Energy Bill [HL]

Lord Foulkes of Cumnock Excerpts

Wednesday 14th October 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I start by speaking to government Amendments 1 to 13, which seek to amend and supplement Clause 66. I thank noble Lords for extending this debate and allowing us the time for a fuller and thorough discussion.

[Lord Foulkes of Cumnock (Lab)]

I am sorry to interrupt but may I put on record in the Grand Committee what I said in the Chamber? It would have been better for all of us if this debate had taken place in the full Chamber rather than in the Grand Committee.

[Lord Bourne of Aberystwyth]

I thank the noble Lord for his intervention but I make the same response as I gave previously. I know that is the noble Lord’s view but I have heard contrary views, and not from the Conservative Benches, that Members prefer this Bill to be in the Moses Room. However, the point is noted.

As previously set out in the Secretary of State’s announcement on 18 June regarding the early closure of the renewables obligation, we proposed a grace period to protect investor confidence in the wider renewables sector. A grace period was proposed that would provide for those projects which had, as of 18 June this year, planning consent, grid connection and land rights. The grace period was designed to allow for projects that meet certain criteria to continue to accredit under the renewables obligation until the original closure date of 31 March 2017. Following this announcement, we undertook a significant period of engagement to understand better the views of industry and other stakeholders on our proposals.

I recognise that the Government’s amendments, which were tabled last week, are somewhat technical and have the potential to be seen as complex. I reassure noble Lords that, from the outset, the Government have been alive to the issues of investor certainty and clarity, which is why the provisions have been drafted to reflect the approach taken in existing renewables obligation legislation, in particular the Renewables Obligation Closure Order 2014 and the 2015 closure order relating to large-scale solar. This approach aims to ensure consistency and ease of understanding for industry. Following our previous Committee debate on 14 September, we have now carefully reviewed the feedback and evidence provided during the engagement exercise. We have since developed amendments to our original policy to ensure that it strikes the right balance. The amendments aim to protect consumer bills and ensure the right mix of energy, while balancing this against the interests of onshore wind developers and the wider industry.

I am also pleased that the amendments and the revised impact assessment were made available to noble Lords on 8 October in advance of today’s debate and as promised at our last sitting. I hope that noble Lords have had time to review the amendments and that they go some way towards addressing concerns raised during the debate in our previous Committee sitting on 14 September.

Amendments 1 to 13 amend the Bill to introduce the proposed grace period criteria for the early closure policy as outlined in the announcement on 18 June and make a number of additional supplementary amendments.

Amendments 1 to 12 make a number of changes to Clause 66, which introduces a new provision into the Electricity Act 1989 to implement the early closure of the schemes to new onshore wind in Great Britain. The amendments seek to remove the delegated power with a view to setting out the terms of the grace period in the Bill. Amendment 13 sets out the detail of the grace period in the Bill. I hope that these amendments will be welcomed by noble Lords, as initial feedback from the industry to the department following the publication of these clauses has indicated.

I again apologise for the delay in bringing these amendments forward, but hope noble Lords understand the complexity of the policy that has been drafted and appreciate that we will now have an appropriate amount of time in which to debate them today.

I turn first to the terms of the initial grace period criteria as outlined in the Secretary of State’s announcement in June. The proposal was—and, following detailed industry engagement, remains—to offer a grace period to those projects which, as of 18 June 2015, already have, first, relevant planning consents; secondly, a grid connection offer and acceptance of that offer, or confirmation that no grid connection is required; and thirdly, access to land rights.

In addition to this, in certain circumstances, projects that have been granted planning permission following a successful appeal will also be eligible for the grace period. In particular, those projects which have, via an appeal or judicial review, had a negative planning decision that was made on or before 18 June overturned, should be eligible for the grace period. This is because had the correct decision been made in the first instance, they would have had planning consent on or prior to the 18 June cut-off date. These key grace period terms are referred to in the amendments as the “approved development condition” and are referred to in proposed new Section 32LJ.

I turn now to investor confidence. At the time of the announcement outlining the initial grace period, the Secretary of State also said that she wanted to hear the views of industry and other stakeholders before framing the terms of the legislation. The department engaged with hundreds of stakeholders, including the devolved Administrations, supply chain, investors and developers, over the summer. The evidence gathered during that engagement exercise demonstrated the views of individual developers and the wider industry. Evidence was collected though online representations, individual meetings, representations from trade bodies and investor round-table sessions.

