Lords, it is not for me to determine whether the conditions are met. There is a process set out in relation to those projects that would be able to deploy and, if they have suffered a hiatus, for them to come forward with the claim in relation to how much it is. It is not going to cost any additional money, because it just gives them additional time in which to deploy. As I am coming to, it gives them approximately another nine months. It is not an additional amount of deployment; it is some projects that will deploy being allowed additional time to meet the conditions.
My Lords, perhaps I can help the Minister out, if I may. We have had estimates from the independent renewable energy group to say that the projects that have fallen just the other side of this cut-off deadline that the Government have imposed have costs in the region of £350 million.
With respect to the noble Baroness, this is not about those projects that fall just the other side of the line; this is about those projects that can satisfy the conditions being given additional time. This does not bring any more deployment in. That is a quite separate point, if I may say so.
I would like to ask the Minister about the extension of time. I fully understand and think it is fair that there has been an extension of time where planning permission is granted on appeal. However, did I understand the Minister to say that, where permission was refused on appeal, and if there were a judicial review that ultimately granted permission, that would be respected and it would be deemed to have been an appropriate permission? What concerns me is the timescale, if my understanding is correct. How many years down the line are we talking about beyond June 2015? Once we go down that line, for perhaps two years, that might have an impact on meeting the 2019 deadline.
My Lords, I am very happy to respond to that point, but it is a quite separate point from the investment freezing condition, relating, as it does, to the appeals process. The point of the amendments that we are putting forward is to say that if a project should have been given planning permission on or before the cut-off date of 18 June, and the appeals process demonstrates that, whether by an appeal or judicial review, it is reasonable, rational and right that they should be allowed to accredit under these proposals, and that is what would happen. That was done in response to the engagement exercise that we have been through. We have tried to do what is right, in considering very reasonable points. I do not accept that this would drag on indefinitely: I do not think that the legal process is in a Jarndyce v Jarndyce situation. There will, of course, necessarily be some sort of delay, but that is how the judicial process will operate. It is absolutely right to have that provision in relation to the appeals procedure.
To return to the investment freezing condition, the extension available in the circumstances that I have outlined will be approximately nine months—broadly equivalent to the period between the date of the Secretary of State’s announcement and Royal Assent. To be eligible for this extra time, projects must be able to provide evidence that they have been impacted by a lack of investment during the period to Royal Assent.
This “investment freezing condition” has been designed specifically to protect the projects that were intended to be able to access the grace period as proposed on 18 June. It is not an extension of deployment, but an extension of the period for those that are able to deploy within the grace period. This condition is not about increasing the pipeline of onshore wind projects that are able to accredit under the renewables obligation.
Furthermore, as a result of the helpful discussion at recommittal, a drafting change has been made to the amendment. Your Lordships will have seen that in new Section 32LK(4)(a)—some of you may have picked this up—the phrase “as at May 2016” has been replaced by the phrase,
“as at the Royal Assent date”,
following representations made by the noble and learned Lord, Lord Wallace—representations that I think were entirely valid, and which have been echoed by the noble Baroness, Lady Worthington. Similarly, in consequence, new Section 32LK(4)(b) now refers to,
“the date which is 28 days after the Royal Assent date”.
In addition, those provisions have been amended—again, following representations at recommittal—to make it clear that either uncertainty about whether the Bill will receive Royal Assent or uncertainty about the final wording of the Bill will be sufficient for the purposes of meeting the “investment freezing condition”. We have made it absolutely clear in the Bill that it is not necessary to show both. I am grateful to noble Lords for the helpful debate that we have had on these points. I believe that this revised drafting now makes our intent perfectly clear, and has improved the Bill.
In order to provide a consistent approach to all onshore wind projects eligible to accredit under the renewables obligation, we also ensure through these amendments that a pre-existing grid and radar delay grace period will apply here. This condition entitles projects affected by unforeseen grid and/or radar delays to an additional 12-month period in which to accredit. This amendment, too, has been redrafted to provide clarity about when a project may benefit from a grace period for grid and/or radar works delays. The provision is now clear that either grid delays or radar delays, or both, will be sufficient for these purposes. Again, I thank noble Lords for the useful discussion that led to this amendment.
I am confident in the amendments, and in the proposed grace period. I have listened to noble Lords, and I believe that I have responded positively on various issues. Again I thank them for their helpful suggestions which have been incorporated to improve the clarity of the clauses. We have listened actively to stakeholders and worked to ensure that the final policy strikes the right balance between the interests of onshore wind developers and those of the wider public. I hope that your Lordships will agree that these amendments should stand. I beg to move.
My Lords, I am grateful to the Minister for introducing the government amendments. I will speak to those and also to Amendment 78C in my name, and in support of the amendments tabled by the noble and learned Lord, Lord Wallace.
