Renewable Energy: Generation Licences

Lord Callanan Excerpts

Tuesday 13th December 2022 Lords Chamber

[Baroness Jones of Moulsecoomb]

To ask His Majesty’s Government what plans they have to increase the number of renewable energy generation licences.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the acceleration in renewable deployment will be supported by the UK’s main renewable energy scheme, contracts for difference. The latest round delivered almost 11 gigawatts of new renewable projects, almost double that achieved in the previous round. The next CfD round will be brought forward to March 2023, and future rounds will run annually to further drive deployment of renewable power. The majority of CfD applicants are exempt from the requirement to hold a generation licence.

[Baroness Jones of Moulsecoomb (GP)]

So far, it has been much more difficult to get renewable licences. One thing that might help, as well as the Government’s investment, is if the Minister could go back to his government colleagues and ask them to stop taking party donations from fossil fuel companies. That might give renewables a fair chance.

[Lord Callanan (Con)]

I thank the noble Baroness for that, which is totally unrelated to the Question she tabled. There have been almost 1,000 generation licences issued. It is a demand-driven process. All generators below 50 megawatts are exempt from having a licence in the first place.

[Lord Forsyth of Drumlean (Con)]

My Lords, could my noble friend the Minister indicate what has happened in recent days, as temperatures have fallen so low and there being no wind, to the cost of electricity as a result?

[Lord Callanan (Con)]

My noble friend makes an important point. I suspect that he knows the answer to his own question: because it has been relatively still, there have been relatively small amounts of wind in the power sector, so the other sources of power—nuclear, imports, gas, et cetera—have moved in to fill the gap. That is how a diverse system should work.

[Baroness Humphreys (LD)]

My Lords, getting a grid connection, never mind a generation licence, for any kind of generation is increasingly difficult, and indeed is even beginning to restrict housing developments. Will the Government instruct Ofgem to increase the pace of grid investment to avoid a literal energy gridlock?

[Lord Callanan (Con)]

The noble Baroness raises a good point. We are seeing a total reconfiguration of the grid away from large nodes, such as coal-fired power stations, to a much more diversified system of generators. That requires massive configuration of the grid, which is extremely expensive and, I might add, politically controversial. Many people do not want new pylons, et cetera, going through their neighbourhoods. Nevertheless, work is ongoing to reconfigure it. Considerable sums are being invested, but clearly we need to do more in that area.

[Lord Geddes (Con)]

My Lords, I have asked my noble friend this question before, and to an extent it follows up the question from my noble friend Lord Forsyth. Where are we with tidal power?

[Lord Callanan (Con)]

Tidal power is an interesting technology. A number of schemes are being rolled out. For the first time ever, in the last CfD round a number of schemes were awarded licences. We need to continue supporting and developing it, but we must not run away with the idea that this will be a long-term, sustainable solution for large amounts of power. At the moment, it is on a relatively small scale. We need to continue supporting it, and we will.

[Lord Hain (Lab)]

My Lords, the biggest tidal power project is, of course, the Severn barrage. Will the Minister receive a delegation to brief him on the potential for that? It is equivalent to two nuclear power stations, and it is lunar, and therefore generates predictable baseload energy. Frankly, it is a no-brainer.

[Lord Callanan (Con)]

I understand the point the noble Lord makes. A Severn barrage scheme has been talked about since I was an electrical engineering student, way back in the 1980s; it is not a new scheme. It all comes down to the cost and the environmental damage that would result from implementing it. We continue to keep all these things under review. I assure the noble Lord that both I and the department know all about the details of the scheme.

[Lord Hayward (Con)]

My Lords, I add my comments to those made in relation to both tidal and wave power. We have the second-largest tidal range in the world. Some 40 years ago, I lobbied the Government on the Severn barrage, but there are many alternatives. They are not small power generators but potentially very substantial generating powers, particularly wave power.

[Lord Callanan (Con)]

The barrage schemes are potentially large-scale schemes. I meant that some of the bottom tidal schemes are on a relatively small scale. It all comes down to cost. The costs of these schemes fall on bill payers. The Government’s general approach is to support forms of renewable power that offer the best value for money for taxpayers—principally solar and wind, but we are starting to support some of the other tidal schemes as well. The barrage schemes are extremely expensive and very long term, and there are a lot of environmental implications.

