Energy BILL [ Lords ] (Fifth sitting)

Philip Boswell Excerpts

Tuesday 2nd February 2016 Public Bill Committees

[Clive Lewis]

I thank the hon. Members for their interventions. We are not talking about subsidies ad infinitum. We are just saying stick to the plan; that is all we are saying. Whether it is solar or wind energy, subsidy should be seen as a glide path. What the Government have done is chop the wings off. I have lists of quotes from investors who will say that this is not the best way forward.

A report last week from Bloomberg New Energy Finance research forecast that these measures will see the UK lose at least 1 GW of renewable energy generation, enough to power 660,000 homes over the next five years. The figures suggest that after 2020 the renewables infrastructure will collapse to almost nothing because of a lack of investment.

David Hostert, the analyst behind the research, said:

“Without some form of change in policy support, we could see investment drop off a cliff after 2019.”

Meanwhile, Maria McCaffery, chief executive of RenewableUK, said:

“The Government’s decision to end prematurely financial support for onshore wind sends a chilling signal not just to the renewable energy industry, but to all investors right across the UK’s infrastructure sectors. It means this Government is quite prepared to pull the rug from under the feet of investors even when this country desperately needs to clean up the way we generate electricity at the lowest possible cost—which is onshore wind. People’s fuel bills will increase directly as a result of this Government’s actions. If Government was really serious about ending subsidy it should be working with industry to help us bring costs down, not slamming the door on the lowest cost option.”

I come back to the point on bills, Let us look at what this saves the average household. According to the Government’s own assessment, the changes will save just 30p on consumer annual energy bills and increase the UK’s carbon emissions by 63 million tonnes.

Ultimately, these measures are a backtracking, chaotic travesty. They make no sense, punish one of our most cost-effective and successful renewable industries and endanger this country’s energy security by undermining investor confidence. As such, I urge the Minister to drop them.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

Tempted though I am to talk about solar, carbon capture and the Green Investment Bank, I will not go over issues that have been well covered in debate in both the Chamber and this Committee. Instead, I will focus on onshore wind.

As part of the Bill, the Government propose to close the renewables obligation to new onshore wind projects from April 2016, one year earlier than originally planned. As the only current mechanism that enables large-scale onshore wind to enter the power market, the proposed early closure of the RO poses a significant threat to the future of the onshore wind sector and the UK’s growing green manufacturing, export and investment potential, while increasing the difficulty and cost associated with achieving our decarbonisation targets.

We agree that swift passage of the Bill with clear and consistent RO grace period provisions is needed in order to provide certainty to investors in the onshore wind sector as quickly as possible. The renewables industry fears that the longer legislative uncertainty over RO closure persists, the greater the risk of otherwise eligible projects running out of time to deliver under the proposed grace periods. We share the concerns of the hon. Member for Southampton, Test in that respect.

We thank the Government for having the foresight to include grace periods in relation to onshore wind projects, but feel that the grace periods put forward by the Government do not quite fulfil the Conservative party’s own manifesto promise, and we urge further consideration in that respect. Both the Minister herself and the hon. Member for Daventry have spoken in this Committee of the manifesto commitment to ending “any new public subsidy” and allowing local people to “have the final say”.

Indeed, the Minister stated clearly her intent at the Energy and Climate Change Committee of 20 October 2015, when she pointed out that the primary purpose of the grace periods was ensuring,

“that those who have spent money in a significant investment and achieved everything technically to meet the cut-off date, but through reasons beyond their control have not actually made it, are not penalised for reasons beyond their control”.

The Conservatives have perhaps been true to their word on the first point, but by closing the RO one year early, they are not necessarily allowing the people in Scotland, Northern Ireland, Wales and England who have agreed to site wind farms in their area to have the final say unless, as a minimum, more comprehensive grace periods are implemented. We see much cross-party support in this House for such a consideration.