As we enter the second day of Report, I do not feel that the Bill has been well handled, as has already been referenced. This may stem from the fact that the Bill was not ready when it was presented to us. Significant areas of policy were still being developed. It was a very fluid situation. In fact, the term “liquid legislation” will probably stay with us for many years to come. It was coined by the noble Lord, Lord Howell, in the recommital stage of Committee and describes very accurately how we have been dealing with a set of moving parts as we have gone through the Bill. Here we are on Report, but it still feels very much like a Committee stage, and that is regrettable. We should not be in this situation where we have so many controversial issues still unresolved.
Throughout the Bill’s passage, I have pressed the Minister to give me a justification and a sound argument why the Government have chosen the route that they have in this Energy Bill of introducing what is now Clause 66 regarding the early closure of a renewables support scheme that was already closing 12 months early—and, in fact, not closing it to everybody but just to one subsection of technology: onshore wind. Why do we find ourselves in a place where the Government appear to have singled out for special treatment a single technology from all the low-carbon technologies available to us, and where that special treatment is so damaging and corrosive to investor confidence? I am afraid that I have not received a suitable answer to that question throughout the passage of the Bill. Now the answer given boils down to a very few words that appeared in the Tory Party manifesto, that the Conservative Party would put an end to—
I am most grateful to the noble Baroness for giving way at that point, which is a very material point. The measure was in a manifesto which was taken to the country and a Conservative Government were elected in May. As the noble Baroness will know, the Salisbury convention has previously indicated that what is in a manifesto is allowed passage through the House of Lords. I value the House of Lords and its traditions and I fear that if we refer in a rather dismissive way to something that was in a party’s manifesto as somehow not being important, in the way that she did, that is a very serious pivotal moment for the House of Lords. I hope that she will consider that.
We can debate who benefits most from our low-carbon agenda—possibly it is the Chinese at this particular juncture. However, in the context of closing the RO early, it is some of the smaller schemes—the independent developers and the independent renewable companies—that are suffering the most, and it is the larger companies that seem to be getting the grace period amendments that they need. It is the smaller guys who are losing out. This is not about rewarding the richest or the most powerful lobbyists—that is not what we are seeking to do.
As the noble Baroness, Lady Young, pointed out, this is about fairness and a common-sense test of whether, when you read those words in a manifesto in May, you then think, “Ah yes, I know what that means; it means that in about the middle of June, I will see an announcement from the Government that closes a scheme in which I have invested hundreds of millions of pounds, which is already closing with no consultation”. I hesitate to say that that passes the common-sense test, as I do not think it does. Indeed, we know it does not, because we have had a large number of investors come to us to say that this is not the way that they should be dealt with.
Normally, a consultation exercise is undertaken and then the results of that consultation are published. In this case, because we have been racing since 18 June to get everything ready in order to close the scheme early, even though it is closing anyway, we have not had a proper public consultation or publication of the results of any consultation. Therefore we are flying blind and having to work with large numbers of people contacting us to express their concern and dismay at being handled in this way by the Government.
The specific issue raised under Amendment 78C is another important one. As I have said before, I do not think this House will discuss this, but it will certainly be discussed, with far greater passion potentially, when it moves to the other place. Amendment 78C would simply repatriate the closure of the RO to Scottish Ministers. The reason for this is that during the passage of the Energy Bill in 2013, the Government had to take a power to repatriate the renewables obligation back to Westminster. We were told at the time that this would be a technical amendment and that this had to be done simply to make the closure easier, tidier and more efficient. However, we now see that this was not the case: this was a cynical move that gave the Government the power to close a scheme for Scotland without due consultation with Scottish interests. It flies against the spirit of the Smith commission agreement, which is seeking to repatriate more powers to Scotland and allow Scottish people to determine what they want to see built to provide them with clean energy in the future.
That brings me on to the question of fairness and whether the Government’s amendments, and their proposals for grace periods, are fit for purpose. It should be noted that although the announcement was made on 18 June—and a very hard guillotine introduced at that point—and some details were provided about potential grace periods, it was not until 8 October that we were given the full detail of the proposals. That is not a long period for us to consider them, and they are incredibly complex—I am very grateful to the noble and learned Lord, Lord Wallace, for his forensic and expert deconstruction of some of these issues. It is not appropriate for us to have to wait four months before we see the detail and, when we do see it, for it to be so substandard. This is a cause of great concern. It was of course quite a heated debate in Committee in the Moses Room the other week. That resulted in the withdrawal of the amendments, for which we were grateful. We hoped then that that would result in a bit of reflection and some clearer amendments coming forward.
