Renewables Obligation (Amendment) Order 2021

Lord Kirkhope of Harrogate Excerpts

Tuesday 23rd March 2021 Lords Chamber

[Lord Kirkhope of Harrogate (Con) [V]]

My Lords, before I address the subject of this debate, I pay tribute to my noble friend Lord Kamall and congratulate him on his maiden speech, which, typically, was informative, knowledgeable and entertaining. I say “typically” because I had the pleasure and honour of working closely with my noble friend for many years as a fellow Member of the European Parliament. I see some other familiar faces around the Chamber today as well. We both had the privilege of high office there, but it is much to the credit of my noble friend that he continued almost to the end of the mandate for UK representation to uphold the positive principles of engagement with many other national representatives, especially in our parliamentary group, of which he was leader. In doing so, he ensured continuing and great respect for our country and for himself. I am sure that he will achieve much in our House.

We live in a changing world. On this day in particular, one year on from the start of the Covid crisis, many of us are reflecting on the future as we remember the past. So many things are changing and in need of change, no more so than in the field of the environment, with the UK hosting the COP 26 conference later this year, and as part of that policy area in the way our energy needs are met as we move towards a zero-emission outcome.

Some will say that everything was much simpler in the old days. My late father worked in the electricity supply industry. Coal-fired power stations were all over the place in my native north-east, and consumers obtained their power from local and regional monopolies. The thread from generator to consumer—or wire— was direct and understandable. The measure before us demonstrates how complicated we have become in the ways in which we compensate our generators for renewable energy initiatives, and how our free-market instincts, while they are generally of benefit to consumers, can go wrong.

Noble Lords will be pleased to hear that I am not going to delve too far into the technical and administrative details of the renewables obligation scheme, except to comment that it should perhaps have been monitored better from the start and taken, as we are now doing with this measure, at a much earlier point. The key moment was in 2015, when the new licence arrangements to possible new entrants to the electricity supply sector were formulated. Encouraging new entrants, especially those offering an emphasis on green energy, was good news, and today we have a much wider choice of suppliers, tariffs and sources of power, but that change has also resulted in problems with the ROC scheme. Some of the new entrants have failed, some have not honoured their obligations to pay the sums agreed to in order to undercut rivals and, despite the intervention of Ofgem a year or so ago to tighten up the rules of entry into the market, the shortfall of moneys due has continued.

As I understand it, the impact on generators should be minimal with these provisions unless the value of certificates is reduced because of any shortfall in the cash fund caused by suppliers defaulting on their obligations. Could my noble friend explain how generators can be better protected from changes of this kind, bearing in mind the formula in place for these processes?

A growing proportion of our electricity comes from renewable resources. About one-third of the supply is now supported by the ROC scheme, and it is growing. Use of electricity is growing with our transport system in particular, including cars and buses being progressively electrified. It is therefore important that schemes such as this are kept under review as to their structure and outcomes. I believe that Ofgem wants to carry out an annual review on the efficacy of the rules in place. Can my noble friend confirm that?

At the end of the day, it is in all our interests to increase our green credentials. In doing so, we must always consider those involved—the generators, suppliers and, above all, the consumers, who will need ever-increasing supplies of electricity in the years to come.