Energy Bill

Lord Roper Excerpts

Thursday 11th July 2013 Grand Committee

[Baroness Verma]

My Lords, in moving Amendment 51A I will also speak to Amendment 57; I hope that noble Lords will welcome them. The issue of increasing the scale of the feed-in tariff scheme was debated in Committee and on Report in the other place. It has also been raised by a number of noble Lords, both at Second Reading and outside the Chamber, including my noble friends Lady Maddock, Lord Teverson and Lord Stephen, as well as the noble Baroness, Lady Worthington, the noble Lords, Lord Whitty and Lord Cameron, and the right reverend Prelate the Bishop of London.

Having carefully considered the options, the Government agree that there would be a benefit to a limited extension of the feed-in tariff scheme. We intend to limit this support to community energy projects only. For developers of commercial projects larger than 5 megawatts, we continue to believe that larger projects are best supported through market-based incentives such as the renewables obligation and, shortly, contracts for difference as part of the electricity market reform process. This approach also offers the best value for money to the taxpayer.

Since the start of the FITs scheme three years ago, many communities have installed solar panels, wind turbines or hydro schemes. However, until now, they have been limited to a maximum capacity of 5 megawatts. We have listened to the compelling arguments of Co-operatives UK and others, and are convinced that the certainty of the feed-in tariffs scheme is a more appropriate way of helping community groups to deliver locally generated energy at scale and at the heart of their communities. We want to see communities up and down the country raising their ambition, and consider community-owned wind and solar schemes the most likely to benefit from this change. We hope that these amendments pave the way to support this greater ambition for community energy.

Amendment 57 is a procedural requirement which explains when this enabling power to amend the feed-in tariff scheme should come into effect. We will consult on how we intend to enable this change in secondary legalisation following Royal Assent. The current FITs scheme includes a definition of “community” which will form the basis of our consultation. We know that many will want to apply for this new support. However, we want to ensure that only genuine community energy schemes are permitted to benefit, so it is important that we create robust legislation which provides confidence to the public that subsidies are being delivered only to the intended recipients.

Taken together, these two amendments will drive a step change in the deployment of community energy. I hope your Lordships will support these amendments. I beg to move.

[Lord Roper]

My Lords, can I be the first to welcome the amendment? Those of us who have read the debates that took place in the other place in Committee and on Report are certainly very pleased that the move to assist communities to produce 10 rather than 5 megawatts has been agreed to. It will, however, be rather important that we watch carefully the secondary legislation which will define what is a “community activity”. Quite clearly, if it were to move into the commercial area, the increase to 10 megawatts would be resented by those who generate a little more than 10 megawatts. As it has been defined by the Minister today, however, it is an important step forward and will help a lot of micro-microgeneration in communities.

[Lord Grantchester]

My Lords, this is an important government amendment and we welcome the group, which replicates amendments tabled by Labour in Committee in the other place to increase the feed-in tariffs to at least 10 megawatts. This comes as a welcome acknowledgment of the gap that exists in the Bill on community energy. I also pay tribute to the personal enthusiasm of the Minister of State in the other place, Mr Greg Barker, both for these schemes and for the work that he has done since the debate in order to secure the amendment. We welcome the progress the Government have made in this respect.

On Report in the other place, we pushed the Government to introduce a minimum threshold for the fixed feed-in tariff of 10 megawatts. The Community Energy Coalition of NGOs, including the Centre for Sustainable Energy, the Forum for the Future, the National Trust, the Low Carbon Communities Network, Co-operatives UK and many more have called for the threshold to be raised even higher to 20 megawatts to allow community energy schemes a guaranteed income and enable them to participate effectively in the energy market in the future.

Already in the UK a number of community energy schemes exceed 5 megawatts, such as Westmill Wind Farm Co-operative in Oxfordshire of 6.5 megawatts, the Lochcarnan Community Wind Farm on South Uist of 7 megawatts and the Neilston Community Wind Farm near Glasgow of 10 megawatts. Community schemes are not necessarily small. The mid-size market can attract the participation of the wider population in renewable energy and the attainment of our 2020 targets. These schemes should also be given the signal that there is support to develop further.

