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Energy Bill

My Lords, the Government must be happy because one amendment seeks to change the ceiling from 3 megawatts to 1 megawatt, and another seeks to change the 3 megawatts to 10 megawatts. That is always an admirable position for a Government to find themselves in because they can split the difference and demonstrate that they have come up with the right figure. I shall explain why I think it is not the right figure. The noble Lord, Lord Jenkin, shares many of my objectives: a need for clarity for those involved in the ROC scheme and a need to promote investor confidence. On Report, the Minister stressed the need for investor confidence in the ROC system for larger-scale renewables—he used the words ““larger-scale renewables”” advisedly—and the noble Lord, Lord Whitty, rightly said that that works both ways and that there needs to be confidence for the small and medium-sized generators in another scheme which would suit their needs because it would be simpler and clearer. I would be sad if the Government, in adopting a 3 megawatt ceiling, boxed themselves in and left themselves with insufficient headroom in a market and a set of technologies that are moving quite rapidly. Under their outline proposals the Government can set different tariff levels for individual technologies following consultation, and so the 10-megawatt ceiling should be seen as an envelope within which the whole scheme can happen. For many technologies, as they change their capacity over time, there could be a different set of conditions attached to taking part in the feed-in tariff. That would not destroy flexibility for the Government but it would give them headroom. There has been a failure of the ROC system to incentivise investment in small to medium-size generation schemes. About 95 per cent of the wind capacity currently in the planning system is in developments larger than 10 megawatts. The renewables obligation is not incentivising adequately schemes under 10 megawatts. If we look at other countries that have had advantageous feed-in tariff arrangements as well as other mechanisms, we see that Germany is in the enviable position of having 10 times more wind power than the UK despite the fact that we are a jolly sight windier. It is quite telling that somewhere between one-third and one-half of that power is under 10 megawatts. It is possible to have the best of both worlds, with significant investment in large-scale schemes as well as in small and medium-sized schemes. There is room for both, and we have to find a way of getting feed-in tariffs and ROCs to work together to deliver both. The ROC system is certainly not doing that for schemes between 3 megawatts and 10 megawatts at the moment. At the moment we are not talking about single-house solutions such as sticking a windmill in your garden or on the side of your house. I always thought that putting one on the side of your house would probably mean that your house flew away rather than that you generated electricity. We are looking at the needs of communities and the needs of groups of farmers getting together. Some of the technologies are fairly small-scale at the moment but are rapidly increasing in the scale they are capable of in terms of onsite generation, low-cost housing, hospital onsite generation—a variety of areas where a single provider will not be well versed and well attuned in the ROCs issue and the way in which managing that system needs to take place. Those providers would be much more incentivised by the certainty of a feed-in tariff. I have watched farmers struggle with anaerobic digestion systems. Some of the biggest farming companies in the country have trouble with it for a variety of reasons, as the noble Lord, Lord Jenkin, said, but the ROC scheme is not insignificant in that matter. You can imagine what small-scale farmers, who would still have the capacity for generating substantial amounts of electricity from anaerobic digestion, must feel in trying to pull off a development. I take issue with the noble Lord’s description of these mid-range projects as ““commercial ventures””. One would like to hope that they are commercial if that means they are not going to be loss-makers and a total flop, otherwise no one will invest in them at all. However, they are far from being commercial ventures by commercial energy companies; in most cases, they are concomitant to another activity being carried on at a community level by a very small-scale business. I hope that the Government will not say that, as they cannot get agreement between the two amendments, that must mean that they are probably right. I hope they will take account of the fact that a number of responsible groups have got together in support of the 10-megawatt proposition, including several of the home building associations and the Energy Saving Trust. I hope, too, that the Government will ponder on paragraph 155 of the good report by the noble Lord, Lord Freeman—who, alas, has just abandoned his slot. That paragraph, which examines the case for feed-in tariffs and recommends that system, says: "““Although the evidence we received in favour of feed-in tariffs anticipated that micro-generators would benefit most from such a system, we do not believe that the benefit of feed-in tariffs would be limited only to small-scale generation. Single site operators, community developments, affordable housing schemes and farmers will often want generation capacity above the micro-generation level. They are, however, unlikely to want to trade in the ROCs market with large energy companies. Such generators are likely to favour the certainty of a medium term feed-in tariff structure over the uncertainty of the RO. Therefore, we see potential for the RO and a feed-in tariff to work in parallel with generators choosing the most appropriate support scheme for their own needs””." I hope we can encourage the Government to ponder that recommendation from the committee and not box themselves in. If the noble Lord, Lord Campbell-Savours, can wax lyrical about Woking, I hope I can wax lyrical about Willington, my local village, which, if we can get a feed-in tariff, I hope will ultimately generate its entire needs from local hydropower.