I would like to take this opportunity to thank Ben Williams and Katy Stout of the Department of Chamber and Committee Services for assisting us in the inclusion of such a complex set of amendments. While I am on the subject of the extremely rare occasion when a Member of Parliament gives praise where it is actually due, instead of taking it for himself, I would also like to thank Scottish Renewables, RenewableUK and Energy UK, among others, for their significant contributions in respect of these amendments.

I apologise to the Committee in advance, but I would like to take some time to put on record a detailed explanation of the intent of each amendment, which should assist our collective decision-making process. Amendments (b) to (r) relate to new section 32LJ of the Electricity Act 1989, inserted by new clause 2, on the approved development condition. The new section sets out the Government’s grace period criteria for projects that may receive renewables obligation certificates after the 31 March 2016 deadline. However, the current grace periods do not cover a number of circumstances in which an onshore wind developer could reasonably have been expected to continue to receive support under the ROC regime but are excluded because of the 18 June 2015 deadline.

Amendments (b) and (c) are technical and are required to fix inconsistencies so that all of the amendments, taken as a whole, make sense when read together with the existing legislation. Amendment (b) is required because of the definition of planning permission in new section 32LJ(7). The grace period condition covers appeals and can therefore only cover applications under the Town and Country Planning Act 1990 and the Town and Country Planning (Scotland) Act 1997, since a right of appeal only arises in respect of such applications. The amendment limits the application of the grace period condition to such cases. Amendment (c) is required because amendment (o) now covers judicial review cases and there is therefore no need to refer to judicial review within new section 32LJ(4)(b)(i).

Amendments (d) and (f) ensure the availability of the grace periods to cases of non-determination, whereby the statutory period for the determination of a planning application expired on or before 18 June 2015, but where a time extension had been agreed between the developer and the planning authority which expired after 18 June. Amendment (d) covers examples of projects which receive permission after 18 June 2015 following a non-determination appeal, where extension of time for determination has been agreed following the expiry of the statutory period before 18 June. However, it does not benefit projects where an extension of time has been agreed and which subsequently received planning permission without an appeal. Amendment (f) is, therefore, required to cover projects where an extension of time has been agreed and which subsequently received local planning permission without an appeal.

These amendments are fair because they avoid penalising developers who seek to negotiate with a planning authority rather than appealing for non-determination immediately following the end of the statutory time period for such a determination. A case study for this would be the Binn Eco Park, Perthshire, for which I am happy to provide a synopsis, should one be required.

Amendment (h) ensures the availability of grace periods to cases where an application has been called in by Ministers. The amendment covers the situation where the statutory period for the determination of the planning application expired on or before 18 June but the application was referred to the Secretary of State, Welsh Ministers or Scottish Ministers and was subsequently granted after 18 June. The amendment is necessary to ensure that projects for which an application for planning permission was submitted within sufficient time to allow a decision to have been granted prior to 18 June, but which were subsequently called in and then granted, are not unfairly prejudiced.

Amendment (i) covers the case of projects that have had local planning permissions resolved on or before 18 June but were technically granted by the planning authority after that date. This amendment is fair because it covers projects where there was approval by the local planning committee on or before 18 June 2015 but an official written consent notice was given after that date. There are a number of projects where recommendations to approve were made prior to 18 June but delays stemming from pre-election purdah or resource constraints in local authorities meant that projects did not receive final consent or a full committee resolution until after this point. A great deal of investment will have gone into projects in good faith and without foreknowledge of the cut-off point of 18 June. A case study would be Twentyshilling Hill, Dumfries and Galloway, which is, of course, in the constituency of our Scottish Conservative MP, the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale.