I am grateful to the Minister for presenting the changes that were incorporated. By and large they were merely technical issues of clarification, but the biggest one, about planning and when you deem planning consent to have been given, remains unresolved. This is what is so strange about these grace periods. The anomaly here could not be more strange: because of the way the Government are interpreting this and putting it into legislation, if you are refused planning permission—if the local council signals that it is not content—and you then appeal and win that appeal, you will be able to get a subsidy. However, if you had consent from the local committee and it was clear that the community wished to see the development, but you were waiting for various formalities to be concluded which then came after the artificial 18 June deadline, you would not be eligible. That seems to fly in the face of the Government’s manifesto commitment—they are evidently keen on their manifesto commitments, as I am sure is right and proper—which is that they want local people to have the final say. There are clearly still weaknesses and great anomalies within the grace periods. The provisions already run to many pages, but we still need the department to go back to think again and come forward with something workable.
I do not want anything that I have said today to be interpreted as our desire to see endless subsidies for particular technologies continuing indefinitely. That is absolutely not the case. As I have said on previous occasions, the issue we should look at on which the Government have refused to give any clarity is what is happening with the new form of support, the contracts for difference, which replace the RO. That is the pertinent question, but whenever I have asked it, I am told that the Government will make a Statement in the autumn. It is not a good answer for an industry with 25 long years of history to be proud of to be told, “We will tell you your fate in our own good time at some point”—presumably, after the Bill has passed its crucial stages. It is not appropriate to be closing one scheme and not giving any clarity over what is to replace it.
My final concern is that the Government have left us little choice but to object to the provision. It demonstrates a Government who put ideology ahead of evidence. There is no place for ideology in energy policy. If the Government have set their mind against onshore wind, as they are demonstrating—that is evident from all that they have done—they are no better than those who take an ideological principle against fracking or nuclear. We should not be singling out technologies; we need every technology to play its part. Some technologies are better than others in certain circumstances, but there is no reason to decide that we should cease to support one over another, especially when it turns out to be cheaper than many of the alternatives, has a proven track record of delivery and is sustaining investment in our country.
I look forward to hearing from the Minister, but I doubt that he will be able to reassure me on those points, and it is for that reason that I reserve the right to press the amendment that follows.
My Lords, first, a rare moment of agreement: I suspect that I will not be able to satisfy the noble Baroness with the points that I am about to make. Nevertheless, I thank noble Lords who have participated in this part of the debate on the Bill.
Perhaps I may deal first with the Scottish issue, as it were—the amendment relating to Scotland, which I think only the noble Baroness spoke to. We are keen to do what is fair for Scotland—but no more, no less. That is a fair position. I reassure noble Lords that we are committed to implementing the recommendations of the Smith agreement and are doing so through the Scotland Bill. As agreed during the drafting of that Bill, the Government have and will continue to engage with the Scottish Government, as we do on a regular basis on energy issues, in line with the spirit of the Smith agreement, on all changes to the renewables obligation. That does not mean that we will agree; often we will not, sometimes we will. However, transferring legal authority to close the renewables obligation in Scotland to Scottish Ministers goes considerably further than Smith. That is nothing to do with the spirit of Smith; it is to do with the letter of Smith. As I see it, there was no suggestion that that should happen, but that debate—if there is a debate to be had—can no doubt happen on the Scotland Bill.
I turn to the issues raised other than the specific point on Scotland. As noble Lords have kindly acknowledged, I have sought to move on some of the issues. I thank the noble and learned Lord, Lord Wallace, for what he said—particularly in relation to my office. I can tell the noble Lord, Lord Foulkes, that my office often works those late hours, even when it is not dealing with the Energy Bill, as my staff will gladly tell you. I am very grateful for the massive efforts that they have made on the Bill and many other matters.
There seem to be two key differences between those on the Government and Opposition Benches. One is about subsidy. I noted what the noble Baroness, Lady Worthington, said about not believing in subsidy, but this is about subsidy. If she has not got that attachment to subsidy, that is the essence of this debate. It took considerable chutzpah to attack us for ideology on the Government’s energy policy. Her leader is against new nuclear and, I believe, against fracking.
I do not wish the debate to descend into party politics, but since the Minister has raised it, it may well be the case that our leader is personally anti-nuclear and anti-fracking, but that does not mean that that is translated into a change in the position of our shadow DECC team. It would probably be sensible to discuss this with my honourable friend in the other place, Lisa Nandy, who is now the shadow Secretary of State and consult her on these matters. Jeremy’s style of leadership is not that he would impose that on departments.
It is ideological to single out a single technology on no evidence and treat it in the way that the Government are doing. I remind the Minister that being in government is not the same as being a political party and that drafting manifestos is very different from drafting the law of the land.
I note what the noble Baroness says, but this comes back to leadership. If its leader has materially different views, it would be good to know the Labour Party position on those issues. On ideology, I reassure her that we are not against wind. We have wind deployed offshore, and I hope we will continue to have wind deployed onshore. It will just be without subsidy. That is rather different from saying “No new nuclear” and “No fracking”. It is saying “No subsidy”, which is very different.
Perhaps the Minister can clarify something that appears in the Conservative Party manifesto: that there will be new nuclear without subsidy. Does that mean that contracts for difference are not subsidy, in which case contracts for difference can presumably be applied to onshore wind?