Following this engagement, we now have evidence that certain projects which already meet the proposed grace period criteria are experiencing difficulty securing finance. Feedback has shown that a number of financiers may be unwilling to lend to projects due to legislative uncertainty created by the parliamentary Bill process. Therefore, to ensure that projects which meet the grace period criteria and would have otherwise been able to commission and accredit under the renewables obligation by 31 March 2017 are not frozen out of the process, we are offering those projects which meet the approved development condition additional time to seek accreditation. The extension available is broadly equivalent to the period between the date of the Secretary of State’s announcement—18 June—and likely Royal Assent to the Bill, which is approximately nine months. 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 freeze condition I have just described is intended not to increase the pipeline of onshore wind projects that are able to accredit under the renewables obligation but rather to ensure that those projects which were intended to be protected by the grace period, as proposed on 18 June, are afforded this protection.

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 applies here. This entitles projects affected by unforeseen grid and radar delays an additional 12-month period in which to accredit.

We are confident in our amendments and the proposed grace period. We have actively listened 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 beg to move.

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[Baroness Quin (Lab)]

My Lords, I have not spoken before on the Bill but have followed the proceedings closely, particularly as I live in Northumberland, the county that has had more onshore wind farms installed than any other county in England. I know that many people have made the point during debates that Scotland is the part of the UK that feels the major effect of both the previous policy and what is now being proposed, and I accept that completely, but in England Northumberland has a key role and a key interest both in the policy and in the changes that are proposed to it.

I speak as someone who is strongly supportive of the renewable energy sector generally, and indeed I was concerned today at what seems to be the direction that the Government seem to be taking over solar energy. None the less, I have a problem with onshore wind installations in my part of the country, which probably relates more to the planning process than to anything else simply because in Northumberland so many applications were approved in the face of not just the majority of the local people affected opposing them but an overwhelming majority. In many cases it seemed to those residents as though those investing in and pushing for such schemes had little connection with the local area, and little commitment to it other than making a financial gain with generous public support. For that reason, I am glad that the Government started to listen.

I know that comments have been made during the proceedings about the role of Conservative Back-Bench MPs. Having been a long-standing Labour Member in another place over many years, this is perhaps the first time that I might be saying something kind about Conservative Back-Bench MPs. I assume that they were opposing onshore wind not because they suddenly felt like it but in response to constituents’ concerns, which is what MPs of all parties can and should do. In my area, plenty of people who are not Conservative supporters were concerned about some of the inappropriate intrusive wind farm schemes that, for example, led to very familiar views of our iconic coastal castles disappearing behind a circle of turbines, or, in another case, threatened to overshadow ancient standing stones that had stood proudly amid beautiful countryside for thousands of years.

Organisations that are normally very concerned about environmental issues and about climate change, such as the Northumberland and Newcastle Society or the Northumberland branch of the Council to Protect Rural England, have expressed their concerns very loudly about this. I should declare a non-financial interest as president of the Northumberland National Park Foundation. I have a lot of links with those who are concerned to protect and enhance the Northumbrian countryside and ensure its continued attraction to tourists and residents alike.

I should like the Government to give us some more information about the effect of what they are now proposing for areas such as Northumberland. A lot of very reasonable questions have just been asked by the noble and learned Lord, Lord Wallace of Tankerness, which obviously need addressing. But a breakdown as to how different parts of the UK will be affected by the changes that the Government are proposing would be welcome to all of us, whatever views we take of onshore wind and its future.

I also understand some of the points about investor confidence that have been made by my noble friends. As I said, I also understand what has been said by my honourable friends about the situation in Scotland and ensuring that there is proper and meaningful consultation with the Scottish devolved authority on these issues. However, I support local people wherever they are in the UK having their strong views taken into account. In many areas and in many cases there is strong public support for the renewable energy sector, whether in onshore or offshore development. I believe that we can meet our targets. But at the same time we need to be determined to conserve and enhance our precious national landscapes and countryside, not least in Northumberland.