Amendment (j) covers applications for section 36 consent made before 18 June, where the consultation period for local authorities and others had expired on or before 18 June. Industry believes this amendment should address a significant anomaly over eligibility for projects consented under the section 36 regime, compared to those consented under the Town and Country Planning Act 1990 and the Town and Country Planning (Scotland) Act 1997 regimes. Under section 36 of the 1989 Act, the relevant planning authority is not the decision taker but can object to the proposal, after which there must be a public inquiry and then a decision by the Secretary of State or devolved Minister, as appropriate. This process is analogous in practice to a refusal under local planning, followed by an appeal. While the Government’s grace period provisions, as drafted, would allow a successful appeal after 18 June to become eligible for the grace period, the provisions do not cover this analogous situation under section 36. This means that small extensions of larger sites, which must follow the section 36 route, are, in particular, treated disadvantageously in respect of grace period eligibility compared to sub-50 MW stand-alone developments.

Sub-paragraph (iii) also reflects the need to provide for cases that do not go to inquiry but where the other provisions of the amendment apply, in addition to cases that do go to inquiry. Were this not to be included, section 36 applications ultimately issued permission without a local authority objection and without an inquiry would be penalised in comparison with those which did go to inquiry.

Amendment (k) covers applications for consent made under the Planning Act 2008 before 18 June and when a deadline for receipt of representations has passed on or before 18 June. The amendment ensures that projects requiring a development consent order are eligible for the grace period in the same circumstances as an equivalent project requiring a section 36 process.

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[Simon Hoare]

I fear that there is an inherent danger in the amendments. It is simply the conflation, which I think the planning process should quite specifically seek to avoid, of arguments surrounding financial viability, whether funded from the private or public sector, and whether a proposal dovetails with planning policies and the acceptability and suitability of a particular physical proposal. By trying to conflate the two, the hon. Gentleman puts an undue weight on the viability case, which local authorities will find very difficult to opine upon, and even a very casual review of planning inspectors’ decisions would also suggest that the Planning Inspectorate itself finds it very difficult to balance the two as well.

[Philip Boswell]

I assure the hon. Gentleman that this is merely an attempt to clarify or articulate the position from a legislative perspective. It remains our firm intention that the decision remains, as per policy, with local authorities and local people.

Although statements from Ministers in the House of Lords have indicated that the Government intend for modified consents to remain eligible, clarity on this in the Bill would remove any doubt and allow investments to proceed. Amendment (l) provides for cases where a planning permission was granted on or before 18 June 2015, but where that planning permission has been varied under the provisions recorded in sub-paragraph (ii). Permissions under section 73 of the 1990 Act or section 42 of the 1997 Act are in law new permissions, and without this provision such further approvals based on permission granted before 18 June would be shut out from receiving a ROC. Deemed planning permission issued with section 36 consents can be varied under section 73 or 42, but there is a need to refer to section 90 of the 1990 Act and section 57 of the 1997 Act because they will be engaged on an application to vary section 36 consent under section 36C of the 1989 Act.

Amendment (m) ensures that applications to vary an existing 1990 Act or 1997 Act permission that was granted on or before 18 June, that may result in an increased capacity which takes the total generating capacity of the station above 50MW and must therefore be done by way of an application for a section 36 consent rather than by way of a variation of the 1990 Act or 1997 Act permission, will still qualify for the grace period. Amendment (n) ensures that a project is still eligible for the grace period where a planning permission granted on or before 18 June 2015 is superseded by a subsequent permission granted after 18 June 2015 for a generating station of the same or lower capacity on the same site.

Amendment (o) is a new amendment to cover judicial review and statutory challenges relating to planning permissions granted on or before 18 June 2015. It envisages that the planning permission which is ultimately granted or confirmed following court proceedings can be accredited under the RO. How much capacity may come through the door as a result of the amendment that can be easily quantified by reference to any proceedings now in the court.

It is common practice within the sector for grid agreements to be varied by parties after initial agreement. Amendment (p) will clarifies that, provided a grid connection agreement is in place by 18 June, eligibility for grace periods will not be affected by any subsequent variations of that agreement. So far, Ministers have been unable to provide sufficient clarity that subsequent alterations or replacement of agreements would be eligible for the grace period. If the Government intend projects in those circumstances to proceed with construction and be accredited under the RO, that should be made clear in the Bill, for the avoidance of any further doubt and further delays. Amendments (q) and (r) are intended to make it clear that deemed planning permission is included within the definition of permission in the 1990 Act and the 1997 Act, and thus fall within the definition of planning permission.