I have made the position on contracts for difference very clear, as I think the noble Baroness appreciates. We will set out the position on contracts for difference this autumn, not at an unspecified date in the future as she suggested in her contribution. That is not long to wait. We are in the autumn now, so I hope that she accepts that an announcement on that will be forthcoming shortly.
I do not want to go over old ground again. We have a cut-off date. I accept that cut-off dates are arbitrary. In Committee on recommital and today, the noble and learned Lord, Lord Wallace, made telling contributions, but he suggested that we were taking a legalistic approach to this. It is likely that we will. As he will appreciate, this is legislation. We want it to be certain and for businesses and others to know where we are on this. I accept that dates will be arbitrary, but we have selected a date. Noble Lords have been indicating that they want certainty. We are delivering certainty. We have a basic difference of opinion on these issues. I do not think it is capable of resolution, as it was on the Oil and Gas Authority where we had a basic unity of view. We have a different view on onshore wind. We believe that the Salisbury convention applies here. I disagree with the suggestion that there is something ambiguous about the position in the manifesto. It was made very clear and nobody should have been taken by surprise by this, so I differ materially from what I am sure is the opinion honestly held by the noble Baroness, Lady Worthington, but I cannot see that we can resolve some of these issues because of the basic difference between us.
My Lords, I realise that this is Report, but I would like to press the question I put in my intervention. When all is done and dusted—leaving aside the allegations of ideology on all sides—in relation to all the subsidies that are likely to be paid out for wind turbines in the next 25 years, what proportion of that will be saved by this activity?
My Lords, I do not know the proportion, but I know that the upper end of the limit is £270 million over the period. That might seem like a small amount, but it is not a small amount to me and I am not sure it would be to anyone else. We have this basic difference, and with that I oppose these amendments.
First, I did not raise the issue of the definition of the recognised lenders because the noble Lord did not deal with it when he moved his own amendment. Did he give a commitment to go away and come back with a better definition that included, for example, organisations such as the Green Investment Bank? My second point, although there are many others that I could make, is this: does he accept that with regard to radar issues, what the Government give the Government might also take away? Will he undertake to talk to the Ministry of Defence to see if it can ensure that whatever provision is made by this grace period for radar is not actually defeated by the tardiness of the MoD?
My Lords, on his last point first, I am very happy to speak to the MoD in the way that the noble and learned Lord suggests. On the former of the two points that he raised relating to the recognised lenders, I have indicated that we will look at this issue. I have not made any commitment about what the result of looking at it will be but I recognise, based on information given by the noble and learned Lord and others, that there is a case to look at it. I hope that is helpful.
My Lords, I support the point made by the noble and learned Lord, Lord Hardie, about the situation in Skye, where the implementation of the arrangements already in place has been postponed simply because of the need for the connection. There is no point in having the development until the connection is in place. This was all set up before this Bill was put forward. It requires a degree of special attention. All I want is to be assured that it will have that.
My Lords, this has been a very wide-ranging debate, taking in issues which are beyond the scope of the Bill. Nevertheless, they are important issues. I hope that I can do justice to the quality of the debate and respond to the points made. I shall come back to the noble Baroness, Lady Worthington, at the end because her comments perhaps symbolise the crux of the difference. In no particular order, except that it is present in my mind, first, I say to the noble Lord, Lord Steel, that I will take up the point about water and write to him on that specifically. As he indicated, it is not within the Bill but I am very happy to look at that and respond to him by letter.
I will probably stand corrected on this but I do not think that solar comes into this legislation either. If it does, I will regret that comment. It could in passing but this Bill basically is concerned about oil and gas, and the onshore wind position. I say to my noble and learned friend Lord Mackay of Clashfern and the noble and learned Lord, Lord Hardie, that I will write to them on their specific point on Skye. I do not know the particular position, so, without commitment, if I can write to them ahead of Third Reading I will certainly do so.
The debate has exhibited a very clear difference of position in relation to onshore wind. I shall come to the Salisbury convention later. I remind noble Lords that it is the responsibility of the Government and the department to do three important things. We have to ensure that we have a supply of electricity that is affordable; that we have a supply of energy that is secure; and that we decarbonise. There is a danger that today this debate has focused on just one of those elements, almost to the exclusion of the other two. They are all important and attention is required to deal with those three, as I am sure noble Lords will appreciate. I will come back to the steel issue later.
The noble Lord, Lord Foulkes, suggested that we cast aside suggestions from the noble Lord, Lord Oxburgh, who is not in his place. That has certainly been far from the case. As regards the part of the legislation in which he was taking a particular interest and giving his experience on oil and gas, we have taken up a lot of his suggestions, as noble Lords will know. I have also ensured that he will head a committee, or perhaps an advisory group, which will report to the Secretary of State on CCS policy going forward. I must correct that point as it is not true.