[Lord Foulkes of Cumnock]

My Lords, I understand that we are dealing with all the amendments grouped together, so we can discuss aspects of any of them. Amendment 18, which I tabled, is really a technical amendment given to me as a way of tidying up the amendments that the Government have proposed. I will not speak to it today but I am happy to table it again on Report and speak to it on that occasion if necessary.

I fully understand what my noble friend Lady Quin just said. She and I were together in the other place, along with the noble Lords, Lord Deben and Lord Howell, and others, and we know the importance of representing constituents and making sure that their views are represented in relation to major planning issues such as wind farms. In my old constituency of Carrick, Cumnock and Doon Valley—I never had to explain to anyone that that was in Scotland; they knew straightaway once I had pronounced it—we had a number of wind farms and they were welcomed locally. We did not have the kinds of objections that my noble friend obviously experienced in Northumberland, but I understand that and she made her points very well.

I was tremendously impressed by the explanations of the noble and learned Lord, Lord Wallace, of his own amendments—they were detailed and forensic—and by his clear knowledge and understanding of them. I noticed that the noble Baroness, Lady Maddock, was, like me, slightly perplexed on one or two occasions, but he managed to explain them to us. As I whispered to my noble friend Lady Quin at the time, “You can easily tell that he is a very good lawyer by the way he takes a brief and manages to explain it to lesser mortals like me and others”. I was very impressed by that.

However, I am not as equable and relaxed about what the Government are proposing as some of my colleagues in this Grand Committee appear to be. People in Whitehall and Westminster sometimes do not understand what is going on in the real world outside. I wish that the Minister had experienced the kind of anger, fury and despair that I have experienced in the representations made to me about what the Government have done and are doing on this. I am astonished that they are pursuing this and treating it with such equanimity.

This has been an exercise of the greatest incredible incompetence and betrayal that I have known for a long time and I have seen some degree of incompetence and a lot of betrayal from time to time. I want to go through that statement and explain it, even in terms of the procedure. I tabled my Amendment 18 with the very helpful clerks in the Public Bill Office upstairs. I asked how frequently Governments have to resort to this astonishing procedure of re-commitment. Apparently, it is a very infrequent procedure and it is astonishing that the department has had to resort to it. It is a procedure where we are dealing with 12 pages of detailed amendments which have a huge effect, as the noble and learned Lord, Lord Wallace, has pointed out, on investors, consumers, producers and everyone, and we are trying to rush them through in this way. Next week, we have two days of Report, when we are supposed to deal with the whole Bill yet again. This is an astonishingly incompetent way of dealing with legislation.

I want to turn to the betrayal and the reneging on promises that have been made. I took part in a referendum in Scotland and went on platforms—much to my disadvantage, I may say—with Conservative spokespersons. It was a bit easier with the Liberal Democrat spokespersons. The SNP and others have taken us to task—to some extent understandably—for appearing shoulder to shoulder with Tory spokespersons. I feel really annoyed now that some of the things that were said on behalf of all of us, but put into government documents, are now being reneged on by the Conservative Government. Perhaps if it had been a coalition, they would not have been reneged on.

I will give two examples of the documents that went out to electors in the referendum. One said:

“The UK Government is now introducing the Contracts for Difference scheme, which will provide long term support for all forms of low-carbon electricity generation. These contracts provide industry with the long-term framework to make further large scale energy investments at least cost to the consumer.”

Does not that ring hollow in the light of what the Government are now doing? It continues:

“Whilst the Renewables Obligation has been successful in incentivising renewable electricity deployment, a new market mechanism is now required to provide industry with the framework to make further large scale energy investments at least cost to the consumer. Therefore in its place, the UK Government is introducing the Contracts for Difference mechanism, which will provide long term support for all forms of low-carbon electricity generation—including nuclear, renewables and carbon capture and storage. Such contracts will allow investors to be confident about the returns on their capital in advance of investing billions”—

this is in a government document—

“into new infrastructure, remove exposure to volatile wholesale electricity prices and produce a more competitive market; therefore ensuring electricity remains affordable.”

That is really astonishing. This pledge in a government document to electors in the Scottish referendum was totally reneged on by the new Conservative Government.