Our amendments (s), (t) and (u) relate to new section 32LK of the Electricity Act 1989, inserted by Government new clause 2, which sets out the criteria for projects that would be eligible to meet the investment freezing condition. This condition is necessary—I thank the Minister for her stated intention of respect—because the way that the Government have chosen to close the RO a year earlier than planned through primary legislation has caused so much uncertainty that some investors cannot have stopped investment in onshore wind projects until the Energy Bill receives Royal Assent.

Amendment (s) addresses an illogicality within new section 32LK(4)(a)(i). The Government-drafted amendment envisages a developer requiring funding from a recognised lender, a term which is defined in subsection (5). However, it must have been intended that the only condition should be that the relevant developer required funding from any source, hence the proposed deletion of the reference to a recognised lender in this clause.

Amendment (t) deletes certain words as they unnecessarily narrow the definition of “recognised lender”. If the words proposed for deletion were included, they could exclude lenders who are new to the market and who have not previously given loans to onshore wind developers. Amendment (u) is consequential on amendment (t). The change proposed by amendment (t) removes the terms defined in subsection (6) from the definition of “recognised lender” so there is no longer any need to define those terms, making subsection (6) unnecessary.

I move on to new clause 3, and again I thank the Minister for her efforts and intents on new Northern Irish onshore wind. The new clause covers the development of wind generating stations in Northern Ireland. When the Energy Bill provisions were published, they related only to projects in Great Britain, because energy policy is devolved to Northern Ireland. Subsequently, Northern Ireland Ministers consulted on equivalent changes to the Northern Ireland renewables obligation, with cut-off dates for planning consent proportionate to this later consultation and notification date. Northern Ireland Ministers proposed setting two closure dates which related to different sizes of projects, and to the manner of connection to the Northern Ireland electricity market of these different project types. Smaller projects which connect at 33 kV to the Northern Ireland grid network would have to have been consented to by 30 September 2015. Larger projects which connect as clusters of projects would have to be consented to by 31 October 2015.

Northern Ireland Ministers have yet to announce their decision on Northern Ireland closure, as agreement between the Northern Ireland Executive and the UK Government has yet to be reached. This means that any subsequent Northern Ireland legislation cannot be enacted via the Northern Ireland Assembly until after the Bill is enacted. It is therefore necessary that the Bill is clear as to the limits of the application of the provision to Northern Ireland and that it respects timescales proportionate to the Northern Ireland generating stations. Failure to do this would mean that generating stations in Northern Ireland could be penalised because of a misalignment of timescales between reserved and devolved powers in the UK. I urge the Minister to seriously consider these amendments.

New clause 15 would,

“return to the Scottish Ministers the power to close the renewables obligation in relation to electricity generated by onshore wind generating stations in Scotland”.

Before the Energy Act 2013 was passed, Scottish Ministers had full control over renewables obligations in line with the Scotland Act 1998, which devolved powers to the Scottish Government regarding the supply of electricity from renewable sources. The Energy Act 2013 took back this control through a UK Government amendment tabled in the House of Lords that gave the Secretary of State the power to close the RO, including in Scotland. The justification for this change in the law was that it would facilitate a coherent and transparent closure across the UK and move toward the new contract for difference system. Those powers were taken back to Westminster under the previous Energy Act on the clear understanding and promise from the Government that there would be no policy implications; it was said to be just a technical change that would not affect any policy decisions.

At the time, the move was condemned by the Scottish Government’s Fergus Ewing, who said that the UK Government produced the amendment in the House of Lords with “no consultation or explanation”. He said:

“We are deeply concerned about this summary removal of the Scottish Government’s discretion in an area of such vital importance to our people and economy.”