The Energy and Climate Change Committee has argued that medium-sized projects of up to 50 megawatts are disadvantaged because they cannot access the feed-in tariff, yet often lack the financial capability to deal with the complexities of the renewables obligation and, in the future, contracts for difference. In the interim, until contracts for difference come into play, the gap remains. They may also struggle to obtain the reference price under the CFD regime, meaning that they would lose out financially. Why is the threshold fixed at 10 megawatts? What will the Government do to support mid-sized community energy schemes which are not eligible for the FITs but have difficulty accessing the contracts for difference? Community and co-operative energy schemes can be hugely beneficial in helping to meet our renewables targets that must be met by 2020.

Research reported by Co-operatives UK estimates that there is the potential for at least 3.5 gigawatts in UK community energy schemes by 2020—the equivalent of four conventional coal-fired power stations. Looking overseas, Germany, where 15% of renewables are community owned, is a good example of how community energy generation helps to diversify the market and increase its resilience. Locally owned and locally targeted strategies for energy generation and saving can be better tailored to local needs, such as helping to tackle fuel poverty, and can increase community awareness and engagement in a way that leads to lower bills and greater sustainability. We welcome the Government’s call for evidence on community energy launched last month. Indeed, the Secretary of State has said that he wants,

“nothing less than a community energy revolution”.

While it is disappointing that this proposed new clause is in many ways an afterthought to the Energy Bill, nevertheless it is welcome that it may become an integral part of the Government’s vision for the future electricity market.

FITs are a user friendly, bankable mechanism to encourage easy investment and engagement from people and organisations for whom energy is not their core business and who do not want the complexity of the renewables obligation. So far the mid-size market has failed due to excessively low FIT tariffs and unfair capacity constraints. However, the constraints on many applications of non-domestic solar are unfair. First, the FIT tariffs were set too low for many of the non-domestic FIT bands. Secondly, the degression mechanisms under budgetary constraint measures that come into play at relatively early stages are having the effect of leading to an imbalance between technologies.

The solar industry especially feels that it is subject to unnecessarily harsh measures. The consequences of these low capacity triggers is that any significant national deployment of solar power in schemes over 50 kilowatts in size—about the size of a school roof—will result in major cuts to the tariff that will make developing further schemes uneconomical. The solar industry contends that between 50 kilowatts and 5 megawatts it is cheaper than other renewables supported under the renewables obligation. I ask the Minister: why does it feel that it is subject to constraints beyond those that utility-scale renewables are subject to under the renewables obligation? Can the Minister clarify whether this Energy Bill could be used to correct the situation or could this be achieved through secondary legislation? Would there be any repercussions to correcting her department’s imbalance in the energy mix between technologies? Would there be an increase in the total budget before degression or would it result in reducing payments to some other technologies?

--- Later in debate ---

[Lord Jenkin of Roding]

I apologise for appearing to interrupt the noble Baroness in mid-flow. I just have one question. I had the same problem as the noble Baroness did. I thought, “Why has this clause stand part question been put down and what does the clause say?”. I turned up the Ofgem consultation letter published on the same day as its recent capacity assessment report, which has of course shown that the margins will, by the middle of this decade, become very much smaller. It goes on making hopeful remarks that perhaps there will not be interruptions but an increasing number of people think that there might be. The letter consults on additional balancing measures for the grid. It proposes two of them. I will not go into this in great detail at this hour of the night—we are due to rise in two minutes—but does that have anything to do with this clause? There is nothing in the letter about fees so there may be no connection, but it proposes new methods to achieve resilience to avoid power cuts. It seemed that there might be a connection. The noble Baroness, Lady Worthington, seems not to think so. We will listen to my noble friend replying in due course.

[Lord Roper]

My Lords, I want to raise a slightly narrower point, but one related to that raised by the noble Baroness, Lady Worthington. The report of the Delegated Powers Committee raised very clearly a point about subsection (3)(b), where money can be specified or determined by the Secretary of State without any reference to Parliament. Your Lordships’ Delegated Powers Committee is very clear, and concludes:

“We accordingly do not find persuasive the explanations in the memorandum that the power conferred by clause 134(3)(b) is appropriate; and we recommend that, unless the House can be satisfied to that effect by further explanations from the Minister, paragraph (b) should be removed from clause 134(3)”.

I would be most grateful if the Minister could give us such a reply.

Perhaps, as I am dealing with the Delegated Powers Committee, I could raise a slightly wider question. We have, of course, had a new report from the Delegated Powers Committee this morning, based on a further memorandum submitted by the department to that committee. It is impossible to find a copy of that memorandum on either the department’s or the committee’s website. I would be grateful if it could in due course be made available to Members who have attended this Committee.