Let us take the second betrayal by the Government. I will quote the noble Baroness, Lady Verma, who in the Chamber on 4 November 2013 said:

“My Lords, Amendment 66 provides the Government with the power to close the renewables obligation to new capacity. As noble Lords know, this closure is planned for 31 March 2017 as part of the transition to contracts for difference. We had previously considered that the renewables obligation could be closed using existing powers within the Electricity Act 1989. However, we have now concluded that a specific power in this Bill will put the closure arrangements on a more reliable and transparent legislative basis”.—[Official Report, 4 November 2013; col. 28.]

That enabled the power, which had been devolved to the Scottish Parliament, to be brought back here on the pretence that all this would be done on a proper, comprehensive, United Kingdom basis. The Scottish Government were betrayed on that promise, too, made by the noble Baroness, Lady Verma.

The third betrayal relates to the Conservative Party 2015 manifesto, which, as the noble Baroness, Lady Quin, said, explicitly committed to ensuring that,

“local people have the final say on windfarm applications”.

Independent generators, as other Members will have seen from their paper, are concerned that the Government’s proposed grace period for the early closure of the RO unfairly excludes projects with democratic local planning consent, contradicting that manifesto commitment to give local people the final say. Like the noble and learned Lord, Lord Wallace, they give examples of that. I will not go into the full details, except to say that the Section 75 agreement was made on 2 July 2015, which of course was after the cut-off date, because of a technical delay. That means that the will of local people, contrary to what the Government say, will not be taken into account. We keep being told that we should all abide by the Salisbury convention, but the Government are betraying their own manifesto. Those are the three betrayals.

We are told that all this is being done to keep prices down, but Bloomberg has just produced a report, which says, according to the Guardian—I know that not all Members like the Guardian, but I am sure that they like Bloomberg more:

“New onshore windfarms are now the cheapest way for a power company to produce electricity in Britain, according to Bloomberg New Energy Finance … Costs have dropped to $85 … per megawatt hour … compared with the current costs of about $115 for constructing coal or gas-fired plants”.

The costs for nuclear are assessed by Bloomberg at $190. The noble Lord, Lord Howell, said earlier in the Chamber that he was looking forward to the day when we do not have to subsidise renewables such as wind, but he should perhaps think about how much subsidy is going into Hinkley Point and look forward to the day when we do not have to subsidise nuclear.

These matters go beyond the terms of today’s debate, of course, but it is clear that, if we are to help consumers and keep our pledge to them to provide the cheapest form of electricity, using onshore windfarms is one way of doing that, according to the Bloomberg report. It is most unfortunate that we are dealing with this matter in this way.

I do not know who is going to the climate change conference in Paris in December. I once went to a climate change meeting that the noble Lord, Lord Deben, in his previous capacity, chaired—in a brilliant way, by the way—with everyone discussing the issues rather than reading out reports prepared by civil servants back home. It was a very good and constructive debate.

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[Lord Foulkes of Cumnock]

I would like to resume. I was thinking ahead to Paris in the week beginning 7 December, wondering which poor Minister—I hope it is not the noble Lord, Lord Bourne—is going to have to go there and explain how we are going to manage to achieve our targets for reducing carbon emissions by the appropriate date, given what we are doing in relation to solar energy, and now in relation to onshore wind. I certainly would not like to be doing that.

In the light of the fact that there has been this betrayal and that the Government are trying to rush us through some very complicated and detailed amendments with serious long-term effects that will affect not just investors, customers and suppliers but many more people, I must give the Minister notice that I am minded to oppose all his amendments in this Grand Committee unless he can give me some very clear assurances. I will be listening very carefully. If we do not agree this today, it will give the Government another week to try to get it right.

I ask the Minister to go back to his Secretary of State and his other Ministers and ask whether it is really worth the candle to push this through the House of Lords and then go to the House of Commons and try to persuade it, with 55 SNP Members of Parliament snapping away at Ministers’ heels, just for the relatively small amount that it would cost to go ahead as originally planned, and for the relatively small amount of generation involved? Is it really worth pushing ahead with that?