Clearly, there is a difference of view in this debate. Perhaps I may come to the Salisbury convention. The noble Lord, Lord O’Neill, suggested that we were casting aside planning law. We are not. The grace period makes it very clear that if you have planning permission plus grid connection plus ownership rights, you qualify for the grace period. Therefore, we are far from doing that.
I come to the political point and the points made by the noble Baroness, Lady Worthington, who comes with particular knowledge and commitment. I understand all that. She said at one stage that this is political. It is; I plead guilty to that. It is political in the sense that we believe that this is very clear in the manifesto and that it is protected by the Salisbury convention. To find a bit of wriggle room to oppose this while saying that you are upholding the Salisbury convention is not the way forward.
I also regret suggestions from the Liberal Democrats that they do not regard the Salisbury convention as important at all. They have gone a stage further. That is not a desirable place for this House to be in. As I said, I have been here a relatively short period of time, but I value the institutions of this House. I would say the same if a Conservative Opposition were opposing a different political party in government, which will happen at one stage. If we really wish to maintain the traditions of this House and the important role that we fulfil, we have to move very carefully in the territory that we are in. We have a very clear manifesto commitment. People know and understand that. It should be upheld.
On the question of the Salisbury convention, I confess that I have not included recently the Conservative manifesto in my bedtime reading, but what does the Minister say to the point of substance raised by my noble friend Lord Foulkes? The commitment in the manifesto was to avoid or to reject any new subsidies, whereas we are talking about getting rid of existing subsidies. The noble and learned Lord who spoke about the legal issues involved said that these were legal niceties. They are not; it is the English language. Will the Minister tell us how it is that “new” in English has come to include “pre-existing”? If he cannot tell us that, then it is not a breach of the Salisbury convention because the promise was to end new subsidies, not to get rid of existing subsidies that had a preordained timeline.
The noble Lord is right on the wording—actually, it is “new public subsidy”, but he is stressing “new”. The point is that those already in receipt of subsidy will continue to have the subsidy. This is for people who have not yet got or applied for the subsidy. It is certainly new to them in a new Parliament. It is absolutely clear that that is within the Salisbury convention. Clearly we will disagree on this. I argue that we are in dangerous territory and that the Salisbury convention should apply.
I omitted to do so earlier because I wanted to finish on the Salisbury convention, but I will say something on affordability and steel. The noble Baroness made some relevant points on that. She said that electricity was a small part of their costs; it is not for all steel companies. If it is a blast furnace it is 3% of the costs; if it is an arc furnace, as it is for Celsa in Cardiff South, a Labour-held constituency, it is 12% of the cost. That is not insignificant. That point was made forcefully at the steel summit by many Labour MPs, as well as by other people. We have to take that on board. It is a complex issue. It is not just about electricity costs, but they certainly are a valid consideration from some steel companies.
With that, there clearly is a disagreement but, as I said, this is dangerous territory for the House. In my belief and the Government’s belief, this is firmly protected by the Salisbury convention and I urge noble Lords to reject the amendment.
Before the Minister sits down—I asked a specific question and I would like to encourage an answer. The noble and learned Lord, Lord Wallace, spoke of those who incurred expenditure under the March 2017 deadline who had, I think he said, a legitimate expectation that their investment could be carried through. Is the Minister saying that they do not have a legitimate expectation any more and that that can be changed by the legislation, or is it simply that the Government are legislating in the face of what might be regarded as a legitimate expectation?
It is neither of those, if I may say so. We have had an engagement exercise with industry, the devolved Administrations and others to look at those who would be prejudiced by the proposal as set out on 18 June. In consequence of that, the grace period that we have put forward—which I think we have agreed to as it stands—is that if you have a planning permission, a grid connection and land rights as at 18 June, you have additional time. We have also moved in relation to the investment freeze condition and appeals to try to achieve that. So, following the engagement exercise launched after the decision which was taken on 18 June, we have catered for those with a legitimate expectation of being able to deploy in this regard.
My Lords, I am grateful to the Minister for his response and, indeed, to all noble Lords who have participated in this debate. We always knew that it would be a very interesting debate and it certainly has been wide-ranging. I must start by apologising for not referring to Lady Thatcher by her proper title. I think that may be due to the fact that I was not here during her great tenure.
I do not propose to detain the House for very much longer. It is absolutely clear that we have a difference of opinion. Manifestos are brief, do not contain detail and therefore are open to interpretation, and opinion therefore plays an important role. We are not doing anything that we believe contravenes the Salisbury convention. I have read the Conservative manifesto and I am afraid that it is not that clear. There are some inconsistencies. It says that the Government support wind, which may come as terrible news to the noble Lord, Lord Cormack, and the noble Viscount, Lord Ridley. However, the manifesto says in black and white that the Conservatives think that it plays a valuable role. It also says that the Conservatives will deliver nuclear without subsidy. That is a very interesting phrase. I do not understand how that will work. The manifesto also says that the Conservatives are committed to least-cost decarbonisation and that they will stop new subsidies.