[Baroness Blake of Leeds (Lab)]

My Lords, we note the increase in the frequency of contracts for difference allocation rounds every year. Can the Minister expand what impact this will have on deploying more energy regeneration? Why is the process so prescriptive? It has “lack of ambition” written all over it. Surely more flexibility is the key to encouraging more investment in zero-carbon technologies. Are any plans coming forward to make Britain the clean energy superpower it deserves to be?

[Lord Callanan (Con)]

I disagree with the premise of the noble Baroness’s question. We are already a renewable energy superpower. She talks about lack of ambition. In the last auction, round 4, we delivered more than 11 gigawatts and 93 renewable power projects—enough to power 12 million homes. We have the largest offshore wind capacity in the whole of Europe and the second largest in the world. We want to scale-up that ambition and deliver more, but I think the noble Baroness should give us some credit for what we have already achieved.

[Lord Vaux of Harrowden (CB)]

My Lords, I remind the House of my interests in the register. Now that the feed-in tariff has ended, there is not much incentive for people to install more capacity on their homes than they use themselves. The smart export guarantee pays typically between only 1p and 5p per kilowatt-hour, which is not enough to encourage people to install excess generating capacity. Does the Minister agree that a peer-to-peer trading facility that allows people to sell their excess power to their neighbours might increase returns to generators and improve the incentive, and also reduce the cost of power to neighbours?

[Lord Callanan (Con)]

It is an interesting concept. As the noble Lord knows, the smart export guarantee is a market-driven mechanism, and it is for suppliers to determine the value of the exported electricity to them, taking account of their administrative costs. There are a number of schemes, such as the one mentioned by the noble Lord, and I am certainly very happy to look at it. However, we always have to bear in mind that any subsidy offered to certain generators is paid for by every other customer on the network.

[Lord West of Spithead (Lab)]

My Lords, all this talk of tidal power makes one think of ships. Noble Lords will be glad to hear that I am not going to ask a question about ships. There is going to be a huge growth in demand for electrical power. The only certain way of providing electrical power, no matter what the weather and completely green, is nuclear. What is the actual percentage that we are looking for in the provision of nuclear power, looking to the future of electrical supply within this country?

[Lord Callanan (Con)]

The noble Lord is right: we need to expand our nuclear production. We have just agreed the contract for Sizewell, only a couple of weeks ago, and other developments are planned. We have not set a specific target for nuclear production, but we will need to replace a lot of the aging plants that will come offline in the next 10 or 15 years or so.

[Baroness Jones of Whitchurch (Lab)]

My Lords, the Minister, in reply to several questions, has said that it comes down to cost. Could he assure us that the full cost of continuing to invest in fossil fuels is factored in when that equation is calculated? Fossil fuels come at a cost to the environment and certainly to our climate change ambitions. Can he assure us that this is fully taken into account when those balanced decisions are taken?

[Lord Callanan (Con)]

There are of course no subsidies given to fossil fuel generation. In fact, it is the opposite: they are paying into the system record levels of taxation. This is a gradual transition. To all those who want to get rid of fossil fuels, I say great, but 80% of our heating is gas heating at the moment; are we going to turn off people’s gas boilers overnight? I suspect that the answer to the noble Baroness’s question is no. Of course we want to roll out renewable generation, which is what we are doing, but it is intermittent, as the question from my noble friend Lord Forsyth intimated earlier. We need back-up generation for that; that could take a number of different forms, and nuclear is one of the possible options. In the short term, as we move to a more renewable system, we will need fossil fuel generation.

[Lord Kamall (Con)]

My Lords, I want to ask my noble friend the Minister about the long-term thinking in the department. Looking at the developments in technology, particularly in storage capacity and micro- generation, might there be a day when there really is no incentive for people to feed into a grid, and they can generate all their energy locally? What sort of long- term thinking has there been on the impact on the grid of more local generation and storage?

[Lord Callanan (Con)]

My noble friend makes an important point. There will be, and has been, an increasing amount of microgeneration. I am told by the suppliers that there are record demands at the moment for things such as solar panels and PV generation, as people respond to high electricity costs. Many people will want to install systems that will save them money in the long term. Of course, the higher electricity prices are, then the pay-back period for microgeneration schemes becomes less and less. It comes down to the question that was asked earlier about the reconfiguration of the grid. There would be much more small-scale generation rather than the big node operators that we are used to. A considerable investment is going into the grid to bring that about. We also have schemes such as smart metres; 50% of the country is now connected to a smart meter, and they enable better charging regimes, demand-management schemes, et cetera, all of which will contribute to what the noble Lord suggests.