Infrastructure Bill [HL]

Lord Jenkin of Roding Excerpts

Wednesday 5th November 2014 Lords Chamber

[Baroness Worthington (Lab)]

My Lords, I begin by apologising to noble Lords for the late tabling of this amendment. It was down to a misunderstanding as to when this group of amendments would be taken.

We now turn to Part 4 of the Bill, concerning energy, and to the community electricity right specifically. Although we discussed this in Committee, the purpose of tabling the amendment is to press the Government again on it. We were not satisfied with the response in Committee and we feel that this needs a considerable rethink in terms of how it is presented in the Bill. I also look forward to debating the amendments that we will come to later today.

The clause heading is “The community electricity right” but it quickly becomes clear from subsection (1) of the clause that this is about not electricity but a subset of electricity that is defined as renewable. That is the point we want to probe. We live in a world where energy markets and the energy system are changing and we are seeing a higher degree of decentralisation of energy, not just in renewable energy but also potentially in gas, both in terms of generation and the extraction of local sources of fossil fuels. Our main concern is that we should not single out a particular group of technologies for what is, in effect, an inflexible proposal from the Government when a much more holistic approach to the issue of community involvement in these projects is needed. There have been examples of local communities being unhappy with proposals for their localities, but there have been many more examples of communities embracing proposals and finding great benefit from the jobs and income that flow to those communities from development in their area.

Although we are fully supportive of the idea of community involvement, we are not necessarily persuaded that a single approach should be applied when considering how to engage communities or help them to benefit from development. The Government’s proposals are restrictive in that sense. Our main concern is that we do not make presumptions about what is going to work in every part of the country. In some parts of the country, rights to buy and ownership stakes will be the interesting issues; in other parts, there may be a simpler formula that enables people to have lower bills for electricity in their local area. We all know that a voluntary approach is being explored to try to identify the best way forward. We will come on to debate the need to allow for a good process and for enough time to come to conclusions before rushing into regulation.

This amendment is not about that but it tries to explore why it is necessary to qualify electricity generation with the word “renewable”. It is defined in law but covers a subset of all types of electricity generation that might attract community involvement and interest. We have seen under the capacity mechanism new development coming forward involving capacity market payments, such as in the small-scale, sub-20 megawatt gas generators that are bidding for 15-year contracts. They may well be located close to communities, which may feel that they would like to have a stake in those projects.

There is an issue here. We fully support more community involvement and better community integration in order to produce much more positive engagement with decentralised electricity production. However, I do not see why the Government have come forward at this time with a narrow proposal applying to a subset of technologies. What is the rationale for this provision relating only to renewables and not to a broader range of technologies that communities might be interested in being involved in or having a stake in? I beg to move.

[Lord Jenkin of Roding (Con)]

My Lords, I very much share the concern of the noble Baroness. I have an example that I raised at a meeting with the Minister. I am grateful for the trouble she has taken to allow us to engage with her and her officials. I made the point, as the noble Baroness, Lady Worthington, has done, that there are many other worthy forms of community involvement in energy.

The example that I gave at the time was the Plymouth Ovo Energy project—the Plymouth Energy Community, which even contains the word “community”. I was struck by the reply I received from one of the Minister’s officials. Both my noble friend and the official realised that perhaps I deserved a rather fuller reply. I am pleased to say that I received one in a letter from the official, written on the same day. Perhaps I may quote from it because it begins to give an explanation regarding the question that the noble Baroness has just asked. The letter states that there are,

“strong examples of ways in which the community energy sector is innovating, growing and maturing. However, I would say that they focus on different areas of community energy. The Community Electricity Right concentrates on new renewable electricity generation schemes and involves communities as investors”.

Never let us forget that we are talking about the statutory scheme, not the current voluntary arrangements. It is the statutory scheme that is in the Bill. The letter continues:

“On the other hand, Plymouth Energy Community mainly focuses on the supply of electricity from existing schemes and principally involves communities as energy consumers”.

My immediate reaction is: why is this so narrow? The letter goes on to explain:

“Energy supply and generation are dealt with quite differently within the regulatory and policy framework. As such, it would not be appropriate to include the Plymouth Energy Community directly within the scope of the Community Electricity Right”’

The letter then makes what is really the most important point:

“I would just like to add that DECC is taking separate measures to promote local supply. For example, we have formed a dedicated Local Supply Working Group formed of DECC officials, Ofgem, Academics, Local Authorities and community energy groups to explore the regulatory barriers limiting local supply. They will be reporting to the Secretary of State in March next year”.

