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Energy Bill

As the House knows, an amendment that we tabled in the other place enables the Secretary of State to establish a scheme allowing us to create incentives for renewable heat. If we are to meet the 2020 EU target on renewable energy, substantial amounts of renewable heat will be required, as well as an expansion of renewable electricity and transport fuels. We estimate that, to meet the United Kingdom's renewable energy target of 15 per cent. by 2020, we will need to obtain not 10 per cent. of heat from renewable sources—as I believe was suggested by the hon. Member for Northavon (Steve Webb)—but about 14 per cent. At present, the renewable heat sector is very small. The Government accept that financial support is necessary for investment in renewable heat, and creating the right financial incentive will be important in helping us to meet our 2020 renewables targets. The powers in the amendment will allow the Secretary of State to establish a financial support system for the renewable heat incentive. The purpose of amendment (a) is to get the Government to specify a time scale. I understand why information should be required—the hon. Member for Wealden (Charles Hendry) rightly said that people would need it so that they could take a view—but because heat, including renewable heat, is a new and potentially complex area of policy, it will take some time to make the necessary arrangements. A new Department with a new agenda has made a series of changes to the Bill at quite a late stage, and, understandably, a good deal of work on the details of the policy remains to be done. To an extent, we have a picture of what we want to do. We want to enable those who generate heat to be paid from a levy to be imposed on those who supply fossil fuel for the purpose. The funds created by the levy will be used to support the production of renewable heat. That formulation, however, does not take us far enough. We could do this through the Treasury, through something more like the renewables obligation or through a direct mechanism like a feed-in tariff, which I think would be preferable. We need to think about the details, and discuss them not only with the industry but with all the potential beneficiaries. Stakeholders have recognised the complexities involved in developing new policies in a sector in which there are much more players and issues to consider than there are in the electricity sector. It will take time to work out the implications of a move to the heat market, and how best to provide incentives for renewables. As was pointed out by both my hon. Friend the Member for Nottingham, South (Alan Simpson) and the hon. Member for Wealden, people want to know about the timetable. We plan to introduce the renewable heat incentive as soon as possible, and hope to be able to set out a robust timetable in the new year. However, a good deal more policy work will be necessary before we can do so with much precision. Can we do this at the same time as introducing the new feed-in tariffs? Clearly the two schemes will have to work side by side, and clearly it will be important to provide a single interface for generators who will want to benefit from both schemes. Heat is a complex issue, and considerable time will be required for the development of the strategy. However, we must find a way of providing the two financial incentives together, so that people can benefit from both.