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Fuel: Electricity Supply Licences

My Lords, I have no interest to declare in solar energy. Indeed, I am something of a sceptic and regard the subsidies we are discussing today as something of an unwelcome and unjustified imposition on the public. I am all in favour of the measures that the Government are taking to control the cost of these subsidies, but I regret—putting it gently—the way in which they have chosen to do that. I believe that they breach the trust that ought to exist between Governments and those who place faith in what they have said. The measure fails to take account of the opportunities for building new industries in this area, and it has been structured so as to be a much harsher imposition on consumers than it needs to be. Before the election, we, the Conservative Party, were talking in terms of extending the limits of the feed-in tariff for solar to 10 megawatts—that is, if you are to believe Friends of the Earth. Personally, I do not often do so, but I suspect that the Government are more favourable towards them. However, on 1 February 2010, the Government said that adjustments would be made to the feed-in tariff, "““as evidence on actual deployment, costs and performance emerges … with the first review due to take place in 2013””," subject to degression in the level of feed-in tariff from 31 March 2012. The meaning of that seems plain to me: anything that you get under way before 1 April 2012 will be at the stated tariff. Fine, that was said by a previous Government, but new Governments cannot just tear up what has been said before, which is what we appear to be doing. The result of people relying on that government statement was that serious investors who were committed to supporting the development of alternative energy throughout the UK spent money on sites, on the design of kit, on planning, on organising grid connections and in some cases on building factories to make the kit. I do not have an exact figure but the closest I can get to the amount that was invested on this basis is in the order of £50 million. That has all been burnt to a crisp by the way that this Government have decided to change the feed-in tariff. The Government ought to reflect on the effect of that on their reputation. This is something that you expect to happen in the dodgier parts of the third world, not here. It makes the Government seem frivolous and unreliable. I understand the underlying motivation but things could have been done in a different way. The tariff could have been lowered more generally. People running little schemes, operating at household level, must be pinching themselves at the level of feed-in tariff that they have been left with. I think that they find it hard to believe how profitable they are going to be over the next few years, which is why they are keeping so silent on the subject of the order. If we had taken the general industry advice and lowered feed-in tariffs by 25 per cent to 30 per cent overall to achieve a general lowering of the market, we would have put investors in a position where, although they were not earning the returns that they had once expected from their investments, their money would none the less have been worth something and they would have gone ahead in one way or another with their schemes. Indeed, we could have offered some transitional arrangements, looked at the people who had invested a lot of money and said, ““Right, you may not be able to take advantage of the scheme this year but we will let you bleed into the scheme over the next five to 10 years so that all you have lost is the time value of your money, not the absolute value””. However, we have done none of that. We have required them to write off everything and, in the case of many overseas investors, just throw up their hands and go off elsewhere, never to think of returning to the UK—at least, that is what they say. We have also missed a trick in support for the solar industry. If noble Lords look at the current statistics, they might reasonably say, ““What industry?””. Solar costs about 25p per kilowatt hour and the sun does not shine very much in this country, so it seems a basket case when looking at alternative technologies. DECC’s levelised cost estimates for solar say that, while in 2007 its estimate was that solar would cost 51p per kilowatt hour in 2015, in 2011 it is estimating that the cost in 2015 will be 23p. The cost of solar is falling extremely fast. Partly this is due to economies of scale as other countries, such as in the Far East and Germany, go in for large-scale solar development, and partly because it is an electronic technology. In common with many such technologies, given a decent market and the application of research and development, which is happening worldwide and indeed in the UK, its costs are coming down—predictably, to my mind. If the department is as wrong now as it was four years ago, the cost of solar electricity in 2015 will actually be 10p per kilowatt hour and at that point it will have achieved grid parity, or close to it. Solar electricity is unlike a lot of other forms of electricity generation. It is local. It replaces electricity at a retail price rather than a wholesale price. There is no requirement to build extra grid for it. There will be no equivalents of the campaigns in east Wales and other places against the vast new lines of pylons marching across the countryside to bring us our wind power because we do not need them; in fact, solar saves on grid capacity. It is much more acceptable than wind in many ways, and that surely must have a value. There is generally no difficulty in getting planning permission for solar installations and none of the opposition that you get to wind power, and one can see why: it is a much less visually and aurally offensive technology. It produces daytime electricity and so is replacing the most inefficient forms of power generation, the peak generators that are turned on only in the daytime when we hit peaks. Its profile is generally complementary with wind; we tend to have sun when the wind is not blowing and vice versa. It irons out some of the peaks that we will have in electricity generation as a result of having a substantial amount of onshore and offshore wind. The solar electricity industry has suffered because nowhere in government does anyone have a responsibility for looking after it. You can see this from the EMR White Paper that was published a couple of days ago. There seems to be very little understanding in that document of the benefits of local generation. It seems to be written entirely from the point of view of suppliers who think in terms of large centralised electricity generation and then distribution through a grid. The interests of solar energy do not appear to have been taken into account. The potential for solar being an economic form of electricity supply in its own right without subsidy by, say, 2020 does not seem to have received a rational assessment anywhere in government, although a lot of big companies like General Electric are being a good deal more optimistic than that. They are the proponents of the new solar technologies rather than the old one that we are used to. There is a lot of development going on. If we look at all the prospects and sources for renewable energy, solar is the only one where we are seeing large and consistent cost reductions. It is the only one where we are looking at an end to subsidy rather than a continuous imposition on people’s electricity bills. I get the impression that the Government have decided that our future is to be an installer of Chinese-made kit rather than to have a presence in this industry ourselves. One of the little things which convinces me of that is that they seem to be talking about a pot of money which will be available under the feed-in tariff scheme rather than continuous; in other words, at some point it will come to an end. This is fine for general builders who would be putting up these things one day and then doing something else the next, but if you are trying to build an industry, something that will add real value and jobs to the UK economy, having an episodic form of subsidy which will go through periods of unavailability is completely hopeless. All you can run on that basis is a business based on imports. We have this concentration on mini-installations—on the vanities of individual householders thinking that they are doing something for the climate by installing these vastly uneconomic things on their own roofs—rather than looking at how we can make a serious dent in our need for electricity generation by looking at things on the scale of factories or office buildings, all of which have been wiped out by the route that the Government have chosen to take. I regret that the route that this Government have taken to achieve a laudable objective has so abused the trust that people have placed in the Government’s word. They have missed the opportunities to create a new industry and instead put an imposition on the consumer which is much higher than it needs to be to achieve the level of electricity generation that we would have from solar as a result of the subsidies. I do not think that there is any going back; Governments rarely back-track on this sort of thing. I am not urging the Government to spend more money on solar. However, they should sit down with the industry and make a proper assessment, first and most urgently, of how distributed generation should work under the EMR—they have got that wrong and have an opportunity to set it right. Secondly, they should make a proper assessment of their response to the real prospect that solar will achieve grid parity within the lifetime of this Government and the next; and how, under those circumstances, we are to have in this country our share of a great new industry rather than just being importers. I beg to move.