Lord Teverson
Main Page: Lord Teverson (Liberal Democrat - Life peer)
Lord Teverson
My Lords, if there has one been theme since the Bill started its long route over the past couple of years to where it is now, it is that it is not decarbonisation that has been the subject of the big debate—although it is a bigger debate now, I admit—but access to the market and competition by a vibrant independent generating sector. I would not be as pessimistic as the noble Viscount when he says that this sector would be squeezed out altogether. However, we want to see not just a surviving independent sector—and I believe it would survive under the conditions that we have at the moment—but a vibrant and expanding sector where we see future competition growing. I do not think we have got there yet. Whether it was the Select Committee in the House of Commons that went through the draft Bill or our own committee under the noble Lord, Lord Oxburgh, the whole area of independent generator competition was a theme that was common to us both and a very strong one.
What concerns me is not that the Government do not understand that this is an issue. I think that they do and that they have done for some time. They have done a lot of work on this, and I am sure that the Minister will go through it. The Government are aware that this is an issue and have been working on it very hard. What concerns me is that, as far as this Bill and the amendments are concerned, we still seem to be in a position of “may” rather than “must”. Although we talk about this in all sorts of other areas and sometimes use it as a political ploy—sometimes trying to strengthen something that is legitimate as a “may”—in this area it prolongs the uncertainty of the market.
When the Bill started its long process back in 1910—I mean in 2010-11; it might seem like the last century but it clearly was not—we said we saw this as important. I thank the Minister for keeping us very much in touch with the Government’s thinking via her letters. In her letter of 22 July she quite rightly said:
“This is a key issue as independent renewable generators currently hold a significant pipeline of projects”.
We understand that but the point is that over this period it has always been that the ROCs would finish in 2017. That system gave a fair degree of certainty. We are now two or three years on in that process and it is only some three and a half years until that April 2017 deadline. By the time this Bill becomes an Act, as it surely will in whatever state, that will be down to three years. As the noble Baroness, Lady Liddell, said, these major investment projects take time, whether it is in planning permission, judicial review or all the other areas. By then we will be well into the post-2017 period. That is why it is important that the Bill firms up on that and why I am slightly concerned that it is still a “may” situation in these amendments.
Also, the Minister’s letter says:
“Whilst I believe that the introduction of the Contracts for Difference … will greatly improve conditions in this market, I appreciate that [we] may need to go further to support independent developers. This is why I have tabled amendments to allow the Government to further support independent developers if necessary”.
I understand that entirely and welcome the great clarity that the Minister has given in her correspondence to all our debates through this Bill—that has been exceedingly good. What concerns me is that the point has come where, as a Government—I point out to the noble Lord, Lord Cameron, that they are Liberal Democrat as well as Conservative—we need to come off the fence. We need to say, “Yes, this is not just a problem but one we understand needs to be fixed—and it will be in the legislation”. I am sure the Minister will assure us that by Report there will be a very strong indication of exactly how this is to be played out.
One unfortunate thing in this long process is the feeling that the auction system has partly been disregarded because of the pressure of the big six. That may be completely fallacious and wrong but that perception is there. That means that the perception remains that this market is not fully open to full competition for a generation into the future. We absolutely need to make sure that it is.
Baroness Worthington
My Lords, I am very grateful to the noble Lords who tabled amendments and spoke so eloquently to them this afternoon. Obviously, in this group we also have the Government’s own amendments, which share many aspects with the others.
The question of independent generators is crucial. As noble Lords have already said, this is an important sector and deserves to be treated with all due seriousness. The group of independent generators, which I am sure has been in contact with many noble Lords present, already represents 20% of the onshore wind capacity in the UK. According to Ofgem’s projections, independent generators are already responsible for 12% of renewable capacity and are expected to be responsible for between 35% and 50% going forward—something to which my noble friend Lord Hanworth alluded. This is not a small part of the market but a considerable part of it, and my noble friend Lady Liddell pointed to the reasons for this. The group represents the entrepreneurial energy developers in this country and it is that burgeoning sector that is providing jobs and investment for a green economy. I am not saying that the big six and other energy companies are not also participating but the entrepreneurs have shown great tenacity and appetite for engaging in a complicated market, but yet can succeed.
I should like to bring the Committee’s attention to the fact that last week economic statistics were produced that showed that the green sector in the UK grew in 2011-12 by 5% at a time when the rest of the economy was in a double-dip recession. The green sector is an important engine of growth for the country and we hope that that will continue.
Lord Gardiner of Kimble
My Lords, I thank my noble friend and the noble Baroness for tabling these amendments, and for an illuminating, positive and helpful debate. In Committee, we can help to fine tune a Bill. My noble friend mentioned helping the Government; our duty is to help the nation to get this right. Certainty, trust and the smooth passage of transitional arrangements are certainly key.
Amendment 55AK inserts a requirement for the fixed-price certificate scheme to replicate the arrangements under the renewables obligation. The amendment aims to ensure that the fixed-price certificate scheme will be based upon and replace the RO, which is indeed our intention. I can confirm for my noble friend Lord Stephen that those generators that would otherwise qualify to receive renewables obligation certificates in 2027 and beyond will instead qualify for fixed-price certificates.
Clause 46 already mirrors much of the primary legislation for the RO to ensure that we are able to replicate the effect of the RO, so far as is appropriate. The differences from the RO are a result of the different ways in which the schemes operate; for example, the fact that the price of certificates will be fixed means that this will no longer be a market-based scheme. Amendment 55AL removes the provisions for both regular and ad hoc reviews of support levels under the fixed-price certificate scheme. The Government do not expect to make regular support-level changes under the fixed-price certificate scheme. However, I hope that noble Lords would accept that the Government must be able to respond to significant unexpected changes, such as major cost reductions or increases within a particular technology, so that we can deliver the generation we need for our renewables targets at value for money for consumers.
My noble friend mentioned secondary legislation. In the autumn of 2014, we intend to consult on the secondary legislation for the transition of the renewables obligation to a fixed-price certificate regime. We propose to bring forward this legislation in early 2015.
Lord Teverson
My noble friend said rightly that, clearly, any Government need to be able to reduce intervention rates, if technology costs go down—and that needs to happen in terms of consumer value and government expenditure. But in this situation, we are talking only about those projects that have already had investment. The technology is fixed at the time when the investment took place, so I do not completely follow that argument.
Lord Gardiner of Kimble
I wanted to put the caveat of the Government seeking to respond having the ability, potentially, to respond. I agree with my noble friend that we may not expect it to happen, but we need to have that ability. My noble friend also mentioned uncertainty about state aid. We are working with the European Commission to ensure that our policies are compliant with state aid rules; we are confident of delivering EMR in 2014, and are helping industry to make early investment decisions. That might have been useful to the noble Lord, Lord Whitty, in an earlier exchange.
These amendments deserve careful and further consideration, and I would certainly look with my noble friend the Minister to provide further information on these matters as the Bill progresses. I would also want to consider with my noble friend ways in which the purpose of Clause 46 could best be clarified and examine proportionate measures for reviewing support levels. It is on that basis that I very much hope my noble friend will be sufficiently encouraged. He and the noble Baroness are hitting some targets because this is an area on which the Government would like to reflect and consider further. On that basis, perhaps my noble friend will withdraw the amendment.