Noble Lords have said very eloquently that the nub of the issue is: does it pass the common-sense test that, if you read the manifesto commitment before the election you would read those words and think, “Ah, yes, that will mean the RO is closing a year early”? You would not think that. That is not a common-sense response to reading those words. Had the Government been clear-minded and knew what they were about to do, why did they not simply say in the manifesto, “We propose to close the renewables obligation for onshore wind a year early”? That would have been very easily understood and everyone would have known where they were. However, that was not what was said. One could put a wide range of interpretations on what was said. Again, I come back to what is happening with the contracts for difference. We have heard nothing from the Government on this. In light of that, how weak this legislation is, and the concerns that have been raised on all sides of the House, I propose to press this amendment and wish to test the opinion of the House.
My Lords, we have already debated this. I think that Amendment 78RA would improve Amendment 78R, so I would wish to test the opinion of the House, but perhaps the Minister would clarify. Is he still insisting on his Amendment 78R, or is our amendment otiose?
Perhaps the noble and learned Lord can tell me what it is about.
My understanding is that Amendment 78R contains the new clause to embrace the grace periods. As Clause 66 has fallen, I am not sure whether he wants to insist on it. If he does, I will want to press our Amendment 78RA, but I want clarification, because there is no point dividing the House if he does not insist on his new clause, which incorporates the grace periods.
My Lords, I thank noble Lords who have participated in the debate on this part of the Bill. I shall take the amendments in the order that they are marshalled.
With regard to Amendment 78S, we are committed to ensuring that the UK continues to do its part to tackle climate change, in line with the Climate Change Act, but we want to do so as cost-effectively as possible to make sure that our energy is secure and affordable, as well as lower carbon. We believe that locking ourselves into an expensive and inflexible target for the power sector is not the way to do that. There are just too many things that we cannot predict about how the energy system will develop up to 2030, and the costs of getting it wrong would be picked up by consumers for many years to come.
The amendment would, in effect, require the Government to introduce an additional power sector target in the form of an obligation on electricity suppliers in the United Kingdom. As has been referred to, the Conservative manifesto, upon which this Government were elected, stated that we will not support additional distorting and expensive power sector targets, but it is our belief that this is what the amendment would lead to.
Noble Lords will know that setting a decarbonisation target for the power sector, which would be the effect of the amendment, was debated in this House during the passage of the then Energy Bill 2013, which has been referred to, and the then Infrastructure Bill 2015. The topic of power sector decarbonisation targets was also discussed during the Committee stage of this Bill. In that discussion, I set out the Government’s intention not to set a power sector decarbonisation target, following that manifesto pledge. As has been confirmed, I also wrote to noble Lords after that further reiteration of the position, explaining that, instead, the Government have already committed to set out totals for the levy control framework beyond 2020, providing a basis for electricity investment into the next decade. I shall not restate the position on contracts for difference, as I think it is already clear that we are committed to making a statement on that this autumn. Therefore, I know that noble Lords will be familiar with the arguments against setting a target such as this.
We have an extensive range of targets at the domestic, EU and international levels. These require action across the economy to meet targets in 2020, 2030 and 2050 on carbon, renewables and energy efficiency. Domestically, we have a legally binding target to reduce greenhouse gas emissions by 80% by 2050. We have carbon budgets setting out targets to 2027 and will be setting a further budget next year, covering the period to 2032. We are also subject to EU targets on carbon, which cover 2020 and 2030. On renewables, these run to 2020 and include interim milestones along the way. Internationally, we are subject to the requirements of the Kyoto Protocol and the compliance periods that these set up.
These targets are comprehensive, far-reaching, and mutually reinforcing. What makes the United Kingdom unusual by comparison with our European partners is the fact that we have a carbon budget system with comprehensive reporting and independent scrutiny. Investors want to know that we have clear, credible and affordable plans. The CBI has said that clarity on future financial support for low-carbon electricity will be more important than targets in driving investment. That is why we have said that we will set out totals for the levy control framework beyond 2020, providing a basis for electricity investment into the next decade, as well as setting out plans in the autumn in respect of future contract for difference allocation rounds.
In relation to Amendment 78T, I acknowledge that it is important that developers and investors have some foresight as to the frequency of CFD allocation rounds. However, this must be balanced with LCF budget availability, which, as noble Lords know, is funded by a levy on consumer bills. The function of the levy control framework is to limit the amount paid by consumers. It is therefore crucial that the Government are able to take decisions in the light of the latest evidence around deployment projections and costs.
The United Kingdom is continuing to make progress towards the 2020 renewables target of 15% of final energy consumption from renewable sources, with provisional 2014 figures showing that we are on target to meet the 2020 target. No carbon intensity targets for electricity generation have been set in order that we retain flexibility around how we achieve our 2050 target. Committing to annual CFD allocations, even only in certain circumstances, would inhibit the Government’s ability to respond to evidence around levels of deployment in renewable electricity generation, costs to consumers and opportunities in other sectors, such as heat and transport.