As I said a moment ago, that goes some way to meet the concern that I expressed. However, I then have to go on and ask my noble friend the Minister this question. What other forms of community involvement are being considered? Here I refer to the task force’s report, which we had only on Monday. On another occasion I expressed my displeasure that it had all come so late, two days before we have to debate the whole subject. That report has a lot to say about various forms of community sharing. They are described in annex A of the report, although at this hour of the night I would not dream of reading it all out.

We must remember that we are at this stage, and the task force is concerned solely with the voluntary system. It had nothing to say—I suspect because it felt that it was outside its terms of reference—about the statutory power for which power is being taken in this Bill. The main point on this amendment is: what other forms are being considered? Yes, the letter is referring to the supply side. The noble Baroness asked about cheaper electricity. When winding up the debate in Committee, I referred to the McAlpine schemes and their proposals to offer cheaper electricity to communities within the reach of the particular scheme that was being developed. It is a very familiar concept in many other areas of the world—notably, nuclear power stations in France. They gained popular consent by being generous with the prices that they charged.

That leads me to my final point. There is no doubt that large parts of the renewable energy industry are dead against any form of statutory straitjacket being imposed on them. They would much rather continue with and demonstrate the success of the voluntary scheme with which they are engaging. I had a very strong statement from the Solar Trade Association. It says that the task force report is an interesting starting point but that,

“it must be given time to be put into practice”.

I think later on we shall say that we have won that argument—we have got more time. Secondly, it says that,

“Government and the community energy sector need to be flexible and proactive in supporting this and in establishing an evidence base”.

Thirdly, it says that,

“no evidence has been provided by the Government that the extensive yet unspecified powers within the proposed Bill are needed or will lead to increased investment”.

Similar points have been made by other parties that have been advising me.

Echoing the noble Baroness, one has to say: what other forms of community involvement are being considered? Will the Government recognise that what they have said is intended to be a backstop provision only if the voluntary system is seen not to be working? Is that still very much their approach on all this? There is no doubt that the provisions of the Bill have worried the industry.

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)]

My Lords, I thank the noble Baroness for tabling the amendment and my noble friend for his contribution.

The amendment seeks to extend the scope of the community electricity right provisions to include all electricity generation. I listened very carefully to what the noble Baroness said about also looking at different models. I hope I will be able to lay out clearly that what we are trying to do, in the first instance, is to take the positive step of focusing on community-shared ownership of renewables but our drive really is to increase that shared ownership as a positive step in enabling people to take some stakeholding in their local communities and to drive forward a voluntary approach, as has been worked through the Shared Ownership Taskforce.

We have made it very clear that we are not excluding other forms of energy; we are just saying that within the renewables sector we are concentrating on wind and solar, which are two mature sources and therefore it is easy to demonstrate their benefit to local communities. We are absolutely clear that this legislation should apply only to renewable electricity technologies. There are two key reasons for this.

The noble Baroness said that some communities embrace renewables and others do not. We want to bridge that disconnect between national and local benefits for renewable electricity schemes. What we have seen often is that nationally there is great support for the renewables sector but that is not always reflected when it becomes a local issue, where the impacts are felt directly by communities.

What we want to do through this legislation is to seek to redress the imbalance by ensuring that communities have the opportunity to get much more involved and can develop a real sense of ownership of local schemes being developed on their doorstep. This is about promoting decentralised energy generation that is happening in people’s homes and in local communities right across the country.

Renewable electricity generation, particularly from technologies such as wind and solar power, is now well established. This typically translates into lower risk profiles for community investors, which is an important safeguard. It is important to remember that shared ownership is still very much a developing concept in this country. The Shared Ownership Taskforce published its final framework on Monday, and I very much take on board the point my noble friend made that it came a little later than expected. The members of the taskforce have worked long and hard to develop a framework which both developers and local communities can work with. This has been a challenging task, even for the most established renewable technologies where there are successful case studies working on the ground.

