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Fuel: Electricity Supply Licences

My Lords, I welcome this debate. It is important that we discuss these issues and get clarity on them. I hope I am going to do that in response. I have received a very good letter from the chairman of the British Photovoltaic Association in conjunction with the director of the Combined Heat and Power Association, the chief executive of the Anaerobic Digestion and Biogas Association and the chief executive of the building council for sustainable energy. They say a number of things, including: ““Those highly dependent on the previous tariff of photovoltaic levels are now few in number in comparison with the sizeable and growing industry for other parts of the feed-in tariff””. They also give a word of warning and, ““urge people not to reopen the Government’s decision at this stage. It would cause lasting, and we believe irreparable, damage. This would apply not just to solar PV but also to the vibrant and growing activity of small and medium-sized wind, aerobic digestion and microchip””. Finally, they say: ““We would urge you to oppose any attempts to overturn the Government’s decision implementation on 1 August””. I think that sets out the stall of the industry that we have consulted and discussed things with. The noble Baroness said that it was a very short consultation. Of course it was a short consultation because the industry wants certainty. In government, we unfortunately have to make choices. We are in a situation of rising electricity and energy prices, and we have to make choices in order to prevent that. These are the questions we asked ourselves when getting to the point of making this decision. Do we consider that at a time of rising bills we should encourage the spending of £7 billion on solar PV? Does this represent value for money? Does it have a real impact on our demand for electricity, given that it produces under 0.1 per cent of our electricity supply? Even if everything worked as planned, by 2020 it would be only as much as 0.3 per cent of our energy supply. Like the noble Lord, Lord Teverson, who is so sound on all these subjects—even though I do not think he is in complete agreement with me, for a change, on this one—we asked ourselves whether we are best suited as a country, given that we need electricity in winter when we have narrow daylight hours, and whether this is the most effective way of creating electricity. Therefore, is this a core activity for the Government? We also looked at some of the schemes that were being offered. I am sure this does not apply to my noble friend Lord Liverpool, but schemes were offering a 21.4 per cent return on investment guaranteed by government-backed FITs and were being sold to people as the greatest investment opportunity for a long time. There are many examples of that. The Government are concerned that people could be taken advantage of. Similarly, did we think the support that we gave the schemes was fair? If you were putting up onshore wind you would get one ROC, if you were putting up offshore wind you would get two ROCs, and this feed-in tariff is the equivalent of over five ROCs. Is that fair and reasonable for the rest of the industry? The noble Lord, Lord Lucas, criticised us for frivolous and unreliable decisions worthy of a third-world country. I emphasise that this is not retrospective. It does not apply to people who have installed this. I absolutely repudiate his suggestion that this is frivolous and unreliable. To suggest that we should push on with this regardless is frivolous and unreliable, which is why we have stopped it. What was the purpose of this particular form of electricity generation? It was for microgeneration, and microgeneration stays as is. The noble Lord, Lord Lucas, referred to covering this green and pleasant land with pylons. I totally agree that that would be an unattractive sight. However, this could have covered our green and pleasant land with solar panels, and that was the intention of a lot of the large solar providers. That is not an attractive proposition either. For domestic use, microgeneration is still useful and still creates an opportunity—and, for that matter, for anyone who wants to put up solar panels of the equivalent size of two tennis courts. There is still scope within the industry to carry on. Those were the questions we asked ourselves when coming to this difficult decision, which I am absolutely convinced is the right one. This is nothing to do with the Treasury because it was the Treasury that passed the FITs in the first place. I am grateful to the noble Lord, Lord Whitty, who said that this would pump-prime the industry. The industry has been pump-primed to such an extent that it was probably getting overheated and it was time that we adjusted it. I hope that allays fears about why we are doing this. I will deal with a few specific points before I wind up because we are running out of time. The noble Lord, Lord Lucas, referred to £50 million invested. In the overall scheme, we are saving £3 billion. That is a pretty modest figure to throw back at us. In the overall scheme of things, it is very small. I think the noble Baroness, Lady Smith of Basildon, is broadly supportive of this. She may be frowning now or smiling in a minute, I am not entirely sure. Either way, she is quite right to point out that communities are very relevant to this. We do not want to have a huge impact on communities, but it has to be balanced. Of course, communities can benefit from this by adjusting their aspirations accordingly. That probably covers most of the ground covered by the debate, apart from the question asked by my noble friend Lord Teverson about whether a review of ROCs could be considered. Obviously I am not going to prejudge the review on ROCs that we are having, but of course at any time convenient to him I am prepared to listen to him and discuss this. We are only too aware of the impact on jobs, but in focusing on the jobs we want to create by putting our shoulder behind a number of the other industries, we feel that we can achieve our very substantial aspiration on jobs.