Energy: Feed-in Tariffs

Lord Teverson Excerpts

Monday 31st October 2011 Lords Chamber

[Lord Teverson]

My Lords, it is clear that one of the challenges, as mentioned by the Minister and the noble Baroness, is the sustainability of this industry. One area in which I would give sympathy to the Minister is that if we have an industry that steams ahead until next April but then there is no money and everything stops, we will be in the situation that Spain and Germany have been in in the past whereby we have built up an industry that then completely disappears. We need to make sure that that does not happen and that we have a sustainable industry. We want a sustainable environment that works over a number of years and builds up, which is why I am sympathetic to trying to achieve that in these measures.

Having said that, one of the most unfortunate things is that we are moving to the second review on FIT rates in a short period. Where we have a global investment market in energy—in the United Kingdom we have a requirement, estimated by Ofgem, which is often quoted, of £200 billion of investment over the next 10 years—how can we make sure that the investing community remains confident in government schemes and that investment in our energy systems, energy plants and energy distribution systems can be sustained? One change to FIT rates is unfortunate, two might be careless, but another one would mean that we could destroy confidence in investment in this industry. It is not perhaps so much of a problem for manufacturing industries, but the installation industry in this country is far less mobile.

Although I applaud the Government’s efforts to make sure that this business and this industry stay sustainable over a number of years, how will the Minister ensure that that confidence, not just of households but of other larger investors, remains in the UK energy market?

[Lord Marland]

As always, my noble friend Lord Teverson is well informed about these matters and I am grateful for his broadly supportive comments. I totally agree and accept that the confidence of the investor is paramount. However, put yourself in the position of the Government. We inherited a scheme of feed-in tariffs that did not consider the fact that the more solar panels that are bought, the cheaper they become, as illustrated by this argument; and that a pot of money is available to support this scheme, which becomes a scheme for which the IRR is way beyond most people’s dreams and beyond what is reasonable for consumers. At some point, a decision has to be made to say stop or pause or to take action. That is broadly the step that we have taken on this.

I wholly agree that getting future investment and the infrastructure of this country right is fundamental, but we have to get that right against the backcloth of heavy lifters in the game changes for the electricity supply. As I have already indicated, I do not believe that the 0.1 per cent, or the £3.2 billion that we will have saved the consumer, is the right change of game plan for electricity in this country.