Clearly, the original justification for stripping Scotland of a power devolved in 1998 no longer holds water. There has been a policy change by the UK Government, and it is one to which the Scottish Government dissent.

[James Cartlidge]

Is the hon. Gentleman suggesting that if the amendment were implemented, the Scottish Government would take over the expenditure associated with the RO?

[Philip Boswell]

We would be willing to discuss that, depending on the benefits. The RO was developed and evolved for good reason.

[Chris Heaton-Harris (Daventry) (Con)]

I understand the hon. Gentleman’s point, and I was interested in the intervention from my hon. Friend the Member for South Suffolk. My understanding is that in 2015-16, out of the £850 million spent on the renewables obligation, expenditure in Scotland was £520 million—60%. Is the hon. Gentleman saying that the Scottish Government are willing to take half a billion pounds of spending on board?

[Philip Boswell]

The short answer to that is no. We are looking for dispensation from paying the £92.50 strike price for Hinkley Point C—double the current electricity rate—that seems to have been imposed on the rest of the country by this Government.

It is also important to honour the Smith commission recommendations on how power is devolved to Scotland, where appropriate, so that Scotland can make its own decisions about its economic development. In the light of those developments, control over the renewables obligation must be returned to Scottish Ministers.

[Chris Heaton-Harris]

It is a pleasure to serve under your chairmanship, Mr Bailey. Given what the hon. Gentleman just said, I point out to him that as his party has a policy of achieving 100% renewable energy provision in Scotland, so much of it dependent on onshore and offshore wind, when the wind is not blowing there, Scotland—if it is independent—will have to come crawling to a country that will be setting a rate based on what it can sell on the market, rather than being generous. That is a hostage to fortune for any Scotland, future or past.

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Amendment (a) deals with those two categories of project, the majority of which are in Scotland. It would be reasonable, certainly on Report, for the Government to consider conceding that point. That would protect investor confidence and, indeed, play fair by developers who played by the rules in doing what we asked them to do when bringing forward projects. That would be a reasonable position to take.

[Philip Boswell]

The hon. Gentleman makes a good point. Moreover from his excellent point, the sunk costs incurred, for example, on Twentyshilling Hill, currently sit at £3.5 million plus further commitments and the sunk costs incurred on Binn Eco Park wind farm currently sit at £1.5 million. That needs to be considered.

[Jonathan Reynolds]

Some interesting points are being raised, which the Government would do well to treat fairly.

The Minister mentioned the overperformance of onshore wind and our 2020 renewables target. I must stress this point clearly: there is a legally binding overall 2020 renewables target, but it is made up of a road map of targets for electricity, heat and transport, which are not binding but form our contribution to the overall renewables target. The target is for 30% of electricity generation, 12% of heat generation and 10% of transport to be renewable by 2020. When conceding that point, the Minister said that the problem is that the subsidies required for electricity and things such as onshore wind are such that we could not possibly try to overperform and that, frankly, we are not hitting our heat and transport targets.

If the Minister is worried about the impact of electricity subsidies on billpayers, she must get the briefing on how we will hit the heat target. To do so through the renewable heat incentive alone would require a budget in excess of the entire budget for the Department of Energy and Climate Change. The Minister will not save money by cutting back on this important area. She will almost certainly incur a much bigger liability for the taxpayer unless she can tell us that we are on track for our heat and transport targets, but we all know that we are not.

The Bill is needed to legislate for the Conservative party’s manifesto position, but the Government should recognise the UK’s pressing situation regarding investability. There are anomalies in the way that the Government’s objectives have been drawn up in the Bill and it is reasonable to correct them at this stage. Most of all, this group of amendments strikes the right balance between the Government’s objectives, investability and the national interest. I hope that the amendments will be considered properly.

[Simon Hoare]

It is a pleasure to serve under your chairmanship, Mr Bailey.