The noble Baroness’s amendment would unnecessarily commit the Government to a course of action that would neither benefit the consumer nor provide any certainty to renewable energy generators or investors. We are committed to our energy targets and continue to make progress towards meeting them. For this reason, I do not accept the amendment.
Amendment 78UA seeks to make a fundamental change to the Climate Change Act which—as, in fairness, I think the noble Baroness acknowledged—runs contrary to how the carbon budget regime was designed and implemented by the last Labour Government. The noble Baroness played a significant part in that, I know. I think that this is much more than a small, technical amendment and it has huge implications for the Climate Change Act. It changes the focus of the United Kingdom’s approach to decarbonisation and, I believe, sends a wrong message about our faith in the EU emissions trading system. I may have misquoted the noble Baroness in terms of it being a radical change. If I did, I apologise. I think that it is a radical change. She is shaking her head, so I have misinterpreted her position and I apologise for that.
We believe that the amendment would make a fundamental change to the basis of carbon budgets and, if it were accepted, it is likely that we would need to revisit the levels of all current budgets. It would be an unnecessarily and overly burdensome process, as carbon budgets reflect the EU ETS.
Instead, we want to focus on driving the action to deliver decarbonisation at least cost. We are committed to ensuring that the United Kingdom continues to do its part to tackle climate change in line with the Climate Change Act and international obligations. However, we want to do this as cost-effectively as possible to make sure that our energy is secure and affordable, as well as lower carbon.
The EU emissions trading system is a central component of the United Kingdom Government’s policy for delivering emissions reductions in the UK and further afield in a cost-effective and technologically neutral way. The EU emissions trading system is designed to deliver least-cost decarbonisation of particular sectors across the EU, and we are supportive of this approach. We are also supportive of international efforts to price carbon, such as the EU emissions trading system, which is the first, and largest, cap-and-trade system of allowances for emitting greenhouse gases in the world.
We recognise that the EU emissions trading system requires reform, and the United Kingdom has been one of the leading advocates of measures to strengthen the scheme, such as negotiating the market stability reserve. However, on what is, I think, at the very least a significant change, we need to beware of throwing out the baby with the bath-water. We do not want to imply a loss of faith in the EU emissions trading system as a means of achieving least-cost decarbonisation by decoupling our carbon budget regime from it. Instead, we are focused on continuing to work with other member states to strengthen the EU emissions trading system.
Finally, it must be noted that our approach is in line with the Committee on Climate Change’s advice on the use of emissions trading system allowances. It renewed its advice in 2013 that we should include emissions trading system allowances in the net carbon account and proposed an approach for doing so, which the then Government broadly accepted.
My noble friend Lord Howell made significant points during the debate about ensuring that we keep energy affordable. I think that this would jeopardise that, at the very least.
In the light of those comments, I hope that the noble Baroness and the noble Lord have found my explanation reassuring and will not press their amendments.
My Lords, I am grateful to the Minister for his response and to the noble Lord, Lord Teverson, for his support for this amendment and for lending his name to it.
I am afraid that I am not reassured. I have listened to and understood the argument. However, it is not a radical change but an important change—there is a distinction there.
In answer to the specific question from the noble Lord, Lord Howell, about whether it will be cheaper to do it this way, I honestly believe that, for UK plc, it will be. At present, the way the budgets work is that, essentially, we pay other people to decarbonise and then we import the certificates. That can be done for a while, and it makes economic sense to do so. In fact, for the first three carbon budgets, while the system has been bedding down, it probably made sense to use a traded system—the rules and the allocations from Europe were clearer and we were all finding our way to see whether the EU ETS would deliver. The closer that we get to our 2050 target, the more that that approach starts to be a false economy. We find then that, potentially, we are repeatedly paying other countries to decarbonise and not investing in our own country.
I can follow the argument that the noble Baroness is making very clearly. However, does she not agree that the great danger with the proposal is that it takes away the flexibility of being able to use the trading system? At the moment, it does not have to be used but it can be used if it is appropriate. If we were to go down this path, we would be throwing away that tool.
I am grateful to the Minister for that question. However, that is not the case. There are two versions of flexibility in the Climate Change Act: there is an overarching flexibility created by the budget system, and there is a flexibility that the Government maintain to settle their accounts using credits that they can then take from the EU budget that they are given, by simply not auctioning them, or purchase from offsets that are relatively cheap. There is always a limited amount of offsetting that the Government are able to do if they find themselves out of an account. This would not change that; it simply changes how we count emissions and what counts towards the budget. In this sense, we are saying that actual emissions—what happens in our territorial waters —is what we count. Then, we do the settling up, using credits, to a certain extent, as the budget management system. That is an important point and I hope that people can follow it.
