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Energy Bill

I will certainly do my best to put the Government’s case, appreciating that the noble Lord, Lord Wallace, is likely to appear on Report and argue the case at somewhat greater length. The amendment specifically addresses research and development grants and would prevent the recipients of R&D grants from benefiting the choice of being able to surrender their grants to receive a higher level of support under the RO. By their very nature, research grants are awarded to projects in the early stages of development to provide an incentive to companies to innovate and to bring ideas to fruition. Irrespective of the differences between research grants and other capital grants, our case is that they both involve significant sums of taxpayers’ money, which can amount to as much as several million pounds for a sizeable project. Of course, Governments have a duty to ensure that that is spent wisely and that there is value for money. Where a project has been funded by the taxpayer and a separate subsidy regime applies, we have to take measures to ensure that these two schemes do not overlap in a way that undermines that prime responsibility on government. Our goal for the renewables obligation is to promote the deployment of renewables at a reasonable cost to consumers in a way that best supports progress towards our targets. Equally, as grants are allocated based on income derived from current levels of support, a higher level of subsidy in addition to the grant could, we believe, potentially breach state aid rules on cumulation of aid and additionality. In order to ensure that the introduction of banding presents no perverse incentive to delay the progress of their projects, we have committed to allow companies to take a commercial decision on whether to surrender their grant and receive the higher level of support or retain the grant and remain on one ROC per MWh. To ensure compliance with state aid rules, our intention has always been to take a power to enable generators who want to be banded up to repay the relevant proportion of the grant they have received. That has to be done on a case-by-case basis with individual companies at the time when they make that decision. The mechanism for surrendering the grants will be included as part of the statutory consultations on the renewables obligation order, which we hope to publish before the Summer Recess. We are in the process of discussing with the European Commission the proposed changes to the RO to obtain clearance for these proposals. Removing the provisions would take away our ability to ensure that we are not oversubsidising projects and that the RO continues to operate on least-cost-to-the-consumer basis. It would also prevent the recipient of a grant making a commercial decision which would allow them to benefit from banding. That is why we cannot support the amendment in the name of the noble Lord, Lord Wallace of Tankerness.