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Energy Bill

I am grateful to the noble Baroness for proposing this amendment. Perhaps I may adapt the old adage: I can look after the Opposition, but heaven protect me from my friends. Some very powerful speeches were made from this side of the Committee as well as from the other side. I am well aware that this issue was debated substantially at Second Reading. This has been an excellent debate and, as the noble Baroness said, there was quite a significant debate in the other place, which led to some interesting voting figures. I am conscious of the fact that for many Members of the Committee, as well as for a large number of Members of the other place and the wider community whom they represent, this is a significant issue. However, we need to look at these issues with hard realism. I am persuaded of the importance of microgeneration and its virtues, and I will seek to demonstrate the work that we are doing in this area. I shall of course ask the noble Baroness to withdraw her amendment. I have no doubt that she will do so and go on to say that she will be returning to it on Report. No doubt, on Report there will be greater participation and these arguments will be scrutinised very carefully. I shall deploy some arguments which, although they accept the virtues of microgeneration, we all need to take very seriously. What would be the most effective series of policies that could be pursued in order for us to reach what we all recognise are enormously challenging targets for renewable energy and reducing carbon generation? The Government have to make choices about the resources at their disposal. The first proposition has figured in a number of today’s contributions, including those from the noble Baroness and the noble Lord, Lord Teverson, who spoke on behalf of his Front Bench. The German example was commended to the Committee and greatly lauded. If one looks at the numbers involved in microgeneration in Germany, it is a successful strategy. However, let me emphasise that it uses a very generous feed-in tariff to encourage the uptake of micro-photovoltaic installations. That is put forward to us as a model to follow. But Germany’s policy of providing government-backed soft loans to accompany those tariffs has been a major factor in the rapid take-up of these installations. As soon as the soft loans were withdrawn, there was a very significant drop in the rate of installations. While the overall policy has been very successful in promoting domestic PV, it has not been able to encourage the full range of microgeneration technologies, nor has it led to the growth of renewable heat. Moreover, this generous subsidy carries a very heavy price tag. The International Energy Agency estimates that the German feed-in tariff between 2000 and 2012 will result in payments of €68 billion and that by 2012 the annual cost would be between €8 billion and €9.5 billion, which would add around 15 per cent annually to all domestic and industrial electricity bills. Against the background of the power bills that people are facing at present, I counsel the Committee to recognise that putting forward proposals with such a potentially significant impact on electricity bills carries considerable risks. Of course, I can appreciate the desire to ensure that we in the UK seize the opportunities to promote and encourage householders and community-sized groups to generate their own energy. However, the role that microgeneration of both heat and electricity can play must be part of a wider energy strategy. People need to know not only that they are doing their bit but that their bit contributes to the best strategy. As part of this, in this period of very high energy prices, we cannot ignore the costs to consumers. The noble Lord, Lord Teverson, illustrated part of that cost; there he was, describing to everyone in the Committee the most favourable circumstances which he enjoyed, but then he said that of course it was just not economic with the support he gets at present. If he lived not in the south-west of England but in similar circumstances in Germany, he would have had his costs met—but I am also indicating what the costs would be to wider society with extensive take-up. We are of course concerned to increase the take-up of microgeneration in the UK. We have made £86 million available in capital grants under the low-carbon buildings programme to reduce the cost of buying and installing equipment. We have removed the need for planning permission in England and Wales for domestic installations which have little or no impact beyond the host property, and have proposed a doubling of support for all microgeneration electricity technologies under the renewables obligation once banding is introduced. We also know that we need to do more for the deployment of other forms of renewable technology. When we published the microgeneration strategy in 2006, we indicated that we were of course aware of its potential benefits. We have supported it financially. I mentioned the low-carbon building programme. We supported it by making it easier for planning permission to be given and by setting up the microgeneration certification scheme to provide consumers with independent certificates of products and services. We supported microgeneration through the expanded Act, with the carbon dioxide advice service from the Energy Saving Trust. So of course we recognise the broad thrust of the arguments for the role that microgeneration can play, but we have a big target to hit. The EU target of producing 20 per cent of energy from renewable sources will be challenging. Our renewable energy strategy, which we will publish once the renewables directive has been agreed—we expect it to be next spring—will set out our proposals for meeting the UK’s share of the EU target. To inform the strategy, we will consult on a raft of options, including how best to support the small-scale generation of electricity and design a financial instrument to promote uptake of renewable heat. Under our renewable energy strategy, which we will publish once the renewables directive has been agreed, and which we expect in the spring of next year, we will set out our proposals for meeting the UK’s share of the EU target. To inform the strategy we will consult on a raft of options, including how most effectively to support the small-scale generation of electricity and how we could best design a financial instrument to promote the uptake of renewable heat. However, I counsel against the easy transfer of the extremely expensive model that the Germans have pursued as being translatable into the British context without it being either enormously costly to the consumer or putting such a demand on Government resources that it pre-empts other strategies which may enable us to reach the target more readily and effectively. The Minister for Energy has publicly stated that he will be looking at feed-in tariffs for small-scale electricity as part of the work to inform our thinking. The Government have given a clear commitment that they want to keep an open mind on this issue, but I ask for the recognition that of course we will look at all these issues—we will be obliged to do so—when we develop our strategy from the spring of next year. However, I want to avoid a situation where we insert into this Bill not just a proposal but a very severe time constraint. After all, the opening line of the proposed new clause states: "““The Secretary of State shall make regulations within one year””." That ties us to a timetable in the Bill and would severely pre-empt the strategy that the Government need to follow in the light of the renewables directive next year and the work that needs to be done. I want also to emphasise that the proposed new clause does not provide an enabling power for the Secretary of State to introduce a feed-in tariff. If the Government determine that that is the right thing to do following consultation, it is a requirement to do so within one year of the passing of the Bill. All noble Lords, and particularly my noble friends—my noble friend Lord Whitty spoke with great persuasive power to this amendment; he also piloted the last energy Bill through the House with great success—will recognise the Government’s severe reservations, particularly on issues related to energy policy, about being tied to a commitment that must be delivered within one year. If there is one thing we all acknowledge in energy strategy, it is that a time constraint of 12 months scarcely makes sense when we are putting in place mechanisms that must last for decades to come. I am happy to give way to my noble friend.