Energy: Feed-in Tariffs

Lord Redesdale Excerpts

Thursday 9th February 2012 Lords Chamber

[Baroness Stowell of Beeston]

I thank my noble friend for his comments. I think it would be better if I wrote to him on his specific question. I am aware that there is definitely flexibility within the department. To put it another way, one of the advantages of the new arrangements that we are putting in place is that we do not have to introduce significant shifts in the way in which we change the tariff as the solar PV industry becomes more successful. In terms of flexibility that is an important thing to be able to do. We have a budget for that but it is proving difficult to predict specifically how the tariffs will change in light of the success of the industry, and it is increasingly successful. I think it is probably safer for me to write to the noble Lord on whether that budget can be used for ROCs rather than feed-in tariffs.

I am grateful to the noble Lord for referring to community projects as it gives me the opportunity to correct something that I said in response to the noble Baroness, Lady Smith. I think that I became a little confused between my “highers” and my “lowers” when I was talking about the number of people who might benefit from the new multi-installation tariffs. Projects of fewer than 25 units will enjoy the higher tariffs. Those above 25 units will not because once you get above 25 you start getting into a different category of people, and clearly they should not be subsidised by the public purse.

[Lord Redesdale]

My Lords, I declare an interest as the chairman of the Anaerobic Digestion and Biogas Association. That always gets a smile but I feel that I am a lone voice. I add a note of slight criticism: FITs are not just for solar PV. It seems to me that unless I raise AD, it never seems to get mentioned in this House, but FITs are incredibly important for small-scale AD. We are going to be very much more reliant on the renewable energy coming from AD than we are from PV. Although PV is important, the amount of generating capacity is a fraction of that coming from AD.

I seek clarification on two points in relation to the Statement. However, I realise that this is a consultation process. First, DECC has come forward with a 500 kilowatt band. The problem we always have with setting such arbitrary targets is that we then have to build the kit to meet the artificial target. Until recently no technology has stopped at 500 kilowatts, so you end up building new kit to meet the artificial boundary. There is a problem here. With regard to the digressions that have been talked about on small-scale FIT, after you go over the 500 kilowatt point, the amount of money you will get under FIT goes down markedly. The stated aim in the consultation is that farm-based AD should take in food waste. If it is taking in food waste, it will then start producing more power because there are more kilojoules in the food waste, which will take it over the band. However, the very boundary itself, and the digression that is set in there, could bring about a major problem in that people will not take that extra step because they cannot get the funding.

Secondly, the expression “TLC” was used. “Tender loving care” is probably a better expression. The same financiers who have had certain problems with solar PV are the ones who are financing AD. It is extremely difficult to get any debt financing or equity financing for AD at the moment. This is of particular concern regarding the statement that if certain trigger points are met, there would be a retroactive reduction in the feed-in tariff for anything coming on-stream at that point. If we were nearing those targets, that would have a major implication for financiers financing schemes because they would not know which band tariff they would be under. I realise that that is a point for consultation and that the Minister might not be briefed on the minutiae of these individual issues, but the major problem at the moment with anaerobic digestion is that it is a high-risk operation and we need to make sure that the financiers are in a position to fund it. We therefore need regulatory clarity over the regime. I very much hope that my noble friend will take these points back to DECC.

[Baroness Stowell of Beeston]

I am grateful to my noble friend for his comments and for widening the debate beyond solar. It is worth pointing out that feed-in tariffs are not just about solar PV but, as I mentioned in my Statement, they are also about micro-CHP, wind and hydro power, and anaerobic digestion, as my noble friend said. As to his specific question about bands for AD, they are the same as in the original scheme, so we are not proposing a change. However, we have announced today two things: one is an outcome from the first phase of the consultation, and the other is the start of a second consultation. I therefore hope that my noble friend will take the opportunity of the new consultation and make his contribution along the lines he mentioned.