---

Energy Bill

moved Amendment No. 29: 29: After Clause 40, insert the following new Clause— ““Feed-in tariffs: electricity (1) The Secretary of State may modify— (a) a condition of a particular licence under section 6(1)(c) or (d) of the Electricity Act 1989 (c. 29) (distribution and supply licences); (b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act; (c) a document maintained in accordance with the conditions of licences under section 6(1) of that Act, or an agreement that gives effect to a document so maintained. (2) The Secretary of State may exercise the power in subsection (1) for the purpose only of— (a) establishing, or making arrangements for the administration of, a scheme of financial incentives to encourage small-scale low-carbon generation of electricity; (b) requiring or enabling the holder of a distribution licence to make arrangements for the distribution of electricity generated by small-scale low-carbon generation; (c) requiring the holder of a licence to make arrangements related to the matters mentioned in paragraph (a) or (b). (3) Modifications made by virtue of subsection (1) may include— (a) provision requiring the holder of a supply licence to make a payment to a small-scale low-carbon generator, or to the Authority for onward payment to such a generator, in specified circumstances; (b) provision specifying how a payment under paragraph (a) is to be calculated; (c) provision for the level of payment under paragraph (a) to decrease year by year in accordance with a formula published, or to be published, by the Secretary of State; (d) provision about the circumstances in which no payment, or a reduced payment, may be made to a small-scale low-carbon generator; (e) provision about the circumstances in which a payment may be recovered from a small-scale low-carbon generator; (f) a requirement for the holder of a supply licence or distribution licence to pay a levy to the Authority at specified times; (g) provision specifying how a levy under paragraph (f) is to be calculated (which may require specified matters to be determined by the Authority or the Secretary of State); (h) provision conferring an entitlement on the holder of a supply licence or distribution licence to receive a payment from the Authority. (4) In this section— ““Authority”” means the Gas and Electricity Markets Authority; ““distribution licence”” means a licence under section 6(1)(c) of the Electricity Act 1989 (c. 29); ““owner””, in relation to any plant which is the subject of a hire purchase agreement, a conditional sale agreement or any agreement of a similar nature, means the person in possession of the plant under that agreement; ““plant”” includes any equipment, apparatus or appliance; ““small-scale low-carbon generation”” means the use, for the generation of electricity, of any plant— (a) which, in generating electricity, relies wholly or mainly on a source of energy or a technology mentioned in subsection (5), and (b) the capacity of which to generate electricity does not exceed the specified maximum capacity; ““small-scale low-carbon generator”” means an owner of plant used or intended to be used for small-scale low-carbon generation, whether or not the person is also operating or intending to operate the plant; ““specified maximum capacity”” means the capacity specified by the Secretary of State by order, which must not exceed 3 megawatts; ““supply licence”” means a licence under section 6(1)(d) of the Electricity Act 1989 (c. 29). (5) The sources of energy and technologies are— (a) biomass; (b) biofuels; (c) fuel cells; (d) photovoltaics; (e) water (including waves and tides); (f) wind; (g) solar power; (h) geothermal sources; (i) combined heat and power systems with an electrical capacity of 50 kilowatts or less. (6) The Secretary of State may by order modify the list of sources of energy and technologies for the time being listed in subsection (5). (7) The power conferred by subsection (1)— (a) may be exercised generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as specified conditions are satisfied); (b) may be exercised differently in different cases or circumstances; (c) includes a power to make incidental, supplemental, consequential or transitional modifications. (8) Provision included in a licence by virtue of that power— (a) need not relate to the activities authorised by the licence; (b) may make different provision for different cases.”” The noble Lord said: My Lords, I am grateful for the opportunity to discuss with noble Lords this group of amendments on the important issue of feed-in tariffs. I announced on Report that we would be bringing forward these amendments and it has been helpful to have input from noble Lords on whether they think that we have got the matter right. We have had to prepare the new clauses at short notice. As a result, we have had to adopt a broad approach, as that was the only way in which we could prepare the amendments in the time available and be confident that they will be sufficiently flexible to allow us to deliver the policy that we all want. We are fully committed to introducing a tailor-made scheme to financially support small-scale low-carbon generation of electricity. Our intention is that generators will receive a guaranteed payment for generating electricity. We know that different technologies of different sizes will require different rates of payment, and we believe that the provisions in subsection (3)(a) and (b) will allow for this to happen. Cost reductions are encouraged by decreasing the rates of reward, year on year, for new installations, and this is covered by subsection (3)(c). However, we also need flexibility to allow us to deliver incentives differently in some situations if the evidence supports it. For example, we may decide that for some scales of generation we need the option of deeming generation from a given installation and then making payment upfront. Subsection 3(a) and (b) allows for this. I accept that the powers are broad, but until we have completed the work to determine how the scheme might operate we need to ensure that we have sufficient flexibility in primary legislation to be confident that we have not inadvertently closed down options. Let me give a brief outline of the powers we are proposing. The clause gives the Secretary of State the power to modify electricity supply and distribution licences as well as standard conditions and some documents and to introduce a scheme of financial incentives to encourage small-scale low-carbon generation of electricity. Modifying licences would allow us to piggy-back on the existing electricity licensing framework and to tap into the enforcement and other provisions that already govern the electricity market. Building on the existing framework will dramatically reduce the risk that we inadvertently miss out important elements of that framework. Modifications may include requiring supply licence holders to make payments to small-scale low-carbon generators, either directly or via Ofgem; specifying how such payment is calculated; and imposing a levy on supply or distribution licence holders in order to fund the scheme. A number of amendments seeking further clarity on how the scheme will operate have been tabled and I shall respond to them at the appropriate time. However, by way of introduction to the general debate, perhaps I should say that the amendment sets an absolute upper capacity cap of three megawatts beneath which the Secretary of State will have the power to set the maximum capacity limit for small-scale low-carbon feed-in tariffs by order. Under this power we have the flexibility to give different levels of reward for different technologies in setting the tariff payments. There are amendments on the upper-capacity limit which take a rather different view and I shall respond to them at the appropriate moment. Other amendments deal with the procedure for amending licence conditions and other supplemental issues. Again, I shall come to those later. In broad terms this is an appropriate response to the arguments that have been made both here and in the other place, and the announcements that my right honourable friend the Secretary of State and I have made on it have been warmly welcomed. I accept that many details still have to be worked out, which is why there is flexibility in the amendment. Equally, I assure noble Lords that the Government are committed and determined to go down this path. I beg to move.