Renewables Obligation Closure Etc. (Amendment) Order 2016

Lord Grantchester Excerpts

Wednesday 16th March 2016 Lords Chamber

[Lord Teverson (LD)]

My Lords, I will be extremely brief. Perhaps I may reply to the noble Baroness, Lady Byford—whose expertise in all these areas I admire greatly —as well as comment on one of the Minister’s remarks.

First, these Benches absolutely want to reduce renewable tariffs and subsidies as the costs come down. That is a fundamental point. We have a track record of doing that, and that is what we do. However, we are not into executing a particular technology. The way that this has worked is that the Government—interestingly, a Conservative Government—have been moving down the road of choosing technologies. The whole strategy of the energy market reform was to move gradually to a more market-based, less technology-specific situation as time went on—but we are doing the opposite.

We absolutely agree on the levy control framework and lowering costs to the consumer, but what have the Government decided to do? They have decided to invest in the two most expensive low-carbon technologies, offshore wind and nuclear, both of which are hugely more expensive than onshore wind and solar, the technologies that cost the least. So I say to both the Minister and the noble Baroness that if that is what the Government want, they need to change the strategy. They can achieve another strategy at the same time as meeting the carbon emissions target and lowering costs to consumers. That is the way it works—it is arithmetic. So, please, let us go for that.

I return very briefly to the issue of investor confidence. As noble Lords will know, the Select Committee on Energy and Climate Change in the other place recently looked at investor confidence in the energy sector. I hate round numbers, because one often does not believe them, but DECC itself estimates that we need some £100 billion of investment up to 2020, not just in generation but in the distribution system as well. As my noble friend said, to achieve that we need real investor confidence. What was the Select Committee’s conclusion? It said:

“It is clear that the confidence of many investors has been dented by the Government’s actions since the election. The sudden, unexpected nature of many of the announcements has unsettled investors who had been used to receiving more forewarning of policy changes. There is a high risk that a hiatus in new developments has been created, pending further clarity on short- and longer-term policy. The Government removed support for renewables due to concerns about costs for consumers. But they have not set out the evidence base for this conclusion or for other decisions, and engagement with the investment community has been poor”.

That is an all-party conclusion in a report on the Government’s action in this area, and the conclusion is to condemn it. The need for investment is huge. We need to make sure that investment is right and that subsidies are low—and we are absolutely for reducing subsidies—but it has led to a hiatus. We no longer have carbon capture and storage or appear to have nuclear, and as far as I can see we do not have a workable strategy to bring in gas—so we have a huge energy problem. We need those investors but we have thrown away their confidence, and through the decisions we have made on renewable energy, by picking expensive winners, we have ensured higher energy costs for the future.

[Lord Grantchester (Lab)]

My Lords, it is becoming an all too familiar situation on energy policy that once more there is another order before your Lordships’ House that severely limits the UK’s renewables industry, the mishandling of which, once more, has left confidence among investors in the sector further damaged.

The draft instrument today contains severe restrictions on the deployment of solar schemes of 5 megawatts or less under the RO regime. For solar it is another blow on top of the 65% cut to the rate of feed-in tariffs that your Lordships debated barely a month ago. As was said then, in the wake of the Paris agreement on climate change, the Government are sending out a terrible mixed message with another sudden and severe policy change, risking cutting off the sector at its knees rather than supporting its gradual glide path to being subsidy-free.

Today we will join the noble Baroness, Lady Featherstone, in her amendment to the Motion on the order. She is of course correct in her appraisals. Today the Government are not being technology-neutral as regards solar power. Having closed the RO to schemes above 5 megawatts on 31 March 2015, the extension to close the RO to 5 megawatt schemes and below, yet without access to the contracts for difference auction system, means that solar projects above 1 megawatt are now in effect without support, with no route to market.