To say simply that we need to extend the concept of shared ownership to all forms of electricity generation, without proper consideration of the inherent issues that each faces, therefore makes little sense to me when the voluntary approach on shared ownership to date has been solely developed for, and has focused on, those particular renewable sectors. It is right that, if these powers were ever exercised, we would expect them to focus specifically on established and mature renewable electricity generation technologies, such as solar and onshore wind.

I would like to reassure the noble Baroness again that this is the first step in increasing community shared ownership of renewables. If it is successful, there is nothing to stop us considering extending it to other technologies, because we want lessons to be learnt and to do the proper consultation that everybody would expect to take place when we extend this.

In responding to a couple of questions that were raised by my noble friend, we are encouraging local electricity discount schemes and recognise that they are a valuable initiative which we wholeheartedly support. However, we must remember and recognise that offering reduced-price electricity is giving a gift to the community, not providing the community with the chance to invest in schemes such as community electricity. There is a slight difference there, which we need to be able to recognise.

[Lord Jenkin of Roding]

A moment ago my noble friend said that there was absolutely nothing to prevent the scheme being extended to other forms of community involvement. However, the word “renewable” is in the first paragraph of the first clause of the part of the Bill which deals with energy. Will extending it to other forms require further primary legislation?

[Baroness Verma]

It would require proper consultation. We would have to go through the proper consultation processes to ensure that, having seen what has worked or not worked with these initial schemes, when going forward on including other schemes we are able to respond to the needs of those technologies. That is what local communities will ultimately have to face. It is not about primary legislation; it is about looking at how we would be able to add those new schemes through consultation. We have said very clearly that we are not stopping or excluding other provisions of electricity supply. We would have this opened up but we are starting with the focus on the renewable sector. I hope that I have been able to make that a little clearer to the noble Baroness. If I have not done so, I will repeat what I have already stated: these provisions would apply only to renewable electricity schemes. To clarify my noble friend’s point, we would have to readdress it in primary legislation.

--- Later in debate ---

Moved by

[Lord Jenkin of Roding]

109: Clause 27, page 28, line 9, at end insert—
“( ) Before making regulations under—
(a) subsection (1)(a), the Secretary of State, or another person with the consent of the Secretary of State, must conduct a progress review of voluntary shared ownership and stakes offered to communities, and the Secretary of State or that person must set out the results and conclusions of the review in a report to Parliament.(b) subsection (1)(b), the Secretary of State, or another person with the consent of the Secretary of State, must appoint a panel of experts to review and advise on community stakes and engagement in offshore renewables, and the Secretary of State or that other person must set out the results and conclusions of the review in a report to Parliament.”

[Lord Jenkin of Roding]

My Lords, that was a very interesting and revealing debate, because we have not always kept clear in our minds the distinction between the innovating and expanding voluntary sector and what would inevitably have to be, on the basis of the Bill, a very rigid, defined and inflexible sector. One has to make it quite clear that we are dealing here with two different approaches to this whole problem. We have all agreed that community involvement is a very good thing; it is simply a question of how.

In the first of these three groups of amendments we have dealt with what is included, and we have had a very interesting answer on that. The second group, which we come to now, poses the question: how? How will the regulations be introduced? The third group, which we shall come to later and to which I think there will be a happier answer, concerns the “when?”.

The previous amendment considered the “what?”. In this group, we debate the whole question of the process and say straightaway that the Bill appears to have nothing whatever to say about any form of review of the developing experience of the voluntary approach. Happily, the task force’s report offers some valuable advice and comment on that. Indeed, in its chapter 5, it talks about implementation and monitoring, and devotes nearly a whole page to the review process. It makes it perfectly clear that in any development of this policy there must be proper reviews at regular intervals, and it suggests in the first place six months from the original report and thereafter annual reviews.

However, one question which is not answered to my satisfaction in the task force’s report is who should do the reviewing. It assumes that it will be itself; that it will be continued either in its current form or as a monitoring group which it would set up. I have had some very firm representations that, if there is to be a different group, it should be the department itself. The argument is put that the task force seems to be wholly committed to one form of participation; namely, shared ownership. I think that we have already established that there can be other forms of community participation which have the same value of promoting community support for a development and giving a community a feeling of involvement in what is going on in its area.

