Renewables Obligation Certificate Scheme

Melanie Onn Excerpts

Wednesday 5th March 2025 Westminster Hall

[Nick Timothy (West Suffolk) (Con)]

Thank you, Dr Murrison—I shan’t promote you any further than that just yet.

I am pleased to respond to this important debate on the renewables obligation certificate scheme. Although the scheme was closed in 2017, its costs remain with us and are a reminder of how difficult it can be to unwind long Government contracts. I congratulate my constituency neighbour, the hon. Member for South West Norfolk (Terry Jermy), on securing this debate, which I believe is his first in Westminster Hall. I am sure he will get to debate more glamorous issues than chicken litter in the future.

Like South West Norfolk, my constituency of West Suffolk has chicken farmers grappling with many of the issues raised by Members, including avian flu, which the hon. Member for Strangford (Jim Shannon) mentioned. I echo what the hon. Member for Inverness, Skye and West Ross-shire (Mr MacDonald) said about the cost of energy in rural areas, which is very often overlooked.

I will not join the commentary from the hon. Member for Westmorland and Lonsdale (Tim Farron) about the predecessor of the hon. Member for South West Norfolk. I did plenty of that in The Daily Telegraph before I was a Member of Parliament. It is pleasing that Suffolk and East Anglia are so well represented today.

We must always be very careful when considering how public money is spent, especially when it comes to subsidies. There are lots of reasons why the Government might sometimes provide public support towards outcomes that are not necessarily the most narrowly efficient, but promote a wider social or local economic good, but they must always guarantee value for money for the families who ultimately foot the bill. Renewals obligation subsidies have fallen short of that standard. Originally introduced in 2002 by the last Labour Government, and closed to new entrants in 2017 by the last Conservative Government, the renewals obligation remains a significant drain on the public finances, providing a fixed rate of financial support through 20-year-long contracts.

[Melanie Onn (Great Grimsby and Cleethorpes) (Lab)]

By the time that the new renewables obligation closed, the cost of large-scale offshore wind had come down by half, allowing contracts for difference to be introduced, which have seen it grow at scale. It has enabled a brand-new industry to start and progress in this country, has it not?

[Nick Timothy]

I will turn to contracts for difference in a moment. We may discuss them in this debate, or perhaps in other fora, but it is important that we are honest with ourselves about the full costs of some of the renewable technologies upon which we have come to depend. With the hidden costs that apply to wind farms, I do not think that we have been quite so honest. That is not a party political point but something that has been true across the party divide. In 2023-24 the scheme cost £7.6 billion, and it will remain high, at £6.9 billion in 2028-29, according to the Office for Budget Responsibility. That proves how dangerous it can be to lock in subsidy schemes under lengthy contracts, with the cost passed on to people’s energy bills.

That is not the only zombie renewables subsidy scheme. Introduced in April 2010, feed-in tariffs were made available for schemes with capacity for 5 MW or less as an alternative for smaller projects, such as rooftop solar panels. Closed to new entrants in 2019, the scheme still sustains 20-year-long contracts, and £1.84 billion of feed-in tariff payments were made last year. Far from saving money, renewables subsidies have come with significant long-term costs.

The phasing out of the renewables obligation and feed-in tariffs is being used by the Government in their efforts to hoodwink the public on the true costs of their net zero policies. The National Energy System Operator’s 2030 report made several highly questionable assumptions about how the Government’s goal of decarbonising the grid will cut energy bills. One of the points made by NESO was that energy bills would fall due to the expiration of the renewables obligation and feed-in tariff contracts, but those contracts will expire regardless of the speed of decarbonisation, so it is misleading to include that as a benefit of the Government’s deeply flawed clean energy plan. We will see costs increase significantly elsewhere, thanks to Government policies.

The renewables obligation and feed-in tariff schemes should be a warning. The Government are consulting on substantial changes to the next round of contracts for difference, which replace the previous subsidy schemes. They include easing eligibility criteria for fixed-bottom offshore wind, as well as extending the lifetime of contracts subsidising renewables from 15 years to 20 years. We are at risk of wasting billions of pounds of taxpayers’ money in a race to meet the unrealistic clean power target.

[Melanie Onn]

The hon. Gentleman is being very generous. What he says is very interesting, but I am not entirely clear where he is headed. Is this a shift in Conservative policy on green industry and the renewables industry, which they have previously championed, or is this just an attack on Labour’s plans because he does not like them?

[Nick Timothy]

I would never suggest that the hon. Lady has tracked everything that I have written through my career, but I have been making these arguments for a number of years. The Leader of the Opposition has made the point that one of the things our party did not get right in government was setting ambitious goals on things such as energy policy without having a clear enough plan to deliver them. My concern, and the concern of the Conservative Front Benchers, is that this Government are making not only a similar mistake but a graver mistake because of the speed and unilateralism of their energy policies. [Interruption.] I can see the hon. Lady smiling, and I hope that is in approval of what I said.

--- Later in debate ---

[Kerry McCarthy]

As I said to the hon. Member, that issue that has been debated numerous times here, and it is not really the subject of today’s debate—but nice try on getting it in there. He might want to secure his own Westminster Hall or Adjournment debate on it. As I said, it is very much on our radar to look at the fairness in the system and to make sure that energy is affordable for everybody and that there are community benefits as we roll out that clean power ambition. All those issues are talked about in the Department on a daily basis.

Before I move on from the hon. Member for West Suffolk, I will say that the urgent question on carbon budget 7 was not granted because there is a process for the Government to respond to the analysis given to us from carbon budgets, and we will follow that process. First, though, we have to deal with the carbon budget delivery plan. Before looking to CB7, we must look at how we meet the obligations contained in current carbon budgets.

The previous Government were taken to court because their plan was not deemed adequate. They presented another plan, and the courts again found that it was not adequate, so we now have a deadline from the courts to produce our carbon budget delivery plan this year to show that we are back on track. That is very much our first priority. I am sure that once that is published, we will debate that and then carbon budget 7 as well, but we have to show that we are back on track before we start looking into the future.

[Melanie Onn]

The Opposition’s new-found position is apparently anti-ideological, but I have just read the article in the Telegraph—not my usual source of news—and it is in fact deeply ideological. Furthermore, it now sets the Opposition against the reality of industry in coastal and remote communities that has been generating the jobs, apprenticeships and investment that have long been requested and needed by those communities.

[Kerry McCarthy]

My hon. Friend makes a valid point. I wonder whether the Opposition spokesperson has spoken to businesses on this matter because, in all my conversations with businesses, both in opposition and now in government, it is clear that they want certainty. They need a stable investment environment if they are to make long-term decisions. They cannot invest in renewable energy, in industrial decarbonisation or in the economic growth this country needs without certainty. We know that one reason why we are in the economic situation we are is the lack of stability and the economic chaos at times under the previous Administration, particularly under the predecessor of my hon. Friend the Member for South West Norfolk. Therefore, certainty is what we need to have. Business is crying out for that.

In places such as Grimsby, it is particularly important to have a place-based solution to the current situation, showing what the energy transition would look like in such places. I urge the hon. Member for West Suffolk to take a bit of a tour, to talk to businesses and people who are trying to get much-needed investment into places such as Grimsby, and to see—I am not quite sure what his proposals are—what he can say to them on how to get long-term investment.