Renewable Energy

Lord Grantchester Excerpts

Tuesday 28th June 2016 Lords Chamber

[Lord Grantchester (Lab)]

My Lords, I congratulate the noble Baroness, Lady Featherstone, on securing this debate today, which enables us to consider and take stock of the UK’s energy policy position and direction under the new Conservative Administration, one year on from the 2015 election,. The noble Baroness is correct to highlight how important renewable energy and the low-carbon economy are to the UK. More than 11,000 businesses are engaged in the low-carbon economy, directly employing more than a quarter of a million people and indirectly a further 200,000—potentially a growing opportunity for the UK to create a high-skill, low-carbon economy.

Against the international backdrop of the Paris accord, Bloomberg New Energy Finance’s New Energy Outlook 2016 reports that renewable energy will generate 70% of Europe’s power by 2040—up from 35% in 2015. In the UK, renewables technologies have been growing rapidly to reach a 25% share of all electricity in 2015. More broadly, low-carbon electricity’s share of generation, including nuclear, increased to 45.5% last year.

Sadly, since the May 2015 general election, policy changes and mixed messages have created uncertainty over financial support and further new investment. Your Lordships’ House debated the renewables obligation closure order, the early closure of onshore wind schemes, the huge 65% cuts to feed-in tariffs for smaller solar schemes, the ceasing of support to biomass conversion plants, the scrapping of the zero-carbon homes programme, the ending of the Green Deal scheme for home efficiency, and uncertainty regarding the future of carbon capture and storage. The noble Baroness, Lady Featherstone, was again correct to underline how this risk to energy investment has undermined investor confidence and is having an impact on household bill payers, because more risk means more cost.

The House of Commons Energy and Climate Change Committee’s report, Investor Confidence in the UK Energy Sector, in March 2016 listed as its first factor of six that have combined to damage investor confidence:

“Sudden and numerous policy announcements have marred the UK’s reputation for stable and predictable policy development”.

Predictably, Ernst & Young’s attractiveness index for international investment in energy has shown a drop in the UK’s ranking to 13th place, arguably jeopardising UK energy security, going against the grain of almost universal global support to bring renewables through to a support-free regime.

Let us be clear that it is recognised that the Government will, despite the votes of last week, remain committed to reaching our climate goals, to fulfil our emissions reduction targets and to decarbonise our power supply. They are to be congratulated on plans to phase out unabated coal by 2025, but they are sending out horrible mixed messages and non sequiturs. Yes, it is recognised that the cost of the levy control framework is rising from its present total of more than £5 billion to perhaps more than £10 billion in 2020, but the lack of transparency over government evidence for their argument that this amounts to overspending on renewables is undermining their credibility. On the one hand the Government are understandably aware of the cost of energy on household bills, but on the other they are picking technologies such as shale gas and CCS, which are unproven, and new nuclear and offshore wind, which are substantially more expensive. Investors cannot understand what the Government are trying to achieve.

Furthermore, the Government’s mishandling and the extent of the industry’s lack of belief in the department was highlighted in your Lordships’ Secondary Legislation Scrutiny Committee report on the renewables obligation closure order 2016. It reported that at two stakeholder workshops that the department undertook, respondents questioned its rationale, as no transparency was provided for the figures for the levy control framework and no evidence was provided to detail the breakdown of the LCF overspend.

The Energy and Climate Change Committee has called on the Government to set out clearly the purpose of the LCF and to explain why the capacity market is not currently included, when it is clearly an electricity policy that results in levies on consumer bills. Yes, it is right that we need to control costs, especially when the poorest households pay more for their energy as a proportion of their income than more wealthy households, but if the Government are focusing on the LCF as a determining factor in low-carbon energy technologies, it is vital that the framework becomes coherent with the utmost urgency. That the Government have not done so is of great regret. I ask the department to undertake this work immediately.

Just as technologies such as solar are standing on the cusp of becoming subsidy-free and economically competitive, the Government’s slashing of subsidies is killing off thousands of jobs. Yet, shortly after capping subsidies, they announced potential subsidies to diesel generators, one of the most polluting energy forms available. The cuts to subsidies also included community schemes. Under present conditions, the sector will not be able to continue at scale. What plans does the department have to encourage the community energy scheme and the sector in future?

The change needed to decarbonise the economy does not point only to the renewables energy sector. It must also refer to low-carbon generation, and it is right that we should also take account of the wider context that includes nuclear and carbon capture and storage, among others. In his reply, will the Minister outline the latest position regarding Hinkley Point C? Is he confident that the technology remains robust and the timetable for becoming operational in 2025 is still realistic?

In a very recent publication, the Energy and Climate Change Committee also reported on the low-carbon network infrastructure. It reported that transformation of the UK’s infrastructure is already occurring. The noble Earl, Lord Stair, highlighted in his remarks how those distribution changes need to occur even more quickly. Electricity generators used to be predominantly large, centralised plant connected to high-voltage, long-range transmission networks. Now, significant quantities of generation are connected to low-voltage, short-range distribution networks. These are new challenges where innovative solutions need to be developed, including a focus on battery storage and heat decarbonisation technologies.

I recognise and applaud the Government’s announcement in the 2016 Budget to allocate at least £50 million to help innovation in energy storage, demand-side response and other smart technologies. Can the Minister give the House an update on when the Government expect widespread take-up of storage and how effective that will be in helping to match supply at peak demand?

Key technologies also include heat decarbonisation and carbon capture and storage. As I said earlier, the Government cancelled the planned competition to develop greater use of the CS technology. The department’s estimates predicted in 2013 that:

“By 2050, CCS could provide more than 20% of the UK’s electricity and save us more than £30 billion a year in meeting our climate targets”.

What future do the Government see for CCS technology, and what are their plans for the sector?

In my earlier comments, I mentioned energy efficiency and how the Government scrapped the Green Deal. While not commenting on the merits or otherwise of the scheme, the importance of energy efficiency and conservation is not to be overlooked. When do the Government expect to reply to the Energy and Climate Change Committee’s report Home Energy Efficiency and Demand Reduction?

A recent Carbon Brief analysis showed how the department for energy has downgraded its expectations for each of the main low-carbon sources of electricity in this year’s projections. The analysis lays bare the consequences of policy changes introduced since the May general election. The forecasts suggest that it will now be harder for the UK to meet its legally binding carbon budget for 2028-32, which is likely to be delayed past the deadline of the end of June. Has the Minister any news of the Government’s response to the climate change committee’s advice on that fifth carbon budget? I am also grateful to the noble Lord, Lord Teverson, for his remarks on the transport sector and how vital it is that it is not ignored.

In contrast to low-carbon sources of power, the department is now forecasting higher deployment of new gas-fired generation capacity, particularly into the 2030s. The expectation of 27 gigawatts of new-build gas, up from 16 gigawatts last year, could lock the UK into continued fossil fuel use into the 2030s, when gas- fired electricity is supposed to be on the way out. Can the Minister comment on the analysis that these policy changes are likely to increase the UK’s emissions?

Against the context of the Paris accord, it is now imperative that the Government restore confidence in the low-carbon economy. They must position the UK as an expert partner on low-carbon delivery by supporting and encouraging the low-carbon technologies of the future and maintaining the UK’s international climate leadership role. To quote the National Infrastructure Commission:

“The UK is uniquely placed to lead the world in a smart power revolution. Failing to take advantage would be an expensive mistake”.