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Energy Bill

I welcome the debate and its positive tone, not least in terms of the praise for the Government and, quite rightly, for my right hon. Friend the Secretary of State. I join with other Members in paying tribute to the work of my hon. Friends the Members for Nottingham, South (Alan Simpson) and for Morley and Rothwell (Colin Challen) and others who, on an all-party basis, have pressed for the changes. The hon. Member for Wealden (Charles Hendry) was right that this measure will help hospitals and schools but 5 MW of electricity can heat an awful lot of homes, indeed thousands of them, so that means we can ensure that we have electricity, and heat in due course, for large communities. May I also reassure the hon. Gentleman that we are talking not about super-ROCs, but about real feed-in tariffs? That is certainly the obligation to which the Government have signed up, but there has been much lengthy debate about the effective deployment of renewables since the Bill was introduced in the House in January. I am pleased that hon. Members both sides of the House share our objective of ensuring that we are best placed and have the best possible financial framework to enable us to meet our 2020 renewables target. The changes that we will make to the renewables obligation under the Bill will build on the success of the renewables obligation so far and lead to the deployment of more diverse mixes of larger-scale renewable electricity projects as we move towards 2020. That is important: although there is a lot of praise for the introduction of feed-in tariffs, the renewables obligation will continue to be a primary means by which we ensure that the 2020 target is hit. We have listened to the arguments that the RO is not suitable for domestic and small-scale electricity generation projects, at least partly because of its relative complexity. Although some small-scale projects have operated via the RO, the results are patchy, so we have decided to introduce feed-in tariffs for small-scale low-carbon electricity generation. An upper cap for those feed-in tariffs has been defined in the Bill to give clarity and certainty to investors in large-scale projects under the RO. Our original amendment in the other place set an upper limit of 3 MW—we wanted the upper cap to be high enough to give us sufficient flexibility to ensure that we can direct support to small-scale projects of the right capacity. It is important that there is no confusion about the fact that the 5 MW limit relates to capacity, not generation. The capacity restriction is not dependent on the number of kilowatt-hours that an installation will generate over a year. Different technologies will generate different kilowatt-hours of electricity, and they will be paid over that period. This is a capacity argument in terms of determining whether or not they qualify, rather than anything else. It is important that that point is made clear during the debate, so that no one expects all those technologies to generate at that massive 5 MW level or whatever, but we also want the cap to be low enough to avoid delaying perfectly viable renewable projects under the renewables obligation. Since the debate in the other place, we have decided that the 5 MW level will be better than the 3 MW one because it will enable projects that fall into the 3 to 5 MW category to benefit from feed-in tariffs. Those involved in such projects should analyse the evidence to find out which tariff is beneficial. We will, of course, consult on the tariffs next year. As part of that process, we will undertake further analysis to determine the limit at which FITs would be set below the 5 MW cap. It is important to note that we expect that the renewables obligation will deliver the vast majority of renewable electricity up to 2020. We intend to make further announcements soon on how we plan to modify the renewables obligation to ensure that it delivers a much higher share of renewable electricity by 2020 than previously planned. On a one-off opt-out to the RO or to FITs, we intend to make further announcements on our approach to transitional projects that could be captured in the new scheme. Our aim in this announcement, however, is to minimise the risk of projects being tempted to wait and see before committing to either the RO or FITs. It is absolutely crucial that we ensure that investment confidence is sustained in the RO for larger-scale electricity projects and that no project is disrupted while we develop a feed-in tariff policy to support small-scale low-carbon generation. Indeed, 2020 is only 11 years away; delay now is undesirable. Amendment (a) seeks to require the Secretary of State to modify licences within a period of 12 months after Royal Assent to the Bill. I understand the wish of Members in all parts of the House to make rapid progress on these enabling provisions and to ensure that we deliver an effective scheme as quickly as possible. The need for urgency is felt no more keenly than in Government, especially in view of the EU renewables target that we need to hit by 2020. However, we also need to ensure that we get this right. For example, before we can modify the relevant licences to implement the policy, we need to develop models enabling us to introduce a scheme that can effectively encourage deployment on the scale that we want. We need to consult on our analysis on the proposed tariff levels of payments for the different technologies. We need to work with the electricity suppliers and Ofgem, which will deliver the tariffs to generators to ensure that the licence modifications that we propose will function as we intend, alongside the existing licence conditions that regulate this complex market. Members should not assume that this process will be simple. It will be enormously complex. However, the benefits will be considerable and important, so we shall have to go through the process and we shall have to get it right. It will involve spending a vast amount of consumers' money, for, as was pointed out by the hon. Member for Northavon (Steve Webb), the consumer will ultimately pay for much of it. We do not want to waste any of that money. We do not want people to be pushed further into fuel poverty because we are spending more money than is necessary on a particular project. The hon. Member for Northavon said that we had wasted enough time, and that we needed to get on with all this. I agree about the urgency, but moving too fast and getting it wrong will carry a price, and that price will be paid by consumers. We have an obligation to ensure that we get the process right, and that means getting the consultation right. While we all agree on the need for urgency, I trust that we also all agree on the need to ensure that we do not land consumers with a big and unnecessary bill. Last but not least, we need to allow time for Parliament to scrutinise the draft proposals before modifications can be made. Parliament takes its time with things: it has to go through the processes. Let us ensure that we can carry out our consultation on the feed-in tariff system and the proposed tariff levels next summer. Following that consultation and through further work with Ofgem, electricity industry players and other interested parties, we shall be in a position to finalise the implementation aspects of the system, such as arrangements for payment processes. Taking all that into account, we are committed to introducing a feed-in tariff scheme for small-scale electricity in 2010. Our ideal target is for the scheme to go live in April 2010, so that it can be aligned with the financial year of the renewables obligation. As I do not know the date of the next general election just yet, I cannot assure my hon. Friend the Member for Morley and Rothwell that ““power to the people”” will be at the top of the manifesto; but I can say that, if this Parliament extends to a full term, it might. We should not underestimate the challenges inherent in delivering a fully operational scheme in a little over 16 months, but, despite its complexity, it is important for us to set a target and try to meet it. We are committed to introducing the feed-in tariff as soon as possible. However, choosing an arbitrary date at this stage will fetter our ability to deliver a fully functional and effective scheme in 2010, and may put consumers at risk of having to pay more than they need.