I wonder whether the Government are now regretting having introduced this Bill into the House of Lords. We are supposed to deal with Bills that are not contentious but this one is proving very contentious indeed. The Minister should go back and explain the problems that he is having getting the Bill through the House of Lords and warn his colleagues that it is going to be not just twice or 10 times as hard but many times more difficult to get it through the House of Commons. The Government have a majority there but there are all sorts of ways that it can be upset. I hope that he will consider changing his mind, withdrawing Clause 66 completely, finding some better arrangement that protects onshore wind schemes and keeping the three promises that I mentioned earlier, which the Government have reneged upon. I give him that very serious warning. Perhaps he will reflect that if he had taken my advice to have this matter dealt with in the Chamber, he might not be in the pickle he is in now.

[Lord Howell of Guildford (Con)]

My Lords, I declare my interests, including as president of the Energy Industries Council, which I cease to be tomorrow evening so I shall not need to declare it after that.

I applaud the very balanced assessment of the situation given by the noble Baroness, Lady Quin. It reflected very sensible views about the way this issue should be handled and approached. As for the noble Lord, Lord Foulkes, perhaps he was not in the Chamber at Second Reading, or if he was he seems to have completely forgotten what I said about Hinkley Point. I am very pro-nuclear indeed, but I do not mind saying in front of my noble friend that I have very serious reservations about whether the Hinkley Point C programme is the right way to get our nuclear renaissance going. I just remind him of that before he makes a further comment.

[Lord Foulkes of Cumnock]

I apologise for forgetting that. I was only recollecting what he said in the Chamber this afternoon. I accept that he made that point previously.

[Lord Howell of Guildford]

I thank the noble Lord for that. Turning to the amendments, they are very generous and I congratulate my noble friend on bringing them forward, even though they are rather extensive. They are what we used to call in the other place “liquid legislation”; that is, legislation going through Parliament that all the time is massively amended so that it changes from day to day. The amendments are indeed extensive but also very generous. This is a very exciting industry, part of the great low-carbon renewables transformation in the world that most of us want to see. All around the world, costs not only for solar power, which we were discussing earlier in the Chamber, but for all forms of wind power, onshore and offshore, and all sorts of other associated technologies are coming down dramatically. Really amazing technological advances are being achieved.

I listened to the expert legal commentaries of the noble and learned Lord, Lord Wallace, and I am all for speeding up the planning. However, it has to be remembered that what we are doing here is not legislating to stop all onshore wind. That is a vast industry that will continue and contribute to the energy transformation of the entire planet. What we are legislating for is to bring to a halt, with the various adjustments embodied in the amendments, further subsidy that falls upon consumers. This has to be weighed in the balance. We hear horrid stories about the closure of businesses; the Redcar steelworks is perhaps the most dramatic recent one. When you look at the small print, you find that one of the difficulties is that they are facing much cheaper imports from countries that are not carrying such heavy energy costs. We have to put that in the balance and not just ignore the other side of the argument. There are consumers and taxpayers, often poor households and consumers with very low incomes, at the other end of this process, and we cannot ignore their position.

In addition, it has to be remembered that many of the investors behind the projects we are talking about have not just entered into them entirely from the goodness of their hearts or because they want to save the planet. Investors enter into these great projects because they can make a profit, and I have nothing against that; that is excellent. Less excellent, however, is that they sometimes enter into them because the subsidies seem so juicy and attractive and they think that they are going to make exceptionally large profits. So I just say to my noble friend, and I am sure he would agree, that we should bring to an end—with these many concessions and in a very balanced way—this particular growth of additional subsidies. In future, let us make sure that investors in these industries understand, as I believe the wise ones do, that the projects that they want to go for are the ones that are really likely to be extremely profitable, particularly in Scotland, and very competitive with all other forms of energy. They should be careful if they think that they are just going to ride on an indefinite continuation of very large subsidies because Governments and policies change. Wise advisers to wise investors will always warn them that the best projects are those for which the subsidies are a minimal part of the reward, and the profitable and efficient operation of the industry itself, and the rapid adaption of new technology, are the larger part of the profit generated. In every case, we advise that subsidies can end.

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[Lord Foulkes of Cumnock]

With respect to the noble Lord, Lord Deben, the promise was not that it would continue for ever but just to the end of March 2017. That is the promise that has been reneged upon.