My first amendment in this group, Amendment 109, suggests that the reviews should be carried out either by,

“the Secretary of State, or another person with the consent of the Secretary of State”.

I must ask that, when Ministers publish their formal response to the task force’s report, they make two things absolutely clear. They should make clear, first, that there will be regular reviews of how the voluntary approach to community involvement is evolving and, secondly, who will conduct these reviews.

--- Later in debate ---

[Baroness Verma]

My Lords, I thank my noble friend for tabling these amendments. The first part of Amendment 109 seeks to include a requirement on government to conduct a progress review of the voluntary approach and report the findings to Parliament before regulations may be made in respect of onshore facilities. The second part seeks to require government to appoint a panel of experts to review, advise and report on community stakes in relation to offshore renewables before regulations may be made in respect of offshore facilities.

To start with the first element of the amendment, as I mentioned in an earlier discussion, the Shared Ownership Taskforce published its final framework on Monday. I appreciate that there has not been much time to consider it, so I will set out today the relevant commitments that the taskforce has made in relation to reviewing and reporting progress. In doing so, I hope to demonstrate that there is already a clear process in place for reviewing and reporting. As such, there is no need to include these additional requirements in the Bill, as my noble friend proposes.

The taskforce intends to set up a monitoring group to ensure that progress is evaluated and reported. It proposes six-month and 12-month reviews and will report its findings to my department. As set out in the Community Energy Strategy, the Government will conduct a review of progress next year. The findings from the taskforce’s progress reviews will be critical to this. The Government wholeheartedly support the work of the taskforce. We will be formally responding to its report early in the new year. In it, we intend to endorse its monitoring and reporting process and confirm that this process will feed into the Government’s review next year. Both the Shared Ownership Taskforce and the Government will be monitoring and evaluating the success of the voluntary approach prior to backstop powers coming into force in line with the Government’s Amendment 129, which we will debate a little later.

Turning to the second part of the amendment on offshore renewables, our focus now is on increasing community shared ownership for established onshore technologies such as onshore wind and solar. These are the technologies covered by the Shared Ownership Taskforce’s voluntary framework. Having said that, the community electricity right powers provide future flexibility to include offshore technologies, but we have been very clear from the start that this would be on a longer timescale. This is not to say that we would not encourage offshore developers to offer a stake to communities where they choose.

The suggestion that my noble friend Lord Jenkin makes in Amendment 109 is sensible. If the Government were ever to consider exercising these powers for offshore renewables, I agree it would make sense to set up a panel of independent experts to provide advice on offshore renewables in advance. This would be a similar approach to the one we have taken for onshore renewables with the Shared Ownership Taskforce, which is comprised of experts from the renewables industry and the community energy sector. However, at this stage our focus is firmly on onshore renewables. It is not our intention to establish a voluntary process for offshore renewables right now. As such it would be premature to commit to this and to restrict ourselves at this point to the wording that my noble friend has proposed. We should therefore wait and consider the option of a panel of offshore experts when we have a clearer position on whether this is needed, and if so, what any panel might look like and report on.

Amendment 110 seeks to introduce an obligation on the Government to consult a range of interested parties in advance of exercising the community electricity right provisions and developing any secondary legislation. I completely agree that consultation is essential to ensure that the Government hear the views of all relevant stakeholders and take them into account before deciding the best course of action. These views will also be critical to the formation of secondary legislation that is fit for purpose and can be implemented successfully. However, I do not believe the amendment is necessary. In Grand Committee I made it clear that the Government intend to conduct a formal consultation before exercising the powers. That position has not changed. The consultation would be open to everyone, including the parties listed by my noble friend in Amendment 110, such as community groups, developers, the Scottish and Welsh Governments and Ofgem. My noble friend’s amendment includes some of the very organisations and bodies that we would expect and encourage to contribute to a public consultation given their clear interest, knowledge and understanding of this area.

I will provide a single response to Amendments 111 and 112 as they are inextricably related. I recognise that this is an extremely important aspect of the provisions, particularly in terms of providing future certainty to the renewables industry. The community electricity right provisions would apply to new renewable electricity projects coming forward in the development process. I confirm that the provisions would therefore not apply retrospectively nor to projects that have already received planning consent. The Government have always been clear that this is our policy intent. For example, the Explanatory Notes to Clause 28(5) explain that this provision ensures that the regulations would not apply retroactively and would apply only to facilities that have not, at that date, reached a specified point of development.

