Fuel: Electricity Supply Licences

Lord Spicer Excerpts

Thursday 14th July 2011 Lords Chamber

[The Earl of Liverpool]

My Lords, I rise briefly to register my strong support for the two Motions. I declare an interest as a director of a company that has already received planning permission to build a substantial solar farm in the south of England, but whose whole future has now been put in doubt because of the Government’s decision to reduce the feed-in tariff so drastically. I simply wish to say that I agree with everything that has been said so far today on this subject, and I am very keen to hear what my noble friend the Minister will have to say by way of, I hope, reassuring me, my noble friend Lord Lucas, and the House that he will get together with the industry and try to resolve this serious difficulty. It is basically a nascent industry that has been snuffed out at birth. Having said those few words, I look forward to the Minister’s response.

[Lord Spicer]

My Lords, I had not meant to intervene in this debate. In fact, I am breaking the habit of the past 25 years, since I was the Minister responsible for taking the Electricity Bill through Parliament. I also declare an interest as president of the Association of Electricity Producers.

I just want to enter two notes of caution about what has been said. Of course, renewables and solar are a good thing—nobody doubts that—but they are also expensive, as has been admitted by the noble Lord, Lord Whitty. They also require, certainly when talking about wind power, heavy extra capacity. Therefore, on capacity grounds and on price grounds above all, whatever we say about renewables—I hope that we will say positive things—we have to be realistic. One thing that worries me about the present situation is that we set targets that turn out to be unrealistic. Oil power and carbon-related fuels will be necessary. We will have to have either carbon-free coal or oil-fired power stations to a very great extent in the future. We had better recognise that, otherwise we will be another £200 billion behind in investment.

[Lord Teverson]

My Lords, as I have said on other occasions, I am pleased about the way in which DECC has managed to negotiate very positively with the Treasury over its budget, even in the areas of private taxation that are reflected in private energy Bills, and how the overall programme for renewables has started to move ahead. I also sympathise in many ways with the Government’s priority to make sure that as many people as possible are involved in the renewables industry so that households that want to fit solar PV to their houses, or SMEs solar PV to their business premises, can do that. Both those things are positive.

Having said that, the difficulties caused to the industry by this major change in policy over a short period of time have been very great. I understand and agree with my noble friend Lord Lucas on this. As many Members of the House will know, I come from Cornwall. I represent an electoral division there that as we speak is constructing a 5 megawatt facility to make sure that it can throw the switch before midnight on 31 July. I do not know whether any electricity will flow then: presumably it will, in order to come in before the tariff changes. In Cornwall, about half a dozen sites will hit the grid before the deadline arrives.

It is clear that a very large number of investors wanted to come into this field. Some were opportunists—which is not necessarily a bad thing, because we are trying to work with the market—but there was a basis to enable a number of new renewable energy companies that genuinely held the values of decarbonising our economy to start, work and gain ground in order to be part of that decentralised electricity-generating system that so many of us in the House want to see. Those business starts and the growth of micro-businesses into medium-sized businesses can no longer happen. The amount of investment, for example to secure planning permissions, was very great.

I accept that not all the schemes should have gone ahead. Planning permissions were extremely easy to obtain because people did not object to them as they do to a number of other renewable technologies. However, now the momentum has stopped in its tracks. I very much regret that. The particular practical difficulty is that even where too many of the larger schemes would have been very onerous, there were a number of community schemes, too, that have come to a halt or will not be fulfilled.

Two days ago, as well as receiving the electrical market review, we saw the UK Renewable Energy Roadmap, which I very much welcome. On the whole it is an excellent document. However, perhaps it is illustrative that chapter 3, “Actions”, names the technologies of onshore wind, offshore wind, marine energy, biomass electricity, biomass heat, ground source heat pumps and air source heat pumps—I am very pleased to see those there—and renewable energy in transport, which we sometimes forget about but which is of equal importance.

Solar PV is nowhere in that list. The document includes a case study of solar PV and states:

“The Government believes that solar PV could potentially have a role to play in larger-scale UK renewables deployment in the future”.

That is a very iffy assessment of solar PV. I am very aware, as we have seen today and during part of this week, that the UK is not the best country in the world for solar PV. However, there is no doubt that the technology is potentially useful. The costs are expected to come down very significantly in future. The initial FIT rate was too high and provided too great a return, but it has come down so much that it has acted as a veto on the industry. As a result, the green jobs that all of us want to see have been postponed or might not happen as they might have done.

The document goes on to say that the Government encourage solar PV on a large scale as part of the ROCs regime. Will the Minister say whether there is a way forward there for large-scale PV? The renewable obligations review is due in the next few weeks. The Government have cut out the higher FIT rates. Could they over a temporary period fix a higher ROC rate for solar PV so that we could again encourage investment in this industry? When the costs come down we can reduce the ROC rate, as we would do with any other technology.

Will the Minister tell us how many ROC schemes there are on solar PV at the moment? I do not know whether there are many. I would be interested to know what the scale of demand is at the minute. I think there is a good future for solar PV in this country. We want to encourage it for jobs and growth, and I would like it to be a larger part of the jigsaw of the renewable road map for the future.