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Energy Bill

My Lords, it has been an interesting debate. I assure noble Lords that careful note is being taken of their comments, although they are not entirely uniform, which reflects some of the difficult decisions that will have to be made in a short period of time. It is good that we will have the benefit of the Select Committee, which will I am sure be very helpful to us. It was a great pleasure to repeat the Statement last Thursday when the Government’s view on feed-in tariffs was made clear, as well as our commitment to renewables and, of course, to the 80 per cent target by 2050. Those set an important context in which to discuss these amendments. Clearly the Government have listened to the debate in your Lordships’ House and the other place and listened to the many Members in both Houses who have argued so persuasively for a feed-in tariff mechanism for small carbon electricity generation. That is why we intend to bring forward at Third Reading an amendment to this Bill to support small-scale renewable generation. The opposition amendments and today’s debate have given the Government much food for thought. I very much welcome the principles outlined in the amendment proposed by the noble Baroness, Lady Wilcox. There has also been considerable debate about heat. When we look at both those issues in detail, it is clear that we cannot incorporate both small-scale electricity and heat into one single mechanism, primarily because the heat market is very different from the electricity market. For those reasons, I shall address those areas separately in my wind-up speech tonight, although I assure the noble Lord, Lord Jenkin, that we understand the need for the amendment that we table at Third Reading to cover the heat sector. On electricity, we are convinced of the need to introduce a feed-in tariff mechanism to reward the smaller producers of low-carbon electricity. Such a mechanism must incentivise the individual householder. More than that, however, schools, hospitals, community projects and businesses will play a role in our fight to reduce carbon emissions. It was a delight that the noble Baroness, Lady Gardner of Parkes, intervened on that important point. I assume that she was talking about the Royal Free when she mentioned her hospital. Of course, we also need a significant amount of investment in larger-scale renewables projects to meet the challenging targets that we have set and, clearly, to provide a substantial degree of energy. Forecasts of modelling available to my department suggest that large-scale renewables will have to account for a significant part of the renewable electricity that we will need by 2020 to meet our targets. That is a generally accepted view in your Lordships’ House. So we have to maintain investor confidence in large-scale investment. The last thing we want to do is to take any action that might inhibit investment decisions at the moment and in the foreseeable future. That is why we want to retain the existing renewables obligation for large-scale renewable projects. As the noble Lord, Lord Oxburgh, persuasively said, maintaining confidence is absolutely crucial, which is why we believe that clarity is best delivered by specifying an upper limit for feed-in tariffs in the Bill. I know that my noble friend Lord Whitty has reservations on that matter, although he has also accepted the general point about needing to maintain confidence in a renewables obligation. The question then is how we devise an effective scheme that is, as the noble Lord, Lord Oxburgh, says, fair and meets the need in maintaining confidence in the current system, albeit with the amendments that this Bill brings in, and in relation to the small-scale microgeneration projects that we so much wish to encourage. I very much agree with the noble Baroness, Lady Wilcox, that we may need a different approach for different technologies. It is different for heat, but the implication is that any upper limit or cap in the Bill will have to be a maximum level, giving sufficient flexibility to set different tariff levels for different technologies, following consultation. I accept the points raised by the noble Baroness, Lady Young, the noble Lord, Lord Teverson, and my noble friend Lord O’Neill about community generation, suggesting that the cap should not be set at too low a level. The noble Lord, Lord Redesdale, tentatively put forward 2.2 megawatts as where one might start the discussion. We will consider that. There is a danger of a kind of auction here, but next week we will have a discussion with noble Lords about where this level should be set. I suspect that we will not get utter uniformity on that view. I have noted the concerns of the noble Lord, Lord Jenkin, about the implication for the local distribution network. This matter has not been reported to me, but I will look into it and will be able to respond to him in due course.