I was slightly anxious when my hon. Friend the Member for Daventry began his remarks with a clear US feel in talking about caucuses and the like. The Committee will know that today is groundhog day in the United States and listening to some of the speeches of Opposition Members, it did feel a bit like groundhog day today. Google is good for some things. [Interruption.] Trump that, as my hon. Friend says.

My heart sank when listening to an erudite but certainly groundhog day speech from the hon. Member for Norwich South, with all those surveys where this association says that and that association says the other, while 37% do such and such. As we all know, surveys can be made to say all sorts of things. “Bears prefer woods to bathrooms,” says one survey, “Turkeys don’t endorse Christmas as an annual event,” says another. The one survey that the Opposition parties seemed to neglect was the survey at the general election. That was a survey in which the British people said very clearly, among other things––particularly, though not exclusively, in rural England––that enough was enough. The survey at the ballot box demonstrated that this is an incredibly popular policy.

I have a fundamental support for how the Government are proposing to tackle the issue. My hon. Friend the Member for Daventry alluded to it. It would have been entirely within the purview of the Department––had it so wished, based on the election result––to say, “There we are. We’ve won. Any form of financial support or subsidy is going. You’ve got 12 hours to prepare and that’s it.” [Interruption.] For an Opposition Member to say that something the Government might do is very stupid takes a little brass neck. The hon. Member for Stalybridge and Hyde exhorted us all to take front and centre our duties to ensure that the investment markets had confidence in Britain. I look forward to the leaked transcripts of parliamentary Labour party meetings where he makes those points to his leader and the shadow Chancellor because I am not entirely sure that their policies do much to support confidence for investment in UK plc.

The stance that the Government have taken is to have a realistic timeframe whereby the industry, which must have been the most myopic ostrich if it did not see this coming, has time to rethink existing plans and, if it so wishes, seek alternative funding from the market. It is indicative that the Opposition say that this sector must always be subsidised. When David Davies of Llandinam literally sold the family silver––and almost the shoes on his feet––to pay the workers who were digging for coal in the south Wales valleys because he realised that there would be a market for coal to fuel the industrial revolution of which we were on the cusp, I doubt he sat down and thought, “Do you know what? I just wish there was a Government subsidy to support me doing this.” No, he realised that there was a market opportunity with profit attached to it and he went and did it. He did not need a subsidy and I do not believe wind should have one.

[Philip Boswell]

Does the hon. Gentleman understand that no tax was paid at that time? That gentleman therefore did not have to worry about that cost.

[Simon Hoare]

I am delighted to hear an SNP Member thinking about a no-tax economy to help entrepreneurs. I am sure he will take that to Holyrood.

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[Simon Hoare]

Let me make this point, because I think this is how the market operates, and will operate in future.

The hon. Member for Coatbridge, Chryston and Bellshill was discussing the planning system. Anybody who has any understanding of the commercial planning process—onshore wind turbines are part of that process as much as supermarkets or hotels are—will know that there are risks attached to it. People can spend an awful lot of money optioning up the land, paying consultants, having surveys done and so on, yet still fall foul of the process. Even if someone does not fall foul of it and secures consent, they might suddenly find that the funding regime from the banks or pension funds has altered or the appetite for the product they were seeking to develop has waned. They just have to chalk it down to experience. If we have some form of system in which as soon as anybody makes a planning proposal the automatic presumption is that, de facto, they will always have consent, that would be a very dangerous sign to send to the commercial development sector.

[Philip Boswell]

Does the hon. Gentleman agree that under the Twentyshilling Hill wind farm timeline, the sunk costs incurred before 18 June 2014 were £3.5 million, plus commitments of £3.3 million, totalling £6.8 million? The point is that these included placing deposits on turbines with Nordex. Such orders in the industry are long-lead orders and often have to be placed a year or more in advance. Does he not agree that for a project of such efficacy, one has to plan ahead and commit?