As to whether this would take us out of step with other countries, as I have said, other countries use actual accounts for their targets. Germany is the most obvious example, where there are domestic climate change targets that go beyond European targets. There is a reason for that: Germany is investing in business, infrastructure, companies and enterprise that will be future proofed and provide an export market long into the future. Germany has been very smart about that. We, on the other hand, have a slightly more liberalised market view. In this case, because the ETS is not working as it was meant to, that is potentially damaging our ability to stay within our targets, to do so cost-effectively and to drive investment here. We want to see jobs here and money flowing here, not necessarily pass money overseas for the abatement that someone else has invested in.
For those reasons, I believe that this is an important but not radical move that squares the circle. In response to Amendment 78S, the Minister said that we do not want to set any more distorting new targets in the power sector. I am happy to concede that point. However, this is a very good way of doing what we all agree that we need to do, which is to create investor certainty that this is an enterprise that we remain committed to. As we get closer and closer to that 2050 target, we need to start looking not just at what is happening Europe-wide but at what is happening in the UK economy, so that we are benefitting from the supply chains, the investment and the projects happening here.
I hope that I have made it quite clear why I think this is important, why it is timely and why it has arisen in the course of this Bill. I am encouraged by the support that I have seen from the House. I feel confident that I can answer the question from the noble Lord, Lord Howell: this will be cheaper in the long run; it will be cheaper for UK plc to do this in a way that enables us to drive investment here. For those reasons, I am minded to test the opinion of the House on Amendment 78UA.
My Lords, once again very briefly, could the Minister also make some comment in his response about what the cost to the consumer will be of electricity which is generated by plant under contracts under the capacity mechanism?
My Lords, I thank all noble Lords who have participated in the debate on Amendment 78V and the noble Baroness, Lady Worthington, for introducing it. We missed each other late last night to discuss this amendment, but I am grateful that she rang before breakfast this morning so that we could discuss it then. That is how seriously we both take our jobs. Again, I am grateful to the noble Baroness because otherwise it would have taken us on the blind side that the amendment was coming up today. I am also grateful to the noble Baroness for what she has said in relation to this issue and for confirming that she will not push it to a vote. The comments made by the noble Lord, Lord Teverson, are right, but as framed there would be difficulties with the amendment anyway.
Perhaps I may say something about the purpose of the capacity market for the benefit of the House and then say something about the particular issue that has been raised. The purpose of the capacity market is to ensure security of electricity supply by providing all forms of capacity with the right incentives to be on the system and to deliver energy when it is needed. The first capacity market auction was successfully concluded in December 2014, contracting 49.3 gigawatts of capacity at a clearing price of £19.40 per kilowatt—and with that I have addressed the particular and very valid point raised by the right reverend Prelate. The outcome was great news for consumers, as fierce competition between participants drives down costs. The results will ensure that enough of our existing capacity will remain open at the end of the decade, as well as unlocking new investment.
I accept that there is an issue about emissions. Other government policies that were referred to by the noble Baroness, Lady Worthington, including the emissions performance standard and the carbon price floor, limit potential emissions from thermal plant for larger producers in keeping with our aims of decarbonising the power sector. For example, the emissions performance standard for larger generators limits carbon emissions to around half of that produced by unabated coal. The carbon price floor obviously provides an incentive for investment in low-carbon electricity generation. I accept that, as things stand, small generators are not covered by that. The department is aware of the issue, but we believe that the EPS represents the best way of looking at the smallest generators, perhaps within the review cycle for the EPS rather than in the context of the capacity market alone because that clearly seeks to ensure that the capacity we need is delivered. I am happy to discuss this further outside the Chamber. It is worth recognising that, at least at present, most of the small generators in the capacity market run for only a limited number of hours per year, but I appreciate that there is no guarantee on that. However, I recognise that this is an issue.
I turn now to what might have been the point that, given his background, the noble Lord, Lord Teverson, was referring to. There is not a state aid issue here. The capacity market state aid clearance is based on the current design of the mechanism, including the concept of technology neutrality, so accepting the amendment in its present form would have required state aid renotification, which as we know typically takes nine months or longer. That would have introduced uncertainty into the market and would have caused problems. But I am happy to continue a discussion on how to tackle what is a very real issue, and I thank the noble Baroness for her comments.
I thank the Minister for his response, and our conversation was welcome just so that this did not come completely out of the blue. I am reassured by his comments and I think that this is something we can work on together to try to find a solution. I am certain that the wording I came up with was not perfect.
I would just say that state aid absolutely does require technology neutrality, and it is something that we need to think about in general for the whole of the EMR Bill. State aid clearance was on the basis of technology neutrality and that relates to the CFDs that we let as much as the capacity mechanism. I am grateful to the noble Lord for indicating that we can continue to work on this, and I am happy to withdraw the amendment.
My Lords, in view of the earlier defeat of Clause 66, I shall not move this amendment.