While I am keen to provide these reassurances in the House, it would not be right for me to commit to include in primary legislation a qualification that the regulations may not apply to projects that have applied for, but not yet received, planning consent. That may be an appropriate approach to take, but as I am sure my noble friend will understand, the Government would wish to consult on this matter before making a final decision. In doing so we would look closely at the experiences of successful shared ownership schemes including lessons learnt from the voluntary approach. In conclusion, I hope that I have provided noble Lords with enough reassurance about the Government’s position on these matters and, on this basis, I hope my noble friend Lord Jenkin will withdraw his amendment.

[Lord Jenkin of Roding]

My Lords, I was grateful for the support of the noble Baroness, Lady Worthington; I hope that she will share my view that we have got almost all that we want. The amendment has not been agreed, but my noble friend on the Front Bench has gone as far as one could possibly expect to say, “Without actually accepting your amendments, we are going to do pretty well everything in them”. It will be for the other place to decide whether that is sufficient or whether it would like to see these included in the Bill. As I explained at the end of my speech, that was the purpose of moving the amendments on Report. Having said that, I thank the Minister for what she said and take much pleasure in begging leave to withdraw the amendment.

Amendment 109 withdrawn.

--- Later in debate ---

Moved by

[Lord Jenkin of Roding]

113: Clause 27, page 29, line 40, at end insert—
“( ) Sections 27 and 28 and Schedule 5 come into force at the end of the period of two years beginning with the day on which this Act is passed.”

[Lord Jenkin of Roding]

My Lords, we can deal with this much more briefly. My amendments in this group address when regulations might be introduced. From Second Reading onwards, I was asking for two years. The government amendment has now suggested what is, in effect, 18 months. I have already given a message to the Minister through her department that I am extremely pleased with that. I feel that the argument has been worth while. We now have time to make sure that the reviews really can be reviews of the way in which the voluntary system is working, without the immediate threat of legislation.

The Government have made it clear that this is a backstop power. Sometimes I get the impression from the way in which Ministers speak that they regard the introduction of regulations as inevitable. I certainly do not. The industry certainly hopes not. It hopes that it can satisfy the Government that progress is being properly made, that it can be extended much more flexibly through the voluntary system and that regulations may in fact be unnecessary. Therefore, when Ministers refer to introducing regulations, they should always say “if necessary”, not “automatically”.

I thank my noble friend again, who has brought a substantial concession in answer to the question of when. I beg to move.

[Baroness Worthington]

My Lords, briefly, I again support the noble Lord’s amendment and welcome the government amendment which will indeed delay the “when” aspect of this question. There remain considerable questions about why these provisions have been brought forward, given that the voluntary approach is moving forward. I still think that we are unfairly singling out two technologies relative to other forms of electricity generation. However, I am happy that we now have more time to think. I absolutely echo the words of the noble Lord, Lord Jenkin, that this should be seen as a backstop power, which we hope should not need to be enforced.

[Baroness Verma]

My Lords, I am grateful to my noble friend and the noble Baroness for their contributions. We listened carefully to my noble friend in Committee and I have very much taken on board all the views that were expressed on that matter, including those of my noble friend, industry stakeholders and the Shared Ownership Taskforce. I am pleased, in response, to bring forward government Amendment 129 which revises the date of commencement of these provisions to 1 June 2016. That ensures absolute clarity on the minimum amount of time the Government intend to allow for the voluntary approach to take effect. It means that the Government could not exercise these powers before 1 June 2016 at the very earliest. This date allows just over 18 months from the date on which the Shared Ownership Taskforce published its voluntary framework, earlier this week, to when the powers may be exercised. I hope that by bringing forward this amendment I shall allow my noble friend to go home feeling satisfied with his input, which—as much as is possible—is always my intention.

[Lord Jenkin of Roding]

I am grateful for my noble friend’s graciousness. She has gone a long way to meet us but, as has been indicated in the original amendment tabled by the noble Baroness, Lady Worthington, I think there is a lot more exploration that will need to be done in the other place. In the mean time, I beg leave to withdraw.

Amendment 113 withdrawn.